Opinion ID: 1489814
Heading Depth: 1
Heading Rank: 3

Heading: ambiguity of the mid-century policy

Text: The determinative issue on appeal is whether the Mid-Century policy is ambiguous. An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language in the policy. Language is ambiguous if it is reasonably open to different constructions. Seeck, 212 S.W.3d at 132. Moreover, [i]f a contract promises something at one point and takes it away at another, there is an ambiguity. Id. at 133. Absent an ambiguity, an insurance policy must be enforced according to its terms. Rodriguez v. General Accident Ins. Co., 808 S.W.2d 379, 382 (Mo. banc 1991). If, however, policy language is ambiguous, it must be construed against the insurer. Seeck, 212 S.W.3d at 132. The critical portions of the Mid-Century policy state as follows: Limit of Liability a. Our liability under the UNDERinsured Motorist Coverage cannot exceed the limits of UNDERinsured Motorist Coverage stated in the policy, and the most we will pay will be the lesser of: 1. The difference between the amount of an insured person's damages for bodily injury, and the amount paid to that insured person by or for any person or organization who is or may be held legally liable for the bodily injury; or 2. The limits of liability of this coverage b. Subject to subsections a. and c.h. in this Limits of Liability section, we will pay up to the limits of liability shown in the schedule below as shown in the Declarations. Coverage Designation Limits (each person / each occurrence) U9 100/300 f. The amount of UNDERinsured Motorist Coverage we will pay shall be reduced by any amount paid or payable to or for an insured person; i. by or for any person or organization who is or may held legally liable for the bodily injury to an insured person; or ii. for bodily injury under the liability coverage of this policy.... (emphasis added). Limit of Liability (a) of the Mid-Century policy expressly states that the most it will pay is the lesser of the $100,000 per person policy limit or the difference between the damages and the payments already made. A reasonable construction of this language is that the insurer will pay the full policy limits of $100,000 per person if that is the lesser of the two damage amounts listed. This is also what Limit of Liability (b) states, for it says that the insurer will pay up to the limits of liability shown in the schedule and on the declarations page, which the policy specifically recites is $100,000 per person. Here, the parties stipulated that each plaintiff suffered at least $150,000 in damages and that the negligent driver's insurer paid each plaintiff $50,000, leaving each with at least $100,000 in damages unpaid. The declarations page for the policy and subsection (b) above both state that coverage is provided up to $100,000. Under either subsection (a) or (b), therefore, Mid-Century would be obligated to pay each plaintiff $100,000, and the total amount of liability would be $100,000. Mid-Century says, however, that under subsection (f), it is entitled to reduce the coverage it sets out on the declarations page by the amount already paid to the insured (The amount of UNDERinsured Motorist Coverage we will pay shall be reduced by any amount paid or payable to or for an insured person ...). In this case, because each plaintiff already received $50,000, that amount must be deducted from the $100,000 in coverage provided in the policy, Mid-Century says, to determine the amount payablein this case, $50,000. Such a construction of subsection (f) is, at best, in conflict with the clear intent of subsections (a) and (b), and is, at worst, misleading. To avoid this conflict, one impliedly would have to insert additional words into subsection (a)(2) and interpret it as if it read as follows: Limit of Liability a. Our liability under the UNDERinsured Motorist Coverage cannot exceed the limits of UNDERinsured Motorist Coverage stated in the policy, and the most we will pay will be the lesser of: 1.The difference between the amount of an insured person's damages for bodily injury, and the amount paid to that insured person by or for any person or organization who is or may be held legally liable for the bodily injury; or 2. The limits of liability of this coverage minus the amount already paid to that insured person. (new language underlined and in bold italics). This Court does not rewrite insurance policies to add language. [1] Subsection (f) cannot be construed to mean that any amount paid to the insured must be deducted from the coverage limit, for such an interpretation in effect would add language to subsection (a)(2) that is not there. While subsection (b) does state that it is [s]ubject to subsections a. and c.h. in this Limits of Liability section, and, arguably, is limited by subsection (f)'s language, subsection (a) has no similar reference to subsection (f), indicating it is not so limited. In addition, this Court notes that Mid-Century's interpretation of subsection (f) also would make inaccurate and misleading subsection (b)'s statement that it will pay up to the limits of liability shown in the schedule below as shown in the Declarations that is, that it will pay up to $100,000. This is so because Mid-Century never would be called on to pay its total limit of liability shown on the schedule if it were entitled first to deduct any amounts received from the tortfeasor, for in the case of underinsured motorist coverage, some amount always will have been received from the tortfeasorthat is why the insured is seeking to collect under insured rather than un insured motorist coverage. [2] If subsection (f) could not be reconciled with subsections (a) and (b), then these contract provisions would be found to be ambiguous, for as previously noted, it is well-settled that where one section of an insurance contract promises coverage and another takes it away, the contract is ambiguous. Seeck, 212 S.W.3d at 133. Conflicting clauses in a policy should be reconciled so far as their language reasonably permits; when reconciliation fails, however, inconsistent provisions will be construed in favor of the insured. Lutsky v. Blue Cross Hospital Servs., Inc. of Missouri, 695 S.W.2d 870, 875 n. 7 (Mo. banc 1985). Subsection (f), if interpreted as proposed by Mid-Century, would take from the insured a substantial part of the benefit for which the insured contracted and would be in conflict with the clear language of subsections (a) and (b) of the Limits of Liability section of the policy. This Court, therefore, rejects Mid-Century's interpretation of subsection (f). [3] Here, however, an alternative interpretation of subsection (f) does exist, and it gives meaning to all subsections of the coverage provisions. In stating that [t]he amount of UNDERinsured Motorist Coverage we will pay shall be reduced by any amount paid or payable to or for an insured person subsection (f) simply means that in determining the total damages to which the underinsured motorist coverage will be applied, the amount of money already received from the tortfeasor must be deducted. In this way, it avoids a double recovery. So, for instance, if the plaintiffs here had suffered only $125,000 in damages, and had received $50,000 from the tortfeasor, then the $50,000 received would be deducted from the total of $125,000 in damages and the underinsured motorist coverage would supply the remaining $75,000. It is not intended that the $50,000 already paid be deducted a second time, however, as would be the effective result of Mid-Century's argument.