Western Heritage Ins. Co. v. Chava Trucking, Inc.

• Decision Date: 19 April 1993
• Docket Number: No. 91-2199,91-2199
• Citation: 991 F.2d 651
• Parties: WESTERN HERITAGE INSURANCE COMPANY, Plaintiff-Appellant, v. CHAVA TRUCKING, INC., also known as Chava & Co.; Salvador Guzman doing business as Chava Trucking, Defendants-Appellees, and Raymond Pacheco, Personal Representative of the Estates of George J. Pacheco and Lorraine K. Pacheco; Ron Casaus and Julie Lopez, individually and as next friends of, Andre Lopez, a minor; Jesse Lopez, as next friend of Michael Murdock a minor, Defendants-Intervenors.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 651

991 F.2d 651

WESTERN HERITAGE INSURANCE COMPANY, Plaintiff-Appellant, v. CHAVA TRUCKING, INC., also known as Chava & Co.; Salvador

Guzman doing business as Chava Trucking,

Defendants-Appellees,

and

Raymond Pacheco, Personal Representative of the Estates of

George J. Pacheco and Lorraine K. Pacheco; Ron Casaus and

Julie Lopez, individually and as next friends of, Andre

Lopez, a minor; Jesse Lopez, as next friend of Michael

Murdock a minor, Defendants-Intervenors.

No. 91-2199.

United States Court of Appeals, Tenth Circuit.

April 19, 1993.

Raymond J. Connell (Geoffrey D. Rieder and George R. McFall, of Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, NM, were with him on the briefs) (Richard Hall, of Hall & Evans, Denver, CO, on appellant's brief), of The Connell Law Firm, Denver, CO, for plaintiff-appellant.

Mark C. Dow (Howard R. Thomas and Ruth Musgrave of Hinkle, Cox, Eaton, Coffield & Hensley, Albuquerque, NM; David M. Berlin, of Duhigg, Cronin & Spring, Albuquerque, NM, and Fred M. Calkins, Jr., Albuquerque, NM, were with him on the brief), of Hinkle, Cox, Eaton, Coffield & Hensley, Albuquerque, NM, for defendants-intervenors-appellees.

Before ANDERSON, BARRETT, and TACHA, Circuit Judges.

TACHA, Circuit Judge.

In this declaratory judgment action, Plaintiff-Appellant Western Heritage Insurance Company ("Western Heritage") appeals an order declaring on motion for summary judgment that (1) an insurance policy issued by Western Heritage to Defendant-Appellee Salvador Guzman d/b/a Chava Trucking ("Chava") provided coverage for Chava's liability regarding an auto-truck accident involving one of Chava's trucks; and (2) Western Heritage breached its duty to defend Chava in the underlying state court action. We exercise jurisdiction under 28 U.S.C. § 1291 and affirm.

I. Background

On February 19, 1989, a vehicle owned by Chava and driven by Chava employee Salvador Campos was involved in an accident ("the accident") which killed George J. and Lorraine K. Pacheco ("the Pachecos") and injured Ronnie Casaus, Julie Lopez, Andre Lopez, and Michael Murdoch. On June 2, 1989, Raymond Pacheco, the personal representative of the Pachecos's Estates, filed a wrongful death suit against Chava and its sole proprietor, Salvador Guzman, in the District Court of Bernalillo County, New Mexico. The amended complaint stated three causes of action: (1) wrongful death as the result of Campos's allegedly negligent operation of the truck (2) wrongful death per se on the basis of Chava's alleged violations of various statutes and regulations; and (3) negligent entrustment.

After the Pacheco state court action was filed, several of the injured individuals and their representatives (the "Lopez Intervenors") moved to intervene. ¹ The Lopez Intervenors subsequently filed a complaint substantially repeating the Pachecos's allegations and alleging that Chava negligently placed a defective vehicle on the road.

On December 11, 1989, Chava sent a letter to Western Heritage demanding that it defend Chava on the negligent entrustment count as a result of Liability Policy No. CLPOO37479 ("the policy") issued by Western Heritage to Chava. Western Heritage denied coverage on March 6, 1990 and brought this declaratory judgment action on March 13, 1990, seeking a declaration that the policy provided no coverage for Chava's liability for the accident. ² Chava counterclaimed, asking the court to declare that Western Heritage had breached its duty to indemnify and defend Chava under the policy. Raymond Pacheco and the Lopez Intervenors intervened as defendants in the declaratory judgment action and also counterclaimed, joining Chava in seeking a declaration that Western Heritage owed Chava coverage for the accident.

On cross-motions for summary judgment, the district court held: (1) the policy provided coverage for the driver's negligence leading to the accident; (2) the policy did not provide coverage for claims made directly against Chava, such as for negligent entrustment or for negligence per se based on violation of statute or regulation; and (3) Western Heritage had a duty to defend Chava in the state court action and had breached that duty. On appeal, Western Heritage argues that the district court erred in declaring that coverage existed for the driver's negligence and in declaring that Western Heritage had a duty to defend. Western Heritage also argues that summary judgment was improper because there exist genuine issues of material fact.

II. Standard of Review

We review a trial court's grant or denial of summary judgment de novo, applying the same standards used by the district court. Osgood v. State Farm Mutual Auto. Ins. Co., 848 F.2d 141, 143 (10th Cir.1988). Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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." Fed.R.Civ.P. 56(c). "When applying this standard, we examine the factual record and reasonable inferences therefrom in the light most favorable to the party opposing summary judgment." Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir.1990). In this diversity case, we ascertain and apply New Mexico law such that we reach the result that would be reached by a New Mexico court. See Adams-Arapahoe Sch. Dist. No. 28-J v. GAF Corp., 959 F.2d 868, 870 (10th Cir.1992). We review de novo the district court's rulings with respect to New Mexico law. See Salve Regina College v. Russell, 499 U.S. 225, ----, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991).

III. Policy Coverage

Western Heritage issued the policy to Chava for the period June 20, 1988 to June 20, 1989. The policy as originally issued provided coverage for property damage and bodily injury in connection with Chava's operations. The original policy specifically limited coverage to "[w]recking-dismantling of buildings not exceeding 3 stories in height" and expressly denied coverage caused by unenumerated hazards. ³ The policy also contained the following automobile exclusion:

This insurance does not apply ... (b) to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of

(1) any automobile or aircraft owned or operated by or rented or loaned to any insured, or

(2) any other automobile or aircraft operated by any person in the course of his employment by any insured

....

On October 31, 1988, the policy was amended by Endorsement No. 1, adding coverage for "Excavation" and "Truckmen." An undated Amended Coverage Part added the terms "Excavation 'XCU' " and "Truckmen incl. comp. ops." ⁴ to the description of hazards to be covered by the policy. Chava's total premium before tax for the added coverage was $15,852. Of that total, $15,318 was for Excavation coverage and $534 was for truckmen coverage. The district court concluded that the amended policy provided coverage for the accident under the truckmen provision. We agree.

"The obligation of the insurer is a question of contract law and will be determined by reference to the terms of the insurance policy." Knowles v. United Servs. Auto. Ass'n, 113 N.M. 703, 832 P.2d 394, 396 (1992). The court can construe an insurance policy only where the language of the policy is equivocal, indefinite, or ambiguous. Gamboa v. Allstate Ins. Co., 104 N.M. 756, 726 P.2d 1386, 1389 (1986). Whether an insurance policy is ambiguous is a question of law to be determined by the court. Richardson v. Farmers Ins. Co., 112 N.M. 73, 811 P.2d 571, 572 (1991). In determining whether an ambiguity exists, we consider the policy as a whole, Crawford Chevrolet, Inc. v. National Hole-in-One Ass'n, 113 N.M. 519, 828 P.2d 952, 953-54 (1992), and will find ambiguity only if the contract "is reasonably and fairly susceptible of different constructions," Levenson v. Mobley, 106 N.M. 399, 744 P.2d 174, 176 (1987). Where the contract is unambiguous, however, the court is bound to enforce the terms of the policy. Sanchez v. Herrera, 109 N.M. 155, 783 P.2d 465, 469 (1989).

We find that the only reasonable construction of the amended policy is that the truckmen endorsement provides coverage for acts of truckmen, including the driving of trucks. The policy does not define the term "truckmen." In determining whether an ambiguity exists, "words and terms must be read in the usual and ordinary sense, unless some different meaning is required." United Nuclear Corp. v. Mission Ins. Co., 97 N.M. 647, 642 P.2d 1106, 1109 (Ct.App.1982); see also Vihstadt v. Travelers Ins. Co., 103 N.M. 465, 709 P.2d 187, 188-89 (1985) (defining term "accident" in its usual, ordinary, and popular sense). Webster's Third New International Dictionary defines "truckman" as "one who conveys goods by truck: a truck driver." Webster's Third New International Dictionary 2454 (1981); cf. Federal Ins. Co. v. Century Fed. Sav. & Loan Ass'n, 113 N.M. 162, 824 P.2d 302, 306 (1992) (referring to Webster's Third New International Dictionary to define the term "verify"). While Western Heritage contends that it did not intend to add coverage for Chava's truck drivers, it cannot escape the usual and ordinary definition of the language of the policy: a truckman is a truck driver. Therefore, the only reasonable reading of the amended policy is that the truckmen endorsement provides coverage for the acts of truckmen, including the driving of trucks.

Western Heritage counters that the "clear intent" of the parties demonstrates that Chava did not purchase insurance for its trucks. Western Heritage points out that the insurance agent who issued the policy did not believe the endorsement added coverage, that Mr. Guzman stated in a deposition that he questioned whether the endorsement added coverage, and that the relatively small premium--$534--strongly suggested...