Allstate Ins. Co. v. Shelby Mut. Ins. Co., 700

• Decision Date: 03 February 1967
• Docket Number: No. 700,700
• Citation: 152 S.E.2d 436,269 N.C. 341
• Parties: ALLSTATE INSURANCE COMPANY, v. SHELBY MUTUAL INSURANCE COMPANY, Concord Motors, Inc., Ruby Cleo Widenhouse,Ray W. Widenhouse and David Elroy Clontz and R. B. Clontz.
• Court: North Carolina Supreme Court

Page 436

152 S.E.2d 436

269 N.C. 341

ALLSTATE INSURANCE COMPANY, v. SHELBY MUTUAL INSURANCE COMPANY, Concord Motors, Inc., Ruby Cleo Widenhouse,Ray W. Widenhouse and David Elroy Clontz and R. B. Clontz.

No. 700.

Supreme Court of North Carolina.

Feb. 3, 1967.

Smith, Moore, Smith, Schell & Hunter, Greensboro, for plaintiff Allstate Ins. Co.

Jordan, Wright, Henson & Nichols, by Charles E. Nichols and Edward Murrelle Greensboro, for defendants Shelby Mutual Ins. Co. and Concord Motors, Inc.

LAKE, Justice.

The nature and extent of the liability of an automobile liability insurance company depends upon the proper construction of the terms of its policy. The policy is a contract between the parties thereto and must be construed so as to carry out their intent, except insofar as a statute or an authorized administrative regulation or order requires a different construction. Rodman, J., speaking for the Court in Muncie v. Insurance Co., 253 N.C. 74, 116 S.E.2d 474, said:

'Freedom of contract, unless contrary to public policy or prohibited by statute, is a fundamental right included in our constitutional guaranties. * * * Since the contractual provision is, as related to the facts of this case, a valid one, the parties are entitled to have it enforced as written. We cannot ignore any part of the contract.'

It is well settled that, in the construction of a policy of insurance, ambiguous provisions will be given the meaning most favorable to the insured. Exclusions from and exceptions to undertakings by the company are not favored. Jamestown Mutual Insurance Co. v. Nationwide Mutual Insurance Co., 266 N.C. 430, 146 S.E.2d 410; Anderson v. Allstate Insurance Co., 266 N.C. 309, 145 S.E.2d 845. Nevertheless, it is the duty of the court to construe an insurance policy as it is written, not to rewrite it and thus make a new contract for the parties. Hardin v. American Mutual Fire Insurance Co., 261 N.C. 67, 134 S.E.2d 142; Richardson v. Liberty Life Insurance Co., 254 N.C. 711, 119 S.E.2d 871, 87 A.L.R.2d 475; Pruitt v. Great American Insurance Co., 241 N.C. 725, 86 S.E.2d 401.

The terms of another contract between different parties cannot affect the proper construction of the provisions of an insurance policy. The existence of the second contract, whether an insurance policy or otherwise, may or may not be an event which sets in operation or shuts off the liability of the insurance company under its own policy. Whether it does or does not have such effect, first requires the construction of the policy to determine what event will set in operation or shut off the company's liability and, second, requires a construction of the other contract, or policy, to determine whether it constitutes such an event. A provision in a policy of insurance is not rendered invalid by the presence of a 'repugnant' provision in another policy of insurance issued by a different company to a different policyholder, but the other policy, by reason of its own terms, properly construed, may fall outside the class of events which the first policy declares to be exclusions from or limitations upon the liability of the company issuing the first policy.

In Hawley v. Indemnity Insurance Co., 257 N.C. 381, 126 S.E.2d 161, Moore, J., speaking for the Court, said:

'An insurance policy is a contract between the parties, and the intention of the parties is the controlling guide in its interpretation. It is to be construed and enforced in accordance with its terms insofar as they are not in conflict with pertinent statutes and court decisions.'

In the present case we have two policies of liability insurance issued by different companies to different policyholders. The liability of each company must be determined by the terms of its own policy, subject to such modification as may be imposed by statute or by authorized administrative regulation or order. It is clear that each policy would provide coverage to Mrs. Widenhouse against liability upon the claim of David Elroy Clontz had the other policy not been in existence.

The principal questions to be determined on this appeal are: (1) Is the existence of the Allstate policy an event which brings into operation the exclusionary clause of the Shelby Mutual policy? (2) Is the existence of the Shelby Mutual policy an event which brings into operation the provision of the Allstate policy deferring liability of Allstate? (3) Does the fact that Mrs. Widenhouse was driving an automobile, owned by a dealer, for the purpose of deciding whether to buy it, constitute an event which brings into operation the exclusionary provision of the Allstate policy relating to a non-owned automobile used by the insured 'in the automobile business'?

We turn to the last question first since, if it be answered as Allstate contends it should be, that will determine the answer to question No. 1, and make it unnecessary to answer question No. 2.

There is no liability upon Allstate, under the terms of its policy, if, at the time of the injury to the Clontz boy, Mrs. Widenhouse was driving this automobile 'in the automobile business'; that is, in 'the business or occupation of selling * * * automobiles.' Under the rule above stated, this exclusionary clause in the Allstate policy must be construed in favor of the insured; that is, in favor of the existence of coverage for Mrs. Widenhouse, if this is a reasonable interpretation of the language used in the policy.

It will be observed that the operation of this exclusionary clause in the Allstate policy is not contingent upon the existence of any other insurance covering Mrs. Widenhouse while so driving this automobile. Thus, if it be construed as Allstate contends, the holder of such an Allstate policy test drives the vehicle of a dealer at his peril. Unless the dealer has a policy of insurance in effect and covering the prospective customer so driving the automobile to the full extent of the coverage specified in the driver's own policy, the driver is wholly or partially uninsured while so driving.

We dealt with this problem in Jamestown Mutual Insurance Co. v. Nationwide Mutual Insurance Co., 266 N.C. 430, 146 S.E.2d 410. There we said: 'It would be a strained construction of the phrase 'used in the automobile business' to apply it to a prospective purchaser of a vehicle who is 'trying it out' to see if he likes it.' Accordingly, we there held that this exclusionary clause is not brought into operation by the fact that a prospective purchaser of an automobile, owned by a dealer, is driving it with the dealer's permission, to see if he wishes to purchase it, neither the dealer nor any of his representatives being present. We reaffirm that decision.

Consequently, the Allstate policy does afford some coverage to Mrs. Widenhouse against the claim of the Clontz boy for his injuries. We come, therefore, to the question of whether its liability is affected by the existence of the Shelby Mutual policy, which, in turn, depends upon whether the existence of the Allstate policy is an event bringing into play the exclusionary clause of the Shelby Mutual policy. We first turn to the construction of the Shelby Mutual policy, irrespective of the provisions of the North Carolina Financial Responsibility Law, G.S. § 20--279.1 et seq., and without regard to regulations of the North Carolina Department of Motor Vehicles.

There is no uniformity among the decisions of other courts upon this and closely related questions, but much of the apparent lack of harmony in these decisions disappears upon a careful analysis of the factual situations presented to those courts. Few of the decisions from other jurisdictions involved policies containing the exact language in the two policies now before us. The answers to the questions now before us depend upon the constructions to be placed upon the language in these policies. Decisions from other jurisdictions as to the meaning and effect to be given to policies containing different language are helpful only insofar as they outline or point to broad, general principles to be applied in the construction of exclusionary or limiting provisions of policies of automobile liability insurance.

In the frequently cited case of Oregon Auto. Ins. Co. v. United States Fidelity & Guar. Co., 9 Cir., 195 F.2d 958, the court had before it two policies not precisely like those now before us. There, the policy issued to the driver provided that, as to a claim arising out of his use of an automobile other than the one specified, it would be 'excess' insurance over and above 'other valid and collectible insurance.' The policy issued to the car owner provided that it did not insure one other than the named insured if he had 'other valid and collectible insurance.' The court said, 'It is plain that if the provisions of both policies were given full effect, neither insurer would be liable.' This result, the court rejected.

We, likewise, reject such a result in the present case. To do so, it is not necessary to hold that the law requires one or both companies to be liable, and forbids the use of language in the respective policies which would relieve both from liability. In the present case, it is sufficient to state that it was clearly not the intent of the parties to the Shelby Mutual policy, or of the parties to the Allstate policy, that Mrs. Widenhouse would be an uninsured motorist while driving the automobile in question. The language used is not fairly susceptible to that interpretation. The Shelby Mutual policy was intended by its parties to provide coverage to Mrs. Widenhouse while driving the automobile, unless the event named therein occurred; that is, unless there was in effect a policy of another insurer of a type described in the Shelby Mutual policy. Similarly, the Allstate policy was intended by the parties thereto to provide primary coverage to Mrs. Widenhouse while driving this automobile, unless there was in effect the policy of another insurer of the...