Horace Mann Insurance Co. v. Adkins

599 S.E.2d 720

215 W.Va. 297

HORACE MANN INSURANCE COMPANY, Plaintiff Below, Appellee, v. Charles W. ADKINS, Jr., Individually and as Administrator of the Estate of Joseph Cory Adkins, Deceased, and Sandra K. Adkins, Defendants Below, Appellants.

No. 31592.

Supreme Court of Appeals of West Virginia.

Submitted: March 31, 2004.

Filed: June 30, 2004.

Charles D. Perfater, Esq., Law Office of Charles D. Perfater, Charleston, for the Appellants.

Robert A. Lockhart, Esq., Daniel R. Schuda, Esq., Schuda & Associates, PLLC, Charleston, for the Appellee.

DAVIS, Justice.

The appellants herein and defendants below, Charles W. Adkins, Jr., individually and in his administrative capacity, and his former wife, Sandra K. Adkins [hereinafter collectively referred to as "Mr. Adkins"], appeal from an order entered December 27, 2002, by the Circuit Court of Fayette County. By that order, the circuit court granted summary judgment to the appellee herein and plaintiff below, Horace Mann Insurance Company [hereinafter referred to as "Horace Mann"], concluding that Horace Mann was not obligated to pay underinsured motorist benefits [hereinafter referred to as "UIM benefits"] to Mr. Adkins because he did not, in settling his underlying claim, exhaust the available limits of liability coverage. On appeal to this Court, Mr. Adkins contends that the circuit court erred by so ruling. Upon a review of the parties' arguments, appellate record, and pertinent authorities, we reverse the decision of the Fayette County Circuit Court, and remand this case for further proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL HISTORY

On July 22, 2000, Mr. and Ms. Adkins' son, Joseph Cory Adkins,¹ was killed in an automobile accident on U.S. Route 19 in Fayette County, West Virginia. The accident occurred when the vehicle in which Mr. and Ms. Adkins' son was riding, which was driven by minor Holly Jeffries [hereinafter referred to as "Miss Jeffries"], attempted to enter U.S. Route 19 and pulled into the path of oncoming traffic, namely a vehicle driven by Dr. James P. Brown [hereinafter referred to as "Dr. Brown"]. The collision was fatal to all four minor occupants of the Jeffries vehicle, while Dr. Brown and his wife, Lynn Brown [hereinafter referred to as "Mrs. Brown"],² who owned the vehicle Dr. Brown was driving and who was a passenger therein at the time of the accident, sustained various non-life threatening injuries.

Following these events, Miss Jeffries' motor vehicle insurer, Newark Insurance Company, filed an interpleader action in the Circuit Court of Fayette County against the estates of the four minor occupants of the Jeffries' vehicle and tendered its policy limits of $100,000. In that proceeding, Mr. Adkins, as administrator of his son's estate, filed a cross-claim against the insurers of Dr. Brown and Mrs. Brown. At the time of the accident, Dr. Brown had policies of insurance with Shelby Insurance Company with coverage limits as follows: $300,000 liability limits under a policy of motor vehicle insurance and $1,000,000 limits under a policy of umbrella insurance.³ Similarly, Mrs. Brown had a policy of motor vehicle insurance with Allstate Insurance Company with liability limits of $300,000. Upon filing his cross-claim, Mr. Adkins also provided notice of a potential claim for underinsured motorist [UIM] benefits to Horace Mann Insurance Company, with whom he and Ms. Adkins maintained separate policies of motor vehicle insurance.⁴ Ultimately, the Browns' insurers settled with the four estates, which settlements were approved by the circuit court. Dr. Brown's insurer, Shelby Insurance Company, tendered $500,000, and Mrs. Brown's insurer, Allstate Insurance Company, tendered $255,000. The Adkins' insurer, Horace Mann, consented to such settlements and waived its right of subrogation, but reserved its right to assert defenses to the Adkins' UIM claim. Following the effectuation of these settlements, Horace Mann filed a declaratory judgment proceeding against Mr. and Ms. Adkins to determine its duty to pay UIM benefits under their policies of insurance. In support of its contention that it was not obligated to pay such benefits, Horace Mann relied upon a provision contained in the Adkins' policies which states that

[t]here is no [UIM bodily injury] coverage until the insured's damages exceed the limits of all bodily injury liability insurance policies or bonds applicable to the accident and those limits of liability that apply to the bodily injury have been used up by payments of judgments or settlements.

Based upon this language, Horace Mann moved for summary judgment, contending that because the Adkins had settled for less than the full amount of liability limits provided by the Browns' insurers, they had not sufficiently exhausted all applicable liability coverages so as to activate their UIM coverage under their Horace Mann policies. The Adkins maintained their entitlement to such UIM benefits, arguing that because Miss Jeffries was at fault for the accident, and because Dr. Brown was not culpable, the only insurance applicable to the accident was the policy insuring Miss Jeffries, the limits of which were paid to the four estates. Following a hearing on Horace Mann's motion, the circuit court, by order entered December 27, 2002, awarded summary judgment to Horace Mann, concluding that "[t]he policies issued by Horace Mann to Mr. and Mrs. Adkins include a provision requiring that all liability policies be exhausted before any UIM coverage is triggered" and that "[i]n this case, neither Mrs. Brown's liability coverage with Allstate, nor Mr. Brown's liability coverage with Shelby, were exhausted.... Accordingly, UIM coverage under the Horace Mann policies was not triggered." The circuit court additionally found that such provision was clear and unambiguous and did not violate the requirements of W. Va.Code § 33-6-31 (1998) (Repl.Vol.2003).⁵ From this adverse ruling, Mr. Adkins appeals to this Court.

II. STANDARD OF REVIEW

On appeal to this Court, the parties ask us to ascertain the proper construction to be accorded to an exclusion contained in a policy of motor vehicle insurance. In this regard, we have held that "[d]etermination of the proper coverage of an insurance contract when the facts are not in dispute is a question of law." Syl. pt. 1, Tennant v. Smallwood, 211 W.Va. 703, 568 S.E.2d 10 (2002). "Where the issue on an appeal from the circuit court is clearly a question of law..., we apply a de novo standard of review." Syl. pt. 1, in part, Chrystal R.M. v. Charlie A.L., 194 W.Va. 138, 459 S.E.2d 415 (1995). Thus, "[t]he interpretation of an insurance contract, including the question of whether the contract is ambiguous, is a legal determination that, like a lower court's grant of summary judgement, shall be reviewed de novo on appeal." Syl. pt. 2, Riffe v. Home Finders Assocs., Inc., 205 W.Va. 216, 517 S.E.2d 313 (1999).

Likewise, this case comes to us procedurally as an appeal from an order granting summary judgment. As we noted above with respect to our review of questions of law, we apply a plenary review to summary judgment decisions. "A circuit court's entry of summary judgment is reviewed de novo." Syl. pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). Within this context, we will proceed to consider the parties' arguments.

III. DISCUSSION

The sole issue presented for resolution by this Court concerns the interpretation of the exclusionary language contained in the Horace Mann insurance policy. In short, we are asked to determine whether the exclusionary language, which directs its insured to exhaust all applicable policies of liability insurance before he/she may collect underinsured motorist [UIM] benefits under the subject Horace Mann policy, requires the actual exhaustion of all applicable coverages or whether a constructive exhaustion of such coverages will suffice. During its review of this exclusion, the circuit court strictly construed the policy language as requiring an actual exhaustion of all applicable policies of insurance. Thus, because Mr. Adkins settled with the Browns' insurers for less than the full policy limits, the circuit court determined that Mr. Adkins had not satisfied the exhaustion requirement and therefore could not recover UIM benefits under his Horace Mann policy.

In his appeal to this Court, Mr. Adkins urges the adoption of an offset rule, or constructive exhaustion interpretation of the contested exclusionary language. Under such a construction, an insured who settles with a tortfeasor's insurer for less than the full policy limits would nevertheless be treated as having settled for the full policy limits. Having thus attributed the full policy limits of the tortfeasor's insurance to the insured, he/she would then have constructively exhausted all applicable coverages in satisfaction of the requirements of the exhaustion clause. As a result, Mr. Adkins argues, the insured should then be permitted to collect UIM benefits under his/her own policy of insurance because he/she would have exhausted, albeit constructively, all applicable liability coverages.

Horace Mann rejects the interpretation of its exhaustion clause proposed by Mr. Adkins. In this regard, Horace Mann contends that the circuit court properly determined that the language of the subject exclusion is plain, and that it clearly requires the actual exhaustion of all applicable liability coverages before its insured may recover UIM benefits.

The language of the exclusion at issue in this appeal provides that

[t]here is no [UIM bodily injury] coverage until the insured's damages exceed the limits of all bodily injury liability insurance policies or bonds applicable to the accident and those limits of liability that apply to the bodily injury have been used up by payments of judgments or settlements.

In order to resolve the issue presently before us, however, we will have to...