Hedges v. Am. Family Ins.

TONYA HEDGES, an individual, Respondent, v. AMERICAN FAMILY INSURANCE, a corporation, Appellant.

No. 72832-6-I

COURT OF APPEALS OF THE STATE OF WASHINGTON DIVISION ONE

March 16, 2015

UNPUBLISHED OPINION

VERELLEN, A.C.J. — American Family Insurance appeals the trial court's order granting its insured, Tonya Hedges, summary judgment permitting her to "stack" multiple underinsured motorist (UIM) coverages to a total amount of $200,000. American Family contends the "anti-stacking" clause limits her to the $100,000 in UIM benefits she already recovered under another UIM policy. We agree.

The anti-stacking provision here is unambiguous and precludes Hedges from stacking multiple UIM policies. Because Hedges' UIM coverage with American Family had $100,000 of liability limits, Hedges, the driver, has already received the benefit of her bargain with American Family by recovering $100,000 under the car owner's UIM policy. Accordingly, we reverse the trial court's summary judgment order. Because Hedges is not the prevailing party, we also reverse the award of attorney's fees and costs.

FACTS

The material facts are undisputed. Hedges was injured in an automobile accident while driving a vehicle owned by her mother. Her injuries exceeded the $250,000 limit she received from Arthur Beagle's (the at-fault driver) insurance company. Since Beagle's policy liability limits were insufficient to compensate Hedges' damages, he was an underinsured motorist.¹ Hedges also recovered $100,000 under her mother's UIM policy.²

Hedges then sought $100,000 in UIM coverage from her insurance company, American Family. American Family denied Hedges' claim, relying on an anti-stacking clause that barred her from stacking multiple UIM policies. American Family's UIM endorsement "other insurance" provision includes an anti-stacking clause:

1. Other Insurance

. . . .

b. Other Liability Coverage From Other Sources

If there is other similar insurance for a loss covered by this endorsement, we will pay our share according to this policy's proportion of the total of all liability limits. But any insurance provided under this endorsement for an insured person while occupying a vehicle you do not own, including any vehicle while used as a temporary substitute for your insured car, is excess over any other similar insurance.

Any recovery for damages under all such policies or provisions of coverage may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing coverage on either a primary or excess basis.³

Hedges sued. Both parties agreed to stipulated facts and filed cross-motions for summary judgment. The trial court granted Hedges' summary judgment motion, determining that the other insurance provision was ambiguous and must be construed in favor of the insured to allow stacking. The trial court concluded that Hedges could stack UIM coverages and recover an additional $100,000 of UIM benefits under her insurance policy.⁴ The trial court also awarded Hedges attorney's fees and costs.

American Family appeals.

ANALYSIS

The parties dispute the interpretation of an UIM endorsement other insurance provision that contains an anti-stacking clause.⁵ We must determine whether Hedges can stack UIM coverage from two different UIM policies. The core issue is whether the UIM endorsement anti-stacking clause clearly and unambiguously precludes her from collecting UIM benefits under her insurance policy where the "highest applicable limit" ofUIM coverage has already been paid by her mother's insurer. American Family contends the anti-stacking clause limits her to $100,000 in UIM benefits from all sources, and therefore, Hedges should not be able to recover $100,000 under her UIM policy because she already recovered that amount from another policy. We agree.

We review summary judgment orders de novo, performing the same inquiry as the trial court.⁶ We review questions of law, such as the interpretation of an insurance policy, de novo.⁷ Because the material facts are undisputed, we need only determine whether Hedges was entitled to judgment as a matter of law.⁸

We construe insurance policies as contracts, so policy provisions are "interpreted according to basic contract principles."⁹ We consider the policy as a whole, giving it a '"fair, reasonable, and sensible construction as would be given to the contract'" by an average purchaser of insurance.¹⁰ We must enforce policy language that is clear and unambiguous as written and not create an ambiguity where none exists.¹¹ An ambiguityexists only when the policy's language on its face is fairly susceptible to two different but reasonable interpretations.¹²

Exclusionary clauses, such as an anti-stacking clause, are strictly construed against the insurer.¹³ When two constructions of an exclusionary clause exist, "one favorable to the insured and one favorable to the insurer," we "must adopt the construction favorable to the insured."¹⁴ But a strict application should not trump a policy's plain and clear language such that a strained or forced construction results.¹⁵

Anti-stacking clauses allow insurers to prohibit insureds from stacking coverage limits among multiple policies.¹⁶ RCW 48.22.030 governs UIM coverage in Washington. The UIM anti-stacking statute provides:

The policy may provide that if an injured person has other similar insurance available to him or her under other policies, the total limits of liability of all coverages shall not exceed the higher of the applicable limits of the respective coverages.¹⁷

In the UIM context, the term "similar insurance" has been understood to mean other UIM coverages.¹⁸ Further, UIM coverage's underlying policy is to provide "a second layer of floating protection, not full compensation."¹⁹

The other insurance provision here is an external anti-stacking provision. External anti-stacking provisions prohibit an insured from layering multiple UIM policies upon each other, "giving the insured UIM coverage beyond his or her UIM single policy limits."²⁰ Hedges seeks to recover under two different UIM policies: her mother's UIM policy and her own UIM policy. The key provision states:

If there is other similar insurance for a loss covered by this endorsement, we will pay our share according to this policy's proportion of the total of all liability limits. But any insurance provided under this endorsement for an insured person while occupying a vehicle you do not own, including any vehicle while used as a temporary substitute for your insured car, is excess over any other similar insurance.

Any recovery for damages under all such policies or provisions of coverage may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing coverage on either a primary or excess basis.²¹

This other insurance provision is found within the UIM endorsement. A "heading is not a grant of coverage," but it does inform the insured generally what subject covers this section of the policy: UIM coverage.²²

The provision's first subheading—"other insurance"—is instructive. An average purchaser of insurance would reasonably believe that "other insurance" means other UIM insurance because it is found within the UIM endorsement. Our Supreme Courthas understood the term "'similar insurance'" to be "'other underinsured motorist insurance coverages'" in the UIM context.²³ Thus, when the other insurance provision here uses the phrase "other similar insurance for a loss covered by this endorsement," that must refer to other UIM insurance.²⁴ This is consistent with the trial court's determination that the phrase "'other similar insurance for a loss covered by this [e]ndorsement' limits the insured's ability to obtain coverage from multiple underinsured motorist provisions."²⁵ Further, Hedges' insurance policy parallels the UIM statutory language by using the term "other similar insurance available . . . under other policies."²⁶

Additionally, the last sentence in the first paragraph of the other insurance provision must also refer to UIM insurance. It states that "any insurance provided under this endorsement for an insured person while occupying a vehicle you do not own, including any vehicle while used as a temporary substitute for your insured car, is excess over any other similar insurance."²⁷ Only one reasonable interpretation of this sentence exists. The terms "other similar insurance" and "any insurance provided under this endorsement" must mean, consistent with the subheading and the preceding sentence, other UIM insurance because this endorsement specifically addresses UIM coverage.

"Because multiple insurance policies often apply to the same accident, insurance companies insert 'other insurance' clauses into their policies in an effort to limit orextinguish liability so as to prevent a victim's double recovery."²⁸ Thus, because the UIM coverage provided under Hedges' policy would be "excess" when she was injured while occupying a car she did not own, the UIM coverage Hedges received under her mother's UIM policy was the primary coverage.²⁹

The last sentence of the other insurance provision contains the anti-stacking clause. That sentence limits recovery "under all such policies or provisions of coverage" to the "highest applicable limit for any one vehicle under any insurance providing coverage on either a primary or excess basis."³⁰ This language is unambiguous and only one reasonable interpretation exists. The phrase "all such policies or provisions of coverage" must refer to all UIM policies or provisions of coverage. The plain meaning of "such" is "previously characterized or specified" or "having a quality already or just specified."³¹ Thus, "such policies or provisions of coverage" modifies "other similar insurance" in the preceding paragraph, which must mean other UIM insurance.

The highest applicable limit here "under any insurance providing coverage on either a primary or excess basis" is $100,000. Both Hedges' and her mother's...