Opinion ID: 2639219
Heading Depth: 1
Heading Rank: 4

Heading: Kansas Law Interpreting K.S.A. 40-284(b)

Text: K.S.A. 40-284(b) has been in effect without amendment since 1981. L. 1981, ch. 191, sec. 1. The first Kansas appellate decision interpreting this statute in a similar factual setting was State Farm Mut. Auto Ins. Co. v. Cummings, 13 Kan. App. 2d 630, 778 P.2d 370 (1989). Cummings, like the present case, involves both a multi-party settlement through interpleader and a UIM policy with coverage limits which did not exceed the limits on the face of the tortfeasor's policy. In Cummings, the UIM claimants Lisa Vest, Angie Vest, and Bradley Vest were occupants in a car driven by Charles Pinnell. The car was owned by Vivian Vest Pinnell and driven by Charles Pinnell. Angie, Lisa, and Charles were injured, and Bradley died in the accident. The tortfeasor was Charlene Purcell, and the car she was driving was owned by James Cummings. Fault was evenly divided by stipulation between Purcell and Cummings based on negligence in Purcell's case and negligent entrustment in Cummings' case. Purcell carried liability insurance limited to $50,000 per person and $100,000 per occurrence. Cummings had no liability insurance. The UIM claimants were insured under Pinnell's policy with UIM benefits identical to the tortfeasor's coverage  $50,000 per person and $100,000 per occurrence. The UIM claimants settled with the tortfeasor Purcell's insurance carrier for amounts less than their actual damages and sought UIM coverage for the balance of their actual damages. Cummings noted that the liability coverage of the tortfeasor's vehicle did not cover the claimants' actual damages. Emphasizing that K.S.A. 40-284(b) required UIM benefits to the extent that the limits of the insured's liability coverage exceeds those of the tortfeasor's vehicle, Cummings affirmed the trial court's denial of UIM benefits, finding that the limits of Purcell's policy and Pinnell's policy were the same. 13 Kan. App. 2d at 638. Cummings concluded: In determining whether underinsured motorist coverage is available [under K.S.A. 40-284(b)], two steps must be satisfied: (1) The opposing party's liability coverage must be below the claimant's liability coverage, and (2) the claimant must have damages in excess of the opposing party's liability coverage. In this case, step one cannot be satisfied. The liability coverage provided to the driver of the offending vehicle was not below appellants' liability coverage, but was equal to it. Both steps must be satisfied and, in the case of appellants only step two applies and no underinsured motorist coverage is available. 13 Kan. App. 2d at 639. Cummings acknowledged that the result may appear harsh but noted that the minimum requirements dictated by K.S.A. 40-284(b) had not been met by the UIM claimants and to impose further liability would impose a risk upon the insurers that had not been bargained for and for which the insurer had not been compensated. 13 Kan. App. 2d at 639. Cummings interpreted K.S.A. 40-284(b), holding that the plain and unambiguous language of the statute provides that UIM coverage exists only in cases where the claimant/insured has UIM limits which are greater than the tortfeasor's liability coverage. If upon comparison, the limits of the tortfeasor's coverage are greater than the limits of the claimant's UIM coverage, no UIM coverage exists. Thirteen years have passed since the decision in Cummings, and the legislature has not amended the law to ameliorate what Cummings referred to as the appearance of a harsh result. When the legislature fails to modify a statute to avoid a standing judicial construction of that statute, the legislature is presumed to agree with the court's interpretation. In re Adoption of B.M.W., 268 Kan. 871, 881, 2 P.3d 159 (2000) Application of the holding in Cummings to the case we now consider would require this court to reverse the decision of the trial court. Halsey's UIM coverage of $500,000 does not exceed the limits of the bodily injury coverage carried by the owner or operator of the other motor vehicle. Halsey fails to satisfy the first test adopted in Cummings. Halsey argues that the language in Cummings involved more than reference to the word limits. According to Halsey, the actual holding states that UIM coverage exists if the coverage in the policy exceeds the limits of the liability coverage in effect on the driver of the other vehicle. Halsey argues that the coverage terminology and the reference to that coverage which is in effect, should not be overlooked. However, there is no indication in Cummings that K.S.A. 40-284(b) would allow UIM recovery in circumstances where the claimant's UIM coverage limit was equal to or less than the liability limit on the face of the tortfeasor's policy. Cummings concludes that the plain and unambiguous language of K.S.A. 40-284(b) allows coverage for UIM benefits to the extent that the insured's applicable UIM coverage limit exceeds the limits of the bodily injury coverage carried by the owner or operator of the other motor vehicle. Coverage exists only when UIM limits are greater than the coverage limits of the tortfeasor. Thus, according to Cummings, the statute calls for a limits-to-limits comparison in determining whether UIM coverage exists, which is the first test adopted in that opinion. 13 Kan. App. 2d at 638-39. Jones v. Automobile Club Inter-Insurance Exchange, 26 Kan. App. 2d 206, 981 P.2d 767, rev. denied 268 Kan. 847 (1999), considered a slightly different situation. Joan Coffman Jones, Everetta Burris, and Terry Burris were injured following a collision with a car driven by Alvin Barrett. A passenger in Barrett's vehicle was also injured. Barrett was totally responsible for the accident. Barrett's liability policy provided benefits for $25,000 per person and $50,000 per occurrence. Jones' UIM benefits were limited to $50,000 per person and $100,000 per accident. Thus, application of step one in Cummings did not prevent UIM coverage because the UIM limits in Jones exceeded the tortfeasor's liability limits. The passenger in Barrett's vehicle settled with Barrett's insurer for $7,000, leaving $43,000 for Jones, Everetta Burris, and Terry Burris. Jones received $7,826, Terry Burris received $31,261, and Everetta Burris received $3,913. Because Jones' actual damages amounted to $20,682.15, she attempted to collect the difference between her damages and the amount received from Barrett's insurer under her own UIM provisions. The trial court ruled that Jones was not entitled to UIM benefits because her damages were less than the per person limits under Barrett's liability policy. The Court of Appeals reversed, finding that since Cummings does not state whether it is the tortfeasor's per occurrence or per person limit which applies to determine whether the injured person is an underinsured motorist, the case was not dispositive on the issue of whether Jones was entitled to UIM benefits. The court found that K.S.A. 40-284(b) should be liberally construed to provide broad protection of the insured against all damages resulting from injuries sustained by the insured that were caused by an automobile accident and arose out of the ownership, maintenance, or use of the insured motor vehicle. 26 Kan. App. 2d at 208. Jones noted that the statute referred to limit in the plural, not in the singular. The court concluded with the following: Accordingly, either the per person or the per occurrence limit may apply. Whether the per person or the per occurrence liability limit applies will depend on which limit impairs the insured's ability to receive compensation from the other motorist. 26 Kan. App. 2d at 209. Thus, Jones concluded that while the plaintiff's damages did not exceed the tortfeasor's $25,000 per person limit, the tortfeasor's $50,000 per occurrence limit, which was exceeded, was applicable, and Jones was held to have a UIM claim. The court remanded the case with instructions for the district court to determine the actual damages of Terry Burris and Everetta Burris to eliminate any potential for collusion between Jones, Terry Burris, and Everetta Burris. 26 Kan. App. 2d at 209. Farm Bureau correctly points out that the net effect of Jones was to modify the second prong of the Cummings test in cases involving group settlements. Jones was based upon its ability to interpret the provisions of K.S.A. 40-284(b) in its use of the word limits. After Jones, even though a UIM claimant's damages do not exceed the tortfeasor's per person liability limit coverage, a UIM claim arising from a group settlement will not be impeded by step two of Cummings as long as the tortfeasor's occurrence limit is exceeded by the total damages of all injured parties. Jones did not deal with the first test announced in Cummings. See Cummings, 13 Kan. App. 2d at 639. We reject Halsey's attempts to expand the reasoning of Jones to affect the first prong of the Cummings test. While some of the language used in Jones may seem to support Halsey's position in this case, Jones does not deal with the first step in Cummings. Language in the Jones decision such as Jones' claim against AAA should be calculated as the difference between her pro rata share of the settlement and the total value of her damages and language from the Jones syllabus that [u]nder the facts of this case that involves a group settlement with the tortfeasor, the underinsured motorist provider is responsible for paying the difference between the insured's pro rata share of the settlement and the total amount of damages up to the insured's underinsured liability limits, 26 Kan. App. 2d at 206, Syl. ¶ 7, assumes the existence of a UIM claim under Cummings' first step and alters the second step of Cummings. Thus, the above language provides no support for the conclusion that UIM coverage exists in the case we now consider. This court in Cashman v. Cherry, 270 Kan. 295, 13 P.3d 1265 (2000), interpreted the provisions of K.S.A. 40-284(b) in a case involving facts similar to those in Jones. However, again, Cashman did not deal with step one of the Cummings test; rather, the main thrust in Cashman, as in Jones, was step two of the Cummings test. Mandi Cashman and her parents Arnold and Donna Cashman were injured when their car collided with a car driven by Margery Cherry. Cherry was charged with 85% of the fault, and Donna was charged with the remaining 15% of the fault. Cherry had liability insurance with a $50,000 per person limit and a $100,000 per occurrence limit. The Cashmans had UIM benefits with a $100,000 per person limit and a $300,000 per accident limit. The district court found that Mandi's damages attributable to Cherry's negligence amounted to $40,539.91. Arnold's damages attributable to Cherry's negligence were $101,348.76. The Cashmans settled with Cherry and her insurance carrier for the $100,000 per occurrence limit and apportioned the settlement as follows: $50,000 to Arnold, $25,000 to Donna, and $25,000 to Mandi. Mandi claimed UIM benefits in the amount which her damages of $40,539.91 exceeded the $25,000 she received under the settlement with Cherry's liability insurance carrier. The district court held that Mandi was not entitled to UIM benefits as her damages ($40,539.91) were not in excess of Cherry's per person liability limit ($50,000). In Cashman, we were faced with a group settlement similar to that in J ones. Like Jones, the plaintiff was able to satisfy the first step of Cummings, but the plaintiff was denied UIM coverage based on the fact that the plaintiff's damages were less than the tortfeasor's per person liability limit. At the time of the district court decision in Cashman, Jones had not yet been decided. When Cashman reached this court, we cited Jones and permitted the recovery of UIM benefits on the grounds that in group settlements, Jones had altered step two of the Cummings test, permitting recovery where the insured's damages are uncompensated, either because the per person limit or the per occurrence limit is exceeded. In that regard, we said that Jones trumps Cummings. 270 Kan. at 296. We specifically indicated in Cashman that the principal issue for review was the lower courts' denial of benefits based upon the second prong of Cummings. See 270 Kan. at 299. Halsey cites the recent case of O'Donoghue v. Farm Bureau Mut. Ins. Co., 30 Kan. App. 2d 626, 49 P.3d 22 (2002), to support his claim that UIM benefits are due in this case. A petition for review was filed with this court in O'Donoghue which we subsequently granted. Pursuant to Rule 8.03(i) (2002 Kan. Ct. R. Annot. 56), O'Donoghue has no precedential value. Both of the insureds in Jones and Cashman met the first step of the analysis discussed in Cummings. In both cases, the UIM coverage exceeded the limits of the bodily injury coverage carried by the owner or operator of the other motor vehicle. K.S.A. 40-284(b). It follows, then, that nothing in Jones and Cashman changed the first step of the Cummings analysis.