*1 (49 22) P.3d 87,002 No. O’Donoghue, the Estate of Administrator of

Peter Chong O’Donoghue, O’Donoghue, Heir at and Sean Ae Chong O’Donoghue, Ae Law of Appellees/Cross-Appellants, Co., Inc., Mutual Insurance Farm Bureau v. Appellant/ Cross-Appellee. filed Opinion 26, 2002.

April Gribble, Wheeler, Hite, II, P. & D. and Vince of Don Fanning Honeyman, L.L.P., Wichita, of for appellanficross-appellee. Grace, Pratt, L.C., Wichita, Unruh, Unruh Corlin Pratt and L. & Terry J. for appellees/cross-appellants. Marquardt, Before Johnson, P.J., Gernon and JJ. Co., (Farm Farm Bureau Mutual Insurance Inc. Johnson, J.: Bureau) of the amount the district court’s determination appeals insured, (UIM) to its motorist benefits underinsured payable this action are the Ae deceased. Plaintiffs in Chong O’Donoghue, (col- and the heir of Ae estate administrator Chong We referred to as affirm. lectively O’Donoghue).

The facts are a July undisputed. O’Donoghue, passen- Brown, in a vehicle driven Sarah was killed single-car ger *2 vehicle; accident. There were two other in the one was passengers Thus, killed in the accident and the other was also severely injured. insurer, were three claimants the there driver’s American against (American Insurance Family Family). Company Brown’sAmerican automobile insurance Family policy provided $50,000 $100,000 of bodily injury liability per person i.e., (50/100), occurrence American would not Family per pay any $50,000 one more than and would more than not a total person pay $100,000 to all of of the in the same compensate persons accident. Brown’s limits were to insufficient com- coverage fully all The three claimants. to divide the total pensate parties agreed occurrence available monies under the American per Family policy $50,000 as follows: the would receive and each injured passenger $25,000. Bureau, the would of decedents’ estates receive Farm as insurer, the with of settlement American O’Donoghue’s approved as a fair and reasonable distribution Brown’s lia- Family being bility Farm Bureau UIM with

O’Donoghue’s policy provided coverage $100,000 $300,000 (100/ limits of per person per 300). The have that ex- parties agreed O’Donoghue’s $100,000. ceeded made claim under Farm Bureau’s $75,000, $100,000 UIM for representing per person $25,000 limit less the from Farm American Bu- recovery Family. countered that to reau its maximum was liability O’Donoghue $50,000, Brown’s limit of per computed by subtracting person $50,000 $100,000. from limit of O’Donoghue’s estate

The filed a and a motion for partial petition summary $75,000 the district court to in UIM declare cov- judgment, asking available to The court district erage O’Donoghue. granted $75,000 that O’Donoghue’s partial summary judgment, finding available, UIM but the court denied O’Donoghue’s motion fees under K.S.A. 40-256. The later attorney parties to a Bureau Farm the un- agreed journal entry judgment. paid contested amount of but appealed O’Donoghue, the denial of at- O’Donoghue cross-appealed judgment. fees. torney OF BENEFITS UIM

CALCULATION issue before court As primaiy presented parties, with Farm whether the amount of O’Donoghue’s limit should be calculated her Bureau reducing per person (1) limit of Brown’s American Family liability by: — = (2) ($100,000 $50,000); the amount or — ($100,000 American actual Family’s payment O’Donoghue = $75,000). was based on Because summary judgment facts, the court’s of review is de standard novo. stipulated appellate 1081, 1082, (1993). Beck, 252 v. Kan. Veatch mirrors the agree policy ap- apparently language parties statute, and, therefore, the and application plicable interpretation *3 statute, 40-284(b), is the underinsured motorist K.S.A. disposi- law, of a and tive in this case. statute is question Interpretation court’s is unlimited. Babe Houser Motor Co. the review appellate 506, Tetreault, 502, (2000). P.3d 270 Kan. 14 1149 v. 40-284(b) the basic for UIM K.S.A. sets forth cov- requirements erage: uninsured motorist shall include an underinsured motorist “Any coverage pro- the insured’s to vision which enables insured or the recover representative legal the insurer the amount of or death to which the from damages injury bodily entitled the owner or of another motor insured is from vehicle operator legally limits limits of such

with to the uninsured coverage equal liability by provided the motorist the extent such exceeds the limits of coverage coverage bodily carried the owner or of the other motor vehicle.” by operator injury coverage Farm Bureau State Farm Mut. Ins. Co. v. cites to Auto. Cum 630, 370, 13 Kan. 2d rev. denied 245 Kan. mings, App. (1989), rule, i.e., as 786 for its “hmits-to-limits” authority proposed a maximum UIM the tortfeasor’s by deriving obligation deducting limit from limit. In the UIM Cummings, insurance had 50/100 limits. The oc tortfeasor’s liability of the other were the driver’s State vehicle covered cupants Farm which likewise had UIM limits of 50/100. The four policy, for less settled the tortfeasor’s insurer than with injured parties

629 and UIM from their actual then demanded benefits State damages Farm to make difference. up facts,

Based on the district found there these court stipulated The no UIM available to Court coverage injured parties. of Appeals agreed, holding: “Since motorist available that it ex- underinsured is to the extent only ceeds the limits the driver other bodily injury coverage

vehicle, case, of this is under the facts underinsured motorist not avail- able because it is identical to the on vehicle bodily injury offending that and does not exceed 13 Kan. 2d at 638-39. coverage.” App. Thus, even had been unable to collect though injured parties the full amount of their to the due tortfeasor’s damages inadequate limits, no benefits UIM were available because the liability words, and the tortfeasor’s limits were identical. In other liability the claimant had court limits. The con- purchased inadequate cluded with its a test to “In be such cases. de- opinion applied available, whether motorist underinsured termining (1) two must be satisfied: cov- steps opposing party’s (2) must be below the claimant’s erage liability coverage, claimant have must in excess of the lia- party’s opposing 13 Kan. 639. 2d at bility coverage.” App. contends that stated in the law has been Cummings two recent cases

superceded by involving injury multiple group v. settlements: Automobile Club Inter-Insurance Exchange, 206, 767, 26 Kan. 2d 981 rev. P.2d denied 268 Kan. 847 App. (1999), v. Cashman P.3d Cherry, (2000). these cases establish According O’Donoghue, clearly Farm from Bureau should be cal- payment O’Donoghue’s *4 culated the actual American by simply deducting Family payment without the of the of the two necessity per comparing companies’ policies. The in was one of four a vehicle plaintiff persons injured Jones

that was struck the tortfeasor’s vehicle. The tortfeasor’s bodily $25,000 had limits of injury liability coverage per person $50,000 (25/50). occurrence The tortfeasor’s col- per passenger $7,000, $43,000 lected of the occurrence limit remain- leaving per and the other three in the struck vehicle. ing passengers Jones $20,682.15 and were

The related damages agreed parties Jones’ $7,826. tire was rata share of that pro Jones’ insurer, AAA, for to her then turned payment. Jones’ Jones that un- court ruled limits. The district had 50/100 UIM coverage test, did not have der the second Cummings prong Jones ($20,682.15) were less than the her UIM claim because damages ($25,000). limit tortfeasor’s per person court, that reversed the district Court of finding Appeals or whether test did not per person per Cummings specify whether should be occurrence limit determining applied exceeded the tortfeasor’s claimant’s liability coverage. damages was not Thus, the court Cummings dispositive summarily opined, nature at the remedial 2d at 208. the issue. 26 Kan. of Looking App. 40-284, that whether the court determined of K.S.A. per per- limit which will limit son or occurrence upon depend applies per from the receive full the insured’s compensation ability impairs in the had been same several tortfeasor. Because people due accident, the tortfeasor was from incomplete recovery Jones’ limit, rather than the occurrence to the tortfeasor’s per at 209. limit. 26 Kan. 2d Apparently, App. of all claimants if the total of the against damages saying limit, in excess of the tortfeasor’s the tortfeasor was individual the UIM claimant’s of the amount of then regardless met. had been the second of Cummings damages, prong of a collusive settle- about concerned possibility the related occu- ment of the available among liability coverage vehicle, the Court of remanded the struck Appeals pants each court for further case to the district findings regarding party’s are instructed: “Once those The court actual damages. determined, to determine each district court is directed per- claim rata settlement. son’s share against pro Jones’ her rata as the between AAA be calculated should pro difference (Em- her and the total value share the settlement damages.” to this added.) 2d at 209. points phasis App. the amount of the rule for as calculating estabhshing language the tortfea- actual from The amount of benefits recovery payable: from the claimant’s total sor is deducted damages. *5 after the Kansas Court considered a fac-

Shortly Jones, Supreme Cashman, 270 Kan. 295. The similar scenario plaintiff tually tortfeasor, was one of three who Cashman injured by people limits. s with 50/100 Cashman liability damages $40,539.91, within an were found to be amount per person limit. the total of all claimants’ exceeded the damages limit. Cashman setded with the occurrence tortfea- per $25,000, rata sor’sinsurer for as her share of the occurrence pro per insurer, limit. Cashman filed a claim the UIM which against pro- vided limits. The 100/300 district court denied Cashman’s claim for benefits under the second test prong Cummings ($40,539.91) because her were not in excess of the damages limit of the tortfeasor’s 270 Kan. per person liability policy. at 296-97. Kansas Court Finding logic persuasive, Supreme Jones

commented that Cashman could not receive the full amount of the ($50,000) because the per person liability coverage ($100,000) limit due exhausted to multiple injured parties involved. 270 Kan. at 300-01. Like the Kansas Jones, Supreme Court remanded the case to the district court to determine the amounts of all the and Cash- injured parties’ respective damages man’s rata share of the available from the tortfeasor’s pro [Cashmanj’s insurer. It then advised: “Mandi UIM claim liability American should be the difference between her against Family pro rata and her share of settlement damages $40,539.91.” 270 Kan. at 302. The second syllabus paragraph even broader “The underinsured motorist contains language: pro- vider is the difference between the insured’s responsible paying rata share of the and the total amount of settlement pro .” to the insured’s underinsured limits . . . up liability at 2. forth the UIM Syl. setting provider’s responsibilities, ¶ of a “hmits-to-limits” rule Court made no mention Supreme that would reduce the UIM notes, the focal issue of both As Farm Bureau correctly

and Cashman was whether there was available any insured, a “hmits-to-hmits” rule to re- to the not whether applied UIM claim. duce the amount of benefits available to pay proper *6 Cashman, In and the UIM claimants’ total were less damages Jones the than the UIM limit reduced tortfeasor’s per person per limit, i.e. their would have been the same under person recovery instance, Farm or For either Bureau’s O’Donoghue’s theory. of Farm Bureau’s “limits-to-limits” rule Jones, application $25,000 a would have maximum available benefit of yielded ($50,000 $25,000), minus but total were damages only Jones’ $20,682.15. Cashman, In the maximum UIM under Farm exposure $50,000 ($100,000 Bureau’s have been would minus theory $50,000); ($40,539.91) were within that limit. Cashman’s damages Therefore, it does not that Farm Bureau’s inter- appear proffered 40-284(b), of K.S.A. pretation creating “per person limit-to-per rule, limit” before the or Cashman squarely Jones courts. Cashman, claimants the tort- multiple dividing However, feasor’s insurance were members. once proceeds family the actual are determined and the UIM insured’s rata pro calculated, share of the tortfeasor’s limits is relationship should have no on the calculation of injured parties impact benefits. Cashman s directive to the difference between the pay UIM insured’s rata share of the tortfeasor’s insurance pro proceeds and the total amount of the insured’s to the insured’s damages up UIM limits should not be restricted to linked closely injured per- sons. last, of40-284(b).

Farm Bureau focuses on the qualifyingportion first, Neither the here nor the cases discuss the parties previous of the statute. The statute is not as as it principal portion plain However, could be. a fair of the first of the statute reading portion directs that insurance are to a UIM companies provide which enables the insured to collect from his her or own insurance the amount of that the insured would have re- company money tortfeasor, covered from if the tortfeasor had been carrying Here, same limits as the insured. if Brown had carried liability limits, insurance with 100/300 would have O’Donoghue $100,000 $300,000 recovered from Brown. The per $100,000 limit was sufficient to fund the limit for fully claimants, $100,000 each of the three had over O’Donoghue statute, in actual this damages. By applying interpretation claimants problem prorating coverage among multiple is dealt with in the same manner as the of the tortfeasor’s proration instance, claimants, if For there had been four UIM each with UIM occurrence lim- damages, its would have been based on actual rather than prorated, damages, noted, to the first to file a claim. It should be simply paid persons however, and, that UIM is first not all party coverage ordinarily, the tortfeasor will be UIM ben- persons against claiming claiming efits under the same policy. 40-284(b) if K.S.A. contained no further provision, UIM, could collect under the in addition

to the Therefore, collected from Brown’s insurer. already *7 the statute die UIM “to the extent such qualifies [UIM] recovery exceeds the limits of the carried bodily injury coverage the owner or of the other motor vehicle.” It is note- operator that the statute to the UIM worthy speaks “coverage” exceeding the tortfeasor’s This connotes the amount availa- “coverage.” ble for under the tortfeasor’s both the recovery policy, considering and occurrence limits and the number and respec- claimants, tive of all is deducted from the amount which would have been available to the UIM claimant under the same if the scenario tortfeasor had UIM limits to ar- higher rive at the amount which the UIM insurer must its insured. pay of the statute does not create a qualifying portion “per person rule, limits” limitation but rather it limits-to-per person provides Because of the tortfea- “coverage-to-coverage” comparison. limit, sor’s the tortfeasor’s inadequate per $25,000.00. available to was The amount that was ($25,000) under tire tortfeasor’s limits is deducted payable policy from the amount that would have been under the UIM paid policy ($100,000).

Cashman noted the UIM was purpose mandating “to fill the inherent in motor vehicle financial gap responsibility insurance legislation compulsory legislation” specifically 40-284(b) directed that “K.S.A. should be construed liberally intent to innocent dam- light legislative compensate persons 2. It sufficient insurance.” others without Syl. ¶ aged that the of UIM is to would also seem purpose logical limits, 100/300, be available allow one to certain to purchase e.g. s bodily purchaser injuries, regardless compensate tortfeasor. the lim- limits carried injury by any potential Although it To its-to-limits rule is creates aberrant results. simple apply, illustrate, chart reflects of the limits- application following rule in this if Brown had carried various to-limits case bodily injury limits: liability O’Donghue’s

Brown’s B/I Farm Bureau’s recovery Limits total payment Uninsured 75,000 87,500 $ $

25/50 75,000 50,000 50/100 $ $ 100/300 -0- no are filled and innocent are not

Surely, gaps persons adequately a rule that for full if compensated by provides compensation only the tortfeasor is either uninsured or insured. Fur- completely fully ther, it is counterintuitive to that the the tortfeasor’s provide higher limits the smaller the innocent total re- person’s covery.

There was that the rule nec- some hmits-to-limits suggestion for insurance to be able to define their essary companies accurately 40-284(a), K.S.A. under Farm Bureau exposure. 100/300, liable for the entire if Brown had been potentially *8 uninsured. There was no evidence that Farm Bureau’s UIM cov- had been an actuarial determination of the erage priced prob- that would be a tortfeasor that car- ability O’Donoghue limits, ried 50/100 rather than 25/50 or other amount. Our any of Farm Bureau’s UIM retains the interpretation responsibility $100,000 $300,000 outside limits of occurrence. No to the insurance hardship industry readily apparent.

Here, from have Brown would been O’Donoghue’s recovery $100,000, if Brown had carried 100/300 $25,000 recovered from Brown lia- because of the O’Donoghue (50/100). had Brown incurred bility actually O’Donoghue Therefore, the tortfeasor’s cov- than of more damages. is deducted from the UIM erage $75,000. UIM benefit of The district court’s to arrive at the payable is affirmed. ruling

ATTOBNEYFEES the district

In its contends court O’Donoghue cross-appeal, in its motion for fees to K.S.A. erred attorney denying pursuant on the estate’s motion for sum- 40-256. During hearing partial the motion for the district court denied attorney mary judgment, fees as the district court the estate premature. permitted renew at a later time. The record does not indicate to its motion motion, Furthermore, neither the estate ever revived its however. nor the nunc tunc order ad- entry journal judgment pro dressed the merits of the motion for fees. attorney 40-256

K.S.A. states: commenced, in all actions hereafter which is rendered judgment against any “[I]n ... if from the evi- insurance as defined K.S.A. 40-201 it company appear that . . . cause or excuse to dence such has refused without just company pay loss, the full amount of such the court in such shall allow the rendering judgment action, a reasonable sum as an fee for services in such attorney’s including plaintiff to be recovered and collected as a part proceeding upon appeal, costs . . . .” and Cashman contends indicate clearly Farm Bureau’s in UIM obligation provide coverage, and, therefore, Farm Bureau did not have cause or excuse to just the claim. deny Co., v. & Accident Ins. Evans Provident Life

In (1991), the Kansas Court summarized the Supreme fees under K.S.A. 40-256: law the award of attorney regarding cause or “The of whether an insurer has refused to without just question pay excuse is one of fact for the trial court. pay [Citation omitted.] refusing claim, an has a to make a faith insurance duty company good investigation facts the claim. If there is a bona fide and rea- [Citation omitted.] surrounding claim, failure to sonable factual the insured’s there is no ground contesting an insurance com- without cause or excuse. Whether omitted.] just [Citation pay is determined on the facts refusal to is without cause or excuse just pany’s pay and circumstances each case. [Citation omitted.] *9 636 and, therefore,

“Whether there was cause to refuse just justification payment for denial of fees is in the trial court’s sound discretion. omit- [Citation attorney fanciful, discretion is abused when action is or judicial arbitrary, ted.] Judicial unreasonable, which is another that discretion is abused where way only saying no reasonable would take the view the trial court. adopted by [Citation at 249 Kan. 261-62. omitted.]”

It is not clear that the fee issue was attorney properly presented to the district court and for See thereby preserved appeal. Lindsey Bank, 685, 690, v. Miami National 267 Kan. 984 719 P.2d County (1999). Nevertheless, the district court’s denial of fees was attorney a valid exercise of its discretion. When an insurance controversy an involves issue of first the award of fees is attorney impression, Co., Garrison v. State Farm Mut. Auto. Ins. 20 Kan. inappropriate. 918, 931, 226, 547, 2d 894 P.2d 258 Kan. 907 P.2d 891 App. aff'd (1995). Furthermore, the of an issue raised in faith presence good an award of bars fees under K.S.A. 40-256. Whitaker v. attorney Co., 279, 284-85, State Farm Mut. 13 Auto Ins. Kan. 2d App. (1989). above, P.2d 320 As we noted and Cashman were not on Farm Bureau had a bona fide reason for its clearly point of the maximum UIM benefits An award interpretation payable. would have been fees attorney inappropriate. Affirmed. I dissent. J., dissenting: respectfully

Gernon, Kansas, (UIM) underinsured motorist is mandated coverage 40-284(b), K.S.A. which provides: uninsured motorist shall include an “Any underinsured motorist pro- vision which enables the insured or the insured’s to recover legal representative from the insurer the amount of or death to which the bodily injury insured is entitled from the owner or of another motor vehicle legally operator with to the limits of such uninsured equal provided by to the extent such exceeds limits of the cov- bodily injury the owner or of the other motor vehicle.” erage operator This statute is State Farm Mut. Auto. Ins. plain unambiguous. 630, 638, Co. v. 2d rev. Cummings, App. (1989). denied 245 Kan. 786 *10 40-284(b),

IAs read the of K.S.A. it means that plain language an underinsured motorist should be able to recover UIM benefits to the extent that the insured’s UIM exceeds the only coverage tortfeasor’s

I read the mean that the amount of UIM ben- plain language efits to an available insured must be determined a “limits-to- by Therefore, limits” of the UIM and comparison liability coverages. two, if the UIM is the the insured coverage greater may collect UIM benefits amount of the difference between up the two coverages.

This court such a rule in 13 Kan. recognized Cummings, App. 2d at 638. We reaffirmed that v. Allstate Indem position Taylor Co., , 12, 2002). 30 Kan. 2d P.3d nity App. (April 40-284(b) we stated that K.S.A. Cummings, “is and indicates that the underinsured motorist unambiguous plainly coverage enables the insured to recover from his underinsured motorist carrier damages ‘tothe extent such exceeds the limits of the carried coverage bodily injury coverage words, the owner or of the other motor vehicle.’ In other if the operator underinsured motorist in the exceeds the lim- coverage policy covering appellants vehicle, its of the in effect on the driver of the other resort liability coverage may case, however, be had to underinsured motorist In this both limits were coverage. the same. “ . . . Since underinsured motorist is available to the extent that coverage only it exceeds the limits of the the driver of the other bodily injury coverage vehicle, case, under the facts of this underinsured motorist avail- is not able. available, “In whether underinsured motorist two determining steps (1) must be satisfied: The must be below the opposing party’s liability coverage (2) claimant’s and the claimant must have in excess of liability coverage, tire 13 Kan. 2d at 638-39. opposing party’s liability coverage.” App. cases, 295, Two other Cashman v. 270 Kan. P.3d 13 Cherry, (2000), v. Automobile Club Inter-Insurance Jones 767, 2d rev. denied 268 Exchange, App. (1999), issues, Kan. 847 deal with similar but not precisely the issue here. The issue in both Cashman and was whether an under- Jones

insured motorist claim existed. Both dealt with settlements. family Neither Cashman nor under- dealt with how available I should be calculated. read

insured motorist nothing limits- case which modifies the traditional either overarching to-limits rule. economic and

The limits-to-limits rule makes both public policy must be able to calculate risk and sense. The insurance industry rule which is uncertain could some application exposure. risk, make it to assess could potentially impossible help promote run, collusion, and, in the could affect the underwriting long underinsured motorist coverage. stated,

For the reasons I dissent.