Close v. Ebertz

• Decision Date: 15 September 1998
• Docket Number: No. 970380,970380
• Citation: 583 N.W.2d 794
• Parties: Clifford CLOSE and Millie Close, Plaintiffs and Appellees, v. Dominic EBERTZ, Defendant. American Economy Insurance Co., Garnishee and Appellant. Civil
• Court: North Dakota Supreme Court

Page 794

583 N.W.2d 794

1998 ND 167

Clifford CLOSE and Millie Close, Plaintiffs and Appellees, v. Dominic EBERTZ, Defendant.

American Economy Insurance Co., Garnishee and Appellant.

Civil No. 970380.

Supreme Court of North Dakota.

Sept. 15, 1998.

Gregory L. Lange, of Richardson, Lange & Donovan, Hazen, for plaintiffs and appellees.

Peter K. Halbach, of Haugland, Halbach & Halbach, Devils Lake, for garnishee and appellant.

SANDSTROM, Justice.

¶1 American Economy Insurance Co. (American) appealed a summary judgment awarding Clifford Close $50,000 and Millie Close $10,000 in their garnishment action to collect insurance proceeds for personal injuries under an automobile liability policy issued to John Ebertz. We hold the entitlement exclusion under the policy excluding coverage to "any person" using an auto without a reasonable belief the person is entitled to do so applies to a "family member" of the insured. Because the Closes do not dispute the trial court's ruling John Ebertz's son, Dominic Ebertz, was driving the vehicle at the time of the accident without his father's express or implied permission, we further hold the policy provides no coverage. We reverse the summary judgment and remand for entry of summary judgment in favor of American.

I

¶2 On October 1, 1992, American issued an automobile policy to John Ebertz for a 1979 Ford van. On October 12, 1992, John Ebertz's 15-year-old son, Dominic Ebertz, skipped school, took the van, and went riding around Devils Lake with a friend while his father and stepmother were at work. Dominic Ebertz had no drivers license, and he and his friend returned the van to the home before his parents returned for lunch. The boys hid in the van until the parents returned to work.

¶3 The boys, with Dominic Ebertz at the wheel, continued driving around Devils Lake during the afternoon. When an off-duty police officer attempted to stop the boys, Dominic Ebertz fled. During the chase, Dominic Ebertz entered an intersection and collided with a vehicle driven by Randy Holtz. The collision caused the Ebertz van to veer into a vehicle driven by Clifford Close, which was approaching the intersection from the opposite direction. Clifford Close suffered serious injuries in the accident. Dominic Ebertz was charged with unauthorized use of the vehicle.

¶4 Clifford Close and his wife, Millie Close, sued Dominic Ebertz, John Ebertz, and Randy Holtz to collect damages for Clifford Close's personal injuries. Millie Close also sought damages for loss of consortium. The Closes alleged John Ebertz was liable under the family car doctrine or under the doctrine of negligent entrustment. The court granted summary judgment dismissing John Ebertz, concluding neither doctrine applied because Dominic Ebertz was not using the van with his father's express or implied permission. The Closes and Randy Holtz reached a settlement agreement. The Closes were awarded a default judgment against Dominic Ebertz in the amount of $168,131.82.

¶5 The Closes then brought a garnishment action against John Ebertz's insurance company, American. American claimed the entitlement exclusion in the policy excluding coverage to "any person" using an auto without a reasonable belief the person is entitled to do so applied to "family members." Because Dominic Ebertz used the van without John Ebertz's express or implied permission, American asserted there was no coverage under the policy. The Closes did not challenge the trial court's earlier ruling Dominic Ebertz used the van without his father's permission, but argued the policy language was ambiguous and should be interpreted to provide coverage under the circumstances.

¶6 Both parties moved for summary judgment. The trial court concluded the "any person" language in the policy did not include "family members," and ruled the policy provided coverage. Judgment was entered against American awarding Clifford Close $50,000, the per person limit under the policy, and Millie Close an additional $10,000 on her loss of consortium claim.

¶7 The trial court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. § 27-05-06. American's appeal is timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, § 6, and N.D.C.C. § 28-27-01.

II

¶8 Summary judgment is a procedure for the prompt and expeditious disposition of a controversy without trial if either litigant is entitled to judgment as a matter of law, if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts, or if resolving factual disputes would not alter the results. Perry Center, Inc. v. Heitkamp, 1998 ND 78, p 12, 576 N.W.2d 505.

A

¶9 John Ebertz's American automobile policy's "Part A-Liability Coverage" says:

Insuring Agreement

A. We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident....

B. "Insured," as used in this Part, means:

1. You or any "family member" for the ownership, maintenance or use of any "auto" or "trailer."

2. Any person using "your covered auto."

A "family member" is defined in the policy as "a person related to you by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child."

¶10 The policy contains nine exclusions, including the following:

Exclusions

A. We do not provide Liability Coverage for any person:

* * * * * *

8. Using an "auto" without a reasonable belief that person is entitled to do so.

¶11 The term "any person" is not defined in the policy. The trial court noted the undefined term "any person" is used both in the introductory Paragraph A to the Exclusions and in Paragraph B.2 of the "Insuring Agreement" defining an insured as "[a]ny person using 'your covered auto.' " The court reasoned the "undefined term 'any person' could reasonably be interpreted to mean any 'insured' or as simply a reference to the second category of insureds i.e. 'any person using your covered auto' as described in B-2 of the Insuring Agreement." The court further reasoned because "the provision can be reasonably interpreted in either way, it is ambiguous and must be interpreted ... against [American], who could have eliminated the ambiguity through a more careful choice of terms...." The court therefore held the exclusion of "any person" did not include a "family member," and ruled the American policy provided coverage for the Closes' injuries arising from the October 12, 1992, accident.

B

¶12 The interpretation of an insurance policy is a question of law, fully reviewable on appeal. Northwest G.F. Mut. Ins. Co. v. Norgard, 518 N.W.2d 179, 181 (N.D.1994). This Court reviews the trial court's interpretation by independently construing and examining the insurance policy. Sellie v. North Dakota Ins. Guar. Ass'n, 494 N.W.2d 151, 156 (N.D.1992). We look first to the language of the insurance contract, and if the language is clear on its face, there is no room for construction. Stuhlmiller v. Nodak Mut. Ins. Co., 475 N.W.2d 136, 138 (N.D.1991). If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract. Martin v. Allianz Life Ins. Co., 1998 ND 8, p 9, 573 N.W.2d 823. Although insurance policies are contracts of adhesion, and we will resolve ambiguities in favor of the insured when appropriate, Kief Farmers Co-op. Elevator v. Farmland, 534 N.W.2d 28, 32 (N.D.1995), we will not strain the definition to provide coverage for the insured. Link v. Federated Mut. Ins. Co., 386 N.W.2d 897, 900 (N.D.1986).

¶13 The question whether an entitlement exclusion in an automobile policy applies to members of the family of the named insured has generated a fairly substantial amount of litigation. See Annot., Application of Automobile Insurance "Entitlement" Exclusion to Family Member, 25 A.L.R.5th 60 (1994). Construing policy language indistinguishable from the language at issue here, a minority of courts have determined the "any person" language of the exclusion does not include a "family member," and there is coverage under circumstances comparable to this case. See Hartford Ins. Co. of Illinois v. Jackson, 206 Ill.App.3d 465, 151 Ill.Dec. 451, 564 N.E.2d 906 (1990); American States Ins. v. Adair Industries, 576 N.E.2d 1272 (Ind.Ct.App.1991); State Auto. Mut. Ins. Co. v. Ellis, 700 S.W.2d 801 (Ky.Ct.App.1985); United Services Auto. Ass'n v. Dunn, 598 So.2d 1169 (La.Ct.App.1992); Rutgers Casualty Insurance Company v. Collins, 313 N.J.Super. 79, 712 A.2d 709 (A.D.1998). The majority of courts, however, have concluded the "any person" language unambiguously includes a "family member," and there is no coverage under these circumstances. See Omni Ins. Co. v. Harps, 196 Ga.App. 340, 396 S.E.2d 66 (1990); Allied Group Ins. v. Allstate Ins., 123 Idaho 733, 852 P.2d 485 (1993); State Farm v. Casualty Reciprocal Exch., 600 So.2d 106 (La.Ct.App.1992); General Accident v. Perry, 75 Md.App. 503, 541 A.2d 1340 (1988); Hanover Ins. Co. v. Locke, 35 Mass.App.Ct. 679, 624 N.E.2d 615 (1993); St. Paul Ins. v. Rutgers Cas. Ins., 232 N.J.Super. 582, 557 A.2d 1052 (A.D.1989); Hartford Ins. Co. of the Midwest v. Halt, 223 A.D.2d 204, 646 N.Y.S.2d 589 (4 Dept.1996); Newell v. Nationwide Mut. Ins. Co., 334 N.C. 391, 432 S.E.2d 284 (1993); Harlan v. Valley Ins. Co., 128 Or.App. 128, 875 P.2d 471 (1994); Omaha Property & Cas. Ins. v. Johnson, 866 S.W.2d 539 (Tenn.Ct.App.1993); Driskill v. American Family Ins. Co., 698 F.Supp. 789 (E.D.Mo.1988) (applying Missouri law).

¶14 The reasoning underlying the minority view is the phrases "any person" and "family member" in the policy define mutually exclusive classes, so an exclusion for "any person" does not include family members but means any person other than a family member. See Adair Industries, 576 N.E.2d at 1274. The minority view is also based on the conclusion the policy language is ambiguous and should be resolved...