Grinnell Mut. Reinsurance Co. v. Center Mut. Ins. Co.

• Citation: 658 N.W.2d 363,2003 ND 50
• Decision Date: 26 March 2003
• Docket Number: No. 20020073.,20020073.
• Parties: GRINNELL MUTUAL REINSURANCE COMPANY, Plaintiff and Appellee, v. CENTER MUTUAL INSURANCE COMPANY, Defendant and Appellant.
• Court: United States State Supreme Court of North Dakota

658 N.W.2d 363

2003 ND 50

GRINNELL MUTUAL REINSURANCE COMPANY, Plaintiff and Appellee, v. CENTER MUTUAL INSURANCE COMPANY, Defendant and Appellant.

No. 20020073.

Supreme Court of North Dakota.

March 26, 2003.

Lawrence A. Dopson, Zuger Kirmis & Smith, Bismarck, N.D., for plaintiff and appellee.

Lawrence R. Klemin, Bucklin, Klemin & McBride, Bismarck, N.D., for defendant and appellant. MARING, Justice.

[¶ 1] Center Mutual Insurance Company ("Center") appealed from a declaratory judgment holding that an automobile insurance policy it issued to Steven R. Haskins provided coverage for injuries suffered by James D. Jones in an accident on Haskins' farm, and ordering Center to indemnify Grinnell Mutual Reinsurance Company ("Grinnell") for a settlement payment made by Grinnell to Jones and for a guaranty of payment made by Grinnell to the United States on Haskins' behalf. We conclude the trial court did not err in ruling Center's automobile insurance policy provided coverage for the accident, but did err in ruling the Grinnell policy did not provide coverage and in ordering Center to fully indemnify Grinnell with interest for the settlement. We also conclude the trial court erred in ordering Center to indemnify Grinnell with interest on its guaranty to the United States. We affirm in part and reverse in part.

I

[¶ 2] During 1990, Haskins owned a farm near Deering. On April 22, 1990, Haskins' friend, Jones, who served in the United States Air Force, was driving in the area and stopped at Haskins' farmstead. Jones spoke with Haskins' wife, who told him she was supposed to help Haskins move an inoperable John Deere tractor the family stored in a field. Jones offered to help Haskins instead. After finding Haskins, Jones "asked him if he needed help moving the tractor and he said yes." They drove in Haskins' 1970 Chevrolet pickup to the field where the tractor was located.

[¶ 3] Haskins took from the pickup toolbox a "light nylon rope" with a hook on one end and a braided loop on the other to hook up and tow the disabled tractor. Haskins wrapped the hooked end of the rope around the tractor axle, hooked the braided loop to the bumper hitch on the back of the pickup, and stuck a pin through the loop and through the bumper hitch. The tractor gear was placed in neutral and Jones steered the tractor while Haskins towed it with the pickup. While Haskins was towing the tractor with the pickup, he accelerated to take some slack out of the rope; the rope stretched, "the pin snapped out," and the rope snapped back striking Jones in the arm, severely injuring him. The trial court found: "The accident was caused by the fact there was no cauter [sic] pin inserted into the hole." Neither Center nor Grinnell disputed this finding on appeal. Jones was taken to the hospital at the Minot Air Force Base where he was hospitalized for 45 days and underwent seven surgeries on his arm.

[¶ 4] At the time of the accident, Haskins' pickup truck was covered by an automobile insurance policy issued by Center. Haskins also had a farm insurance policy issued by Grinnell, covering his farming operation. Haskins first notified Grinnell about the accident and notified Center after the United States requested the insurance policy number for the pickup truck. Center and Grinnell each concluded its policy did not provide coverage for the accident. After Center refused to contribute with Grinnell to a settlement of Jones's claim against Haskins, Grinnell paid Jones $25,000 and obtained a signed release from him on May 22, 1991. The United States also submitted to Center and Grinnell a $17,684 bill for medical services provided for Jones. Both companies refused to pay, and on April 20, 1993, the United States sued Haskins, Center, and Grinnell in federal district court to recover Jones's hospital and medical expenses under the Medical Care Recovery Act, 42 U.S.C. § 2651 et seq. After Center refused to participate with Grinnell in a settlement with the United States, Grinnell, in a June 10, 1993, letter to the United States, "guarantee[d] that the air force lien will be paid in full... to facilitate a determination of the issue of priority of coverage without the need to become involved in expensive litigation in the U.S. District Court action you have commenced."

[¶ 5] In August 1993, Grinnell began this declaratory judgment action against Center to resolve the insurance coverage dispute and to be reimbursed by Center. Depositions of Jones and Haskins were taken in May 1994. Although no formal guaranty agreement was executed by Grinnell and the United States, the federal district court action was dismissed with prejudice upon the United States' motion on October 7, 1994.

[¶ 6] The declaratory judgment action sat idle until Grinnell, represented by different counsel, moved for summary judgment against Center on July 31, 2001. Center responded with its own motion for summary judgment. The trial court granted Grinnell's motion, concluding Center's automobile policy rather than Grinnell's farm policy provided coverage for the 1990 accident, and Grinnell was entitled to reimbursement for the $25,000 it paid to Jones, plus six percent interest from the date of payment, and for the $17,684 Grinnell guaranteed to pay to the United States, plus six percent interest from the date of the guaranty.

[¶ 7] The trial court had jurisdiction under N.D. Const. art. VI, § 8, and N.D.C.C. §§ 27-05-06, 32-23-02, and 32-23-06. Center's appeal was timely under N.D.R.App.P. 4(a). This Court has jurisdiction under N.D. Const. art. VI, § 2, and N.D.C.C. §§ 27-02-04 and 28-27-01.

II

[¶ 8] Center argues the trial court erred in ruling its personal automobile insurance policy, rather than Grinnell's farm insurance policy, provided coverage for Jones's injuries.

[¶ 9] Summary judgment is a procedure for the prompt and expeditious disposition of a controversy without trial if either party is entitled to judgment as a matter of law, if no dispute exists as to either the material facts or the inferences to be drawn from undisputed facts, or if resolving factual disputes would not alter the result. Luallin v. Koehler, 2002 ND 80, ¶ 7, 644 N.W.2d 591. Factual issues become appropriate for summary judgment when reasonable minds can draw but one conclusion from the evidence. Jones v. Barnett, 2000 ND 207, ¶ 4, 619 N.W.2d 490. Summary judgment is appropriate if the only issues to be resolved are questions of law. Rask v. Nodak Mut. Ins. Co., 2001 ND 94, ¶ 10, 626 N.W.2d 693. Interpretation of an insurance policy is a question of law, which is fully reviewable on appeal. Fortis Benefits Ins. Co. v. Hauer, 2001 ND 186, ¶ 11, 636 N.W.2d 200.

[¶ 10] We review a trial court's interpretation of an insurance policy by independently examining and construing the policy. DeCoteau v. Nodak Mut. Ins. Co., 2000 ND 3, ¶ 19, 603 N.W.2d 906. We summarized our standards for construing an insurance policy in Ziegelmann v. TMG Life Ins. Co., 2000 ND 55, ¶ 6, 607 N.W.2d 898 (citations omitted):

Our goal when interpreting insurance policies, as when construing other contracts, is to give effect to the mutual intention of the parties as it existed at the time of contracting. We look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. "If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract."

While we regard insurance policies as adhesion contracts and resolve ambiguities in favor of the insured, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage. We will not strain the definition of an undefined term to provide coverage for the insured. We construe insurance contracts as a whole to give meaning and effect to each clause, if possible. The whole of a contract is to be taken together to give effect to every part, and each clause is to help interpret the others.

Exclusions from coverage in an insurance policy must be clear and explicit and are strictly construed against the insurer. Western Nat'l Mut. Ins. Co. v. University of North Dakota, 2002 ND 63, ¶ 7, 643 N.W.2d 4.

A

[¶ 11] Center's "Personal Auto Policy" provided liability coverage "for `bodily injury' or `property damage' for which any `insured' becomes legally responsible because of an auto accident." Center argues its policy does not provide coverage in this case because the incident resulting in Jones's injuries was not an "auto accident," but was a farm accident for which there is no coverage under the policy.

[¶ 12] In Norgaard v. Nodak Mut. Ins. Co., 201 N.W.2d 871, 874 (N.D.1972), this Court adopted the causal connection test for determining whether an automobile insurance company was liable under its policy for coverage for an accidental injury suffered as a "result of the ownership, maintenance or use of the automobile described herein." The insured used the roof of his vehicle as a gun rest and accidentally shot and killed a companion as the companion was alighting from the vehicle. Relying on court decisions interpreting the phrase, "arising out of," contained in insurance policies, this Court said, "the causal relationship need not constitute a proximate cause, but on the other hand if an injury is directly caused by some independent or intervening cause it does not arise out of the use of an automobile, notwithstanding there may have been some remote connection between the use of an automobile and the injury complained of." Id. at 875. This Court ruled, "`use', to result in liability on the part of the insurance carrier, must be such use as arises out of the inherent nature of the automobile." Id. at 874. This Court held the causal connection test was not satisfied in that case because "the automobile was being used merely as a bench rest for the rifle," which was not a "use" arising out of the inherent nature of the...