Nielsen v. O'Reilly

Decision Date13 November 1992
Docket NumberNo. 900489,900489
Citation848 P.2d 664
CourtUtah Supreme Court
PartiesRichard H. NIELSEN, Plaintiff and Appellant, v. Mark O'REILLY, Linda R. French, and Metropolitan Property & Liability Insurance Co., Defendants and Appellees.

L. Rich Humphreys, Karra J. Porter, Salt Lake City, for Richard Nielsen.

Glenn C. Hanni, Barbara L. Maw, Salt Lake City, for Metropolitan Property.

HALL, Chief Justice:

Plaintiff Richard H. Nielsen appeals the judgment of the Third Judicial District Court that $250,000 is the maximum recovery possible under the uninsured motorist provision of an insurance policy issued by defendant Metropolitan Property & Liability Insurance Co. ("Metropolitan"). We affirm.

The facts of this case are undisputed. Prior to April of 1983, Nielsen purchased an insurance policy from Metropolitan. The policy insured two automobiles owned by Nielsen and was in force at all relevant times. Among other coverages, the policy included uninsured motorist protection with a limit of $250,000 for "each person" and $500,000 for "each accident." Metropolitan charged a separate premium for each vehicle.

On April 28, 1983, Nielsen and his son were involved in an automobile accident with two uninsured motorists, Mark O'Reilly and Linda French. As a result of the accident, both Nielsen and his son sustained personal injuries and filed claims with Metropolitan. Metropolitan settled the claim of Nielsen's son and made a partial payment of $1,707 to Nielsen. However, no settlement was reached on the remaining portion of Nielsen's claim. Ultimately, Nielsen filed suit against Metropolitan, O'Reilly, and French, seeking an apportionment of fault and a determination of Nielsen's damages and Metropolitan's liability.

The suit proceeded to a jury trial. O'Reilly and French defaulted. However, Metropolitan undertook their defense, disputing Nielsen's damage claims and asserting that Nielsen's own negligence was the primary cause of the accident. At trial, the parties stipulated that the question of Metropolitan's liability would not be presented to the jury. Rather, the court would determine Metropolitan's liability based on the jury's special verdict.

The jury determined that Nielsen was 3 percent at fault and O'Reilly and French were 97 percent at fault and awarded Nielsen $213,593 in special damages and $500,000 in general damages. After a reduction for comparative fault and an addition of interest and court costs, the court entered judgment against O'Reilly and French in the amount of $707,590.

Following trial, Nielsen moved for summary judgment, seeking to recover the entire $707,590 judgment from Metropolitan in addition to prejudgment interest. Metropolitan argued that the limit on its coverage is $250,000 and that an insurer is not liable for prejudgment interest in excess of its policy limits. The trial court ruled in favor of Metropolitan.

This case presents three issues on appeal: (1) whether the $250,000-per-person limit, as opposed to the $500,000-per-accident limit, governs Nielsen's claim; (2) whether Nielsen is entitled to stack the policy limits because he paid separate premiums on two automobiles; and (3) whether Nielsen can recover prejudgment interest in excess of the policy limits. Because the trial court disposed of each of these issues on summary judgment, which by definition decides only questions of law, we grant the trial court decision no deference and review for correctness. 1

In claiming that he is entitled to the $500,000 limit and that he may stack the policy limits, Nielsen asserts that the trial court erred in interpreting the policy's language. Generally, the interpretation of insurance policy language presents a question of law to be decided by the trial judge using accepted methods of construction. 2 Specifically, the terms of insurance contracts, as well as all contracts, are to be interpreted in accordance with their usually accepted meanings and should be read as a whole, in an attempt to harmonize and give effect to all of the contract provisions. 3 To protect against overreaching insurers and because courts construe contracts against their drafters, ambiguities in the policy are resolved in favor of coverage. 4 Policy language is ambiguous if it is not " 'plain to a person of ordinary intelligence and understanding, viewing the matter fairly and reasonably, in accordance with the usual and natural meaning of the words, and in the light of existing circumstances, including the purpose of the policy.' " 5

Nielsen first contends that the language of the policy can be read as providing coverage of $500,000 in cases where two or more people suffer injuries in one accident and that any language purporting to limit liability to $250,000 per person is ambiguous. Therefore, this language does not deny coverage. The provision in question states:

Protection Against Uninsured Motorists Coverage.

The limit for Protection Against Uninsured Motorists Coverage stated in the Declarations as applicable to "each person" [$250,000] is the limit of METROPOLITAN's liability for all damages arising out of bodily injury sustained by one person in any one accident, and subject to this provision, the limit of liability stated in the Declarations as applicable to "each accident" [$500,000] is the total limit of METROPOLITAN's liability for all such damages for bodily injury sustained by two or more persons in any one accident.

(Bold in original.) Nielsen maintains that this language is ambiguous because the policy does not define the terms "subject to this provision" and "person." This fact, however, does not render the policy unclear to a person of ordinary intelligence and understanding. The policy clearly limits the amount one person can recover in one accident to $250,000, and therefore, the provision should be given effect. 6

Similarly, Nielsen asserts that he is entitled to stack the applicable policy limit. He points out that uninsured motorist coverage, unlike liability coverage, is not linked to a particular vehicle but is a floating coverage that covers the insured for injuries and damages caused by uninsured motorists in all circumstances. Therefore, he argues, it is reasonable to expect additional coverage upon the payment of an additional premium. Nielsen claims that this fact creates an ambiguity as to whether he should be able to stack two policy limits of $250,000 to arrive at a total limit of $500,000, because he paid separate premiums on two automobiles.

The policy, however, contains the following provision:

5. OTHER AUTOMOBILE INSURANCE AND METROPOLITAN.

With respect to any occurrence, accident or loss to which this and any other automobile insurance policy issued to the named insured by METROPOLITAN also applies, the total limit of METROPOLITAN'S liability under all such policies shall not exceed the highest applicable limit of liability or benefit amount under any one such policy.

(Bold in original.)

Nielsen claims that this provision is ambiguous because it appears in the general conditions section as opposed to the uninsured motorist section and because it refers to other insurance instead of other coverages. These facts, however, are of no significance. The provision clearly prohibits the stacking of policy limits. Indeed, we have held almost identical language to be unambiguous. 7 Furthermore, the placement of a provision does not affect its validity. As noted above, insurance policies must be interpreted as a whole, giving effect to all provisions. Reading the policy as a whole, the above-quoted language resolves any ambiguity as to whether an insured can stack policy limits.

Nielsen also argues that even if we determine the above-quoted provision to be unambiguous, the provision should not be given effect. Rather, as a matter of public policy, we should enforce Nielsen's reasonable expectation that he can stack the policy limits.

In making this argument, Nielsen asks this court to adopt a version of the reasonable expectations doctrine, a doctrine developed to protect against overreaching insurers that, under certain circumstances, allows courts faced with an adhesion contract to look to the insured's reasonable expectations in determining policy coverage. 8 Other jurisdictions have adopted various formulations of this doctrine, such as allowing the enforcement of expectations in direct conflict with clear policy language. 9

This court, however, has never adopted any version of the doctrine. Indeed, in a case just recently decided, Allen v. Prudential, 10 we declined to adopt two formulations of the doctrine presented in that case. Specifically, we rejected an assertion that in dealing with an adhesion contract, the reasonable expectations of the insured should be enforced as a matter of course. 11 We noted that such a claim was without support and "overreaches the rationale for the [reasonable expectations] doctrine, even at its broadest [point]." 12

We also rejected a more mainstream approach suggested by the Utah Court of Appeals in Wagner v. Farmers Insurance Exchange. 13 Under the Wagner formulation, the insured's reasonable expectations may be enforced if "the insurer knew or should have known of the insured's expectations; ... the insured created or helped to create these expectations, and ... the insured's expectations are reasonable." 14 If the fact finder is convinced that these three requirements are met, the reasonable expectations of the insured will be enforced in the face of contrary and unambiguous policy language. 15

In rejecting Wagner 's approach, we noted that regardless of the formulation of the reasonable expectations doctrine, substantial uncertainty surrounds "the theoretical underpinnings of the doctrine, its scope, and the details of its application." 16 We also noted our belief that case-by-case development of Utah's traditional equitable remedies suffices to protect against overreaching...

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