Werley v. United Services Auto. Ass'n

Decision Date12 June 1972
Docket Number1455,Nos. 1454,s. 1454
Citation498 P.2d 112
PartiesHarley D. WERLEY, Appellant, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Appellee. UNITED SERVICES AUTOMOBILE ASSOCIATION, Cross-Appellant, v. Harley D. WERLEY, Cross-Appellee.
CourtAlaska Supreme Court

Bruce E. Gagnon and Joseph L. Young, of Atkinson, Conway, Young & Bell, Anchorage, for appellant-cross-appellee Werley.

Catherine S. Krendl and Murphy L. Clark, of Hughes, Thorsness, Lowe, Gantz & Clark Anchorage, for appellee-cross-appellant, United Services.

Before BONEY, C. J., and RABINOWITZ and CONNOR, JJ.

CONNOR, Justice.

In this appeal we are called upon to interpret the meaning of certain 'other insurance' clauses contained in three identical insurance policies. Through coincidence the policies were issued by the same company. We must determine what effect the 'other insurance' clauses should have upon the uninsured motorist coverage provided by each policy.

At issue in this case is whether appellant Werley, a passenger in his own car who had already recovered under the uninsured motorist protection of his own automobile insurance policy, is entitled to recover under identical provisions of two policies which extend coverage to him through the driver of his car. The identical 'other insurance' provisions in each of the three policies would on their face prevent recovery. This case squarely presents the issue of whether Alaska should adopt the Oregon or 'Lamb-Weston' 1 rule of insurance law concerning conflicting 'other insurance' clauses.

The insurer, who prevailed below, cross-appeals on only one issue: whether the $400 award of attorney's fees was inadequate.

The facts are relatively simple and, for the purpose of the motion for summary judgment, were stipulated between the parties. No issue of fact remains. The only question is which party is entitled to summary judgment as a matter of law.

Appellant owned and was a passenger in an automobile driven by a Mrs. Pope. A collision occurred with a second car driven by an uninsured motorist, assumed to be negligent. It is agreed that Mrs. Pope was not negligent. Appellee, United Services Automobile Association, had issued three identical automobile liability policies with uninsured motorist limits of $15,000 per person and $30,000 per accident, one to plaintiff and two to the Popes. 2 Appellant recovered $15,000 on his policy and now seeks an additional $15,000 on each of the two Pope policies. It is agreed that appellant's damages for the injuries received equal or exceed combined policy limits.

U.S.A.A. refused payment on both Pope policies because of two 'other insurance' clauses applicable to uninsured motorist coverage, found in all three policies:

I

'Other Insurance: With respect to bodily injury to an insured while occupying an automobile not owned by the named insured, the insurance under Part IV shall apply only as excess insurance over any other similar insurance available to such insured and applicable to such automobile as primary insurance, and this insurance shall then apply only in the amount by which the limit of liability for this coverage exceeds the applicable limit of liability of such other insurance.

II

'Except as provided in the foregoing paragraph, if the insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable for a greater proportion of any loss to which this Coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance.'

In the settlement on his policy, plaintiff reserved the right to sue on the Pope policies. After suit was brought, both parties moved for summary judgment, appellee raising several additional grounds irrelevant to this appeal. Construing the above provisions, the superior court held that the clauses,

'when read as a whole, are not conflicting. (Miller v. Allstate Ins. Co., (66 Wash.2d 871) 405 P.2d 712 (Wash. 1965); Russell v. Paulson, (18 Utah 2d 157) 417 P.2d 658 (Utah 1966)). Therefore, the clauses control the present situation and an additional recovery under the policies must be denied.'

I

Appellant asserts that the 'other insurance' clause conflicts with the statutory minimum coverage under AS 21.89.020, 3 the uninsured motorist provisions in the Alaska Statutes, and should be disregarded by this court. While recognizing that the policy was issued before the effective date of AS 21.89.020, appellant urges that, even if we cannot apply AS 21.89.020, the 1966 amendment to AS 28.20.440 should be construed to have required all automobile policies issued after January 1, 1967, to provide minimum uninsured motorist coverage of $15,000 per person and $30,000 per accident.

In Hart v. National Indemnity Co. 4 we held that the provisions of AS 28.20.440 are mandatory only if a policy is certified as proof of financial responsibility or is required by law due to a person's previously having been in an accident. We find no reason to alter this ruling in light of the 1966 amendment and find it applicable to the instant case where no certification of financial responsibility was required. 5

In conjunction with his claim that the 'other insurance' clause is repugnant to the mandatory minimum coverage provision of our uninsured motorist statute, appellant argues that, by virtue of representations made at the time the policy was issued, 6 appellee should be either estopped to deny applicability of the statute or that we should hold that the representation incorporated the statute into the policy by reference.

However, even if we are to assume the applicability of AS 21.89.020 to this case, the provision in the statute allowing an individual to reject uninsured motorist coverage removes any conflict between the 'other insurance' clause and the uninsured motorist statute. Because the statute permits rejection of uninsured motorist coverage, and appellee's representation included the privilege of rejecting such coverage, a policy provision which 'waives' coverage in the event the insured has other available insurance does not directly contravene the statute. Therefore, we decide this issue in favor of the insurance carrier.

II

Appellant argues that we should disregard the 'other insurance' clauses and hold U.S.A.A. liable to the combined policy limits. This argument presents the central issues in this appeal which are: first, whether the 'other insurance' clauses create an ambiguity that cannot be resolved by logic or standards of interpretation commonly used by the courts in construing insurance policy provisions; and, second, if we cannot harmonize the clauses through interpretation, what method should be employed to resolve the conflict.

Appellee asserts that, from a reading of the language of the policy, it is clear that appellant's policy was intended to provide primary coverage. From this it would follow that the 'other insurance' clauses in the two Pope policies would bar further recovery by appellant. Where the terms of the policy are clear and unambiguous, we will, of course, give effect to the language. 7 However, we must first determine whether appellant's policy, by its terms, must be regarded as secondary.

Most, perhaps all, automobile liability insurance policies contain 'other insurance' clauses providing that in the event of other applicable insurance, (1) this insurance shall not apply (an 'escape' clause), or (2) that this insurance shall be excess only (an 'excess' clause), or (3) there shall be a proration of the loss (a 'proration' clause). Combinations of these are also found. 8

U.S.A.A. argues that the prorata clause of the Werley policy provides that he, as owner of the automobile involved in the accident, can recover to the policy limit unless there is 'other insurance' available to him. In U.S.A.A.'s view Pope policies are available to Werley only for those amounts that exceed the Werley policy limit. U.S.A.A. contends that the Pope policies were not available to Werley for amounts that do not exceed the $15,000 policy limit of the Werley policy. Further, U.S.A.A. asserts that the clauses are clear and hence do not conflict as to amounts in excess of $15,000. U.S.A.A. contends that once the Werley policy had paid to its $15,000 limit, none of the policies could pay more because the excess clauses of the Pope policies apply only to the amount by which the limit of liability of their coverage exceeds the limit of liability of the primary policy. It is asserted that there is no liability under the Pope policies because no liability is created under the language of either policy for amounts exceeding $15,000.

Appellant urges another view of the policies. In his analysis the policy clauses are void because each policy attempts to defer liability to the other policies. Werley points out that under paragraph II of his own policy's 'other insurance' clause, his recovery on that policy is to be reduced or prorated by other available insurance. Following this language to its logical conclusion, Werley asserts that he is entitled to only $5,000 under his own policy since the two Pope policies are 'other insurance' and both have $15,000 limits. However, Werley feels that in looking to the two Pope policies, where he is not the named insured, no recovery is available since under paragraph I of the 'other insurance' clause only excess coverage is available. Paragraph I also seeks to label 'other insurance' as 'primary' insurance. For this reason Werley contends that the label 'primary' cannot be affixed to his policy, as it says nothing of being the primary policy and affirmatively states that it is prorata insurance. From the foregoing Werley concludes that a problem of circularity arises, with each policy deferring to the other two, there being no...

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