Smith v. Southern Farm Bureau Cas. Ins. Co.

• Decision Date: 15 May 2003
• Docket Number: No. 02-787.,02-787.
• Citation: 114 S.W.3d 205,353 Ark. 188
• Parties: Sarah SMITH, v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY.
• Court: Arkansas Supreme Court

114 S.W.3d 205

353 Ark. 188

Sarah SMITH, v. SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY.

No. 02-787.

Supreme Court of Arkansas.

May 15, 2003.

Jeff Slaton, Springdale, for appellant.

Davis, Wright, Clark, Butt & Carithers, PLC, by Constance G. Clark and Don A. Taylor, Fayetteville, for appellee.

RAY THORNTON, Justice.

Appellant, Sarah Smith, appeals the trial court's granting of summary judgment in favor of Southern Farm Bureau Casualty Insurance Company (Farm Bureau). Mrs. Smith appeals the trial court's decision that the phrase "you or any member of your family residing in your household" in an insurance policy was not ambiguous, and that there was no question of material fact concerning the terms of the policy's underinsured-motorist clause.

On November 29, 1999, Sarah Glass, now Sarah Smith, was injured when Melbern Samuels struck a vehicle in which Mrs. Smith was a passenger. Mr. Samuel's insurance carrier settled with Mrs. Smith for the policy limit of $25,000.00. Mrs. Smith contended that her damages exceeded $25,000.00 and attempted to make a claim under the underinsured-motorist coverage of her then boyfriend, Raymond Smith, issued by Southern Farm Bureau Casualty Insurance Company. Raymond Smith's car was not involved in Mrs. Smith's accident. Farm Bureau denied the claim on the basis that the policy covered only the policy holder and/or members of the policy holder's family residing in his household. Because Mr. Smith and Mrs. Glass were living together but not married at that time, she was not considered to be a family member by Farm Bureau.

After her marriage to Raymond Smith, Sarah Smith filed suit against Farm Bureau on October 1, 2001, arguing that she was entitled to be covered by the underinsured-motorist clause and medical-payment coverage under her husband's Farm Bureau policy. The disputed portion of the insurance policy states that under the medical-payment coverage, the person covered is defined as "you or any member of your family residing in your household." Mrs. Smith moved for summary judgment on the grounds that the policy did not define the word "family" and it was an ambiguous term that as a matter of law must be construed against Farm Bureau in favor of coverage. Farm Bureau also moved for summary judgment on the grounds that the insurance policy was not ambiguous, and that Mrs. Glass was not a member of Mr. Smith's family at the time of the accident.

A hearing was held on March 14, 2002, where the trial court granted summary judgment in favor of Farm Bureau, finding that the only reasonable conclusion was that the word "family" implies a legal or blood relationship. The trial court found that any other interpretation would render the language of the policy reading "you or any member of your family residing in your household" meaningless. An order was entered April 29, 2002, and it is from that order that Mrs. Smith appeals. We affirm the summary judgment and hold that there was no question of fact for the jury concerning the meaning of the word "family."

Summary judgment is to be granted by a trial court only when it is clear that there are no genuine issues of material fact to be litigated and the party is entitled to judgment as a matter of law. Spears v. City of Fordyce, 351 Ark. 305, 92 S.W.3d 38 (2002). Once the moving party has established a prima facie entitlement to summary judgment, the opposing party must meet proof with proof and demonstrate the existence of a material issue of fact. Id. On appellate review, we determine if summary judgment was appropriate based on whether the evidentiary items presented by the moving party in support of the motion leave a material fact unresolved. Id.

Ambiguous terms within an insurance policy should be construed against the insurer. Southern Farm Bureau Casualty Insurance Co. v. Williams, 260 Ark. 659, 543 S.W.2d 467 (1976). However, we also held that "the terms of an insurance contract are not to be rewritten under the rule of strict construction against the company issuing it so as to bind the insurer to a risk which is plainly excluded and for which it was not paid." Id. Insurance contracts are to be construed strictly against the insurer, but where language is unambiguous, and only one reasonable interpretation is possible, it is the duty of the courts to give effect to the plain wording of the policy. Unigard Security Insurance Co. v. Murphy Oil, USA, Inc., 331 Ark. 211, 962 S.W.2d 735 (1998). Our court of appeals has expanded on this language and stated that the "language of an insurance policy is to be construed in its plain, ordinary, and popular sense." Tri-State Insurance Co. v. Sing, 41 Ark.App. 142, 850 S.W.2d 6 (1993); Prudential Insurance Co. of America v. Jones, 1 Ark. App. 51, 613 S.W.2d 114 (1981).

Mrs. Smith argues that because the term "family" was not defined by the policy, it must be ambiguous. There is no authority for this argument. Furthermore, we have encountered undefined terms in insurance policies and deemed the terms unambiguous. For example, in Nationwide Mutual Insurance Co. v. Worthey, 314 Ark. 185, 861 S.W.2d 307 (1993), we held that a motor-driven cycle used on public streets was a "motor vehicle" even though it was not specifically listed in the policy as a motor vehicle. Id.

We have established as a guideline of contract interpretation that the different clauses of a contract must be read together and that the contract should be construed so that all parts harmonize. Continental Casualty Co. v. Davidson, 250 Ark. 35, 463 S.W.2d 652 (1971). Construction that neutralizes any provision of a contract should never be adopted if the contract can be construed to give effect to all provisions. Id.

The Court of Appeals of Washington recently encountered a similar issue in a case where a young man was injured in an automobile accident and then attempted to make a claim under the insurance policy of his mother's boyfriend. Matthews v. Penn-America Insurance Co., 106 Wash. App. 745, 25 P.3d 451 (2001). That court held that the victim, who lived in the same household as his mother and her boyfriend at the time of the accident, was not a member of the insured's "immediate family" for purposes of coverage under his mother's boyfriend's policy. The court explained that the word "family" must be construed in the popular sense:

The meanings of "family" range from "a group of persons connected by blood, by affinity, or by law" to "a group of people who live, sleep, cook and eat upon the premises as a single housekeeping unit." The question is whether the average purchaser of insurance would reasonably read Penn-America's language to intend coverage for the traditional group connected by blood, affinity, or law, or for the more broadly defined group of people who live ... upon the same premises. If "family" is to be construed broadly, Blake would be covered because he, his mother, and Edinger lived together under the same roof for most of the five years before his 1994 accident. But if "family" is read in the more limited traditional sense, Blake would not be covered because he was not related by blood, affinity, or law to Edinger. We conclude that, in the context of Penn-America's policy, the average purchaser would read "family" in the traditional, "connected by blood, affinity, or by law." Thus, Blake was not covered as a family member.

Id. (Citations omitted.)

This case is directly on point with the instant case, and we agree that if we were to construe the term "family" to mean anything other than related by blood or by law, then the terms "family" and "household" would merge, making the words "your family" in the phrase "you or any member of your family residing in your household" both redundant and meaningless. We agree with the Washington court's holding that "`family' must further qualify the definition of `insured' beyond the qualification imposed by residency." Id.

We further agree with the trial court in its finding:

[T]he insurance policy in the instant case provides coverage for "you or any member of your family residing in your household." (Exhibit A, p. 11)(Emphasis added). In order to afford coverage under the policy, two requirements must be met: 1) the claimant must be a member of the policyholder's family; and 2) the claimant must reside in the household of the policyholder. To construe the term "family" in the non-traditional sense of "all those who live under one roof," would merge those two requirements into one and would reject the rules of construction requiring one to construe the contract of insurance so that all clauses harmonize and requiring one to give legal effect to all language used.

We conclude that to give effect to the entire phrase, "you or any member of your family residing in your household," the term "family" has the meaning in common parlance as kin, by blood, marriage, or adoption. Any other interpretation nullifies the portion of the policy language requiring the claimant to be a member of the insured's family. Otherwise, the claimant could be any person living in the same home as the insured.

We find no error in the trial court's finding that there is no ambiguity in the word "family" as included in the policy, and that summary judgment was appropriate. Accordingly, we affirm.

DONALD L. CORBIN, J., concurs.

ANNABELLE CLINTON IMBER, J., dissents.

DONALD L. CORBIN, Justice, concurring.

This case was certified to us by the Arkansas Court of Appeals as presenting an issue of first impression and substantial public interest: Whether the term "family," as used in an automobile insurance policy, encompasses a couple living together. I agree with the majority that the trial court was correct in ruling that the plain meaning of the term is kin, or persons related by blood or marriage. I further agree that because Appellant Sarah Smith was not, at the time of the accident, married to the insured, Raymond Smith, she was not covered under his...