Wasson v. Shelter Mut. Ins. Co.

Decision Date08 November 2011
Docket NumberNo. WD 72991.,WD 72991.
PartiesCynthia WASSON and Kenneth Wasson, Respondents, v. SHELTER MUTUAL INSURANCE COMPANY, Appellant.
CourtMissouri Court of Appeals

OPINION TEXT STARTS HERE

Supreme Court Denied Dec. 20, 2011.

Application for Transfer Denied March 6, 2012.

William Clayton Crawford and James Patrick Maloney, Kansas City, MO, for appellant.

Laurie Schear Ward, Sedalia, MO, for respondents.

Before Division Two: JAMES M. SMART, JR., P.J., MARK D. PFEIFFER and CYNTHIA L. MARTIN, JJ.

JAMES M. SMART, JR., Judge.

Shelter Mutual Insurance Company appeals a declaratory judgment in favor of its insureds, Cynthia and Kenneth Wasson. Shelter contends that the court erred in finding certain provisions of its insurance policy ambiguous and in ruling in the Wassons' favor on that basis. The judgment is reversed in part and affirmed in part.

Background

On May 14, 2008, Cynthia Wasson was seriously injured when her motor vehicle was struck by another driver. At the time of the accident, Cynthia and Kenneth Wasson were insured under an automobile insurance policy issued by Shelter. That policy included an endorsement for underinsured motorist (UIM) coverage.1

The driver who struck Cynthia was insured by State Farm Mutual Insurance. Following the accident, State Farm paid the Wassons $100,000 on behalf of its insured, which exhausted the liability coverage provided by that policy. This was insufficient to compensate the Wassons for the total amount of their monetary damages, which exceeded $600,000.

After receiving payment from State Farm, the Wassons made a claim for UIM coverage under their policy with Shelter. Shelter paid the Wassons $150,000 for UIM coverage, claiming that to be the policy limits after the policy's “set-off” provision is applied. Shelter arrived at the figure of $150,000 by starting with the amount Shelter contends was the declared policy limit for UIM coverage, $250,000, and off setting that by the $100,000 that State Farm paid the Wassons.

The Wassons filed a petition for declaratory judgment in which they claimed that a total of $500,000 was available for UIM coverage under the policy. The petition set forth policy provisions and alleged that the parties “disagree on the interpretation of the insurance policy contract entered into between [them] as to the amount of coverage available to Plaintiffs under their underinsured motorist coverage.” The Wassons sought a declaration that Shelter owed them an additional $350,000 for UIM coverage. Shelter denied that any additional UIM benefits were available under the policy.

At a bench trial in July 2010, the parties presented their stipulations to the court and Cynthia Wasson testified briefly. The parties stipulated that Ms. Wasson had suffered serious injuries in the accident on May 14, 2008, and that her total economic damages exceeded $600,000. The sole question with regard to the Wassons' UIM claim was the amount of coverage that was applicable to those damages.

The Wassons argued that the policy is ambiguous with respect to the declared limit of liability for UIM coverage, such that the UIM limit stated in the Declarations would be $500,000. They also claimed that the “set-off” provision in the policy is ambiguous and that the UIM policy limits should not be reduced by the $100,000 paid by State Farm. In sum, the Wassons interpret the contract as subtracting the amount paid by State Farm ($100,000) from the total damages (over $600,000), leaving Shelter to pay the uncompensated damages up to the policy limits (which the Wassons believe to be $500,000). Shelter interprets the contract as starting with UIM coverage limits of $250,000 and reducing that amount by State Farm's $100,000 payment, leaving Shelter owing the reduced policy limit of $150,000. This is a summary of the parties' positions:

+------------------------------------------------------------------+
                ¦Wassons' Position   ¦                        ¦Shelter's Position  ¦
                +--------------------+------------------------+--------------------¦
                ¦                    ¦                        ¦                    ¦
                +--------------------+------------------------+--------------------¦
                ¦$500,000            ¦Declared UIM Limit      ¦$250,000            ¦
                +--------------------+------------------------+--------------------¦
                ¦–0–                 ¦Set–off Amount          ¦–100,000            ¦
                +--------------------+------------------------+--------------------¦
                ¦–150,000            ¦UIM Coverage Paid       ¦–150,000            ¦
                +--------------------+------------------------+--------------------¦
                ¦                    ¦                        ¦                    ¦
                +--------------------+------------------------+--------------------¦
                ¦$350,000            ¦UIM Coverage Not Paid   ¦$–0–                ¦
                +------------------------------------------------------------------+
                

The trial court ruled in favor of the Wassons on the two issues relevant to UIM coverage, i.e., the declared limit of liability and the “set-off” provision.2 The court found the UIM endorsement to be ambiguous when read in conjunction with the Declarations page of the policy. Construing this ambiguity in favor of the insureds, the court declared that the Wassons were entitled to $500,000 in UIM coverage. With regard to the “set-off” issue, the court found that prior case law required it to reject Shelter's claim that it is entitled to offset its policy limits by the $100,000 paid by State Farm. In light of Shelter's prior payment of $150,000, the court declared that “there remains $350,000 due and owing under the underinsured provisions of the contract.” Shelter appeals.

Point on Appeal

Shelter says the trial court erred in declaring that the Wassons are entitled to a total of $500,000 in UIM coverage based on its finding that provisions of the Shelter policy were ambiguous. Shelter claims that (1) the limit of liability for UIM coverage is clearly and unambiguously stated in the Declarations as $250,000 per person, and (2) the policy clearly and unambiguously provides for a reduction, or “set-off,” of the UIM coverage limit by the amount State Farm paid on behalf of the tortfeasor. According to Shelter, no additional UIM coverage is available beyond the combined $250,000 that the Wassons have already received from State Farm and Shelter. Thus, the issues to be decided in this appeal are whether the declared limit for UIM coverage under the policy is $250,000 or $500,000, and whether the amount paid by Shelter must be reduced by the $100,000 paid to the Wassons by the other driver's insurance.

Standard of Review

The parties agree that the determinative issue is whether specific provisions of the insurance policy are ambiguous. “The interpretation of an insurance policy, and the determination [of] whether coverage and exclusion provisions are ambiguous, are questions of law that this [c]ourt reviews de novo. Burns v. Smith, 303 S.W.3d 505, 509 (Mo. banc 2010). In construing the terms of an insurance policy, we apply the meaning that would be attached by an ordinary person of average understanding if purchasing insurance, and we resolve ambiguities in favor of the insured. 3 Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. banc 2007). “Language is ambiguous if it is reasonably open to different constructions.” Id.

Issue I: UIM Coverage Liability Limits

We turn first to Shelter's argument concerning the limits of liability for UIM coverage. The purpose of underinsured motorist coverage is to provide insurance coverage for insureds who have been bodily injured by a negligent motorist whose own automobile liability insurance coverage is insufficient to pay for the injured person's actual damages. See Long v. Shelter Ins. Co., 351 S.W.3d 692, 695 (Mo.App. W.D., 2011). “UIM coverage is floating, personal accident insurance that follows the insured individual wherever he goes rather than insurance on a particular vehicle.” Id. In Missouri, there are no statutory requirements for underinsured motorist coverage. Krombach v. Mayflower Ins. Co., Ltd., 827 S.W.2d 208, 210–11 (Mo. banc 1992). Thus, it is the contract of insurance that defines and limits such coverage. Id.

To resolve this issue, we look to the policy's declarations, endorsements, and amendments pertaining to UIM coverage. See Long, 351 S.W.3d at 701 (“To determine whether an insurance policy provides coverage, we look to the insurance contract itself.”). Ordinarily, one begins with the declarations page and the coverage declarations there. In this case, we see that “Coverage A” of Part I of the policy is “Bodily Injury Liability Coverage.” “Coverage B” is Property Damage, “Coverage C” is Medical Payments Coverage, “Coverage D” is Accidental Death, “Coverage E” is Uninsured Motorists Coverage (not under insured), “Coverage F” is Collision, “Coverage G” is Comprehensive, and “Coverage J” is Emergency Road Service.

Underinsured Motorist coverage is not one of the coverages that Shelter lists as a standard item on the declaration sheet, but arises from an endorsement that, along with five other endorsements, has been added to the policy; it is shown, along with the other endorsements, as an endorsement (with the limits of liability of $250,000 and $500,000 specified) on the Declarations page, all of which are declared to be “a part of this policy.”

The Declarations page refers to the endorsement as A–577.6–A Underinsured Motorists $250,000 Per Person/$500,000 Per Accident. As in the case of the other endorsements, UIM coverage is implemented within the policy purely by the specific UIM endorsement. If there is no specific UIM endorsement, there is no underinsured motorist protection and no provision at all related thereto. There are only two places to find anything about Wassons' UIM coverage—the Declarations page, and the endorsement pages.

One of the endorsements (other than the UIM endorsement) changes the limits on one of...

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