Universal Underwriters Ins. Co. v. Hill, 78179

• Court: Court of Appeals of Kansas
• Writing for the Court: Before GERNON, P.J., GREEN, J., and TIMOTHY E. BRAZIL; GREEN
• Citation: 24 Kan.App.2d 943,955 P.2d 1333
• Parties: UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Appellee, v. David C. HILL and Shelley Adams, Defendants, and American Standard Insurance Company of Wisconsin, Appellant.
• Docket Number: No. 78179,78179
• Decision Date: 13 March 1998

Page 1333

955 P.2d 1333 24 Kan.App.2d 943 UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Appellee,
v.
David C. HILL and Shelley Adams, Defendants,
and
American Standard Insurance Company of Wisconsin, Appellant. No. 78179. Court of Appeals of Kansas. March 13, 1998.

Page 1334

SYLLABUS BY THE COURT

1. Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.

2. The construction of a written instrument is a question of law, and the instrument may be construed and its legal effect determined by an appellate court. Whether an instrument is ambiguous is a matter of law to be decided by the court. This court's review of questions of law is unlimited.

3. When an insurance policy is unambiguous, the court may not make another contract for the parties.

4. The test to determine whether an insurance contract is ambiguous is not what the insurer intends the language to mean, but what a reasonably prudent insured would understand the language to mean. An insurance policy is not ambiguous unless there is a genuine uncertainty as to which of two or more possible meanings is proper. The policy must be read as a whole.

Byron L. Sloan, Kansas City, MO, for appellant.

Alvin D. Herrington and Shari R.L. Willis, of McDonald, Tinker, Skaer, Quinn & Herrington, P.A., Wichita, for appellee.

Before GERNON, P.J., GREEN, J., and TIMOTHY E. BRAZIL, District Judge, assigned.

GREEN, Judge:

This appeal involves a dispute over the amount of insurance coverage available to Olathe Ford Sales, Inc., (Olathe Ford) under an insurance policy issued to it by Universal Underwriters Insurance Company (Universal Underwriters). American Standard Insurance Company of Wisconsin, Inc., (American Standard)[24 Kan.App.2d 944] appeals from a judgment of the trial court declaring that Olathe Ford had only $25,000 in coverage for a car accident. On appeal, American Standard contends that the trial court erred in determining that the policy language in question was unambiguous. In addition, American Standard contends that certain provisions of Universal

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Underwriters' insurance policy violated the Kansas Automobile Injury Reparations Act. We disagree and affirm.

During the summer of 1993, David C. Hill purchased a new car from Olathe Ford. While awaiting delivery of his new car, Hill received a loaner car from Olathe Ford. The loaner car was owned by Olathe Ford. While driving the loaner car, Hill was involved in a car accident. Shelley Adams was injured in the accident.

In the summer of 1995, Adams filed suit against Hill and Olathe Ford. When the accident occurred, Adams was insured by American Standard and Olathe Ford was insured under an umbrella policy issued by Universal Underwriters. Adams had underinsured limits of $100,000. In the fall of 1995, American Standard intervened in the underlying suit between Adams and Hill.

Hill admitted liability for the injuries and damages sustained by Adams as a result of the collision. The parties stipulated that Adams suffered $300,000 in damages, including $172,972 in noneconomic loss and $89,368 in future economic loss.

Following an entry of judgment in the underlying case, Universal Underwriters moved for declaratory judgment in a separate action. Universal Underwriters asked that the trial court declare Hill's coverage forfeited because Hill breached its policy provisions by confessing to judgment. In the alternative, Universal Underwriters requested that Hill's coverage under its policy be limited to $25,000 should the trial court deny its request for forfeiture.

After dismissing Universal Underwriters' forfeiture claim, the trial court granted summary judgment in favor of Universal Underwriters. The trial court determined that Universal Underwriters' policy was unambiguous and that it only provided coverage limits of $25,000 per person to permissive users such as Hill. The trial court also found that Universal Underwriters' policy provisions did not violate the Kansas Automobile Injury Reparations Act.

[24 Kan.App.2d 945] The primary issue before the trial court was whether Universal Underwriters' policy contained a limit of $25,000 for permissive users such as Hill or whether the general limits of $300,000 were available. American Standard contends that Universal Underwriters' policy is ambiguous as to the proper limits, and, therefore, the full $300,000 in policy limits is available for the claims against Hill.

Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Mitzner v. State Dept. of SRS, 257 Kan. 258, 260-61, 891 P.2d 435 (1995). Here, the facts are essentially undisputed. Whether the trial court erred in granting Universal Underwriters' summary judgment depends upon the construction given the language of the policy.

Moreover, our Supreme Court has frequently observed that " '[a]s a general rule, the construction and effect of a contract of insurance is a matter of law to be determined by the court. If the facts are admitted, then it is for the court to decide whether they come within the terms of the policy.' Farm Bureau Mut. Ins. Co. v. Horinek, 233 Kan. 175, Syl. p 1, 660 P.2d 1374 (1983)." Harris v. Richards, 254 Kan. 549, 552, 867 P.2d 325 (1994). Moreover, this court recently reviewed the rules of construction for insurance contracts in Oetinger v. Polson, 20 Kan.App.2d 255, 257-58, 885 P.2d 1274 (1994), rev. denied 256 Kan. 996 (1995) (quoting U.S.D. No. 259 v. Sloan, 19 Kan.App.2d 445, 452-53, 871 P.2d 861 [1994] ):

" ' "The construction of a written instrument is a question of law, and the instrument may be construed and its legal effect determined by an appellate court." [Citation omitted.] "Whether an instrument is ambiguous is a matter of law to be decided by the court." [Citation omitted.] This court's review of questions of law is unlimited. [Citation omitted.]' "

The parties agree that determination of the policy limits for claims against Hill must be made based upon the language in several different sections of the umbrella policy. In the policy declarations, part 500 covers garage operations and auto hazards and has a $300,000 limit. The policy's definitions establish that Adams' claims against Hill fall

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within the policy's definitions of "auto hazard." That definition reads: " 'AUTO HAZARD' means the ownership,[24 Kan.App.2d 946] maintenance, or use of any AUTO YOU own or which is in YOUR care, custody or control and: ... (3) furnished for the use of any person or organization."

No dispute exists that Hill is an "insured" under the policy for purposes of Adams' claims. The policy states:

"WHO IS AN INSURED--...

....

"With respect to the AUTO HAZARD:

1. YOU;

2. Any of YOUR partners, paid employees, directors, stockholders, executive officers ...;

3. Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR permission."

Thus, as required by Kansas law, Olathe Ford's policy covers permissive users such as Hill. See K.S.A. 40-3107(b).

While the general declarations indicate that policy limits for "auto hazard" under part 500 is $300,000, the policy has what the parties refer to as a "step-down" provision. The step-down provision reduces the policy limits for certain persons covered under the contract--in this case, the policy limits are reduced for permissive users. The policy states:

"THE MOST WE WILL PAY--Regardless of the number of INSUREDS or AUTOS insured by this...