Globe Indem. Co. v. Jordan

• Decision Date: 09 December 1993
• Citation: 634 A.2d 1279
• Parties: GLOBE INDEMNITY COMPANY v. Claudia JORDAN, et al.
• Court: Maine Supreme Court

Page 1279

634 A.2d 1279

GLOBE INDEMNITY COMPANY v. Claudia JORDAN, et al.

Supreme Judicial Court of Maine.

Argued Sept. 23, 1993.

Decided Dec. 9, 1993.

Christopher C. Taintor (orally), Norman, Hanson & Detroy, Portland, for plaintiff.

Marshall J. Tinkle (orally), Thompson, McNaboe, Ashley & Bull, Jennifer S. Begel, Friedman & Babcock, Christopher Dinan, Monaghan, Leahy, Hochadel & Libby, Portland, for defendants.

Before ROBERTS, GLASSMAN, CLIFFORD, COLLINS, RUDMAN and DANA, ^* JJ.

CLIFFORD, Justice.

Claudia Jordan and Keystone Insurance Company, defendants in this declaratory judgment action, appeal from a summary judgment entered in the Superior Court (Cumberland County, Lipez, J.) making determinations as to the obligations of Keystone and Globe Indemnity Company to defend and indemnify Jordan in an underlying lawsuit. Concluding that the Superior Court correctly decided the issues of coverage, and properly exercised its discretion in apportioning the costs of defense, we affirm the judgment.

On December 21, 1990, Cora Gervais was injured when, as a pedestrian, she was struck by a vehicle operated by Jordan in front of Dolby Funeral Chapel in Windham. At the time of the accident, Jordan was driving a car owned by Lee Dodge from its Westbrook location because she had left her own car to be repaired at the Lee Dodge location in Portland.

Cora Gervais and her husband Dennis Gervais brought the underlying suit against Jordan, Robert Dolby and the Dolby Funeral Chapel, Inc., and Lee Dodge. Globe, Lee Dodge's insurer, brought this declaratory judgment action to determine the obligations of Globe and Keystone to defend and indemnify Jordan in the Gervais lawsuit. Three insurance policies were identified as having potential obligations to defend and indemnify Jordan.

The Insurance Policies

1. The Globe Garage Policy:

Globe issued two insurance policies to Lee Dodge. The first is a "Garage policy" that provides coverage up to $500,000 per occurrence for Lee Dodge car drivers who qualify as "insureds." Section II.A.1.a of the Garage policy states that the following are "insureds" for covered "autos:"

(1) You [Lee Dodge] for any covered "auto."

(2) Anyone else while using with your permission a covered "auto" you own, hire, or borrow except:

....

(d) Your customers, if your business is shown in the Declarations as an "auto" dealership. However, if a customer of yours:

(i) Has no other available insurance (whether primary, excess or contingent), they are an "insured" but only up to the compulsory or financial responsibility law limits where the covered "auto" is principally garaged.

(ii) Has other available insurance (whether primary, excess or contingent) less than the compulsory or financial responsibility law limits where the covered "auto" is principally garaged, they are an "insured" only for the amount by which the compulsory or financial responsibility law limits exceed the limits of their other insurance.

2. The Globe Umbrella Policy:

The second policy Globe issued to Lee Dodge is an "Umbrella policy" that covered the same risks that the underlying Garage policy covered, up to $10 million per occurrence. The policy stated:

a. We will pay those sums, in excess of the amount payable under the terms of any underlying insurance, that the insured becomes legally obligated to pay as damages because of injury or damage to which this insurance applies, provided that the underlying insurance also applies, or would apply but for the exhaustion of its applicable limits of insurance.

....

The exclusions applicable to the underlying insurance also apply to this insurance.

(Emphasis in original.) "Underlying insurance" is defined in the Umbrella policy as "only the liability insurance coverage provided under policies shown in the Declarations or endorsed onto this policy."

3. The Keystone Policy:

Keystone is Jordan's liability insurer. Under its policy, Keystone would provide coverage up to $100,000 to Jordan when driving a car that is substituted for her own while her own is being repaired. The Keystone policy states that when other liability insurance applies, Keystone is obligated to pay only its share of the loss. "Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own shall be excess over any other collectible insurance."

In addition, Part A, section A of the Keystone policy addresses paying Jordan's defense costs, and provides that Keystone would settle or defend claims or suits and would pay all defense costs (in addition to limits of liability), but would not settle or defend once the limit of liability had been exhausted.

Globe initiated this declaratory judgment action. Defendants Jordan and Keystone counterclaimed against Globe, cross-claimed against the other defendants, ¹ and impleaded Lee Dodge as a third-party defendant, seeking declaratory relief on the same issues presented by Globe, i.e., the obligations of Globe and of Keystone to defend and indemnify Jordan in the underlying Gervais lawsuit. Jordan and Keystone (jointly) and Globe filed motions for summary judgment.

Jordan and Keystone argue that Globe's Garage policy provides primary coverage to Jordan and that Globe's Umbrella policy provides her with secondary coverage. They contend that coverage under Globe's Umbrella policy and the Keystone policy should be allocated in the same proportions as the limits of each policy, and that Globe should indemnify Keystone for Keystone's defense costs.

In entering a summary judgment, the court rejected the contentions of Jordan and Keystone. The court noted that the parties stipulated that Lee Dodge was an auto dealership, and determined that (1) Jordan was excluded from coverage under Globe's Garage policy by the customer exclusion clause; (2) under the Garage policy, Globe owed coverage to Jordan only to the minimum amount required by statute; (3) Jordan was not covered by Globe's Umbrella insurance policy; and (4) Keystone and Globe must contribute to the defense of Jordan in the underlying suit on an equitable basis in the same ratio as their obligations to indemnify. This appeal followed.

Because there is no dispute as to the material facts relevant to this appeal, the court properly entertained motions for a summary judgment, Lewiston Bottled Gas Co. v. Key Bank of Maine, 601 A.2d 91, 93 (Me.1992), and entered its declaratory judgment. The court's decision was based on an interpretation of the insurance policies. Unless it is ambiguous, construction of language in written documents is a question of law. See Northern Util., Inc. v. City of South Portland, 536 A.2d 1116, 1117 (Me.1988). Therefore, we review the Superior Court decision for errors of law. See Northern Util., 536 A.2d at 1117; see also Currier v. Cyr, 570 A.2d 1205, 1208 (Me.1990).

I. COVERAGE UNDER GLOBE'S GARAGE POLICY

Section II.A.1.a of the Garage policy provides coverage for anyone using, with Lee Dodge's permission, a covered "auto" except for "[Lee Dodge's] customers, if [the] business is shown in the Declarations as an 'auto' dealership." Although the policy provisions provide coverage for a customer whose other available insurance is less than that mandated by law, ² the plain language of the policy leads us to agree with the Superior Court that, because Jordan was a customer of Lee Dodge, and because Lee Dodge is shown in the declarations as an auto dealership, a fact stipulated to by the parties, Jordan is excluded from primary coverage.

Jordan and Keystone attempt to distinguish between Lee Dodge's business as an auto dealership and its rental business. They contend that Jordan was a customer not of the auto dealership, but rather of what they contend is a separate rental business with a separate location in Westbrook. Therefore, they argue, the exclusion for auto dealership customers does not apply. We are unpersuaded by that contention. The Garage policy covers Lee Dodge as a business entity. Lee Dodge is an automobile dealership, and is identified as such in the declarations. The rental of automobiles is an integral part of the business of automobile dealerships. Accordingly, because Jordan was Lee Dodge's customer, the Garage policy by its own terms provides no coverage for her use of the Lee Dodge vehicle.

Jordan and Keystone also contend that Jordan is covered under the Garage policy pursuant to Section II.B.7 that excludes from coverage:

Any covered "auto" while leased or rented to others. But this exclusion does not apply to a covered "auto" you rent to one of your customers while their "auto" is left with you for service or repair.

Jordan and Keystone rely on Stanfield v. Hartford Accident & Indem. Co., 581 So.2d 340 (La.Ct.App.1991) and Connecticut Indem. Co. v. Cordasco, 369 Pa.Super. 439, 535 A.2d 631 (1987). Those cases held that provisions similar to Section II.B.7 covered customers who left an auto for repair as exceptions from the general exclusion for customers of the auto dealership. We are unpersuaded, however, by the holdings in those cases because they are contrary to the basic principle of insurance law that coverage cannot be provided by an exclusion clause. An exclusion clause can "subtract from coverage" granted somewhere else in the policy; it alone cannot establish coverage. Peerless Ins. Co. v. Brennon, 564 A.2d 383, 387 (Me.1989). The Superior Court correctly construed Section II.A.1.a of the Garage policy to exclude coverage for Jordan because she was a customer; the exception from exclusion in Section II.B.7 cannot in and of itself create coverage that is not otherwise provided.

Nevertheless, 24-A M.R.S.A. § 2909 (1990) and 29 M.R.S.A. § 832 (Supp.1992) ³ require a certain level of coverage for Jordan even though the Garage policy excludes her by its terms. These statutory mandates ($20,000 per person, $40,000 per occurrence, $10,000 property damage) override any...