Ochs v. Federated Mut Ins Co.

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No. 101,562

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

SCOTT OCHS,
Appellant,

v.

FEDERATED MUTUAL INSURANCE COMPANY,
Appellee.

SYLLABUS BY THE COURT


1.
When the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, show that there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a matter
of law, summary judgment is appropriate.

2.
Where there is no factual dispute, appellate review of an order regarding
summary judgment is de novo.

3.
The interpretation of a statute is a question of law that affords an appellate
court unlimited review.


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4.
The interpretation of an insurance contract is a question of law over which
an appellate court has unlimited review.

5.
A corporation is generally bound by contracts entered into by its duly
authorized officers or agents acting within the scope of their authority.

6.
K.S.A. 40-284(c) requires that rejection of underinsured motorist coverage
be in writing signed by the named insured or an authorized representative of the
named insured.

7.

The provisions of K.S.A. 40-284(c) are to be narrowly and strictly
construed.

8.
An insurance agreement is a contract subject to agreement of the parties,
and its terms, including definitions, will control so long as not in conflict with
statutes or public policy.

9.
An insurance agreement that defines "automobile" more broadly than
K.S.A. 40-298 is not in conflict with the statute but, instead, is less restrictive.

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10.
K.S.A. 40-284 specifically provides that a written rejection applies to any
subsequent policy issued by the same insurer for motor vehicles owned by the
named insured unless the insured makes a subsequent written request for
additional coverage.

11.
An issue not briefed by an appellant is deemed waived or abandoned.


12.
Where an insurance contract is not ambiguous, the courts will not make
another contract for the parties but will enforce the contract as written.

13.
It is not the intent of the insured as to what the language of a policy means,
it is what a reasonably prudent insured would understand the language to mean.

14.
Under the uncontroverted facts of this case: (1) Alderson's approval and
signature on the coverage option form was authorized by Ramsey Oil and
constituted a binding election in compliance with K.S.A. 40-284(c); (2) Ramsey

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Oil's propane truck was an automobile as defined in the Federated Mutual
insurance policy and that definition controls and is not precluded by the more
limited definition of an automobile in K.S.A. 40-298; (3) the written rejection of
underinsured motorist coverage by Ramsey Oil in conjunction with a previous
automobile policy issued by Federated Mutual controls because the insured named
in the policy has made no subsequent request in writing for additional coverage;
and (4) a reasonably prudent insured would have understood the provisions of the
option form to be an election to accept a lower limit for underinsured motorist
coverage than the limit equal to the bodily injury liability limit of the policy.


Appeal from Rice District Court; HANNELORE KITTS, judge. Opinion
filed January 8, 2010. Affirmed.

Matthew L. Bretz, Mitchell W. Rice, and Chelsea S. Boldra, of Bretz Law
Offices, LLC, of Hutchinson, for appellant.

Richard W. James and Dustin L. DeVaughn, of McDonald, Tinker, Skaer,
Quinn & Herrington, P.A., of Wichita, for appellee.

Before GREENE, P.J., MALONE, J., and KNUDSON, S.J.




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KNUDSON, J.: Scott Ochs appeals the trial court's grant of summary
judgment in favor of Federated Mutual Insurance Company (Federated Mutual)
that denied Ochs' claim for underinsured motorist coverage for a motor vehicle
accident. Ochs also appeals the trial court's denial of his motion for summary
judgment. The facts are not in dispute.

Ochs was driving a propane truck for his employer, Ramsey Oil
Hutchinson, Inc. (Ramsey Oil), on July 12, 2004, when he was seriously injured in
a motor vehicle accident involving an alleged negligent third party, Loren L.
Hayden. Subsequently, Ochs reached a monetary settlement with Hayden's
insured, State Farm Insurance, in the amount of $50,000.

Ochs had a personal automobile policy with Farm Bureau Insurance
Company, with which he settled his underinsured motorist claim in the amount of
$50,000.

Ochs then filed this action against Federated Mutual, the automobile
liability insurance company for his employer Ramsey Oil, seeking additional
underinsured motorist benefits. On the day of the accident, Ramsey Oil's policy
with Federated Mutual was policy 9181626, with a liability limit of $1,000,000.
The issue before the trial court was whether the Federated Mutual policy provided

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underinsured motorist benefits of $1,000,000 as contended by Ochs or $50,000 as
contended by Federated Mutual.

Federated Mutual had been Ramsey Oil's automobile liability insurance
carrier from at least April 1, 1999. On May 20, 1999, Ramsey Oil's president and
sole stockholder, Loren Alderson, signed a document provided by Federated
Mutual entitled KANSAS COMMERICAL AUTO COVERGE OPTION FORM
selecting the lower amounts of uninsured and underinsured motorist coverage than
that equal to the bodily injury limit of liability amount. Alderson chose to limit
underinsured motorist benefits for directors, officers, partners, owners, and
qualifying family members of the named insured to $500,000 and for other
persons qualifying as an insured to $50,000. Alderson acknowledged:

"I have been given the opportunity to purchase Uninsured
Motorists Coverage (including Underinsured Motorists Protection)
equal to my limit of liability for bodily injury or death, and instead I
select the lower $50,000 limit.

"I understand and agree that this rejection of higher limit of
Uninsured Motorists and Underinsured Motorists Coverage shall be
applicable unless I subsequently request such coverage in writing."

The option form stated the applicant or policy holder was "Ramsey Oil
Hutchinson, Inc.," and that the election applied to "All Covered Automobiles."

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The policy number on the option form was 9181578, consistent with Ramsey Oil's
automobile liability policy in effect at the time.

Both parties filed motions for summary judgment. The trial court granted
Federated Mutual's motion, concluding the option form met the requirements of
K.S.A. 40-284(c) and was executed by an authorized employee of Ramsey Oil.
Ochs has filed a timely appeal. Before us, the parties agree summary judgment
was a proper remedy. They disagree as to whom summary judgment should have
been granted.

Our Standard of Review

When the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, show that there is no genuine issue
as to any material fact and that the moving party is entitled to judgment as a matter
of law, summary judgment is appropriate. Miller v. Westport Ins. Corp., 288 Kan.
27, 32, 200 P.3d 419 (2009). Where there is no factual dispute, appellate review
of an order regarding summary judgment is de novo. Central Natural Resources
v. Davis Operating Co., 288 Kan. 234, 240, 201 P.3d 680 (2009).

The interpretation of a statute is a question of law that affords an appellate
court unlimited review. See Mitchell v. Liberty Mut. Ins. Co., 271 Kan. 684, 690,

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24 P.3d 711 (2001). The interpretation of an insurance contract is likewise a
question of law over which an appellate court has unlimited review. Marshall v.
Kansas Med. Mut. Ins. Co., 276 Kan. 97, 111, 73 P.3d 120 (2003).

Statutory Requirements For Underinsured Motorist Coverage

K.S.A. 40-284 provides:

"(a) No automobile liability insurance policy covering
liability arising out of the ownership, maintenance, or use of any
motor vehicle shall be delivered or issued for delivery in this state
with respect to any motor vehicle registered or principally garaged
in this state, unless the policy contains or has endorsed thereon, a
provision with coverage limits equal to the limits of liability
coverage for bodily injury or death in such automobile liability
insurance policy sold to the named insured for payment of part or
all sums which the insured or the insured's legal representative
shall be legally entitled to recover as damages from the uninsured
owner or operator of a motor vehicle because of bodily injury,
sickness or disease, including death, resulting therefrom,
sustained by the insured, caused by accident and arising out of
ownership, maintenance or use of such motor vehicle, or
providing for such payment irrespective of legal liability of the
insured or any other person or organization. No insurer shall be
required to offer, provide or make available coverage conforming
to this section in connection with any excess policy, umbrella

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policy or any other policy which does not provide primary motor
vehicle insurance for liabilities arising out of the ownership,
maintenance, operation or use of a specifically insured motor
vehicle.

"(b) Any uninsured motorist coverage shall include an
underinsured motorist provision which enables the insured or the
insured's legal representative to recover from the insurer the amount
of damages for bodily injury or death to which the insured is legally
entitled from the owner or operator of another motor vehicle with
coverage limits equal to the limits of liability provided by such
uninsured motorist coverage to the extent such coverage exceeds the
limits of the bodily injury coverage carried by the owner or operator
of the other motor vehicle.

"(c) The insured named in the policy shall have the right to
reject, in writing, the uninsured motorist coverage required by
subsections (a) and (b) which is in excess of the limits for bodily
injury or death set forth in K.S.A. 40-3107 and amendments thereto.
A rejection by an insured named in the policy of the uninsured
motorist coverage shall be a rejection on behalf of all parties
insured by the policy. Unless the insured named in the policy
requests such coverage in writing, such coverage need not be
provided in any subsequent policy issued by the same insurer for
motor vehicles owned by the named insured, including, but not
limited to, supplemental, renewal, reinstated, transferred or
substitute policies where the named insured had rejected the

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coverage in connection with a policy previously issued to the insured
by the same insurer." (Emphasis added.)

K.S.A. 40-3107(e) provides that every motor vehicle liability insurance
policy issued to owners who are Kansas residents must contain liability limits for
each covered vehicle of no less than $25,000 because of bodily injury or death of
one person in any one accident, or no less than $50,000 because of bodily injury or
death of two or more persons in any one accident.

Under these statutes, then, an insurer must provide underinsured motorist
coverage equal to the amount of liability coverage provided in the policy unless
the insured rejects in writing coverage in excess of the amounts provided in K.S.A.
40-3107(e). In this case, Federated Mutual was required to provide Ramsey Oil
with underinsured motorist coverage of $1,000,000 unless the option form signed
by Alderson is held to be valid.

Discussion of Issues Presented By Ochs

(1) Does Loren Alderson's failure to indicate his corporate capacity an
authority as an agent on the face of the option form render the limitation of
underinsured motorist coverage ineffective?


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A corporation is generally bound by contracts entered into by its duly
authorized officers or agents acting within the scope of their authority. Executive
Financial Services, Inc. v. Loyd, 238 Kan. 663, Syl. ¶¶ 2-3, 715 P.2d 376 (1986).
Ochs acknowledges Alderson was president of Ramsey Oil and authorized to sign
the option form on behalf of the corporation. His contention is that Alderson's
signature, absent indication of any representative capacity, does not meet that
requirement. Ochs relies on Larson v. Bath, 15 Kan. App. 2d 42, 801 P.2d 1331,
rev. denied 248 Kan. 996 (1990), and Jankord v. Lin, 32 Kan. App. 2d 1255, 96
P.3d 692 (2004), for support.

In Larson, the court recognized that the insured named in the automobile
liability policy has the right to reject, in writing, the uninsured and underinsured
motorist coverage required by K.S.A. 40-284 that is in excess of the limits for
bodily injury or death set forth in K.S.A. 40-3107. The court held there was no
evidence the insured met the statutory requirement for rejecting underinsured
motorist coverage where no rejection form was attached to the policy. 15 Kan.
App. 2d at 43, 46. Thus, Larson did not address the issue now presented.

In Jankord, the court held that a mechanic's lien was invalid because the
subcontractor's manager failed to indicate on the lien statement that his signature
was in a representative capacity for the subcontractor. 32 Kan. App. 2d at 1256-

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58. The court recognized that for a mechanic's lien to attach the requirements of
K.S.A. 60-1102 must be strictly met. 32 Kan. App. 2d at 1257.

Undoubtedly, strict construction is appropriate in mechanic's lien law cases
because the lien, once it attaches, clouds the legal title of the landowner and takes
priority over all subsequent encumbrances. K.S.A. 60-1101. Because a
mechanic's lien is a creature of statute and, in the case of a subcontractor, may
attach without benefit of contract between the subcontractor and the owner,
requirements of verification must be rigidly enforced. See Ekstrom United Supply
Co. v. Ash Grove Lime & Portland Cement Co., 194 Kan. 634, 400 P.2d 707
(1965). Because our mechanic's lien laws are a specific and unique category of
law with unique rules and procedures, we are not persuaded Jankord gives us a
legal roadmap to follow in deciding the issue on appeal in this case.

In McTaggart v. Liberty Mut. Ins., 267 Kan. 641, 983 P.2d 853 (1999), the
court considered whether a K.S.A. 40-284(c) rejection form was sufficient.
Although the effectiveness of the representative's signature on the form was not an
issue directly raised in McTaggart, the McTaggart court upheld the form, which
listed "Transam Trucking, Inc." as the named insured and was signed by "Bert
Hicks," presumably an authorized agent for Transam Trucking, Inc. Left blank
was the line that provided: "By (title if other than an individual)." 267 Kan. at
648. The court concluded the written rejection form was "signed by a duly

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authorized agent of the named insured" and was "executed by an authorized
employee." 267 Kan. at 650-51. The court cited Ridgway v. Shelter Ins. Co., 22
Kan. App. 2d 218, 913 P.2d 1231, rev. denied 260 Kan. 995 (1996), noting that an
agent of the named insured who is authorized to purchase insurance may also have
authority to reject excess underinsured motorist coverage under K.S.A. 40-284(c).
McTaggart, 267 Kan. at 649-50.

In Ridgway, this court held that the girlfriend of the insured had authority as
an agent to reject excess underinsured motorist coverage. 22 Kan. App. 2d at 223-
224. The court reasoned that absent an express statement by the legislature
indicating otherwise, the Kansas Insurance Code permits a named insured to give
an agent authority to reject excess underinsured motorist coverage. 22 Kan. App.
2d at 223. The court noted that there is no evidence the legislature intended to
abrogate principles of agency law and rejected the argument that Larson controls
the issue. Ridgway, 22 Kan. App. 2d at 222 (citing Larson, 15 Kan. App. 2d 42).

We are of course aware that because the rejection provisions of K.S.A. 40-
284(c) detract from the public policy goals of protecting innocent victims, the
rejection provisions are to be narrowly and strictly construed. See Larson, 15
Kan. App. 2d at 44 (although construing K.S.A. 40-284[c] was not necessary in
view of the plain language of the statute that requires a written rejection).
Nonetheless, strict construction should not be invoked to circumvent application

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of an election under K.S.A. 40-284(c) that is apparent from the four corners of the
underlying insurance agreement and the option form signed by Alderson. We
believe that the agreement and the option form show unequivocally that Alderson
acted in an authorized representative capacity.

It is plain on the face of the option form that the name of the applicant or
policyholder is Ramsey Oil that the option to be exercised applies to policy
9181578, the underlying insurance agreement with Ramsey Oil. In addition, there
is no dispute that Alderson as president of the company and its sole stockholder
had the legal authority to act on its behalf and sign the option form as its agent.
Alderson also stated in an affidavit that he executed the rejection form on behalf of
Ramsey Oil and chose to limit underinsured motorist coverage. We conclude
Alderson's signature on the option form is not reasonably subject to confusion or
ambiguity when considered with the underlying insurance agreement, the other
information on the face of the option form, and Ochs' acknowledgement of
Alderson's capacity and authority to act on behalf of Ramsey Oil. The option form
bound Ramsey Oil to the terms of the agreement and resulted in reduced
underinsured motorist coverage.

(2) Is a propane truck an automobile to which the signed option form applies?


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Ochs contends that even if we determine the option form signed by
Alderson constitutes a coverage rejection, the rejection does not apply because
Ochs was driving a truck, not an automobile, when the accident occurred. Ochs
argues the option form only applies to "Covered Automobiles" and K.S.A. 40-298
defines automobiles to exclude trucks. Cf. K.S.A. 2008 Supp. 8-126(c) and (x).

"Auto" is defined in the Federated Mutual policy with Ramsey Oil to mean
"a land motor vehicle." Ochs does not argue that the truck was not an automobile
within the definition of the policy. Instead, he ignores the terms of the insurance
policy and relies upon K.S.A. 40-298 to conclude the propane truck was not an
automobile within the meaning of the option form.

An insurance agreement is a contract subject to agreement of the parties,
and its terms, including definitions, will control so long as not in conflict with
statutes or public policy. See Gibson v. Metropolitan Life Ins. Co., 213 Kan. 764,
518 P.2d 422 (1974); Merritt v. Farmers Ins. Co., 7 Kan. App. 2d 705, 647 P.2d
1355 (1982).

Here, Federated Mutual could have chosen to exclude trucks from the
policy definition of automobiles but did not do so and its more expansive
definition is not in conflict with Kansas law. See Western Casualty & Surety Co.
v. Budig, 213 Kan. 517, 519, 522, 516 P.2d 939 (1973) (holding where insurance

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policy defines "automobile" in the broader generic sense as a "motor vehicle," a
motorcycle is included absent an exclusionary provision to the contrary).
Consequently, we hold the truck driven by Ochs was a covered automobile within
the meaning of the insuring agreement and the coverage option form signed by
Alderson.

(3) Does the executed option form apply to the insuring agreement in effect at the
time of Ochs' accident?

Ochs argues the option form does not apply in this case because the option
form only operated to reject excess underinsured motorist coverage for policy
9181578, not 9181626—the policy in effect on the date of the accident. This
argument is without legal merit.

As previously noted, Federated Mutual has continuously provided
automobile liability insurance to Ramsey Oil since April 1, 1999. K.S.A. 40-
284(c) specifically provides that a written rejection applies to any subsequent
policy issued by the same insurer for motor vehicles owned by the named insured.
See Mitchell, 271 Kan. 684, Syl. ¶ 2; Phillips v. St. Paul Fire & Marine Ins. Co.,
39 Kan. App. 2d 758, 761-64, 184 P.3d 280 (2008), aff'd 289 Kan. 521, Syl. ¶ 3,
213 P.3d 1066 (2009).


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Ochs does not claim that policy 9181626 and policy 9181578 were made
between different parties. Ochs does not dispute that the coverage under these two
policies was virtually the same. There is no evidence Ramsey Oil requested
additional underinsured motorist coverage after it executed the option form. It is
undisputed policy 9181626 merely replaced the prior policy due to a subsequent
contract between the same parties. Thus, under the explicit language of K.S.A.
40-284(c), Ochs' argument fails.


(4) Did Ramsey Oil through its authorized representative Alderson intend to limit
underinsured motorist coverage?

Ochs' final argument is that Ramsey Oil did not intend to reject excess
underinsured motorist coverage. We note Ochs does not contend summary
judgment should not have been granted because there remained a disputed
question of fact as to Alderson's intent to waive underinsured motorist coverage on
behalf of Ramsey Oil. An issue not briefed by an appellant is deemed waived or
abandoned. Kingsley v. Kansas Dept. of Revenue, 288 Kan. 390, 395, 204 P.3d
562 (2009).

Thus, we understand the argument to be that Alderson testified
unequivocally his intent was not to reduce underinsured motorist coverage. This

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argument fails to appropriately consider Alderson's testimony in its entirety. In his
deposition, Alderson testified he believed the significance of the option form was
that he was selecting the amount of liability insurance for him and his employees,
and later agreed the option form was "the amount of liability coverage."
Nevertheless, Alderson also stated he did not remember seeing the exact form, did
not remember every form he filled out, and agreed the form appeared to be a
selection of coverage for himself, as an officer, and employees. Alderson testified
the Federated agent was thorough and spent a great deal of time explaining the
coverage. Alderson stated he was sure he was told exactly what he was signing,
and what the form meant at the time. Alderson stated the option form made it
"absolutely clear" that the limit for directors, officers, partners, and owners was
$500,000 and that the limit for other qualifying persons was $50,000. Alderson
testified he could not say he did not understand the option form when he signed it.
Alderson believed the option form was "a selection of the coverage that I made
and that would be a reasonable number to have more on the officers because of the
debt incurred there."

Based on the above testimony, the trial court found that Alderson intended
to reduce coverage for underinsured motorist coverage when signing the option
form. We agree but would suggest the following to be a more appropriate
analysis.


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The terms of the signed coverage option form became a part of the
insurance agreement between the parties. "Where an insurance contract is not
ambiguous, the courts will not make another contract for the parties but will
enforce the contract as written." Jones v. Reliable Security, Inc., 29 Kan. App. 2d
617, 627, 28 P.3d 1051, rev. denied 272 Kan. 1418 (2001). Additionally, it is not
the intent of the insurer as to what the language of a policy means, it is what a
reasonably prudent insured would understand the language to mean. Hodgson v.
Bremen Farmers' Mut. Ins. Co., 27 Kan. App. 2d 231, Syl. ¶ 1, 3 P.3d 1281, rev.
denied 268 Kan. 886 (1999). We hold the option form signed by Alderson is
unambiguous and a reasonably prudent insured would understand the provisions of
the form to mean approval by the insured would constitute an election to accept
lower underinsured motorist coverage limits.

Conclusion
We hold under the uncontroverted facts of this case: (1) Alderson's
approval and signature on the coverage option form was authorized by Ramsey Oil
and constituted a binding election in compliance with K.S.A. 40-284(c); (2)
Ramsey Oil's propane truck was an automobile as defined in the Federated
Mutual insurance policy and that definition controls and is not precluded by the
more limited definition of an automobile in K.S.A. 40-298; (3) the written
rejection of underinsured motorist coverage by Ramsey Oil in conjunction with a
previous automobile policy issued by Federated Mutual controls because the

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insured named in the policy has made no subsequent request in writing for
additional coverage; and (4) a reasonably prudent insured would have understood
the provisions of the option form to be an election to accept a lower limit for
underinsured motorist coverage than the limit equal to the bodily injury liability
limit of the policy.

Accordingly, we affirm the district court's grant of summary judgment in
favor of Federated Mutual and its denial of summary judgment to Ochs.

Affirmed.