CCI v. American Family Mut. Ins. Co.

• Citation: 208 Ariz. 416,94 P.3d 616
• Decision Date: 27 July 2004
• Docket Number: No. 1 CA-CV 03-0645.,1 CA-CV 03-0645.
• Parties: CALIFORNIA CASUALTY INSURANCE COMPANY, Plaintiff-Appellant, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Appellee.
• Court: Court of Appeals of Arizona

94 P.3d 616

208 Ariz. 416

CALIFORNIA CASUALTY INSURANCE COMPANY, Plaintiff-Appellant, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Defendant-Appellee.

No. -0645.

Court of Appeals of Arizona, Division 1, Department B.

July 27, 2004.

The Cavanagh Law Firm, P.A. By Steven D. Smith, Christopher Robbins, Phoenix, Attorneys for Plaintiff-Appellant.

Mariano & Allen, P.L.C. By Lynn M. Allen, Rebecca J. Herbst, Phoenix, Attorneys for Defendant-Appellee.

OPINION

KESSLER, Judge.

¶ 1 California Casualty Insurance Company ("CCI") appeals the trial court's summary judgment in favor of American Family Mutual Insurance Company ("American"), in this equitable contribution action brought by CCI after it paid to settle a claim by a postal carrier bitten by American's insured's dog. The trial court ruled that the "owned premises" exclusion in the renter's insurance policy issued by American precluded coverage, and therefore precluded CCI's contribution claim. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶ 2 Raul and Elvia Lujan (the "Lujans") reside in Phoenix, Arizona, in a home insured by CCI under a homeowners insurance policy. Their daughter, Diane, resided in Scottsdale, Arizona, with her roommate, Tracy, who was the named insured on a renter's policy issued by American. Diane and Tracy owned a dog and asked the Lujans to dog-sit at the Lujans' house. On March 7, 1998, the dog bit Ronald Miner ("Miner"), the postal carrier, as he delivered mail to the Lujans' home. Miner sued the Lujans, and CCI settled the claim for its policy limit of $100,000. CCI then sought equitable contribution from American for a pro rata share of the defense costs and the $100,000 settlement. The parties filed cross-motions for summary judgment on the issue of whether American's policy provided coverage for the incident.

¶ 3 American conceded for purposes of CCI's motion for summary judgment that the Lujans are "insureds" pursuant to American's renter's insurance policy.¹ However, American argued that coverage for the dog bite was excluded pursuant to the "owned premises" policy exclusion, which provides as follows:

Premises Owned Rented or Controlled. We will not cover bodily injury or property damage arising out of any act or omission occurring on or in connection with any premises owned, rented or controlled by any insured other than an insured premises.

(Bold in original).

¶ 4 The trial court ruled that the "owned premises" exclusion applied and it granted judgment in American's favor. The court entered judgment in May 2002, and awarded attorneys' fees to American pursuant to Arizona Revised Statutes ("A.R.S.") section 12-341.01(A) (2003). Later, the trial court entered an amended judgment and again awarded attorneys' fees to American. CCI moved for a new trial or for reconsideration. The trial court denied the motion and awarded American additional attorneys' fees. We have jurisdiction over CCI's timely appeal. A.R.S. § 12-2101(B), (F)(1) (2003).

DISCUSSION

¶ 5 We review the trial court's grant of summary judgment, which is based upon its interpretation of American's renter's insurance policy, de novo. Liristis v. Am. Family Mut. Ins. Co., 204 Ariz. 140, 142, ¶ 6, 61 P.3d 22, 24 (App.2002) (we review propriety of summary judgment de novo); Arizona Biltmore Estates Ass'n v. Tezak, 177 Ariz. 447, 448, 868 P.2d 1030, 1031 (App.1993) (issues of law, including contract interpretation, reviewed de novo). We construe the policy's provisions

according to their plain and ordinary meaning. Sparks v. Republic Nat. Life Ins. Co., 132 Ariz. 529, 534, 647 P.2d 1127, 1132 (1982). "[A]mbiguity in an insurance policy will be construed against the insurer"; however, this rule applies only to provisions that are "actually ambiguous." Thomas v. Liberty Mut. Ins. Co., 173 Ariz. 322, 325, 842 P.2d 1335, 1338 (App.1992). If a clause may be susceptible to different constructions, rather than simply finding ambiguity and resorting to the contra proferentum doctrine, we will first attempt to discern the meaning of the clause "by examining the purpose of the [clause] in question, the public policy considerations involved and the transaction as a whole." Ohio Cas. Ins. Co. v. Henderson, 189 Ariz. 184, 186, 939 P.2d 1337, 1339 (1997) (quoting Transamerica Ins. Group v. Meere, 143 Ariz. 351, 355, 694 P.2d 181, 185 (1984)).

Keggi v. Northbrook Property & Cas. Ins. Co., 199 Ariz. 43, 46, ¶ 11, 13 P.3d 785, 788 (App.2000).

A. "Insured Premises"

¶ 6 American has conceded that the Lujans are "insureds" entitled to coverage for the dog bite, unless the "owned premises" exclusion applies. CCI contends that the "owned premises" exclusion does not apply because the Lujans' home qualifies as an "insured premises" under the policy. The renter's policy defines "insured premises" to include the location described on the declarations page (the rented apartment), and "any premises you use in connection with" that described location. (Emphasis in original). That policy defines "you" as the "person or people shown as the named insured in the Declaration." (Emphasis in original). Only Tracy is listed on the Declaration page.

¶ 7 CCI contends that, when Tracy asked the Lujans to keep the dog at the Lujans' house, she was using the house "in connection with" her own insured apartment, thus bringing the Lujans' house within the renter's policy's definition of "insured premises." CCI also argues that, because Tracy's renter's insurance policy extends coverage to any person legally responsible for her dog, it must necessarily apply to cover incidents occurring wherever the dog is, because wherever the dog is located is a premise used "in connection with" the insured premises. Otherwise, CCI contends, insureds would be required to purchase a separate liability policy for dogs.

¶ 8 We disagree with CCI. The plain language of the policy does not support CCI's assertion. The word "connection" is commonly defined as a link, an association or a relationship. Random House Webster's College Dictionary 282 (2d ed.1999). Thus, for coverage to apply to premises not specifically described in the declarations, the policy requires a "link," "association," or "relationship" between the specifically insured premises and the additional premises. Here, there is no link, relationship, or association between the rented insured premises and the Lujans' house, other than the fact that Tracy's dog slept in both places. Simply put, while Tracy may have used the Lujans' house "in connection with" her dog, she did not use it "in connection with" her insured premises.

¶ 9 Although we have found no cases directly on point, this conclusion is supported by analogous cases. In determining whether premises are used "in connection with" insured premises, courts generally consider the proximity of the premises, the type of use of the premises, and the purpose of the insurance policy as a whole. See, e.g., United Servs. Auto. Ass'n v. Parry, 158 Ariz. 83, 86, 761 P.2d 157, 160 (App.1988)

; Hudnell v. Allstate Ins. Co., 190 Ariz. 52, 55, 945 P.2d 363, 366 (App.1997). For example, the court in Parry considered whether a water retention area in the common area of the subdivision in which the insureds lived qualified as premises used by the homeowners "in connection with" the insured premises. 158 Ariz. at 85,

761 P.2d at 159. The court explained that the "two-fold purpose" of the area was "to collect and retain run off waters during the rainy season," and as a "recreational area that could be used and enjoyed by [residents] and their guests." Id. at 86, 761 P.2d at 160. Because the area was owned by the homeowner's association, designed for collection of run-off water, and located some distance from the insureds' residence, the court concluded that it was not a "premise" "used in connection with" the insured home. Id.

¶ 10 Similarly, in Hudnell the court considered whether injuries caused by a dirt bike crash on a roadway adjacent to the insureds' home were covered under a homeowners policy. 190 Ariz. at 54, 945 P.2d at 365. The insureds argued that the adjacent roadway should be considered part of the homeowners' insured "premises" because it had been used to test-drive the dirt bike after making repairs on the insured premises. Id. The court noted that the purpose of a vehicle exclusion in a homeowners policy is to require the insured to obtain separate automobile insurance. Id. at 56, 945 P.2d at 367. The court explained that interpreting the policy to "extend[ ] coverage to any instance where the insured chooses to use a public street to continue an activity he performed on his residence premises" would "blur[ ] the distinction between homeowners and automobile insurance." Id. In short, because extending coverage under the "in connection with" provision would essentially eliminate the vehicle exclusion, the court declined to broadly construe the "in connection with" provision.

¶ 11 Here, the purpose of the "owned premises" clause is to require the insured to obtain specific liability insurance for each premises owned. Cf. Hudnell, 190 Ariz. at 56,

945 P.2d at 367 (explaining that purpose of vehicle exclusion in homeowners policy is to require insured to obtain specific liability insurance on motor vehicles). This allows the insurer to more accurately assess the risks associated with the insured premises and to set an appropriate premium. If an insured could convert any other "owned premises" into "insured premises" merely by having a dog sleep there temporarily, there would be no limit to the insurance policy's coverage. An insured could purchase any number of homes, keep her animals in them, and claim that these additional homes were being used "in connection with" the insured premises, thereby obtaining insurance for all of the homes for the price of a single premium. We decline to construe the provision providing coverage for "use in connection with" insured premises so broadly...