Rich v. Farm Bureau Mut. Ins. Co., Inc., 66319
| Decision Date | 17 January 1992 |
| Docket Number | No. 66319,66319 |
| Citation | 824 P.2d 955,250 Kan. 209 |
| Parties | Frances Jean RICH, Executor of the Estate of John E. Lavin, Deceased, Appellant, v. FARM BUREAU MUTUAL INSURANCE COMPANY, INC., and KFB Insurance Company, Inc., Appellees. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. The purpose of legislation mandating the offer of uninsured and underinsured motorist coverage is to fill the gap inherent in motor vehicle financial responsibility and compulsory insurance legislation. This coverage is intended to provide recompense to innocent persons who are damaged through the wrongful conduct of motorists who, because they are uninsured or underinsured and not financially responsible, cannot be made to respond in damages.
2. The uninsured and underinsured motorist statutes are remedial in nature. They should be liberally construed to provide a broad protection to the insured against all damages resulting from bodily injuries sustained by the insured that are caused by an automobile accident and arise out of the ownership, maintenance, or use of the insured motor vehicle, where those damages are caused by the acts of an uninsured or underinsured motorist.
3. The purpose of K.S.A. 40-284 is to provide the individual who is covered by the standard automobile liability policy with a right against his own insurer equal to that the insured would have against the uninsured or underinsured tortfeasor.
4. K.S.A. 40-284(e)(6) allows an insurer to exclude or limit its uninsured and underinsured motorist coverage to the extent that duplicative personal injury protection benefits apply. The legislature intended K.S.A. 40-284(e)(6) to permit an insured to recover underinsured motorist benefits which are not duplicative of PIP benefits. Any other result negates the legislature's intent to require underinsured motorist coverage protection.
Jeffrey W. Jones, of Sloan, Listrom, Eisenbarth, Sloan & Glassman, Topeka, argued the cause, and Gary E. Laughlin, of the same firm, was with him on the briefs, for appellant.
N. Larry Bork, of Goodell, Stratton, Edmonds & Palmer, Topeka, argued the cause, and Wayne T. Stratton, of the same firm, was with him on the brief, for appellees.
This is an action for the recovery of underinsured motorist benefits. John E. Lavin was a passenger injured in a one-vehicle accident. Both the driver and the owner of the vehicle paid the liability limits of their policies in settlement with Lavin. Because Lavin's underinsured motorist coverage limits exceeded the combined coverage of the two tortfeasors, Lavin made claim for underinsured motorist benefits against his own automobile liability insurance carrier, KFB Insurance Company, Inc. (KFB). That claim was denied by KFB on grounds the PIP benefits Lavin had collected from KFB exceeded his claim for underinsured motorist benefits. Lavin died three weeks before the trial court decision in favor of KFB. Lavin's executor now appeals the trial court ruling that, pursuant to K.S.A. 40-284(e)(6), the insurer was entitled to set off the underinsured motorist benefits it owed against the nonduplicative PIP benefits it previously paid.
Lavin was a passenger in a car driven by Jimmy Roberts, which was involved in a single-car accident. The owner of the vehicle was insured by State Farm Insurance Company, with liability limits of $50,000. Roberts was insured by Farm & City Insurance Company through Mid-States Adjustment, Inc., with $25,000 liability limits. Each of those insurers paid the limits of its policy to plaintiff in settlement of its insured's liability to Lavin.
Lavin was insured under four policies of automobile liability insurance, two with Farm Bureau Mutual Insurance Company, Inc., and two with KFB. Farm Bureau Mutual Insurance Company is not involved in this appeal.
Lavin received $31,167.52 of PIP wage loss benefits and $9,500 PIP medical benefits through KFB policy # FA65134, which had the highest PIP coverage. Lavin's KFB policy # BC41159 had the highest underinsured motorist coverage with a limit of $100,000. Lavin's underinsured motorist coverage exceeded the combined $75,000 liability coverages of the owner and driver of the vehicle ($50,000 + $25,000) by $25,000. The parties agree that the maximum liability coverage and PIP benefits plaintiff is entitled to receive is $177,000.
KFB denied the estate's claim for $25,000 on grounds the $40,667.52 in PIP benefits it paid Lavin exceeded his $25,000 claim for underinsured motorist benefits; therefore, the $25,000 claim can be offset against the PIP benefits already paid. K.S.A. 40-284(e)(6).
Lavin's insurance benefits were calculated as follows:
Liability $100,000
Lost Earnings 63,000 ($1,750 x 36 months)
Medical 9,500
Rehabilitation 4,500
--------
$177,000
The parties stipulated that a court or jury would probably find Lavin's actual damages exceeded $177,000. The parties also stipulated that none of the damages plaintiff claims under the underinsured motorist coverage are damages to which PIP benefits "apply." Thus, the issue is whether Lavin's estate is entitled to the $25,000 of underinsured motorist benefits or whether KFB is entitled to offset the $25,000 of underinsured motorist coverage against the nonduplicative PIP benefits it paid.
The trial court, relying on a literal reading of K.S.A. 40-284(e)(6), ruled the statute allows the insurer to reduce the underinsurance coverage by payments it already made for personal injury protection. The trial court held the $25,000 of underinsurance coverage could be set off against the PIP payments and, thus, KFB had no further liability to its insured. Lavin's estate appealed, claiming K.S.A. 40-284(e)(6) allows setoff of the underinsured benefits only if the benefits are duplicative of the PIP benefits KFB previously paid.
In 1968, the Kansas Legislature enacted the uninsured motorist statute, K.S.A.1968 Supp. 40-284. This statute allowed motorists who incurred damages in an automobile accident with an individual who had no automobile insurance to recover benefits for those damages from their own insurance company, up to the limits of their coverage. In 1981, the legislature amended the law to include within the uninsured motorist statute provisions for coverage for underinsured motorists. This section of the statute, K.S.A. 40-284(b), provides:
"Any uninsured motorist coverage shall include an underinsured motorist provision which enables the insured or the insured's legal representative to recover from the insurer the amount of damages for bodily injury or death to which the insured is legally entitled from the owner or operator of another motor vehicle with coverage limits equal to the limits of liability provided by such uninsured motorist coverage to the extent such coverage exceeds the limits of the bodily injury coverage carried by the owner or operator of the other motor vehicle."
The insurer charges a premium for uninsured motorist coverage and a separate premium for underinsured motorist coverage.
Other pertinent language of K.S.A. 40-284 allows an insurer to exclude or limit its uninsured and underinsured motorist coverage "to the extent that personal injury protection benefits apply." KFB's insurance policies incorporate the statute's language and state that coverage is not provided for bodily injury sustained by any person to the extent personal injury protection coverage applies.
PIP benefits apply to amounts for disability; funeral, medical, and rehabilitation expenses; substitution benefits; and survivor benefits. Intangible elements of damage, such as pain and suffering, disfigurement, and emotional distress are not covered by PIP benefits, but an injured person can recover such damages from the tortfeasor or, if the tortfeasor is underinsured, from the injured person's underinsured motorist insurance carrier. K.S.A. 40-3103(q).
Plaintiff contends the trial court erroneously construed the plain language of K.S.A. 40-284(e)(6) to allow KFB to offset the underinsured motorist coverage benefits against nonduplicative PIP benefits previously paid. Plaintiff further...
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