Fire Ins. Exch. v. Oltmanns

• Decision Date: 16 August 2012
• Docket Number: No. 20100462–CA.,20100462–CA.
• Citation: 2012 UT App 230,285 P.3d 802
• Parties: FIRE INSURANCE EXCHANGE, a reciprocal or inter-insurance exchange, Plaintiff and Appellee, v. Robert Allen OLTMANNS and Brady Blackner, Defendants and Appellants.
• Court: Utah Court of Appeals

285 P.3d 802

2012 UT App 230

FIRE INSURANCE EXCHANGE, a reciprocal or inter-insurance exchange, Plaintiff and Appellee,

v.Robert Allen OLTMANNS and Brady Blackner, Defendants and Appellants.

No. 20100462–CA.

Court of Appeals of Utah.

Aug. 16, 2012.

Alan W. Mortensen, Paul M. Simmons, and Donald L. Dalton, Salt Lake City, for Appellants.

Aaron Alma Nelson, Salt Lake City, for Appellee.

Before Judges McHUGH, VOROS, and ORME.

OPINION

ORME, Judge:

¶ 1 Robert Oltmanns and Brady Blackner appeal the decision of the district court granting Fire Insurance Exchange's motion for summary judgment. The court determined that the term “jet ski” as used in a homeowner's policy was unambiguous and effectively excluded coverage for claims arisingfrom the use of any and all personal watercraft. We reverse.

BACKGROUND

¶ 2 Oltmanns, the insured, and his friend Blackner were operating a Honda F–12 AquaTrax personal watercraft on a lake in southern Utah. This kind of personal watercraft is designed for use by a seated driver and up to two additional seated passengers. A lawsuit resulted from injuries sustained in an accident that occurred during this use, and Oltmanns tendered the defense to Fire Insurance Exchange, with whom he was insured under a homeowner's policy. The insurance policy contained the following exclusion from its liability coverage:

We do not cover bodily injury [that] ...

...

7. results from the ownership, maintenance, use, loading or unloading of:

a. aircraft

b. motor vehicles

c. jet skis and jet sleds or

d. any other watercraft owned or rented to an insured and which:

(1) has more than 50 horsepower inboard or inboard-outdrive motor power; or

(2) is powered by one or more outboard motors with more than 25 total horsepower; or

(3) is a sailing vessel 26 feet or more in length.

Exclusions 7c and d do not apply while jet skis, jet sleds or watercraft are stored....

¶ 3 Relying on this exclusion, the insurance company brought a declaratory judgment action against Oltmanns and Blackner, arguing that it had no duty to defend or indemnify Oltmanns or compensate Blackner because liability coverage was excluded by the above provision. The insurance company then moved for summary judgment, arguing that Oltmanns was operating a “jet ski,” which is merely a synonym for personal watercraft, and that the policy unambiguously excluded coverage for use of all such watercraft. Oltmanns argued that the exclusion did not apply because it was ambiguous, pointing out that “Jet Ski” is a registered trademark for a particular model of Kawasaki personal watercraft, which was not involved in the accident. The trial court granted the insurance company's motion for summary judgment, and this appeal followed.

ISSUE AND STANDARD OF REVIEW

¶ 4 Oltmanns and Blackner contend that the trial court erred in granting the insurance company's motion for summary judgment. A motion for summary judgment may be granted only when “there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law.” Utah R. Civ. P. 56(c). “Where the moving party would bear the burden of proof at trial, the movant must establish each element of his claim in order to show that he is entitled to judgment as a matter of law.” Orvis v. Johnson, 2008 UT 2, ¶ 10, 177 P.3d 600. Even “ ‘[w]here the party opposed to the motion submits no documents in opposition, the moving party may be granted summary judgment only ... if he is entitled to judgment as a matter of law.’ ” Ward v. Graydon, 2011 UT App 358, ¶ 15, 264 P.3d 764 (emphasis and omissions in original) (quoting Olwell v. Clark, 658 P.2d 585, 586 (Utah 1982)), cert. denied,275 P.3d 1019 (Utah 2012). A trial court's ruling on summary judgment presents a question of law. See Massey v. Griffiths, 2007 UT 10, ¶ 8, 152 P.3d 312. The court's “legal conclusions and ultimate grant or denial of summary judgment are reviewed for correctness.” Id. Also, “[i]nterpretation of an insurance contract presents a question of law” and we “accord the trial court's legal conclusions regarding the contract no deference but review them for correctness.” Bear River Mut. Ins. Co. v. Williams, 2006 UT App 500, ¶ 7, 153 P.3d 798 (citations and internal quotation marks omitted).

ANALYSIS

¶ 5 The insurance company argues that its use of the term “jet ski” was intended to refer to any and all personal watercraft. It contends that “jet ski” is common vernacular for such and thus is not ambiguous. Before we attempt to understand what “jet ski” means for purposes of this contract, however, it is helpful to review the rules governing contract interpretation, particularly in the insurance contract context.

¶ 6 “Insurance policies are generally interpreted according to rules of contract interpretation.” Utah Farm Bureau Ins. Co. v. Crook, 1999 UT 47, ¶ 5, 980 P.2d 685. Because “an insurance policy is a classic example of an adhesion contract,” Utah courts have long held that “ ‘insurance policies should be construed liberally in favor of the insured and their beneficiaries so as to promote and not defeat the purposes of insurance.’ ” United States Fidelity & Guar. Co. v. Sandt, 854 P.2d 519, 521–22 (Utah 1993) (quoting Richards v. Standard Acc. Ins. Co., 58 Utah 622, 200 P. 1017, 1020 (1921)). “It follows that ambiguous or uncertain language in an insurance contract that is fairly susceptible to different interpretations should be construed in favor of coverage” and “provisions that limit or exclude coverage should be strictly construed against the insurer.” Id. at 522–23. In strictly construing exclusions, we give them effect only when they use “language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided.” Crook, 1999 UT 47, ¶ 5, 980 P.2d 685 (citations and internal quotation marks omitted).

¶ 7 When faced with ambiguity in a written contract, courts do not interpret the provision to comport with what they think is most sensible or is most likely what one of the parties “really” meant or is what leads to the fairest result. Rather, they recognize the need to consider extrinsic evidence in an effort to resolve the ambiguity. See Wilburn v. Interstate Electric, 748 P.2d 582, 584–85 (Utah Ct.App.1988). If the extrinsic evidence is not conclusive, then the last resort in contract interpretation is to construe the provision against the drafter. See id. at 585 (“Once a contract is deemed ambiguous, the next order of business is to admit extrinsic evidence to aid in interpretation of the contract. It is only after extrinsic evidence is considered and the court is still uncertain as to the intention of the parties that ambiguities should be construed against the drafter.”) (footnote omitted).

¶ 8 As a practical matter, though, there is a different protocol in the case of insurance and surety contracts, where it is seen as appropriate to jump immediately to what is usually viewed as the “last resort,” “tie-breaker” rule of interpretation, namely construction against the drafter. See id. at 585 & n. 2. This is due to the probable dearth of relevant extrinsic evidence in these contexts. See id. (noting that while the usual rule is that extrinsic evidence must be considered before turning to the rule of construction that calls for ambiguities to be construed against the drafter, there are “arguable exceptions” in the case of insurance and surety contracts that “may be explained, at least in part, by the fact that such contracts are ordinarily not preceded by discussion or negotiation of specific terms and, thus, absent meaningful extrinsic evidence as to intent, recourse must be had directly to the maxim that ambiguities should be construed against the drafter”). As noted above, construction against the insurer is especially appropriate when an ambiguous term appears in an exclusionary provision because such provisions are “strictly construed against the insurer.” Sandt, 854 P.2d at 523.

¶ 9 In the case at hand, it may be true that the insurer meant, through its use of the term “jet ski,” to exclude from coverage all varieties of personal watercraft. And we are confident that the insurer did not intend to refer only to a particular Kawasaki model of personal watercraft, even though there is such a model named Jet Ski. But the provision in question is not a model of clarity and at least one additional interpretation is entirely possible. Another common use of the term “jet ski” is in reference to the stand-up variant of personal watercraft, in contradistinction to the sit-down variety, known colloquially—and also imprecisely—as wave runners. The subject is well-illuminated in that great repository of contemporary wisdom, Wikipedia: ¹

Jet Ski is the brand name of a personal watercraft manufactured by Kawasaki Heavy Industries. The name is sometimes mistakenly used by those unfamiliar with the personal watercraft industry to refer to any type of personal watercraft; however, the name is a valid trademark registered with the United States Patent and Trademark Office, and in many other countries. The term “Jet Ski” (or JetSki, often shortened to “ Ski ”) is often mis-applied to all personal watercraft with pivoting handlepoles manipulated by a standing rider; these are properly known as Stand-up PWCs. The term is often mistakenly used when referring to WaveRunners, but WaveRunner is actually the name of the Yamaha line of sit-down PWCs, whereas “Jet Ski” refers to the Kawasaki line.

Jet Ski, http:// en. wikipedia. org/ wiki/ Jet_ ski (last visited August 13, 2012) (footnotes omitted).

¶ 10 Basically, then, the insurer was imprecise in using the term “jet ski” in its policy. Even discounting the bizarre possibility that it meant to refer only to one Kawasaki watercraft model, it still cannot be definitively said what the insurer intended: Did it mean all manner of personal watercraft? Or did it mean only the stand-up...