Title: Britt v. US Auto. Ass'n
Citation: 950 P.2d 695
Docket Number: 20504
State: Hawaii
Issuer: Hawaii Supreme Court
Date: January 9, 1998

950 P.2d 695 (1998) 86 Hawai`i 511 Queen BRITT, Plaintiff-Appellee, and Bernadina Collins, Plaintiff v. UNITED STATES AUTOMOBILE ASSOCIATION, Defendant-Appellant No. 20504. Supreme Court of Hawai`i. January 9, 1998. Michael F. O'Connor and Lissa H. Andrews of Tam, O'Connor &amp; Henderson, on the briefs, Honolulu, for defendant-appellant. Henry R. Lobdell, Robert D. Kawamura, Stacy Moniz, and Kekuailohia M. Beamer of Kawamura, Lobdell &amp; Moniz, Honolulu, on the brief, for plaintiff-appellee. Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ. MOON, Chief Justice. Following a First Circuit bench trial, defendant-appellant United Services Automobile Association (USAA) appeals from the trial court's final judgment in favor of plaintiff-appellee Queen Britt, wherein the trial court held that USAA's insurance renewal form, with respect to the selection of "stacked" versus "nonstacked" uninsured/underinsured motorist coverage (UM/UIM), was ambiguous and, therefore, construed coverage as "stacked," in favor of Britt. On appeal, USAA contends that the trial court erred in holding that its insurance renewal form packet was ambiguous and that, therefore, Britt should not have been permitted to recover under the policy as a "stacked" insured. *696 For the reasons set forth below, we affirm the final judgment of the trial. Prior to May 1993, Britt, who owned two motor vehicles, had an automobile insurance policy with USAA for minimum bodily injury coverage of $35,000 on each vehicle and had her uninsured motorist (UM) and underinsured motorist (UIM) coverage "stacked." Stacked, as opposed to nonstacked UM/UIM coverage means that, in the event that one is involved in an accident with a motorist who is uninsured or underinsured, the injured party may make a claim against his or her own insurance policy for the aggregate sum of the limits under his or her UM or UIM coverage. Hence, in the instant case, nonstacked coverage would be $35,000 and stacked coverage for two vehicles would be $70,000, that is, two vehicles at $35,000 each. It is undisputed that, prior to 1993, insureds who owned more than one vehicle could automatically make claims as stacked insureds. However, due to legislative amendments, Hawaii Revised Statutes (HRS) § 431:10C-301 (1993), effective January 1, 1993, mandated that insurance companies could no longer automatically stack UM/UIM coverage for their insureds, but were required to offer the insured the option to: (1) purchase stacked insurance; and (2) select UM and UIM coverage up to, but not greater than the bodily injury liability coverage limits in the insured's policy. Additionally, the statute was amended to provide that minimum coverage was reduced from $35,000 to $25,000. HRS § 431:10C-301 provides in relevant part: On or about May 3, 1993, Britt received a 19-page automobile policy renewal packet from USAA. On page 2 of the packet, under the heading "IMPORTANT CHANGES IN YOUR HAWAII AUTO POLICY," USAA made the following disclosures relevant to the instant case: On page 3 of the renewal packet, the bodily injury limits of Britt's policy were listed as $35,000 coverage. Page 15 of the packet was entitled "BNF [Basic No-Fault]/ANF [Additional No-Fault] ORDER FORM." At the very top of the form, it stated: "To order or reject coverage, please complete and sign this form. If a current policy is in effect, and no changes are desired, no action is required." The remainder of the form included several coverage option amounts, including the previous minimum of $35,000 and the new minimum of $25,000. Beneath each choice was a box where the insured could select the coverage he or she wished, as well as the corresponding premium and deductible. Wishing to retain the same coverage as that under her current policy, that is, $35,000, Britt took "no action." Page 16 of the renewal packet was entitled "UM/UIM ORDER/REJECTION FORM". Again, at the very top of the form, USAA provided the following instruction: "To order or reject coverage, please complete and sign this form. If a current policy is in effect, and no changes are desired, no action is required." The top half of the form contained information on stacked and nonstacked limits, along with the corresponding premiums. The bottom half of page 16 was entitled "REJECTION" and contained six sentences adjacent to six boxes wherein the insured could make a check mark to reject the following: (Bold emphasis in original.) Not wishing to reject any coverage, and in accordance with the instruction that "no action [was] required" if a current policy was in effect and no changes were desired, Britt did not fill out the form on page 16. On October 6, 1993, Britt was involved in an automobile accident with an uninsured motorist. On March 31, 1995, she filed a declaratory action to have the circuit court declare that her policy limits were $70,000 pursuant to the stacked coverage of her UM limits of $35,000 on each of her two automobiles. On August 29, 1996, USAA moved for *698 summary judgment, arguing that Britt had only nonstacked coverage. On November 12, 1996, the circuit court denied the motion, ruling that there were material issues of fact with respect to ambiguities in the renewal policy that had to be submitted to the trier-of-fact. On January 2, 1997, the case proceed to a jury-waived trial. At trial, Britt testified that, when she received the renewal packet, she looked through it briefly but focused her attention on pages 3 and 16. Her interest in page 3 was to ascertain that her bodily injury coverage was maintained at the rate in her current policy, that is, $35,000. The form so indicated. She then looked at page 16 and concluded that, because she did not wish to reject any coverage in her current policy, in accordance with the instruction at the top of the page, she took "no action" and did not select any of the six options beginning with "I reject." Britt further testified that, although she was not completely conversant with the terms "stacked" versus "nonstacked," she understood her policy as providing a total of $70,000 in UM coverage. Hence, under her current policy, Britt understood that she had $35,000 coverage per car and that she was able to combine coverages for each car such that "the whole thing was $70,000 worth of insurance." She wished to maintain her policy exactly as it had been prior to May 1993, explaining: "I want to keep everything that I have from day one and from square one. And I don't want to reject anything. I don't want toI didn't want to send [the renewal forms] back. I want all of what I've got." On January 3, 1997, based upon its review of the renewal packet and the evidence adduced at trial, the circuit court orally ruled in Britt's favor. In its oral ruling, the court, having found the renewal packet to be ambiguous, consulted the legislative history and read the following into the record: On February 19, 1997, the court issued the following relevant findings of fact and conclusions of law: USAA's timely appeal followed. We review the circuit court's findings of fact (FOF) under the clearly erroneous standard. Hirono v. Peabody, 81 Hawai`i 230, 232, 915 P.2d 704, 706 (1996) (citation omitted). A FOF is clearly erroneous when, "despite evidence to support the finding, the appellate court is left with the definite and firm conviction that a mistake has been made." Id. A conclusion of law is not binding upon the appellate court and is freely reviewable under the right/wrong standard. Id. On appeal, USAA contends that the renewal packet was unambiguous and legally sufficient. Conversely, Britt argues that USAA's automobile renewal packet was ambiguous and failed to intelligibly advise her of the nature of her coverage. In Mollena v. Fireman's Fund Insurance Company of Hawaii Inc., 72 Haw. 314, 816 P.2d 968 (1991), this court held that, where a statute mandates that "`[e]ach insurer shall offer to each policy holder' optional underinsured motorist coverage[,]" we will interpret this language to mean that the insurer must make a legally sufficient offer under the following four-part test: Id. at 320, 816 P.2d at 971 (citations omitted). The insurer has the burden of proving that it made a legally sufficient offer under the four-part test. Id. "If the insurer cannot show that the four-part test has been met, then coverage is implied as a matter of law." Id. Furthermore, because insurance polices are contracts of adhesion, they must be construed liberally in favor of coverage. Estate of John Doe v. Paul Revere Ins. Group, 86 Hawai`i 262, 274, 948 P.2d 1103, 1115 (1997) (citations omitted); Hurtig v. Terminix Wood Treating &amp; Contracting Co., 67 Haw. 480, 481, 692 P.2d 1153, 1153 (1984). Ambiguity must therefore be resolved against the insurer. Estate of John Doe, 86 Hawai`i at 274, 948 P.2d at 1115 (citations omitted); State Farm Mut. Auto. Ins. Co. v. Cage, 874 F. Supp. 272, 273 (D.Haw.1994). Specifically at issue in the instant case is whether USAA satisfied the third prong of the test, that is, whether USAA intelligibly advised Britt of the nature of her coverage. On appeal, USAA contends that the offer was legally sufficient because, when read as a whole, USAA's disclosures regarding changes made it clear to Britt that action was required in order for her to "reject the Nonstacked Uninsured Motorists coverage" and to "reject Nonstacked Underinsured Motorists coverage." We disagree. The method of acceptance in USAA's renewal packet was ambiguous because it leads a reasonable person to believe that, "if a *701 current policy is in effect, and no changes are desired, no action is required." Britt: (1) had a current policy in effect with (a) $35,000 bodily injury coverage and (b) "stacked" UM/UIM coverage; and (2) desired no changes. Therefore, it was reasonable for her to conclude that her coverage would be maintained if she took "no action." Furthermore, the resulting coverage asserted by USAA in this instance belies USAA's claim of clarity. With respect to maintaining Britt's minimum bodily injury limits at $35,000, Britt notes that the policy disclosed that the minimum had been reduced to $25,000. However, by taking "no action," her higher coverage and commensurately higher premium remained the same, but, with respect to maintaining her stacked "UM/UIM" coverage, taking no action caused it to be "nonstacked." Additionally, the double negative language used on page 16 is confusing. Where USAA meant to provide an option for consumers to "select stacked" UM/UIM insurance, it worded it as, "I reject nonstacked" UM/UIM insurance. Britt testified that she did not wish to reject any coverage in her current policy. Rather she wished to "keep everything that I have from day one and from square one. And I don't want to reject anything. I don't want toI didn't want to send [the renewal forms] back. I want all of what I've got." The renewal packet sent to Britt can hardly be said to have "fully informed [Britt of her] loss of rights and ability to protect [herself]." Hse. Conf. Comm. Rep. No. 150, in 1992 House Journal, at 878. We therefore hold that the trial court's conclusion that USAA's renewal packet was ambiguous and failed to intelligibly advise Britt of the nature of her coverage was right. Pursuant to Estate of John Doe and Hurtig, USAA's ambiguous renewal packet must be construed in favor of the insured. As such, USAA failed to meet its burden of intelligibly informing Britt of the nature of her coverage, and, therefore, "coverage is implied as a matter of law." Mollena, 72 Haw. at 320, 816 P.2d at 971. Accordingly, we affirm the final judgment of the trial court.