Shafer v. Automobile Club Inter-Insurance Exchange

• Decision Date: 04 August 1989
• Docket Number: No. 16017,INTER-INSURANCE,16017
• Citation: 778 S.W.2d 395
• Parties: Edmond L. SHAFER, Plaintiff-Appellant, v. AUTOMOBILE CLUBEXCHANGE, Defendant-Respondent.
• Court: Missouri Court of Appeals

Page 395

778 S.W.2d 395

Edmond L. SHAFER, Plaintiff-Appellant, v. AUTOMOBILE CLUB INTER-INSURANCE EXCHANGE, Defendant-Respondent.

No. 16017.

Missouri Court of Appeals,

Southern District,

Division One.

Aug. 4, 1989.

Motion for Rehearing or Transfer to

Supreme Court Denied Aug. 28, 1989.

Application to Transfer Denied

Nov. 14, 1989.

John Wooddell, Bruer & Wooddell, P.C., Springfield, for plaintiff-appellant.

Brad J. Fisher, Lee Ann Miller, Woolsey, Fisher, Whiteaker & McDonald, Springfield, for defendant-respondent.

HOLSTEIN, Chief Judge.

Plaintiff Edmond L. Shafer filed an amended eight-count petition asserting various claims stemming from an auto accident in 1983. The counts relevant to this appeal are Count II, seeking recovery pursuant to uninsured motorist provisions of an insurance policy issued by defendant Automobile Club Inter-Insurance Exchange (Automobile Club) and prejudgment interest; Count III, asserting a statutory claim for vexatious refusal to pay the uninsured motorist claim; and Count V, alleging a claim for "tortious breach of contract" for delay in paying the uninsured motorist claim.

Pursuant to motions by Automobile Club, the trial court found that Counts III and V failed to state a claim upon which relief could be granted and that "the parties agree that Plaintiff's claims for prejudgment interest may be stricken from Count II." Accordingly, the trial court sustained the motions to dismiss Counts III and V and strike the claim for prejudgment interest on the uninsured motorist coverage claim. Following an entry of judgment disposing of all other claims, Shafer appeals.

On appeal two points are raised. The first is that the trial court erred in dismissing Counts III and V because the facts alleged are sufficient to invoke principles of substantive law entitling plaintiff to recover. The second point asserts the trial court erred in rejecting plaintiff's request for prejudgment interest on the uninsured motorist claim. We affirm in part and reverse in part.

When reviewing the dismissal of a claim for failure to state a cause of action, the pleading is given its broadest intendment all facts alleged are treated as true, and allegations are construed favorably to the plaintiff in determining whether the allegations invoke principles of substantive law. Missouri Mun. League v. Brunner, 740 S.W.2d 957, 958 (Mo. banc 1987). The facts recited below are extracted from Shafer's amended petition.

On September 17, 1983, Shafer was riding in a vehicle being driven by Mark Pruett in a northerly direction on Highway 160 in Christian County, Missouri. Ronald L. Munsey was operating a vehicle in the opposite direction. The Pruett and Munsey vehicles collided. The collision was a result of negligence by both Pruett and Munsey. ¹ At the time of the collision, Automobile Club had issued an insurance policy to Pruett which provided uninsured motorist coverage for persons occupying Pruett's vehicle. Under that coverage Automobile Club agreed to pay all sums up to a $25,000 limit which any insured might be "legally entitled to recover" from the owner or operator of an uninsured motor vehicle. Under the terms of the policy, Shafer was an insured. Munsey's vehicle was uninsured. Shafer claimed substantial injuries and damages in the sum of $5,000,000. Shafer submitted records of medical expenses in excess of $63,000 to Automobile Club.

Shafer's attorney contacted Automobile Club's claims adjuster with respect to his claim in January 1984 and by February 7, 1984, had furnished the adjuster with proof of losses and made a demand for payment due under the uninsured motorist coverage of the insurance contract. On February 15, 1984, Automobile Club's claims adjuster acknowledged its obligation to pay the uninsured motorist coverage. The adjuster indicated he was turning the matter over to Automobile Club's attorney who would draft the documents to accomplish the settlement. On May 14 Shafer's attorney contacted Automobile Club's attorney by letter. No reply was received. On October 3, 1984, Shafer's attorney notified Automobile Club's attorney that because of the silence, he assumed Automobile Club had decided not to pay the claim, and if that assumption was incorrect to contact him. Automobile Club's attorney did not reply.

On November 27, 1984, Shafer filed his suit against Pruett and Munsey and again offered to accept the $25,000 limits of the uninsured motorist coverage. The attorney for Automobile Club again did not reply. The first offer to settle occurred February 13, 1985, in which Automobile Club offered $25,000 to settle the claim.

Shafer asserted in Count III that the refusal to pay was vexatious and without reasonable cause or excuse. In support of Count V, the claim for tortious breach of contract, Shafer alleged that Automobile Club had unreasonably delayed settlement and was negligent in performing its obligations under the contract of insurance.

The first part of plaintiff's first point on appeal is that the facts alleged in Count III, if true, entitle plaintiff to damages for vexatious refusal to pay the claim. Section 375.420 ² provides:

In any action against any insurance company to recover the amount of any loss under a policy of automobile, fire, cyclone, lightning, life, health, accident, employers' liability, burglary, theft, embezzlement, fidelity, indemnity, marine or other insurance except automobile liability insurance, if it appears from the evidence that such company has refused to pay such loss without reasonable cause or excuse, the court or jury may, in addition to the amount thereof and interest, allow the plaintiff damages not to exceed twenty percent of the first fifteen hundred dollars of the loss, and ten percent of the amount of the loss in excess of fifteen hundred dollars and a reasonable attorney's fee; and the court shall enter judgment for the aggregate sum found in the verdict. ³

A preliminary question not addressed in the briefs of the parties is whether "automobile liability insurance" includes the uninsured motorist provisions. Among those provisions required in an automobile liability insurance policy is uninsured motorist coverage. § 379.203. The underlying public policy of the statute requiring uninsured motorist provisions as part of a liability insurance policy is to give insureds protection when injured by an uninsured motorist. Otto v. Farmers Ins. Co., 558 S.W.2d 713, 717 (Mo.App.1977). Liability insurance is generally that type of insurance protection which indemnifies one from liability to third persons as contrasted with insurance coverage for losses sustained by an insured. Black's Law Dictionary 824 (5th ed. 1979). Uninsured motorist coverage has been likened to accident insurance restricted to a limited class of accident, as distinguished from liability insurance. State ex rel. State Farm Mut. Auto. Ins. Co. v. Craig, 364 S.W.2d 343, 346-47 (Mo.App.1963). Taking into consideration the general definition of liability insurance, and that uninsured motorist coverage is designed to protect injured insureds, it becomes apparent that uninsured motorist coverage is not automobile liability insurance. Thus the coverage does not fall within the "automobile liability insurance" exception to § 375.420. It is true that the statute is penal in nature and must be strictly construed. However, that rule of construction should not be used to create exceptions not found in the plain language of the statute.

The briefs of the parties and our research disclose only one Missouri case specifically addressing the circumstances under which the penalties provided for in § 375.420 may be assessed on claims based on uninsured motorist coverage of an insurance policy, Craig v. Iowa Kemper Mut. Ins. Co., 565 S.W.2d 716 (Mo.App.1978). ⁴ The Western District of the Missouri Court of Appeals held that the vexatious penalty provisions are not applicable to uninsured motorist claims until after the liability of the uninsured tort-feasor is adjudicated. The court stated:

The obligation of insurer ... to the [insured] ... did not accrue merely because [the insured] proved a loss but only after the damage was adjudicated to result from the legal liability of the uninsured motorist.... [T]he claim of the [insured] did not become a loss under the policy ... until the legal cause for the injury first was fixed on the uninsured motorist. Only then did the claim become a loss under the policy, and so, ex contractu ... when final judgment was entered on the verdict ... against [the uninsured motorist].

Id. at 720-21. (Emphasis in original). The court did not rely on any statutory language or on any authoritative case law in reaching the above conclusion. The case also seemed to rely on a legal fiction that the contractual relationship of the insurer and insured is modified, or transformed, because the uninsured motorist coverage places them in an adversary position. Id. at 721. Only after an adjudication against the uninsured motorist was the relationship of insurer and insured restored. Id. at 722. Of course, the insurer and insured are in an adversary relationship whenever there is any claim by an insured for loss under any insurance policy.

Craig is no longer controlling authority. In cases decided prior to Craig, an unsatisfied judgment against an uninsured motorist was found not to be a prerequisite to bringing a contract action on the policy. Hill v. Seaboard Fire & Marine Ins. Co. 374 S.W.2d 606, 611 (Mo.App.1963); State ex rel. State Farm Mut. Auto. Ins. Co. v. Craig, supra, at 347. These cases are not mentioned by the Craig court, although they are impossible to harmonize with its rationale. Defendant's brief argues that Hill was reversed by Craig. If that is true, it is also true that Hill was followed subsequent to Craig. Edwards v. State Farm Ins. Co., 574 S.W.2d 505, 506 (Mo.App.1978).

Subsequent to the decision in Craig, the Supreme Court of Missouri,...