Liggatt v. Employers Mut. Casualty Co.

• Decision Date: 31 May 2002
• Docket Number: No. 87,005.,87,005.
• Citation: 273 Kan. 915,46 P.3d 1120
• Parties: GALE LIGGATT, Plaintiff/Appellant, v. EMPLOYERS MUTUAL CASUALTY COMPANY, Defendant/Appellee, and JANET HATHAWAY, Plaintiff/Appellant, v. GALE LIGGATT, Defendant/ Appellant, and EMPLOYERS MUTUAL CASUALTY COMPANY, Garnishee/Appellee.
• Court: Kansas Supreme Court

273 Kan. 915

46 P.3d 1120

GALE LIGGATT, Plaintiff/Appellant, v. EMPLOYERS MUTUAL CASUALTY COMPANY, Defendant/Appellee, and JANET HATHAWAY, Plaintiff/Appellant, v. GALE LIGGATT, Defendant/ Appellant, and EMPLOYERS MUTUAL CASUALTY COMPANY, Garnishee/Appellee.

No. 87,005.

Supreme Court of Kansas.

Opinion filed May 31, 2002.

Michael W. Murphy, of Galloway, Wiegers & Heeney, PA, of Marysville, argued the cause and was on the briefs for appellant Gale Liggatt.

William J. Pauzauskie, of Oyler & Pauzauskie, of Topeka, was on the brief for appellant Janet Hathaway.

Steve R. Fabert, of Fisher, Patterson, Sayler & Smith, LLP., argued the cause and was on the brief for appellee Employers Mutual Casualty Company.

The opinion of the court was delivered by

DAVIS, J.:

Passenger Janet Hathaway filed a tort action against driver Gale Liggatt for injuries she sustained in a one vehicle motorcycle accident. Liggatt's insurer, Employers Mutual Casualty Company (EMC), denied coverage and refused to defend based upon a specific policy exclusion for a vehicle with less than four wheels. Hathaway's garnishment action against EMC based upon a consent judgment and Liggatt's breach of contract action against EMC for attorney fees expended in defending Hathaway's tort action both failed on summary judgment. The trial court granted summary judgment to EMC, concluding that the clearly expressed intent of the parties and not the reasonable expectations of the insured controlled. We agree and affirm.

Hathaway was a passenger on a three-wheeled vehicle operated by Liggatt. She was severely injured when the vehicle ran off the road. Hathaway was the owner of the vehicle. She filed suit against Liggatt for personal injuries she suffered in the single vehicle accident. EMC refused to defend the action based upon its determination that its policy of insurance covering Liggatt's vehicle, which also happened to be a motorcycle, did not provide coverage for his use of Liggatt's three-wheeled vehicle. Liggatt was defended under reservation of rights by an attorney retained by his homeowners insurance company.

After notice to EMC, a consent judgment was entered against Liggatt in favor of Hathaway for $676,846.44. Within the same action, Hathaway obtained a garnishment to collect her judgment against EMC, and Liggatt filed a separate breach of contract action against EMC to recover his attorney fees in defending Hathaway's action against him. The two cases were consolidated, and the trial court entered summary judgment for EMC and dismissed Liggatt's claim for attorney fees.

We are called upon to review the decision of the trial court in its interpretation of the policy of insurance issued by EMC to Liggatt. The interpretation of a written instrument is a question of law, and regardless of the construction given to a written instrument by the trial court, the appellate court may construe the instrument and determine its effect. Marquis v. State Farm Fire & Cos. Co., 265 Kan. 317, 324, 961 P.2d 1213 (1998). However, because we agree with the trial court, its decision and the appellant's response identify and clarify the issues we must resolve in this opinion. For that reason we quote at length from the trial court's memorandum decision.

Trial Court's Ruling

The trial court ruled as follows:

"The court takes judicial notice of the policy in question. It is a standard insurance contract with endorsements changing parts of the policy. The Policy Declarations clearly provide, in large letters, that:

"`COVERAGE IS PROVIDED ONLY WHERE A PREMIUM IS SHOWN'

"The continuation page of the Policy Declarations captioned `CYCLE DESCRITION/COVERAGE,' describes a 1984 HD motorcycle, Id. # 1HD1EC120E257987, as the only vehicle covered under the policy. Each element of coverage (bodily injury liability, property damage liability, etc.) is itemized, for a total premium of $265.00.

"The base Policy is contained in form PP0001, pages 1 through and including 11. DEFINITIONS are contained on page 1 thereof and define `Your Covered Auto' as `Any vehicle shown in the Declarations.' (Paragraph J) The only change in that definition is contained in Endorsement Form PP0323. Form PP0323 is a MISCELLANEOUS TYPE VEHICLE ENDORSEMENT, consisting of 3 pages. It provides, in large type, conspicuously placed at the top of page 1:

`THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.'

"Page 1 of this endorsement form further provides:

`This coverage is subject to all the provisions of the policy with respect to the miscellaneous type vehicles and coverages described in the Schedule on the Declarations except as modified as follows:

No modifications are shown in that schedule of vehicles. Policy DEFINITIONS contained on page 1 of this endorsement change the definition of `Your Covered Auto' as follows:

`A. For the purpose of the coverage provided by this endorsement, "miscellaneous type vehicle" means a motor home, motorcycle or other similar type vehicle, all-terrain vehicle, dune buggy or golf cart.

`B. the definition of "your covered vehicle" is replaced by the following: `Your covered auto' means:

1. Any "miscellaneous type vehicle" shown in the Schedule or in the Declarations.

The only coverage defined under this endorsement for any vehicle not shown on the Declarations or Schedule relates to vehicles acquired by the Insured after inception of the policy and vehicles used as a temporary substitute for the insured vehicle while it is under repair. The accident vehicle was not being used by Insured as a substitute for his motorcycle within the meaning of that definition.

"EMC's contractual obligation for Liability Coverage is set forth on Page 2 of the base policy. The insuring Agreement therein states:

We will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident. Damages include prejudgment interest awarded against the insured. We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted. WE HAVE NO DUTY TO DEFEND ANY SUIT OR SETLE ANY CLAIM FOR BODILY INJURY OR PROPERTY DAMAGE NOT COVERED UNDER THIS POLICY.' (Emphasis supplied.)'"

The only change made to the Insuring Agreement is contained in the Amendment or Policy Provisions form PP0156. That change simply removes the reference to prejudgment interest from the Insuring Agreement as set forth above by eliminating the second full sentence, but retains the remainder of that clause.

"The foregoing obligation of EMC for Liability Coverage is subject to the Exclusions specified on pages 2 and 3 of the base policy. The relevant Exclusion with respect to the issue in these cases is contained in paragraph B.1. on page 3, as follows:

`B. We do not provide Liability Coverage for ownership, maintenance or use of:

1. Any motorized vehicle having fewer than four wheels.'

The only change made to the B.1. Exclusion of the base policy is contained on page 2 of the Miscellaneous Type Vehicle Endorsement form (PP0323), which is as follows:

`B. The Exclusions Section is amended as follows:

1. Exclusion B. 1. is replaced by the following:

We do not provide Liability Coverage for the ownership, maintenance or use of any motorized vehicle having fewer than four wheels. However, this exclusion does not apply to a motorized vehicle having fewer than four wheels if it is insured for Liability Coverage under this endorsement.'"

The trial court had previously noted that the parties did not dispute that the motorcycle involved in the accident was not owned by Liggatt and that the vehicle was not a replacement or substitute vehicle under Liggatt's policy with EMC. The court additionally noted that "[t]here is no question that the accident vehicle had fewer than four wheels." The question for the trial court was whether the accident "arose out of the ownership, maintenance or use of a motorized vehicle having fewer than four wheels which was excluded from coverage under the terms of EMC's policy."

Hathaway's Response

Hathaway acknowledged that standing alone, the B.1. exclusion is unambiguous. However, she asserts that the vehicle described in the declarations is a motorcycle and the exclusion becomes patently ambiguous because it is in conflict with the specifically described vehicle in the declarations and is, therefore, void. Her contention appears to be that the policy would have covered a four-wheel vehicle and that because coverage extends to such four-wheel vehicles, it would be reasonable to assume that coverage would also extend to a vehicle with fewer than four wheels. She further contends that because of excessive amendments to the base policy, including amendments which are not particularly relevant to the issue in this case, the policy as a whole is incomprehensible.

Trial Court's Response and Decision

In disagreeing with Hathaway's response, the trial court noted that the only way to reach the conclusion urged by Hathaway would be to completely read the exclusion for the use of vehicles with fewer than four wheels out of the policy. The trial court further concluded:

"The court does not believe that any particular expertise is required to understand that amendment provisions contained in the endorsements to a policy, under like headings to provisions in the base policy being amended, are in fact limited in scope to the provision so amended. Headings in the subject policy are clearly marked in capital letters. As previously noted, the only amendment to the pertinent exclusion is contained in the Miscellaneous Type Vehicle Endorsement and it clearly sets forth that it changes the policy and directs the Insured to read it carefully.

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"Here, the intent of EMC and Insured is clear. The policy was to provide liability coverage to

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