Garrick v. Northland Ins. Co.

• Decision Date: 31 May 1991
• Docket Number: No. C0-90-100,C0-90-100
• Citation: 469 N.W.2d 709
• Parties: Emmett GARRICK, et al., Respondents, v. NORTHLAND INSURANCE CO., Petitioner, Appellant, Athena Assurance Company, Respondent, The Omaha Indemnity Co., Petitioner, Respondent.
• Court: Minnesota Supreme Court

Page 709

469 N.W.2d 709

Emmett GARRICK, et al., Respondents, v. NORTHLAND INSURANCE CO., Petitioner, Appellant Athena Assurance Company, Respondent The Omaha Indemnity Co., Petitioner, Respondent.

No. C0-90-100.

Supreme Court of Minnesota.

May 31, 1991.

Syllabus by the Court

1. The absence of an "other insurance" clause in one of three applicable insurance policies does not mandate a finding that such policy is primary. This court analyzes priority in light of total policy insuring intent as determined by the primary policy risks and the primary function of each policy.

2. Policy endorsement allowing multiplication of coverage is not ambiguous and, therefore, limit of insurer's liability is the sum of the limits applicable to each covered vehicle.

3. Party is not entitled to attorney fees and costs, pursuant to Minn.Stat. Sec. 555.08 (1990), incurred in bringing a declaratory judgment action to establish coverage.

Louis A. Dovre, David M. Bolt, Rider, Bennett, Egan & Arundel, Minneapolis, for appellant.

Charles B. Bateman, Halverson, Watters, Bye, Downs, Reyelts & Bateman, Ltd., Duluth, for Athena.

Dexter O. Corliss, Clarance Hagglund, Hagglund Law Firm, Minneapolis, for Omaha.

Robert C. Falsani, Falsani, Balmer, Berglund & Merritt, Duluth, for Garrick.

Heard, considered and decided by the court en banc.

YETKA, Justice.

This case involves the priority of three policies of insurance providing the insured with uninsured motorists coverage. We reverse in part the holdings of the court of appeals and reinstate in part the holdings and findings of the trial court.

An outline of the facts in this case is required for a proper disposition. Respondents, Emmett and Kathleen Garrick, commenced a declaratory judgment action to recover, among other things, uninsured motorist benefits from three insurance carriers--respondent, Athena Assurance Company (Athena); appellant/petitioner, Northland Insurance Company (Northland); and respondent/petitioner, Omaha Indemnity Company (Omaha)--by reason of injuries sustained by Emmett Garrick when his semitruck and trailer struck an uninsured motorist. The trial court found coverage by all three insurers in the following order: the first $50,000 of coverage from Northland under its coverage for the trailer involved in the accident; the second $50,000 from Athena under its coverage of the tractor involved in the accident; the remaining $200,000 of coverage from Northland based on its coverage of the tractor and other vehicles; and, finally, from Omaha for its coverage of the Garricks' automobiles. The trial court denied the Garricks' claim for attorney fees.

The court of appeals reversed the trial court's order of priority and held that Omaha had primary, Athena secondary, and Northland tertiary coverage. The court also reversed and allowed the Garricks attorney fees as to Northland. Finally, the court of appeals upheld the multiplication of Northland's uninsured motorist coverage. Garrick v. Northland Ins. Co., 460 N.W.2d 920 (Minn.App.1990). All three insurance companies appealed. However, this court granted review only to Northland and Omaha; Athena's petition was denied.

The accident at issue occurred on October 17, 1984, when a semitruck owned and operated by Emmett Garrick struck an uninsured motorist. The truck was a 1958 Hendrickson tractor and was hauling an empty trailer from St. Cloud to Duluth. Garrick swerved to miss a stalled car, but the rear of the trailer struck it. Garrick claims injuries from the accident.

At the time of the accident, Garrick owned the Hendrickson tractor. He bought it from Donald Youngdahl, d/b/a D & D Transport, for whom Garrick had previously done some driving. At the trial, only Garrick testified. The depositions of Donald Youngdahl and his insurance agent, Duane Wolff, were admitted into evidence. According to Youngdahl's deposition testimony, he sold Garrick the Hendrickson tractor so Garrick could begin working as a truck driver.

After the sale of the truck, Garrick and Youngdahl entered into a lease agreement. Such lease agreements are common in the trucking industry. Generally, the driver/owner will lease his/her tractor to the motor carrier so the driver/owner can operate under the motor carrier's "operating authority." This operating authority must be obtained from both the Interstate Commerce Commission and the Minnesota Department of Public Services when hauling nonexempt commodities.

The lease agreement executed by Garrick and Youngdahl in this case is not very helpful. It appears that their names under the titles "lessee" and "lessor" have been transposed. The agreement also states that the lessee (which was Youngdahl according to the agreement) will obtain insurance on the tractor. In contrast, deposition testimony indicates that Garrick and Youngdahl intended Garrick to obtain the insurance coverage for the Hendrickson tractor. Furthermore, as Youngdahl stated regarding the lease agreement, "We just wrote it up so he'd [Garrick] have an agreement in the truck. We didn't really go by it." The parties seem to agree that the language of the lease is not important for a determination of this case.

At the time of the accident, the Hendrickson tractor was covered under Youngdahl's Northland insurance policy. The Hendrickson tractor was also listed on Garrick's Athena policy obtained through Youngdahl's insurance agent, Duane Wolff. Garrick testified that, at the time he obtained insurance coverage for the Hendrickson tractor, he told Duane Wolff that the tractor no longer needed to be covered by Youngdahl. Wolff did not remove the Hendrickson from coverage, nor did Youngdahl direct him to do so.

The Athena and Northland policies contain nearly identical "other insurance" provisions. Both "other insurance" provisions are primary/excess-type clauses, providing primary coverage for any covered auto owned by the insured and excess coverage for any covered auto hired or borrowed by another from the insured.

At the time of the accident, the Garricks had a policy issued by Omaha on their two private autos. The Omaha policy originally contained an "other insurance" clauses providing for pro rata coverage. However, this "other insurance" provision was deleted by an Omaha endorsement. No substitute provision was provided in its place.

The issues on this appeal are:

I. Does the absence of an "other insurance" clause leave Omaha as the primary uninsured motorist carrier?

II. Does the language of the Northland policy allow for the multiplication of coverages?

III. Are the Garricks entitled to attorney fees and costs incurred in bringing the declaratory judgment action to establish coverage?

Interpretation of an insurance policy is a question of law. A reviewing court is not bound by the lower court's determination. Iowa Kemper Ins. Co. v. Stone, 269 N.W.2d 885, 887 (Minn.1978). Thus, this court may examine de novo the language and insuring intent of the policies at issue here.

The court of appeals held that Omaha provides primary uninsured motorists coverage, Athena secondary, and Northland tertiary. ¹ Garrick, 460 N.W.2d at 925. The court of appeals found that apportionment could be made without violating any terms of the various policies. It reasoned that, since Omaha deleted its "other insurance" provision, it became the primary insurer. As between Athena and Northland, their policies contain functionally equivalent "other insurance" provisions. According to the court of appeals, the Athena policy provides secondary coverage on the Hendrickson tractor (the covered auto its insured, Garrick, owns), and the Northland policy provides tertiary (or excess) coverage on the Hendrickson tractor (the covered auto its insured, Youngdahl, did not own, but leased from Garrick). Id.

Omaha contends that the court of appeals erred by relying on the absence of the "other insurance" clause without reviewing the total policy insuring intent of the three policies at issue.

As a general rule, "an insurance policy is a contract and the rights of the contracting parties are determined by the terms of the policy." Farkas v. Hartford Accident and Indem. Co., 285 Minn. 324, 327, 173 N.W.2d 21, 24 (1969). Regarding "other insurance" clauses, this court, in Integrity Mutual Insurance Co. v. State Automobile & Casualty Underwriters Insurance Co., 307 Minn. 173, 239 N.W.2d 445 (1976), stated the following:

When it is clear that two or more companies are among themselves liable to the insured for his loss but the apportionment among the companies cannot be made without violating the other insurance clause of at least one company, then the courts must look outside the policies for rules of apportionment.

Id. at 174-75, 239 N.W.2d at 446.

Here, however, there is no Omaha "other insurance" provision to conflict with the Athena and Northland provisions. Nevertheless, Omaha argues that this court should not turn the absence of an "other insurance" clause into a "void" insulating Athena and Northland from the risk their commercial policies were designed to cover. Omaha looks to the following language to support its argument:

In Minnesota, this court does not simply look at the type of "other insurance" clauses involved. In [Integrity ], this court explained that the better approach was to "allocate respective policy coverages in light of the total policy insuring intent * * *."

* * * * * *

It appears to us that, in this case, rather than applying the three-part "closest-to-the-risk" test, it is more helpful to use the broader approach set out in Integrity of allocating respective policy coverages in light of the total policy insuring intent, as determined by the primary policy risks and the primary function of each policy.

Interstate Fire & Casualty Co. v. Auto-Owners Ins. Co., 433 N.W.2d 82, 85-86 (Minn.1988) (citing Integrity, 307 Minn. at 175, 239 N.W.2d at 446). Omaha contends that, since the Northland and Athena policies are designed...