Armstrong v. Farmers Ins. Co. of Idaho

• Decision Date: 02 April 2009
• Docket Number: No. 34250.,34250.
• Citation: 205 P.3d 1203,147 Idaho 67
• Parties: Brian ARMSTRONG and Glenda Armstrong, husband and wife, Plaintiffs/Appellants, v. FARMERS INSURANCE COMPANY OF IDAHO, an Idaho Corporation; Corporate Does I-X, whose true names are unknown, Defendants/Respondents.
• Court: Idaho Supreme Court

205 P.3d 1203

147 Idaho 67

Brian ARMSTRONG and Glenda Armstrong, husband and wife, Plaintiffs/Appellants, v. FARMERS INSURANCE COMPANY OF IDAHO, an Idaho Corporation; Corporate Does I-X, whose true names are unknown, Defendants/Respondents.

No. 34250.

Supreme Court of Idaho. Boise, February 2009 Term.

April 2, 2009.

Ramsden & Lyons, LLP, Coeur d'Alene, for appellants. Douglas Marfice argued.

Patrick E. Miller, Coeur d'Alene, for respondent.

NATURE OF CASE

W. JONES, Justice.

This case involves the question of whether a "household appliance" provision in a homeowner's insurance policy (the Policy) provides coverage for damage to a dwelling and personal property caused by the collapse of an outdoor above-ground swimming pool. The district court denied Brian and Glenda Armstrong's (Appellants) Motion for Partial Summary Judgment and found that the swimming pool was unambiguously not within the meaning of the "household appliance" provision of the Policy; thus, the court held the Policy did not provide any coverage for Appellants' claimed loss. The court then granted Farmers Insurance Company of Idaho's (Respondent) Motion for Summary Judgment on all claims. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Appellants purchased homeowner's insurance through Respondent from insurance agent David Nipp (Nipp) for their residence. Nipp owns and operates his own independent insurance agency and is not an employee or general agent of Respondent. Appellants claim they asked Nipp, prior to purchasing the insurance, whether they would be covered for their swimming pool. Appellants claim Nipp told them they would be covered for the pool under the Policy. Nipp denies that this conversation took place.¹

In July 2003, Appellants went home to find that their above-ground swimming pool had collapsed, resulting in water, mud, and debris flooding their finished basement. The pool was connected to the house by an extension cord to the filtration pump, but not by any piping or plumbing.

Appellants immediately filed a claim with Respondent for loss to their dwelling and personal property. After investigating, Respondent denied Appellants' claim. Appellants filed an appeal with Respondent, which Respondent denied. Appellants thereafter prepared and submitted to Respondent a Sworn Statement of Proof of Loss to comply with I.C. § 41-1839 and the Policy. Respondent then informed Appellants for the third and final time that it was denying their claim.

The relevant provision of the Policy expressly excludes from coverage losses to property caused by "water damage." "Water damage" is defined in part as "overflow or escape of a body of water." An exception to the water damage exclusion provides: "We insure for accidental direct physical loss to property ... but only if caused by ... [s]udden and accidental discharge or overflow of water ... from within a household appliance." The Policy does not define the term "household appliance."

Appellants filed suit on December 23, 2003, alleging breach of contract, breach of the covenant of good faith and fair dealing, negligence, unfair trade practices and constructive fraud. Respondent filed an answer, generally denying Appellants' allegations.

On January 5, 2005, Appellants moved for partial summary judgment on the issue of whether the household appliance provision of the Policy provided coverage for damage resulting from the collapse of the swimming pool. After hearing argument, the district court denied the Motion for Partial Summary Judgment, finding the term "household appliance" to be neither ambiguous, nor commonly understood to include Appellants' above-ground swimming pool within its meaning. The court found that the Policy exception to the water damage exclusion did not apply, so the loss was excluded from coverage under the water damage provision, and Respondent was not obligated to compensate Appellants for their claimed loss.

Respondent then filed a Motion for Summary Judgment, requesting the court to dismiss Appellants' claims. In response, Appellants failed to make substantive arguments and instead relied upon the previous briefing they had submitted to the court in their Motion for Partial Summary Judgment. The court granted Respondent's motion and entered judgment against Appellants on all claims. Appellants brought this appeal and request attorney fees on appeal pursuant to I.C. § 41-1839.

ISSUES ON APPEAL

a. Whether the district court erred in ruling that the Policy unambiguously excluded from coverage water damage resulting from the collapse of Appellants' swimming pool?

b. Whether the district court properly granted Respondent's Motion for Summary Judgment?

c. Whether Appellants are entitled to attorney fees on appeal?

STANDARD OF REVIEW

When reviewing an order for summary judgment, the standard of review for this Court is the same standard as that used by the district court in ruling on the motion. Mendenhall v. Aldous, 146 Idaho 434, 436, 196 P.3d 352, 354 (2008). Summary judgment is appropriate if "the pleadings, depositions, 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 a judgment as a matter of law." I.R.C.P. 56(c). Disputed facts should be construed in favor of the non-moving party, and all reasonable inferences that can be drawn from the record are to be drawn in favor of the non-moving party. Dorea Enterprises, Inc. v. City of Blackfoot, 144 Idaho 422, 424, 163 P.3d 211, 213 (2007) (citation omitted). This Court exercises free review over questions of law. Id.

ANALYSIS

The district court properly found that the Policy unambiguously excluded coverage for water damage resulting from the collapse of Appellants' swimming pool.

"When interpreting insurance policies, this Court applies the general rules of contract law subject to certain special canons of construction." Arreguin v. Farmers Ins. Co. of Idaho, 145 Idaho 459, 461, 180 P.3d 498, 500 (2008) (quoting Clark v. Prudential Prop. & Cas. Ins. Co., 138 Idaho 538, 540, 66 P.3d 242, 244 (2003)). Whether an insurance policy is ambiguous is a question of law over which this Court exercises free review. Purvis v. Progressive Cas. Ins. Co., 142 Idaho 213, 216, 127 P.3d 116, 119 (2005) (citation omitted). Where policy language is found to be unambiguous, this Court is to construe the policy as written, "and the Court by construction cannot create a liability not assumed by the insurer nor make a new contract for the parties, or one different from that plainly intended, nor add words to the contract of insurance to either create or avoid liability." Id. (citing Anderson v. Title Ins. Co., 103 Idaho 875, 878-79, 655 P.2d 82, 85-86 (1982) (quoting Miller v. World Insurance Co., 76 Idaho 355, 357, 283 P.2d 581, 582 (1955))). "Unless contrary intent is shown, common, non-technical words are given the meaning applied by laymen in daily usage— as opposed to the meaning derived from legal usage—in order to effectuate the intent of the parties." Howard v. Oregon Mut. Ins. Co., 137 Idaho 214, 217, 46 P.3d 510, 513 (2002) (citing Mut. of Enumclaw v. Box, 127 Idaho 851, 853, 908 P.2d 153, 155 (1995)). Where there is an ambiguity in an insurance contract, special rules of construction apply to protect the insured. Hall v. Farmers Alliance Mut. Ins. Co., 145 Idaho 313, 318, 179 P.3d 276, 281 (2008) (citation and internal quotations omitted). Under these special rules, because insurance contracts are adhesion contracts, typically not subject to negotiation between the parties, any ambiguity that exists in the contract must be construed most strongly against the insurer. Arreguin, 145 Idaho at 461, 180 P.3d at 500 (internal citations omitted). In determining whether a particular provision is ambiguous, the provision must be read within the context in which it occurs in the policy. Purvis, 142 Idaho at 216, 127 P.3d at 119.

The question before us is whether the term "household appliance" is ambiguous. In their Motion for Partial Summary Judgment, Appellants argued that the Policy covered their loss under an exception to the water damage exclusion, which provides coverage for loss resulting from a sudden discharge of water from within a household appliance. Appellants asserted that the term "household appliance" unambiguously includes within its meaning an above-ground swimming pool such as the one owned by Appellants. Alternatively, Appellants argued that if the term "household appliance" is ambiguous, a reasonable person would understand it to include within its meaning an above-ground swimming pool, so the Policy should provide coverage for the loss they claim. Specifically, they argue that because a pool is a device that provides for the specific function of aquatic exercise and recreation it fits within the dictionary definition of "appliance." Further, they point out that Idaho's statutory Property Condition Disclosure Act and Seller Property Disclosure Form defines "appliance" to include "pool/hot tub," illustrating legislative intent to include swimming pools and hot tubs within the definition of "appliance." See I.C. § 55-2508.

Respondent argued below that the term "household appliance" unambiguously excludes swimming pools from within its meaning, thereby making the exception to the water damage exclusion inapplicable. Respondent contends that the dictionary definitions provided by both parties reflect that neither the word "appliance," nor the phrase "household appliance," has any ordinary use, meaning or application that would include a swimming pool. Moreover, Respondent argues that the Policy language "body of water" unambiguously includes a swimming pool.² Thus, it argues the above-ground swimming pool at issue in this case is squarely within the Policy exclusion for water damage and the "household appliance" exception is not applicable. The district court agreed with Respondent below, finding...