Farm Bureau Mut. Ins. Co. v. Sandbulte

• Decision Date: 18 February 1981
• Docket Number: No. 64501,64501
• Citation: 302 N.W.2d 104
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant, v. Wendell I. SANDBULTE, Kenneth Sandbulte, Donna Vander Lugt, as Conservator of the Estate of Kenneth Ray Vander Lugt, Incompetent, and Donna Vander Lugt, Individually, Appellees.
• Court: Iowa Supreme Court

Page 104

302 N.W.2d 104

FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant, v. Wendell I. SANDBULTE, Kenneth Sandbulte, Donna Vander Lugt, as Conservator of the Estate of Kenneth Ray Vander Lugt, Incompetent, and Donna Vander Lugt, Individually, Appellees.

No. 64501.

Supreme Court of Iowa.

Feb. 18, 1981.

H. R. Grigg of Smith, Grigg & Shea, Primghar, for appellant.

Michael R. Hellige and Gerald M. Kraai of Shull, Marshall & Marks, Sioux City, for appellee, Donna Vander Lugt.

Loren J. Veldhuizen of Klay, Bastemeyer & Veldhuizen, P.C., Orange City, for appellees, Wendell I. Sandbulte and Kenneth Sandbulte.

Considered en banc.

LARSON, Justice.

The appellant, Farm Bureau Mutual Insurance Company, sought a ruling in district court, through declaratory judgment proceedings, that it was not liable under a farm liability policy for damages arising out of a collision involving a pickup owned by its insured, Kenneth Sandbulte. Farm Bureau joined Sandbulte and his son, Wendell, as defendants, as well as Kenneth Ray Vander Lugt and Donna Vander Lugt, plaintiffs in a separate suit filed against the Sandbultes for damages arising out of the collision. Following trial to a jury, judgment was entered in favor of the defendants Sandbulte as to Farm Bureau's liability under the policy; it also entered judgment against Farm Bureau for $300,000, the amount of a consent judgment previously agreed to by the Sandbultes and the Vander Lugts. We conclude there was no policy coverage for this occurrence and therefore reverse the trial court.

The underlying facts are substantially without controversy. On April 22, 1976, Sandbulte farmed 760 acres in four separate tracts of 120 to 280 acres in size, and spread across approximately nine miles in Sioux County. On that date his son, Wendell, drove a pickup approximately 81/2 miles from the homeplace, the northernmost tract, to the southernmost tract and began to plow. He had problems with the tractor, left it in the field, and headed for the homeplace in the pickup to get another tractor. He failed to yield the right-of-way at an intersection approximately halfway home, and the pickup was struck by a motorcycle operated by Kenneth Vander Lugt, causing serious injuries to him.

Farm Bureau, which insured the pickup, tendered the maximum coverage under that policy to Vander Lugt. It also was the insurer under a farm liability policy, called Squire IV, owned by Kenneth Sandbulte and providing a maximum of $300,000 for bodily injury. The Squire IV excludes coverage for motor vehicles "while away from the insured premises or the ways immediately adjoining" and Farm Bureau contends this incident fell outside the policy coverage. In its general statement of coverage the policy provides:

COVERAGE M ...

This Company agrees to pay all reasonable medical expenses ... for each person who sustains bodily injury ....

2. if such bodily injury

(a) arises out of a condition in the insured premises or the ways immediately adjoining ....

(Emphasis added.) The emphasized language is also used in the policy's statement of exclusions:

This policy does not apply:

1. Under Coverages L and M:

a. to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of:

* * *

* * *

(2) any motor vehicle owned or operated by ... any insured while away from the insured premises or the ways immediately adjoining ....

"Insured premises" is defined as

the farm premises (including grounds and private approaches thereto) and the residence premises described in the Declarations of this policy ....

Sandbulte argues (1) that the site of the accident was on a "way immediately adjoining" its farm premises, thus entitling him to express policy coverage; if not expressly covered, he is still entitled to prevail, because this policy language was subject to different interpretations and, under our general rule, must be interpreted in the manner most favorable to the insured; (2) Farm Bureau impliedly warranted to him that he had coverage for this type of occurrence under his Squire IV policy; (3) coverage should be accorded under the principle of "reasonable expectations" and (4) in any event, this pickup was not a "motor vehicle" as that term is used in the policy. Farm Bureau asserts that interpretation of the "ways adjoining" language and "motor vehicle" definition in the policy were legal issues not binding upon this court on appeal. And, it argues, there was insufficient evidence for submission of Sandbulte's implied warranty and reasonable expectation theories to the jury.

I. The trial court submitted "special verdict" forms under which the jury was asked to respond whether "ways immediately adjoining" as used in the policy would to "(t)he ordinary person ... (include) the location of the automobile accident in this case." The jury indicated in response that the area of this accident was on a "way adjoining" the insured premises. Farm Bureau argues that the interpretation of this language was for the court, that it erred in allowing the jury to decide the issue, and that a proper interpretation of the phrase excludes coverage under the policy. Sandbulte counters that it was a fact issue properly submissible to the jury and that the issue was properly decided by it.

"Construction" of a contract, the process of determining its legal effect, is always a matter of law to be resolved by the court. "Interpretation", the process of determining the meaning of words used, is also a matter for the court to decide as a matter of law, unless it depends upon extrinsic evidence or a choice among reasonable inferences to be drawn from it. Connie's Construction Co. v. Fireman's Fund Insurance Co., 227 N.W.2d 207, 210 (Iowa 1975); C & J Fertilizer, Inc. v. Allied Mutual Insurance Co., 227 N.W.2d 169, 172 (Iowa 1975); General Casualty Co. v. Hines, 261 Iowa 738, 745, 156 N.W.2d 118, 122-23 (1968).

No extrinsic evidence bearing on the interpretation of the phrase "ways immediately adjoining" was submitted in the trial court. The insured, who was not even aware of the language used until after the accident, argued only that the phrase was susceptible to two meanings and that he was entitled to the one most favorable to him; the insurer argued only that the phrase was clear on its face. Because no extrinsic evidence was submitted, the issue should have been resolved by the court as a matter of law, based upon its examination of the words used. Id. Rather than follow that procedure, however, the court submitted the issue to the jury. While this procedure did not comport with that prescribed by our cases for interpretation of contract language in the absence of extrinsic evidence, the real issue is whether the phrase was interpreted correctly. Because this was an issue of law, of course, the trial court's interpretation is not binding on appeal, Connie's Construction Co. v. Firemans Fund Insurance Co., 227 N.W.2d at 209, and we address that issue anew.

The insurance policy does not define the phrase in question. The words used, however, are commonly understood. "Adjoining" is defined as "touching or bounding at some point or on some line: near in space ...." Webster's Third New International Dictionary 27 (unabridged 1961); and "immediately" is defined as "without intermediary: in direct connection or relation ...." Id. at 1129. The combination of the words "immediately" with "adjoining" or "adjacent" has been held to be synonymous with actual contiguity, without any intervening space. See Long v. London & Lancashire Indemnity Co., 119 F.2d 628, 630 (6th Cir. 1941); Pickens v. Maryland Casualty Co., 141 Neb. 105, 108, 2 N.W.2d 593, 595 (1942). Sandbulte, in arguing that the phrase is susceptible to two interpretations and, therefore, the one favorable to him must be accepted, relies upon a well-established rule. See, e. g., State Farm Automobile Insurance Co. v. Malcolm, 259 N.W.2d 833, 836 (Iowa 1977); Central Bearings Co. v. Wolverine Insurance Co., 179 N.W.2d 443, 445 (Iowa 1970). However, the mere fact that parties disagree on the meaning of a phrase does not establish ambiguity for purposes of this rule. See Travelers Indemnity Co. v. Bohn, 460 S.W.2d 642, 645 (Mo.1970) (parties' conflicting interpretations of "ways immediately adjoining" does not establish ambiguity). The test is an objective one: Is the language fairly susceptible to two interpretations? Central Bearings Co. v. Wolverine Insurance Co., 179 N.W.2d at 445. We conclude it is not.

The phrase "ways immediately adjoining" is found frequently in general liability and "homeowners" insurance policies. See 7A J. Appleman, Insurance Law and Practice § 4500.02, at 191 (1979); G. Couch, Cyclopedia of Insurance Law § 44:303, at 718-19 (1964). It is considered to be unambiguous. See Appleman, supra § 4500.02, at 191; 11 Couch, supra § 44:303, at 718. Although our court has apparently never decided the issue, those cases addressing it agree: the phrase "ways immediately adjoining" is clear, and that the "way" upon which the incident occurs must touch or abut the insured premises at the point of the occurrence. See, e. g., United States v. Great American Indemnity Co., 214 F.2d 17, 19 (9th Cir. 1954) ("words 'immediately adjoining' are unequivocal and have a definite and certain meaning. 'Adjoining' used in its usual and ordinary sense means touching or contiguous, in contact with, as distinguished from lying near or adjacent."); Long v. London & Lancashire Indemnity Co., 119 F.2d at 629-30; Jones v. Globe Indemnity Co., 305 F.Supp. 242, 245 (E.D.Cal.1969); Travelers Indemnity Co. v. Bohn, 460 S.W.2d at 645-48; Pickens v. Maryland Casualty Co., 141 Neb. at 108, 2 N.W.2d at 595 (1942); Lendway v. Muse, 83 N.J.Super. 256, 260-61, 199 A.2d 391, 392-93 (1964); Carraco Oil Co. v. Mid-Continent Casualty Co., 484 P.2d 519 (Okl.1971); Sam Finley, Inc. v. Standard Accident Insurance Co., 41 Tenn.App. 417, 295 S.W.2d 819 (1956); ...