Windsor Insurance Company v. Lucas

• Decision Date: 25 April 2000
• Parties: (Mo.App. E.D. 2000) . Windsor Insurance Company, Appellant, v. Artricia Lucas, et al., Respondents. Case Number: ED76614 Missouri Court of Appeals Eastern District Handdown Date: 0
• Court: Missouri Court of Appeals

24 S.W.3d 151 (Mo.App. E.D. 2000)

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.

Windsor Insurance Company, Appellant, v. Artricia Lucas, et al., Respondents.

Case Number: ED76614

Missouri Court of Appeals Eastern District

Handdown Date: 04/25/2000

Appeal From: Circuit Court of St. Louis County, Hon. Patrick Clifford

Counsel for Appellant: Lawrence J. Permuter

Counsel for Respondent: Gretchen Myers and William P. Hogan

Opinion Summary: Windsor Insurance Company appeals from a judgment finding the "step-down" provision of an automobile insurance policy, which provided lesser coverage for losses caused by a permissive driver unrelated to the insured, to be ambiguous as well as contrary to Missouri public policy. Windsor also appeals the trial court's award of attorney's fees to the defendants.

REVERSED AND REMANDED.

Division Three holds: The trial court erred in finding the insurance policy ambiguous. The insurance policy twice mentioned the "step-down" provisions in sections entitled "Limits of Liability" and "Definitions." The trial court also erred in finding "step down" provisions contrary to public policy. "Step down" provisions are permitted in numerous other jurisdictions, and absent specific statutory language, insurance companies are only required to provide liability limits to the extent specified in the Missouri Financial Responsibility Law. Finally, the trial court erred in awarding attorney's fees to defendants. Neither "special" nor "very unusual" circumstances existed to warrant contravention of the American Rule, which requires parties to account for their own attorney's fees.

Opinion Author: Clifford H. Ahrens, Judge

Opinion Vote: REVERSED AND REMANDED. Teitelman, P.J., and Mooney, J., concur.

Opinion:

Opinion modified by Court's own motion on May 2, 2000. This substitution does not constitute a new opinion.

Windsor Insurance Company ("Windsor") appeals from a judgment of the Circuit Court of St. Louis County finding the "step-down" provision of an automobile insurance policy, which provided lesser coverage for losses caused by a permissive driver unrelated to the insured, to be ambiguous as well as contrary to Missouri public policy. Windsor also appeals the trial court's award of attorney's fees to the defendants. We reverse and remand.

On July 13, 1997, Artricia Lucas ("Lucas") gave Charles Billups ("Billups"), her boyfriend, permission to drive her automobile. While driving, Billups was involved in an accident. Several individuals have made claims against Billups for alleged negligent operation of the vehicle.

Lucas was insured by Windsor. The applicable insurance policy provided maximum coverage for bodily injury in the amount of $100,000 per person and $300,000 per accident. However, the policy contained a "step-down" provision which limited coverage to $25,000 per person and $50,000 per accident, the minimum insurance coverage required under Missouri law, in the event of injury caused by a "non-relative" driver whom Lucas permitted to drive the car ("permissive driver"). Windsor, arguing for the applicability of the "step down" provision, filed an action in interpleader to determine the extent of its liability.

In its judgment and order, the trial court noted the declaration page of the policy provided for bodily injury liability coverage in the amount of $100,000 per person and $300,000 per accident. The trial court also stated the language providing for reduced coverage of permissive users was found only in the "definitions" section of the policy and not in the "limits of liability" section. Claiming the "step-down" provision was contradicted in at least five sections of the policy, the trial court declared the terms of the policy ambiguous and declared "step-down" clauses for permissive users against Missouri public policy. Consequently, the trial court ordered the limits of liability applicable to Billups under Lucas's insurance policy to be $100,000 per person and $300,000 per accident.¹ This appeal follows.

In its first point on appeal, Windsor contends the trial court erred in finding the "step-down" provision limiting liability for permissive users was ambiguous as the "step down" limits were specifically articulated in the "limitations of liability" section and not contradicted elsewhere in the policy. Windsor also contends the trial court erred in determining such "step-down" provisions are contrary to Missouri public policy because Missouri law, as well as the law of other states, has recognized and enforced such clauses in the past. We consider these two issues separately.

We first address the issue of ambiguity in the insurance policy. The interpretation of the meaning of an insurance policy is a question of law. Buck v. American Family Mut. Ins. Co., 921 S.W.2d 96, 98 (Mo. App. 1996). When evaluating the meaning of an insurance policy, an ambiguity arises when there is duplicity, indistinctness, or uncertainty in the meaning of words used. Id. Courts will not create an ambiguity in order to distort the language of an unambiguous insurance policy. Id. Where provisions of an insurance policy are ambiguous, they are construed against the insurer. Id. Further, an ambiguous provision of a policy designed to cut down, restrict, or limit insurance coverage already granted, or introducing exceptions or exemptions must be strictly construed against the insurer. Id. However, the fact the parties may disagree on the interpretation of a term or clause in an insurance policy does not create an ambiguity. Lang v. Nationwide Mutual Fire Ins. Co., 970 S.W.2d 828, 830 (Mo. App. 1998).

The declarations page, under the headings of "coverage" and "limits of liability," lists bodily injury at $100,000 each person and $300,000 each accident. The first page of the insurance policy states "[t]he declaration page along with this policy hereby form the agreement between the insured and Windsor." The definition of the term "insured" used in the "Liability" portion of the policy states:

"insured(s)" means...[a] person using your insured car with your permission. The limits of liability for a permissive user will be equal to minimum limits of liability specified by the Financial Responsibility Law of the state in which the accident occurs.

Under the heading "Limits of Liability -- Part A Only," the policy states:

Regardless of the limits of liability shown on the Declarations page the bodily injury and property damage liability...for each insured, other than you and a relative, will equal the limits of the Financial Responsibility Law of the state in which the accident occurred.

We cannot say as a matter of law that the insurance policy is ambiguous or creates uncertainty or indistinctness in the meaning of words used. The "Liability" portion of the policy twice mentions the "step down" provision in calculating liability limits for permissive drivers, and nowhere does the policy state the limits on the declaration page are final and absolute in every situation.

We recognize there is no prohibition under Missouri law for an insurance contract to set forth the maximum amount the insurer will pay in one part, then stipulate the circumstances under which the insurer may lower the maximum amount it will pay, so long as all considered sections contain plain and unambiguous terms, and reading them together does not create an ambiguity. See Farmers Ins. Co., Inc. v. Pierrousakos, 49 F.Supp.2d 1148, 1152 (E.D.Mo. 1999). The insurance policy read as a whole is unambiguous in creating a "step-down" provision limiting the liability when the automobile is operated by a non-relative permissive user. The trial court erred in finding ambiguity in the contract and awarding coverage in the amount of $100,000 per person and $300,000 per accident.

We now consider whether "step down" provisions in automobile insurance policies are contrary to Missouri public policy. As the term "public policy" is vague, there must be found definite indications in the law of the sovereignty to justify the invalidation of a contract as contrary to that policy. Muschany v. United States, 324 U.S. 49, 66-67, 65 S.Ct. 442, 451, 89 L.Ed. 744, 756 (1945). Exceptions based on public policy must usually find support in necessary implication from statutory provisions. Halpin v. American Family Mut. Ins. Co., 823 S.W.2d 479, 483 (Mo. 1992).

Missouri courts recognize freedom of contract in liability insurance. Halpin, 823 S.W.2d at 483. However, it is the public policy of Missouri to assure financial remuneration for damages sustained through the negligent operation of motor vehicles on the public highways of the state not only by the owners of such automobiles but also by all persons using such vehicles with the owner's permission. Allstate Ins. Co. v. Sullivan, 643 S.W.2d 21, 22 (Mo. App. 1982). This public policy is evidenced by Missouri law, which requires an automobile owner's policy of liability insurance to insure "any other person...using any such motor vehicle"with the express or implied permission of such named insured...subject to limits...[of] twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and,...fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident." Section 303.190 RSMo (1994). The issue here is whether an insurer must provide a permissive user with the same liability limits as the named insured or whether an insurer can provide greater coverage to the named insured so long as a permissive user's limits comply with the minimum limits stipulated in the Missouri Financial Responsibility Law, section 303.190 RSMo (1994). We hold Missouri public policy does not preclude "step down" provisions in insurance policies which contain lesser liability limits for permissive drivers so long as the lesser limits comply with the minimum limits provided in the...