CONTINENTAL WESTERN INSURANCE COMPANY v. Conn

629 N.W.2d 494

262 Neb. 147

CONTINENTAL WESTERN INSURANCE COMPANY, Appellee, v. Barry CONN and Marilyn Conn, individually and as husband and wife, Appellants.

No. S-00-129.

Supreme Court of Nebraska.

July 6, 2001.

Richard L. Swenson, Omaha, for appellants.

Stephen S. Gealy and Darla S. Ideus, of Baylor, Evnen, Curtiss, Grimit & Witt, Lincoln, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, MCCORMACK, and MILLER-LERMAN, JJ.

MILLER-LERMAN, J.

NATURE OF CASE

In this declaratory judgment action, Barry Conn and Marilyn Conn appeal the decision of the district court for Douglas County which determined that the schoolbus which struck Marilyn Conn was not an "underinsured vehicle" and, therefore, declared that Continental Western Insurance Company (Continental Western) was not required to make payment to the Conns pursuant to the underinsured motorist coverage provision in the policy Continental Western had issued to the Conns. We affirm.

STATEMENT OF FACTS

The controlling facts are not in dispute. On April 24, 1995, Marilyn Conn was struck and injured by a bus owned and operated by an agent or employee of Douglas County School District 001, Omaha Public Schools (OPS), a political subdivision. In settlement of the Conns' claim, OPS, through its insurer, paid the Conns the total sum of $1 million. Under Nebraska law, the total amount recoverable against a political subdivision under the Political Subdivisions Tort Claims Act for claims arising out of an occurrence after November 16, 1985, is limited to $1 million for any person for any number of claims arising out of a single occurrence. Neb. Rev.Stat. § 13-926 (Reissue 1991). In addition to the settlement with OPS, the Conns sought coverage from Continental Western for their damages in excess of $1 million pursuant to the underinsured motorist coverage provision of an automobile liability policy that Continental Western had issued to the Conns on November 5, 1994. Under Nebraska law, pursuant to Neb.Rev.Stat. § 44-6407 (Cum.Supp.1994) of the Uninsured and Underinsured Motorist Insurance Coverage Act, an "uninsured or underinsured motor vehicle shall not include a motor vehicle ... (4)[w]hich is owned by any government, political subdivision, or agency thereof...." Throughout this opinion, we generally use the word "government" to mean the state and its political subdivisions. Coverage was declined.

On October 9, 1997, Continental Western filed the present declaratory judgment action against the Conns. Continental Western prayed for a declaration and judgment that any claim of the Conns against Continental Western pursuant to the underinsured motorist coverage of the policy was barred by the Political Subdivisions Tort Claims Act. The Conns answered and prayed for a declaration that their claim against Continental Western was not barred by the Political Subdivisions Tort Claims Act and that Continental Western was indebted to them in an amount equal to the full underinsured motorist coverage provided in the policy.

A hearing was held October 1, 1999, at which the parties entered into evidence a stipulation in which they agreed that the only issue was as follows:

"Where the defendants' damages exceed $1,000,000.00 as a result of Marilyn Conn's having been struck by a bus owned by the Omaha Public Schools and driven by its duly authorized agent, is the Omaha Public Schools an underinsured motorist within the meaning of the statutes of the State of Nebraska and the Continental Western Insurance Company policy issued to the defendants and in full force and effect at the time of the accident which gave rise to the defendants' original claim?"

The parties also stipulated and agreed to the following:

1. This Court has jurisdiction over the parties to and the subject matter of this action.

2. On November 5, 1994, Continental Western issued to Defendants Conn a policy of automobile liability insurance numbered AP68100 with effective dates of November 5, 1994 through November 5, 1995 and was in full force and effect on or about April 24, 1995. Said policy provided to Defendants Conn $100,000.00 in underinsured motorist coverage per person and $300,000.00 in underinsured motorist coverage per accident a copy of which is attached hereto, marked Exhibit A, and made a part hereof.

3. On April 24, 1995, Defendant Marilyn Conn was a pedestrian at or near the intersection of 28th and Dodge Streets in Omaha, Douglas County, Nebraska and was struck and injured by a bus owned by Douglas County School District 001 (OPS) and operated by its agent or employee.

4. As a result of the accident described in paragraph 3, above, OPS, through its insurer, paid the Defendants Conn, individually and as husband and wife, the total sum of one million dollars ($1,000,000.00) which amount is the maximum payable by or on behalf of OPS.

5. As defined in Neb.Rev.Stat. § 13-903(1), OPS is a political subdivision. The claim of De[f]endants Conn against OPS was, therefore, governed by the Nebraska Political Subdivisions Tort Claims Act set forth at Neb. Rev. Stat[.] §§ 13-902 et. seq.

6. Defendants Conn are, for purposes of resolution of the issue stated above, a single person with a single claim which arose as a result of the accident of April 24, 1995.

7. Continental Western has been called upon to provide coverage to Defendants Conn under the underinsured motorist coverage contained in their insurance policy to satisfy the claim of Defendants Conn in excess of the one million dollar amount previously paid to them by the insurer of OPS.

8. The applicable underinsured motorist coverage limit of the Continental Western Insurance policy issued to Defendants Conn is $100,000.00.

9. As a direct and proximate result of the accident described in paragraph 3 above, Defendants Conn have incurred damages in excess of one million, one hundred thousand dollars ($1,100,000.00).

A copy of the Continental Western automobile liability policy issued to the Conns was received into evidence. The underinsured motorist coverage section of the policy included, inter alia, the following provisions:

We will pay compensatory damages which an "insured" is legally entitled to recover from the owner or operator of an "underinsured motor vehicle" because of "bodily injury":

1. Sustained by an "insured"; and

2. Caused by an accident.

....

"Underinsured motor vehicle" means a land motor vehicle or trailer of any type to which a bodily injury liability bond or policy applies at the time of the accident but its limit for bodily injury liability is either:

1. Not enough to pay the full amount the "insured" is legally entitled to recover as damages; or

2. Reduced by payments to others injured in the accident to an amount which is not enough to pay the full amount the "insured" is legally entitled to recover as damages.

However, "underinsured motor vehicle" does not include any vehicle or equipment:

....

2. Owned by any governmental unit or agency.

On January 7, 2000, the district court entered an order containing its findings which was favorable to Continental Western. Specifically, the district court found:

1. Omaha Public Schools (OPS) is immune from liability over one million dollars.

2. OPS has a one million dollar liability insurance policy.

3. The one million dollars of liability insurance on OPS was paid to the Defendants in settlement of their claim.

4. The underinsured motorist provision in the Continental Western policy issued to the Defendants applies only when there is a lack of liability insurance on the involved vehicle.

5. Since OPS has liability insurance in an amount equal to its maximum liability, its vehicle is not underinsured.

The district court declared that Continental Western was "not required to make payment to the [Conns] pursuant to the underinsured motorists coverage provision in its policy" and entered judgment accordingly. The Conns appealed.

ASSIGNMENTS OF ERROR

The Conns assert that the district court erred (1) in finding that the underinsured motorist provision of the policy only applied when there was a lack of liability insurance, (2) in finding that the OPS vehicle was not underinsured because it had liability insurance in the amount required by law, (3) in failing to find that § 44-6407(4) was either unconstitutional or void as against public policy, (4) in failing to find that the provision of the insurance policy excluding government-owned vehicles from the definition of underinsured vehicle was void as against public policy.

STANDARD OF REVIEW

[1] In an appeal from a declaratory judgment, an appellate court, regarding questions of law, has an obligation to reach its conclusion independently of the conclusion reached by the trial court. Simons v. Simons, 261 Neb. 570, 624 N.W.2d 36 (2001).

ANALYSIS

The Conns argue on appeal that although the $1 million limitation of the Political Subdivisions Tort Claims Act limits the amount OPS must pay, it does not limit the total recovery which they may obtain. The Conns contend they are entitled to further recovery under the terms of the underinsured provisions of the policy with Continental Western. Finally, the Conns argue that both the policy and statute which provide that underinsured motor vehicles do not include vehicles owned by a governmental unit are void and unenforceable as unconstitutional and as against public policy.

In response, Continental Western contends that the underinsured motorist carrier's obligation is identical to, but not broader than, the tort-feasor's and that because OPS can have no legal responsibility beyond $1 million pursuant to law, neither can Continental Western. Continental Western also argues that the OPS bus was not an underinsured motor vehicle. Continental Western advances several arguments as to why the government-owned exclusion provisions of the policy and statute are not against public policy. We agree with Continental Western that the OPS bus was not an underinsured motor...