Sowa v. National Indem. Co.
| Decision Date | 27 September 1984 |
| Docket Number | No. 50463-6,50463-6 |
| Citation | 102 Wn.2d 571,688 P.2d 865 |
| Parties | Anna M. SOWA and Kenneth B. Sowa, husband and wife; and Charles O. Shoemaker, Appellants, v. NATIONAL INDEMNITY COMPANY, Respondent. Anna M. SOWA and Kenneth B. Sowa, husband and wife, Appellants, v. ALLSTATE INSURANCE COMPANY, Respondent. |
| Court | Washington Supreme Court |
Peters, Schmalz, Leadon & Fowler, Jay R. Inslee, Selah, Charles O. Shoemaker, Jr., Sunnyside, for appellants.
Gavin, Robinson, Kendrick, Redman & Mays, Michael W. Leavitt, Yakima, for respondent Nat. Indem. Co.
McArdle, Dohn & Talbott, G. Thomas Dohn, Blaine G. Gibson, Yakima, for respondent Allstate Ins. Co.
These consolidated cases were certified to this court following the trial court's denial of underinsured motorist coverage to plaintiffs. We affirm.
Appellants (Sowas) seek benefits from two different insurance companies for damages sustained in a motorcycle accident. Appellants' son, Kevin, purchased the motorcycle involved from Matt Shoemaker several days before the accident. In his deposition, Kevin stated that the two boys negotiated the sale and agreed on a price of $300 for the bike. Kevin delivered the check and took possession of the bike, the registration slip and the title.
Because the legal owner of the bike, Charles Shoemaker (Matt's father), was not available, the title was not signed over to Kevin. Kevin apparently intended to return for the necessary signature sometime during the following week. No insurance was purchased for the bike between the day of its acquisition and the accident.
The present controversies arise from the Sowas' claims for underinsured motorist benefits from their own automobile policy and the motorcycle policy owned by Charles Shoemaker. The facts pertinent to each case are as follows:
Sowa v. National Indemnity Company
In the first case, the Sowas seek coverage from National Indemnity Company under a policy issued to the bike's original owner, Charles Shoemaker. That policy provided coverage for various vehicles, including the motorcycle. The policy included underinsured motorist protection to "covered person[s]". The policy defines covered persons as (1) the insured (Shoemaker) or any family member, (2) any other person occupying "your" covered auto, and (3) any person for damages that person is entitled to recover because of bodily injury to which this coverage applies sustained by a person described above. Ex. A, at 15.
Appellants filed a declaratory judgment action, alleging that they are entitled to underinsured motorist benefits as individuals occupying a covered vehicle (definition (2)). National Indemnity answered, denying coverage. National Indemnity argues that the pronoun "your" in definition (2) requires that it insure only owned vehicles. According to National Indemnity, Charles Shoemaker did not own the motorcycle on the day of the accident because of the prior sales transaction. To prove this fact, National Indemnity notes the Sowas admit that, on the day of the accident, both parties intended the Sowas to have the possession, use, control and benefit of the motorcycle. The Sowas also admit that, prior to the accident, Shoemaker had relinquished control of the vehicle, that Shoemaker would have had to obtain permission to use the motorcycle on the date of the accident, and that the only remaining task for completion of the sale was the transfer of title.
The trial judge concluded these uncontroverted facts disposed of the legal issue of coverage and granted summary judgment in favor of National Indemnity.
The second dispute arises from the Sowas' attempt to obtain underinsured motorist benefits from an insurance policy covering their personal automobiles. The following sequence of events appears from the record.
Although the Sowas originally insured their automobiles through Nationwide Insurance, they changed insurance companies shortly after the effective date of Washington's underinsured motorist statute, RCW 48.22.030. Under the underinsured motorist statute, insurance companies are required to offer underinsured motorist coverage to all Washington policyholders.
The policy in question was purchased through respondent Allstate Insurance Company. The type of coverage purchased, however, is disputed. Allstate contends it offered underinsured motorist coverage to the Sowas at that time in accordance with the statute, but Mrs. Sowa rejected it. The record shows that she signed a form which acknowledged that she did not desire such coverage. Ex. 2. This form also states that Allstate's underinsured motorist coverage, if purchased, does not provide coverage for insureds while they are "occupying or operating motorcycles or similar vehicles not insured under [their] policy."
Two months after the policy was issued, the Sowas notified Allstate of their desire to modify their policy. The extent of this request is also disputed. Appellants' affidavits assert that they requested underinsured/uninsured motorist coverage at this time. Allstate's records indicate only that the Sowas requested uninsured motorist coverage. Ex. 3.
Regardless of what was requested, the Sowas' insurance policy shows an initial addition of uninsured motorist coverage. Later policy forms show underinsured motorist coverage. Moreover, it is not clear from the record what endorsements were sent in conjunction with this policy. While the Sowas allege they received nothing but the bills, Allstate asserts that the endorsements were actually sent.
The trial judge assumed either that no endorsement or an uninsured motorist endorsement was sent. He then resolved the question solely by interpreting the underinsured motorist statute, RCW 48.22.030. He reasoned that while the statute would provide automatic coverage to appellants if the accident had occurred while they were riding in their automobile, the statute does not require automatic coverage when insureds are using owned but not insured motorcycles. He entered summary judgment in favor of Allstate and appellants appealed both cases to the Court of Appeals, Division Three, which certified the cases to this court.
The first case presents a relatively simple question of contract interpretation. Appellants assert that the contract between Shoemaker and National Indemnity provided underinsured motorist protection to anyone occupying a vehicle named in the policy regardless of ownership of the vehicle. Appellants note the policy in question provides underinsured motorist protection to "covered persons". Covered persons, in turn, is defined as the named insured and any other person "occupying your covered auto". "Your covered auto", then, is defined as any vehicle shown in the declarations. Since, on the day of the accident, the motorcycle was listed on the policy, appellants assert they are entitled to coverage.
The trial judge disagreed. He believed that the definition of covered auto was to be read in conjunction with other definitions in the policy. He reasoned that since the policy defined "you" and "your" as the named insured, i.e Charles Shoemaker, the policy required that Charles Shoemaker have a possessory or ownership interest in the motorcycle in order to provide underinsured motorist coverage to individuals in the appellants' situation. As Shoemaker had surrendered all indicia of ownership except the legal title, the judge concluded his interest was insufficient to support appellants' interpretation of the policy.
Appellants now argue that this interpretation of the policy is incorrect, that the above language is ambiguous, and that it is unfair to allow an insurance company to charge a premium for a vehicle without providing coverage. These arguments are not persuasive. Since an insurance contract is merely a written contract between an insurer and the insured, courts cannot rule out any language which the parties have put into it. Sears, Roebuck & Co. v. Hartford Accident & Indem. Co., 50 Wash.2d 443, 449, 313 P.2d 347 (1957). The trial judge's decision gives effect to all of the policy terms and is the logical reading of the policy. Appellants' position, on the other hand, ignores the policy's definition of "you" and "your".
Moreover, the trial judge's decision corresponds with the general rule that insurance policies are highly personal contracts which terminate upon sale of the insured vehicle. See 7 J. Appleman, Insurance § 4269 (Cum.Supp.1972). Also, as this court has frequently stated, the ownership requirement in insurance policies is supported by sound policy considerations. For instance, the ownership requirement allows insurers to regulate the risk they assume in relationship to the premium charged. Kelly v. Aetna Cas. & Sur. Co., 100 Wash.2d 401, 407-08, 670 P.2d 267 (1983). The interpretation of the trial court reflects these policy considerations.
We also reject appellants' assertion that the language quoted is ambiguous. The test for ambiguity is set out in Dairyland Ins. Co. v. Ward, 83 Wash.2d 353, 358, 517 P.2d 966 (1974).
In our opinion, the proper inquiry is not whether a learned judge or scholar can, with study, comprehend the meaning of an insurance contract, but whether the insurance policy contract would be meaningful to the layman who at his peril may be legally bound or held to understand the nature and extent of its coverage. The language of insurance policies is to be interpreted in accordance with the way it would be understood by the average man, rather than in a technical sense. Zinn v. Equitable Life Ins. Co., 6 Wn.2d 379, 107 P.2d 921 (1940).
The average consumer, we believe, would read the term "your covered auto" as requiring an ownership interest in the vehicle. Since Mr....
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