Canal Ins. Co. v. Bunday

• Decision Date: 18 June 1991
• Docket Number: No. 90-620,90-620
• Citation: 48 St.Rep. 597,249 Mont. 100,813 P.2d 974
• Parties: CANAL INSURANCE COMPANY, Plaintiff and Appellant, v. Gary BUNDAY, d/b/a Bunday Trucking; and United States Fidelity and Guaranty Company, Defendants and Respondents.
• Court: Montana Supreme Court

Page 974

813 P.2d 974

249 Mont. 100

CANAL INSURANCE COMPANY, Plaintiff and Appellant, v. Gary BUNDAY, d/b/a Bunday Trucking; and United States Fidelity and Guaranty Company, Defendants and Respondents.

No. 90-620.

Supreme Court of Montana.

Submitted on Briefs May 10, 1991.

Decided June 18, 1991.

Gig A. Tollefsen, Berg, Lilly, Stokes, Andriolo, Tollefsen & Schraudner, Bozeman, for plaintiff and appellant.

Sarah M. Power, Gough, Shanahan, Johnson & Waterman, Helena, for defendants and respondents.

McDONOUGH, Justice.

This case involves a dispute between two insurers concerning who should pay the liabilities incurred by the insured, Gary Bunday d/b/a Bunday Trucking (Bunday), arising from a negligence case. The plaintiff, Canal Insurance Company (Canal), appeals the order of the Eighteenth Judicial District Court, Gallatin County, denying its motion for summary judgment and granting the defendant United States Fidelity and Guaranty Company's (USF & G) motion for summary judgment. We reverse.

The parties raise several issues on appeal and cross-appeal. However, the first issue raised by Canal on its appeal is dispositive of this case: Did the District Court err in granting summary judgment to USF & G based upon finding coverage for the insured in the policy issued by Canal?

On August 2, 1983, Terrence North was killed when he drove off the end of a dead-end frontage road east of Bozeman and drove his vehicle into two semi-trailers owned by Bunday Trucking. The trailers were parked on property adjacent to Bunday's premises. The decedent's estate sued the State of Montana for failing to properly mark the end of the frontage road and Bunday for negligently placing the semi-trailers in a position where they could be struck by someone driving off the end of the frontage road. Bunday tendered the defense of the case to his insurers, Canal and USF & G.

At that time, USF & G took the position that Canal had the obligation to defend Bunday, and that USF & G had no liability. Canal refused to defend Bunday, and brought the present action seeking a declaratory judgment that it had no liability on the North claim. To protect itself, USF & G undertook defending Bunday on the North claim. Following trial on the liability issue and appeal to this Court, the underlying case was settled. Bunday's share of the settlement was $125,000.00. USF & G paid $108,500.00 and Canal contributed the remaining $16,500.00.

After the settlement, USF & G amended its answer in this declaratory judgment action and counterclaimed against Canal seeking reimbursement of the $108,500.00 it had paid on the North settlement, and the costs and fees incurred in defending Bunday. On February 26, 1990, Canal moved for summary judgment asserting that the USF & G policy provided coverage and their policy did not. On February 27, 1990, USF & G moved for summary judgment arguing that the Canal policy was ambiguous and that such ambiguities should be resolved in favor of coverage for the insured. USF & G further asserted that the reason it provided coverage was due to an underwriting coding error on the declaration page of its own policy.

On May 3, 1990 the District Court granted USF & G's motion for summary judgment and ordered Canal to reimburse USF & G for the $108,000.00 paid on the North claim. It further ordered that since USF & G had no duty to defend the claim, it should recover costs and attorney fees from Canal incurred in the defense. Additionally, the court held that USF & G was entitled to interest to be paid by Canal on the principal sums paid by USF & G on the claim. Canal appealed. We dismissed that appeal as premature because the District Court had not yet determined the amount of attorney's fees and interest to be awarded.

On June 23, 1990, the matter of the attorney's fees award and interest was considered by the District Court. On August 17, 1990, the court denied USF & G's motion for costs and attorney's fees and pre-judgment interest on the grounds that there had been a legitimate legal issue regarding which insurer should pay Bunday's liability. Canal now appeals, asserting that the finding of coverage under its policy was error and, alternatively, if this Court finds that Canal's policy does provide coverage, that the District Court's failure to split the settlement equally between the insurers, in accordance with policy provisions, was error.

We now examine the specific paragraphs of Canal's policy that give rise to the issues in this case. Canal's policy provides that

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

bodily injury or property damage to which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use, including loading and unloading, for the purposes stated as applicable thereto in the declarations, of an owned automobile.... (Underscored emphasis added.)

The bold-face terms in the policy are further defined in the policy. The policy defines an "owned automobile" as

either

(a) an automobile which is owned by the named insured and described in the declarations;

or

(b) an automobile ownership of which is newly acquired by the named insured during the policy period....

The policy defines "automobile" as

a land motor vehicle, trailer or semi-trailer designed for travel on public roads (including any machinery or apparatus attached thereto)....

The coverage paragraph of the policy quoted above essentially provides coverage for accidents involving automobiles owned by the insured which are described in the declarations, or automobiles purchased to replace ones described in the declarations or added to the insured's fleet of automobiles if notice is given and an increased premium paid. The declarations portion of the policy refers to a separate Schedule of Equipment, form E-69L. The Schedule of Equipment states that it is "[a]ttached to, forming a part of and completing the Declarations" of the policy. It lists the following equipment:

1. 1973 Freightliner Tractor S# CA213HP086005

2. 1977 Kenworth Tractor S# 156877

3. 1977 Kenworth Tractor S# 255T30M

4. 1978 Kenworth Tractor S# 165147S

5. 1978 Freightliner Tractor S# CA213HL137604

6. 1979 Freightliner Tractor S# CA213HP164470

7. 1981 Freightliner Tractor S# 1FV8YOY97B

8. 1979 Freightliner Tractor S# CA213HP164471

9. 1968 Freightliner Tractor S# CA213HP0328027

10. 1976 Peterbuilt Tractor S# 83864P

11. 1979 International Tractor S# E252HGA21711

12. 1970 International Tractor S# 259471VG403083

13. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 1

14. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 2

15. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 3

16. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 4

17. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 5

18. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 6

19. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 7

20. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 8

21. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 9

22. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 10

23. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 11

24. ANY UNDESCRIBED TRAILER WHILE ATTACHED TO UNIT 12

Canal alleges that the two trailers in this case were merely being used for storage; USF & G alleges they were parked but generally used to haul beer. Regardless of these allegations, it is undisputed that the trailers in this case were parked and not attached to any tractor when the decedent collided with them.

The District Court found, and USF & G argues on appeal, that the policy is ambiguous. After concluding that the policy was ambiguous, the court then followed the established rule of resolving ambiguities against the insurer. See § 28-3-206, MCA; Bauer v. Mountain West Farm Bureau Mutual Ins. Co. (1985), 215 Mont. 153, 156, 695 P.2d 1307, 1309; St. Paul Fire & Marine Ins. Co. v. Cumiskey (1983), 204 Mont. 350, 363, 665 P.2d 223, 229; Williams v. Ins. Co. of North America (1967), 150 Mont. 292, 295, 434 P.2d 395, 397. Ambiguity exists only when the contract taken as a whole in its wording or phraseology is reasonably subject to two different interpretations. Williams, 434 P.2d at 397. A clause in an insurance policy is ambiguous when different persons looking at it in the light of its purpose cannot agree upon its meaning. Bauer, 695 P.2d at 1309. The ambiguity argued by USF & G and found by the court is that the policy definition of "automobile" as used in the term "owned automobile" includes semi-trailers and does not require attachment to a tractor.

We disagree. If the language of a contract is unambiguous and subject to only one meaning, there is no basis for the interpretation of the policy coverage under the guise of ambiguity. Bauer, 695 P.2d at 1309; Williams, 434 P.2d at 397. As Canal points out, there is no ambiguity here at all. Under the policy, coverage is only extended to "owned automobiles." The definition has three criteria. An "owned automobile" is defined as (1) an automobile (2) owned by the insured, and (3) described in the declarations. Thus, a semi-trailer--while clearly an "automobile" under the policy--is not an "owned automobile" unless it is also owned by the insured and described in the declarations--i.e., it must be attached to a tractor. This is the only reasonable construction that can be arrived at from the wording here. USF & G's "ambiguous" construction gives little or no effect to the declarations of the policy and the attached schedule. Section 28-3-202, MCA, requires that effect be given to every part of a contract if reasonably practicable, with each clause helping to interpret the others. To follow USF & G's logic one could also conclude that an ambiguity exists because the term "automobile" as used in "owned automobile" includes semi-trailers and does not require ownership by the insured; thus all automobile liability policies that limit...