Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co., A7902-00958

• Decision Date: 11 April 1984
• Docket Number: No. A7902-00958,A7902-00958
• Citation: 679 P.2d 879,67 Or.App. 623
• Parties: ALLSTATE INSURANCE COMPANY, an Illinois corporation, Appellant-Cross-Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Rebecca Maples, Rebecca D. Hass, Nancy Moore, Respondents, and George E. Wilson, Ruth L. Wilson, Kermit C. Wilson, Respondents-Cross-Appellants. ; CA A24182.
• Court: Oregon Court of Appeals

Page 879

679 P.2d 879

67 Or.App. 623

ALLSTATE INSURANCE COMPANY, an Illinois corporation Appellant-Cross-Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Rebecca Maples, Rebecca D. Hass Nancy Moore, Respondents and George E. Wilson, Ruth L. Wilson, Kermit C. Wilson Respondents-Cross-Appellants.

No. A7902-00958; CA A24182.

Court of Appeals of Oregon.

Argued and Submitted July 20, 1983.

Decided April 11, 1984.

Frank M. Parisi, Portland, argued the cause for appellant-cross-respondent. With him on the briefs were James H. Clarke, Robert E. Maloney, Jr., and Spears, Lubersky, Campbell, Bledsoe, Anderson & Young, Portland.

Thomas Sauberli, Portland, argued the cause for respondents State Farm, Maples, Hass and Moore. With him on the brief was Vergeer, Roehr & Sweek, Portland.

Gordon W. Stewart, Madras, argued the cause for respondents-cross-appellants Wilson. With him on the briefs was Shepard & Stewart, Madras.

Before BUTTLER, P.J., and WARREN and ROSSMAN, JJ.

WARREN, Judge.

Allstate Insurance Company (Allstate) appeals from a judgment entered by the trial court, finding liability coverage for Kermit Wilson under a policy issued by Allstate to his parents Ruth and George Wilson. The Wilsons cross-appeal from the trial court's finding of no collision coverage in the same judgment. We affirm on the appeal and reverse on the cross-appeal.

Allstate issued a policy to Ruth and George Wilson, the named insureds, in 1974. The policy, set out in relevant part in the margin, ¹ covered several automobiles, including a 1975 Datsun pickup jointly owned by George and Kermit. At the time the policy was issued, Kermit lived with the named insureds.

In July, 1976, Kermit permanently moved out of the named insureds' household. Two years later, he signed a contract with an auto dealership to trade in the 1975 Datsun pickup for a 1978 Chevrolet pickup. Because he could not purchase the Chevrolet without a loan and he could not get a loan without insurance, Kermit contacted an Allstate agent. Because Kermit had a poor driving record, the agent declined to write him a policy of his own, but when Kermit produced an insurance card identifying his father as a named insured and told the agent the Chevrolet was going to replace the 1975 Datsun pickup listed on the policy, the agent completed and sent in the appropriate change request form. The agent later confirmed coverage with the auto dealership, and the dealership in turn verified coverage with GMAC, which financed the loan. Less than a month later, Kermit had an accident in the Chevrolet, injuring Maples, Hass and Moore.

Allstate brought this action for reformation or rescission of the change request and a declaration that Kermit was not covered under his parents' policy. It named as defendants Ruth, George and Kermit Wilson, Maples, Hass and Moore, as well as State Farm Mutual Automobile Company, which provides personal injury protection and uninsured motorist coverage for Maples, Hass and Moore. All defendants entered a general denial, and the Wilsons alleged affirmatively waiver and estoppel and counterclaimed for collision damages and attorney fees.

The trial court entered judgment, declaring that the policy issued to George and Ruth Wilson covers any liability of Kermit to persons injured in the accident and dismissing Allstate's rescission and reformation counts and defendants Wilsons' counterclaim for collision coverage. Because the court found coverage under the policy, defendants' affirmative claims for coverage by reason of waiver or estoppel were declared moot.

Allstate claims that the trial court erred in concluding that Kermit was covered under the Wilsons' policy, because the vehicle was an "owned vehicle." We conclude as a matter of law that Kermit could not have been covered under the terms of the Wilsons' policy. He was not a named insured or a resident relative of the named insureds' household. The Chevrolet was not an "owned" or "replacement" automobile; and there was no collision coverage, because the named insureds had no ownership interest in it. When the terms of an insurance policy are not ambiguous, we apply those terms and will not create coverage where none was intended by the contract. See Western Fire Insurance Co. v. Wallis, 289 Or. 303, 308, 613 P.2d 36 (1980).

In the alternative, the Wilsons assert that Allstate is estopped ² by its representations from denying Kermit liability and collision coverage and that the trial court erred in concluding that the estoppel issue was moot. ³ The Wilsons' claim of estoppel was considered in the trial to the court as an "equitable proceeding" and submitted to an advisory jury which rendered a verdict on the claim in favor of the Wilsons. Because estoppel is equitable in nature, we review this assignment of error de novo.

An insurer may be estopped from denying coverage when the party claiming coverage has acted in reasonable reliance on an agent's representation of coverage that is not patently absurd. Farley v. United Pacific Ins. Co., 269 Or. 549, 525 P.2d 1003 (1974), where the agent represented that an insurance policy would provide specific coverage, although the policy itself did not provide the desired coverage. The court concluded that the insured was entitled to rely on the agent's representation and that the insurance company was estopped from asserting a contrary interpretation of the policy.

In this case, the insurance agent accepted the change request form and confirmed coverage to the dealer in the usual manner. The parties disagree whether the agent told Kermit that a named insured must be co-owner of the Chevrolet for there to be coverage under the terms of the policy. Although neither of Kermit's parents was on the title to the new Chevrolet, the trial court...