Howard v. Farmers Ins. Co., Inc., 50938
| Decision Date | 14 November 1980 |
| Docket Number | No. 50938,50938 |
| Citation | 5 Kan.App.2d 499,619 P.2d 160 |
| Court | Kansas Court of Appeals |
| Parties | Beverly HOWARD, Appellant, v. FARMERS INSURANCE COMPANY, INC., Appellee. |
Syllabus by the Court
1. Where a policy of insurance is reisued, an accident occurs, and PIP benefits are paid, all after July 1, 1977, an amendment to a statute effective July 1, 1977, applies.
2. Although a motor vehicle liability policy will be construed to meet the minimum statutory requirements for the benefit of the insured, an insurer is liable to its insured under a policy which grants rights in excess of those provided for by statute.
3. There is definite ambiguity in the insurance contract in the instant case. The policy states both (1) that no recovery will be had of the insured, and (2) that the statute [which permits recovery] shall govern the terms.
4. Since an insurer prepares its own contracts, it has a duty to make the meaning clear, and if it fails to do so, the insurer and not the insured must suffer. Thus, if the terms of an insurance policy are ambiguous or susceptible of more than one meaning, the meaning most favorable to the insured must prevail.
Jerry R. Palmer, of Stumbo, Stumbo, Palmer, McCallister & Bruening, Topeka, for appellant.
J. H. Eschmann, of Ascough, Bausch, Eschmann, Topeka, for appellee.
Before FOTH, C. J., and SWINEHART and MEYER, JJ.
This case involves a dispute over subrogation rights to personal injury protection (PIP) benefits. It was submitted to the court for summary judgment on the following uncontroverted facts.
On January 18, 1973, the Farmers Insurance Company, Inc. (appellee) issued its policy to Jerry Howard, the appellant's husband. The policy contained PIP benefits. It was last reissued on July 18, 1977, extending coverage to January 18, 1978.
On August 22, 1977, the named insured, appellant's husband, died as a result of injuries sustained in an automobile collision.
Appellee paid $2,960.00 in PIP funeral and survivor benefits. Later a settlement was concluded with a third-party tortfeasor for $50,000.00. Appellee asserted its lien interest in the $2,960.00. The third-party's insurance carrier issued one draft to appellant and her attorney for $47,040.00, and a second draft to appellant, her attorney, and appellee for $2,960.00. This check was endorsed to appellee in December, 1977, and sent with a letter expressing objection to payment. The present lawsuit was filed to contest appellee's right to indemnity.
Prior to July 1, 1977, the law provided that a PIP insurer was not entitled to indemnity rights in survivor or funeral benefits. The insurance policy provided:
'No recovery of damages by an injured person or his estate shall be subtracted by an insurer in calculating benefits due after such person's death resulting from an injury for which the benefits were payable, and no recovery under K.S.A. 1973 Supp. 60-1903 shall be subtracted in calculating funeral benefits.'
The policy, however, also contained a section which stated:
'Terms of Policy Conformed to Statute: Terms of this policy which are in conflict with the provisions of the Kansas Automobile Injury Reparations Act are hereby amended to conform to such law.'
K.S.A. 40-3113 was amended in 1977 to provide the PIP insurer with subrogation rights to recoveries from third-party tortfeasors for survivor or funeral benefits paid, said amendments to be effective July 1, 1977.
The insurance policy was not formally amended by endorsement to conform with the changed law until after January 1978 when the Commissioner of Insurance approved it and resubmitted it to appellee.
The trial court sustained summary judgment for appellee on the basis that K.S.A. 40-3113 was unambiguous and that the terms of the policy conflicted with the statute. The court, therefore, incorporated the changes made in the statute of July 1, 1977, and ruled that the insurance company had subrogation rights to the survivor benefits. Appellant appeals from this decision.
The predecessor statute under which the insurance policy clause denying reimbursement rights for survivor benefits as originally written was K.S.A. 1974 Supp. 40-3113(a). Said statute provided:
'An insurer's or self-insurer's rights of reimbursement and indemnity shall be as follows:
In Farm & City Ins. Co. v. American Standard Ins. Co., 220 Kan. 325, 552 P.2d 1363 (1976), the Kansas Supreme Court interpreted this statute to mean that the reimbursement section did not apply to survivors' benefits and that the PIP carrier had no right to reimbursement for them. The court's opinion was based upon several elements. The first was that the reimbursement section spoke of reimbursement for the recovery of damages by the injured person, not by the survivors. The second was that subsection (a) specifically provided that "no recovery under K.S.A. 1973 Supp. 60-1903 (wrongful death statute) shall be subtracted in calculating funeral benefits." The third was that the elements of damage that could be recovered in wrongful death action included non-pecuniary loss 'such as mental anguish, loss of companionship, loss of marital and filial care and other such items.' 220 Kan. at 338-40, 552 P.2d 1363.
The new statute, K.S.A. 1979 Supp. 40-3113a, which became effective July 1, 1977, provides '(a) When the injury for which personal injury protection benefits are payable under this act [is] caused under circumstances creating a legal liability against a tortfeasor pursuant to K.S.A. 1977 Supp. 40-3117, the injured person, his or her dependents or personal representatives shall have the right to pursue his, her or their remedy by proper action in a court of competent jurisdiction against such tortfeasor.
'(d) In the event of a recovery pursuant to K.S.A. 60-258a, the insurer or self-insurer's right of subrogation shall be reduced by the percentage of negligence attributable to the injured person.
'(e) Pursuant to this section, the court shall fix attorney fees which shall be paid proportionately by the insurer or self-insurer and the injured person, his or her dependents or personal representatives in the amounts determined by the court.'
It is noted that the new statute alters each of the elements relied upon by Farm & City and establishes the PIP carrier's reimbursement right for its payment of survivors' benefits. Instead of limiting reimbursement rights to recoveries by 'injured persons', the new statute allows 'recovery . . . by the injured person, his or her dependents or personal representatives . . ..' The last sentence of former ...
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