Kelly WAGNER, Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant and Respondent.
No. 890316-CA.
Court of Appeals of Utah.
Jan. 9, 1990.
Rehearing Denied Jan. 29, 1990.
Olwell v. Clark, 658 P.2d 585, a case similar to this one, involved a claim by a cotenant that his payment of property taxes caused the statute of limitations for adverse possession to begin running. We held that the cotenant‘s payment of taxes and attempts to preserve title were for the benefit of all cotenants and therefore did not constitute notice of adverse possession and did not start the statute of limitations running. In Olwell, we also reiterated that an adverse possession claimant‘s “conduct must give notice of his claim to his cotenant in some clear and unequivocal manner.” Olwell, 658 P.2d at 589.
In this case, respondents Gilbert and Maud paid taxes on the property and redeemed the property prior to a tax sale. Applying the standards established in McCready and followed in cases like Olwell, we conclude that these actions did not constitute notice to the other cotenant, Robert Kimball, or to his surviving wife Elizabeth that Gilbert and Maud intended to adversely possess the property. Respondents’ payment of taxes and redemption prior to a tax sale were for the benefit of all cotenants and did not trigger a claim of adverse possession. Of course, respondents are entitled to contribution for payments made to protect the property.
The final question raised in this case is whether the Court of Appeals correctly treated petitioners’ alternative claim that they acquired rights in the property by prescriptive easement. Because we hold that they acquired a valid cotenant interest in the property by taking a quitclaim deed from Elizabeth Kimball, Robert Kimball‘s successor in interest, we need not address this issue.
We reverse the Court of Appeals and vacate its unpublished opinion. We reinstate the trial court‘s ruling as to petitioners’ cotenant interest. The Court of Appeals noted, as we do, the confusion in the record regarding the trial court‘s ruling on the Sweeney Land Company‘s property rights. The judgment and decree of quiet title, which were signed by the trial judge, do not comport with the judge‘s oral ruling as to the Sweeney interest. Because of this confusion at the trial court level and the absence of any information presented to this Court on this issue, we remand the case to the trial court for clarification on the discrepancy between the oral ruling and the judgment and decree of quiet title.
HALL, C.J., HOWE, Associate C.J., and STEWART and ZIMMERMAN, JJ., concur.
Don J. Hanson, Salt Lake City, for defendant and respondent.
Before GARFF, GREENWOOD and ORME, JJ.
GARFF, Judge:
Appellant Kelly Wagner, the surviving spouse of Thomas Wagner (Wagner), sought a declaratory judgment that she is entitled to uninsured motorist benefits in the amount of $100,000 pursuant to an insurance contract entered into between Wagner and respondent Farmers Insurance Exchange. The district court granted summary judgment to respondent. We affirm.
Wagner entered into an insurance contract with respondent to insure his 1979 Porsche 928. This contract named Wagner as the insured party and provided liability and uninsured motorist coverage.
On November 15, 1986, Wagner died as a result of injuries received in a single vehicle automobile accident. At the time of the accident, he was riding as a passenger in his insured Porsche, while Charles P. Lingle, who had no liability insurance, was driving with Wagner‘s permission. The accident was caused by Lingle‘s negligence.
Respondent paid Wagner‘s medical expenses, and funeral and death benefits under the no-fault provisions of the policy. It also offered to pay appellant $20,000 under the liability portion of the policy rather than $100,000, the face amount of the policy, for Wagner‘s death. Appellant rejected this offer and brought this declaratory judgment action, demanding the entire $100,000. Both parties, relying upon stipulated facts, submitted the case on cross-motions for summary judgment. The trial court ruled in favor of respondent. Appellant then brought this appeal.
The sole issue appellant raises is whether the provisions of the insurance policy which excluded coverage should be voided as against public policy because Wagner reasonably expected to be covered in such a situation when he purchased the policy. She argues that insurance policies are not typical contracts in which the terms are bargained for by the parties but are, instead, contracts of adhesion. She also argues that purchasers commonly expect to be fully covered by the insurance they buy, so the insurance contract should be essentially rewritten to fulfill Wagner‘s reasonable expectation of coverage.
On the other hand, respondent argues that an insurance policy is a contract and the written provisions should control unless: (1) the provisions are illegal or against public policy; (2) the provisions are ambiguous; or (3) one of the parties has misrepresented the provisions of the policy, leading the other party to have different expectations than the terms of the policy would dictate. Respondent asserts that none of these conditions are present here.
“[I]n the absence of ambiguity, we interpret the terms of an insurance policy according to their plain meaning.” Valley Bank & Trust Co. v. United States Life Title Ins. Co., 776 P.2d 933, 936 (Utah Ct.App.1989); see also Bear River Mut. Ins. Co. v. Wright, 770 P.2d 1019, 1020 (Utah Ct.App.1989) (per curiam). Where an ambiguity appears in the terms of a policy, especially in an exclusion from coverage, we examine the language from the viewpoint of the average purchaser of insurance who is not trained in law or in the insurance business. State Farm Mut. Auto. Ins. Co. v. Gibbs, 139 Ariz. 274, 678 P.2d 459, 464 (Ct. App.1983); see also Draughon v. CUNA Mut. Ins. Soc‘y, 771 P.2d 1105, 1108 (Utah Ct.App.1989). However, we construe any ambiguity in an insurance policy against the insurer and in favor of coverage. LDS Hosp. v. Capitol Life Ins. Co., 765 P.2d 857, 858 (Utah 1988).
An insurer may limit its obligation to provide coverage by “exclusions phrased in language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided.” Reserve Ins. Co. v. Pisciotta, 30 Cal.3d 800, 640 P.2d 764, 769, 180 Cal.Rptr. 628 (1982).
Wagner‘s insurance policy, written in a so-called “E-Z Reader” style, excludes “liability for bodily injury to an insured person” under its liability coverage section. Because this section defines an “insured person” as “[y]ou or any family member,” Wagner, as the named insured, was excluded from coverage. This exclusion is clearly labelled and clearly stated.
Under the policy‘s uninsured motorist coverage section, respondent is obligated to “pay all sums which an insured person is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by the insured person.” (Emphasis added.) This obligation is limited by the requirement that “[t]he bodily injury must be caused by accident and arise out of the ownership, maintenance or use of the uninsured motor vehicle.” (Emphasis added.) An “insured person” is defined in this section as “[y]ou or any family member,” or “[a]ny other person while occupying your insured car.” Thus, both Wagner and Lingle qualify as insured persons.
The general definitions describe an “insured vehicle” as “[t]he vehicle described in the Declarations of this policy or any private passenger or utility car with which you replace it.” This section defines an “uninsured motor vehicle” as “a motor vehicle which is “[n]ot insured by a bodily injury liability bond or policy at the time of the accident.” Under these definitions, Wagner‘s vehicle, because it was insured under this policy at the time of the accident, is not an “uninsured vehicle.”
These provisions are clearly stated and do not contemplate the possibility of the insured vehicle also being the uninsured vehicle. Under these provisions, respondent is not obligated to pay for Wagner‘s damages.
However, under the “Other Insurance” provision of the liability coverage, respondent agrees to “provide insurance for an insured person, other than you or a family member, up to the limits of the Financial Responsibility Law only.”1 Under the definition of an “insured person” in the liability coverage section, Lingle is an insured person who would be legally liable for Wagner‘s injuries and death. Because Lingle qualifies as an “insured person,” and is not Wagner or a family member, respondent is liable to pay $20,000, the minimum statutory amount of coverage, to appellant on Lingle‘s behalf. It is undisputed that respondent has offered to pay appellant $20,000 under this provision of the policy.
We find that the exclusions to coverage under this policy are clearly stated and that Wagner knew or should have known about them, and that respondent offered to pay appellant according to the terms of the contract.
“[T]he reasonable expectations concept is quite troublesome, since most insureds develop a ‘reasonable expectation’ that every loss will be covered by their policy.” Id. However, because of the necessity to balance this expectation against the need to keep the cost of insurance premiums relatively stable, its application must be limited. See Allstate Ins. Co. v. United States Fidelity & Guar. Co., 619 P.2d 329, 333 (Utah 1980); see also Zobrist v. Farmers Ins. Exch., 103 Nev. 104, 734 P.2d 699, 700 (1987) (per curiam).4
There are circumstances when the reasonable expectations of the insured may counteract a clear exclusion in the policy. See State Farm Mut. Auto. Ins. Co. v. Mastbaum, 748 P.2d 1042, 1047 (Utah 1987) (Durham, J., dissenting). In Gray v. Zurich Insurance Co., 54 Cal.Rptr. at 104, 419 P.2d at 168, the California Supreme Court reasoned:
Although courts have long followed the basic precept that they would look to the words of the contract to find the meaning which the parties expected from them, they have also applied the doctrine of the adhesion contract to insurance policies, holding that in view of the disparate bargaining status of the parties we must ascertain that meaning of the contract which the insured would reasonably expect.
Id. 54 Cal.Rptr. at 107-08, 419 P.2d at 171-72 (footnotes omitted).
Provisions that are against public policy or against the reasonable expectations of the parties may be found void in appropriate circumstances. However, even this reasonable expectation concept must be limited by something more than “the fervent hope usually engendered by loss,” such as the expectations that “have been induced by the making of a promise.” Darner Motor Sales, 682 P.2d at 395 (quoting 1 Corbin, Contracts § 1 (1963)). Therefore, in making a judicial determination of such expectations, we examine the following interrelated factors: first, whether the insurer knew or should have known of the insured‘s expectations; second, whether the insurer created or helped to create these expectations; and third, whether the insured‘s expectations are reasonable. See Abraham, Judge-Made Law And Judge-Made Insurance: Honoring The Reasonable Expectations Of The Insured, 67 Va. L.Rev. 1151, 1179-80. To accomplish this determination, we examine, in addition to the wording of the contract, “extrinsic matters such as the intent of the parties, the purpose sought to be accomplished, the subject matter of the contract, and circumstances surrounding the issuance of the policy.” Bonner County v. Panhandle Rodeo Ass‘n, Inc., 101 Idaho 772, 620 P.2d 1102, 1106 (1980); see also Restatement
If the evidence indicates that the insurer knew or should have known of the insured‘s expectation or that he created or helped to create this expectation, equity weighs heavily in favor of holding the insurer to fulfill the insured‘s expectation. Abraham, Judge-Made Law And Judge-Made Insurance: Honoring The Reasonable Expectations Of The Insured, 67 Va. L.Rev. 1151, 1180 (1981); see also Restatement (Second) of Contracts § 211(3) (1981). An insurer may be found to know of an insured‘s reasonable expectation from prior negotiations or other circumstances, or such knowledge may be inferred if a term in the contract eliminates the dominant purpose of the transaction. Restatement (Second) of Contracts § 211 comment f (1981). This is especially true if an insured never has the opportunity to read the term in the contract. Id.
In making a judicial determination of reasonable expectations, we rely upon extrinsic evidence surrounding the making of the insurance contract. Because the facts are undisputed in the present case, we accord the trial court‘s conclusions no particular deference, but review for correction of error. Sacramento Baseball Club, Inc. v. The Great N. Baseball Co., 748 P.2d 1058, 1060 (Utah 1987); Knight v. Post, 748 P.2d 1097, 1099 (Utah Ct.App.1988).
We first examine whether respondent knew or should have known of Wagner‘s supposed expectation of uninsured motorist coverage for injuries to himself while riding as a passenger in his insured vehicle being driven by an uninsured permissive driver. After a thorough review of the record, we find that appellant presented no evidence that Wagner specifically contemplated this situation in purchasing the insurance policy, but only presented unsupported suppositions and allegations. There is no evidence, whatsoever, that Wagner ever contemplated the present set of circumstances. Therefore, there is no compelling evidence that respondent knew or should have known of this expectation.
Second, we must determine whether respondent created or helped to create Wagner‘s alleged expectation of coverage. The insurance agent who sold respondent‘s policy to Wagner testified that he did not have any specific recollection of his negotiations with Wagner, but indicated that it was his habit, in describing the scope of respondent‘s uninsured motorist coverage, to explain that, “[i]f you are involved in an accident which you are not at fault and you are injured and that person does not have liability insurance to cover your medical costs, that you have that coverage available under the uninsured motorist [provisions].” If anything, this statement understates the extent of coverage in the situation at issue, only indicating that the insured‘s medical costs would be covered. Therefore, we find that respondent, through its agent, did not create or help to create Wagner‘s alleged expectation of coverage.
The Utah Supreme Court has held that the intent of the legislature in enacting these statutes is “to require the minimum coverages outlined in the [applicable statute] in all insurance policies used as security for the registration and subsequent operation of motor vehicles in Utah.” Allstate Ins. Co., 619 P.2d at 332. Consistent with this holding, it has found both a named driver exclusion clause, id. at 333, and a household or family exclusion clause, Call, 712 P.2d at 231, unenforceable up to the minimum statutory liability limits but enforceable in excess of these limits.8 In the present case, respondent offered appellant coverage up to the minimum statutory amount, $20,000, according to terms of the policy. Its coverage, then, is not inconsistent with these statutes.
Identification of Lingle as an insured driver under the policy is similarly consistent with the provisions of section
coverage for covered persons who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, disease, or death, in limits which at least equal the minimum bodily injury limits for motor vehicle liability policies under §
31A-22-304 .
Respondent‘s policy explicitly provides this coverage in its “Other Insurance” section.9
a vehicle, the operation, maintenance, or use of which is not covered under a liability policy at the time of an injury-causing occurrence; or if the vehicle is covered, but with lower limits than required by §
31A-22-304 , then the motor vehicle is uninsured to the extent of the deficiency.
The wording of respondent‘s insurance policy closely parallels this definition. Further, the Utah Supreme Court has indicated that insurance coverage “was intended to rest with the vehicle and not with the named insured.” Clark v. State Farm Mut. Auto. Ins. Co., 743 P.2d 1227, 1230 (Utah 1987). The relevant provisions of respondent‘s policy coincide with applicable Utah law. Thus, we do not find any statutory basis for Wagner to have had a reasonable expectation of coverage. Because respondent did not know nor should have known of Wagner‘s expectations and did not do anything to create such expectations of coverage, and because there is no statutory basis for such expectations, Wagner could not have had any reasonable expectation of coverage.
At this point, the only basis upon which we could find in appellant‘s favor is that this situation is appropriate for judicial revision of the insurance policy.10 We decline to take such an activist approach, but leave any plugging of this “loophole” to the discretion of either the free market or the legislature. We note that this position is consistent with our supreme court‘s previous decisions in Allstate Insurance Co., 619 P.2d at 329, and Mastbaum, 748 P.2d at 1042. We further note that, under Utah law, an insurance policy “must be enforced as written when its provisions do not conflict with our mandatory automobile insurance statutes.” Mastbaum, 748 P.2d at 1044. Therefore, we hold that respondent had no obligation to insure Wagner under the circumstances presented by this case beyond the statutory minimum amount, and that the trial court correctly bound appellant to the terms of respondent‘s policy.
Other jurisdictions which have dealt with this issue have arrived at the same conclusion. Under identical facts, the New Mexico court concluded that uninsured motorist coverage was not provided under an automobile insurance policy because “the obligation of a liability insurer is contractual and is to be determined by the terms of the policy.” Willey v. Farmers Ins. Group, 86 N.M. 325, 523 P.2d 1351, 1352 (1974) (quoting Jones v. Harper, 75 N.M. 557, 408 P.2d 56, 58 (1965).11 Likewise, under identical facts, the Arizona Supreme Court allowed such an exclusion in Gibbs, 678 P.2d at 459.12 The court agreed with the insurer
We affirm the trial court‘s decision.
GREENWOOD, J., concurs.
ORME, Judge (concurring specially):
I join in the court‘s decision to affirm the judgment in favor of the insurer.
Appellant concedes that the language of the policy unambiguously denies uninsured motorist liability coverage, under the peculiar facts of this case, in any amount greater than $20,000. Appellant nonetheless asks this court to embrace the “reasonable expectations” doctrine, hold as a matter of law that Wagner‘s reasonable expectation was that he would be covered up to $100,000 in the instant situation, and decree that this expectation must control over the unambiguous policy language to the contrary.
While I do not subscribe to the court‘s opinion in its entirety, I concur fully in its ultimate holding, namely that it is unnecessary in this appeal to definitively accept or to definitively reject the “reasonable expectations” doctrine. This is so because even if the doctrine were to be adopted in this state, appellant would not be entitled, given the state of the record before us, to the judgment she seeks. As explained in the main opinion, there is no evidence Wagner expected, reasonably or otherwise, $100,000.00 in uninsured motorist liability protection if he were injured or killed as a passenger in his own car while it was being operated by an uninsured friend. Moreover, the insurance agent‘s best guess of how he would have explained to Wagner the extent of the uninsured motorist coverage he was obtaining would not have promoted such an expectation.
With no hard evidence but the policy before us, we are basically asked to superimpose on these facts our own common-sense notion of what someone in Wagner‘s position would reasonably have expected when contracting for the uninsured motorist coverage he obtained. This we have declined to do. But I must say that if we thought it appropriate to do otherwise, at least my common-sense view would not help appellant. My sense is that the average consumer in Wagner‘s situation would be contemplating a collision between his heavily-insured Porsche and some junk-heap operated by an irresponsible, insolvent, and uninsured stranger. Thoughts of needing additional protection while riding as a passenger in one‘s own Porsche, having turned the keys over to a friend without insurance, strike me as being quite unlikely indeed.
Notes
Id. at 396-97 (quoting Restatement (Second) of Contracts § 21 comment f (1981)).Although customers typically adhere to standardized agreements and are bound by them without even appearing to know the standard terms in detail, they are not bound to unknown terms which are beyond the range of reasonable expectation.... [An insured] who adheres to the [insurer‘s] standard terms does not assent to a term if the [insurer] has reason to believe that the [insured] would not have accepted the agreement if he had known that the agreement contained the particular term. Such a belief or assumption may be shown by the prior negotiations or inferred from the circumstances. Reason to believe may be inferred from the fact that the term is bizarre or oppressive, from the fact that it eviscerates the non-standard terms explicitly agreed to, or from the fact that it eliminates the dominant purpose of the transaction. The inference is reinforced if the adhering party never had an opportunity to read the term, or if it is illegible or otherwise hidden from view. This rule is closely related to the policy against unconscionable terms and the rule of interpretation against the draftsman.
Willey, 523 P.2d at 1352. Under the policy terms, an “uninsured motor vehicle shall not include ... a motor vehicle owned by or furnished for the regular use of the named insured.” Id.To pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of (a) bodily injury, sickness or disease, including death resulting therefrom, hereinafter called ‘bodily injury,’ sustained by the insured; caused by accident and arising out of the ownership, maintenance or use of such uninsured motor vehicle.
Gibbs, 678 P.2d at 461. Under the policy, the term “YOU” as “You or Your—means the named insured or named insureds shown on the declaration page.” Id.THERE IS NO COVERAGE .... 2. FOR ANY BODILY INJURY TO: .... c. YOU.