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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

APR 2 9 1992 

ROBERT L. HOECKEE 

Clerl: 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

) 

) 

) 

) 

v. ) No. 91-3236 

) (D.C. No. 90-CV-1425) 

UNITED SERVICES AUTOMOBILE ASSOCIATION, 

Defendant-Appellant, 

) (D. Kan.) 

NATIONAL ASSOCIATION OF INDEPENDENT 

INSURERS, 

Amicus Curiae. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

ORDER AND JUDGMENT* 

Before EBEL, BARRETT, Circuit Judges, and KANE,** Senior District 

Judge. 

**Honorable John L. Kane, Jr., Senior 

States District Court for the District of 

designation. 

District Judge, United 

Colorado, sitting by 

After examining the briefs and appellate record, this panel 

has decided unanimously that oral argument would not materially 

assist the determination of this appeal. See Fed . R. App. P . 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppal. 10th Cir. R. 

36 . 3. 

Appellate Case: 91-3236 Document: 010110246207 Date Filed: 04/29/1992 Page: 1
34(a); 10th Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

Defendant appeals from the district court's Memorandum and 

Order granting Plaintiff's motion for judgment on the pleadings. 

See Fed. R. Civ. P. 12(c). Defendant argues that the district 

court erred in holding that Plaintiff is a third-party beneficiary 

under the personal injury protection coverage of an insurance 

policy issued by Defendant pursuant to the Kansas Automobile 

Injury Reparations Act, Kan. Stat. Ann.§§ 40-3101 to 40-3121 

(no-fault). We affirm. 

Plaintiff commenced this action to recover the cost of 

medical care, $670.00, provided to active duty and retired members 

of the Air Force and their dependents for injuries caused by 

accidents arising out of the ownership, operation, maintenance or 

use of motor vehicles insured by Defendant. Plaintiff maintained 

it is a third-party beneficiary to the insurance contract. 

Defendant filed a motion to dismiss alleging Plaintiff is not 

a third-party beneficiary entitled to bring a direct action 

against Defendant for personal injury protection benefits. 

Defendant also moved to certify the issue to the Kansas Supreme 

Court. The district court denied both motions and held that 

Plaintiff is a third-party beneficiary. Thereafter, Defendant 

filed its answer, and Plaintiff moved for judgment on the 

pleadings. The district court granted judgment on the pleadings. 

On appeal, Defendant continues to argue that Plaintiff, as a 

provider of medical services, is not a third-party beneficiary to 

the policy issued by Defendant. In addressing this argument, we 

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Appellate Case: 91-3236 Document: 010110246207 Date Filed: 04/29/1992 Page: 2
must examine Kansas law to determine whether Plaintiff is a 

third-party beneficiary under the policy. See United States v. 

State Farm Mut. Auto. Ins. Co., 455 F.2d 789, 790-91 (10th Cir. 

1972)(Oklahoma law applied to construe policy). 

Under Kansas law, to be a third-party beneficiary to a 

contract, the contract must be made for the third-party's benefit. 

Fasse v. Lower Heating & Air Conditioning, Inc., 736 P.2d 930, 932 

(Kan. 1987). Because the third-party beneficiary can enforce the 

contract if it is entitled to receive benefits from the contract, 

the intent to benefit the third-party must be clearly expressed in 

the contract. Id.; Cornwell v. Jespersen, 708 P.2d 515, 520-21 

(Kan. 1985). General rules of contract construction are applied 

to determine the intent of the contracting parties as to the 

rights of a third-party. Cornwell, 708 P.2d at 521; see Noller v. 

GMC Truck & Coach Div., Gen. Motors Corp., 772 P.2d 271, 275 (Kan. 

1989)(intent of parties to benefit third-party is to be determined 

from instrument where terms are plain and unambiguous). Before 

reaching the issue of whether a third-party may directly enforce a 

contract from which it would benefit, the third-party must show 

the existence of a provision in the contract that operates to its 

benefit. Hartford Fire Ins. Co. v. Western Fire Ins. Co., 597 

P.2d 622, 632 (Kan. 1979). 

Defendant maintains that the policy at issue does not clearly 

provide for payment of personal injury protection benefits to a 

service provider such as Plaintiff, because the policy language 

does not provide for payment to the insured or to an organization 

rendering treatment. Cf. United States v. State Farm Mut. Auto. 

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Ins. Co . , 455 F.2d at 790-92 (policy language provided for payment 

to the insured or to an organization rendering treatment); United 

States v. State Farm Mut. Auto. Ins. Co., 936 F.2d 206, 210 {5th 

Cir. 1991)(same); United States v. Government Employees Ins. Co., 

461 F.2d 58, 59-60 {4th Cir. 1972){same); United States v. United 

Servs. Auto. Ass'n, 431 F.2d 735, 736-37 (5th Cir. 1970){same), 

cert. denied, 400 U.S. 992 {1971) . 

The relevant policy language is as follows: 

SECTION I 

Personal Injury Protection Coverage 

The Company will pay 

Automobile Injury 

protection benefits, 

the Schedule of 

Declarations, for: 

in accordance with the Kansas 

Reparations Act personal injury 

in the amounts specified herein for 

Benefits printed on the Policy 

{a) medical expenses 

incurred with respect to bodily injury sustained by an 

eligible injured person caused by an accident arising 

out of the ownership, operation, maintenance or use of a 

motor vehicle. 

SECTION II 

In consideration of the coverage afforded under Section 

I and the adjustment of applicable rates the following 

conditi ons shall apply: 

{a) Excess Insurance: Any Medical Payments 

Coverage afforded under this policy shall be 

excess insurance over any personal injury 

protection benefits paid or payable under this 

or any other automobile insurance policy 

because of bodily injury sustained by an 

eligible i njured person. 

Appellant's App. at 17, 21. 

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Appellate Case: 91-3236 Document: 010110246207 Date Filed: 04/29/1992 Page: 4
As Defendant admits, the policy language does not specify to 

whom benefits should be paid. Thus, Defendant argues the policy 

does not clearly disclose that the intent of the parties was to 

benefit a third-party. Plaintiff counters that the policy clearly 

indicates that Defendant will pay all reasonable expenses for 

medical services that are incurred by the insured, regardless of 

who requests payment. Plaintiff points to the general provision 

of the policy which provides that if Defendant makes payment under 

the "policy and the person to or for whom payment was made" has a 

right to recover damages, Defendant is subrogated to that right. 

Appellee's Supp. App., Auto Policy at 10. 

The policy language does not contain specification or 

limitation as to the beneficiary. Because such an absence or 

ambiguity must be construed against Defendant, see Bendis v. 

Federal Ins. Co., F.2d , No. 90-3057, slip op. at 4 (10th 

Cir. June 20, 1991); Lightner v. Centennial Life Ins. Co., 744 

P.2d 840, 844-45 (Kan. 1987); see also United States v . Allstate 

Ins. Co., 910 F.2d 1281, 1284 (5th Cir. 1990)(policy failed to 

specify payee or contain limiting language as to payee), we agree 

with Plaintiff that the insurance policy does provide for payment 

of benefits to persons other than the insured. The general 

provisions Plaintiff points to, which are applicable to the nofault provisions of the policy, suggest that Defendant did 

contemplate payment to persons or organizations other than the 

insured. If Defendant had wanted to exclude Plaintiff from such 

payment, it could have included appropriate exclusionary 

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Appellate Case: 91-3236 Document: 010110246207 Date Filed: 04/29/1992 Page: 5
language. 1 See Farm Bureau Mut. Ins. Co. v. Old Hickory Casualty 

Ins. Co., 810 P.2d 283, 286 (Kan. 199l)(where insurer intends to 

restrict or limit coverage, it must use clear unambiguous language 

to do so or contract is construed in favor of insured); Central 

Sec. Mut. Ins. Co. v. DePinto, 681 P.2d 15, 18 (Kan. 1984) ( "Where 

an insurer intends to limit or restrict the coverage under its 

policy, it should use language which clearly reveals its stated 

purpose."). 

Defendant also argues that the policy, in accordance with 

Kansas no-fault laws, Kan. Stat. Ann.§ 40-3102, provides only for 

first-party coverage. Section 40-3102 provides that the purpose 

of no-fault "is to provide a means of compensating persons 

promptly for accidental bodily injury arising out of the 

ownership, operation, maintenance or use of motor vehicles." This 

statutory provision does not preclude a holding that Plaintiff is 

a third-party beneficiary. 

Under Kansas law and the policy language, we hold that 

Plaintiff is a third-party beneficiary to the policy. Because it 

is a third-party beneficiary under the policy, Plaintiff is 

entitled to reimbursement for the reasonable medical expenses 

incurred by the insureds. To hold otherwise would grant Defendant 

a windfall represented by the portion of the premium the insureds 

paid for coverage which Defendant effectively contends they did 

not need. See United States v. State Farm Mut. Auto. Ins. Co., 

455 F.2d at 792. 

1 We assume Defendant knew the insureds were entitled to free 

medical care from Plaintiff. See United States v. Government 

=E=m~p~l~o~y~e=e=s-=I=n~s~·-C=o~., 461 F.2d at 60. 

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Appellate Case: 91-3236 Document: 010110246207 Date Filed: 04/29/1992 Page: 6
The district court did not err in granting judgment on the 

pleadings. See Utah State Univ. of Agric. & Applied Science v. 

Bear, Stearns & Co., 549 F.2d 164, 171 (10th Cir.), cert. denied, 

434 U.S. 890 (1977). Accordingly, the judgment of the United 

States District Court for the District of Kansas is AFFIRMED. 

Defendant's Motion to Certify Question of Law to the Kansas 

Supreme Court is DENIED. 

Entered for the Court 

John L. Kane, Jr. 

Senior District Judge 

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