Fillmore v. Iowa Nat. Mut. Ins. Co., C3-83-1612

• Citation: 344 N.W.2d 875
• Decision Date: 15 February 1984
• Docket Number: No. C3-83-1612,C3-83-1612
• Parties: Irene FILLMORE and Richard Fillmore, City of St. Paul, a municipal corporation, Joan C. O'Brien, Special Representative of the Estate of John J. O'Brien, deceased, and Shelly Ann Woller, Appellants v. IOWA NATIONAL MUTUAL INS. CO., Respondent.
• Court: Court of Appeals of Minnesota

Page 875

344 N.W.2d 875

Irene FILLMORE and Richard Fillmore, City of St. Paul, a municipal corporation, Joan C. O'Brien, Special Representative of the Estate of John J O'Brien, deceased, and Shelly Ann Woller, Appellants v. IOWA NATIONAL MUTUAL INS. CO., Respondent.

No. C3-83-1612.

Court of Appeals of Minnesota.

Feb. 15, 1984.

Syllabus by the Court

There is no duty under a homeowner's policy to defend or indemnify victims of an automobile accident, based upon negligent entrustment, supervision, or control of the driver, a minor son of the insureds.

Claims of negligent supervision and negligent entrustment are all within the ambit of the language "arising out of the use" of a motor vehicle and therefore fall within the exclusionary language of the policy.

Negligent entrustment is part of the tort of negligent use and operation of the entrusted automobile, and in this case there is no independent act that was not auto-related.

Thomas Germschied, St. Paul for Richard and Irene Fillmore.

Edward P. Starr, City Atty., and Jane Hogan, Asst. City Atty., City of St. Paul, St. Paul, for City of St. Paul.

Mark H. Gruesner, Minneapolis, for Joan O'Brien.

Sharon W. Rushton, Roseville, for Shelly Ann Woller.

Richard P. Mahoney, Minneapolis, for respondent.

Heard, considered and decided by PARKER, P.J., and WOZNIAK and LANSING, JJ.

OPINION

WOZNIAK, Judge.

This is an appeal from a declaratory judgment determining that the homeowner's policy issued by Iowa Mutual to the defendants Donald Lunzer and Nancy Lunzer did not provide coverage for claims made against Lunzers by the appellants alleging that Lunzers negligently entrusted an automobile owned by them to their son, Thomas D. Lunzer, and negligently failed to supervise and control his conduct in the operation thereof relative to an accident that occurred on April 16, 1981, causing damages sustained by the various appellants.

We affirm.

FACTS

Thomas Lunzer had drug and alcohol abuse problems. His parents, Donald and Nancy Lunzer, knew of his problems and that he, at times, drove while intoxicated. Nonetheless, they allowed him to use their car.

On April 16, 1981, Thomas took two of his friends for a ride in his parents' car. The ride ended tragically in an accident with a St. Paul police squad car. Thomas Lunzer, one of his passengers, Laura Lane, and one of the police officers, John J. O'Brien, were killed. Thomas' other passenger, Shelly Woller, and the other officer, Richard Fillmore, were seriously injured.

Several lawsuits were commenced and consolidated for trial in Ramsey County District Court. The plaintiffs John and Diane Fillmore, plaintiff Joan C. O'Brien, as trustee of the heirs of John J. O'Brien, and plaintiff City of St. Paul were granted leave to amend their respective complaints to add a cause of action against Donald and Nancy Lunzer.

The causes of action are substantially the same in each action. The plaintiffs claim that the Lunzers caused the accident by negligently entrusting their automobile to their son. One source of recovery sought by the appellants is the Lunzers' homeowner's insurance.

At the time of the accident, Iowa Mutual insured the Lunzers under a homeowner's policy. The policy contained a motor vehicle exclusion. The exclusion was worded as follows:

SECTION II--EXCLUSIONS

1. COVERAGE E--Personal Liability and Coverage F--Medical Payments to Others do not apply to bodily injury or property damage:

* * *

* * *

e. arising out of the ownership, maintenance, use, loading or unloading of:

* * *

* * *

(2) a motor vehicle owned or operated by, or rented or loaned to any insured;

Iowa Mutual commenced a declaratory judgment action alleging that, based upon the above exclusion, it had no duty to either defend or indemnify the Lunzers against the claims of negligent entrustment and negligent control and supervision of their son, Thomas Lunzer. Iowa Mutual admitted, for the purposes of the declaratory action, that the allegations against the Lunzers with respect to negligent control and entrustment were true. Therefore, there were no genuine issues of material fact as to the claim, and the trial court was left with the question of law as to whether or not Iowa Mutual had a duty to defend and indemnify the Lunzers under the terms of the homeowner's policy.

The trial court granted Iowa Mutual's motion for summary judgment. The court found that the homeowner's policy did not provide coverage and therefore, Iowa Mutual had no obligation to defend or indemnify the Lunzers. ¹

ISSUE

Under terms of the homeowner's policy, is Iowa National obligated to defend and indemnify their insureds, Nancy and Donald Lunzer, for injuries sustained that were alleged to be caused by the Lunzers' negligent control, supervision of, and entrustment of an automobile to their minor son, Thomas Lunzer?

ANALYSIS

Insurance policies are similar to other contracts; they are matters of agreement by the parties and the function of a court is to determine what the agreement was and enforce it. If the terms of the policy are plain and unambiguous, their plain meaning should be given effect. Gabrelcik v. National Indem. Co., 269 Minn. 445, 447; 131 N.W.2d 534, 536 (1964). When a policy contains an ambiguity, it is to be construed in favor of the insured and against the insurer. Farmers and Merchants State Bank v. St. Paul Fire and Marine Ins. Co., 309 Minn. 14, 242 N.W.2d 840 (1976). Here, the question is whether negligent entrustment of an automobile arises out of ownership of a vehicle.

Some jurisdictions have found that coverage exists under a homeowner's policy for the negligent entrustment of a motor vehicle. According to the reasoning used in those cases, the act of negligently entrusting a motor vehicle is distinct from the ownership, maintenance, operation or use of the motor vehicle and therefore the policy exclusion does not apply. Douglass v. Hartford Ins. Co., 602 F.2d 934 (10th Cir.1979); Upland Mut. Ins., Inc. v. Noel, 214 Kan. 145, 519 P.2d 737 (1974); McDonald v. Home Ins. Co., 97 N.J.Super. 501, 235 A.2d 480 (1967).

A number of recent decisions, however, have reached the opposite conclusion. They have done so after concluding that negligent entrustment of a motor vehicle, as a cause of action, is derived from the more general concepts of ownership, use or operation of a motor vehicle. According to the reasoning in these decisions, although the act of negligently entrusting a motor vehicle is an essential element of the tort, liability giving rise to the tort is not actually triggered until the motor vehicle is used in a negligent manner, resulting in injury. They reason that since the accident occurred off the homeowner's premises and resulted from the use or operation of a motor vehicle, the clear language of the exclusionary clause disavows coverage. Cooter v. State Farm Fire & Cas. Co., 344 So.2d 496 (Ala.1977); State Farm Fire & Cas. Co. v. McGlawn, 84 Ill.App.3d 107, 39 Ill.Dec. 531, 404 N.E.2d 1122 (1980); Barnstable County Mut. Fire Ins. Co. v. Lally, 374 Mass. 602, 373 N.E.2d 966 (1978); Great Cent. Ins. v. Roemmich, 291 N.W.2d 772 (S.D.1980).

It is this latter position which the trial court, in essence, adopted. We agree. Generally, a homeowner's liability policy does not include use of an automobile:

Liability insurance is generally written for a specific hazard in order to enable the underwriter to calculate premiums on some equitable as well as predictable basis. As a result, the hazard to be covered under each policy is carefully defined and other hazards are excluded ... and unless the automobile hazard is included in the general liability policy, use of automobiles is excluded, or only covered within a narrow limit such as on premises.

Appleman, Insurance Law & Practice § 4500.04 (1979). This is consistent with the public policy of having separate policies for automobile and homeowner's liability. If the coverages overlap, coverage costs more without a proportionate improvement in coverage. Torbert v. Anderson, 301 Minn. 339, 222 N.W.2d 341 (1974); Bankert v. Threshermen's Mut. Ins. Co., 105 Wis.2d 438, 445, 313 N.W.2d 854, 858 (App.1981).

The Minnesota Supreme Court previously has allowed recovery under a homeowner's policy for negligent entrustment of a vehicle to a child. In Republic Vanguard Ins. Co. v. Buehl, 295 Minn. 327, 204 N.W.2d 426 (1973), defendant John Buehl, minor son of Leonard and Betty Buehl, struck and injured a pedestrian with his motorcycle. The injured pedestrian instituted a personal injury action against both the parents and the son, alleging that the parents knew of their son's dangerous driving habits and of the necessity to control him, and that they were negligent in permitting their son to operate the motorcycle.

The homeowner's insurer declined to defend the action on the grounds that under the following motor vehicle exclusion contained in the policy, coverage did not extend to accidents of this type. The policy provided: "This policy does not apply: ... to the ownership, maintenance, operation, use, loading or unloading of (1) automobiles ...."

The Minnesota Supreme Court held that under the above language, a separate claim of negligent entrustment against the parents did not arise out of any of those excluded acts, i.e., ownership, maintenance, operation, use, loading or unloading, and therefore the homeowner's insurer had a contractual obligation to defend the Buehls.

Since Buehl, insurers have broadened the language of the exclusion. The Minnesota Supreme Court recognized this difference in Faber v. Roelefs, 311 Minn. 428, 250 N.W.2d 817 (1977). Faber involved a student who was injured by a school bus. The jury found the school 25 percent negligent, the school district 20 percent negligent for its actions in establishing bus routes and 20 percent negligent for its bus loading and unloading procedures, and the plaintiff 35 percent negligent. The school district had a general...