Bidwell v. Shelter Mutual Insurance Co.
2012 Ky. LEXIS 86
| Ky. | 2012Background
- Bidwell was injured as a passenger in a vehicle driven with permission of the Gaineses; Shelter Mutual Insurance issued the Gaineses’ policy.
- Declarations page lists bodily injury limits of $250,000 per person and $500,000 per accident, with no mention of permissive-user limits.
- Policy contains a permissive user step-down provision stating permissive users are limited to the minimum limits of liability under applicable financial-responsibility law, regardless of Declarations.
- The applicable law is Kentucky’s KRS 304.39-110, which sets minimums of $25,000 per person and $50,000 per accident, reducing the stated $250,000 limit for permissive users.
- Bidwell sought declaratory judgment asserting the step-down provision is inconspicuous and violates the doctrine of reasonable expectations; the circuit court granted summary judgment for Shelter, and the Court of Appeals affirmed in a split decision.
- The Kentucky Supreme Court reversed, holding the step-down provision is unenforceable as a matter of law because it is not clearly stated, conspicuous, or plain against the insured’s reasonable expectations.
- The court ultimately held that the Declarations page creates a reasonable expectation of the listed coverage, and the step-down provision cannot defeat that expectation without being unequivocally conspicuous, plain, and clear.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the permissive user step-down provision is clearly stated and conspicuous. | Bidwell argues the provision is inconspicuous and ambiguous. | Shelter argues the provision is sufficiently clear and can limit permissive-user coverage. | unenforceable; provision not clearly stated or conspicuous enough to defeat reasonable expectations. |
| Whether the Declarations page creates a reasonable expectation of full coverage for permissive users. | Bidwell contends the Declarations page implies full coverage regardless of driver. | Shelter argues the step-down provision can legally limit coverage for permissive users. | unenforceable; Declarations page created a reasonable expectation of coverage that the step-down cannot defeat. |
Key Cases Cited
- Simon v. Cont’l Ins. Co., 724 S.W.2d 210 (Ky. 1986) (doctrine of reasonable expectations applies when ambiguity exists; ins. terms construed in insured's favor)
- St. Paul Fire & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870 S.W.2d 223 (Ky. 1994) (limits must be clearly stated to apprise insured of limitations)
- National Life & Accident Ins. Co. v. Ransdell, 259 Ky. 559, 82 S.W.2d 820 (Ky. 1935) (policy terms and declarations bar inferences against insured; ambiguity resolved in insured's favor)