Hillman v. Nationwide Mut. Fire Ins. Co.

• Decision Date: 01 July 1988
• Docket Number: No. S-1669,S-1669
• Citation: 758 P.2d 1248
• Parties: John A. HILLMAN and Janet Hillman, individually, and Janet Hillman as Personal Representative of the Estate of Julie G. Hillman, a deceased minor, Appellants, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY and Maury Hafford, Appellees.
• Court: Alaska Supreme Court

Page 1248

758 P.2d 1248

John A. HILLMAN and Janet Hillman, individually, and Janet Hillman as Personal Representative of the Estate of Julie G. Hillman, a deceased minor, Appellants, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY and Maury Hafford, Appellees.

No. S-1669.

Supreme Court of Alaska.

July 1, 1988.

Michael J. Schneider, Mestas & Schneider, P.C., Anchorage, for appellants.

Peter J. Maassen, Burr, Pease & Kurtz, Anchorage, for appellees.

Before RABINOWITZ, C.J., and BURKE, MATTHEWS, COMPTON and MOORE, JJ.

OPINION

MATTHEWS, Justice.

Following the death of their eleven year old daughter, John and Janet Hillman filed suit against Nationwide Mutual Fire Insurance Company for benefits under the uninsured motorists and medical payments sections of their automobile insurance policy issued by Nationwide. Nationwide denied liability, claiming that the policy provides no coverage in this instance. After making several important but non-dispositive rulings, the superior court granted Nationwide's motion for summary judgment and entered a final judgment dismissing the Hillmans' complaint. This appeal followed.

The facts are undisputed. On August 14, 1983, eleven year old Julie Hillman was driving her family's three wheel all-terrain vehicle (ATV) in the Nancy Lake area near Wasilla. The accident occurred when Julie attempted to cross Long Lake Road, and the ATV was struck by a truck. Julie died as a result of the collision.

The driver of the truck was uninsured. At the time of Julie's accident, however, the Hillmans had a Nationwide auto policy which listed three insured vehicles: a 1977 Datsun pickup, a 1976 Plymouth, and a 1978 GMC pickup. The ATV was not listed. Each listed vehicle had uninsured motorists coverage. The policy provided, in the "Uninsured Motorists" section under the bold-faced heading "coverage," that Nationwide

will pay bodily injury damages that you or your legal representatives are legally entitled to recover from the owner or driver of an uninsured motor vehicle. Damages must result from an accident arising out of the ownership, maintenance, or use of the uninsured vehicle.... Relatives living in your household also have this protection.

In the same section of the policy several "COVERAGE EXCLUSIONS" are listed. The pertinent exclusion is number four:

This Uninsured Motorists insurance does not apply as follows:

....

4. It does not apply to bodily injury suffered while occupying a motor vehicle owned by you or a relative living in your household, but not insured for Uninsured Motorist coverage under this policy. It does not apply to bodily injury from being hit by any such vehicle.

The final relevant policy language is the definition of "motor vehicle:"

In this policy:

....

6. the words "MOTOR VEHICLE" mean a land vehicle designed to be driven on public roads. They do not include vehicles operated on rails or crawler-treads. Other motor vehicles designed for use mainly off public roads are covered when used on public roads.

(Emphasis added). This definition is under the bold-faced heading "DEFINITIONS."

About one year after the accident, Mrs. Hillman wrote to Nationwide to initiate a claim under the policy. In September 1984, Nationwide's claims adjuster, Maury Hafford, denied the Hillmans' claim, stating that coverage under the policy did not extend to the ATV. The Hillmans wrote Nationwide several more times, but Nationwide continued to deny coverage. Eventually, the Hillmans filed suit. On cross-motions for summary judgment, the superior court determined that the Nationwide policy did not provide coverage for the accident, and entered final judgment dismissing the Hillmans' complaint.

DISCUSSION

A. WHAT DOES "COVERED" MEAN IN THE MOTOR VEHICLE DEFINITIONS PARAGRAPH?

Initially, it is apparent that this accident falls within the general "Coverage" language of the "Uninsured Motorists" section of the policy. Julie suffered bodily injury resulting from an accident with a driver of an uninsured vehicle. It is equally apparent, however, that if Julie were occupying a motor vehicle owned by the Hillmans but not insured under the policy, "Uninsured Motorists Exclusion" number four would apply, and there would be no policy coverage. The Hillmans' position is that the final sentence of the motor vehicle definition, "[o]ther motor vehicles designed for use mainly off public roads are covered when used on public roads" (emphasis added), constitutes an affirmative grant of coverage to persons operating off road vehicles on public roads. Nationwide, on the other hand, argues that the words "are covered" in the definition mean that off road vehicles are included in the "motor vehicle" definition when they are operated on public roads. Thus, they conclude that Julie was operating an owned, but uninsured, "motor vehicle" and her accident is expressly excluded under the policy.

Insurance policies are contracts. Thus, the liability of an insurer is generally determined by the terms of the policy which it has issued. State v. Underwriters at Lloyds, London, 755 P.2d 396 (Alaska 1988). However, since an insurance policy is a contract of adhesion, it will be construed according to the principle of reasonable expectations: "The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though a painstaking study of the policy provisions would have negated those expectations." Id. (quoting R. Keeton, Basic Text on Insurance Law § 6.3(a), at 351 (1971)).

Another rule of construction applicable to insurance policies is that ambiguities in the contract language should be resolved in favor of the insured. U.S. Fire Ins. v. Colver, 600 P.2d 1, 3 (Alaska 1979). However, this rule does not apply to every case in which the parties disagree as to the interpretation of a term; ambiguity exists "only when the contract, taken as a whole, is reasonably subject to differing interpretations." Modern Constr. v. Barce, Inc., 556 P.2d 528, 529 (Alaska 1976), quoted in Jarvis v. Aetna Casualty & Sur., 633 P.2d 1359, 1363 (Alaska 1981).

We find that the only reasonable interpretation of the "motor vehicle" definition is that advanced by Nationwide, i.e., that the sentence on which the Hillmans rely means that motorized vehicles designed mainly for use off public roads, such as an ATV, are "motor vehicles" within the policy definition when they are used on public roads. ¹ The definitional section is distinct from the coverage provisions, and cannot logically be read as providing any substantive additions to the coverage section of the policy.

Further, we have no basis for concluding from extrinsic evidence that an insured in the position of the Hillmans would have held an objectively reasonable expectation of coverage. Mrs. Hillman stated to the insurance adjuster investigating this case that she and her husband had thought that insurance was unobtainable for the ATV.

B. IS THE UNINSURED OWNED VEHICLE EXCLUSION PROHIBITED BY STATUTE?

Alternatively, the Hillmans argue that even if the ATV is a "motor vehicle" under the policy, the uninsured owned vehicle exclusion set out as exclusion number 4 in the uninsured motorists section of the policy, supra p. 3, is impliedly prohibited by law. In 1983, AS 28.20.440 provided: ²

(b) The owner's policy of liability insurance shall

....

(2) insure the person named and every other person using the vehicle ... against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of the vehicle [as provided herein] ... ;

(3) contain coverage in the amounts set out in (2) of this subsection for the protection of the persons insured under the policy who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury or death arising out of the ownership, maintenance or use of the uninsured motor vehicle, except that this coverage may be waived in writing by the insured on or before the effective date of the policy.

The Hillmans argue that the uninsured owned vehicle exclusion contravenes this statute.

There is extensive case law on the question whether statutory sections similar to AS 28.20.440(b)(3) relating to the scope of uninsured motorists coverage preclude giving effect to similar uninsured owned vehicle exclusions. The Supreme Court of Arizona, in Calvert v. Farmer's Insurance Co. of Arizona, 144 Ariz. 291, 697 P.2d 684 (1985), has listed some twenty-six states ³ which have refused to give effect to uninsured owned motor vehicle exclusions. ⁴ There is also contrary authority, though it is a distinct minority view. ⁵

We align ourselves with the majority position on this question. Our statute prohibited coverage narrower than that which was statutorily prescribed. As the Supreme Court of Florida stated in a similar case:

Insurers or carriers writing automobile liability insurance and reciprocal uninsured motorist insurance are not permitted by law to insert provisions in the policies that they issue that exclude or reduce the liability coverage prescribed by law for the class of persons insured thereunder who are legally entitled to recover damages from owners or operators of motor vehicles because of bodily injury.

Mullis v. State Farm Mut. Auto. Ins. Co., 252 So.2d 229, 234 (Fla.1971). All that the statutory coverage requires is that the person injured be insured and that he or she be entitled to recover damages from the operator of the uninsured motor vehicle arising out of the use of the uninsured motor vehicle. Those conditions are met in this case. Statutory coverage bears no relationship to the occupancy of any particular motor vehicle by the person insured. For the policy to impose as a coverage limitation a requirement that the person insured not be occupying an owned uninsured vehicle plainly conflicts with the mandated coverage:

The purpose of the statute is to protect...