Hopkins v. American Economy Ins. Co., WD

• Decision Date: 21 February 1995
• Docket Number: No. WD,WD
• Citation: 896 S.W.2d 933
• Parties: Rex HOPKINS and Jo Strader, Appellants (Cross-Respondents), v. AMERICAN ECONOMY INSURANCE CO., Respondent (Cross-Appellant). 47651.
• Court: Missouri Court of Appeals

Page 933

896 S.W.2d 933

Rex HOPKINS and Jo Strader, Appellants (Cross-Respondents), v. AMERICAN ECONOMY INSURANCE CO., Respondent (Cross-Appellant).

No. WD 47651.

Missouri Court of Appeals Western District.

Feb. 21, 1995.

Motion for Rehearing and/or Transfer to

Supreme Court Denied March 28, 1995.

Application to Transfer Denied

May 30, 1995.

James A. Burt, Springfield, for appellant.

Gordon N. Myerson, Kansas City, for respondent.

Before ULRICH, P.J., and LOWENSTEIN and HANNA, JJ.

LOWENSTEIN, Judge.

Both sides have appealed the judgment rendered after a jury verdict in this suit, which was brought by an insured against his carrier, American, to stack or combine underinsured motorist benefits without offset for the recovery against the tortfeasor, as well as damages for vexatious refusal to pay.

Underinsured coverage is optional from a person's own motorist carrier and pays for losses incurred because another negligent motorist's coverage is insufficient to pay for the injured person's actual losses. Geneser v. State Farm Mut. Auto. Ins. Co., 787 S.W.2d 288, 289 (Mo.App.1989). Under the policy here, an "underinsured vehicle" means a vehicle to which an insurance policy "... applies at the time of the accident, but its limit for bodily injury liability is less than the limit of liability for this coverage." This policy language is practically the same as in a policy involving the insurer in Nolan v. American State Preferred Ins. Co., 851 S.W.2d 720, 722 (Mo.App.1993).

The plaintiffs are Rex Hopkins, the insured, and his daughter, Jo Strader. For ease of discussion, these plaintiffs will be referred to collectively as Hopkins. Rex Hopkins was driving, and his wife, Helene, was the passenger when they were involved in a collision. Their automobile was one of three which Hopkins insured with the defendant, American Economy Insurance Co. (American). Helene Hopkins was killed in the collision, and Rex Hopkins was injured. The other automobile, insured by Allstate, was driven by a young lady named Romans. Hopkins and his daughter recovered $50,000, the policy limits, from Romans' carrier, Allstate, on the wrongful death claim of Helene Hopkins. In addition, Hopkins received $25,000 in settlement from Romans' carrier for his personal injury claim. The accident occurred near Bolivar on Highway 13. Evidence indicated that Romans' car ran a stop sign.

Hopkins' petition stressed that his policy with American had $100,000 and $300,000 limits, and covered three vehicles, all of which contained underinsured coverage. The petition also alleged Romans' coverage was less than the limits of American's policy. Hopkins claims to have made demands for the combined underinsured policy limits ($300,000), but American had denied that stacking was allowed, and had further claimed it was allowed a deduction from the policy limits for the amounts Hopkins had received in settlement from Allstate. It was American's failure to allow stacking and insisting on the deduction for an offset, that provided the foundation for the additional count in the petition for vexatious refusal to pay. Section 375.296, RSMO 1986 ¹. This statute allows, in addition to allowing an insured the ability to enforce the contract of insurance, to also seek additional damages. Under § 375.420 RSMo 1986 ².

Hopkins submitted three counts against American: the first for recovery of the underinsured motorist's benefits under the policy for the wrongful death of Helene for which the jury returned a $500,000 verdict; the second was also for recovery of underinsured benefits under the American policy for Hopkins' personal injuries which resulted in a verdict for $260,000 with all the fault assessed against the defendant; and, the third count was for American's refusal to pay without reasonable cause or excuse (vexatious refusal to pay on the underinsured provision of Hopkins' policy) which ended with a total verdict of $534,050, including $153,900 for interest, $76,150 for penalty, $304,000 for attorney's fees, and nothing for expenses.

The court, believing Hopkins failed to make a submissible case for vexatious refusal to pay, granted American's motion for Judgment N.O.V. on count three. This ruling forms the first point raised in Hopkins' appeal. The trial court also entered an order granting American a $50,000 offset (based on the settlement from Allstate) of the $300,000 judgment under count one for wrongful death (the verdict was for $500,000, but the judgment was limited by $300,000, the amount of the "stacked" coverage). That ruling forms the other point of Hopkins' appeal. The trial court then reduced the verdict on count two for Hopkins' personal injury verdict, $260,000, by the $25,000 he received from Allstate for a judgment of $235,000. This ruling has not been appealed. American's cross-appeal stems from various allegations of error on the admission of evidence (testimony for the plaintiffs by two former Supreme Court Justices), rulings on plaintiffs' argument, instructional and other errors. American's other point attacks the judge's conclusion allowing stacking of the three $100,000 limit policies to form a gross aggregate limit of recovery of $300,000 on the wrongful death and personal injury counts. Additional facts on each side's appeal will be provided in the pertinent discussion location.

The total of four points contained in both appeals will be taken up in the following order: 1) Hopkins' point of error in allowing an offset against policy limits on the wrongful death case; 2) American's point that the court erred in determining underinsured motorists coverage stacks; 3) Hopkins' contention of trial court error in granting American's Judgment N.O.V.; and 4) because of the disposition of all the other issues, American's remaining point dealing with various trial errors will not be taken up. Additional facts relevant to each point will be provided in the discussion pertinent to that point.

I. OFFSET

The relevant part of the policy on offset, located in the "Limit of Liability" section provides:

"Any amounts otherwise payable for damages under this coverage shall be reduced by:

1) All sums paid because of the bodily injury by or on behalf of persons or organizations who may be legally responsible."

Hopkins asserts the above provision, when read against the backdrop of the following language from within the policy, creates an ambiguity:

"We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured/underinsured motor vehicle because of bodily injury sustained by a covered person and caused by an accident",

and, from the Limit of Liability Section:

"If the limit of liability in the Declarations is shown separately for 'each person' and 'each accident'; The limit of liability for 'each person' for Uninsured/Underinsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one auto accident. This is the most we will pay regardless of the number of covered persons, claims made, or vehicles involved in the auto accident."

In a nutshell, Hopkins argues the policy language is ambiguous in deciding this crucial issue: Is the $50,000 received from the underinsured's carrier for the wrongful death count for Mrs. Hopkins, subtracted from the damage incurred to Hopkins, or is that amount offset from the combined coverage of the American policy? With verdict damages for Helene Hopkins' death set at $500,000, and combined policy limits of $300,000, the difference in the net effect of which interpretation of American's ruling is adopted is now shown:

Hopkins interpretation:

$500,000 (damages) - $50,000 (settlement) = $450,000 in damages, Which is covered to the extent of $300,000, the stacked coverage of the three policies.

Trial court's interpretation and ruling:

$300,000 (stacked underinsured coverage) - $50,000 = $250,000 recoverable on the American combined limits of $300,000.

The ruling to offset the recovery against underinsured coverage limits is supported by the opinion of the Court adopted in Rodriguez v. General Accident Insurance Co. of America, 808 S.W.2d 379 (Mo banc 1991). The insured in Rodriguez had coverage of $50,000 for each of two vehicles. The tortfeasor's insurer paid the limits of a $50,000 policy. 808 S.W.2d at 380. The plaintiffs' policy with the defendant, in language the same as the case at bar, defined an underinsured vehicle as one with liability insurance with a "... limit ... less than the limit of liability for this coverage." Id. at 381. The Rodriguez policy language limiting liability as to offset, was almost the same as in the present case; "however, the limit of liability shall be reduced by all sums paid because of the 'bodily injury' or, on behalf of, persons ... who may be legally responsible." (Though it applies to the next point on appeal as to stacking, the Rodriguez language under the limits of liability stated: "The limit of liability shown in the schedule ... is our maximum limit.... This is the most we will pay, regardless of the number of ... vehicles or premiums shown in the Declarations...." Id. The stacking language there is not the same as in American's policy, as will be pointed out in II infra. The court ruled the language prohibited stacking, and denied the tortfeasor's vehicle was "underinsured." Id. at 382 and 383.

The appellants in Rodriguez argued the offset language in their policy created excess coverage. The Court held that policy language reducing the limit of liability for all amounts "paid ... on behalf of persons ... legally responsible," had "T[t]he effect of ..." a "set-off of the $50,000 paid by [the tortfeasor's insurer] against the $50,000 coverage provided by the respondent." Id. at 382.

With no basic difference between the policy in Rodriguez and the one here, this court deems the trial court was correct in applying Allstate's proceeds against...