Zemelman v. Equity Mut. Ins. Co.

• Decision Date: 15 October 1996
• Docket Number: No. WD,WD
• Citation: 935 S.W.2d 673
• Parties: Leo and Rose ZEMELMAN, Appellant, v. EQUITY MUTUAL INSURANCE COMPANY, Respondent. 52117.
• Court: Missouri Court of Appeals

Page 673

935 S.W.2d 673

Leo and Rose ZEMELMAN, Appellant, v. EQUITY MUTUAL INSURANCE COMPANY, Respondent.

No. WD 52117.

Missouri Court of Appeals,

Western District.

Oct. 15, 1996.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Nov. 26, 1996.

Application to Transfer Denied

Jan. 21, 1997.

William Robert Merryman, Kansas City, for Appellant.

Paul Paxton Hasty, Jr., Kansas City, for Respondent.

Before ELLIS, P.J., and LOWENSTEIN and LAURA DENVIR STITH, JJ.

LOWENSTEIN, Judge.

Appellants, Leo and Rose Zemelman (Zemelman), appeal the trial court's entry of summary judgment entered on behalf of their insurance company, the defendant-respondent, Equity Mutual Insurance Company (Equity Mutual). The Zemelmans assert that the underinsured motorist coverage of $50,000 per person in the insurance contract between the parties is ambiguous, and urge this court to apply the reasonable expectations doctrine to hold that the underinsured motorist coverage amounts to "excess coverage" and they are entitled to recover under their policy an amount over and above funds received from the tortfeasor. The sole question before this court is whether the underinsured motorist coverage ($50,000) takes effect and covers the policy holder's losses in excess of the tortfeasor's automobile liability policy ($100,000). Leo Zemelman's, loss of consortium claim will not be reviewed by this court since it was dismissed at the trial court.

In June of 1993, Rose Zemelman, while driving her insured automobile, was injured in a collision with another driver. She suffered serious injuries and ultimately, lost all use and control of her left arm such that she requires assistance to perform fundamental tasks. At the time of the hearing, she asserted considerable actual damages for health care costs totaling over $85,000.00. The trial court did not make a finding with regard to damages however, because that court found the policy plain and unambiguous and denied plaintiff/appellant's claim for underinsured motorist coverage. The Zemelman policy with Equity Mutual defined an underinsured vehicle as one with less coverage than the underinsured limits, and further read to allow Equity Mutual a set off for all sums paid by the tortfeasor.

Zemelman collected the $100,000 limit in a suit against the negligent driver who had automobile insurance liability limits of $100,000 per person and $300,000 per occurrence. The Zemelman's policy of automobile insurance covered three vehicles and included an underinsured motorist clause with recovery Zemelman asserts that the policy is ambiguous with respect to the definition of underinsured, the "anti-stacking" set-off language under the limit of liability clause, and the "other insurance" clause. The pertinent provisions of the Zemelman's policy read as follows:

limits of $50,000 per person and $100,000 per occurrence. There is no claim here for stacking underinsured policies.

"We will pay compensatory damages which an insured is legally entitled to recover from the owner or operator of an underinsured vehicle because of bodily injury: (1) sustained by an insured; and (2) caused by an accident ...

We will pay under this coverage only after the limits of liability under any applicable bodily injury liability bonds or policies have been exhausted by payment of judgments of settlements ...

Underinsured motor vehicle means land motor vehicle or trailer of any type to which a bodily injury bond or policy applies at the time of the accident but it's limit for bodily injury liability is less than the limit of liability for this coverage.

The limit of liability shown in the Schedule for this coverage is our maximum limit of liability for all damages resulting from any one accident. This is the most we will pay regardless of the number of:

1. 'Insureds.'

2. Claims Made,

3. Vehicles involved in the accident.

However, the limit of liability shall be reduced by all sums paid because of the 'bodily injury' by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under Part A of this policy.

Other Insurance

If there is other applicable similar insurance we will pay only our share of he loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible insurance." [Emphasis added]

In determining whether there is an ambiguity in the policy, the court must abide certain rules of construction. Where insurance policies are unambiguous, the rules of construction are inapplicable, and absent a public policy to the contrary, the policy will be enforced as written. American Family Mutual Ins. Co. v. Ward, 789 S.W.2d 791, 795 (Mo. Banc, 1990). Courts will not create an ambiguity in order to distort the language of an unambiguous insurance policy. Rodriguez v. General Accident Ins. Co., 808 S.W.2d 379, 382 (Mo. Banc 1991). However, where provisions of an insurance policy are ambiguous, they are construed against the insurer. Behr v. Blue Cross Hospital Service, Inc., 715 S.W.2d 251, 255 (Mo. Banc 1986). Language is ambiguous if it is reasonably open to two different constructions and the language used will be viewed in the meaning that would ordinarily be understood by the layman who bought and paid for the policy. Robin v. Blue Cross Hospital Service, Inc., 637 S.W.2d 695, 698 (Mo. Banc 1982).

Appellants urge the court to apply the reasonable expectation doctrine in interpreting the insurance policy at issue. That doctrine provides that where there is an ambiguity, the insured are entitled to a resolution of the ambiguity consistent with their objective and reasonable expectations. Estrin Construction Co. Inc. v. Aetna Casualty & Surety Co., 612 S.W.2d 413 (Mo.App.1981). In order to apply the reasonable expectation doctrine, the court must first determine that the policy contains an ambiguity or is a contract of adhesion.

An adhesion contract is a form contract created by the stronger of the contracting parties. "It is offered on a 'take this or nothing' basis." Robin v. Blue Cross Hosp. Service, Inc., 637 S.W.2d 695, 697 (Mo. Banc 1982). Underinsured motorist coverage is optional coverage and therefore, the underinsured motorist clause is not a contract of adhesion. There are no statutory nor public policy requirements in Missouri for underinsured motorist coverage. Rodriguez, 808 S.W.2d at 383.

This case must be distinguished from cases cited by Appellants where the term underinsured was not clearly defined in the automobile insurance policy. In Krombach v. Mayflower Ins. Co. 785 S.W.2d 728 (Mo.App.1990), the policy was deemed ambiguous because the term "underinsured" was not defined in the policy. Another line of cases invalidates anti-stacking provisions of underinsured motorist coverage and permits stacking of underinsured coverage where the policy fails to distinguish between uninsured and underinsured coverage. Bergtholdt v. Farmers Ins. Co., 691 S.W.2d 357 (Mo.App.1985); Maxon v. Farmers Insurance Co. 791 S.W.2d 437 (Mo.App.1990); and Tegtmeyer v. Snellen, 791 S.W.2d 737 (Mo.App.1990). Unlike the above cases, the Zemelman's policy clearly distinguished and defined the term "underinsured" as separate from "uninsured."

The Supreme Court of Missouri considered language similar to the Zemelman policy language defining underinsured and providing for a set-off in the limit of liability section in Rodriguez v. General Accident Ins. Co. of Am., 808 S.W.2d 379 (Mo. Banc 1991). The Rodriguez policy defined the scope of the underinsured motorist coverage as follows:

"INSURING AGREEMENT

A. We will pay damages which an 'insured' is legally entitled to recover from the owner or operator of an 'underinsured motor vehicle' because of 'bodily injury'....

C. 'Underinsured motor vehicle' means a vehicle to which a policy applies at the time of the accident but its limits for bodily injury liability is less than the limit of liability for this coverage.

LIMIT OF LIABILITY

A. The limit of liability shown in the schedule for this coverage is our maximum limit of liability for all damages resulting from any one accident. This is the most we will pay regardless of the number of:

1. 'Insureds';

2. Claims made;

3. Vehicles of premiums shown in the Declarations; or

4. Vehicles involved in the accident

However, the limit of liability shall be reduced by all sums paid because of the bodily injury by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under part A of this policy." [Emphasis added] Rodriguez, 808 S.W.2d at 379.

In Rodriguez, the Supreme Court found the language of that policy concerning the definition of underinsured and the limit of liability unambiguous. Rodriguez, 808 S.W.2d at 383, Trapf v. Commercial Union Ins. Co., 886 S.W.2d 144 (Mo.App.1994). Thus, under a Rodriguez type policy, if the other motorist pays as much or more to the insured for bodily injury as the insured has underinsured coverage, the insured is not permitted to recover under the underinsured coverage. In accordance with the Supreme Court ruling, this court holds that underinsured motorist and the limit of liability language in the Zemelman policy are unambiguous.

Rodriguez has been followed and interpreted in a number of cases. In Diehl v. Valley Forge Ins. Co., 810 S.W.2d 670 (Mo.App.1991) the court, citing Rodriguez, held that a tortfeasor is not "underinsured" where his liability policy limit is equal to or greater than the insured's underinsured motorist coverage and that the insurer is entitled to set-off the underinsured motorist coverage by any amount the insured recovered from the tortfeasor. The Diehl court denied Appellants argument that the definition of underinsured motorist coverage should supplement amounts paid by the tortfeasor stating, "[appellant] purchased protection to...