Burr v. Nationwide Mut. Ins. Co.

• Decision Date: 23 July 1987
• Docket Number: No. 17533,17533
• Citation: 359 S.E.2d 626,178 W.Va. 398
• Court: West Virginia Supreme Court
• Parties: John Anthony BURR and Ohio Farmers Insurance Company, Etc. v. NATIONWIDE MUTUAL INSURANCE CO., etc., Robert Lee Piercy, etc., Dwain D. McMullen, et al.

Page 626

359 S.E.2d 626

178 W.Va. 398

John Anthony BURR and Ohio Farmers Insurance Company, Etc. v. NATIONWIDE MUTUAL INSURANCE CO., etc., Robert Lee Piercy etc., Dwain D. McMullen, et al.

No. 17533.

Supreme Court of Appeals of

West Virginia.

July 23, 1987.

Syllabus by the Court

1. Where garage liability coverage is provided for the ownership, maintenance, or use of automobiles, and the insured authorizes a third person to operate a covered vehicle and the policy specifically states that such permissive operation makes the operator an additional insured, then there is coverage for an automobile accident even though it occurs when the automobile is being driven on personal business of the operator.

2. Any provision in an insurance policy which attempts to contravene W.Va.Code, 33-6-31(a), is of no effect.

3. The mandatory omnibus requirements imposed by W.Va.Code, 33-6-31(a), indicate that the legislature has demonstrated a clear intent to afford coverage to anyone using a vehicle with the owner's permission as a means of giving greater protection to those who are involved in automobile accidents. The statute should be liberally construed to effect coverage.

4. To be effective under W.Va.Code, 33-6-31(a), an exclusion must specifically designate by name the individual or individuals to be excluded.

Robert M. Steptoe, Jr., C. David Morrison, Steptoe & Johnson, Clarksburg, for appellants.

Joseph A. Wallace, Wallace, Ross & Gibson, Elkins, for appellees.

James C. West, Jr., Jones, Williams, West & Jones, Clarksburg, for D. McMullen.

MILLER, Justice:

This case presents the question whether a "garage operations" insurance policy provides coverage to a person, other than an employee or customer, who uses an insured motor vehicle for a nonbusiness purpose. We also consider to what extent such coverage may be limited by restrictive endorsement to the policy under our omnibus clause statute, W.Va.Code, 33-6-31(a).

I.

Robert Lee Piercy is the owner and operator of Piercy Auto Sales, a motor vehicle dealership in Weston, West Virginia. In March, 1979, Mr. Piercy purchased a garage operations insurance policy ¹ from the defendant, Nationwide Mutual Insurance Company, which was renewed for successive one-year periods.

On September 16, 1980, the plaintiff, John Anthony Burr, was driving a pickup truck which was owned by Mr. Piercy and insured under the Nationwide policy. Mr. Burr, a personal acquaintance of Mr. Piercy, had borrowed the truck for the purpose of towing his boat. It is undisputed that his use of the truck on the day of the accident was unrelated to the business of the dealership. While traveling in a westerly direction on U.S. Route 33 near Buckhannon, West Virginia, Mr. Burr struck an approaching vehicle driven by Dwain D. McMullen. Mr. McMullen, his wife, and two children were injured in the collision. Mr. Burr was insured under a general automobile liability policy issued by Ohio Farmers Insurance Company.

The McMullens brought two suits against Mr. Burr and Mr. Piercy for their personal injuries. ² Subsequently, Ohio Farmers and its insured, Mr. Burr, brought suit in the Circuit Court of Lewis County against Nationwide, pursuant to the Uniform Declaratory Judgments Act, W.Va.Code, 55-13-1, et seq. ³ They sought a declaration (1) that the Nationwide policy provided coverage to Mr. Burr as an insured for any damages he was obligated to pay to the McMullens, and (2) that Nationwide was required to provide Mr. Burr with a defense in the McMullens' personal injury suits against him. In addition, they prayed for reimbursement of all costs and expenses incurred in defending the personal injury suits and in bringing the declaratory judgment suit. ⁴ Nationwide promptly moved to dismiss.

When the personal injury suit proceeded to trial, the district court directed a verdict in favor of Mr. Piercy and held that Mr. Burr was acting "solely for his own business and pleasure and was not the agent, servant, or employee" of Mr. Piercy at the time of the accident. A verdict was subsequently rendered in favor of the McMullens in an amount which exceeded Mr. Burr's liability limits under the Ohio Farmers policy.

On September 25, 1986, the Circuit Court of Lewis County granted Nationwide's motion to dismiss the suit for declaratory judgment on several grounds. First, the court held that the directed verdict in favor of Mr. Piercy in the district court trial operated to absolve his insurer of liability as well. Second, it was held that the controversy was not justiciable under the Uniform Declaratory Judgments Act. Third, the court determined that coverage was not afforded under the Nationwide policy where the use of an insured vehicle was for an avowedly nonbusiness purpose. It is only the third ground which is chiefly argued by the parties on appeal, and to which we turn our attention for purposes of review. ⁵

II.

We begin our analysis by referring to the provisions of the policy. The subject, nature, and extent of the insurance are to be ascertained from the words of the contract. Davis v. Combined Ins. Co., 137 W.Va. 196, 70 S.E.2d 814 (1952). Our threshold inquiry is whether the policy issued by Nationwide provides coverage for accidents which do not relate to garage operations, but rather involve the nonbusiness or pleasure use of a motor vehicle.

There appears to be no dispute that Mr. Burr, having obtained the vehicle with Mr. Piercy's permission, came within the definition of an insured under Part IV(D)(2) of the policy. ⁶ The critical issue is the effect of the language of Part IV(A)(1), which conditions liability on the following sentence: "We will pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies caused by an accident and resulting from garage operations." (Emphasis added). Under Part I(F) of the Nationwide policy, the phrase "garage operations" is defined to mean:

"[T]he ownership, maintenance or use of the locations stated in the declarations and that portion of the roads or other accesses that adjoin these locations for garage business. Garage operations includes the ownership, maintenance or use of the autos indicated in Part II as covered autos. Garage operations also includes all operations necessary and incidental to a garage business."

It seems clear that the definition of the term "garage operations" includes three components of coverage. First, there is coverage for liability arising from "the ownership, maintenance or use of the locations" utilized as the garage business. ⁷ Second, there is coverage for the "ownership, maintenance or use of the autos" specified in the policy as covered vehicles. Third, coverage is available for "all operations necessary or incidental to a garage business."

Nationwide appears to argue that the first coverage, involving the garage location, must also be deemed to form a limitation on the second coverage dealing with automobiles. It contends that to be covered the operation, maintenance, and use of an insured vehicle must be around the garage premises, or at least closely interwoven with some activity arising from the garage operation. However, it seems clear to us that the second coverage deals generally with the ownership, maintenance, and use of the covered vehicles and is not narrowly confined to garage business uses. ⁸

Other jurisdictions have held, in a variety of contexts, that a garage operations policy extends coverage to nonbusiness uses of insured vehicles. For example, it has been held that coverage is afforded to persons using a "demonstrator" vehicle, regardless of whether its use at the time of the accident was related to the business of the garage. E.g., United States Fidelity & Guaranty Co. v. Drinkard, 258 F.Supp. 380 (W.D.Va.1966); Kidwell v. Chuck Olson Oldsmobile, Inc., 4 Wash.App. 471, 481 P.2d 908 (1971). Coverage is also afforded where a prospective buyer drives a garage vehicle with the permission of a salesperson. E.g., Murray v. Bankers Fire & Marine Ins. Co., 198 So.2d 532 (La.App.1967); Morton v. American Employers Ins. Co., 104 So.2d 189 (La.App.1958); Hartford Ins. Group v. Rubinshteyn, 66 N.Y.2d 732, 497 N.Y.S.2d 352, 488 N.E.2d 98 (1985); Safeco Ins. Co. of America v. Pacific Indemnity Co., 66 Wash.2d 38, 401 P.2d 205 (1965); Maryland Casualty Co. v. Heald, 125 Vt. 116, 211 A.2d 177 (1965).

Similarly, where one operates a vehicle which has been loaned or leased to him by a garage, he is covered by the garage's policy even though he uses it for his own purposes. E.g., Wells v. Allstate Ins. Co., 327 F.Supp. 622 (D.S.C.1971); Harrison v. Densmore, 279 Ala. 190, 183 So.2d 787 (1966); Home Ins. Co. v. Lomax, 17 Ariz.App. 520, 498 P.2d 594 (1972); Pacific Indemnity Co. v. Universal Underwriters Ins. Co., 43 Cal.Rptr. 26, 232 Cal.App.2d 541 (1965); Western States Mut. Ins. Co. v. Continental Casualty Co., 133 Ill.App.2d 294, 272 N.E.2d 439 (1971); Greer v. Zurich Ins. Co., 441 S.W.2d 15 (Mo.1969); Gore v. South Carolina Ins. Co., 21 N.C.App. 730, 205 S.E.2d 579 (1974). It thus appears that the significant criterion for coverage under a garage operations policy is whether the vehicle involved is an insured vehicle under the policy, and not the nature of its use when the accident occurred.

It is by now a well settled principle of law that insurance policies are to be strictly construed against the insurer. As we said in Syllabus Point 4 of National Mut. Ins. Co. v. McMahon & Sons, Inc., 177 W.Va. 734 , 356 S.E.2d 488 (1987): "It is well settled law in West Virginia that ambiguous terms in insurance contracts are to be strictly construed against the insurance company and in favor of the insured." See also Huggins v. Tri-County Bonding Co., 175 W.Va. 643, 337 S.E.2d 12 (1985); West Virginia Public Employees Ins. Bd. v. Blue Cross Hospital Serv., Inc., 174 W.Va. 605, 328 S.E.2d 356 (1985); Hensley v. Erie Ins. Co., 168 W.Va. 172, 283...