Opinion ID: 1390684
Heading Depth: 1
Heading Rank: 1

Heading: Application of K.S.A. 40-284

Text: It is generally conceded by both parties that this case turns on whether the mandatory uninsured motorist statute is to be applied in construing the insurance policies in question. The dispute over application of the statute arises from the fact K.S.A. 40-284 did not become effective until July 1, 1968; whereas, the policies were issued and the accident occurred on May 15, 1968, more than a month prior to the effective date of the statute. Ordinarily, an uninsured motorist statute would not apply to insurance policies issued prior to the effective date of the statute. (See, Sturdy v. Allied Mutual Ins. Co., 203 Kan. 783, 457 P.2d 34; Couch on Insurance 2d, § 45:622, p. 569; Ball v. California State Auto. Assn. Inter-Ins. Bureau, 201 C.A.2d 85, 20 Cal. Rptr. 31 [1962]; Pierce v. Hartford Accident & Indemnity Co., 184 So.2d 241 [La. App. 1966]; Rowland v. DAIIE, 34 Mich. App. 267, 191 N.W.2d 56 [1971].) Thus, it is the argument of defendant that since these policies were issued prior to the effective date of the mandatory statute, the uninsured motorist coverage provided in the policies was voluntary and should be construed in that light. Defendant has cited the case of Sturdy v. Allied Mutual Ins. Co., supra, as controlling on this point. It was the first case to come before this court involving uninsured motorist coverage. Prior to reaching the merits of the controversy, we noted: ... Many of the cases present different factual situations and some turn on the question whether various policy limitations and exclusions amount to restriction of mandatory statutory coverage. We have no such question as the coverage here is a voluntary type, the insurance contract having been executed prior to the effective date of our recently enacted uninsured motorist law (K.S.A. 1968 Supp. 40-284, et seq. ) ... (p. 785.) The Sturdy case, however, is distinguishable on the basis of its facts. The accident giving rise to the insured's claim for uninsured motorist coverage occurred on October 4, 1966, well before the passage of the mandatory uninsured motorist statute in this state. There was no claim in that case that the policy coverage was issued in contemplation of the new mandatory act. From all the evidence it was clear that the uninsured motorist coverage included in the policy was a voluntary type, and not subject to the provisions of the subsequently enacted statute. In its memorandum decision of May 4, 1973, the trial court discussed the question of the applicability of the mandatory statute to the facts of the instant case. It was the conclusion of the court that the provisions of the policies in question were subject to the mandatory statute and should be construed in conformity with its mandate, despite the fact the policies were issued prior to the effective date of the statute. To fully understand the holding of the trial court it is necessary to review the facts and circumstances surrounding the issuance of the policies. The policy booklet originally given to Van Hoozer by defendant contained a section on benefits for bodily injury caused by uninsured motorists. Even though the uninsured motorist coverage did not apply to Van Hoozer since he had not purchased that particular coverage, the booklet contained a description of that form of coverage. By the express terms of the policy the limits of liability for uninsured motorist coverage at that time were $5,000 per person and $10,000 per accident. Under the same coverage an exclusion was included reducing the amount payable by the amount received under workmen's compensation law. On May 7, 1968, defendant mailed an Avoid Cancellation notice to Van Hoozer. Some confusion exists as to what took place next. Plaintiff contends, and the trial court so found, that sometime prior to the accident and the purchase of the uninsured motorist coverage on May 15, 1968, Van Hoozer received in the mail from defendant an endorsement E-42A and a letter titled Important Notice informing him of the recent enactment of the uninsured motorist statute by the legislature. The endorsement notified the insured that the definition of Uninsured Motor Vehicle found in the uninsured motorist coverage of the policies was being amended to include a land motor vehicle or trailer where the liability insurer for such vehicle or trailer becomes insolvent within two years after the accident. In addition, the endorsement amended the subrogation condition of the policy. Both changes incorporated in the endorsement had the effect of bringing the policies into compliance with the recently enacted uninsured motorist law which was to become effective on July 1, 1968. (K.S.A. 40-285, 286, 287.) The notice sent with the endorsement also purported to make changes in the policy in accordance with the provisions of the recently enacted statute, 40-284. It provided in part: IMPORTANT NOTICE IF YOUR POLICY ALREADY PROVIDES YOU WITH UNINSURED MOTORISTS COVERAGE, PLEASE DISREGARD THIS NOTICE. Accidents caused by motorists who are uninsured have been on the increase and therefore, the state legislature recently enacted a law by which Uninsured Motorists Coverage would be added to your policy, if it contained motor vehicle liability insurance. Uninsured Motorists Coverage is designed to afford protection when you, persons riding with you, or relatives residing in your household sustain bodily injury in accordance with the provisions of the coverage, as a result of an accident with an uninsured motorist or a hit-run driver, if he is legally responsible for such injury. We are, therefore, adding Uninsured Motorists Coverage to your policy unless you state in writing that you reject such coverage. Defendant claims these two documents were not forwarded to Van Hoozer until after the coverage was purchased, and that the trial court was mistaken in finding to the contrary. Defendant concedes it initially admitted these documents were delivered to Van Hoozer prior to his death, but it claims subsequent evidence indicated the documents were not mailed by defendant's office until after Van Hoozer's death. The trial court permitted defendant's offer of proof on this matter over plaintiff's objection, after which the court ruled inter alia: ... [T]o permit the Defendant to amend, change its legal position at this time would result in substantial prejudice to the plaintiff for the reason that plaintiff and the Court has relied upon the Answers filed herein by the Defendant, upon the Request for Admissions, and upon the Stipulations of the parties. We believe the trial court was correct in its finding. The record discloses that in its answer to the amended petition defendant admitted the documents were forwarded to Van Hoozer prior to his death. The later evidence offered by defendant to contradict this was inconclusive and did not justify a change in defendant's position at that late stage in the proceedings. Defendant is bound by its earlier admission. ( Fairlawn Plaza Development, Inc., v. Fleming Co., Inc., 210 Kan. 459, 502 P.2d 663.) On the morning of May 15, 1968, Van Hoozer went to the office of defendant's agent at which time he purchased, among other things, the uninsured motorist coverage for the two policies. He was charged additional premiums for the uninsured motorist coverage and was given a receipt. The agent also gave Van Hoozer an endorsement increasing the limits of liability for bodily injury caused by uninsured motorists. The endorsement, labeled E-38, provided as follows: ENDORSEMENT INCREASING LIMITS OF LIABILITY FOR BODILY INJURY CAUSED BY UNINSURED MOTORISTS. The limits of liability stated in the policy as applicable to Benefits for Bodily Injury Caused by Uninsured Motorists are deleted and the following limits substituted therefor: bodily injury $10,000 each person; $20,000 each accident This endorsement becomes part of the policy to which it is attached and supersedes and controls anything in the policy contrary hereto, but is otherwise subject to the declarations, insuring agreements, exclusions and conditions thereof. Based on this evidence the trial court ruled as a matter of law that K.S.A. 40-284 was applicable to the Van Hoozer policies. The trial court reasoned that the defendant insurance company clearly regarded the endorsement increasing the limits of liability for bodily injury caused by an uninsured motorist as complying with 40-284 and subject to its provisions. Moreover, the court felt the Important Notice and the endorsement 42-A demonstrated the attempt by defendant to comply with the provisions of the new mandatory statute. After considering the facts and circumstances surrounding the issuance of the policies we reach the same conclusion as the trial court. As previously stated, the uninsured motorist coverage was purchased by Van Hoozer after passage of the bill requiring insurance companies to offer uninsured motorist coverage. Van Hoozer purchased uninsured motorist coverage from defendant for a three-month period during which time the mandatory statute became effective. At no time did defendant indicate to Van Hoozer that the coverage he was purchasing was in any way different from, or more restrictive than, the coverage which was to become mandatory during the terms of the policies. The notice sent to Van Hoozer prior to his purchase of the uninsured motorist coverage referred specifically to the newly enacted statute and it stated that the insurance company would add the new uninsured motorist coverage to the policy unless rejected in writing by the insured. This was obviously done by defendant in anticipation of the new statute. Similarly, the amended definition and the subrogation condition incorporated in endorsement 42-A were clearly an attempt to conform the company's policies with the provisions of K.S.A. 40-285, 286, and 287. At the time the coverage was purchased by Van Hoozer, he was given nothing to describe the extent of coverage other than endorsement E-38. This document increased the limits of liability to $10,000 per person and $20,000 per accident as required by the mandatory statute. Again, this represents an attempt by defendant to bring its policies into conformity with the legislative enactment. Van Hoozer paid additional premiums for this coverage and he should receive the benefits for which he paid. In a similar situation a California district court of appeals laid down the following rule of law in holding that a financial responsibility statute was applicable to an accident occurring prior to the effective date of the statute: An endorsement to an automobile liability policy increasing the amount of coverage in anticipation of a statutory increase in the required amount of financial responsibility, construed in the light of a notice sent by the insurer to the insured and of an increased premium charged, effected an increase also in the amount of the uninsured motorist accident coverage, although the accident in question took place before the statute actually went into effect. ( White v. Farmers Ins. Exchange, 207 C.A.2d 667, Headnote ¶ 1, 24 Cal. Rptr. 755 [1962].) Defendant argues that it should not be penalized for attempting to comply with or anticipate the law. We do not regard the trial court's holding as penalizing defendant. Where an insurance company issues coverage in anticipation of a new statute and receives increased premiums thereby, it seems only fair that such company should be bound by the terms of coverage purchased by the insured. Here, defendant issued the uninsured motorist coverage to Van Hoozer in compliance with the recently enacted statute and the policies should be construed in accordance with its provisions. The trial court did not err in concluding that K.S.A. 40-284 was applicable to the policies in question.