Speer v. Farm Bureau Mutual Insurance Co.

No. 102,460

IN THE COURT OF APPEALS OF THE STATE OF KANSAS

CYNTHIA SPEER,
Natural Mother of Joseph A. Gordon, a/k/a Joseph A. Speer,
Appellee,

v.

FARM BUREAU MUTUAL INSURANCE COMPANY, INC.,
Appellant.


SYLLABUS BY THE COURT

1.
Interpretation of statutory and contractual language is a question of law.

2.
Appellate court review of a district court's construction of a contract on
uncontested facts is de novo.

3.
Language in K.S.A. 40-284(b) that refers to damages "to which the insured is
legally entitled" and similar language in insurance contracts that refer to underinsured
motorist benefits as damages "'which an insured person is legally entitled to recover'" is
to be construed broadly as meaning simply that "the insured must be able to establish
fault on the part of the uninsured motorist which gives rise to the damages and to prove
the extent of those damages" under Winner v. Ratzlaff, 211 Kan. 59, 64, 505 P.2d 606
(1973).

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4.
The statutory cap of $500,000 as the maximum liability of an entity covered by the
Kansas Tort Claims Act, K.S.A. 75-6101 et seq., for all damages arising out of one
accident does not affect the liability of an insurer of one of the injured persons to pay
uninsured motorist benefits to its insured for damages caused by the entity covered by the
Act which exceed that statutory cap.

Appeal from Ford District Court; DANIEL L. LOVE, judge. Opinion filed March 26, 2010.
Affirmed.

Wendel W. Wurst, of Calihan, Brown, Burgardt, Wurst & Daniel, P.A., of Garden City, for the
appellant.

Thomas J. Berscheidt, of Great Bend, for the appellees.

Before STANDRIDGE, P.J., PIERRON, J., and BUKATY, S.J.

BUKATY, J.: Joseph A. Gordon, a/k/a Joseph A. Speer, the minor son of Cynthia
Speer, lost his life in a tragic vehicle accident while riding on a school bus. The accident
was solely caused by the negligence of the school bus driver who at the time of the
accident was an employee of a school district. Several other children also suffered
injuries giving rise to multiple claims against the school district and the bus driver. The
Kansas Tort Claims Act, K.S.A. 75-6101 et seq., (KTCA), limited the liability of the
district and its driver to a total of $500,000 for all claims arising from the accident. The
total claims far exceeded that amount. A judgment in another lawsuit, not a part of this
appeal, determined how much each claimant would receive from the $500,000 available
from the school district and its insurance company. Speer received a judgment in that
case against the school district and its driver for her son's death in the amount of $84,500,
which has been paid. Her total damages exceeded that amount. Apparently, the damages
sustained by the other injured parties also exceeded the judgments awarded.
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Speer and her husband, Chad Speer, had purchased a standard policy of
automobile insurance on their personal vehicle from Farm Bureau Mutual Insurance
Company, Inc. (Farm Bureau). That policy provided them statutorily mandated coverage
for damages caused by an underinsured motorist. Speer filed suit in the district court
against Farm Bureau to recover the portion of her damages arising from the accidental
death of her son that exceeded the $84,500 she received from the funds available from the
school district and its insurer. The district court found in her favor and awarded judgment
to her in the amount of $85,229.06.

Farm Bureau appeals, arguing that Speer's auto policy only provides underinsured
benefits for damages she is legally entitled to recover from the tortfeasors (the school bus
driver and the school district) and Speer already received that amount when her judgment
against the district and its driver was satisfied. We conclude that the judgment was
capped by the KTCA and that cap does not limit the amount of damages an insured may
recover from his or her own policy under the underinsured motorist provisions of the
uninsured's policy. We affirm.

On October 15, 2003, a school bus owned by the school district, U.S.D. No. 482,
and driven by Allen Thornburg was in an accident with a semi-tractor trailer that resulted
in the death of 6-year-old Joseph. Several other children were injured in the accident. The
families of the injured and deceased incurred approximately $420,000 in medical and
funeral expenses. Future medical expenses were estimated to be approximately
$100,000. These amounts apparently did not include any noneconomic damages.

U.S.D. No. 482 had in place a motor vehicle liability insurance policy issued by
State Farm Mutual Automobile Insurance Company (State Farm) that covered the school
bus and any U.S.D. No. 482 employee driving the bus. The policy contained liability
limits of $100,000 per person and $300,000 per accident.
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At the time of the accident, Speer and her husband were covered by a motor
vehicle liability insurance policy they had purchased on their personal automobile from
Farm Bureau, which included a combined single liability and an underinsured motorist
coverage limit of $500,000.

Several months after the accident, State Farm filed an interpleader action in the
district court seeking to pay into the court the amount of its coverage that was to then be
apportioned to the claimants who had incurred damages in the accident. The petition
included as a defendants Joseph, through his mother and natural guardian, Speer, and the
other children injured, by and through their parents. Those defendants then, as third-party
plaintiffs, filed third-party petitions against U.S.D. No. 482, Thornburg, and Moden
Farms, Inc., the owner of the semi-tractor trailer involved in the accident with the school
bus, claiming judgment against them as third-party defendants.

The parties stipulated that under the KTCA, U.S.D. No. 482's and its employee's
liability was limited to $500,000 for all claims arising out of the accident. Specifically,
K.S.A. 75-6105(a) and (b) provide:

"(a) Subject to the provisions of K.S.A. 75-6111 and amendments thereto, the
liability for claims within the scope of this act shall not exceed $500,000 for any number
of claims arising out of a single occurrence or accident.

"(b) When the amount awarded to or settled upon multiple claimants exceeds the
limitations of this section, any party may apply to the district court which has jurisdiction
of the cause to apportion to each claimant the proper share of the total amount limited
herein. The share apportioned to each claimant shall be in the proportion that the ratio of
the award or settlement made to the claimant bears to the aggregate awards and
settlements for all claims arising out of the occurrence or accident."

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The parties then reached a compromise settlement which called for the third-party
plaintiffs to receive a total of $500,000 from U.S.D. No. 482, its driver, and its insurance
company. Of particular relevance to the present case is that Joseph's family would receive
$84,500 from that total of $500,000. Then of that amount, State Farm would pay $15,500
and U.S.D. No. 482 would pay $69,000. The district court entered judgment accordingly
against U.S.D. No. 482 and Thornburg. That judgment was then satisfied.

Also, in addition to the money she received from this judgment, Speer received
funeral and medical expense benefits under the personal injury protection (PIP) portion of
the family's auto policy from Farm Bureau in the amount of $5,270.94.

Speer then filed the present case against Farm Bureau seeking judgment for the
amount of her damages that exceeded those paid by U.S.D. No. 482, its driver, and State
Farm. She argued essentially that those parties were underinsured and that entitled her to
benefits provided in her own policy for damages caused by an underinsured motorist.

The parties stipulated to the essential facts. Based upon those stipulations, the
district court found that the school bus driver, Thornburg, was 100% liable for the
accident. In addition, the court found that Speer suffered economic damages of $5,027.94
and noneconomic damages of $169,729.06 for a total of $175,000 in damages. The
district court set off the amounts of $5,270.94 and $84,500 as amounts previously paid to
Speer from the PIP benefits and from her portion of proceeds from the interpleader
action. The court then awarded Speer judgment for $85,229.06 against Farm Bureau,
representing the amount of damages she had incurred but not recovered from the
tortfeasors and their insurers.

Farm Bureau argues on appeal, as it did in the district court, that it has no liability
arising from this accident for underinsured motorist coverage under its policy with Speer.
Specifically, Farm Bureau argues as follows: that it provides coverage only for the
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amount Speer was legally entitled to recover from U.S.D. No. 482 and its driver; that the
amount was capped under K.S.A. 75-6101 et seq., resulting in the judgment of $84,500
Speer received in the interpleader case; and that she received satisfaction on that
judgment from U.S.D. No. 482 and State Farm.

The essential facts are not in dispute, and resolution of the issues in this case
requires an interpretation of both statutory and contractual language and then application
of that language to those facts. "Interpretation of a statute is a question of law over which
[an appellate] court has unlimited review." Double M Constr. v. Kansas Corporation
Commn, 288 Kan. 268, 271, 202 P.3d 7 (2009). Appellate review of the district court's
construction of a contract on uncontested facts is de novo. Liggatt v. Employers Mut.
Casualty Co., 273 Kan. 915, 920, 46 P.3d 1120 (2002).

K.S.A. 40-284(b) provides:

"(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"

The language in the insurance contract between the parties that is applicable to the
issue here provides:

"We will pay damages which an insured person is legally entitled to recover
from the owner or operator of an uninsured motor vehicle or an underinsured motor
vehicle because of bodily injury;
(1) Sustained by an insured person; and
(2) Caused by an accident.
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". . . We will pay damages under this coverage caused by an accident with an
underinsured motor vehicle, only after the limits of liability under any applicable
bodily injury liability bonds or policies have been exhausted by payment of judgments or
settlements."

We first note that Farm Bureau has provided no cases from Kansas or any
other jurisdiction on point with the facts here that supports its position.

We next note that the Kansas Supreme Court has previously construed the
phrase "legally entitled to recover as damages" in a broad manner. In Winner v.
Ratzlaff, 211 Kan. 59, 64, 505 P.2d 606 (1973), the court defined the phrase to
mean simply that "the insured must be able to establish fault on the part of the
uninsured motorist which gives rise to the damages and to prove the extent of
those damages." Although the case involved uninsured motorist coverage, the
same definition can be applied to the underinsured motorist coverage involved in
the present case since the two are so closely related and are often used in the same
section of insurance contracts. Even though the case did not specifically deal with
the interplay between underinsured motorist coverage and a statutory cap on
damages, its broad construction of language pertinent to the issues in this case is
significant.

Although Kansas has not specifically dealt with the issue of whether a statutory
cap, such as the one contained in K.S.A. 75-6105(a) and (b), exonerates an insurance
company from paying the insured's excess damages under the underinsured motorist
coverage in its insurance contract, several other states have dealt with and discussed the
issue with favorable outcomes to the insured.

In Cincinnati Ins. Co. v. Trosky, 918 N.E.2d 1, 9 (Ind. App. 2009), the Indiana
Court of Appeals determined that "the sovereign immunity defense is not available to
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[underinsured motorist] carriers who argue that once the statutory cap has been paid by
the governmental unit, the insured is no longer legally 'entitled to recover.'" The court
goes on to say, as Kansas has, that the phrase "'legally entitled to recover'" merely means
that the insured must establish fault on the part of the underinsured motorist and
establishes the amount of the insured's damages. 918 N.E.2d at 9. We also find
persuasive the public policy reasons stated by the court for its decision:

"Statutory tort claims caps serve to limit the financial exposure of a states
treasury for torts committed by state officials and employees. [Citation omitted.] Insureds
pay premiums to their insurers to make up the difference between an injured insured's
damages and the tortfeasor's liability coverage up to the limit of the insured's
[underinsured motorist] coverage. [Citation omitted.]" 918 N.E.2d at 8-9.

In Karlson v. City of Oklahoma City, 711 P.2d 72, 75 (Okla. 1985), the Oklahoma
Supreme Court determined that although a tortfeasor's liability is limited by the
Oklahoma Political Subdivisions Tort Claims Act such that it does not compensate an
insured for all of the proven damages suffered in an automobile accident, the insured is
allowed to recover from the insured's insurance company through the underinsured
motorist provision as provided by the insured's automobile liability insurance policy.

In West American v. Popa, 352 Md. 455, 472-73, 478, 723 A.2d 1 (1998), the
Maryland Court of Appeals determined that the governmental immunity of a tortfeasor
did not prevent an insured from applying for and recovering the insured's damages from
the underinsured motorist carrier.

Here, K.S.A. 75-6105 statutorily caps U.S.D. No. 482's and its driver's liability at
$500,000 for all claims. U.S.D. No. 482, its insurance carrier, State Farm, and the bus
driver had judgment entered against them for that statutory maximum in favor of the
victims of the accident of October 15, 2003. Of this amount, Speer received $84,500 for
the death of her son. This amount did not cover all of the damages Speer incurred as a
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result of the accident. We conclude that, in light of our Supreme Court's broad
construction of "legally entitled to recover as damages" and the persuasive case law cited
above, the statutory cap of K.S.A. 75-6105 has no effect on Farm Bureau's underinsured
motorist coverage. As a result, since Speer did prove she is legally entitled to recover
damages exceeding the amount recovered against the tortfeasors, the district court did not
err in granting judgment to Speer against Farm Bureau for those damages as benefits
under the uninsured motorist provisions of her policy.

Affirmed.