LaFrange v. United Services Auto. Ass'n, 84-SC1180-DG
| Decision Date | 21 November 1985 |
| Docket Number | No. 84-SC1180-DG,84-SC1180-DG |
| Citation | 700 S.W.2d 411 |
| Parties | Joseph W. LaFRANGE, III, Guardian of the Estate of Laurie LaFrange, a Minor, Movant, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Respondent. |
| Court | United States State Supreme Court — District of Kentucky |
J. Gregory Wehrman, Wehrman & Wehrman, Chartered, Covington, for movant.
J.M. Collier, Elizabethtown, for respondent.
Gregg Neal, Shelbyville, for the Kentucky Academy of Trial Attys.--amicus curiae.
On June 11, 1982, Laurie LaFrange was struck and severely injured by a motor vehicle driven by Gregory Richardson. Laurie is the minor daughter of Joseph W. LaFrange, the movant, and was residing with her parents at the time of the accident. Richardson's liability insurance carrier, Motorist Mutual, paid its policy limits of $25,000 to the movant, and obtained a covenant not to sue which specifically reserved all claims LaFrange had against his own automobile insurer, United Services Automobile Association (USAA), pertaining to underinsured motorist coverage. Motorist Mutual also paid LaFrange its maximum no-fault coverage of $10,000 for hospital and medical expenses.
Movant's automobile policy with USAA covered two vehicles. It contained an underinsured motorist endorsement with split limits coverage in the amounts of $25,000 for each person and $50,000 for each accident. A separate premium for underinsured motorist coverage of two dollars was charged for each vehicle covered by the policy.
Before settling with the tortfeasor's insurance carrier, Motorist Mutual, LaFrange notified his own carrier, USAA, that he was engaged in settlement discussions with Richardson's liability carrier, that the tortfeasor's liability limits were $25,000, and that the claim would be submitted under the underinsured motorists provision of USAA's automobile policy. USAA did nothing in response to this letter.
This is a declaratory judgment action filed by LaFrange against USAA after Motorist Mutual had paid its liability limits of $25,000. LaFrange asked the court to declare that USAA was liable to the plaintiff for underinsured motorists coverage on each vehicle insured under its policy for $25,000, in the total sum of $50,000.
The trial court dismissed the action on two grounds: (1) that there must be a judgment in favor of plaintiff, LaFrange, against the tortfeasor, Richardson, establishing the total amount of actual damages before presenting a claim against the underinsured motorist carrier, which is now impossible; and (2) the release of the tortfeasor by reason of the covenant not to sue has destroyed the insurance carrier's right of subrogation against the tortfeasor, which presumably vitiates the coverage.
On appeal, the Kentucky Court of Appeals decided both of these issues in favor of the insured, LaFrange. It held that "a judgment against the tortfeasor is not a condition precedent to the recovery of such benefits," and that "[s]ince no subrogation rights existed, no prejudice was created by the release."
Nevertheless, the Court of Appeals affirmed the trial court's judgment of dismissal based on its interpretation of the policy language. The Court of Appeals opines:
We affirm the decision of the Court of Appeals.
As stated by movant's counsel at oral argument, the "crucial issue" in this case is the "offset" question. Under KRS 304.39-320, "Underinsured motorist coverage" is statutory coverage to the extent mandated by that section. Although the policy coverage may be broader, it must be, at the least, coextensive with the statute. Thus, we must look first at the statute, and then at the policy, to see whether either statute or policy provides coverage in this case. In both cases this question turns on whether the $25,000 paid by Motorist Mutual on behalf of the tortfeasor should be "offset" against the $25,000 per person limit specified on the "Declarations" sheet, or should be "offset" against a sum which represents actual damages as determined by a finding of fact in a later law suit.
We recognize as a given the following arguments made on behalf of the movant:
1) KRS 304.39-320, "Underinsured motorist coverage," is part of the Motor Vehicle Reparations Act (MVRA), and, as such, is remedial legislation which should be generally construed to accomplish its stated purposes. cf. Bishop v. Allstate Ins. Co., Ky., 623 S.W.2d 865 (1981).
2) The insurance contract must include, as a minimum, such rights and obligations as are required by the statutory language. Meridian Mutual Ins. Co. v. Siddons, Ky., 451 S.W.2d 831 (1970).
3) The insurance contract is a contract of adhesion, and any ambiguity in the contract language will be construed against the insurer who prepares it. Wolford v. Wolford, Ky., 662 S.W.2d 835 (1984).
Nevertheless, the statute cannot be construed to require rights or impose obligations not required by the statutory language; and, where the statute does not so require, the insurance contract cannot be construed to provide coverage contrary to its terms.
KRS 304.39-320 first requires that underinsured motorist coverage shall be made "available upon request" to the insured. Then the language expressing the coverage in the statutory mandate where such insurance is requested, pertinent to our inquiry, states that in "such coverage":
"[T]he insurance company agrees to pay its own insured for such uncompensated damages as he may recover on account of injury due to a motor vehicle accident because the judgment recovered against the owner of the other vehicle exceeds the policy limits thereon, to the extent of the policy limits on the vehicle of the party recovering less the amount paid by the liability insurer of the party recovered against."
The requirement on the underinsured motorist carrier to provide coverage for "uncompensated damages" is limited by the...
To continue reading
Request your trial
-
Aetna Cas. and Sur. Co. v. Kenner
...Goodman v. Continental Cas. Co., Del.Super., 347 A.2d 662, 666 (1975). Cf. Mulliss, 653 F.Supp. at 691; LaFrange v. United States Auto. Ass'n, Ky.Supr., 700 S.W.2d 411 (1985). On its face, section 3902 does not address the question on appeal: whether monies recovered from a tortfeasor must ......
-
Earle v. Cobb, No. 2000-SC-0818-DG.
...the insured to purchase additional liability coverage for the vehicle of a prospective underinsured tortfeasor. LaFrange v. United Serv. Auto. Ass'n, 700 S.W.2d 411, 414 (1985). Canady further noted that in a UIM case, the tort defendant generally has counsel provided by the liability insur......
-
Motorists Mutual Insurance Co. v. Glass, 95-SC-972-DG
...interpretation was contrary to the interpretation given to it by this Court in LaFrange v. United Services Automobile Association, Ky., 700 S.W.2d 411 (1985). He testified that Farm Bureau acted in bad faith by not paying Jeffrey Glass's $1,975.00 property damage claim under its liability c......
-
Kentucky Ins. Guar. Ass'n v. Jeffers, No. 98-SC-0770-TG.
...that the Motor Vehicle Reparations Act (KRS Chapter 304.39) is "remedial" legislation. 795 S.W.2d at 63 (citing LaFrange v. United Servs. Auto. Ass'n, Ky., 700 S.W.2d 411 (1985)). Thus, within two years before its decision in Peabody Coal, this Court had held in two separate decisions that ......