Vadheim v. Continental Ins. Co.

• Decision Date: 12 March 1987
• Docket Number: No. 52080-1,52080-1
• Citation: 734 P.2d 17,107 Wn.2d 836
• Parties: James L. VADHEIM, M.D. and Jeanne Vadheim, husband and wife, Appellants, v. CONTINENTAL INSURANCE CO., a foreign corporation, Respondent.
• Court: Washington Supreme Court

Page 836

107 Wn.2d 836

734 P.2d 17

James L. VADHEIM, M.D. and Jeanne Vadheim, husband and wife, Appellants, v. CONTINENTAL INSURANCE CO., a foreign corporation, Respondent.

No. 52080-1.

Supreme Court of Washington,

En Banc.

March 12, 1987.

Manza, Moceri, Gustafson & Messina, P.S., Patrick T. Manza, John S. Glassman, Tacoma, for appellants.

John H. Rayback, Seattle, for respondent.

GOODLOE, Justice.

Dr. James L. Vadheim appeals the trial court's order granting Continental Insurance Company's (Continental) summary judgment motion wherein the trial court determined that Vadheim was not entitled to any recovery under the automobile insurance policy's underinsured motorist provision. Specifically, the trial court found as a matter of law that Vadheim's insurance policy (1) was unambiguous and (2) that Vadheim was not entitled to stack his underinsured motorist coverages by the number of vehicles insured under the policy. We affirm in part and reverse in part.

Appellant was injured in an automobile accident on April 26, 1981, when a vehicle driven by Kevin Lee McLean collided with the Vadheim automobile. Vadheim suffered severe multiple injuries including a fractured skull and permanent brain damage in areas that control memory, smell and taste. As a result of his injuries, Dr. Vadheim is unable to continue his medical and surgical practice. McLean's automobile insurance policy provided bodily injury liability limits of $25,000. Vadheim collected this amount. McLean could not respond to damages sustained by Vadheim beyond his policy limits.

At the time of the collision, Continental insured Vadheim's automobiles under a policy that had been renewed May 18, 1980, and was effective until May 18, 1981. This policy provided a single limit liability of $300,000 per occurrence and protection against uninsured and underinsured motorists in the sum of $15,000 per person and $30,000 per accident. Three automobiles were insured under this policy and Vadheim paid a separate premium for each vehicle.

On April 21, 1982, Vadheim submitted a claim to Continental under the policy's uninsured/underinsured motorist provision. Vadheim claimed since three premiums were paid, one for each of the three vehicles, and each premium provided $15,000 uninsured/underinsured motorist coverage, that he should be able to "stack" his uninsured/underinsured coverage for a total recovery of not less than $45,000. Alternatively, Vadheim claimed that because of a clause in the policy that requires the policy to conform to state statutes, the policy should be conformed in accordance with amended RCW 48.22.030 to provide uninsured and underinsured coverage of $300,000 per vehicle, which in turn should be stacked for a total recovery of $900,000. The exact nature and extent of the doctor's injuries were not determined by the trial court.

Continental rejected Vadheim's claims and stated that the policy would not provide any underinsured motorist coverage for Vadheim's loss. Continental believed that by the contractual terms of the effective insurance policy the McLean car was neither an uninsured nor underinsured automobile.

Vadheim sued Continental and both parties subsequently moved for summary judgment. The court ordered supplemental briefs on the issue of whether the $15,000 limits of Continental's underinsured motorist coverage should be stacked because of the three premiums paid by Vadheim to Continental for his three cars. The court concluded that Vadheim was not entitled to multiply his automobile coverage by the number of vehicles insured. The trial court entered an order granting Continental's motion for summary judgment and dismissed Vadheim's complaint with prejudice, finding that the insurance policy was not ambiguous, that McLean was not an uninsured motorist and that Vadheim could not recover under the policy's underinsured motorist provision. Vadheim appealed to the Court of Appeals, and the Court of Appeals transferred the case to this court.

Initially, we must decide what effect, if any, RCW 48.22.030 has on the involved policy. Amended RCW 48.22.030, effective September 1, 1980, addresses underinsured motorist coverage. The trial court's order implicitly found RCW 48.22.030 had no effect. Amended RCW 48.22.030(2) combines uninsured and underinsured motorist coverage requirements, and states:

No new policy or renewal of an existing policy insuring

against loss resulting from liability imposed by law for bodily injury ... suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be issued ... unless coverage is provided therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of underinsured motor vehicles ...

Vadheim argues that RCW 48.22.030(3) and (4) are applicable. RCW 48.22.030(3) and (4) provide that the underinsured coverage required under subsection (2) shall be in the same amount as the insured's third party liability coverage, unless the insured rejects this coverage in writing. Appellant contends the policy's clause requiring conformity with state statutes requires amendment of the insurance contract to conform with the revised statute. By using the amended RCW 48.22.030 statute and the contract's conformity clause, Vadheim claims his original underinsured coverage of $15,000 should be conformed to the $300,000 single limit liability, which in turn should be multiplied by the three vehicles covered by the premiums to reach the $900,000 figure.

Britton v. Safeco Ins. Co., 104 Wash.2d 518, 707 P.2d 125 (1985), answers the question of whether amended RCW 48.22.030 applies to the Vadheim policy. The Britton court stated, at 527-28, 707 P.2d 125:

[T]his state's first statute regulating underinsured motorist coverage was the 1980 statute which became effective September 1, 1980, about 2 months before the insured's accident. As to that, statutes requiring that insurance policies be issued with uninsured or underinsured motorist coverage ordinarily embrace only policies thereafter issued and not existing policies ... Since the enactment clearly applies to the issuance of both "new" policies and "renewal" of existing policies, it precludes our giving it retroactive effect.

(Footnote omitted. Italics ours.) The Britton court, at 521, 707 P.2d 125, also stated that if the policy in effect at the time of the accident was not "issued" or "renewed" after September 1, 1980, the language of the insurance contract, and not statutory policy controls underinsured motorist coverage.

Vadheim's policy was issued May 18, 1980, and was effective until May 18, 1981. Underinsured motorist coverage was not required by statute when the policy was issued, but was available for Vadheim to purchase in any amount he wished. His accident occurred after the effective date of amended RCW 48.22.030, but before a "new" or "renewed" policy was issued. The policy limits in effect at the time of the accident did conform with pre-amended RCW 48.22.030. The record indicates Continental properly amended Vadheim's subsequently renewed policy so that it conformed with the requirements of amended RCW 48.22.030. Amended RCW 48.22.030 and the Britton court's interpretation of the statute make it clear that Vadheim's policy operative at the time of his accident was not affected by the new legislation. Consequently, we find that amended RCW 48.22.030 does not apply to this dispute and the language of the contract controls.

Vadheim contends that his policy contains a number of ambiguities which the trial court failed to construe in his favor. It is a general rule of insurance contract construction that an insurance policy must be meaningful to a layman who at his peril may be legally bound or held to understand the nature and extent of its coverage. Policy language is to be interpreted in accordance with the way it would be understood by the average man. Dairyland Ins. Co. v. Ward, 83 Wash.2d 353, 358, 517 P.2d 966 (1974). A clause in a policy is ambiguous when, on its face, it is fairly susceptible to two different interpretations, both of which are reasonable. Morgan v. Prudential Ins. Co. of Am., 86 Wash.2d 432, 435, 545 P.2d 1193 (1976). Furthermore, if any clause is ambiguous the court must apply a construction that is most favorable to the insured, even though the insurer may have intended another meaning. Morgan, at 435, 545 P.2d 1193. Exclusionary clauses are to be most strictly construed against the insurer and the policy interpreted in accordance with the way it would be understood by the average person purchasing insurance. Phil Schroeder, Inc. v. Royal Globe Ins. Co., 99 Wash.2d 65, 68, 659 P.2d 509 (1983).

Vadheim argues that the heading of Section IV in his policy creates an ambiguity. Section IV of Vadheim's policy is entitled "Uninsured (and underinsured) Motorists Insurance". The Section IV heading states:

This section deals with the protection afforded when an uninsured motorist is legally liable for bodily injury sustained by a person insured under this section.

Clerk's Papers, at 15. Vadheim contends the average person reading this paragraph would have cause to believe that they were covered, without restrictions, for injuries sustained at the hands of a motorist not possessing sufficient insurance to cover their damages. A heading is not a grant of coverage. It merely informs the policyholder what subject is covered in Section IV of the policy. This heading is neither ambiguous as to its purpose nor susceptible to two different meanings.

Appellant also contends that grants of coverage are contained in a section of the policy entitled the "Supplementary Renewal Declarations". Clerk's Papers, at 14. These declarations are a list of form numbers indicating the types of coverage included in Vadheim's policy. Vadheim intimates that a policyholder reading this portion of the policy would be misled...