Mitchell v. Liberty Mut. Ins. Co.

• Decision Date: 08 June 2001
• Docket Number: No. 84,835.,84,835.
• Citation: 24 P.3d 711,271 Kan. 684
• Parties: MICHAEL P. MITCHELL, Plaintiff/Appellant/Cross-appellee, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant/Appellee, and SHELTER MUTUAL INSURANCE COMPANY, Defendant/Appellee/Cross-appellant.
• Court: Kansas Supreme Court

271 Kan. 684

24 P.3d 711

MICHAEL P. MITCHELL, Plaintiff/Appellant/Cross-appellee, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant/Appellee, and SHELTER MUTUAL INSURANCE COMPANY, Defendant/Appellee/Cross-appellant.

No. 84,835.

Supreme Court of Kansas.

Opinion filed June 8, 2001.

Patrick A. Hamilton, of Robert G. Herndon, Chartered, of Overland Park, argued the cause, and Robert G. Herndon, of the same firm, was with him on the briefs for appellant/cross-appellee.

Paul Hasty, Jr, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, of Overland Park, argued the cause, and David Curotto, of the same firm, was with him on the brief for appellee Liberty Mutual Insurance Company.

William A. Larson, of Gehrt & Roberts, Chartered, of Topeka, argued the cause, and Craig C. Blumreich, of the same firm, was with him on the brief for appellee/cross-appellant Shelter Mutual Insurance Company.

The opinion of the court was delivered by

DAVIS, J.:

The question we must resolve in this appeal is which of two separate policies providing underinsured motorist coverage applies to the plaintiff's damages. Plaintiff Michael P. Mitchell claimed Kansas law mandated that his employer's insurance contract with Liberty Mutual Insurance Company (Liberty) provide underinsured coverage equal to the limits of the liability coverage based upon the employer's failure to properly reject such coverage under K.S.A. 40-284. The trial court awarded summary judgment in favor of Liberty, concluding that the employer did reject the higher coverage, with the result that Mitchell's individual policy provided the only underinsured coverage for him. The trial court awarded Mitchell postjudgment interest, but only from the date the court determined that Mitchell's individual policy was responsible and only in an amount due under such policy. We affirm the decision of the trial court in part and reverse in part.

On November 1, 1991, Mitchell suffered bodily injury in a motor vehicle accident which occurred while he was operating a vehicle for the United Parcel Service (UPS). UPS was insured by Liberty under a policy which provided for liability coverage of $5,000,000. The policy expressly provided uninsured/underinsured motorist coverage in an amount equal to the Kansas minimum coverage requirement: $25,000 per person and $50,000 per accident. Mitchell was insured by defendant Shelter Mutual Insurance Company (Shelter). The Shelter policy provided uninsured/underinsured motorist coverage in the amount of $100,000 per person and $300,000 per accident.

Mitchell filed suit against the driver of the other automobile, Loretta Leonard, who was insured by Mid-Century Insurance Company (Mid-Century). Mid-Century tentatively offered to settle Mitchell's claims in exchange for its policy limit of $50,000. Mitchell provided both Liberty and Shelter with notice of the offer. Liberty refused to substitute payment or intervene. Shelter refused to substitute payment but did intervene to protect its interests.

All parties to the action reached a settlement in favor of Mitchell in the amount of $950,000, which the trial court reduced to $890,000 pursuant to the caps provided for in K.S.A. 60-19a02. This sum was reduced by $50,000 which had previously been paid by Leonard's insurance company, Mid-Century. After a hearing, the settlement was approved by the trial court. Within the same action, Mitchell attempted to enforce his underinsured motorist benefits under the Liberty policy and his own Shelter policy. The trial court, pursuant to Mitchell's request, involuntarily joined Liberty as a party and entered summary judgment against Liberty for Mitchell's underinsured coverage.

The resulting judgment against Liberty was overturned by this court in Mitchell v. Liberty Mut. Ins. Co., 265 Kan. 556, 961 P.2d 1235 (1998), wherein we found the district court had no jurisdiction over the underinsured motorist coverage dispute in the same action which determined plaintiff's damages. We held that the underinsured coverage dispute must be resolved by separate action from the damage action. Mitchell then filed the present action against Liberty and Shelter.

Mitchell claimed Liberty was liable for his underinsured motorist claim of $840,000 notwithstanding its policy provision limiting its liability for underinsured motorist coverage to $25,000 per person and $50,000 per accident. His claim was based upon K.S.A. 40-284, which provides that for policies issued in Kansas, uninsured/underinsured coverage is to be "equal to the limits of liability coverage" absent a valid rejection of such coverage by the insured named in the policy. Mitchell contended that no valid rejection was ever executed by the insured, UPS. The parties stipulated that Mitchell's claim against his own policy with Shelter would be effective only if it were determined that Liberty's coverage liability is limited to $25,000 per person and $50,000 per accident. In that event, Shelter's $100,000 per person and $300,000 per accident coverage would provide the primary underinsured motorist coverage for Mitchell. Mitchell also advanced claims for pre-and postjudgment interest against both Liberty and Shelter depending upon the determination of which carrier provided primary underinsured motorist coverage.

Summary Judgment Motions

Liberty filed a motion for summary judgment. Mitchell countered with a motion for summary judgment of his own. In order to understand the positions of the parties, a digression into the law regarding underinsured motorist coverage is necessary. Under K.S.A. 40-284(b), uninsured motorist coverage must include an underinsured motorist provision with coverage limits equal to the uninsured provision. Under K.S.A. 40-284(a), the policy limits of an uninsured motorist provision must be equal to the liability coverage in the insurance policy. Therefore, under those two sections of the statute, underinsured motorist coverage in an automobile policy must have coverage limits equal to the liability coverage of the policy which, in the case of Liberty's policy, was $5,000,000. However, K.S.A. 40-284(c) provides that the insured has the right to reject uninsured and underinsured motorist coverage in excess of the minimum required by law, i.e. $25,000 per person/$50,000 per accident or $50,000 single limit, by giving the insurance company written rejection of the excess. Further, the statute provides that after a valid rejection, the insurer need not include excess insurance in any subsequent policy of the insured unless the insured specifically requests such excess coverage in writing. K.S.A. 40-284(c).

The Liberty policy covering UPS at issue in this case, policy No. AS1-621-004175-339, was issued in 1989 and was effective until 1992. The policy includes uninsured motorist coverage in the amount of $25,000 per person/$50,000 per accident. In 1989, the first year of the policy, Liberty sent UPS a form entitled Kansas Uninsured Motorists Insurance Excess Limits Rejection. The form provided a place for UPS to state in writing that it was rejecting uninsured motorist coverage equal to the liability limit in the policy and to write in the smaller amount of its choosing, subject to the statutory minimums of $25,000 per person/$50,000 per accident or $50,000 per single limit. While UPS signed and remitted the form, the space to select the limits was left blank.

Nevertheless, Liberty argued that UPS had rejected higher limits in 1984 and that this rejection was still valid under K.S.A. 40-284(c) because once an insured rejects higher uninsured motorist coverage by written waiver, that waiver remains effective until the insured selects higher limits. In support of this contention, Liberty attached a copy of the 1984 rejection, along with the affidavit of Albert Sharlun, account executive of the UPS account.

Mitchell countered with his own motion for summary judgment objecting to the affidavit of Albert Sharlun based upon the provisions of K.S.A. 60-256(e). In its response to Mitchell's motion, Liberty asserted that UPS had actually executed rejections in 1990 and 1991 but that these rejections referenced an incorrect policy number because Liberty employees incorrectly assumed that the policy was renewed every year rather than every 3 years. The 1990 rejection purported to select the minimum limits of $25,000/$50,000, while the 1991 rejection purported to select the minimum single limit of $50,000. In his response, Mitchell contended that the underinsured motorist limits in the policy were inserted by UPS and argued that the incorrect policy number made the rejections invalid.

District Court Decision

The district court awarded summary judgment in favor of Liberty, holding:

"5. After Kansas law was changed in 1982 to require underinsured motorist benefits, UPS rejected in writing coverage in excess of that set forth in paragraph 2 [coverage limits equal to the liability coverage of the policy].

"6. That rejection is exhibited as an attachment to the affidavit of Albert Sharlun, which is Exhibit A to defendant Liberty Mutual's motion for summary judgment.

"7. K.S.A. 40-284 in its various forms since 1982 has provided that once a written rejection has been received by an insurer, no further rejection is necessary in subsequent policies.

"8. Notwithstanding that it may be Liberty's corporate policy to obtain written rejections every year, the rejection issued by UPS in 1984 was sufficient to limit the underinsured coverage to $25,000/50,000 at the time of plaintiff's accident."

The trial court also determined that Shelter was obligated to pay Mitchell $50,000 under its underinsured motorist coverage. The court ruled that questions regarding Shelter's liability for prejudgment interest remained outstanding.

Mitchell filed a motion to alter and amend the judgment to allow an appeal of the summary judgment ruling pursuant to K.S.A. 60-254(b) which the trial court denied. Mitchell then moved for...