Reinsurance Law Blog : Oklahoma Insurance Lawyer & Attorney : Stauffer & Nathan Law Firm

In Hartford Underwriters Insurance Company v. Donna Ledbetter, the Missouri Court of Appeals considered whether an insurance policy’s language was ambiguous thus warranting coverage in favor of the insured.  Ledbetter received injuries in a car wreck  when another car driven by Danny Harris struck her car.   Ledbetter sued Harris for her personal injuries and later settled the suit in exchange for his liability insurance policy limit of $50,000.   Ledbetter then attempted to recover $200,000.00  against her insurer, Hartford, under the Underinsured Motorist provision of the Policy. Hartford denied that Harris’ vehicle was underinsured.  Both parties filed a Motion for Summary Judgment and the trial court entered judgment in favor of Hartford finding that Harris’ vehicle failed to meet the Policy’s definition of an underinsured vehicle.  Ledbetter appealed. 

 The appellate court’s review focused on the Policy’s “Other Insurance” clause pertaining to underinsured motorist coverage. The applicable provision stated, “Any insurance we provide with respect to a vehicle you do not own shall be excess over any collectible insurance providing such coverage on a primary basis.”  Ledbetter argued the provision was ambiguous and required a construction that the underinsured motorist coverage was excess to the tortfeasor liability coverage regardless of whether she occupied the non-owned vehicle because a requirement that she actually occupy the non-owned vehicle was not contained in the policy.

 “Language in an insurance policy is ambiguous if it is reasonably open to different constructions, and the language used will be viewed in the light of the meaning that would ordinarily be understood by a layman who bought and paid for the policy.”  Hobbs v. Farm Bureau Town & Casualty Ins. Co., 965 S.W.2d 194, 197-98 (Mo. App. 1998).

 The Court considered Goza v. Hartford Underwriters Ins. Co., 972 S.W.2d 371, 372 (Mo. App. 1998) where Hartford’s  “Other Insurance” clause, which mirrors the “Other Insurance” clause in question, was found ambiguous and resolved in favor of the insured despite the fact that Goza was driving her own insured vehicle at the time of the accident.  The Goza  Court found the policy ambiguous because one could reasonably interpret the ‘excess coverage’ language as providing coverage for a vehicle that the insured did not own, while the ‘excess coverage’ language could also be interpreted as providing underinsured coverage in excess to amounts recovered from tortfeasor. 

This Court held that an objective examination of the ‘excess’ language of the “Other Insurance” clause suggests that the language might reasonably be interpreted by an average lay person to mean underinsured coverage was excess to amounts recovered from the tortfeasor.  It also could be interpreted to mean that the ‘excess’ language prevailed over the conflicting language contained in the Policy’s definition of an underinsured and Limits of Liability sections. 

 The trial court’s grant of summary judgment was reversed and remanded.

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In Mendota v. Ware, Appellant (Ware) obtained a wrongful death judgment of $175,000 in damages against the driver of the car involved in a car accident of which her father was a passenger. Ware sought satisfaction of the entire judgment from respondent’s insurance carrier, Mendota. Ware argued that the Policy contained a typo that described property damage as “Coverage A” when it should have been designated as “Coverage B” thereby rendering the Policy ambiguous with no effective limits of liability. Mendota refused to pay more than the specified $25,000 policy limit for bodily injury claims and filed a declaratory judgment asking the circuit court to determine that the Policy was unambiguous and that the policy limit for bodily injury was $25,000. Both parties filed motions for summary judgment and the circuit court granted Mendota’s motion. Ware appealed. Relying on a single-character typo on the Policy’s Declaration page, Ware contends that the policy should be interpreted in her favor and impose no monetary limit on liability of coverage. The Court of Appeals relied on a recent Missouri Supreme Court definition of ambiguity as a “duplicity, indistinctness, or uncertainty in the meaning of the language of the policy. Language is ambiguous if it is reasonably open to different constructions.” Burns v. Smith, 303 S.W.3d 505, 509 (Mo. banc 2010). The court noted that despite the “blatant” typographical error on the Policy’s Declaration page, the Policy can neither be construed to impose no monetary limit, nor can it be construed to impose a limit other than the policy’s specified $25,000 limit. The Court also found the Policy to contain straight forward terms on how the limits of liability would operate. The Court took its decision a step further and noted that even if the Policy were deemed ambiguous, Ware would only be entitled to a resolve the ambiguity consistent with a reasonable expectation as to what coverage would be provided. Ware’s argument of unlimited liability is contrary to the reasonable expectation as to what coverage would be provided and goes beyond what any fair interpretation will allow.

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Payless was sued in California for making hourly employees work "off the clock."  It asked its insurer, Travelers, to defend and indemnify, but Travelers declined, saying that the claim was not covered.  Payless settled the claims and then went after Travelers for reimbursement of the settlement and defense expenses.  Travelers got summary judgment and the Tenth Circuit affirmed.

See, Payless v. The Travelers. 

The Tenth Circuit found that this was a case of a misplaced modifier.  The clause at issue excluded certain statutory claims against employers and stated: 

The Insurer shall not be liable for Loss on account of any Claim made
against any Insured . . . for an actual or alleged violation of the Fair
Labor Standards Act (except the Equal Pay Act), the National Labor
Relations Act, the Worker Adjustment and Retraining Notification Act,
the Consolidated Omnibus Budget Reconciliation Act of 1985, the
Occupational Safety and Health Act, the Employee Retirement Security
Act of 1974, any workers’ compensation, unemployment insurance,
social security, or disability benefits law, other similar provisions of
any federal, state, or local statutory or common law or any
amendments, rules or regulations promulgated under any of the
foregoing; provided, however, this exclusion shall not apply to any
Claim for any actual or alleged retaliatory treatment on account of the
exercise of rights pursuant to any such law, rule or regulation.

emphasis added. 

The question was whether "other similar provisions" modified all the listed exclusions, or just the underlined exclusions.  The court found that even though bad grammar was used, the clause excluded all claims arising out of the Fair Labor Standards Act or other similar state law. 

The court held that bad grammar did not make the clause ambiguous and even quoted Groucho Marx: 

The opinion states:

All this underscores that, while the rules of English grammar often afford a valuable starting point to understanding a speaker’s meaning, they are violated so often by so many of us that they can hardly be safely relied upon as the end point of any analysis of the parties’ plain meaning. So it is that Groucho Marx could joke in Animal Crackers, “One morning I shot an elephant in my pajamas. How he got into my pajamas I’ll never know,” leaving his audience at once amused by the image of a pachyderm stealing into his night clothes and yet certain that Marx meant something very different. In the more mundane task of contract interpretation, we must be no less entitled to acknowledge the parties’ plain meaning without being straight-jacketed by a grammatical rule into reaching a patently unintended result.

Grammar and Groucho in an insurance policy interpretation case. Doesn’t get much better than that!

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