Farm Bureau Mutual Insurance Co. of Arkansas, Inc. v. Barnhill

George Rose Smith, Justice.

The plaintiff below, A.H. Barnhill, Jr., had a liability insurance policy issued by Farm Bureau, covering Barnhill’s four cars. The policy provided that its terms applied separately to each vehicle. Barnhill was seriously injured in a collision with an uninsured motorist. The policy contained the required minimum uninsured-motorist coverage of $10,000.

Barnhill brought this suit for a declaratory judgment permitting him to stack the four coverages, so that he could recover up to $40,000 to apply to his damages. The circuit court held that the policy did not allow stacking, but the Court of Appeals reversed. Barnhill v. Farm Bureau Mutual Ins. Co., 12 Ark. App. 123, 671 S.W.2d 233 (1984). We granted the insurer’s petition for review to be certain that the reversal was not contrary to our holding in M.F.A. Mutual Ins. Co. v. Wallace, 245 Ark. 230, 431 S.W. 2d 742 (1968). We agree with the Court of Appeals.

The significant difference between the other-insurance clauses in the two cases is that in M.F.A. Mutual the clause referred specifically to other insurance issued by the same company, the language being as follows:

With respect to any occurrence ... to which this and any other automobile insurance policy issued to the named insurer or spouse by the Company [our italics] also applies, the total limit of the Company’s liability under all such policies shall not exceed the highest applicable limit. . . under any one policy.

We did say that the statute was not designed to provide greater protection than would have been available had the insured been injured by an operator with a policy containing the minimum $10,000 statutory limit, but that reasoning does not preclude an insurance company from selling more than the minimum protection if it chooses to do so.

That is the situation here, the other-insurance clause reading as follows:

[I]f the Insured has other similar insurance available to him and applicable to the accident, the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the Company shall not be liable for a greater proportion of any loss to which this coverage applies than the limit of liability hereunder bears to the sum of the applicable limits of liability of this insurance and such other insurance.

Farm Bureau argues that although it charged a separate premium for each of the four vehicles covered by the policy, and although the terms of the policy were to apply separately to each vehicle, the quoted other-insurance clause precludes Barnhill from stacking the coverages that would otherwise exist.

We cannot agree. The other-insurance clause is undoubtedly ambiguous. That is, the holder of a policy such as this one could not be expected to realize that the reference to the limits of liability “of this insurance and such other insurance” includes not only a policy issued by a different company but also the very policy he was reading, so that its multiple coverage would be “other” insurance. Certainly the policy does not state in plain terms the meaning that the company would have us give to it. There being an ambiguity, the doubt must be resolved in favor of the insured.

The question now presented has already been decided by two federal judges who were endeavoring to apply the law of Arkansas. Dugal v. Commercial Standard Ins. Co., 456 F. Supp. 290 (W.D. Ark., 1978); Woolston v. State Farm Mutual Ins. Co., 306 F. Supp. 738 (W.D. Ark., 1969). Woolston involved another Farm Bureau other-insurance clause identical to the one now before us. Both federal judges distinguished our holding in the Wallace case in the same way we have done and decided the issue in favor of the insured. We agree with those decisions, which have been fairly interpreted in a recent Survey of Arkansas Law, 3 UALR L. J. 145, 244 (1980):

After Dugal it is clear that both the Arkansas Supreme Court and the federal courts sitting in Arkansas will construe the “other insurance” clause to include the stacking of damage awards from more than one insurer. In order to be certain that the clause will also apply to other policies issued by the same company, the insurers must clearly define the term “other insurance” to include other insurance provided by the same company. Careful drafting will prevent stacking of policies issued to one insured by one company.

The other matters argued by Farm Bureau have been fully answered by the Court of Appeals and need not be re-examined.

Affirmed.

Purtle, J., dissents.