Fire Ins. Exch. v. Oltmanns
| Decision Date | 21 November 2017 |
| Docket Number | No. 20160304,20160304 |
| Citation | 2017 UT 81 |
| Parties | FIRE INSURANCE EXCHANGE, Appellee, v. ROBERT ALLEN OLTMANNS, Appellant. |
| Court | Utah Supreme Court |
This opinion is subject to revision before final publication in the Pacific Reporter
On Certiorari to the Utah Court of Appeals
Second District, Farmington
The Honorable Glen R. Dawson
Attorneys:
Stewart B. Harman, Joel D. Taylor, Salt Lake City, for appellee
Donald L. Dalton, Salt Lake City, for appellant
INTRODUCTION
¶1 Robert Oltmanns was named as a defendant in a personal injury case. He filed a claim with his insurer, Fire Insurance Exchange, who questioned whether the claim was covered under the policy. Rather than deny the claim outright, Fire Insurance brought a declaratory judgment action to determine whether the claim was covered under Mr. Oltmanns's policy. The court of appeals ultimately held that it was covered, and Mr. Oltmanns filed a counterclaim seeking attorney fees for the declaratory judgment action, arguing that it was brought in bad faith. The question presented for this court is whether the court of appeals erred in concluding that Fire Insurance's denial of Mr. Oltmanns's insurance claim was "fairly debatable," thus negating Mr. Oltmanns demand for attorney fees and expenses for the coverage dispute and appeal. We affirm the court of appeals' decision to uphold the summary judgment of the district court.
¶2 In 2006, Mr. Oltmanns was piloting a Honda F-12 AquaTrax personal watercraft that was towing Mr. Oltmanns's brother-in-law, Brady Blackner. Mr. Blackner sustained injuries, and filed a lawsuit against Mr. Oltmanns. Mr. Oltmanns tendered the defense to Fire Insurance Exchange under his homeowner's insurance policy. The insurance policy contains the following provision under Section II - Liability, Coverage E - Personal Liability:
We pay those damages which an insured becomes legally obligated to pay because of bodily injury, property damage or personal injury resulting from an occurrence to which this coverage applies. . . . At our expense and with attorneys of our choice, we will defend an insured against any covered claim or suit. We are not obligated to pay defense costs, including attorneys' fees of any claim or suit where you select an attorney not chosen by us because there is a dispute between you and us over coverage. We may investigate and settle any claim or suit that we consider proper. Our obligation to defend any claim or suit ends once we have paid our limit of liability.
In the same liability section of the insurance contract, in a subsection titled "Additional Coverages," Fire Insurance agrees to pay "[i]n addition to the limits of liability . . . all costs we incur in the settlement of a claim or defense of a suit with attorneys of our choice."
¶3 Fire Insurance conducted an in-house review of Mr. Oltmanns's claim and then submitted his claim to outside counsel for a coverage opinion. Whether the accident was deemed covered was uncertain because of the following exclusion in its liability coverage:
¶4 Fire Insurance also asked Mr. Oltmanns's attorney to continue to represent him, indicating that Fire Insurance might reimburse him for his fees and expenses should the accident be deemed a covered occurrence. Fire Insurance's outside counsel advised Fire Insurance that he believed there was a high probability that the incident would not be covered, but that Fire Insurance should authorize him to file a declaratory judgment action seeking a determination of its responsibility to Mr. Oltmanns under the policy. He advised this course of action because "[u]nder Utah law, a liability insurance carrier's duty to defend is broader than its duty to indemnify," and "[i]t would be dangerous to simply deny coverage because Mr. Blackner and Mr. Oltmanns may enter into an agreement to stipulate to a large judgment and Mr. Oltmanns could then assign his claims against Fire Insurance Exchange to Mr. Blackner."
¶5 Fire Insurance filed the action and then moved for summary judgment. The district court ruled in favor of Fire Insurance, finding that the exclusion precluded coverage. Mr. Oltmanns appealed and the court of appeals reversed, holding that the term "jet ski" as used in the exclusion was ambiguous and construed the contract against the insurer in favor of the insured. Fire Ins. Exch. v. Oltmanns, 2016 UT App 54, ¶ 5, 370 P.3d 566. Fire Insurance then settled with Mr. Blackner for the policy limit of $300,000 and paid Mr. Oltmanns's attorney fees and expenses for his defense of that claim.
¶6 Fire Insurance did not pay for Mr. Oltmanns's costs of defending the declaratory judgment action. Mr. Oltmanns then filed a counterclaim against Fire Insurance in the still open declaratory judgment action seeking "damages for breach of the implied covenant [of good faith and fair dealing], which include his attorney fees for prosecuting this coverage action and the successful appeal" as well as "damages for the severe emotional distress that was caused by the coverage denial and his self-defense of a significant personal injury claim." Fire Insurance once again moved for summary judgment and for a motion to dismiss. The district court granted summary judgment finding that Fire Insurance's actions were reasonable because the coverage issue was "fairly debatable." Fire Insurance then withdrew its motion to dismiss. Mr. Oltmanns appealed and the court of appeals affirmed the district court, holding that "when an insurance company proceeds in a reasonable way to resolve a difficult coverage question, its eventual loss at the appellate level does not foreclose a determination that an issue of interpretation was fairly debatable, as was the case here." Id. ¶ 15.
¶7 This case comes before us on certiorari review from the court of appeals decision. Orvis v. Johnson, 2008 UT 2, ¶ 6, 177 P.3d 600 (citation omitted). "We review the district court's grant of summary judgment for correctness." Torian v. Craig, 2012 UT 63, ¶ 13, 289 P.3d 479 (citation omitted). Under Utah Rule of Civil Procedure 56, we view any facts and any reasonable inferences "in the light most favorable to the party opposing summary judgment." Farmers Ins. Exch. v. Call, 712 P.2d 231, 237 (Utah 1985) (citation omitted).
¶8 In both his trial- and appellate-level briefing, Mr. Oltmanns advanced the same basic argument: because it wasn't "fairly debatable" whether the term "jet ski" encompassed a Honda F-12 Aquatrax (in Mr. Oltmanns view, it obviously did not), Fire Insurance breached its duty to Mr. Oltmanns by seeking a declaratory judgment that the "jet ski" exclusion in Mr. Oltmanns's insurance policy encompassed bodilyinjuries resulting from the use of that jet-ski-like watercraft. As Mr. Oltmanns has put it:
[Fire Insurance] relied on the advice of counsel [that an Aquatrax would be encompassed by the "jet ski" policy exclusion] in refusing the tender of defense. However, the advice was patently flawed. Therefore, the claim was not "fairly debatable," and [Fire Insurance] breached the insurance contract and the implied duty of good faith [and] fair dealing.
¶9 On Mr. Oltmanns's account of the governing law, then, whether Fire Insurance breached its duties to Mr. Oltmanns turned entirely on whether the "jet ski" exclusion's applicability to an Aquatrax was fairly debatable: If it was fair for Fire Insurance to argue that the "jet ski" exclusion encompassed an Aquatrax then there was no breach; otherwise, according to Mr. Oltmanns, there was.
¶10 Mr. Oltmanns's argument fails on its own terms. It was more than fair for Fire Insurance to argue that its policy's "jet ski" exclusion applied to bodily injuries resulting from the use of an Aquatrax. In litigating whether the "jet ski" exclusion encompassed Aquatrax accidents, Fire Insurance put forward substantial usage evidence suggesting that the term "jet ski" is, in Fire Insurance's words, a "genericized term for any type of personal watercraft." Fire Insurance's argument is bolstered by the fact that "jet ski" is frequently treated as a generic term in cases, ordinances, and dictionaries1 The citeddictionaries, ordinances, and cases show that the public uses the trademarked term "jet ski" generically, at least on occasion. That suggests that the scope of the term may be fairly debatable.
¶11 That conclusion is also confirmed by the context of the "jet ski" exclusion in the insurance policy. The governing language excludes injury resulting from "the ownership, maintenance, use, loading or unloading of aircraft, motor vehicles, jet skis and jet sleds, or any other watercraft owned or rented to an insured." (numbering omitted). With the exception of jet ski, each of the excluded terms unambiguously refers to the generic name for a category of items. None refers to a specific brand. This supports a generic reading of "jet ski" under the noscitur a sociis canon of construction. See ...
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