Dairyland Insurance Company v. Munson

• Decision Date: 07 January 1972
• Docket Number: No. 42888,42888
• Citation: 292 Minn. 141,193 N.W.2d 476
• Parties: DAIRYLAND INSURANCE COMPANY, Respondent, v. Stephen G. MUNSON, Defendant and Third-Party-Plaintiff, Respondent, v. RELIANCE INSURANCE COMPANY, Third-Party-Defendant, Appellant.
• Court: Minnesota Supreme Court

Page 476

193 N.W.2d 476

292 Minn. 141

DAIRYLAND INSURANCE COMPANY, Respondent, v. Stephen G. MUNSON, Defendant and Third-Party-Plaintiff, Respondent, v. RELIANCE INSURANCE COMPANY, Third-Party-Defendant, Appellant.

No. 42888.

Supreme Court of Minnesota.

Jan. 7, 1972.

Syllabus by the Court

In a subrogation action by an automobile owner's insurer against a permissive user to recover collision loss caused by the user, it is held, from an examination of the owner's and the user's policies, that the permissive user was not an additional insured protected by the owner's policy, but that he was entitled to defense and coverage by his insurer, who protected him from collision loss to a 'non-owned automobile.'

Mordaunt, Walstad, Cousineau & McGuire, Minneapolis, for appellant.

Engebretson, Seaberg & Hennessy, St. Paul, for respondent Dairyland Ins. Co.

Eastwood & Goyer, Stillwater, for respondent Stephen G. Munson.

Heard before KNUTSON, C.J., and MURPHY, KELLY, and HACHEY, JJ.

OPINION

MURPHY, Justice.

Appeal from judgment entered against third-party defendant insurance company in a subrogation action. Plaintiff, Dairyland Insurance Company, having paid an automobile collision loss, became subrogated to the rights of its insured and began an action to recover against its insured's bailee, who caused the loss. The bailee interpleaded his insurer, Reliance Insurance Company, as third-party defendant. Issues raised by the appeal are whether or not the permissive user was an additional insured within the terms of the owner's policy so as to be protected from loss by collision; and whether Reliance, the third-party defendant, was liable for the collision loss under the provisions of its policy, which protected its insured from property damage arising from the use of a 'non-owned automobile.'

It appears from the record that Dairyland issued to Charles M. Healy a public liability policy on his automobile. Healy loaned the automobile to one Stephen G. Munson. While using the automobile, Munson rolled the car over, as a result of which there was a net loss in the amount of $1,503. Healy's policy with Dairyland provided for collision coverage. The amount of the loss was paid by Dairyland to Healy. Dairyland then started a subrogation action against Munson. Munson was insured by a policy issued by Reliance. After tender by Munson, Reliance refused to defend on the ground that there was no coverage under its policy. Munson accordingly interpleaded Reliance. After trial without a jury, the court made findings and concluded that Munson was entitled to coverage and defense under the terms of his policy with Reliance.

Reliance contends that Munson was an 'insured' under the terms of Dairyland's policy and that Dairyland's subrogation action against Munson must fail because an insurer has no right of subrogation against its insured. It appears from an examination of Dairyland's policy that it provides Healy, its insured, with protection for 'collision or upset' in excess of a deductible amount. ¹ The provisions relating to collision coverage are separate and distinct from provisions relating to coverage for bodily injury and property damage. The policy protects the permissive user from the latter risks under its coverage of 'any person while using the automobile' with permission of the insured and within the scope of such permission. By express definition contained in the policy, however, the permittee or bailee is not included as an insured with respect to collision or upset damage. One of the conditions specifically states that the insurance afforded shall not inure directly or indirectly to the benefit of the bailee for loss under collision coverage.

We may assume from the record here that Healy may have had a cause of action against Munson because of his failure to exercise that degree of care which the nature of the bailment would require from an ordinarily prudent person. 8 Am.Jur.2d, Bailment, § 205; 2 Dunnell, Dig. (3 ed.) § 732. While Healy could have brought an action against Munson for damages to his automobile, he chose instead to recover from his insurer under the collision provision of his policy. Having paid the damages to Healy, Dairyland stands in Healy's shoes and has the same cause of action against Munson. 9B Dunnell, Dig. (3 ed.) § 4875c(14a). ²

In considering the defense of Reliance that the insurance provided by its policy is 'excess insurance' only and that its insured is protected by the owner's policy, it may be observed that courts have, in recent years, written extensively on the interpretation of language in automobile insurance policy provisions which limit liability where damage occurs while the automobile is being used by another with the owner's permission, and where, as here, it is claimed that there is overlapping coverage. The parties rely on conflicting authorities which relate to similar contracts and similar situations. Reliance relies on Western States Mutual Ins. Co. v. Standard Mutual Ins. Co., 26 Ill.App.2d 378, 167 N.E.2d 833 (1960), which holds that under the facts here the permissive user would be an insured under the owner's policy. However, the later case of Aviation Employees Ins. Co. v. Barclay, 237 Md. 318, 206 A.2d 119 (1965), arrives at the opposite conclusion.

The best guide to an understanding of the insuring intent is, of course, the language of the policy itself. From that language, we cannot escape the conclusion that, insofar as Dairyland's insurance relates to collision, Munson, the bailee, is not an insured. The definition expressed in Paragraph III(a), which significantly omits mention of collision coverage in defining the permissive user as an insured with respect to bodily injury and property damage liability, requires that conclusion. Moreover, one of the conditions specifically indicates that the insurance afforded shall not inure to the benefit of a bailee 'liable for loss to the automobile.'

We are in accord with the trial court's view that Reliance, under the terms of its policy, undertook to insure Munson for damages caused to a nonowned automobile by a collision. ³ Reliance expressly agreed '(t)o pay for loss caused by collision * * * to a non-owned automobile' subject to a...