Polenz v. Farm Bureau Ins. Co. of Nebraska

• Decision Date: 26 February 1988
• Docket Number: No. 87-282,87-282
• Citation: Polenz v. Farm Bureau Ins. Co. of Nebraska, 419 N.W.2d 677, 227 Neb. 703 (Neb. 1988)
• Parties: Margaret A. POLENZ, Personal Representative of the Estate of Kenneth R. Polenz, Deceased, Appellee, v. FARM BUREAU INSURANCE COMPANY OF NEBRASKA, a Nebraska Corporation, Appellant.
• Court: Nebraska Supreme Court

Page 677

419 N.W.2d 677

227 Neb. 703

Margaret A. POLENZ, Personal Representative of the Estate of Kenneth R. Polenz, Deceased, Appellee, v. FARM BUREAU INSURANCE COMPANY OF NEBRASKA, a Nebraska Corporation, Appellant.

No. 87-282.

Supreme Court of Nebraska.

Feb. 26, 1988.

Syllabus by the Court

1. Insurance Contracts. Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties have used, and if they are clear and unambiguous, their terms are to be taken and understood in plain, ordinary, and popular sense.

2. Insurance: Contracts. In construing an insurance contract, the court must give effect to the instrument as a whole and, if possible, to every part thereof.

3. Insurance: Contracts: Intent. An insurance policy is to be construed as any other contract to give effect to the parties' intentions at the time the contract was made.

4. Insurance: Contracts. Where the terms of an insurance contract are clear, they are to be accorded their plain and ordinary meaning.

5. Insurance: Contracts. Where a clause in an insurance contract can be fairly interpreted in more than one way, there is ambiguity to be resolved by the court as a matter of law.

6. Insurance: Contracts. In the case of ambiguity, the construction favorable to the insured prevails so as to afford coverage.

7. Insurance: Contracts: Intent. The resolution of an ambiguity in a policy of insurance turns not on what the insurer intended the language to mean, but what a reasonable person in the position of the insured would have understood it to mean at the time the contract was made.

8. Insurance: Contracts. An ambiguity will not be read into policy language which is plain and unambiguous in order to construe it against the preparer of the contract.

9. Insurance: Contracts. Absent ambiguities, language in a policy of insurance is to be given its plain and ordinary meaning.

10. Insurance: Contracts. Where two or more policies provide coverage for the particular event and all the policies in question contain "excess insurance" clauses, it is generally held that such clauses are mutually repugnant and must be disregarded. If literal effect were given to both "excess insurance" clauses of the applicable policies, neither policy would cover the loss, and such a result would produce an unintended absurdity.

Thomas A. Otepka of Gross, Welch, Vinardi, Kauffman & Day, P.C., Omaha, for appellant.

Edward F. Pohren of Dwyer, Pohren, Wood, Heavey & Grimm, Omaha, for appellee.

BOSLAUGH, WHITE, CAPORALE, SHANAHAN, and GRANT, JJ., and BRODKEY, J., Retired, and COLWELL, District Judge, Retired.

SHANAHAN, Justice.

Margaret A. Polenz, personal representative of the estate of Kenneth R. Polenz, deceased, brought a declaratory judgment action against Farm Bureau Insurance Company of Nebraska to determine the amount payable under each of two Farm Bureau policies owned by Kenneth Polenz, which provided underinsured motorist coverage. On stipulated facts, the district court for Sarpy County entered a declaratory judgment concerning Farm Bureau's policies and then granted the personal representative judgment against Farm Bureau for $75,000, interest, and an attorney fee. Farm Bureau appeals.

Kenneth Polenz was a passenger in an automobile driven by a Jim Collom, who fell asleep while driving, causing a one-car accident when Collom's automobile struck an embankment adjacent to the road on which the Collom vehicle was being operated. Polenz died as a result of injury sustained in the accident.

Collom was the owner and named insured of an automobile insurance policy issued by State Farm Insurance, which provided Collom with $25,000 in liability coverage for bodily injury caused by his operating a vehicle. Collom's State Farm policy also provided medical payment coverage of $2,500. Outside the liability coverage for bodily injury and the medical payment coverage, there was no coverage under Collom's policy from which any damages caused by Collom could be paid to Polenz.

In exchange for the personal representative's covenant not to sue Collom, State Farm paid the personal representative $27,500, that is, $25,000 on the Polenz bodily injury claim and $2,500 on the claim pertaining to medical payment coverage. The personal representative received no other payments from or on behalf of Collom.

At the time of his death, Kenneth Polenz owned two policies issued by Farm Bureau. Those policies were obtained at different times, and the premium for each policy was separately paid by Polenz. Policy No. 103385 on a 1983 Ford pickup and policy No. 651962 on a 1983 Lincoln Town Car contained "COVERAGE L UNDERINSURED MOTORIST COVERAGE" (UDM), with a $50,000 limit on each policy for the underinsured motorist coverage. In the pertinent parts of the Farm Bureau policies, coverage L, or the UDM coverage, provides:

Our Limit of Liability

The amount shown in the declarations for ... Coverage L "per person" is the maximum amount we will pay for all damages due to bodily injury sustained by any one person in any one automobile accident.... [The maximum amount] shall be reduced by any amount paid or payable under any valid and collectible insurance policy or bond providing bodily injury liability coverage for the ownership, maintenance or use of the uninsured motor vehicle or underinsured motor vehicle involved in the accident. [The maximum amount] shall also be reduced by any other payment made by or on behalf of the owner or operator of the uninsured motor vehicle or underinsured motor vehicle. [The reduced amount] shall be our maximum limit of liability regardless of the number of:

1. Insureds;

2. claims made;

3. vehicles or premiums shown in the declarations; or

4. vehicles involved in the accident.

....

Other Insurance

If there is other applicable similar insurance:

1. That applies to an insured injured while occupying any vehicle you do not own:

a. The coverage afforded by this part shall apply only as excess coverage to the primary coverage;

b. such excess coverage shall be limited to the amount by which the coverage afforded by this part exceeds the primary coverage; and

c. when more than one policy applies as excess:

(1) The amount by which the highest limit of liability of any one of the policies applying as excess exceeds the Limit of Liability of the primary policy shall be determined;

(2) we shall pay our share of that amount. Our share is the proportion that our Limit of Liability is of the sum of the Limits of Liability of all the other policies applying as excess.

(Emphasis in original.)

The amount of damages from the wrongful death of Kenneth Polenz is substantially in excess of the declared limits of the coverage in all applicable policies of insurance available concerning Kenneth Polenz, including the limits of Collom's bodily injury liability insurance.

Farm Bureau refused to pay the personal representative's demand for $75,000, that is, the total of the coverage from both policies of $100,000 less the $25,000 received from State Farm on the claim against Collom. The personal representative then filed her declaratory judgment action, asking for determination of the amount due under each of Farm Bureau's policies.

In its declaratory judgment, the district court found that the "other insurance" provision under Farm Bureau's UDM coverage was inapplicable in determining the limit of liability under each of Farm Bureau's policies. The district court then proceeded to determine and declare that Farm Bureau's aggregate liability on its policies was $75,000, which was determined as follows: $50,000 on each policy, reduced by a pro rata amount paid on the claim against Collom, that is, one-half of $25,000, or $12,500, leaving Farm Bureau's net liability on each policy in the amount of $37,500. Since there were two policies, the combined liability for both policies was $75,000. After entry of the declaratory judgment and pursuant to Neb.Rev.Stat. § 25-21,156 (Reissue 1985), the personal representative obtained a monetary judgment against Farm Bureau in the amount of $75,000. Farm Bureau has appealed the declaratory judgment and the monetary judgment awarded to the personal representative.

As this court stated in Cordes v. Prudential Ins. Co., 181 Neb. 794, 797-98, 150 N.W.2d 905, 908 (1967):

Contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties have used, and if they are clear and unambiguous, their terms are to be taken and understood in plain, ordinary, and popular sense. [Citation omitted.]

In construing an insurance contract, the court must give effect to the instrument as a whole and, if possible, to every part thereof. [Citation omitted.]

....

The construction of a written contract is ordinarily a question of law for the court. [Citations omitted.]

In Boisen v. Petersen Flying Serv., 222 Neb. 239, 241, 383 N.W.2d 29, 31 (1986), we held: "Regarding a question of law, this court has an obligation to reach its conclusion independent from the conclusion reached by a trial court."

Other rules for construction of an insurance policy were stated in Malerbi v. Central Reserve Life, 225 Neb. 543, 550-51, 407 N.W.2d 157, 162-63 (1987):

An insurance policy is to be construed as any other contract to give effect to the parties' intentions at the time the contract was made. Waylett v. United Servs. Auto. Assn., 224 Neb. 741, 401 N.W.2d 160 (1987). Where the terms of such a contract are clear, they are to be accorded their plain and ordinary meaning. Waylett, supra. On the other hand, where a clause in an insurance contract can be fairly interpreted in more than one way, there is ambiguity to be resolved by the court as a matter of law. Denis v. Woodmen Acc. & Life Co., 214 Neb. 495, 334 N.W.2d 463 (1983). Our rules of construction require that in the case of such ambiguities, the construction favorable to...