Mann Ex Rel. Mann v. Farmers Insurance Co.

1988 OK 58, 761 P.2d 460, 1988 Okla. LEXIS 57, 1988 WL 46438

• Court: Supreme Court of Oklahoma
• Decided: May 10, 1988
• Docket: 64977
• Status: Published

Opinions

LAVENDER, Justice:

At some time during or prior to the year 1972 appellee Donald K. Mann obtained a commercial fleet liability insurance policy from appellant Truck Insurance Exchange covering all of the vehicles in the fleet and such vehicles as were from time to time added to the policy. This policy provided a $100,000 per person limit on liability and a $5,000 per person limit on liability under the uninsured motorist provisions of the policy.

On March 16, 1976, 1976 Okla.Sess. Laws, Ch. 28 § 1 went into effect as 36 O.S.Supp.1976 § 3636. This statutory amendment of the previous form of section 3636 added the provision in subsection (C) to make uninsured motorist coverage applicable to the situation where the tort-feasor was underinsured. The 1976 amendment also changed the language of subsection (B) of the previous form of the statute from:

Coverage shall be not less than the amounts or limits prescribed for bodily injury or death for a policy meeting the requirements of 47 O.S.1961, § 204, as the same may be hereafter amended; provided, however, that larger amounts of liability may be offered and purchased if desired,

to:¹

Coverage shall be not less than the amounts or limits prescribed for bodily injury or death for a policy meeting the requirements of Section 7-204 of Title 47, Oklahoma Statutes, as the same may be hereafter amended; provided, however, that increased limits of liability shall be offered and purchased if desired, not to exceed the limits provided in the policy of bodily injury liability of the insured.... (emphasis added)

Appellants sent the following notice to ap-pellee Donald K. Mann approximately thirty (30) days prior to the renewal date of the fleet liability insurance policy during the year 1976:

Dear Policyholder:

The Oklahoma Legislature recently passed a law which requires an insurance company to offer to provide Uninsured Motorists coverage with increased limits of liability.

The term “Uninsured Motor Vehicle” has been extended to include an insured motor vehicle whose liability insurer for any reason either cannot or is not legally required to afford at least the per person coverage limits with respect to the legal liability of its insured, applicable to any injured party under any uninsured motorists coverage covering such injured party.

The endorsement on the reverse side amends the Uninsured Motorists provisions of the policy to comply with the new law.

If you wish to increase your Uninsured Motorist limits of liability, please contact your agent. You may not select higher limits than your policy’s Bodily Injury Liability Limits.

FARMERS INSURANCE GROUP

[reverse side]

AMENDATORY UNINSURED MOTORISTS — OKLAHOMA

This endorsement becomes a part of your policy effective from its date of issue unless the policy is being renewed, in which event this endorsement becomes effective with the date shown on the enclosed renewal notice.

Uninsured Motorists is amended as follows:

1) The Limits of Liability are amended to provide:

The limit of the Company’s liability, unless otherwise stated in the Declarations, shall be the limits of bodily injury liability required by the motor vehicle financial responsibility law of the State of Oklahoma.

2) The definition of “Uninsured Motor Vehicle” shall include an insured motor vehicle whose liability insurer for any reason either cannot or is not legally required to afford at least the per person coverage limits with respect to the legal liability of its insured, applicable to any injured party under any uninsured motorists coverage covering such injured party.

As of January 1, 1981, 1980 Okla.Sess. Laws, ch. 235 § 2 became effective, increasing the limits of required liability insurance from $5,000 per person to $10,000 per person.² By the terms of the fleet liability insurance policy this increase became immediately effective as to the uninsured motorist provisions of that policy.

In April of 1981 Donald K. Mann requested that the liability limits of the fleet liability insurance policy be raised to $250,-000 per person for bodily injury liability. At the same time appellee also purchased a $1,000,000 “umbrella” liability policy from appellant Truck Underwriters Association. In June of this same year Donald K. Mann added to the coverage of the fleet policy a 1980 pickup truck purchased by, and titled in the name of, Travis L. Mann.

Subsequently, appellee Travis L. Mann, as a passenger on a motorcycle, was involved in an accident involving the motorcycle and a pickup. As a result of this accident Travis L. Mann suffered serious personal injuries including multiple fractures of his ankle. The driver of the pickup settled out of court for the limits of the driver’s liability insurance policy. Appel-lees then brought action against the driver of the motorcycle and against appellant Farmers Insurance Company, Inc., d/b/a Truck Insurance Exchange, on the uninsured motorist provisions of the fleet liability insurance policy, and against appellant Truck Underwriters Association on the “umbrella” liability policy. At the time of the accident there were nine (9) vehicles, including Travis’ pickup, insured under the fleet liability policy.

A jury trial was held to establish the liability of the driver of the motorcycle and the extent of damages suffered by appel-lees. The jury returned a verdict holding the driver liable and awarding $158,000 in damages, plus costs and prejudgment interest, to Travis and $7,000 plus costs and interest to Donald K. Mann. Following entry of judgment on this verdict both ap-pellees and appellants moved for summary judgment as to the extent of liability of appellants under the insurance policies.

Appellants argued on motion for summary judgment that the uninsured motorist provisions of the fleet liability policy provided a maximum coverage of $10,000 applicable to Travis’ injuries. Appellants also argued that coverage under the fleet policy could not be stacked because Travis’ separate ownership of his own vehicle triggered the operation of an exclusionary clause prohibiting stacking.

Appellees argued that the limits of the uninsured motorist provisions of the fleet policy were equal to the liability limits of the policy because appellees had not rejected the higher limits in writing and/or appellants had not made a sufficient offer of uninsured motorist coverage equal to liability limits. Appellees also argued that stacking should be allowed as to the various vehicles covered under the fleet policy because appellants were estopped to claim the separate ownership of Travis’ vehicle. Finally, appellees argued that the “umbrella” liability policy should include uninsured motorist coverage as a matter of law because such coverage had not been either offered or rejected in connection with the “umbrella” policy.

The trial court ruled in granting summary judgment: 1) that stacking of coverage under the fleet liability policy was precluded by Travis’ separate ownership of his vehicle, citing Shepard v. Farmers Insurance Co., Inc.;³ and 2) that, although appellants’ offer of increased limits of uninsured motorist coverage in this case was sufficient, appellants’ failure to obtain a written rejection of higher limits of coverage left such higher limits as part of the policy as a matter of law. The trial court found the limit of appellants’ liability under the fleet insurance policy to be $250,000.

Appellants filed the present appeal from the trial court’s ruling that a rejection in writing must be obtained as to any level of uninsured motorist coverage less than the maximum liability coverage of the relevant policy. Appellees filed a counter-appeal in which they urged as error the trial court’s ruling on summary judgment that they were precluded from stacking coverage under the fleet policy. Appellees contend that issues of fact remain disputed as to this question.

I.

The basic tenet of appellants’ argument on appeal is that the trial court erroneously construed the terms of 36 O.S. 1981 § 3636 in reaching its conclusion that a written rejection was required to effectuate acceptance of a level of uninsured motorist coverage below the limit of liability of the fleet insurance policy. At issue here are 36 O.S.1981 § 3636(B), which provides:

The policy referred to in subsection (A) of this section shall provide coverage therein or supplemental thereto for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles and hit-and-run motor vehicles because of bodily injury, sickness or disease, including death resulting therefrom. Coverage shall be not less than the amounts or limits prescribed for bodily injury or death for a policy meeting the requirements of Section 7-204 of Title 47, Oklahoma Statutes, as the same may be hereafter amended; provided, however, that increased limits of liability shall be offered and purchased if desired, not to exceed the limits provided in the policy of bodily injury liability of the insured. The uninsured motorist coverage shall be upon a form approved by the State Board for Property and Casualty Rates as otherwise provided in the Insurance Code and may provide that the parties to the contract shall, upon demand of either, submit their differences to arbitration; provided, that if agreement by arbitration is not reached within three (3) months from date of demand, the insured may sue the tort-feasor.

and 36 O.S.1981 § 3636(F), which provides:

The named insured shall have the right to reject such uninsured motorist coverage in writing, and except that unless the named insured requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured had rejected the coverage in connection with a policy previously issued to him by the same insurer.

We find merit in appellants’ contention that the trial court’s construction of these provisions was erroneous. In Moser v. Liberty Mutual Insurance Co.,4 this Court stated:

This Court has stated that the intent of the uninsured motorist legislation is to afford to one insured under his own liability insurance policy the same protection in the event he is injured by an uninsured motorist as he would have had if the negligent motorist had carried liability insurance. In subsection (B) of section 3636, it is provided that the uninsured motorist coverage provided as a part of a liability policy shall not be less than that required under 47 O.S.1981 § 7-204, with the insured to have the option to purchase increased limits of liability not to exceed the limits provided for bodily injury liability under the policy. Section 7-204 sets the minimum limits of liability coverage required to be carried by all owners of vehicles registered in the State of Oklahoma.

The purpose of the uninsured motorist provision, when viewed in light of the requirement that it provide minimum standards of protection, is that it place the insured in the same position he would have been in if the negligent uninsured motorist had complied with Oklahoma laws concerning financial responsibility. To find it applicable to supplemental liability policies, as argued by plaintiff as her interpretation of the “[n]o policy insuring against loss ...” language, would place one injured by an uninsured motorist in the same position as if the uninsured motorist had carried the same liability coverage as the injured party, (footnotes omitted)

In Moser this Court dealt with the question of the applicability of the requirements of 36 O.S.1981 § 3636 to supplemental or “umbrella” liability policies.⁵ The reasoning, however, is clearly applicable to the present case involving a primary policy purchased by the insured with liability limits in excess of the minimum required under the financial responsibility laws. Under the construction adopted by the trial court, failure of the insurer to obtain a written rejection as to the highest available limits would result in those limits being written into the uninsured motorist provisions of the insured’s policy. This would result in the insured being placed in the position as though an uninsured motorist, with whom the insured was involved in an accident, had purchased the same liability policy as that purchased by the insured. As found in Moser this result goes beyond the mandate of 36 O.S.1981 § 3636.

Appellees have cited cases which they contend support the trial court’s result. We do not find these citations persuasive. O’Hanlon v. Hartford Accident and Indemnity Co.,6 cited in Moser,7 simply did not deal with the question of a insurer’s liability for uninsured motorist coverage in the absence of a written rejection, but only dealt with issues regarding the applicability of uninsured motorist provisions to “umbrella” or excess insurance policies. Appellees also cite Landry v. Government Employees Insurance Co.,8 a Louisiana Court of Appeals decision. The difference between Oklahoma law and Louisiana law relative to the intent reflected in our respective uninsured motorist provisions was discussed in Moser9 The cases of Arms v. State Farm Mutual Automobile Ins. Co.,10 and Abate v. Pioneer Mutual Casualty Co.,11 dealt with instances were the insurers failed to offer uninsured motorist coverage at all (Abate) or failed to offer coverage up to the primary liability policy limits (Arms ).¹² In the present case appellees were notified of the availability of higher levels of uninsured motorist coverage and were informed to contact their insurance agent if they wished such coverage. There is no contention raised that appellees did not accept uninsured motorist coverage.

Appellees do appear to contest the sufficiency of the notice previously quoted in full. This argument however is unclear. It does not appear to challenge the clarity of the notice as to whether coverage was available up to policy limits but rather whether the notice, when read in conjunction with the schedule of coverage, indicated that the increase in coverage was automatically effective. The trial court here ruled on the sufficiency of the notice as a matter of law. We do not find appel-lees’ argument persuasive as to the establishment of error in the trial court’s ruling on this point.

II.

In their briefs in support of their cross-petition in error, appellees raise the argument that the trial court erred in holding that stacking of the coverages within the fleet liability policy was precluded by Travis’ separate ownership of his own vehicle. Both the trial court and appellants have relied on Shepard v. Farmers Insurance Co., Inc.,¹³ as supporting the conclusion that stacking of benefits is legally impermissible under the uncontroverted facts, i.e. that Travis did own his own vehicle. However, this Court stated in Shepard: ¹⁴

Keel and its progeny required that a claimant be permitted to recover upon multiple policies for which multiple uninsured motorist premiums had been paid. However, claimant may not recover unless he or she is an “insured”, and the terms of the contract determine who is insured thereunder. Neither the Oklahoma statute nor the relevant cases dictate mandatory classes of insureds or set mandatory limits of coverage. As indicated by Keel and Richardson, one may have recourse to multiple automobile insurance policies, but in order to recover, the claimant must first be an insured under each policy. Contract language which excludes a resident of the named insured’s household who owns an automobile from coverage as an insured under the uninsured motorist provisions of the policy contravenes neither the express language of the Oklahoma Uninsured Motorist Act nor its underlying policy of providing coverage for tortious conduct which would otherwise go uncompensated. Such language in fact triggers operation of our mandatory insurance statute and clearly places the burden of carrying automobile insurance upon automobile owners.

Since uninsured motorist coverage is mandatory unless waived, the presumption exists that one who owns an automobile has recourse to some uninsured motorist benefits. The amount of coverage available depends upon and is limited to the contract between the parties....

In the present case appellants have conceded that Travis L. Mann is an insured although he has separate ownership of his own vehicle. Presumably this coverage comes as a result of insurance on that vehicle. Yet the only policy which appears to cover the vehicle owned by Travis is the fleet liability policy issued to Donald K. Mann. That policy provides for multiple uninsured motorist coverage for which premiums have been paid.

Because the basis for the presumption engaged in in Shepard is not present here, in that the separately owned automobile here is insured under the very policy which appellees claim is subject to stacking, we agree with appellees’ contention that it was error for the trial court to rely on Shepard as dispositive.

Appellees argue that the question of whether stacking should be allowed under the fleet liability policy in this case is not subject to resolution on motion for summary judgment. Appellees maintain that there are disputed factual considerations as to whether appellants are estopped from relying on the separate ownership of Travis’ vehicle because of appellants’ action in insuring the vehicle under Donald K. Mann’s policy. Appellants assert that the question of estoppel was not considered by the trial court.

Because we find error in the trial court’s ruling as to the necessity of a written rejection to be effective as to the acceptance of uninsured motorist coverage with limits less than the liability limits of a motor vehicle liability policy, and because of the erroneous reliance on Shepard v. Farmers Insurance Co., Inc., we REVERSE the trial court’s ruling on summary judgment.

The cause is REMANDED for further proceedings consistent with the views expressed in this opinion. The trial court’s attention is also directed to the case of State Farm Mutual Automobile Insurance Co. v. Wendt,15 handed down subsequent to the trial court’s ruling in the present case.

DOOLIN, C.J., HARGRAVE, V.C.J., and SIMMS, OPALA and SUMMERS, JJ., concur. HODGES, J., concurs in Part II; dissents from Part I. ALMA WILSON, J., dissents. KAUGER, J., recused.

1 . Quoted in full, infra.

2 . Codified as 47 O.S.1981 § 7-204.

3 . 678 P.2d 250 (Okla.1983).

4 . 731 P.2d 406, 408 (Okla.1986).

5 . Appellees argue in their brief on appeal that the failure to offer or obtain rejection of uninsured motorist coverage in connection with the "umbrella” policy from appellant Truck Underwriters Association left uninsured coverage as part of that policy as a matter of law. This issue was not ruled on by the trial court and was not raised in appellees’ counter-petition in error, nevertheless it was specifically rejected in Moser, supra.

6 . 639 F.2d 1019 (3rd Cir.1981).

7 . 731 P.2d at 409, footnote 12.

8 . 390 So.2d 1385 (La.App.1980).

9 . 731 P.2d at 409, 410.

10 . 465 A.2d 360 (Del.Super.1983) affirmed as State Farm Mutual Automobile Ins. Co. v. Arms, 477 A.2d 1060 (Del.1984).

11 . 22 Ohio St.2d 161, 258 N.E.2d 429 (1970).

12 . Appellees also raise the contention that various changes in the fleet liability policy constituted new insurance policies for which new offers of uninsured motorist coverage were required. This contention was relevant to the court’s decision in State Farm Mutual v. Arms, supra note 11. This Court has accepted the view of the court in Arms on this point but made that holding prospective in application to insurance claims arising after December 10, 1987, the date of mandate in Beauchamp v. Southwestern National Ins. Co., 746 P.2d 673, (Okla.1987). Prior to that date interpretation is ruled by Hicks v. State Farm Mutual Auto Ins. Co., 568 P.2d 629 (Okla.1977), which held that the addition and deletion of different automobiles and of changes in coverage under a policy did not constitute a new policy in the absence of an application for a new policy.

13 . Supra, note 3.

14 . 678 P.2d at 252, 253.

15 . 708 P.2d 581 (Okla.1985).