RENDERED: OCTOBER 20, 2016 

TO BE PUBLISHED 

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2014-SC-000354-DG 

PHILADELPHIA INDEMNITY INSURANCE APPELLANT 

COMPANY, INC. 

ON REVIEW FROM COURT OF APPEALS 

V. CASE NO. 2013-CA-001275-MR 

JEFFERSON CIRCUIT COURT NO. 12-CI-04231 

RICHARD TRYON AND APPELLEES 

ENCOMPASS INDEMNITY COMPANY 

AND 2014-SC-000357-DG 

ENCOMPASS INDEMNITY COMPANY APPELLANT 

ON REVIEW FROM COURT OF APPEALS 

V. CASE NO. 2013-CA-001275-MR 

JEFFERSON CIRCUIT COURT NO. 12-CI-04231 

RICHARD TRYON AND APPELLEES 

PHILADELPHIA INDEMNITY INSURANCE 

COMPANY, INC. 
OPINION OF THE COURT BY CHIEF JUSTICE MINTON 

AFFIRMING, IN PART, REVERSING, IN PART, AND REMANDING 

This case involves the construction of motor vehicle liability insurance 

policy provisions regarding Underinsured Motorist Insurance (UIM) coverage for 

a motor vehicle owned by the insured but not scheduled for coverage under the 

owner's policy. We granted discretionary review to determine whether such 

owned-but-not-scheduled provisions are enforceable as a matter of public 

policy to deny UIM benefits. We hold that they are, so long as the plain 

meaning of the policy clearly and unambiguously excludes this type of 

coverage. 

I. FACTUAL AND PROCEDURAL BACKGROUND 

Richard Tryon was driving his motorcycle when he was struck by an 

automobile driven by Logan Hopkins. Tryon insured his motorcycle with 

Nationwide Insurance Company of America, and the policy included 

underinsured motorist (UIM) coverage. At the time of the accident, he also 

owned two automobiles: a Lexus and an antique Pontiac Firebird. He insured 

Lexus with Encompass Indemnity Company and the Firebird with Philadelphia 

Indemnity Insurance Company, Inc. Both policies included UIM coverage 

provisions. 

Tryon made UIM claims under all three policies. As the insurer of the 

motorcycle Tryon operated at the time of the accident, Nationwide's UIM 

coverage was undisputed. But both Encompass and Philadelphia denied UIM 

2 
coverage for Tryon. Specifically, they contend that their respective insurance 

policies have owned-but-not-scheduled-for-coverage exclusions—policy 

provisions that deny UIM coverage for operating or occupying other vehicles 

that Tryon owned but were not identified in the policy. Because Tryon did not 

include his motorcycle in either policy, both insurers insist they are not 

contractually obligated to provide him UIM benefits. Although similar in form, 

the policies have distinct textual differences. 

The Encompass policy excluded UIM coverage when: 

While that covered person is operating or occupying a motor 

vehicle owned by, leased by, furnished to, or available for the 

regular use of a covered person if the motor vehicle is not 

specifically identified in this policy under which a claim is made. 

This statement is augmented in Encompass's definition of a covered person. 

The policy specifically excludes from its definition insureds "while occupying, or 

when struck by, a vehicle owned by you which is not insured for this coverage 

under this policy." 

Likewise, Philadelphia included a similar exclusion, although it is 

structurally different. The policy provides the following: 

A. We do not provide Uninsured Motorists Coverage for "bodily 

injury" sustained: 

1. By an "insured" while "occupying," or when struck by, 

any motor vehicle owned by that "insured" which is not 

insured for this coverage under this policy. This includes 

a trailer of any type used with that vehicle. 

Unlike the Encompass policy, the Philadelphia policy does not expressly 

differentiate between UIM coverage and uninsured motorist (UM) coverage. 

3 
Instead, the owned-but-not-scheduled exclusion mentions only the 

applicability of UM benefits with no reference whatsoever to UIM. 

Tryon filed suit in circuit court. The trial court granted Encompass and 

Philadelphia summary judgment. Persuaded by the unpublished Court of 

Appeals opinion in Motorists Mutual Insurance Co. v. Hartley', the trial court 

ruled that the "language in the policies issued by Encompass and Philadelphia 

are (sic) unambiguous and clearly exclude coverage of Tryon's motorcycle." 

The Court of Appeals reversed on appeal, noting that the trial court erred 

in relying on the unpublished Hartley opinion and that this Court's holding in 

Chaffin v. Kentucky Farm Bureau Ins. Companies 2 mandated coverage from 

Encompass and Philadelphia. Most notably, in Chaffin, we held that coverage is 

personal to the insured, an insured has a reasonable expectation of policy 

benefits when paying multiple premiums for the same type of coverage, and 

depriving an individual of such coverage is contrary to Kentucky's public 

policy. 3According to the Court of Appeals, this controlling precedent required 

reversal of the trial court's summary judgment in favor of the insurers. 

I. ANALYSIS. 

A. Standard of Review. 

On appellate review of the trial court's grant of summary judgment, we 

must determine whether the record, examined in its entirety, shows there is 

1 2010-CA-000202-MR (Ky. App. Feb. 11, 2011) (discretionary review denied 

and opinion ordered unpublished (Ky. Feb. 15, 2012). 

2789 S.W.2d 754 (Ky. 1990). 

3 Id. at 756. 

4 
"no genuine issue as to any, material fact and the moving party is entitled to 

judgment as a matter of law." 4 All factual ambiguities are viewed in a light most 

favorable to the nonmoving party. 5Because there are no factual disputes 

before us today and only review of questions of law, the lower courts' opinions 

are entitled to no deference and are reviewed de novo. 

B. UM Coverage, UIM Coverage, and Controlling Kentucky Law. 

1. Statutory authority. 

The Kentucky Motor Vehicle Reparations Act (MVRA) was enacted in 

1974 to establish a comprehensive motor-vehicle insurance system designed to 

address the growing number of accidents on Kentucky roads each year. 6 

 Among the noteworthy aspects of the MVRA is the individual mandate for 

Kentucky drivers to purchase a baseline level of motor-vehicle liability 

insurance.? But the MVRA also addresses other forms of coverage incidental to 

the mandatory liability coverage, including direction to insurers on the role of 

underinsured motorist coverage (UIM). 

The statute first defines an underinsured motorist as "a party with motor 

vehicle liability insurance coverage in an amount less than a judgment 

recovered against that party for damages on account of injury due to a motor 

vehicle accident." Insurers are required to make UIM coverage "available upon 

4 Kentucky Rules of Civil Procedure (CR) 56.03. 

5 See Hammons v. Hammons, 327 S.W.3d 444, 448 (Ky. 2010). 

6KRS 304.39-010. 

7KRS 304.39-110. 

8KRS 304.39-320(1). 

5 
request to its insureds," but "subject to the terms and conditions of such 

coverage not inconsistent with this section." 9So the MVRA takes two strong 

positions on UIM coverage. First, UIM coverage is supplemental—insurers are 

not forced to offer it unless the insured requests this additional coverage. And 

second, insurers are free to contract with insureds on the form and scope of 

coverage, so long as the terms remain consistent with the remaining provisions 

of the MVRA. 

Interestingly, the legislature's position on UM coverage is not found in 

the MVRA. Instead, the UM statute is found in a separate subsection as part of 

the legislative enactments concerning casualty insurance contracts. There, the 

term uninsured motor vehicle is robustly defined to include: 

An insured motor vehicle where the liability insurer is unable to 

make payment with respect to the legal liability of its insured 

within the limits specified therein because of insolvency; an 

insured motor vehicle with respect to which the amounts provided, 

under the bodily injury liability bond or insurance policy applicable 

at the time of the accident with respect to any person or 

organization legally responsible for the use of such motor vehicle, 

are less than the limits described in KRS 304.39-110; and an 

insured motor vehicle to the extent that the amounts provided in 

the liability coverage applicable at the time of the accident is 

denied by the insurer writing the same. 10 

With that definition firmly in place, the statute commands that all automobile 

and motor-vehicle insurance contracts must include UM coverage in limits 

consistent with the MVRA. 11So while the MVRA makes UIM coverage optional, 

9KRS 304.39-320(2). 

to KRS 304.20-020(2). 

11KRS 304.20-020(1). 

6 
supplemental insurance, the subsection relating to casualty-insurance 

contracts expressly forbids contracts that do not include UM benefits. 

2. Jurisprudential distinctions. 

As one of Tryon's primary arguments, he attempts to align his UIM policy 

limitation with provisions we condemned as contrary to Kentucky's public 

policy in Chaffin v. Kentucky Farm Bureau Ins. Cos. 12 Indeed, the Court of 

Appeals relied on this case as a critical source of its ruling that summary 

judgment in favor of Encompass and Philadelphia was improper. In Chaffin, a 

motorist was injured by an uninsured motorist. She maintained three separate 

policies with Kentucky Farm Bureau for UM coverage for three vehicles, paying 

separate premiums. Her policy actually included language excluding UM 

coverage for certain instances that was remarkably similar to Philadelphia's 

policy in the instant case. We first addressed in Chaffin whether this exclusion 

is an enforceable limitation or whether Chaffin was entitled to stack her 

policies and recover from all three. A divided Court held that stacking was 

permissible and that such anti-stacking exclusions were unenforceable. 

Specifically, the majority held that "uninsured motorist coverage is 

personal to the insured; that an insured who pays separate premiums for 

multiple items of coverage has a reasonable expectation that such coverage will 

be afforded; and that it is contrary to public policy to deprive an insured of 

purchased coverage, particularly when the offer of such is mandated by 

12789 S.W.2d 754 (Ky. 1990). 

7 
statute." 13The Chaffin Court's holding heavily depended on the doctrine of 

reasonable expectations as understood in this context to mean that "when one 

has bought and paid for an item of insurance coverage, he may reasonably 

expect it to be provided." 14The Court determined that when insurers include 

anti-stacking limitations or exclusions of coverage for other vehicles owned but 

not insured, the promise of the insurance coverage as required under the law is 

"fflusory." 15So not only did Chaffin allow insureds to stack policies to recover 

UM benefits, it also held that other-vehicle exclusions of UM coverage are 

unenforceable as a matter of Kentucky public policy. 

Although we recognize a number of factual similarities in Tryon's case, 

we also see key reasons why the Chaffin doctrine is ultimately irrelevant to 

today's issues. Most obviously, the type of coverage at issue is drastically 

different—Chaffin disputed UM recovery, while Tryon seeks recovery of UIM 

benefits. We see no reason to conflate UM and UIM when Kentucky statutory 

law does not do so. One is mandatory. The other is not. One is a facet of the 

MVRA, while the other is an aspect of enforceable casualty insurance 

contracts. It would seem these differences alone should be enough for us to 

determine that the outcome in Chaffin has no bearing on whether Tryon's 

provisions are enforceable as a matter of public policy. 

13 Id. at 756 (echoing a companion certification-of-law case rendered the same 

day, in Hamilton v. Allstate Ins. Co., 789 S.W.2d 751 (Ky. 1990)). 

14 Hamilton, 789 S.W.2d at 753. 

15 Chaffin, 789 S.W.2d at 757-58. 

8 
We encountered this contrast in Allstate Insurance Co. v. Dicke 16 , where 

this Court extended the Chaffin anti-stacking policy to UIM claims. Although 

the opinion largely retreads the familiar Chaffin position, statutory distinctions 

between UM and UIM coverage were presented as material distinctions. But the 

majority in Dicke dismissed these distinctions offhand as not "significantly 

meaningful to permit a different result." 17The problem with our result in Dicke, 

of course, is that we failed explain why these distinctions are meaningless. 

Perhaps if we conducted a more searching statutory analysis, we would have 

discovered that the text stands squarely in opposition to our rule in Dicke. 

The statutory language embodies legislative choices, a willful resolution 

of the General Assembly's declaration of Kentucky law. The words of the 

statute reflect a policy choice. As such, it follows that the use of particular 

words and the placement of certain provisions in certain areas of the statutory 

code are done so with care. It is accordingly the role of this Court to effectuate 

those terms and there meanings. Under this analysis, it is clear that UM and 

UIM coverage are separate facets of Kentucky insurance law. 

If the legislature desired to make UIM coverage mandatory and thus 

subject to the identical public-policy considerations as UM coverage, it 

certainly could have. But instead, it elected to require such coverage "to be 

furnished only on request." 18 Additionally, all specific UM policy provisions 

16 862 S.W.2d 327 (Ky. 1993). 

17 Id. at 329. 

18 Id. at 330 (Spain, J., dissenting). 

9 
mandatory under law must be approved by the Commissioner of Insurance. 19 

 In contrast, there is no such requirement for UIM policies; in fact, the UIM 

statute expressly states that insurers are free to set their own terms and 

conditions of coverage. 20Despite the majority's holding in Dicke, we see a 

meaningful distinction between the two statutes. And given the unmistakably 

disparate treatment both in defining coverage and outlining acceptable 

procedures, "we are left with the inescapable fact that the parties were free to 

contract" UIM coverage. 21And to the extent that Dicke is inconsistent with any 

of today's analysis, it is accordingly overruled. 

But it is also important to note that Chaffin was ultimately not a decision 

reached through a methodical interpretation of various aspects of positive law. 

Nowhere in the majority opinion appears a single assertion that the holding of 

the case is a result of the meaning of a statutory command. Rather, the opinion 

essentially stands on purely common-law rationale almost in spite of the 

strictures in place detailing enforceable insurance policies within the state. 

Because Chaffin relied so heavily on common-law principles and also because 

there is significant statutory law regulating automobile insurance, that decision 

is most appropriately limited to the facts of that case. Simply put, there is a 

significant difference between UM and UIM coverage both in legislation and in 

our own insurance-law jurisprudence. 

19 See KRS 304.020(1) ("...under provisions approved by the commissioner..."). 

20 Dicke, 862 S.W.2d at 330 (Spain, J., dissenting). See also KRS 304.39-320(2) 

("...subject to the terms and conditions of such coverage not inconsistent with this 

section..."). 

21 Id. 

10 
We have addressed the UIM statute in contexts not dissimilar from the 

one presented today. In fact, in Motorists Mutual Ins. Co. v. Glass22 , we 

distinguished UIM principles from our position with respect to UM benefits in 

Chaffin and its progeny. In that case, we held that a policy exclusion for any 

"vehicle owned by or furnished or available for the regular use of the insured or 

any family member" from its definition of an underinsured motorist is an 

enforceable provision. 23This "regular-use exclusion" has been upheld by the 

Court of Appeals on at least three other occasions since Glass.24 

We more recently readdressed the regular-use exclusion in State Farm 

Mutual Ins. Co. v. Hodgkiss-Warrick. 25 Although the case ultimately rested on 

Pennsylvania substantive law, our choice-of-law principles required us first to 

examine whether the policy provisions at issue could be supported as a matter 

of Kentucky public policy. And in light of Glass, we held that the regular-use 

exclusion did not run afoul of our public policy. We supported this ruling by 

stating, "a contract term is unenforceable on public policy grounds only if the 

policy asserted against it is clearly manifested by legislation or judicial decision 

and is sufficiently strong to override the very substantial policies in favor of the 

freedom of contract and the enforcement of private agreements." 26Justice 

22 996 S.W.2d 437 (Ky. 1997). 

23 Id. at 449-50. 

24 See Burton v. Kentucky Farm Bureau Mut. Ins. Co., 326 S.W.3d 474 (Ky. App. 

2010); Edwards v. Carlisle, 179 S.W.3d 257 (Ky. App. 2004); and Murphy v. Kentucky 

Farm Bureau, 116 S.W.3d 500 (Ky. App. 2002). 

25 413 S.W.3d 875 (Ky. 2013). 

26 Id. at 880 (quoting Restatement (Second) of Contracts § 178 (1979)).. 
Hughes, writing for the Court, noted that there is no "specific provision of the 

MVRA...forbidding the sort of exclusion from underinsured motor vehicle 

coverage at issue here." 27Summing up our stance on regular-use exceptions, 

"the gist of these cases is that it is not unreasonable or contrary to the MVRA 

to exclude UIM benefits in that situation, because otherwise household 

members would have an incentive to minimize their liability coverage in 

reliance on less expensive UIM coverage, and because otherwise the insurer is 

apt to be exposed to substantial risks it was not paid to underwrite." 28 

In the wake of Glass and Hodgkiss-Warrick, we have made clear that the 

MVRA does not outweigh the basic and fundamental liberty to contract and 

create personal insurance policies. Instead, rules of contract ultimately guide 

our analysis. And going full circle back to Chaffin, application of our contract 

principles ultimately becomes an inquiry of reasonable expectations. We held 

in Simon v. Continental Insurance Co., that reasonable expectations with 

respect to insurance coverage essentially means that "the insured is entitled to 

all the coverage he may reasonably expect to be provided under the policy. Only 

an unequivocally conspicuous, plain and clear manifestation of the company's 

intent to exclude coverage will defeat that expectation." 29So this doctrine is 

meant to be used "in conjunction with the principle that ambiguities should be 

27 Id. at 881. 

28 Id. at 882. 

29724 S.W.2d 210, 212-13 (Ky. 1986). See also Bidwell v. Shelter Mut. Ins. Co., 

367 S.W.3d 585, 588 (Ky. 2012) ("...[t]o be enforceable, Kentucky law requires a 

limitation of insurance coverage, such as a permissive user step-down provision, to be 

clearly stated in order to apprise the insured of such limitations."). 

12 
resolved against the drafter in order to circumvent the technical, legalistic, and 

complex contract terms which limit benefits to the insured." 30But we are 

sufficiently satisfied that the terms in this policy are both reasonable and 

plainly accessible. 

We noted in Glass that there is a true distinction between illusory 

coverage and instances where the policy simply does not apply to the facts of 

the case. 31Indeed, this is perfectly in line with the text of the UIM portion of 

the MVRA—insurers may limit UIM coverage, at least within the confines of the 

rest of the statute. We think this strikes an adequate balance between the 

Commonwealth's interests in protecting drivers on its roadways with the 

insurance companies' desires to assess accurately the underwriting risks 

involved. Individuals are perfectly capable of negotiating UIM coverage, and it 

strains credulity to suggest it is too tall a task for insureds to read their 

policies. 

The regular-use exclusion does not operate identically to the owned-butnot-scheduled provision in the present case, to be sure, but it nevertheless 

stands resolute as a bold statement from this Court that UIM coverage 

exclusions are not impermissible under Kentucky public policy and parties are 

at liberty to negotiate and customize policies to fit their own needs and desired 

levels of coverage. We shielded insurers under the regular-use exclusion from 

exposure to substantial risks they were not paid to underwrite. That rationale 

30 Id. 

31 Glass, 996 S.W.2d at 450. 

13 
is equally applicable to coverage in cases like Tryon's where the insured owns 

several other vehicles and chooses not to insure them under a particular policy 

or even with the same insurer. We see no reason to force insurers to bear the 

burden of an underwriting risk against the rest of the world while allowing the 

other contracting party to reap the benefits of multiple recoveries. There is no 

meaningful distinction between our rationale upholding regular-use and 

owned-but-not-scheduled exclusions, and the solution for both types of 

coverage is identical: "the named insured can avoid the fact of underinsurance 

by simply purchasing additional liability coverage for his vehicle." 32 

This opinion does not necessarily overrule Chaffin or its precedent with 

respect to UM coverage. But we do question whether the Chaffin Court's 

reasonable-expectation analysis truly synthesizes Kentucky contract principles 

or simply exists as a categorical rule to ensure that insureds always recover. 

But that issue is not before us today. For now, we can only state with certainty 

today that Kentucky public policy does not bar reasonable UIM exclusion 

provisions. 

In summation, there is nothing either in the MVRA or our public policy 

prohibiting enforcement of exclusion of UIM coverage in certain scenarios. The 

reasonable expectations of coverage are satisfied so long as the plain meanings 

of the terms of the underlying policies are clear and unambiguous. We will now 

review the Encompass and Philadelphia policies, respectively, under that 

standard. 

32 Id. at 450. 

14 
C. The Encompass Provision. 

On review of Encompass's UIM exclusion for vehicles owned but not 

schethiled for coverage, we are persuaded that the policy is in fact a clear and 

unambiguous statement that the policy does not pay benefits for vehicles it 

does not insure. The Encompass policy creates a separate heading for UIM 

coverage. In its definition of a covered person, the policy expressly states that 

for the insured, his family members, and other occupants, UIM coverage will 

not be extended to vehicles owned by Tryon but not insured for coverage under 

this policy. In the provision defining insured motor vehicle, the policy goes on to 

contemplate the existence of additional automobiles, motorcycles, or motor 

homes. The policy contains a grace period of thirty days for newly acquired 

vehicles, where Encompass agrees to extend UIM coverage. But after that 

thirty-day period elapses, Tryon "must ask us [Encompass] to insure the 

automobile, motorcycle, or motor home, and we [Encompass] must agree." And 

finally, the Encompass policy includes a separate subsection for "Underinsured 

Motorists Losses We Do Not Cover." Detailed in that subsection, Encompass 

explicitly states that it does not provide UIM coverage for bodily injury for any 

covered person "operating or occupying a motor vehicle owned by, leased by, 

furnished to, or available for the regular use of a covered person if the motor 

vehicle is not specifically identified in this policy under which a claim is made." 

There is no way we can say that, on plain reading of the policy provisions 

at issue, Tryon had any reasonable expectation of UIM coverage. The policy 

repeatedly instructs Tryon that Encompass has no intention of insuring any 

other vehicles Tryon may happen to own but chose not to insure under that 

15 
policy. This information is offered in plain language and presented boldly 

within the four corners of the agreement—this cannot be said to be hidden in 

the small print. All Tryon needs to do to understand his coverage is to simply 

read his policy. Encompass's policy is a clear and unambiguous manifestation 

of its intent to deny coverage in certain scenarios. 

Because the terms are clear and because UIM exclusions like this are not 

unenforceable as a matter of law, we accordingly reverse the Court of Appeals' 

decision and reinstate the trial court's summary judgment in favor of 

Encompass. 

D. The Philadelphia Provision. 

Unlike the Encompass policy, Philadelphia does not include a separate 

section marking the company's position on UIM coverage. Instead, it asks us to 

interpret the portion of the policy labeled "Uninsured Motorists Coverage" to 

include UIM. To be sure, the Philadelphia policy contains a familiar provision 

excluding coverage for bodily injury while "occupying, or when struck by, any 

motor vehicle owned by that insured which is not insured for this coverage 

under this policy." But this only expressly claims to exclude uninsured 

motorist coverage—the policy is silent with respect to underinsured motorist 

benefits. 

We do not doubt that the text included in the policy is unambiguous—it 

seems quite clear that Philadelphia intends to exclude UM coverage for vehicles 

Tryon owned but did not insure under this policy. 33But under the doctrine of 

33 This is actually a remarkably similar provision to the one we found 

unenforceable as a matter of public policy in Chaffin. Today's issue focuses solely on 

16 
reasonable expectations we updated above, there is no such clear statement 

with respect to UIM coverage. Assuming Tryon contracted for UIM coverage at 

all—an assertion that both parties at least implicitly concede—there is nothing 

in the policy reasonably to place him on notice that his UIM benefits are 

subject to certain situational exclusions. 

We stated above that to defeat an insured's reasonable expectation of 

coverage, exclusions must be plainly and unequivocally presented in the four 

corners of the policy to satisfy the well-established rule of contract that 

ambiguous language must be construed against the drafter. It is evident that 

the excluded coverage in this policy is ambiguous at best, if not totally absent. 

Philadelphia is completely capable of drafting reasonable exclusions of UIM 

coverage under both the MVRA and our public policy, but if it chooses to do so, 

it must do so with certainty. Because this policy inadequately rebuts Tryon's 

reasonable expectation of coverage, we have no choice other than to affirm the 

Court of Appeals' decision reversing Philadelphia's summary judgment. 

II. CONCLUSION. 

For the foregoing reasons, we hold that that owned-but-not-scheduled 

provisions for UIM coverage are enforceable under Kentucky law so long as 

they expressly and plainly apprise insureds of the exclusion. We reverse the 

Court of Appeals' decision and affirm summary judgment in favor of 

Encompass because the terms of its policy plainly excluded coverage. But 

UIM coverage, so we need not address the applicability of Chaffin to Philadelphia's UM 

provision—that is a question for a different day. 

17 
because the Philadelphia policy failed to plainly exclude coverage in these 

circumstances, we affirm the Court of Appeals' reversal of summary judgment. 

Accordingly, the case is remanded to the trial court for proceedings consistent 

with this opinion. 

All sitting. Minton, C.J.; Cunningham, Hughes and Keller, JJ., concur. 

Wright, J., concurs in part and dissents in part by separate opinion in which 

Noble and Venters, JJ., join. 

WRIGHT, J., CONCURRING IN PART AND DISSENTING IN PART: While I 

concur with the majority insofar as it affirms the Court of Appeals' holding 

regarding the Philadelphia Indemnity Insurance policy, I respectfully dissent as 

to the Encompass Indemnity Company policy. 

Ultimately, my view boils down to a simple premise: a reasonably 

prudent person purchasing insurance should not have to wrestle to divine the 

meaning of overly technical, vague, and legalistic terms; nor should he have to 

flip between unclear policy provisions to ascertain what his policy covers. 

Society benefits from contracts—from people fulfilling their promises. I would 

hold the exclusion unenforceable for two reasons. First, it would force 

insurance companies to find a way to clearly and unmistakably state what a 

plan covers and what it does not. Second, it would level the playing field so 

that a reasonably prudent purchaser of insurance would be capable of 

understanding the terms and provisions of a policy. This would go a long way 

in ensuring that consumers get what they bargain for. 

18 
The majority indicates that all Tryon had to do was to read his policy to 

know whether he was covered. I disagree. We cannot hold the average person 

to the same standard as we hold ourselves. We cannot forget that we have 

gone to school, practiced law (some of us in the very area of insurance law), sat 

on the benches of various courts in this Commonwealth and risen to the 

Supreme Court of Kentucky. We simply cannot expect the average person to 

have the same level of understanding we do when reading these contracts. 

Even if the majority believes that an average person would understand 

this insurance policy, it is fatally easy to overestimate the average person's 

ability to understand legal concepts, language, and construction of contracts. 

It can be extremely difficult to set aside all of our background, education, and 

experience to determine what would be clear and easily understood by an 

average person. The typical consumer of insurance is unaccustomed to 

referencing various sections and subsections in order to ferret out the meaning 

of a term. Yet, the majority implies he should easily be able to do just that in 

order to know what is covered and what is not. 

What is the reading level of the average adult? The Literacy Project 

Foundation's published statistics show that fifty percent of adults cannot read 

a book written at an eighth-grade level. (http://literacyprojectfoundation.org/ 

community/statistics). According to the Clear Language Group "[t]he average 

reading level of American adults is about seventh to eighth grade level." 

(http://www.clearlanguagegroup.corn/readability) . The Clear Language Group 

goes on to clarify that even though readability scores are given as a "grade 

19 
level," that does not mean that an individual who has completed that grade 

level will understand the text. Id. There are many factors that affect 

understanding and the grade level is merely a determination if you are in the 

right "ballpark." 

I used an online software tool (found at http://www.onlineutility.org/english/readability_test_and_improve.jsp) to calculate readability by 

typing in the ninety-eight words that were the passages that the majority relied 

on in determining that Appellant was not covered under these circumstances. 

The actual document would have been much more difficult than the analysis 

showed, because of such factors as: the length of the entire document (onehundred-thirteen pages); the fact that the document was written with many 

subsections; and the need to reference various sections in order to understand 

any particular phrase. The analysis determined that, according to the Gunning 

Fog Index, a person would need 13.96 years of formal education to understand 

the text on the first reading. The approximate representation of the U.S. grade 

level needed to comprehend the limited text that was analyzed was: 

Flesch Kincaid Grade level 12.88 

ARI (Automated Readability Index) 10.05 

SMOG 15.00 

This one-hundred-thirteen-page document would be much more difficult for 

the average American to read and understand than the majority believes. 

This is further complicated by the way in which most insurance policies 

are sold. The person fills out an application and submits it to the insurance 

20 
company along with payment. The insurance company decides if it will insure 

the individual. If accepted, the individual is then mailed the insurance policy. 

(We do not know if these were the actual steps in this case because evidence 

was not taken on this issue.) The purchaser of the insurance is then left with 

the task of reading, understanding, and determining what his insurance 

coverage is and the dangers of all the exceptions. The purchaser then would 

have to determine whether to renegotiate any problem areas, purchase 

additional insurance, or begin searching for a new insurance policy. An 

average American could easily be overwhelmed with the task. 

Furthermore, the majority deviates from nearly seventy years of 

precedent in this Court's construction of insurance policies. In 1950, our 

predecessor Court stated, "[a] policy or contract of insurance ordinarily is to be 

construed liberally in favor of the insured and strictly as against the insurer." 

Koch v. Ocean Acc. & Guar. Corp., 313 Ky. 220, 224, 230 S.W.2d 893, 895 

(1950). Likewise, for nearly a half century, this Court has held, "exceptions 

and exclusions [of insurance policies] should be strictly construed so as to 

make insurance effective." State Auto. Mut. Ins. Co. v. Trautwein, 414 S.W.2d 

587, 589 (Ky. 1967). In fact, we have said, "as to the manner of construction of 

insurance policies, Kentucky law is crystal clear that exclusions are to be 

narrowly interpreted and all questions resolved in favor of the insured." Eyler 

v. Nationwide Mut. Fire Ins. Co., 824 S.W.2d 855, 859 (Ky. 1992)(citing Koch v. 

Ocean Accident & Guaranty Corp., 313 Ky. 220, 230 S.W.2d 893 (1950); Webb 

v. Kentucky Farm Bureau Ins. Co., Ky. App., 577 S.W.2d 17 (1978)). While 

21 
these long-held tenets of our law are firmly established, I also agree that, "[t]he 

rule of strict construction against an insurance company certainly does not 

mean that every doubt must be resolved against it . . . [because] the policy 

must receive a reasonable interpretation consistent . . . [with] the plain 

meaning and/or language of the contract." St. Paul Fire & Marine Ins. Co. v. 

Powell-Walton-Milward, Inc., 870 S.W.2d 223, 226 (Ky. 1994). 

In Bidwell v. Shelter Mut. Ins. Co., 367 S.W.3d 585, 588 (Ky. 2012), this 

Court unanimously held: 

[t]o be enforceable, Kentucky law requires a limitation of insurance 

coverage, such as a permissive user step-down provision, to be 

`clearly stated in order to apprise the insured of such limitations.' 

St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 

S.W.2d 223, 227 (Ky.1994). [N]ot only is the exclusion to be 

carefully, expressed, but . . . the operative terms clearly defined. 

Id. 

(Emphasis added.) The majority's opinion alters this Court's precedent by 

holding that owned-but-not-scheduled exclusions of underinsured motorist 

insurance policies are enforceable as long as they "expressly apprise insureds 

of the exclusion," without the additional requirement that the operative terms 

be clearly defined. I believe the Court should not break with its precedent and 

should, instead, continue to require the policy to clearly define its operative 

terms. 

22 
In its exclusions, Encompass lists losses the company does not cover. 

Specifically, the policy states: 

[w]e do not provide Underinsured Motorists Coverage for bodily 

injury sustained by any covered person . . . [w]hile that covered 

person is operating or occupying a motor vehicle owned by, leased 

by, furnished to, or available for the regular use of a covered 

person if the motor vehicle is not specifically identified in this 

policy under which a claim is made. 

Encompass's policy also defines the operative term "covered person" as 

"[y]ou for the ownership, maintenance or use of any vehicle, except while 

occupying, or when struck by, a vehicle owned by you which is not insured for 

this coverage under this policy." We will examine these policy provisions in 

turn. 

First, the policy fails to define a phrase used in its exclusions. It is 

unclear what constitutes a "motor vehicle . . . not specifically identified in this 

policy under which a claim is made." This term could potentially mean motor 

vehicles covered under the policy. However, that is not the only possible 

meaning. "Identified" could also mean a vehicle "excluded by endorsement," as 

contemplated elsewhere in the policy—as that vehicle would be "identified" by 

policy documents. 

Just like the exclusion provision in Bidwell, Encompass's policy 

exclusion, "leaves the policyholder guessing as to this provision's meaning." 

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Bidwell, 367 S.W.3d at 590-91. "And since the policy is drafted in all details by 

the insurance company, it must be held strictly accountable for the language 

used. Wolford v. Wolford, 662 S.W.2d 835 (Ky. 1984)." Eyler, 824 S.W.2d at 

859-60. Thus, "when ambiguities exist, we resolve them against the drafter 'in 

order to circumvent the technical, legalistic and complex contractual terms 

which limit benefits to the insured.' Simon v. Cont'l Ins. Co., 724 S.W.2d 210, 

213 (Ky.1986) (quoting R.H. Long, The Law of Liability Insurance, § 5.10B)." 

Bidwell, 367 S.W.3d at 588-89. 

The majority holds that owned-but-not-scheduled exclusionary 

provisions are enforceable "so long as they expressly apprise insureds of the 

exclusion." And the majority concludes that the Encompass exclusion meets 

that standard. I disagree. In order for the apprisal to be express, the provision 

must be "[c]learly and unmistakably communicated; [or] stated with directness 

and clarity." EXPRESS, Black's Law Dictionary (10th ed. 2014). Encompass 

failed to unmistakably communicate the parameters of the exclusion. As this 

Court unanimously said: 

"An essential tool in deciding whether an insurance policy is 

ambiguous, and consequently should be interpreted in favor of the 

insured, is the so-called 'doctrine of reasonable expectations."' 

[Simon v. Continental Ins. Co., 724 S.W.2d 210, 212 (Ky. 1986).] 

We explained in Simon that "[t]he gist of the doctrine is that the 

insured is entitled to all the coverage he may reasonably expect to 

be provided under the policy. Only an unequivocally conspicuous, 

24 
plain and clear manifestation of the company's intent to exclude 

coverage will defeat that expectation." Id. (internal citation and 

quotation marks omitted). 

Bidwell, 367 S.W.3d at 589 (Ky. 2012). 

Furthermore, the majority uses the policy's definition of "covered person" 

to support its claim that "the policy is in fact a clear and unambiguous 

statement that the policy does not pay benefits for vehicles it does not insure." 

However, this is a misstatement of the material terms of the policy. 

The definition of covered person reads "[y]ou for the ownership, 

maintenance or use of any vehicle . . . . "34(Emphasis added.) Thus, contrary to 

the majority's contention, the policy covers virtually any vehicle used by the 

insured. The sole exception under the definition of "covered person" is for 

those vehicles owned by the insured but not covered under this policy. 35 

 Therefore, had Tryon been riding his friend's motorcycle when he experienced 

an underinsured loss (assuming that motorcycle was not available for his 

regular use, pursuant to the policy's exclusionary provisions), Encompass 

34The syntax of the phrase "you for the ownership, maintenance or use" frankly 

puzzles me and further supports my contention that the language throughout the 

policy relating to underinsured motorists coverage is, indeed, ambiguous. 

35If one applies the language from the underinsured motorists exclusion 

instead of the definition of covered person, the corpus of what the policy excludes 

potentially changes. Instead of whether the vehicle is covered under this policy, the 

determinative factor is whether a vehicle owned by the insured is specifically identified 

in the policy—further evidence of the plan's ambiguity relating to underinsured 

motorists coverage. 

25 
would pay underinsured motorists benefits to him, irrespective of the liability 

insurance carrier for his friend's motorcycle. As this hypothetical illustrates, it 

is clear that the policy does, in fact, pay benefits for vehicles it does not insure. 

Therefore, the majority's statement that "the policy is in fact a clear and 

unambiguous statement that the policy does not pay benefits for vehicles it 

does not insure," is simply incorrect. 

Finally, I point out that the policy does not use the language 

"except . . . a vehicle owned by you which is not insured under this policy" 

when describing the "Underinsured Motorists Losses We Do Not Cover," but 

rather, only when defining "covered person." That begs the question: which is 

it? Does the exclusion mean any vehicle owned by the insured but not covered 

by Encompass? Or, does the exclusion apply to motor vehicles not "identified" 

under this policy? This key difference between policy terms creates further 

ambiguity. Whether the ambiguity arises from structural issues or whether it 

is a result of inconsistent or confusing language, courts should interpret the 

ambiguous terms in favor of the insured and in favor of insurance coverage—

just as courts of this Commonwealth have done for more than a half century. 

It is for these reasons that I dissent and would affirm the Court of 

Appeals. 

Noble and Venters, JJ., join. 

26 
COUNSEL FOR: 

PHILADELPHIA INDEMNITY INSURANCE 

COMPANY, INC.: 

Robert E. Stopher 

Robert Dmitri Bobrow 

Boehl, Stopher & Graves, LLP. 

ENCOMPASS INDEMNITY COMPANY: 

William Baxter Orberson 

Patricia Colleen Le Meur 

James Crockett Wade 

Phillips Parker Oberson & Arnett, PLC. 

COUNSEL FOR RICHARD TRYON: 

A. Thomas Johnson 

COUNSEL FOR AMICUS CURIAE: KENTUCKY DEFENSE COUNSEL, INC.: 

Eric Allen Hamilton 

Coleman Lockmiller & Bond 

COUNSEL FOR AMICUS CURIAE: KENTUCKY JUSTICE ASSOCIATION: 

Kevin Crosby Burke 

Burke Neal PLLC. 

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