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Parties Involved:
National Association of Independent Insurers
Amicus Curiae
United Services Automobile Association
Appellant
United States of America
Appellee

Document Text:

PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

APR 2 9 1992 

ROBERT L. HOECKEE 

Clerk 

UNITED STATES OF AMERICA, 

Plaintiff-Appellee, 

v. 

) 

) 

) 

) 

) 

) 

No. 91-3236 

UNITED SERVICES AUTOMOBILE ASSOCIATION, ) 

Defendant-Appellant, 

NATIONAL ASSOCIATION OF INDEPENDENT 

INSURERS, 

Amicus Curiae. 

) 

) 

) 

) 

) 

) 

) 

) 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF KANSAS 

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

Submitted on the briefs: 

Lee Thompson, United States Attorney, and Stephen K. Lester, 

Assistant U.S. Attorney, Wichita, Kansas, for Plaintiff-Appellee . 

Paul Hasty, Jr. and D'Ambra M. 

Austin Brown and Enochs, Chartered, 

Defendant-Appellant. 

Howard, of Wallace, Saunders, 

Overland Park, Kansas, for 

Michael A. Rouse, of Baker & Sterchi, 

Thomas N. Sterchi and Phillip C. Rouse, 

City, Missouri, filed amicus curiae 

Association of Independent Insurers. 

Overland Park, Kansas, and 

of Baker & Sterchi, Kansas 

brief for the National 

Appellate Case: 91-3236 Document: 010110259001 Date Filed: 07/01/1992 Page: 1
Before EBEL and BARRETT, Circuit Judges, and KANE,* Senior 

District Judge. 

*Honorable John L. Kane, Jr., Senior District Judge, United States 

District Court for the District of Colorado, sitting by 

designation. 

Kane, Senior District Judge . 

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). 1 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. S§ 40-3101 to 40-3121 

(no-fault) . We affirm. 

Plainti ff 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 

1 After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

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

34(a); 10th Cir. R. 34.1.9. The case is therefore ordered 

submitted without oral argument. 

2 

Appellate Case: 91-3236 Document: 010110259001 Date Filed: 07/01/1992 Page: 2
against Defendant for personal injury 

Defendant also moved to certify the issue to 

Court. The district court denied both 

Plaintiff is a third-party beneficiary. 

filed its answer, and Plaintiff moved 

protection benefits. 

the Kansas Supreme 

motions and held that 

Thereafter, Defendant 

f or judgment on the 

pleadings . The district court granted judgment on the pleadings. 

On appeal, Defendant continues to argue that Plaint i ff, as a 

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

the policy issued by Defendant . In addressing this argwnent r we 

must examine Kansas law to determine whether Plaintiff i s a 

third-party benefici ary under the policy. See United States v. 

State Farm Mut . Auto. Ins. Co., 455 F . 2d 789 , 790-9 1 (10th Cir. 

1972)(Oklahoma l aw a pplied to construe policy). 

Under Kansas l aw, t o be a third-pa.rty beneficiary to a 

contract, the contract must be made for the thi rd-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; ~ Noller v. 

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

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

from instrument where terms are plain and unambiguous). Before 

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

3 

Appellate Case: 91-3236 Document: 010110259001 Date Filed: 07/01/1992 Page: 3
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. 

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

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

$tates 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. 

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Appellate Case: 91-3236 Document: 010110259001 Date Filed: 07/01/1992 Page: 4
SECTION II 

In consideration of the coverage afforded under Section 

I and the adjustment of applicable rates the following 

conditions 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 t his 

or any other automobile lnsurance policy 

because of bodily injury sustai ned by an 

eligible injured person. 

Appellant ' s App. at 17, 21. 

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 parti es was to 

bene fit a third-party. Plaintiff counters that the policy clearly 

i ndicates that Defendant will pay all reasonable expenses for 

medlcal services that are incurred by the i nsured, 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 . 

Although the policy language does not specifically identify 

or exclude Plainti ff as a beneficiary, 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 no-fault provisions of the policy, suggest that Defendant did 

5 

Appellate Case: 91-3236 Document: 010110259001 Date Filed: 07/01/1992 Page: 5
contemplate payment to persons or organizations other than the 

insured. If Defendant had wanted to exclude Plaintiff from such 

payment, 

language. 2 

it could have included appropriate exclusionary 

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 unambi guous l anguage 

to do so or contract is c onstru ed in favor of insure d ); Central 

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

an insurer intends to limi t o r restrict the c overage under its 

policy, it should use langua ge which clearly r~veals i ts stated 

purpose. " ). Accordingly, Pl ainti ff did meet i t s burden of prov ing 

the policy was intended for its benefit. 

Defendant also argues that the policy, in accordance with 

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

first-party coverage. Section 40-·3102 providef, that the purpose 

of no-fault "is to provide a means of c ompensating persons 

promptly for accidental bodily injury arisi.ng 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 

2 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=oc...:..., 461 F . 2d at 60-.-

6 

Appellate Case: 91-3236 Document: 010110259001 Date Filed: 07/01/1992 Page: 6
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. 

The district court did not err in grant ing judgment on the 

pleadings. See Utah State Univ. of Agric. & ~ied 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 Distri ct Court f or the District of Kansas i s AFFIRMED. 

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

Supreme Court is DENIED. 

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Appellate Case: 91-3236 Document: 010110259001 Date Filed: 07/01/1992 Page: 7