Lepic By and Through Lepic v. Iowa Mut. Ins. Co.

• Decision Date: 18 March 1987
• Docket Number: No. 86-161,86-161
• Citation: 402 N.W.2d 758
• Parties: Lisa LEPIC, By and Through her parents and next friends, Steve and Alicia LEPIC; Steve Lepic, individually; and Alicia Lepic, individually, Appellants, v. IOWA MUTUAL INSURANCE COMPANY, Appellee. Brian SULLIVAN, Loren Sullivan and Lorna Sullivan, Appellees, v. Burton R. CASHNER and Robert B. Cashner, Appellees, Iowa American Insurance Company, Appellant.
• Court: Iowa Supreme Court

Page 758

402 N.W.2d 758

Lisa LEPIC, By and Through her parents and next friends, Steve and Alicia LEPIC; Steve Lepic, individually; and Alicia Lepic, individually, Appellants, v. IOWA MUTUAL INSURANCE COMPANY, Appellee.

Brian SULLIVAN, Loren Sullivan and Lorna Sullivan, Appellees, v. Burton R. CASHNER and Robert B. Cashner, Appellees, Iowa American Insurance Company, Appellant.

No. 86-161.

Supreme Court of Iowa.

March 18, 1987.

Marc B. Moen and Ross G. Hauser, of Rate, Nolan, Bohanan, Moen & Lucas, Iowa City, for appellants Lepic.

J. Hobart Darbyshire, of Carlin, Hellstrom & Bittner, Davenport, for appellant Iowa American Ins. Co. and appellee Iowa Mut. Ins. Co.

John L. Riccolo and Diane B. Gould, of Wenzel, Piersall & Riccolo, P.C., Cedar Rapids, for appellees Sullivan.

David L. Riley, of Lindeman & Yagla, Waterloo, for appellees Cashner.

Considered by HARRIS, P.J., and McGIVERIN, WOLLE, LAVORATO and NEUMAN, JJ.

McGIVERIN, Justice.

The issue before us in these consolidated appeals is whether the limit of liability as to "each person" in the underinsured motorist or bodily injury liability coverages of certain automobile insurance policies applies to each person sustaining bodily injury and all claims arising therefrom or, instead, applies to each person claiming damages as a result of a bodily injury sustained by a covered person. We conclude the "each person" liability limit in these policies caps recovery for all claims arising from one bodily injury, including therein recovery of loss of consortium damages.

I. Background facts and proceedings. In each of these two consolidated appeals, a minor was injured in unrelated one-vehicle automobile accidents. Lisa Lepic was a passenger in an underinsured vehicle and Brian Sullivan was a passenger in a car driven by Robert Cashner and owned by his father, Burton Cashner.

Lepic sought to recover for bodily injuries and her parents, under Iowa Rule of Civil Procedure 8, sought to recover for medical expenses and loss of consortium under the underinsured motorist coverage of the Iowa Mutual Insurance Company policy on the parents' automobile.

Sullivan and his parents sought to recover similar damages under the bodily injury liability coverage of Cashners' automobile insurance policy with Iowa American Insurance Company and from the Cashners personally. The relevant language in Lepics' policy states:

We [Iowa Mutual Insurance Co.] will pay damages which a covered person is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury:

1. Sustained by a covered person; and

2. Caused by an accident.

....

"Covered person" as used in this endorsement means:

1. You or any family member.

....

The limit of liability shown in the Schedule or in the Declarations for "each person" for Underinsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury sustained by any one person in any one accident. Subject to this limit for "each person," the limit of liability shown in the Schedule or in the Declarations for "each accident" for Underinsured Motorists Coverage is our maximum limit of liability for all damages for bodily injury resulting from any one accident. This is the most we will pay regardless of the number of:

1. Covered persons; [or]

2. Claims made;

....

(Emphasis added.) The declarations page of Lepics' policy stated that they had underinsured motorist coverage limits of "$100,000 each person/$300,000 each accident." ¹

Lepics filed a petition for declaratory judgment in Johnson county against Iowa Mutual as to the applicable liability limit. Both Lepics and Iowa Mutual moved for summary judgment in their favor. The district court granted Iowa Mutual's motion, ruling that there was no ambiguity in the policy language and that collectively Lepics were limited to $100,000 coverage under the insurance policy for Lisa's bodily injury.

In a similar proceeding, Sullivans filed a declaratory judgment action in Buchanan county naming Cashners and Iowa American Insurance Company, Cashners' insurer, as defendants. Iowa American and Sullivans moved for summary judgment in their favor. Sullivans' motion was granted by the district court which held that the parents' claims were not to be considered with Brian's claim when applying the "each person" liability limit under the policy.

Thus, the two district courts reached opposite conclusions on the principal issue which all parties treat as determinative of both cases.

Lepics appealed in their case from an adverse ruling. Iowa American Insurance Company appealed from the ruling in the Sullivan case.

On the motion of defendant insurance companies, we consolidated these appeals. Our review of these cases is for correction of errors at law. Iowa R.App.P. 4.

Because the operative language in the two insurance policies and the claims and contentions of both sets of plaintiffs and the Cashners are essentially identical, for simplicity purposes our discussion will regard Lepics as the only plaintiffs and insureds.

The operative language in the policies that we are called upon to interpret is the phrase "all damages for bodily injury sustained by any one person in any one accident."

II. Reasonable expectations doctrine. Lepics initially argue that we must consider their reasonable expectations in interpreting the policy, regardless of whether we conclude the policy language is ambiguous. The doctrine of reasonable expectations is applicable when: a policy term is bizarre or oppressive; it "eviscerates the nonstandard terms explicitly agreed to"; or "it eliminates the dominant purpose of the transaction." C & J Fertilizer, Inc. v. Allied Mut. Ins. Co., 227 N.W.2d 169, 176 (Iowa 1975) (quoting Restatement (Second) of Contracts § 237 comment f (student ed. 1973)). In interpreting the language, we determine "whether an ordinary layman could reasonably expect coverage." Farm Bureau Mut. Ins. Co. v. Sandbulte, 302 N.W.2d 104, 113 (Iowa 1981).

The insurer ² argues that Lepics have not established a factual background, pursuant to C & J Fertilizer, warranting application of the reasonable expectations doctrine. It states there is no dispute as to coverage under the policy; the dispute revolves around the applicable limit of liability.

Without unduly extending this opinion, we would note that the factors considered in C & J Fertilizer and Sandbulte are not present here. The policy language is not bizarre or oppressive, nor does it eliminate the dominant purpose of the coverage or eviscerate any terms to which the parties agreed. See Cairns v. Grinnell Mut. Reinsurance Co., 398 N.W.2d 821, 825 (Iowa 1987); Sandbulte, 302 N.W.2d at 114. We conclude that the necessity for application of the reasonable expectations doctrine has not been shown by Lepics.

Based on these conclusions, we need not look to Lepics' intent or expectation in entering into the automobile insurance policy. We look only to the language of the policy.

III. Limit of liability. Lepics argue the "each person" limitation of liability provision is ambiguous because it is susceptible to at least two meanings. The insurer argues, and we have previously stated, that "the mere fact that parties disagree on the meaning of a phrase does not establish ambiguity" warranting an interpretation favorable to the insured. Sandbulte, 302 N.W.2d at 108. We must determine objectively if the language is "fairly susceptible" to two interpretations. Id. If we determine the language is unambiguous, we turn to the terms of the policy as an expression of the parties' intent. Bertran v. Glens Falls Ins. Co., 232 N.W.2d 527, 530 (Iowa 1975); Iowa R.App.P. 14(f)(14).

A. "Sustained by any one person" and what it modifies. One of the arguments raised by Lepics is that the phrase "sustained by any one person" in the policy modifies the term "all damages" rather than the phrase "for bodily injury"; the phrase "for bodily injury" merely modifies the term "damages" as well. By this argument Lepics contend that each person damaged as a result of a bodily injury to any person is covered up to $100,000 per person, subject to a $300,000 per accident liability limit. Thus, the parents would be entitled to recover up to $100,000 each for loss of consortium with Lisa and medical expenses incurred on her behalf, in addition to Lisa's claim for up to $100,000. A similar recovery would occur in the Sullivan case.

The insurer argues that there is no ambiguity in the policy language. It further urges this court to give the words "all damages for bodily injury sustained by any one person" their plain meaning, limiting liability under the policies to $100,000 for all damages arising out of bodily injury to one person.

Numerous courts have ruled on phrases similar to the one before us and uniformly they have rejected the Lepics' argument that the words of the policy should be reordered to create an ambiguity. In fact, the courts have specifically held that the policy language should be given effect as written, not moving the phrase "sustained by any one person" to modify language earlier in the limitation provision, such as "all damages." See State Farm Mut. Auto. Ins. Co. v. Hodges, 221 Ga. 355, 357, 144 S.E.2d 723, 724-25 (1965) (wife's loss of consortium claim limited); Dunn v. Travelers Ins. Co., 6 Mass.App.Ct. 910, 910-11, 378 N.E.2d 1007, 1008 (1978) (same); Holtz v. Mutual Serv. Casualty Co., 264 Minn. 121, 123, 117 N.W.2d 767, 769 (1962) (husband limited in amount he could recover for wife's medical expenses); Bernat v. Socke, 180 Pa.Super. 512, 515-16, 118 A.2d 253, 254 (1955) (limited husband's loss of consortium claim); Ryan v. Friede, 18 Wis.2d 138, 142, 118 N.W.2d 208, 210 (1962).

In Cairns v. Grinnell Mutual Reinsurance Co., 398 N.W.2d 821, 824-25 (Iowa 1987), we applied a doctrine of statutory construction in aid of our interpretation of insurance contract language. We stated, "In exploring...