Cyprus Plateau Mining Corp. v. Commonwealth Ins.

• Decision Date: 25 August 1997
• Docket Number: No. 2:96-CV-401J.,2:96-CV-401J.
• Citation: 972 F.Supp. 1379
• Parties: CYPRUS PLATEAU MINING CORPORATION, a Delaware corporation, Plaintiff, v. COMMONWEALTH INSURANCE COMPANY, a corporation organized under the laws of Canada, Defendant.
• Court: U.S. District Court — District of Utah

972 F.Supp. 1379

CYPRUS PLATEAU MINING CORPORATION, a Delaware corporation, Plaintiff, v. COMMONWEALTH INSURANCE COMPANY, a corporation organized under the laws of Canada, Defendant.

No. 2:96-CV-401J.

United States District Court, D. Utah, Central Division.

August 25, 1997.

COPYRIGHT MATERIAL OMITTED

Kenneth W. Yeates, D. Matthew Moscon, Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, UT, Mark S. Parris, Angela M. Luera, Heller, Ehrman, White & McAuliffe, Seattle, WA, for Plaintiff.

Craig R. Mariger, Barry G. Lawrence, Jones, Waldo, Holbrook & McDonough, Salt Lake City, UT, R. Jack Stephenson, Joanne Thomas Blackburn, Gary D. Swearingen, Garvey, Schubert & Barer, Seattle, WA, for Defendant.

MEMORANDUM OPINION AND ORDER

JENKINS, Senior District Judge.

On April 14, 1997, the above-captioned action came before the Court on the defendant's Motion for Summary Judgment and the plaintiff's Motion for Partial Summary Judgment. Joanne Thomas Blackburn, Barry G. Lawrence, and Craig R. Mariger appeared on behalf of the defendant Commonwealth Insurance Company. D. Matthew Moscon, Mark Parris, and Kenneth W. Yeates appeared on behalf of the plaintiff Cyprus Plateau Mining Corporation. The Court having reviewed the pleadings and memoranda submitted by the parties, having heard oral argument from counsel, and after fully considering the same, and for reasons discussed more fully below, denies defendant's Motion for Summary Judgment and grants plaintiff's Motion for Partial Summary Judgment.

Background

Cyprus Plateau Mining Corporation ("Cyprus") contracted with J.S. Redpath Corporation ("Redpath"), a United States subsidiary of J.S. Redpath Ltd., a Canadian company, to excavate mine tunnels in Bear Canyon, Carbon County, Utah. Redpath, in return, agreed to name Cyprus as a named insured under its comprehensive general liability and umbrella liability insurance policies. Redpath, with the help of the Marsh & McLennan insurance agency, purchased policies from the Commonwealth Insurance Company ("Commonwealth") and caused Cyprus to be named as an additional insured. These policies ran from September 30, 1989, to September 30, 1990.

On April 18, 1990, Thayde Jones, a Redpath employee, was injured while working at the Bear Canyon site. Jones brought an action against Cyprus for damages relating to his injuries. Cyprus notified Commonwealth of this action and, as a named insured, sought coverage under the Redpath policies. Commonwealth denied all coverage. In November 1995, a jury verdict was returned in favor of Jones for $2 million. An appeal was taken and recently the Utah Supreme Court affirmed. See Jones v. Cyprus Plateau Mining Corp., 944 P.2d 357 (Utah 1997).

On May 6, 1996, Cyprus commenced this action. Cyprus seeks a declaratory judgment on the respective rights and liabilities of the parties under the insurance policies issued by Commonwealth with respect to the claims brought by Jones, and damages flowing from Commonwealth's failure to defend and indemnify Cyprus with respect to the Jones claim.

Discussion

An insurance policy is a contract between the parties and is construed by employing the general rules of contract interpretation. Alf v. State Farm Fire and Cas. Co., 850 P.2d 1272, 1274 (Utah 1993). Words and phrases used in an insurance policy are to be construed using their plain, ordinary, and generally prevailing meaning. See LDS Hosp. v. Capitol Life Ins. Co., 765 P.2d 857, 859 (Utah 1988). An insurance policy should not be interpreted in an unreasonable or strained manner so as to enlarge or to restrict its provisions beyond what is reasonably contemplated by its terms or so as to achieve an absurd conclusion. See id. Where the language of the policy is clear and unambiguous the agreement should be enforced as written. St. Paul Fire and Marine Ins. v. Commercial Union Assurance, 606 P.2d 1206, 1208 (Utah 1980). If, however, after applying the rules of construction an ambiguity remains, the ambiguous provision is to be construed against the drafter the insurer and in favor of the insured. Alf, 850 P.2d at 1274.

The general purpose of liability insurance is to afford the insured party some measure of protection from liability damage claims. Liability policies are therefore construed to achieve that purpose. See LDS Hosp., 765 P.2d at 859. Thus, a provision which seeks to narrow an insurer's obligation will be strictly construed against the insurer. U.S. Fidelity and Guar. Co. v. Sandt, 854 P.2d 519, 523 (Utah 1993). If the language of the exclusion is subject to two or more reasonable interpretations, the interpretation which favors coverage must be applied. Id.

It is equally well settled, however, that insurance companies have the right to limit coverage in any manner they desire, so long as the limits do not conflict with statutory prohibitions or public policy. Farmers Ins. Exch. v. Call, 712 P.2d 231, 233 (Utah 1985). Moreover, the rule of strict construction does not authorize the perversion of language for the purpose of creating an ambiguity where none exists. Nor does it allow the court to refine away the terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties. See Alf, 850 P.2d at 1275.

Whether an exclusion in an insurance policy is clear and unambiguous is a question of law that may be resolved by the court in the context of a motion for summary judgment. Quaker State Minit-Lube, Inc. v. Fireman's Fund Ins. Co., 868 F.Supp. 1278, 1287 (D.Utah 1994), aff'd, 52 F.3d 1522 (10th Cir.1995); see also Grimes v. Swaim, 971 F.2d 622, 623 (10th Cir.1992) ("The construction of an insurance policy is a matter of law."); Alf, 850 P.2d at 1274 (whether an ambiguity exists is a question of law).

Analysis

The pending cross-motions turn on a single issue: whether the insurance policies purchased by Redpath from Commonwealth, to which Cyprus was added as an insured, obligated Commonwealth to defend and indemnify Cyprus against a personal injury claim brought against Cyprus by a Redpath employee who was injured while tunneling at a Cyprus mine. That determination, in turn, hinges on the interpretation of a provision in the insurance policies that reads as follows:

This Policy does not cover Personal Injury including Bodily Injury to any employee of any Insured under this policy for which the Insured or his indemnitee may be held liable.

Commonwealth argues that the exclusion of any claim for personal injury by an employee of one insured, Redpath, against another insured, Cyprus, is what the words mean. Cyprus argues that a "fair and reasonable" reading of the exclusion is that it applies only to claims against a named insured by its own employees. Thus, because there are two reasonable and inconsistent interpretations, Cyprus asserts that Utah law requires that the exclusion be interpreted in favor of coverage and against the insurer. See Sandt, 854 P.2d at 523; see also Alf, 850 P.2d at 1274-75 (policy is ambiguous if the terms may be understood to have two or more plausible meanings). For its part, Commonwealth agrees that Utah law provides that if the exclusion is ambiguous the Court should interpret the policy in favor of Cyprus. (Mem. in Supp. of Def's. Mot. for Summ. Judgment, at 7.)

Although Utah courts have not yet spoken directly on this question, the parties have provided the Court with a number of authorities from other state and federal courts that have addressed this and similar issues.¹ Cyprus relies heavily on Transport Indem. Co. v. Wyatt, 417 So.2d 568, 571 (Ala.1982), an Alabama Supreme Court decision that held that an exclusion from coverage of "any OCCURRENCE which caused BODILY INJURY to any employee of any INSURED arising out of or in the course of his employment by any INSURED" was ambiguous because the language "any insured" could be interpreted to mean any one of the insureds or could apply collectively to the whole group of insureds. (Emphasis added.) The court then construed the exclusion in favor of coverage and against the insurer. Id.

Similarly, in Pacific Indem. Co. v. Transport Indem. Co., 81 Cal.App.3d 649, 146 Cal. Rptr. 648, 651 (1978), the California intermediate appellate court held that a similarly worded exclusion that purported to exclude from coverage any "liability for bodily injury, ... to any employee of any Insured" was ambiguous. (Emphasis added.) The court stated that the phrase was susceptible to two interpretations: (1) it could mean any employee of any insured who is seeking protection under the policy; or (2) it could mean any employee of any insured regardless of whether that insured is seeking the protections of the policy. Applying the general rule that ambiguous exclusions will be construed against the insurer, the court interpreted the exclusion in favor of coverage. Id.; see also United States Steel Corp. v. Transport Indem. Co., 241 Cal.App.2d 461, 50 Cal.Rptr. 576, 584-85 (1966) (finding that the language excluding from coverage "any liability ... for bodily injury ... of Any employee of any Insured" was "obviously ambiguous" and holding that the exclusion did not apply when an employee of the named insured sought damages from another additional insured) (emphasis added).

Commonwealth, on the other hand, points to several decisions, including a Utah Supreme Court decision, which have held that the phrase "any insured" is unambiguous. See Allen v. Prudential Property and Cas. Ins. Co., 839 P.2d 798, 807 (Utah 1992); see also Spezialetti v. Pacific Employers Ins. Co., 759 F.2d 1139, 1142 (3d Cir.1985) (finding no ambiguity and determining that the phrase "any insured" means anyone covered by the policy); Michael Carbone, Inc. v. General Accident Ins. Co., 937 F.Supp. 413, 422 (E.D.Pa.1996) (noting that "the bulk of the courts which have addressed this issue" have held that an exclusion worded "any insured" is unambiguous).

A look at the plain and ordinary meaning of the word "any" also...