Foster v. Johnstone

• Decision Date: 07 June 1984
• Docket Number: No. 14774,14774
• Citation: 107 Idaho 61,685 P.2d 802
• Parties: Jack W. FOSTER, Betha Foster, Rodney Scott Baldwin and Deborah Lynn Baldwin, Plaintiffs, Respondents, Cross-Appellants, v. Dave JOHNSTONE, individually and as an agent for the Prudential Insurance Company, Prudential Property and Casualty Insurance Company, a corporation, The Prudential Insurance Company of America, a corporation and Does III, IV and V, Defendants, Appellants, Cross-Respondents.
• Court: Idaho Supreme Court

Page 802

685 P.2d 802

107 Idaho 61

Jack W. FOSTER, Betha Foster, Rodney Scott Baldwin and Deborah Lynn Baldwin, Plaintiffs, Respondents, Cross-Appellants, v. Dave JOHNSTONE, individually and as an agent for the Prudential Insurance Company, Prudential Property and Casualty Insurance Company, a corporation, The Prudential Insurance Company of America, a corporation and Does III, IV and V, Defendants, Appellants, Cross-Respondents.

No. 14774.

Supreme Court of Idaho.

June 7, 1984.

Rehearing Denied Aug. 30, 1984.

Willis E. Sullivan, III, and David W. Cantrill, Cantrill, Skinner & Sullivan, Boise, for defendants, appellants, cross-respondents.

Ellison M. Matthews, Matthews & Wilson, Chartered, Boise, for plaintiffs, respondents, cross-appellants.

HUNTLEY, Justice.

Dave Johnstone (Johnstone), sales agent for the Prudential Insurance Company (Prudential), and Prudential Insurance appeal from jury verdicts in favor of Rodney and Deborah Baldwin, insureds under an automobile insurance policy with Prudential. The action arose out of a denial of policy coverage by Prudential for liability incurred by Deborah Baldwin when she collided with another vehicle while driving her father's truck.

About the 10th of February, 1976, the Baldwins purchased an automobile insurance policy from Prudential. Agent Johnstone went to the Baldwins' home, where the policy and its coverage were discussed. It is alleged by the Baldwins that Johnstone, upon being specifically questioned whether the policy would cover "any non-owned vehicle" the Baldwins might be driving, assured the Baldwins that it would. Johnstone testified he did not remember being asked if the coverage extended to any non-owned vehicle, but he did outline the basic coverage provisions for non-owned automobiles, namely that the policy "would cover them for any non-used [sic] automobile that they might borrow in case of breakdown or if they had to use somebody else's vehicle for a non-business type use."

About a year-and-a-half after they purchased the policy, Baldwins formed a partnership with Deborah Baldwin's parents, Mr. and Mrs. Foster, to go into the manure-spreading business. Each couple contributed a truck. The Baldwins' truck was not insured under their policy with Prudential. Baldwins owned another truck, also insured under a separate policy, which Rodney Baldwin used in his primary occupation of hauling gravel.

On October 27, 1978, Deborah Baldwin was working with her father in the partnership operation. They were spreading manure with the truck owned by her father. After the day's work was finished, Mr. Foster asked Deborah to take the truck back to his house so that he could have it serviced over the weekend. On the way, Deborah went through a stop sign and collided with another car. The driver of the other car was severely injured, and brought suit against the Fosters and Baldwins. As primary insurer of the Foster vehicle, Farmers Insurance participated in a settlement agreement to the limits of its policy. Baldwins sought recovery from Prudential for $45,000.00 they were required to pay under the terms of the agreement, but Prudential denied coverage.

The basis for Prudential's denial of coverage, and the focus of this action, is the policy's limitations on its non-owned vehicle coverage. Policy coverage for non-owned automobiles is restricted to automobiles "not owned by or furnished for the regular use of either the named insured or any relative, other than a temporary substitute automobile." Coverage is further restricted by an exclusion in the policy for any "non-owned automobile ... maintained or used by any person while such person is employed or otherwise engaged in "... (2) any ... business or occupation of the insured...." Prudential has maintained that there is no coverage because first, Fosters' truck was furnished for Deborah Baldwin's regular use (and consequently does not qualify as a "non-owned automobile"), and second, the truck was used in the Baldwin-Foster manure-hauling business.

After trial, the jury returned verdicts in favor of the Baldwins on the basis of coverage under the policy, and estoppel. We will first discuss the errors alleged with respect to the verdict based on coverage of the insurance policy.

I. Policy Coverage

Prudential contends that it was error for the trial court to find the insurance contract ambiguous as a matter of law. Whether language contained in an insurance policy is ambiguous is a question of law to be determined by the trial judge. Clark v. St. Paul Property & Liab. Ins. Cos., 102 Idaho 756, 639 P.2d 454 (1981). However, Prudential contends that the language in question in the instant case is not ambiguous. We agree. The particular language in question is that which defines non-owned automobile as an automobile "not owned by or furnished for the regular use of ... the named insured," and also that language which excludes from coverage any non-owned automobile which is "maintained or used" by anyone engaged in "any ... business or occupation of the insured...."

Coverage for non-owned automobiles under policy provisions similar to the one at issue has been a much litigated aspect of insurance law, particularly with respect to the term "regular use." See 83 A.L.R.2d 926 (1962); 86 A.L.R.2d 937 (1962); 8 A.L.R.4th 387 (1981). Respondents have cited several cases in support of their contention that the "regular use" language is ambiguous. To the extent that the cited cases stand for that proposition, and most do not, they represent a minority view. The overwhelming weight of authority supports the view that "regular use" and other similar language limiting the extent of coverage provided through non-owned vehicle clauses is not ambiguous. See Dairyland Ins. Co. v. Ward, 83 Wash.2d 353, 517 P.2d 966, 971-72 (1974) (Hamilton, J., dissenting; some 35 cases cited in support of the view, and only two cited as holding the language ambiguous); DiOrio v. New Jersey Mfrs. Ins. Co., 79 N.J. 257, 398 A.2d 1274 (1979). See also Highlands Ins. Co. v. Universal Underwriters Ins. Co., 29 Cal.App.3d 171, 154 Cal.Rptr. 683 (1979); Horridge v. Cooney, 405 So.2d 1276 (La.App.1981); Ins. Co. of North America v. Coffman, 52 Md.App. 732, 451 A.2d 952 (1982); Grinnell Mut. Reinsurance Co. v. Scott, 628 S.W.2d 355 (Mo.App.1981); Spaulding v. Concord Gen. Mut. Ins. Co., 122 N.H. 515, 446 A.2d 1172 (1982); Tollison v. Reaves, 277 S.C. 443, 289 S.E.2d 163 (1982); Benjamin v. Plains Ins. Co., 650 F.2d 98 (5th Cir.1981) (applying Texas law).

Respondents contend that "regular use" is ambiguous under our holding in Moss v. Mid-America Fire and Marine Ins. Co., 103 Idaho 298, 647 P.2d 754 (1982). The Moss case, however, involved an entirely different policy than the one here at issue. Mr. Moss had purchased commercial hauling coverage in connection with his farming operation. The policy included a "radius endorsement" which rendered the liability coverage ineffective if Mr. Moss made "regular or frequent" business trips outside a 300-mile radius of his home. The policy we are asked to construe today, however, is a common family automobile policy, and the particular language at issue is the standard version of "drive other cars" insurance coverage. That language has remained virtually unchanged for three decades. See Miller v. Farmers Mut. Automobile Ins. Co., 179 Kan. 50, 292 P.2d 711 (1956). See also DiOrio v. New Jersey Mfrs. Ins. Co., supra, 398 A.2d at 1277. There is a substantial body of law construing non-owned vehicle provisions similar or identical to the language at issue in the present case. Almost without exception courts have recognized the validity of these policy provisions. In the words of one court:

It is well established that the purpose of this provision creating an exception to coverage of non-owned vehicles in automobile insurance policies is to make certain that the insured properly pays premiums on all of the vehicles which are regularly used and therefore are covered by the policy. The non-owned exception, as well as other exceptions involving replacement cars, rental cars, etc., are designed as a convenience to the insured to enable coverage in the case of occasional and sporadic use of such vehicles. To cover a non-owned vehicle regularly used by an insured would cause the insurance company to have to insure vehicles for which the insured did not pay insured [sic] premiums. Benjamin v. Plains Ins., supra, 650 F.2d at 100.

Moreover, while the Court held in Moss that the phrase "regular or frequent" was ambiguous, the Court's determination was primarily concerned with the proper interpretation of such language in light of the facts in that case. The Court was persuaded of a need to submit to the jury the question of whether Mr. Moss's trips outside the 300-mile radius were "regular or frequent." The Moss Court quoted from State Farm Mut. Auto Ins. Co. v. Gudmunson, 495 F.Supp. 794, 797 N. 4 (D.Mont.1980):

"I think that the variants in the meaning of common words should be considered by the finder of fact--normally a jury. Words used in an insurance policy should be given the meaning which the community would generally give them. A jury chosen from the community is probably better equipped to apply community meanings than is a judge. Any effort to apply meanings as a matter of law simply results in the creation of endless distinctions or in a uniformity that is achieved by squeezing sets of facts into molds carefully tailored for other, but slightly different, sets of facts." 103 Idaho at 301-302, 647 P.2d at 757-58.

The Moss Court cited a number of cases wherein courts have held that the terms "regular" or "frequent" are not ambiguous but nevertheless present questions of fact to be decided by the trier of fact. 103 Idaho at 301-302, 647 P.2d at 757-58. This Court's holding in Moss, however, may have seemed to imply that under Idaho law the question of proper application of such provisions may...