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Allstate Insurance Company v. Teel (10/01/2004) sp-5832
Allstate Insurance Company v. Teel (10/01/2004) sp-5832
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
ALLSTATE INSURANCE )
COMPANY and TINA WATTS, ) Supreme Court No. S-11039
)
Appellants, ) Superior Court No.
) 4FA-02-1736 CI
v. )
) O P I N I O N
MONICA FOSTER TEEL, )
) [No. 5832 - October 1, 2004]
Appellee. )
_______________________________ )
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Fairbanks, Mark I. Wood, Judge.
Appearances: Mark E. Wilkerson, Anchorage,
for Appellants. Ward M. Merdes, Fairbanks,
and Lawrence F. Reger, Fairbanks, for
Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
I. An insurance policy defined insured person as someone
legally entitled to recover damages for injury to the occupant of
an insured vehicle. The parties dispute whether this provision
covers an individual, Monica Foster Teel, who seeks to recover
for her own emotional distress resulting from the death of her
son, Cory Foster, an occupant of the insured vehicle. The
superior court ruled that Teel was an insured person under the
provision. Because we conclude that the policy language does
not clearly exclude Teel from coverage, we affirm the decision of
the superior court.
II. FACTS AND PROCEEDINGS
On November 16, 1997 Cory Foster, Monica Foster Teels
eleven-year-old son, was seriously injured in an automobile
accident. Cory was a passenger in a car driven by Keith
OFlanagan, who was intoxicated at the time of the accident. Cory
was treated at the Fairbanks Memorial Hospital, during which time
he was tended to by Teel until his death on November 23, 1997.
At the time of the crash, both Teel and OFlanagan were
insured by Allstate under separate automobile insurance policies.
Teel filed a claim against OFlanagans liability policy for Corys
death, and in November 1998 she was paid the policy limit of
$50,000, plus attorneys fees and interest. Teel next asserted a
claim for the negligent infliction of emotional distress (NIED)
under the Uninsured/Underinsured Motorist (UM/UIM) provisions of
her own Allstate policy. Allstate denied coverage and the claim
went to arbitration. At arbitration Teel was awarded her UM/UIM
policy limit of $100,000, plus attorneys fees and interest.
Teel then claimed coverage for NIED under the UM/UIM
coverage in OFlanagans policy. Teel argued that she was entitled
to UM/UIM benefits because she was an insured under OFlanagans
policy. For the purpose of UM/UIM coverage, OFlanagans policy
defines an insured person as:
1. [The named insured] and any resident
relative.
2. Any person while in, on, getting into or
out of [the insureds] auto with [the
insureds] permission.
3. Any other person who is legally entitled
to recover because of bodily injury to
[the insured], a resident relative, or
an occupant of [the insureds] auto with
[the insureds] permission.
(Emphasis added.) Allstate denied Teels claim.
Following the denial of her NIED claim against
OFlanagans Allstate policy, Teel filed a civil complaint against
Allstate and Tina Watts, an Allstate employee, in July 2002.
First, Teel argued that she was a person legally entitled to
recover UM/UIM benefits under OFlanagans Allstate policy for
Corys bodily injury. Second, Teel alleged that Watts and other
Allstate personnel had acted fraudulently by failing to inform
her that she was entitled to recover under both policies and by
inducing her to accept only the limits of her own policys UM/UIM
benefits at arbitration. Allstate moved to dismiss Teels claim
under Alaska Civil Rule 12(b)(6). Allstate argued that Teel was
not an insured person under the UM/UIM provisions of OFlanagans
policy and that, even if she was, she would not be entitled to
recover because all available UM/UIM coverage under OFlanagans
policy had already been paid. Teel cross-moved for judgment on
the pleadings, arguing that she qualified as an insured person
under the policy and was entitled to coverage.
Superior Court Judge Mark I. Wood denied Allstates
motion to dismiss and granted Teels motion for judgment on the
pleadings. Judge Wood held that under Alaska law the disputed
policy language defining an insured as [a]ny other person who is
legally entitled to recover because of bodily injury to . . . any
occupant of your insured auto must be interpreted in accordance
with the reasonable expectations of laypersons. Judge Wood held
that because a reasonable layperson would have no reason to
believe that the policy language would exclude Teels NIED claim,
Teel was an insured under the UM/UIM provisions in OFlanagans
policy. Allstates motion for reconsideration was denied and a
final judgment on the issue of coverage was entered on April 11,
2003. Allstate appeals.
III. STANDARD OF REVIEW
We review a grant of a motion for judgment on the
pleadings de novo.1 The interpretation of contractual language
is a question of law, which we also review de novo.2
IV. DISCUSSION
Allstates Policy Covers Teels Direct Claim.
Allstate correctly notes that NIED claims are direct,
not derivative.3 Allstate argues that Teel is not an insured
person under OFlanagans UM/UIM coverage because her injuries are
not derivative, and therefore not because of injuries suffered by
Cory, an occupant of the vehicle. Allstate also argues that this
court should follow cases from other jurisdictions construing
similar policy language to exclude claims for emotional distress.
We interpret insurance contracts by looking to (1) the
language of the disputed provisions in the policy, (2) other
provisions in the policy, (3) extrinsic evidence, and (4) case
law interpreting similar provisions.4 We construe grants of
coverage broadly and interpret exclusions narrowly.5 We use the
doctrine of reasonable expectations when reviewing the terms of
an insurance policy.6 Under this doctrine, [t]he objectively
reasonable expectations of applicants and intended beneficiaries
regarding the terms of insurance contracts will be honored even
though the painstaking study of the policy provisions would have
negated those expectations.7
Allstates UM/UIM policy provision provides that
Allstate will pay all damages that an insured person is legally
entitled to recover from the owner or operator of an uninsured or
underinsured auto because of . . . bodily injury sustained by an
insured person. The policy defines an insured person as:
1. [The named insured] and any resident
relative.
2. Any person while in, on, getting into or
out of [the insureds] auto with [the
insureds] permission.
3. Any other person who is legally entitled
to recover because of bodily injury to
[the insured], a resident relative, or
an occupant of [the insureds] auto with
[the insureds] permission.
(Emphasis added.)
Teel seeks to recover damages for OFlanagans negligent
infliction of emotional distress, which was caused when Teel
observed Corys injuries soon after the accident. A plaintiff
must usually suffer physical injury in order to recover under a
theory of NIED,8 but may also recover under the bystander
exception if she (1) was located near the scene of the accident,
(2) had shock resulting from the sensory and contemporaneous
observance of the accident, and (3) had a close relationship with
the victim.9 Teel seeks to recover under the bystander exception
and admits that her NIED claim is direct rather than derivative.10
Allstate argues that the policy language clearly covers only
derivative claims brought by third parties, such as loss of
consortium or reimbursement for funeral expenses, and that this
court should read the policy language, legally entitled to
recover because of bodily injury to . . . an occupant of [the
insureds] auto, to completely exclude all non-derivative claims.
That Teels claim is direct does not bar the claim. The
wording of Allstates policy does not exclude direct claims it
states that one would be entitled to recover so long as ones
damages were because of bodily injury to an occupant of the
insured vehicle. Websters Dictionary defines the term because of
to mean by reason of or on account of.11 Legal causation is a
stricter standard, generally requiring that (1) but for the
occurrence of the event the injury would not have occurred,12 and
(2) the event was a significant and important cause of the
injury.13 In light of both the common and legal definitions of
causation, we cannot say that the policy language excludes an
NIED claim.
If Teel can prove all of the elements of a bystander
NIED claim, then her injuries were because of the bodily injury
suffered by her son: The injuries suffered by an individual
entitled to recover under the bystander exception to NIED claims,
though not derivative, are the natural and probable consequence
of contemporaneously witnessing the bodily injury suffered by
someone with whom they have a close relationship.14 We therefore
conclude that a party who has met the burden of proving his or
her NIED claim would satisfy the causal requirement between the
accident and the injury that the Allstate policy requires.
Allstate relies heavily on a case decided by the
Colorado court of appeals, Wieprzkowski v. State Farm Mutual Auto
Insurance Co.,15 and a case decided by the Delaware superior
court, Gill v. Nationwide Mutual Insurance Co.,16 where the policy
provisions at issue were similar to the one at bar. In each case
the court interpreted the policy language as excluding a non-
insured individuals claim of emotional distress arising from an
accident and as including only derivative claims, such as claims
for funeral expenses or loss of consortium.
In Wieprzkowski, the plaintiff, Karen Wieprzkowski, was
injured when a bus in which she was a passenger struck another
vehicle.17 Wieprzkowskis mother was killed in the accident and
her body rested upon Wieprzkowski during the two hours that it
took rescue crews to extricate Wieprzkowski from the bus.18
Wieprzkowski sought to recover additional UIM benefits under her
parents automobile policy after recovering liability benefits
under the policy held by another party to the accident.19 The
insurance policy at issue provided UIM coverage for any person
entitled to recover damages because of bodily injury to an
insured.20 Wieprzkowski argued that she was entitled to recover
under the policy because she suffered emotional distress as the
result of bodily injury to an insured (her mother).21 The
Colorado court of appeals rejected Wieprzkowskis claim, holding
that Wieprzkowskis emotional distress was not the type of injury
that is because of bodily injury to an insured, as the damages
sought were for Wieprzkowskis own direct emotional injuries.22
The court believed that the insurance policy covered only the
consequential damages of an accident, such as medical payments
made for the insured, wrongful death claims, and loss of
consortium claims.23
In Gill v. Nationwide Mutual Insurance Co., the policy
language at issue covered others for damages they may be legally
entitled to recover because of bodily injury suffered by an
insured.24 The plaintiffs, who were not themselves considered
insured individuals under the policy, sought to recover damages
for emotional distress.25 The Delaware superior court held that
the plaintiffs were not entitled to recover for their emotional
distress because their injuries were not derivative and the
policy language provided compensation only for derivative
injuries, such as wrongful death.26
We decline to follow those cases. First, Allstates
policy provision clearly covers an individual who is legally
entitled to recover because of bodily injury to an occupant of
the insured vehicle. Second, neither Wieprzkowski nor Gill
considered the reasonable expectations of a layperson.27 In
contrast, we have held that, although we will not ignore or
rewrite provisions in an insurance contract, even unambiguous
language in an insurance contract will be interpreted to comport
with the reasonable expectations of a layperson.28
Allstate also argues that the phrase legally entitled
puts the reasonable layperson on notice that whether one
qualifies under this provision is governed by the law. Allstate
contends that because our decision in State Farm Mutual Insurance
Co. v. Lawrence characterizes NIED claims as direct rather than
derivative,29 Teel, as a reasonable layperson, should not have
expected that her NIED claim would be covered. Allstates
argument is refuted by our case law holding that the reasonable
layperson cannot and should not be expected to understand subtle
legal distinctions when interpreting the terms of an insurance
contract.30 Laypersons are not expected to interpret a contract
as a lawyer might, and we give effect to the reasonable
expectations of a layperson, even if a painstaking study of the
policy provisions would have negated those expectations. 31
Allstates interpretation would require Teel to be intimately
familiar with the characterization of NIED claims, be aware of
the interpretations of similar policy language made by other
courts in other jurisdictions, and then interpret Lawrence in
such a way as to preclude coverage.
Under both common and legal parlance, a successful NIED
claim would be because of injury to an occupant of the insured
vehicle. The fact that Teels recovery is direct and not
derivative does not extinguish the causal relationship between
the accident and her injury, as required by the policy.
V. CONCLUSION
Because the disputed policy provision does not limit
coverage to derivative injuries, but rather provides coverage for
those whose injuries are legally caused by and are the
foreseeable result of injury to an insured, resident relative, or
occupant of the insured vehicle, we AFFIRM the decision of the
superior court.
_______________________________
1 Hebert v. Honest Bingo, 18 P.3d 43, 46 (Alaska 2001).
2 Cox v. Progressive Cas. Ins. Co., 869 P.2d 467, 468 n.1
(Alaska 1994).
3 In State Farm Mutual Automobile Insurance Co. v.
Lawrence, we characterized claims for emotional distress as
direct rather than derivative injuries, in which a party can
recover solely based upon another partys injuries. 26 P.3d 1074,
1079 (Alaska 2001). Claims of emotional distress are
fundamentally different from derivative claims, such as loss of
consortium. Id. We reasoned that [u]nlike claims for loss of
consortium, claims for emotional distress concern injuries that
the claimants have suffered directly, rather than derivative
injuries that resulted from injury to another. Id.
4 Bering Strait Sch. Dist. v. RLI Ins. Co., 873 P.2d
1292, 1295 (Alaska 1994).
5 Id.
6 West v. Umialik Ins. Co., 8 P.3d 1135, 1138 (Alaska
2000).
7 C.P. ex rel. M.L. v. Allstate Ins. Co., 996 P.2d 1216,
1222 (Alaska 2000) (quoting Bering Strait, 873 P.2d at 1295).
8 Kallstrom v. U.S., 43 P.3d 162, 165 (Alaska 2002).
9 Id.
10 See State Farm Mut. Auto. Ins. Co. v. Lawrence, 26 P.3d
1074, 1079 (Alaska 2001).
11 Websters II New Riverside University Dictionary 161
(1988).
12 Rhines v. State, 30 P.3d 621, 625 (Alaska 2001).
13 Id.
14 See, e.g., Estate of Gocha v. Shimon, 573 N.W.2d 218,
221 (Wis. App. 1997) (parents emotional distress was natural and
probable consequence of witnessing accident that killed son).
15 976 P.2d 891 (Colo. App. 1999).
16 1994 WL 150902 (Del. Super. 1994).
17 Wieprzkowski, 976 P.2d at 892.
18 Id.
19 Id.
20 Id.
21 Id. at 892.
22 Id. at 893.
23 Id.
24 1994 WL 150902, *3 (Del. Super. 1994).
25 Id.
26 Id.
27 Wieprzkowski, 976 P.2d at 892 (interpreting policy
language according to the general rules for construction of
contracts); Gill, 1994 WL 150902, at *3 (giving effect to plain
and ordinary meaning of contractual language). Colorado courts
consider the reasonable expectations of the insured layperson
only when the terms of the policy are ambiguous, Farmers Ins.
Exch. Co. v. Chacon, 939 P.2d 517, 522 (Colo. App. 1997), and
otherwise rely upon traditional principles of contract
interpretation. Wieprzkowski, 976 P.2d at 892. Delaware courts
also consider the reasonable expectations of the insured
layperson when the contractual language has been characterized as
ambiguous. Hallowell v. State Farm Mut. Ins. Co., 443 A.2d 925,
926 (Del. 1982).
28 Farquhar v. Alaska Natl Ins. Co., 20 P.3d 577, 579
(Alaska 2001).
29 26 P.3d 1074, 1079 (Alaska 2001).
30 See ONeill Investigations, Inc. v. Illinois Employers
Ins. of Wausau, 636 P.2d 1170, 1175-76 (Alaska 1981).
31 Safety Natl Ins. Cas. Corp. v. Pacific Employers Ins.
Co., 927 P.2d 748, 750 (Alaska 1996) (quoting Robert E. Keeton,
Basic Text on Insurance Law 6.3(a), at 351 (1971)).
