Kowal v. Grange Ins. Ass'n

• Decision Date: 10 March 1988
• Docket Number: No. 53498-5,53498-5
• Citation: 751 P.2d 306,110 Wn.2d 239
• Parties: Kelly M. KOWAL, Respondent, v. GRANGE INSURANCE ASSOCIATION, Petitioner.
• Court: Washington Supreme Court

Page 239

110 Wn.2d 239

751 P.2d 306

Kelly M. KOWAL, Respondent, v. GRANGE INSURANCE ASSOCIATION, Petitioner.

No. 53498-5.

Supreme Court of Washington En Banc.

March 10, 1988.

Murray, Dunham & Murray, Wayne Murray, Seattle, for petitioner.

Thomas J. Chambers, Donald S. Means, Seattle, for respondent.

Bryan P. Harnetiaux, Winston & Cashatt, Robert H. Whaley, Harbaugh & Bloom, Gary N. Bloom, Spokane, amicus curiae for Washington Trial Lawyers Ass'n.

CALLOW, Justice.

This is an action to compel arbitration of an underinsured motorist claim for an insured injured while a passenger in an uninsured automobile owned and driven by a third party.

On September 6, 1982, the plaintiff, Kelly M. Kowal, was injured while riding as a passenger in an uninsured vehicle. The accident occurred when the vehicle's driver, Donald Moore, failed to negotiate a turn and the vehicle left the roadway and came to rest in a field. The plaintiff submitted a claim for damages under the underinsured motorist section of her stepfather's Grange Insurance Association automobile insurance policy. Grange denied Kelly Kowal's claim for damages.

David P. Kowal is the named insured on the automobile insurance policy in question. The declaration page of the policy lists two covered automobiles--a 1964 Volkswagen and a 1976 Datsun.

David Kowal is not Kelly Kowal's biological father and has never adopted her. However, Mr. Kowal was married to Nancy Lee Putnam, the plaintiff Kelly M. Kowal's mother, in 1965. David Kowal and Nancy Putnam were divorced in 1972 or 1973. After the divorce, Kelly Kowal resided primarily with David Kowal, but at times lived with her mother. At the time of the accident Kelly Kowal was 19 years of age and residing with David Kowal.

Prior to the accident, several changes had been made to David Kowal's automobile insurance policy with regard to Kelly Kowal. First, on September 28, 1981, David Kowal signed a change application which provided:

TYPE OF CHANGE (be specific) Add daughter as occasional operator--will not drive '76 Dat at all.

In return for the addition of coverage for Kelly Kowal, David Kowal paid an additional premium of $40.20.

On October 28, 1981, David Kowal requested that coverage for Kelly Kowal be removed from his policy because he had been laid off from his job and could no longer afford the additional premium. As a result, the following restrictive endorsement was added to the policy:

VOIDING AUTOMOBILE INSURANCE WHILE A CERTAIN PERSON(S) IS OPERATING CAR.

(Attach to your policy) This endorsement is part of your policy. It restricts coverage given in the policy.

There is no coverage in the policy for anyone for claims arising from any loss or damage caused by a covered auto while being driven or operated by KELLY MARIE KOWAL.

On March 19, 1982, David Kowal again requested that Kelly Kowal be added to his policy as an occasional driver of the 1964 Volkswagen. On March 27, 1982, Kelly Kowal filled out a Youthful Operator Information form, indicating that she drove the 1964 Volkswagen once or twice a week for shopping and convenience. On April 20, 1982, the above quoted restrictive endorsement was cancelled, restoring coverage for Kelly Kowal effective March 19, 1982. No further changes were made to the policy with respect to Kelly Kowal prior to the accident in which she was injured. Therefore, at the time of her injuries, there was coverage in the policy for damages caused by the 1964 Volkswagen while it was being operated by Kelly Kowal. The parties dispute whether the policy provided underinsured motorist coverage for Kelly Kowal.

The complaint in the present case was filed in January 1984, by Kelly Kowal, seeking to compel arbitration of her underinsured motorist claim. Thereafter Grange Insurance Association filed a motion for summary judgment, which was granted in its favor. The Court of Appeals reversed, finding that Kelly Kowal was "an insured" under the liability section of the policy and therefore covered by the underinsured motorist provision. We agree.

This case presents two issues: (1) whether Kelly Kowal is an insured under the policy, and (2) whether the policy, interpreted in light of RCW 48.22.030, provides underinsured motorist coverage for its insureds if they are injured while riding as passengers in underinsured vehicles.

The initial issue is whether the plaintiff, Kelly Kowal, is "an insured" under the underinsured motorist endorsement of her stepfather's insurance policy. The underinsured motorist endorsement states that The Company agrees to pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an underinsured automobile because of bodily injury ... sustained by the insured, caused by accident arising out of the ownership and the applicable general conditions of this policy, maintenance or use of such underinsured automobile, all subject to the terms of this endorsement ...

Under the definitions section of the underinsured motorist endorsement, the policy states that:

"Insured" means each person covered as an insured under the bodily injury liability protection of the policy to which this endorsement is attached (this policy).

There are certain exclusions listed in the underinsured motorist endorsement, none of which are applicable to the present facts.

The plaintiff, Kelly Kowal, argues that because coverage for her was specifically added to the policy by her stepfather, and an additional fee paid for this coverage, she is "an insured" and entitled to recover under the underinsured motorist endorsement of the policy.

The defendant insurance company proffers that one is insured under the underinsured motorist endorsement only when one is first insured under the liability portion of the policy and only in situations which could lead to liability on the part of the insured. To support this position, the defendant insurer points to the liability statement of the policy, which reads:

We will pay damages the insured becomes legally obligated to pay. The damages must be because of negligence causing or contributing to an accident.

The defendant argues that liability coverage is only provided where there has been an "accident," with accident being defined narrowly as:

an event not expected or intended. It must cause bodily injury or property damage. It must result directly from the operation, maintenance or use of a covered auto.

"Covered autos" are those described in the policy, newly acquired by the named insured, temporary substitutes for described autos, or autos borrowed by the insured with permission of the owner.

The insurer argues that the definition of "insured" in the liability section is narrowed by the limitations on the situations in which the company will pay damages. The defendant insurer asserts that a person is "an insured" under the liability portion of the policy only when using a covered auto because liability attaches only when there has been "an accident," and "an accident" can only occur from the "operation, maintenance or use of a covered auto." Since the definition of "insured" for purposes of the underinsured motorist endorsement is linked to the definition of insured under the liability portion of the policy, such an interpretation would deny underinsured motorist benefits to anyone not driving a covered vehicle. Kelly Kowal's injuries occurred when she was a passenger in an underinsured auto not falling within the category of "covered auto" under the policy, and it is on this basis that the defendant denied her coverage under the underinsured motorist endorsement.

The insurance company's narrow definition of "insured" confuses two separate areas of insurance coverage. In determining whether an insurance policy provides coverage for a particular injury, one must ask: (1) Is the person claiming damages protected under the policy? and (2) does the situation in which the injury occurred fall within the class of risks insured against under the policy? In any event we must interpret the policy from its wording at the time of its issuance since the rights of the parties were fixed at that time. Grange Ins. Ass'n v. Great Am. Ins. Co., 89 Wash.2d 710, 717, 575 P.2d 235 (1978).

The definition of "an insured" answers the first question, while the narrow definition of "accident" which includes only "covered autos" is an answer to the second. To find liability on the part of the insurer under the liability section of the policy, a court must find both that the claimant was intended to be protected under the policy and that the injury was the type of risk protected against by the policy. A person may be an insured, yet not invoke liability on the part of the insurer if there has been no "accident" as that term is defined in the policy.

Kelly Kowal is "an insured" under the liability portion of the policy. David Kowal specifically requested that coverage for Kelly Kowal be added to the policy, and paid an additional premium for the added coverage. If Kelly had been driving her stepfather's Volkswagen and negligently inflicted injury on a third person, the third person could have recovered under the liability...