Webb v. State Farm Mut. Auto. Ins. Co., 25659

Decision Date03 April 1972
Docket NumberNo. 25659,25659
PartiesJohn E. WEBB, a minor, et al., John E. WEBB, a minor, et al., Plaintiffs-Respondents, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant, Lee Ann Burton, a minor, et al., Intervenors-Respondents.
CourtMissouri Court of Appeals

Thomas E. Deacy, Jr., Edward W. Mullen, Spencer J. Brown, Deacy & Deacy, Kansas City, for appellant.

Lonnie J. Shalton, Popham, Popham, Conway, Sweeney & Fremont, Samuel L. Sayles, Kansas City, for respondents.

SHANGLER, Chief Judge.

The question we must decide is whether an insurer which has issued an automobile liability policy protecting against injuries or death caused by an uninsured motorist may lawfully reduce benefits owing thereunder by payments made to the injured parties under the separate medical expense coverage of that policy.

The parties agree that defendant State Farm Mutual Automobile Insurance Company issued to intervenors Harold E. Burton and Iris Burton its policy of automobile liability insurance. The policy contained under Insuring Agreement I, 'Coverage C--Medical Payments' and an Insuring Agreement III, 'Uninsured Automobile Coverage'. A separate premium was paid for each of such coverages. Under the medical payments coverage, defendant agreed to pay reasonable medical expenses to the named insured or any occupant of the insured automobile up to the declared limit of $500 for each person. Under the uninsured motorist coverage, defendant agreed to pay all sums which the insured (including occupants of the insured automobile who were also 'insureds' under this coverage) might be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injuries, including death, sustained by such insured, up to the declared limit of $10,000 for any one person or a total of $20,000 for two or more persons as a result of one accident.

Insuring Agreement III, Uninsured Automobile Coverage, contained this condition:

'13. LIMITS OF LIABILITY.

(b) Any amount payable under this coverage because of bodily injury sustained in an accident by a person who is an insured under this coverage shall be reduced by:

(3) all sums paid or payable on account of such bodily injury under Coverages C and M of a policy issued by this company.'

While the insured automobile was being driven by intervenor Lee Ann Burton, a daughter of the policyholders, it was struck by an automobile negligently operated by Mayme Cappo, an uninsured motorist. The parties agree that all persons injured and damaged by the negligence of the uninsured motorist, including plaintiffs and intervenors, were legally entitled to recover damages from her. The occupants of the insured automobile were minor plaintiff John E. Webb, minor intervenor Lee Ann Burton, and Terry M. Short, all of whom were seriously injured, and Randy L. Burton, minor son of the policyholders, who was killed in the collision. The parties have stipulated that the value of all claims for injuries, wrongful death, loss of services and medical expenses exceeded the $20,000 applicable policy limit under the uninsured motorist coverage (and, apparently, that the medical expenses exceeded $500 per person). Defendant recognized its liability to pay the full $20,000 uninsured motorist coverage but has contended that it is not liable to them also under the medical payments coverage of the policy.

Defendant settled the claim of the minor Terry M. Short and that of his parents for their loss of services for $2500 and paid the Webbs $500 under their medical payments coverage. Defendant has asserted that because of these payments, there remains available $17,000 under the uninsured motorist coverage for payment of all claims of plaintiffs and intervenors, and has admitted liability in that amount. Defendant sought a declaration that its total remaining liability was limited to $17,000 and that the provision of the policy crediting sums paid or payable under the medical payments provision against the total liability of $20,000 under the uninsured motorist coverage was valid, enforceable and binding.

It was the judgment of the trial court that the uninsured motorist and medical payment provisions of the policy were separate coverages and that defendant insurer was not entitled to deduct medical expense payments from the $20,000 otherwise payable under the uninsured motorist section of the policy, and that the provision of the policy (Insuring Agreement III(13)(b)(3)) undertaking to allow such credit was unenforceable. Accordingly, the court also adjudged that, in addition to the $20,000 already paid, the defendant owed under the medical expense provision of the policy $500 each to plaintiff John E. Webb, intervenors Burton (for burial expense of their deceased son) and plaintiff Lee Ann Burton. From this judgment defendant has appealed.

It is the position of the defendant that its right to offset medical payments due under the policy against its liability under the uninsured motorist coverage derives from contractual terms, consensually reached, which are clear and unambiguous and to which a court must give effect. It is the rule that except to the extent a statute may inhibit or public policy control, parties to an insurance contract are free to place such limitations and restrictions on the insurer's liability as they may be willing to agree. Kisling v. MFA Mutual Insurance Company, Mo.App., 399 S.W.2d 245, 252(10, 11); Northwestern Mutual Insurance Company v. Haglund, Mo.App., 387 S.W.2d 230, 232(1). For reasons we presently give, we have concluded that the effect of Insuring Agreement III(13) (b)(3) is to limit the defendant's uninsured motorist liability so as to reduce it below the statutory minimum in derogation of statutory requirement and in violation of declared public policy.

The uninsured motorist statute in effect at the time defendant's policy of insurance issued was Sec. 379.203, V.A.M.S. and which to the extent here pertinent, provided:

'1. No automobile liability insurance covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless coverage is provided therein or supplemental thereto, in not less than the limits for bodily injury or death set forth in section 303.030, RSMo, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom; provided, however, that the coverage required under this section shall not be applicable where any insured named in the policy shall reject the coverage in writing; and provided further, that unless the insured named in the policy requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured had rejected the coverage in connection with a policy previously issued him by the same insurers. Provisions affording such insurance protection against uninsured motorists issued in this state prior to October 13, 1967, shall, when afforded by any authorized insurer, be deemed, subject to the limits prescribed in this section, to satisfy the requirements of this section.' 1 (Emphasis supplied)

Section 303.030 of the Motor Vehicle Safety Responsibility Law, to the extent here pertinent, provides:

'. . . every such policy or bond is subject, if the accident has resulted in bodily injury or death, to a limit, exclusive of interest and costs, of not less than ten thousand dollars because of bodily injury to or death of one person in any one accident and, subject to said limit for one person, to a limit of not less than twenty thousand dollars because of bodily injury to or death of two or more persons in any one accident.'

In Sterns v. M.F.A. Mutual Insurance Company, Mo.App., 401S.W.2d 510, l.c. 514(1, 2), a case decided before uninsured motorist insurance had become a subject of legislative concern in this state, we recognized that such coverage is designed to close a gap in the protection afforded the public under existing financial responsibility laws and, within fixed limits, to provide recompense to innocent persons injured by motorists who lack financial responsibility. Maryland Casualty Company v. Howe, 106 N.H. 422, 213 A.2d 420, 421(1, 2); Kraft v. Allstate Insurance Company, 6 Ariz.App. 276, 431 P.2d 917, 919(2); Harleysville Mutual Casualty Co. v. Blumling, 429 Pa. 389, 241 A.2d 112, 115(2); Mission Insurance Company v. Brown, 63 Cal.2d 508, 47 Cal.Rptr. 363, 407 P.2d 275, 276(2). We also cited with approval the view, then as now generally held, that the purpose of uninsured motorist statutes (401 S.W.2d l.c. 517(1, 2)) "is to give the same protection to the person injured by an uninsured motorist as he would have had if he had been injured in an accident caused by an automobile covered by a standard liability policy". Stephens v. Allied Mutual Insurance Company, 182 Neb. 562, 156 N.W.2d 133, 136(6); American Motorists Ins. Co. v. Thompson, 253 Or. 76, 453 P.2d 164, 165; 7 Am.Jur.2d, Automobile Insurance Sec. 135, pp. 460--461; 7 Blashfield, Automobile Law and Practice, Sec. 274.4, p. 56 (Third Edition). Such statutes are liberally construed to accomplish their highly remedial purpose. Bryant v. State Farm Mutual Automobile Ins. Co., 205 Va. 897, 140 S.E.2d 817, 819(1); Gunnels v. American Liberty Ins. Co., 251 S.C. 242, 161 S.E.2d 822, 824(5).

Since 1967, when the uninsured motorist law was enacted, the minimum limits of any uninsured motorist coverage issued in this state have been required to conform to the minimum limits of $10,000 per person and $20,000 per occurrence prescribed for automobile liability policies under the financial responsibility law. These...

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