Markel Int'l Ins. Co. v. Erekson
| Decision Date | 11 June 2012 |
| Docket Number | No. 38336–2010.,38336–2010. |
| Citation | 153 Idaho 107,279 P.3d 93 |
| Court | Idaho Supreme Court |
| Parties | MARKEL INTERNATIONAL INS. CO., LTD, a corporation incorporated under the laws of England and Wales with principal place of business in London, England authorized to conduct business in surplus lines insurance in the state of Idaho, Plaintiff–Respondent–Cross Appellant, v. Jason Ezra EREKSON, as Personal Representative for the Estate of Thomas R. Erekson, Deceased, Defendant–Appellant–Cross Respondent, Elk Country Sports, Ltd Co., an Idaho Company, Defendant. |
Brent O. Roche ; Racine, Olson, Nye, Budge & Bailey, Chtd; Pocatello; argued for appellant.
Robert D. Williams, Coeur d'Alene, argued for respondent.
This is an appeal from a judgment holding that the Designated Project or Premises endorsement in a commercial general liability insurance policy purchased by a sporting goods store excluded coverage for a claim arising out of the sale of improperly reloaded ammunition. We affirm the judgment on the alternate ground that coverage was excluded under the Products–Completed Operations Hazard endorsement.
On May 31, 2007, Tom Erekson purchased from Elk Country Sports, Ltd. Co., a sporting goods store in Montpelier, a used Magnum Research BFR revolver chambered in .500 S & W Magnum. Along with the revolver, Mr. Erekson received various accessories that included three boxes of handloaded ammunition, all of which Elk Country Sports had purchased from the prior owner.
On June 11, 2007, Mr. Erekson and one of his sons went to a city-owned shooting range to shoot the revolver. Earlier in the day, he had obtained a key to the range from Elk Country Sports. Upon arriving at the range, Mr. Erekson loaded the five chambers in the cylinder with cartridges from a box of the reloaded ammunition. While using a two-handed hold, he cocked the hammer and fired the revolver. The cartridge aligned with the barrel discharged, and two cartridges to its right detonated simultaneously. When the cartridge under the loading gate detonated, it sheared off the loading gate, and a portion of the cartridge case rocketed rearward, striking Mr. Erekson in the forehead, penetrating his skull, and imbedding three inches into his brain. He also lost a portion of his left thumb.
The cause of the accident was the reloaded ammunition. With centerfire ammunition, there is a pocket in the center of the base of the cartridge case into which a primer is inserted. When the firing pin strikes the primer, it produces a flame within the cartridge case that ignites the powder. Cartridge cases for the .500 S & W Magnum were originally designed for use with large pistol primers, but some manufacturers later produced cases designed for use with large rifle primers. Because rifle primers are longer than pistol primers, inserting rifle primers in a case designed for pistol primers will result in the primer protruding above the case head (the base of the case). A protruding primer can be discovered by visual inspection or by running a finger across the case head. The cases that are designed for large rifle primers have an "R" on the headstamp on the case head to indicate that they are designed for rifle primers. The person who had reloaded the ammunition that Mr. Erekson obtained from Elk Country Sports had inserted rifle primers in cases designed for pistol primers. Upon firing the revolver, the recoil caused the base of the cartridge located to the immediate right of the fired cartridge to slam against the flat surface of the reloading gate, detonating the cartridge due to the protruding primer. The .500 S & W Magnum is a high pressure cartridge, and the loading gate was not strong enough to contain the rearward thrust of the case. As a result, the loading gate was sheared off and a portion of the case head rocketed rearward, striking Mr. Erekson in the forehead.
Elk Country Sports had a policy of commercial general liability insurance issued by Markel International Ins. Co., Ltd., which brought this action seeking a declaratory judgment that the policy did not provide coverage for Mr. Erekson's injuries and damages. Markel International moved for summary judgment, contending that coverage was excluded pursuant to three endorsements attached to the insurance policy. For simplicity, they will be referred to as the "Designated Premises or Project Endorsement," the "Firearms Exclusion," and the "Products–Completed Operations Hazard Endorsement." The district court held that the Designated Premises or Project Endorsement excluded coverage and granted the motion for summary judgment.
Mr. Erekson moved for reconsideration, asking the court to also rule on the other two endorsements in the event there is an appeal from its ruling. The court held that the Firearms Exclusion was ambiguous and that the Product–Completed Operations Hazard Endorsement clearly did not exclude coverage. It reaffirmed its holding that coverage was excluded under the Designated Premises or Project Endorsement.
On October 26, 2010, the court entered a declaratory judgment holding that there was no coverage under the policy for the injuries or damages suffered by Mr. Erekson. During the proceedings, Mr. Erekson passed away, and his estate was substituted for him as a party. The estate appealed the court's ruling on summary judgment, and Markel International cross-appealed the court's ruling on the motion for reconsideration.
Whether a provision in an insurance policy is ambiguous is a question of law over which this Court exercises free review. Purdy v. Farmers Ins. Co. of Idaho, 138 Idaho 443, 445, 65 P.3d 184, 186 (2003). A provision is ambiguous if it is reasonably subject to differing interpretations. Id. If the provision is unambiguous, coverage must be determined in accordance with the plain meaning of the words used. Potlatch Grain and Seed v. Millers Mut. Fire Ins. Co., 138 Idaho 54, 58, 57 P.3d 765, 769 (2002).
The insurance policy includes a Designated Premises or Project Endorsement that provides as follows:
This Insurance applies only to "bodily injury", "property damage", "personal and advertising injury" and medical expenses arising out of: 1. The ownership, maintenance or use of the premises shown in the Schedule and operations necessary or incidental to those premises; or 2. The project shown in the Schedule.
The endorsement includes a Schedule stating that the premises were "407 Washington St., Montpelier, ID 83254" and the project was "Sporting Goods Store."
In holding that this endorsement excludes coverage, the district court wrote, "The Court plainly sees the policy in this case as a premises liability policy which limits liability to activities and conduct related [to] the premises, not the business." In so holding, the court erred. In reaching its decision, the district court construed the premises and the project as being identical. That is contrary to the clear wording of the endorsement, especially when construed in the context of the entire policy.
The declaration page of the policy states that Elk Country Sports, Ltd. Co., purchased insurance that provided "Commercial General Liability" coverage and "Commercial Property" coverage, with separate amounts charged as premiums for each coverage.
The Commercial General Liability portion of the policy states, "We will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ ... to which this insurance applies."1
For a limited liability company such as Elk Country Sports, an insured also includes its members, "but only with respect to the conduct of your business"; its managers, "but only with respect to their duties as your managers"; and its employees, "but only for acts within the scope of their employment by you or while performing duties related to the conduct of your business." In the policy, the words "you" and "your" refer to the named insured, Elk Country Sports. Thus, the policy provides coverage to Elk Country Sports for the actions of its members with respect to the conduct of the business, for the conduct of its managers with respect to their duties as managers in the business, and for the conduct of its employees acting within the scope of their employment while performing duties related to the conduct of the business.
The Designated Premises or Project Endorsement states that the policy applies only to bodily injury The word "or" between the two numbered phrases is "[a] disjunctive particle used to express an alternative or to give a choice of one among two or more things." Frasier v. Frasier, 87 Idaho 510, 514, 394 P.2d 294, 296 (1964) (quoting Black's Law Dictionary (4th ed. 1957)). Thus, the policy covers bodily injury arising out of either the "ownership, maintenance or use of the premises" or the "project." The use of the disjunctive shows that the premises and the project do not mean the same thing. Otherwise, there would be no need for the disjunctive. Likewise, the two phrases are in the disjunctive, not conjunctive. For there to be coverage for bodily injury arising out of the project, the bodily injury need not also arise out of the ownership, maintenance or use of the premises.
The word "project" is not defined other than as stated in the endorsement, which is "Sporting Goods Store." The only reasonable construction of the endorsement is that the Sporting Goods Store is the business conducted on the premises. Thus, this endorsement provides coverage for bodily injuries that arise out of the business, which is a sporting goods store. The allegation in this case is that Elk Country Sports was negligent in...
To continue reading
Request your trial