IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 84,835
MICHAEL P. MITCHELL,
Plaintiff/Appellant/Cross-appellee,
v.
LIBERTY MUTUAL INSURANCE COMPANY,
Defendant/Appellee,
and
SHELTER MUTUAL INSURANCE COMPANY,
Defendant/Appellee/Cross-appellant.
SYLLABUS BY THE COURT
1. The fundamental rule of statutory construction to which all other rules are subordinate is that the intent of the legislature governs if that intent can be ascertained. The legislature is presumed to have expressed its intent through the language of the statutory scheme it enacted. When a statute is plain and unambiguous, the court must give effect to the intention of the legislature as expressed rather than determine what the law should or should not be.
2. The term "renewal policy" as used by the legislature in K.S.A. 1982 (Ensley 1981) 40-284(c), encompasses not only those policies, which are specifically designated as renewal policies but also subsequent policies between the same parties with virtually identical coverage which replace the previous policy.
3. A disputed question of fact that is not material to the resolution of an issue will not preclude summary judgment.
4. While construction or interpretation of statutory language is a judicial function, interpretation of a statute is a necessary and inherent function of an agency in its administration or application of that statute. Usually, the legal interpretation of a statute by an administrative agency that is charged by the legislature with the authority to enforce the statute is entitled to great judicial deference although when reviewing questions of law, the court may substitute its judgment for that of the agency. However, such interpretation is only entitled to deference if it has a rational basis. Rules promulgated by an agency must be within the authority conferred by the statute, and an administrative regulation which goes beyond or conflicts with legislative authorization is void.
5. Whether a motion to compel discovery should be granted is within the discretion of the trial court.
6. A claim becomes liquidated for purposes of interest under K.S.A. 16-201 when both the amount due and date on which it is due are fixed and certain, or when they become ascertainable by mathematical computation. The fact that a good faith controversy exists as to whether a party is liable for the money does not preclude a grant of prejudgment interest under K.S.A. 16-201.
7. Unless specified in the insurance contract, supplemental payment provisions in the liability coverage of the policy do not apply to the uninsured/underinsured motorist coverage of the policy.
8. K.S.A. 40-284(b), which requires that an automobile insurance policy provide uninsured/underinsured motorist coverage with coverage limits equal to the liability limit of the policy unless the insured requests lower limits in writing, does not require that the supplemental payment provisions included in the policy with regard to the liability coverage be imputed to the uninsured/underinsured motorist coverage.
Appeal from Riley district court, PAUL E. MILLER, judge. Opinion filed June 8, 2001. Affirmed in part and reversed in part.
Patrick A. Hamilton, of Robert G. Herndon, Chartered, of Overland Park, argued the cause, and Robert G. Herndon, of the same firm, was with him on the briefs for appellant/cross-appellee.
Paul Hasty, Jr, of Wallace, Saunders, Austin, Brown & Enochs, Chartered, of Overland Park, argued the cause, and David Curotto, of the same firm, was with him on the brief for appellee Liberty Mutual Insurance Company.
William A. Larson, of Gehrt & Roberts, Chartered, of Topeka, argued the cause, and Craig C. Blumreich, of the same firm, was with him on the brief for appellee/cross-appellant Shelter Mutual Insurance Company.
The opinion of the court was delivered by
DAVIS, J.: The question we must resolve in this appeal is which of two separate policies providing underinsured motorist coverage applies to the plaintiff's damages. Plaintiff Michael P. Mitchell claimed Kansas law mandated that his employer's insurance contract with Liberty Mutual Insurance Company (Liberty) provide underinsured coverage equal to the limits of the liability coverage based upon the employer's failure to properly reject such coverage under K.S.A. 40-284. The trial court awarded summary judgment in favor of Liberty, concluding that the employer did reject the higher coverage, with the result that Mitchell's individual policy provided the only underinsured coverage for him. The trial court awarded Mitchell postjudgment interest, but only from the date the court determined that Mitchell's individual policy was responsible and only in an amount due under such policy. We affirm the decision of the trial court in part and reverse in part.
On November 1, 1991, Mitchell suffered bodily injury in a motor vehicle accident which occurred while he was operating a vehicle for the United Parcel Service (UPS). UPS was insured by Liberty under a policy which provided for liability coverage of $5,000,000. The policy expressly provided uninsured/underinsured motorist coverage in an amount equal to the Kansas minimum coverage requirement: $25,000 per person and $50,000 per accident. Mitchell was insured by defendant Shelter Mutual Insurance Company (Shelter). The Shelter policy provided uninsured/underinsured motorist coverage in the amount of $100,000 per person and $300,000 per accident.
Mitchell filed suit against the driver of the other automobile, Loretta Leonard, who was insured by Mid-Century Insurance Company (Mid-Century). Mid-Century tentatively offered to settle Mitchell's claims in exchange for its policy limit of $50,000. Mitchell provided both Liberty and Shelter with notice of the offer. Liberty refused to substitute payment or intervene. Shelter refused to substitute payment but did intervene to protect its interests.
All parties to the action reached a settlement in favor of Mitchell in the amount of $950,000, which the trial court reduced to $890,000 pursuant to the caps provided for in K.S.A. 60-19a02. This sum was reduced by $50,000 which had previously been paid by Leonard's insurance company, Mid-Century. After a hearing, the settlement was approved by the trial court. Within the same action, Mitchell attempted to enforce his underinsured motorist benefits under the Liberty policy and his own Shelter policy. The trial court, pursuant to Mitchell's request, involuntarily joined Liberty as a party and entered summary judgment against Liberty for Mitchell's underinsured coverage.
The resulting judgment against Liberty was overturned by this court in Mitchell v. Liberty Mut. Ins. Co., 265 Kan. 556, 961 P.2d 1235 (1998), wherein we found the district court had no jurisdiction over the underinsured motorist coverage dispute in the same action which determined plaintiff's damages. We held that the underinsured coverage dispute must be resolved by separate action from the damage action. Mitchell then filed the present action against Liberty and Shelter.
Mitchell claimed Liberty was liable for his underinsured motorist claim of $840,000 notwithstanding its policy provision limiting its liability for underinsured motorist coverage to $25,000 per person and $50,000 per accident. His claim was based upon K.S.A. 40-284, which provides that for policies issued in Kansas, uninsured/underinsured coverage is to be "equal to the limits of liability coverage" absent a valid rejection of such coverage by the insured named in the policy. Mitchell contended that no valid rejection was ever executed by the insured, UPS. The parties stipulated that Mitchell's claim against his own policy with Shelter would be effective only if it were determined that Liberty's coverage liability is limited to $25,000 per person and $50,000 per accident. In that event, Shelter's $100,000 per person and $300,000 per accident coverage would provide the primary underinsured motorist coverage for Mitchell. Mitchell also advanced claims for pre- and postjudgment interest against both Liberty and Shelter depending upon the determination of which carrier provided primary underinsured motorist coverage.
Summary Judgment Motions
Liberty filed a motion for summary judgment. Mitchell countered with a motion for summary judgment of his own. In order to understand the positions of the parties, a digression into the law regarding underinsured motorist coverage is necessary. Under K.S.A. 40-284(b), uninsured motorist coverage must include an underinsured motorist provision with coverage limits equal to the uninsured provision. Under K.S.A. 40-284(a), the policy limits of an uninsured motorist provision must be equal to the liability coverage in the insurance policy. Therefore, under those two sections of the statute, underinsured motorist coverage in an automobile policy must have coverage limits equal to the liability coverage of the policy which, in the case of Liberty's policy, was $5,000,000. However, K.S.A. 40-284(c) provides that the insured has the right to reject uninsured and underinsured motorist coverage in excess of the minimum required by law, i.e. $25,000 per person/$50,000 per accident or $50,000 single limit, by giving the insurance company written rejection of the excess. Further, the statute provides that after a valid rejection, the insurer need not include excess insurance in any subsequent policy of the insured unless the insured specifically requests such excess coverage in writing. K.S.A. 40-284(c).
The Liberty policy covering UPS at issue in this case, policy No. AS1-621-004175-339, was issued in 1989 and was effective until 1992. The policy includes uninsured motorist coverage in the amount of $25,000 per person/$50,000 per accident. In 1989, the first year of the policy, Liberty sent UPS a form entitled Kansas Uninsured Motorists Insurance Excess Limits Rejection. The form provided a place for UPS to state in writing that it was rejecting uninsured motorist coverage equal to the liability limit in the policy and to write in the smaller amount of its choosing, subject to the statutory minimums of $25,000 per person/$50,000 per accident or $50,000 per single limit. While UPS signed and remitted the form, the space to select the limits was left blank.
Nevertheless, Liberty argued that UPS had rejected higher limits in 1984 and that this rejection was still valid under K.S.A. 40-284(c) because once an insured rejects higher uninsured motorist coverage by written waiver, that waiver remains effective until the insured selects higher limits. In support of this contention, Liberty attached a copy of the 1984 rejection, along with the affidavit of Albert Sharlun, account executive of the UPS account.
Mitchell countered with his own motion for summary judgment objecting to the affidavit of Albert Sharlun based upon the provisions of K.S.A. 60-256(e). In its response to Mitchell's motion, Liberty asserted that UPS had actually executed rejections in 1990 and 1991 but that these rejections referenced an incorrect policy number because Liberty employees incorrectly assumed that the policy was renewed every year rather than every 3 years. The 1990 rejection purported to select the minimum limits of $25,000/$50,000, while the 1991 rejection purported to select the minimum single limit of $50,000. In his response, Mitchell contended that the underinsured motorist limits in the policy were inserted by UPS and argued that the incorrect policy number made the rejections invalid.
District Court Decision
The district court awarded summary judgment in favor of Liberty, holding:
"5. After Kansas law was changed in 1982 to require underinsured motorist benefits, UPS rejected in writing coverage in excess of that set forth in paragraph 2 [coverage limits equal to the liability coverage of the policy].
"6. That rejection is exhibited as an attachment to the affidavit of Albert Sharlun, which is Exhibit A to defendant Liberty Mutual's motion for summary judgment.
"7. K.S.A. 40-284 in its various forms since 1982 has provided that once a written rejection has been received by an insurer, no further rejection is necessary in subsequent policies.
"8. Notwithstanding that it may be Liberty's corporate policy to obtain written rejections every year, the rejection issued by UPS in 1984 was sufficient to limit the underinsured coverage to $25,000/50,000 at the time of plaintiff's accident."
The trial court also determined that Shelter was obligated to pay Mitchell $50,000 under its underinsured motorist coverage. The court ruled that questions regarding Shelter's liability for prejudgment interest remained outstanding.
Mitchell filed a motion to alter and amend the judgment to allow an appeal of the summary judgment ruling pursuant to K.S.A. 60-254(b) which the trial court denied. Mitchell then moved for summary judgment, seeking prejudgment interest against Shelter on the entire amount of the award of $840,000, commencing from the date of the settlement, March 29, 1995. Shelter responded, arguing that it was not obligated to pay prejudgment interest, or in the alternative, that it was only obligated to pay interest on the $50,000 of underinsured motorist coverage from October 12, 1999.
The trial court decided that Shelter was required to pay interest on the $50,000 it owed Mitchell and that this obligation ran from the time the obligation became "liquidated," which was October 12, 1999, the date that the court entered summary judgment in favor of Liberty. Mitchell appealed all rulings. Shelter cross-appealed the ruling awarding summary judgment to Liberty. Our jurisdiction is based upon our transfer pursuant to K.S.A. 20-3018(c).
Discussion
The trial court resolved the underinsured motorist coverage issue on the basis that the written rejection by Liberty in 1984 of its underinsured motorist coverage equal to its liability limits and fixing the same coverage at $25,000 per person and $50,000 per accident remained in effect at the time of Mitchell's accident. Since Liberty's underinsured motorist coverage of $25,000 was less than the amount Mitchell received in settlement from the other driver's insurer in the amount of $50, 000, Liberty's policy provided no uninsured/underinsured coverage. However, Mitchell's own policy provided $100,000 in underinsured motorist coverage, thereby making $50,000 available to Mitchell. The ultimate question resolving this dispute is a legal question involving the interpretation of K.S.A. 40-284.
"Summary judgment is appropriate 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. The trial court is required to resolve all facts and inferences which may be reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusion drawn from the evidence, summary judgment must be denied. [Citation omitted.]" Bergstrom v. Noah, 266 Kan. 847, 871-72, 974 P.2d 531 (1999).
K.S.A. 40-284
K.S.A. 40-284 set forth the requirements with regard to uninsured/underinsured motorist coverage in this state. Effective in 1982, the statute read, in pertinent part:
"(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.
"(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 motorists coverage required by subsection (a) which is in excess of the limits for bodily injury or death set forth in K.S.A. 1980 supp. 40-3107. Unless the insured named in the policy requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured had rejected the coverage in connection with a policy previously issued to the insured by the same insurer." (Emphasis added.) L. 1981, ch. 191, § 1.
Thus, from 1982 to 1986, 40-284 required (1) that an insurer provide its insured uninsured motorist coverage equal to the liability limit of the policy; (2) the uninsured coverage include coverage for underinsured motorists; (3) the insured could reject this excess uninsured motorist coverage by written request, subject only to the minimum coverage amounts provided by law; and (4) once the insured had rejected excess coverage, the insurer need not provide such excess coverage in any renewal policy for the same insured. K.S.A. 40-284 (Ensley 1981).
In 1986, subsection (c) of the statute was amended as follows:
"(c) The insured named in the policy shall have the right to reject, in writing, the uninsured motorists motorist coverage required by subsection (a) 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 or supplemental to a renewal policy 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 coverage in connection with a policy previously issued to the insured by the same insurer." L. 1986, ch. 173, § 1.
From 1986 to 1988, the only substantive change was that in addition to not having to offer excess coverage in any renewal policy, the insurer did not have to offer excess coverage in any subsequent policy with the named insured. K.S.A. 40-284 (Ensley 1986).
In 1988, subsection (c) was again amended, as follows:
"(c) The insured named in the policy shall have the right to reject, in writing, the uninsured motorist coverage required by subsection 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 coverage in connection with a policy previously issued to the insured by the same insurer." L. 1988, ch. 152, § 1.
The 1988 amendment made it clear that the right to reject excess coverage extended to underinsured coverage. See K.S.A. 40-284. There have been no further changes to the statute since the 1988 amendment, and that version of the statute is the one at issue in this case.
It is important to remember that the issue in this case does not involve an interpretation of the language of the insurance policy between Liberty and UPS in effect at the time of Mitchell's accident. That policy expressly provided for underinsured motorist coverage in the amount of $25,000 per person/$50,000 per accident. Rather, the argument involves the interpretation and application of K.S.A. 40-284. It is a question of law, and our scope of review is unlimited. Hamilton v. State Farm Fire & Cas. Co, 263 Kan. 875, 879, 953 P.2d 1027 (1998).
Mitchell advances seven reasons why the trial court erred in holding that the 1984 rejection by the insured UPS effectively set underinsured motorist coverage at $25,000 per person and $50,000 per accident: (1) the 1984 rejection was ineffective because the 1986 amendment which exempted insurers from offering underinsured coverage in excess of the minimum in subsequent policies with the same insured should not be applied retroactively to the policy in 1984; (2) it was the established practice of Liberty that unless UPS rejected the limits, the policy would be issued with underinsured motorist limits equal to the liability limit; (3) the 1989 form was not only ineffective to operate as a rejection, it actually operated as a request for underinsured limits equal to the liability limit of the policy; (3) no rejection form was ever "encompassed within the insurance policy" as required by the commissioner of insurance; (4) the 1984 rejection was not properly in evidence because Liberty failed to comply with K.S.A. 60-256(e) in presenting it; (5) the 1984 rejection was ineffective because the law at the time did not allow the rejection of underinsured motorist benefits equal to the liability limit of the policy; and (7) the 1984 rejection should have been excluded from evidence because the trial court failed to allow discovery concerning it. Mitchell also argues that the 1990 and 1991 rejections were ineffective and contends that the trial court should have awarded judgment in his favor along with prejudgment interest and attorney fees. Shelter joins Mitchell in these arguments.
(1) Mitchell contends that UPS's 1984 rejection was ineffective because the 1986 amendment which exempted insurers from offering underinsured coverage in excess of the minimum in subsequent policies with the same insured should not be applied retroactively to the policy in 1984. In order to understand this argument, some comparison between the law as it stood in 1984 and the law in 1986 is applicable. In 1984, K.S.A. 40-284 stated that once an insured had rejected excess coverage such coverage did not have to be offered in subsequent renewal policies with the same insured. K.S.A. 40-284(c) (Ensley 1981). In 1986, the statute was changed to provide that such coverage did not have to be offered 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. K.S.A. 40-284(c) (Ensley 1986). Mitchell argues that when the 1984 rejection was completed it would have been effective only for renewal policies. He contends that the policy issued by Liberty on May 1, 1986, prior to the effective date of the 1986 amendment, was a new rather than renewal policy and that Liberty was thus required to again offer coverage limits equal to the limits of its liability coverage. Thus, according to Mitchell, the 1984 rejection could not continue in effect.
The 1986 policy in the record does not indicate whether it is a new policy or a renewal policy. The policy code provides that the 1986 policy is a "cancel/rewrite." The record is silent on what "cancel/rewrite" means. Nevertheless, Mitchell's argument concerning new and renewal voices the unanswered question of what the legislature meant in K.S.A. 40-284(c) (Ensley 1981) by its use of the words "renewal policy." Mitchell assumes that the 1986 policy is not a renewal. He argues that there remains a genuine issue of material fact as to whether the policy was a renewal policy. Thus, according to his argument, summary judgment was inappropriate.
The trial court did not directly address the above question, but its decision that the 1984 rejection resolved the question necessarily assumes that the 1986 policy, as well as the 1989 policy issued by Liberty, were renewal policies within the meaning of K.S.A. 40-284(c) (Ensley 1981). Liberty argues that "it does not matter whether the policy was a new or renewal policy. Either way, the new policy was simply a replacement for the prior policy."
The question we must resolve involves a question of statutory interpretation and the intent of the legislature in its use of the term "renewal policy" in K.S.A.. 40-284(c) (Ensley 1981).. The fundamental rule of statutory construction to which all other rules are subordinate is that the intent of the legislature governs if that intent can be ascertained. The legislature is presumed to have expressed its intent through the language of the statutory scheme it enacted. When a statute is plain and unambiguous, the court must give effect to the intention of the legislature as expressed, rather than determine what the law should or should not be. In re Marriage of Kilman, 264 Kan. 33, 42-43, 955 P.2d 1228 (1998).
K.S.A. 40-284(c) (Ensley 1981) as set forth above uses the words "need not be provided in or supplemental to a renewal policy." The phrase "renewal policy" is not defined. Our research into the legislative history of this enactment provides no help in ascertaining legislative intent. Neither the district court nor the parties attempted to define, except in the most general way, what is meant by "renewal policy." The legislature recognized in subsection (c) that the rejection must be in writing. The UPS 1984 rejection was in writing and effective in providing underinsured motorist coverage of $25,000 per person and $50,000 per accident instead of coverage equal to the policy's liability limits. Thereafter, unless the insured named in the policy requests such coverage (coverage equal to the limits of liability coverage) such coverage need not provided "in or supplemental to a renewal policy" where the named insured had rejected the coverage in connection with a policy previously issued to the insured by the same insurer.
It appears that the legislature in subsection (c) intended to simplify further rejections in subsequent policies by the same parties by requiring the named insured to request in writing the higher coverage if desired. Where the parties remain the same and the coverage remains virtually identical, requiring further rejections within that existing relationship would run counter to the legislative intent to simplify the rejection process. Yet, there would be cases where coverage lapsed or where the terms of the coverage markedly changed within that relationship to signal that the new policy issued was not "supplemental to a renewal policy" requiring a new rejection. Again, the determination would depend upon what the legislature meant by renewal policy.
Black's Law Dictionary 1299 (7th ed. 1999) defines renewal as: "n.1. The act of restoring or reestablishing. 2. The re-creation of a legal relationship or the replacement of an old contract with a new contract, as opposed to the mere extension of a previous relationship or contract." We believe that this definition more accurately reflects what the legislature meant when it used the term "renewal policy." We further conclude that allowing a rejection in a previous policy between the same parties to remain in effect absent another written request by the insured where the new coverage is virtually identical and reestablishes the relationship between the parties or where the new policy replaces the old policy with a new contract is consistent with the intent of the legislature.
The uncontroverted facts of this case establish that UPS dealt exclusively with Liberty over an extended period of time. The relationship existed from before 1984 through at least 1993. Moreover, there was uncontroverted testimony that the relationship in Kansas existed over 20 years. While there is evidence that the policy covering UPS is a 3-year policy, the terms of the liability coverage remained the same throughout this relationship with the exception of a gradual increase in the amount of liability coverage.
The provisions of the 1986 Liberty policy were virtually the same as the 1984 Liberty policy. Continual coverage existed between UPS and Liberty over an extended period of time with virtually identical provisions. The provisions of the 1984, 1986, and 1989 policies are identical and involve the same parties. Each policy after 1984 replaced an old policy with a new contract and consistent with the definition of renewal set forth above, we conclude that both the 1986 and 1989 Liberty policies were renewal policies within the provisions of K.S.A. 40-284(c) (Ensley 1981). Since UPS did not again after 1984 request increased underinsured motorist coverage in its renewal policies, underinsured motorist coverage at the time of Mitchell's accident remained the same as in previous policies, at $25,000 per person/$50,000 per accident.
In 1986, the legislature amended K.S.A. 40-284(c) to provide that a rejection would remain in effect for "any subsequent policy issued by the same insurer for motor vehicles owned by the named insured, including, but not limited to, supplemental, renewal, reinstated, trans