Case Title: Clayton v. Alliance Mutual Casualty Co.

Citation: 212 Kan. 640, 512 P.2d 507

Docket Number: 

State: kansas

Court: Kansas Supreme Court

Date: 1973-07-14T00:00:00Z

Document:
212 Kan. 640 (1973)
512 P.2d 507
SANDERS B. CLAYTON, Appellee,
v.
ALLIANCE MUTUAL CASUALTY COMPANY, Appellant, and DARRELL D. BEDORE. RUBYE CLAYTON, Appellee,
v.
ALLIANCE MUTUAL CASUALTY COMPANY, Appellant, and DARRELL D. BEDORE. MAX A. CLAYTON, Appellee,
v.
ALLIANCE MUTUAL CASUALTY COMPANY, Appellant, and DARRELL D. BEDORE.
No. 46,902

Supreme Court of Kansas.
Opinion filed July 14, 1973.
*641 James P. Mize, of Salina, argued the cause, and C.L. Clark, Aubrey G. Linville and C. Douglas Miller, of Salina, were with him on the brief for appellant.
Raymond L. Dahlberg, of Great Bend, argued the cause, and H. Lee Turner and Thomas C. Kelley, of Great Bend, and D.A. Hindman, Stanley Krysl and Wayne McCaslin, guardian ad litem, of Stockton, were with him on the brief for appellees.
The opinion of the court was delivered by
FATZER, C.J.:
At issue is the construction and application of the uninsured motorist provision of automobile insurance policies issued by the appellant, Alliance Mutual Casualty Company (Alliance) to Sanders B. Clayton (Sanders) and Max A. Clayton (Max), two of the appellees herein.
The facts are not in dispute. On October 15, 1968, while riding in an automobile owned and operated by Floyd D. Fix (Fix), the appellees, Sanders, Max, Joy Clayton and Rubye Clayton, were injured when the Fix automobile was struck by an automobile operated by Darrell D. Bedore (Bedore). Subsequently, it was discovered that Bedore did not carry liability insurance. However, Fix, Sanders, and Max held automobile liability insurance policies issued by Alliance which included uninsured motorist endorsements. The policy issued to Sanders covered two automobiles owned by him and the policy issued to Max covered a vehicle owned by him. The Claytons were of the same household, Sanders and Rubye being husband and wife; Max, their adult son, and Joy, their minor daughter.
Fix held a policy on his Buick automobile involved in the accident, which afforded uninsured motorist protection in limits of $10,000 and $20,000, and was the primary insurance on the accident. The entire $20,000 aggregate limit of the Fix policy was made available by Alliance after the accident, and the total amount was paid by Alliance to all of the persons occupying the Buick, including the appellees Sanders, Rubye, Max and Joy, receiving $1,300; $1,300; $2,000 and $500 respectively. In addition, Alliance paid the medical expenses of each of the appellees.
Subsequent to the receipt of payment under the Fix policy, the Claytons made demand upon Alliance for payment pursuant to the uninsured motorist endorsements on the policies held by Sanders and Max. Both policies held by the Claytons had aggregate limits of $20,000 per accident and contained identical provisions.
*642 Alliance refused to make payment, asserting first that the Claytons had failed to make proof of claim and had not consented to submit medical authorizations and medical reports necessary for it to ascertain the character and degree of their injuries sustained in the accident. Proof of loss and medical authorizations were required pursuant to paragraph 9 of the CONDITIONS section of the policies.
Likewise, Alliance requested the Claytons arbitrate their claims under the policies pursuant to PART IV  PROTECTION AGAINST UNINSURED MOTORISTS which was a condition to payment under the uninsured motorist endorsement if either party elected not to agree upon a settlement of the claim. The Claytons refused to consent to arbitration and reasserted their claim against Alliance.
Thereafter, and on October 30, 1969, Sanders, Rubye, and Max each filed separate actions against Bedore and Alliance for damages resulting from the automobile accident. Alliance filed a motion to consolidate the actions which was sustained by the district court. Bedore wholly defaulted, and the Claytons filed a motion for default judgment against him with notice to Alliance.
On January 12, 1970, the appellees' motion for default came on for hearing. Bedore was not present, nor was he represented by counsel. Alliance was represented by counsel, and objected to any evidence in support of the Claytons' motion against Bedore for default as it would relate to Alliance. The district court granted Alliance seven days to answer the appellees' petitions and set up its defenses, and thereafter the following discussion was had:
"MR. MIZE: Your Honor, may I be excused?
"THE COURT: Yes, sir.
Upon hearing evidence relating to the injuries sustained by Sanders, Rubye, and Max, the district court entered default judgment against Bedore and assessed damages to the appellees at $65,000, $30,000, and $15,000 respectively. The judgments for damages were in addition to the amounts allowed for medical expenses and court costs.
Thereafter and three days later on January 15, 1970, Alliance filed *643 its answer alleging policy defenses that the appellees had failed to do certain acts which were a condition precedent to the commencement of an action by the insured against the company. In particular, the answer asserted the Claytons had refused to make proof of claim, to sign medical authorizations, to permit inspection of medical reports and records relating to the injuries sustained and to arbitrate their claims. Further, Alliance contended the Claytons had not secured its written consent to be sued under the policy, and that the judgment against Bedore was not conclusive either as to liability or to damages because of the absence of consent to be sued. In addition, Alliance's answer contained a request for a jury trial on the issue of loss sustained by each of the plaintiffs.
On September 25, 1971, Alliance filed a motion requesting that Joy Clayton be joined as a plaintiff. The motion was sustained, and a guardian ad litem was appointed to represent her.
On January 7, 1971, Joy replied to Alliance's answer, and counterclaimed against it in the amount of $10,000, costs, and attorney's fees. On January 11, 1971, Alliance answered the counterclaim, and reasserted its demand for a jury trial on the issue of loss sustained to each of the appellees.
On February 1, 1971, a pretrial conference was held and the parties agreed that the interpretation of the provisions of the policies relied upon by Alliance and the enforcement of those provisions, being questions of law, would be tried by the district court. In addition, the issue of attorney's fees would be determined by the court. Alliance filed a motion to sever and try the issue of the appellees' damages to a jury. The motion by Alliance to sever and try the issues relating to Joy's injuries was sustained, and the motion to sever and try the issue of damages to Sanders, Rubye, and Max was taken under advisement. Subsequently, Joy's claim for damages was tried to a jury, and it returned a verdict in the sum of $2,500 upon which judgment was rendered.
On April 16, 1971, the district court, having taken under advisement the questions of law, entered the following judgments relating to the construction and application of the insurance policies. First, it held that Alliance was collaterally estopped by the judgment entered against Bedore, not only as to liability, but also as to damages. Second, it held that the policies were to be "stacked" in that the liability of Alliance would be $60,000. Third, that the appellees were not entitled to attorney's fees. Thereafter, on November 22, *644 1971, the district court issued its memorandum opinion setting forth the findings of fact and conclusions of law upon which Alliance has now appealed. The significant portions are quoted:
* * * * *
* * * * * *
On November 23, 1971, Alliance filed a motion for new trial or to alter judgment. On December 3, 1971, the same was overruled by the district court. Thereafter, Alliance perfected its appeal to this court, asserting numerous grounds of error. In the interest of brevity the court considers together the specifications of error relating to the construction, application and enforcement of the policy provisions relied upon by Alliance.
The appellant contends the district court erred in nullifying the "consent to sue" clause, the "arbitration" clause, and the "other insurance" clause. In addition, the appellant asserts the condition precedent stipulation of the policy as it relates to all conditions of coverage, including the "consent to sue" clause, the "proof of loss" clause, the "medical authorization" clause, and the "furnishing of medical reports" clause, is binding upon the appellees and the district court erred in failing to dismiss the actions as being prematurely filed.
This court has held the remedial legislation statutes requiring the offer of uninsured motorist coverage should be liberally construed *646 to provide the coverage intended by the Legislature. (Winner v. Ratzlaff, 211 Kan. 59, 505 P.2d 606.) In determining the intention of the parties as to an insurance contract, the test is not what the insurer intends the printed language to mean, but what a reasonable person placed in the position of the insured would have understood the words to mean. (Gowing v. Great Plains Mutual Ins. Co., 207 Kan. 78, 483 P.2d 1072.) Where an insurance company desires to limit its liability under a policy, it should employ language which will distinctly reveal its purpose. Unclear and obscure clauses in a policy should not be permitted to defeat coverage which is expected by the insured and required by statute. (Miller v. Farmers Mutual Automobile Ins. Co., 179 Kan. 50, 292 P.2d 711; Chicago, R.I. & Pac. Rld: Co. v. Aetna Ins. Co., 180 Kan. 730, 308 P.2d 119; Sturdy v. Allied Mutual Ins. Co., 203 Kan. 783, 457 P.2d 34; Gowing v. Great Plains Mutual Ins. Co., supra.)
K.S.A. 1972 Supp. 40-284 requires all policies of automobile insurance issued after July 1, 1968, the effective date of the statute, to contain uninsured motorist coverage. The statute is controlling as to the effect of the policy provisions relied upon by the appellants, and reads:
The appellants' argument, insofar as it relates to the policy provisions, essentially involves a reconciliation, if possible, between *647 the restrictive language of the insurance contract and the statute, affording unqualified uninsured motorists coverage.
Concerning the policy provisions relating to mandatory arbitration of disputes under the uninsured motorist coverage, this court finds no statutory or decisional authority for such a requirement. As we held in Thompson v. Phillips Pipe Line Co., 200 Kan. 669, 438 P.2d 146, the statutory law of Kansas with respect to arbitration contemplates submission and arbitration only of existing disputes. (K.S.A. 5-201.) Arbitration of disutes in futuro, under the common law, was revocable by either party.
The "arbitration" clause relied upon by Alliance reads:
The undisputed facts clearly show the Claytons expressly refused to submit to arbitration. This court has attempted to construe the purported mandatory requirement to arbitrate so that it will harmonize with the unqualified right to uninsured motorist coverage in K.S.A. 1972 Supp. 40-284, and has concluded the policy provisions are irreconcilable with the statutory requirement. That being the case, we hold the "arbitration" clause to be void and of no effect. (See Anno: Uninsured Motorist  Arbitration, 24 A.L.R.2d 1325.)
Alliance next relies upon the "consent to sue" clause as a valid policy defense: the clause reads:
The "consent to sue" clause is a stipulation that the insurance carrier must give written authorization to the insured as a condition precedent to the filing of an action to enforce the polcy coverage. The effect of construing the clause in a manner proposed *648 by Alliance would be to place the Claytons in an absurd position legally.
The insured (Claytons) must establish fault on the part of the uninsured tort feasor (Bedore) as a condition to enforcement of the coverage under the contract against the insurance carrier (Alliance). (Winner v. Ratslaff, supra.) The "consent to sue" clause was intended, where enforced, to be a notice requirement to the insurance carrier that an action was going to be commenced against an uninsured tort feasor wherein the insurance carrier would have liability or subrogation rights pursuant to the policy. (See Anno: Uninsured Motorist Clause  Settlement, 25 A.L.R.3d 1275.) Measuring the "consent to sue" clause with the statutory requirement of unqualified uninsured motorist coverage, this court likewise holds the clause as written dilutes the character of coverage mandated by K.S.A. 1972 Supp. 40-284, and is void and of no effect.
Turning to the "other insurance" clause, the question involved in the instant case is whether the insurer's liability is limited to the amount of one policy (the Fix policy), or whether each policy contains its own liability which can be used to "stack" coverage up to the full amount of the injuries sustained. The clause reads:
Prior to the enactment of K.S.A. 1972 Supp. 40-284, this court concluded the "stacking" of coverage to be lawful. (Sturdy v. Allied Mutual Ins. Co., supra; Rosson v. Allied Mutual Ins. Co., 203 Kan. 795, 457 P.2d 42.) In Sturdy this court said:
The jurisdictions are split on the manner in which the statutes providing uninsured motorist coverage are construed in light of stipulations in the insurance contract that such coverage may be limited to "excess-escape" amounts beyond the amounts paid under the primary policy. (See Anno: Uninsured Motorists  "Other Insurance," 28 A.L.R.3d 551.) The great weight of authority, however, is to give such restrictive insurance clauses no force and effect. Among the more persuasive decisions following the majority rule are Blakeslee v. Farm Bureau Mut. Ins. Co., 32 Mich. App. 115, 188 N.W.2d 216 [1971], affirmed 388 Mich. 464, 201 N.W.2d 786 [1972]; Stephens v. Allied Mut. Ins. Co., 182 Neb. 562, 571, 156 N.W.2d 133, 139 [1968]. In Blakeslee the Michigan Court of Appeals said:
In Stephens the Nebraska Supreme Court said:
Obviously, insurers have diligently sought means to limit their liability to the minimum requirement under safety responsibility acts. In Widiss, A Guide to Uninsured Motorist Coverage, Section 2.58, Professor Widiss outlines their efforts as follows:
In the recent case of Van Tassel v. Horace Mann Insurance Company, ___ Minn. ___, 207 N.W.2d 348 [May 11, 1973], the court, speaking through Chief Justice Knutson, said:
This court has attempted to reconcile the "other insurance" clause in the instant case with K.S.A. 1972 Supp. 40-284 and with the majority rule cited above, and holds that such clause is void and of no effect, as being in violation of the plain terms of the statute.
Last, this court must reconcile the conditions contained in the "proof of loss," "medical authorization," and "furnishing of medical reports" clauses with K.S.A. 1972 Supp. 40-284 to ascertain their validity. The clauses relied upon by Alliance read:
* * * * *
* * * * *
As indicated, Alliance contends that such clauses are a condition precedent to the commencement of an action against it to enforce the uninsured motorist endorsement. The facts as found by the district court clearly indicate the Claytons complied with the policy requirements referred to above and that all information and medical reports were in Alliance's possession under the Fix policy settlement, and in the instant case. But regardless of those uncontroverted facts, this court cannot establish a reasonable basis upon which such clauses may be enforced. While we are mindful of the need for such information to facilitate settlement, we are of the opinion such provisions may not be used by the insurance carrier to avoid liability. The need for such provisions is questionable in light of the detailed procedures available to the insurer to discover the degree and character of injuries to the uninsured motorist under our code of civil procedure, and the detailed requests for admissions in the record of the instant case indicate Alliance had counsel who was aware of such discovery procedures. Under such circumstances, this court must likewise hold that the "proof of loss" clause, the "medical authorization" clause, and the "furnishing of medical reports" clause, as a condition precedent to enforcement of the uninsured motorist endorsement of the Alliance policies are void and of no effect as being an attempt to dilute the requirements of K.S.A. 1972 Supp. 40-284.
The final contention raised by Alliance involves the district court's holding that the judgment against Bedore was binding upon Alliance. It asserts it was entitled to a jury trial upon the question of the amount and degree of damages sustained by Sanders, Rubye, and Max, and it was not collaterally estopped from challenging the damage judgment entered by the district court with respect to Bedore.
*652 Before ruling on the contention, it should be noted the appellees' motion for default came on for hearing January 12, 1970. Alliance was represented by counsel and timely objected to the entry of any evidence at that hearing which would relate to it. The district court then granted Alliance seven additional days to answer the petitions filed by appellees Sanders, Rubye, and Max, and proceeded to hear testimony as to the amount of judgment to be rendered. The record clearly indicates the district court's ruling on damages "... is limited to Bedore only." Likewise, Alliance filed its answer within the time allowed by the district court and endorsed thereon pursuant to K.S.A. 60-238 (b) was a demand for a jury trial on the issue of loss sustained by each of the plaintiffs.
On April 16, 1971, the district court held Alliance was bound not only as to Bedore's liability, but also as to damages.
Under the facts and circumstances of this case, it is the conclusion of the court that Alliance was not collaterally estopped from challenging the damage judgment against Bedore. The district court permitted counsel for Alliance to leave the hearing after making the statement that any judgment as to damages would be limited only as to Bedore. That being the case, the district court cannot then take an inconsistent position with its previous acts. The denial of a jury trial as to the issue of amount of bodily injury damage sustained by Sanders, Rubye and Max compels a reversal of the judgment rendered by the district court.
The case is reversed and remanded to the district court with directions to grant Alliance a jury trial on the issue of bodily injury damages as to Sanders, Rubye and Max. In all other respects, including the verdict as to Joy, the judgment is affirmed.
It is so ordered.