Farmers Alliance Mut. Ins. Co. v. Bakke, 79-1981

CourtUnited States Courts of Appeals. United States Court of Appeals (10th Circuit)
Citation619 F.2d 885
Docket NumberNo. 79-1981,79-1981
PartiesFARMERS ALLIANCE MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, v. Mary BAKKE, Johnny Bakke, Jo Lynn Wood, Karla Vigil and Lawrence Vigil, Defendants-Appellants.
Decision Date30 April 1980

Stephen M. Williams of Shaffer, Butt, Thornton & Baehr, P. C., Albuquerque, N. M., for plaintiff-appellee.

Paul S. Cronin of Duhigg & Cronin, Albuquerque, N. M., for defendants-appellants Mary Bakke and Johnny Bakke.

Mark Klecan of Klecan & Roach, P. A., Albuquerque, N. M., for defendants-appellants Karla Vigil and Lawrence Vigil.

Before BARRETT, DOYLE and McKAY, Circuit Judges.

BARRETT, Circuit Judge.

After examining the briefs and the appellate record, this three-judge panel has determined unanimously that oral argument would not be of material assistance in the determination of this appeal. See: Fed.R.App.P. 34(a); Tenth Circuit R. 10(e). The cause is therefore ordered submitted without oral argument.

Mary Bakke, Johnny Bakke, Jo Lynn Wood, Karla Vigil, and Lawrence Vigil (appellants) appeal from summary judgment granted to Farmers Alliance Mutual Insurance Company (Farmers) in an action commenced pursuant to the Federal Declaratory Judgments Act, 28 U.S.C. §§ 2201-2202.

The facts are not in dispute. Farmers issued an insurance policy to Mary Bakke covering a 1973 Honda CL 350 motorcycle for the period November 18, 1975 through November 18, 1976. On February 26, 1976, during the policy period, Jo Lynn Wood sustained personal injuries resulting from an intersection collision between the insured motorcycle, on which she was a passenger, and an automobile driven by Karla Vigil, and owned by Lawrence Vigil.

Wood filed an action in state court against the Vigils alleging that Karla Vigil's negligent operation of the automobile caused the accident. The Vigils answered, and set up a third-party complaint for indemnity and/or contribution against Johnny A. Bakke. The third-party complaint alleged that Johnny A. Bakke was the driver of the motorcycle involved in the collision; Johnny Bakke's negligent operation of the motorcycle proximately caused injuries to Jo Lynn Wood; and, as a result thereof, the Vigils were entitled to indemnity and/or contribution for any damages awarded Wood on her complaint.

Following service of the third-party complaint, Farmers (the insuror of Mary Bakke, Johnny's mother) filed this action for declaratory relief seeking a judgment that it need not indemnify or defend Johnny A. Bakke as to any claims arising out of the February 26, 1976 accident in which Wood was injured.

On an agreed statement of facts, Farmers filed a motion for summary judgment relying on the following provisions of the insurance contract issued to Mary Bakke:

Coverage A Bodily Injury Liability; Coverage B Property Damage Liability. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

A. bodily injury, sickness or disease, including death resulting therefrom, hereinafter called "bodily injury," sustained by any person;

B. injury to or destruction of property, including loss of use thereof, hereinafter called "property damage";

caused by accident and arising out of the ownership, maintenance or use of the owned motorcycle and the company shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; . . .

Persons Insured.

(a) with respect to the insurance for bodily injury liability and for property damage liability, the unqualified word "insured" includes the named insured and if the named insured is an individual, his spouse if a resident of the same household, and

(b) any other person using or legally responsible for the use of an insured vehicle covered by this policy with the permission of the named insured, only if such other person (1) has no liability insurance of his (her) own, either primary or excess, or (2) is not included in "Persons Insured" or "Definitions of Insured" in any other liability insurance policy, either primary or excess.

Exclusions. This policy does not apply under Part 1:

(c) to bodily injury to any person while on or getting on or alighting from the insured vehicle;

(R., Vol. I, p. 5).

Appellants vigorously contested Farmers' motion for summary judgment contending that: (1) the exclusionary provisions quoted do not apply under the factual situation presented; (2) exclusion of passengers under the insuring agreement is repugnant to the public policy of the State of New Mexico; and (3) enforcement of the exclusionary provisions triggers uninsured motorist coverage under the insuring agreement and the statutes of the State of New Mexico.

Following extensive briefing by the parties, the District Court ruled:

The policy states in large red capital type on the declaration page that it does not apply to bodily injury to riders and in the Exclusion (c) that the policy does not apply to bodily injury to any person while on or getting on or alighting from the insured vehicle. Inasmuch as the allegation of the complaint and the third-party complaint show clearly that Jo Lynn Wood was a passenger on the motorcycle and as such specifically exempted from coverage by the policy there is no duty to defend on the part of the plaintiff there being no assertion of a claim within the terms of the policy.

There is some contention raised by defendants of applicability of the New Mexico Financial Responsibility Act which I find are not tenable.

Therefore, summary judgment is granted to the plaintiffs.

(R., Vol. I, p. 49).

Thus, the sole issue on appeal is whether the District Court erred in granting summary judgment to Farmers Alliance Mutual Insurance Company.

Exclusionary Provisions

It is axiomatic that the substantive law of the State of New Mexico applies with respect to the issues involved in this federal declaratory relief action predicated upon complete diversity of citizenship, and requisite amount in controversy. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Farmers Insurance Co., Inc. v. McClain, 603 F.2d 821 (10th Cir. 1979). Unfortunately, the New Mexico Supreme Court has not ruled on the issues presented. Accordingly, our decision on the substantive law issues presented must be predicated on our interpretation of how the Supreme Court of New Mexico would construe the law if faced with similar facts and issues. City of Aurora, Colorado v. Bechtel Corp., 599 F.2d 382 (10th Cir. 1979). This requires us to consider all resources available, including decisions of other states, New Mexico and federal decisions, and the general weight and trend of authority. Burgert v. Tietjens, 499 F.2d 1 (10th Cir. 1974). The resident District Court's views on this question of New Mexico law, of course, carry extraordinary force on this appeal because there are no controlling state decisions providing clear precedent. Rasmussen Drilling, Inc. v. Kerr-McGee Nuclear Corp., 571 F.2d 1144 (10th Cir. 1978), cert. denied, 439 U.S. 862, 99 S.Ct. 183, 58 L.Ed.2d 171 (1978).

In New Mexico, the "obligation of a liability insuror is contractual and is to be determined by the terms of the policy". Safeco Insurance Co. of America, Inc. v. McKenna, 90 N.M. 516, 565 P.2d 1033, 1037 (1977). The insuring agreement must be construed to effect the intent of the parties. Cain v. National Old Line Insurance Co., 85 N.M. 697, 516 P.2d 668 (1973). Whenever possible, "the meaning of the contract must be ascertained from a consideration of the written policy itself. Extrinsic evidence is not admissible to determine the intent of the parties unless there is an uncertainty and ambiguity in the contract." Atlas Assurance Co., Lt'd. v. General Builders, Inc., 93 N.M. 398, 600 P.2d 850, 852 (1979).

Exclusionary provisions in insuring agreements are enforceable so long as their meaning is clear and they do not conflict "with the express language of a statute (or) . . . with the legislative intent, absent explicit statutory expression." Chavez v. State Farm Mutual Automobile Insurance Co., 87 N.M. 327, 533 P.2d 100, 102 (1975). If an ambiguity appears, however, its construction should be resolved in favor of the insured. Mountain States Mutual Casualty Co. v. Northeastern New Mexico Fair Assoc., 84 N.M. 779, 508 P.2d 588 (1973). Thus, ambiguities in coverage are construed to afford coverage, Read v. Western Farm Bureau Mutual Insurance Co., 90 N.M. 369, 563 P.2d 1162 (1977), while unclear exclusionary provisions are construed narrowly so as to avoid non-coverage. King v. Travelers Insurance Co., 84 N.M. 550, 505 P.2d 1226 (1973).

The "Declarations" page of the insuring agreement provides in large, visible red-type "THIS POLICY DOES NOT APPLY TO BODILY INJURY TO RIDERS." (R., Vol. I, p. 4). The insuring agreement itself excludes "bodily injury to any person while on or getting on or alighting from the insured vehicle." (R., Vol. I, p. 5). The exclusionary provisions are clear and unambiguous. Moreover, they are highly visible and calculated to afford adequate notice to any purchaser. Inasmuch as it is uncontested that Jo Lynn Wood was a passenger on the Bakke vehicle, the exclusionary provisions apply. Based upon our consideration of the provisions contained in the four corners of the contract, we hold that Farmers has no duty to defend or indemnify Mary Bakke or Johnny A. Bakke in any action seeking damages as a result of the subject collision. This court "will not make a contract of insurance, but will only enforce the intent of the parties as manifested by the writing." Horn v. Lawyers Title Insurance Corp., 89 N.M. 709, 557 P.2d 206, 208 (1976).

Public Policy Considerations

In determining whether the exclusionary clause is repugnant to the public policy of the State of New...

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