State Farm Mut. Auto. Ins. Co. v. Deherrera

• Decision Date: 21 September 2006
• Docket Number: No. 20050868-CA.,20050868-CA.
• Citation: 145 P.3d 1172,2006 UT App 388
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Appellee, v. Ruby DeHERRERA; Rae-Ann Martinez; Yolanda Herrera; and Angela Aragon, a minor, Defendants and Appellant.
• Court: Utah Court of Appeals

145 P.3d 1172

2006 UT App 388

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Appellee, v. Ruby DeHERRERA; Rae-Ann Martinez; Yolanda Herrera; and Angela Aragon, a minor, Defendants and Appellant.

No. 20050868-CA.

Court of Appeals of Utah.

September 21, 2006.

George Waddoups, Debry & Associates, Salt Lake City, for Appellant.

Stuart H. Schultz, Strong & Hanni, Salt Lake City, for Appellee.

Before GREENWOOD, Associate P.J., McHUGH and ORME, JJ.

OPINION

CAROLYN B. McHUGH, Judge:

¶ 1 Ruby DeHerrera appeals from summary judgment in favor of State Farm Mutual Automobile Insurance Company (State Farm), rejecting DeHerrera's claim that the insurance company was required by the terms of the policy and by Utah's omnibus insurance statute, see Utah Code Ann. § 31A-22-303 (2005), and Utah's compulsory insurance statute, see id. § 31A-22-304, to provide the policy limits for each insured involved in a single accident, irrespective of the number of injured persons. This is an issue of first impression for the appellate courts of Utah. We affirm.

BACKGROUND

¶ 2 This case arises out of a May 11, 2003 automobile accident. DeHerrera, Yolanda Herrera, and Rae-Ann Martinez were passengers in a 2000 Pontiac Sunfire owned by Robert Pacheco and driven, with Pacheco's permission, by Manuel Olmos. State Farm issued an automobile insurance policy to Pacheco covering the subject vehicle. Just prior to the accident, Herrera and Martinez had an argument during which Martinez grabbed the steering wheel, causing Olmos to lose control. DeHerrera was injured in the resulting crash.

¶ 3 Following the accident, State Farm paid DeHerrera $50,000, claiming it was the maximum amount available under the policy for bodily injury to one person in a single accident. In exchange, DeHerrera released Olmos, Pacheco, and Martinez from any personal liability, but she retained the right to seek further coverage under the policy between State Farm and Pacheco.¹ DeHerrera claims that the policy provides $50,000 in coverage for each of the three insured persons involved in the accident—for a total of $150,000.

¶ 4 On September 17, 2003, State Farm filed a complaint for declaratory relief. DeHerrera filed an answer, a third-party complaint, and a cross-claim in response. Thereafter, State Farm moved for summary judgment. For purposes of that motion, the parties stipulated that Olmos, Pacheco, and Martinez were each insured as permissive users of the vehicle under Pacheco's policy with State Farm. The parties further stipulated, for purposes of the summary judgment motion only, that Olmos, Pacheco, and Martinez were each negligent and a proximate cause of the accident.

¶ 5 The trial court agreed with State Farm that the policy unambiguously limited the amount of coverage available for a single person injured in an accident to $50,000, notwithstanding the fact that more than one person insured under the policy may have negligently contributed to the accident. DeHerrera appeals, claiming that the policy is ambiguous on this point and must be construed against the insurer. DeHerrera also contends that the interpretation urged by State Farm is contrary to the Utah omnibus insurance statute, see Utah Code Ann. § 31A-22-303, and the Utah compulsory insurance coverage requirements, see id. § 31A-22-304.

ISSUE AND STANDARD OF REVIEW

¶ 6 The issue on appeal is whether the trial court correctly granted summary judgment in favor of State Farm after concluding that coverage was limited to $50,000.

When reviewing summary judgment, we review the facts in the light most favorable to the losing party. Because summary judgment is granted as a matter of law, we review the trial court's ruling on legal issues for correctness. We determine only whether the trial court erred in applying the governing law and whether the trial court correctly held that there were no disputed issues of material fact.

Beltran v. Allan, 926 P.2d 892, 895 (Utah Ct.App.1996) (quotations and citations omitted).

ANALYSIS

I. The Policy Language

¶ 7 DeHerrera first contends that the insurance policy is ambiguous. We construe insurance contracts "`pursuant to the same rules applied to ordinary contracts.'" Saleh v. Farmers Ins. Exch., 2006 UT 20, ¶ 14, 133 P.3d 428 (quoting Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272, 1274 (Utah 1993)). "[U]nless the language of an insurance contract is ambiguous or unclear, the court must construe it according to its plain and ordinary meaning." First Am. Title Ins. Co. v. J.B. Ranch, Inc., 966 P.2d 834, 836 (Utah 1998). Because insurance contracts are contracts of adhesion, "`ambiguous or uncertain language in an insurance contract that is fairly susceptible to different interpretations should be construed in favor of coverage.'" Farmers Ins. Exch. v. Versaw, 2004 UT 73, ¶ 25, 99 P.3d 796 (quoting United States Fid. & Guar. Co. v. Sandt, 854 P.2d 519, 522-23 (Utah 1993)). To avoid ambiguity, "a contract of insurance must use language and grammar capable of understanding by a reasonable insurance purchaser." Id. at ¶ 8 (citing Sandt, 854 P.2d at 521-22). The Utah Supreme Court has explained that the test for insurance contract clarity asks:

Would the meaning [of the language of the insurance contract] be plain to a person of ordinary intelligence and understanding, viewing the matter fairly and reasonably, in accordance with the usual and natural meaning of the words, and in the light of existing circumstances, including the purpose of the policy[?]

Id. (alterations in original) (quotations and citation omitted). In this case, we agree with the trial court that the meaning of the policy would be plain to a person of ordinary intelligence and understanding.

¶ 8 The policy language at issue states:

The amount of bodily injury liability coverage is shown on the declarations page under "Limits of Liability—Coverage A— Bodily Injury. Each Person. Each Accident." Under "Each Person" is the amount of coverage for all damages due to bodily injury to one person. "Bodily injury to one person" includes all injury and damages to others resulting from this bodily injury, and all emotional distress resulting from this bodily injury, and all emotional distress resulting from this bodily injury sustained by other persons who do not sustain bodily injury. Under "Each Accident" is the total amount of coverage, subject to the amount shown under "Each Person," for all damages due to bodily injury to two or more persons in the same accident.

The amount of property damage liability coverage is shown on the declarations page under "Limits of Liability—Coverage A— Property Damage, Each Accident."

We will pay damages for which an insured is legally liable up to these amounts.

The limits of liability are not increased because more than one person or organization may be an insured.

¶ 9 The policy provides a limit of $50,000 for bodily injury to one person in a single accident. According to DeHerrera, that limit should be applied for each insured, thereby making State Farm's cumulative obligation $150,000. In contrast, State Farm argues that the policy language plainly states, first, that the policy limit of $50,000 for "[e]ach [p]erson" is "the amount of coverage for all damages due to bodily injury to one person." The policy then expressly states that "[t]he limits of liability are not increased because more than one person or organization may be an insured." State Farm contends that these statements when read together clearly and unambiguously defeat DeHerrera's argument. We agree.

¶ 10 Taking the usual and natural meaning of the words, we hold that a policy holder of ordinary intelligence would understand that a single limit of $50,000 for bodily injury applies only if one person is injured in the subject accident, and that the limit will not be increased even if more than one person is an insured.² In reaching this conclusion, we accept the reasoning of the majority of jurisdictions that have considered this question. See GRE Ins. Group v. Green, 194 Ariz. 251, 980 P.2d 963, 965 (Ct.App.1999) (holding that language similar to that contained in the State Farm policy unambiguously applied a limit for bodily injury to a single person regardless of the number of covered persons); Murbach v. Noel, 343 Ill.App.3d 644, 278 Ill.Dec. 426, 798 N.E.2d 810, 812 (2003) (same); Mid-Century Ins. Co. v. Shutt, 17 Kan.App.2d 846, 845 P.2d 86, 89 (1993) (same); American Standard Ins. Co. v. May, 972 S.W.2d 595, 601-02 (Mo.Ct.App.1998) (same); Infinity Ins. Co. v. Dodson, 2000 MT 287, ¶ 28, 302 Mont. 209, 14 P.3d 487 (same); Manriquez v. Mid-Century Ins. Co., 779 S.W.2d 482, 485 (Tex.App.1989) (same); Folkman v. Quamme, 264 Wis.2d 617, 665 N.W.2d 857, 860-61 (2003) (same). But see Haislip v. Southern Heritage Ins. Co., 254 Va. 265, 492 S.E.2d 135, 137 (1997) (holding that state's omnibus insurance statute required separate limits for each insured person despite contrary, unambiguous policy language);³ Iaquinta v. Allstate Ins. Co., 180 Wis.2d 661, 510 N.W.2d 715, 716-17 (Ct. App.1993) (same); Miller v. Amundson, 117 Wis.2d 425, 345 N.W.2d 494, 497 (Ct.App. 1984) (same).

II. The Utah Statutes

A. The Omnibus Statute

¶ 11 DeHerrera argues that even if the policy language unambiguously limits coverage to $50,000 for bodily injury to a single person regardless of the number of insured persons, this court should refuse to enforce that provision as contrary to Utah's omnibus insurance statute. See Utah Code Ann. § 31A-22-303. Section 303 provides that:

(1)(a) . . . [A] policy of motor vehicle liability coverage under Subsection 31A-22-302(1)(a) shall:

. . . .

(ii)(A) if it is an owner's policy, designate by appropriate reference all the motor vehicles on which coverage is granted, insure the person named in the policy, insure any other person using any named motor vehicle with the express or implied permission of the named insured, and, except as provided in Subsection (...