Gulf Ins. Co. v. Noble Broadcast

• Decision Date: 21 January 1997
• Docket Number: No. 78891,78891
• Citation: 936 S.W.2d 810
• Parties: GULF INSURANCE CO., Respondent-Appellant, v. NOBLE BROADCAST, et al., Respondents, Angelia Fuller, Appellant-Respondent.
• Court: Missouri Supreme Court

Page 810

936 S.W.2d 810

GULF INSURANCE CO., Respondent-Appellant, v.NOBLE BROADCAST, et al., RespondentsAngelia Fuller, Appellant-Respondent.

No. 78891.

Supreme Court of Missouri En Banc.

Jan. 21, 1997.

John E. Turner, Kansas City, for Appellant-Respondent.

Martin M. Loring, M. Courtney Koger, Kansas City, for Respondent-Appellant.

COVINGTON, Judge.

Angelia Fuller was injured at a "Free Money" parade conducted by Noble Broadcast as a promotion for a radio station owned by Noble.A Noble employee drove the station's mobile studio in the parade and tossed money to the crowd.The crowd at the parade pushed close to the parade vehicles, pushing Fuller in front of the mobile studio.One of the wheels of the mobile studio ran over her lower leg.She suffered injuries to her leg.

Fuller filed suit against Noble Broadcast and the driver of the mobile studio, a Noble employee.Fuller alleged that Noble was negligent in conducting a parade without adequate safety precautions and for negligently operating the mobile studio.Noble removed the case to the United States District Court for the Western District of Missouri.

Noble had a business auto insurance policy with Pacific Indemnity Insurance Company and a commercial general liability policy (CGL Policy) with Gulf Insurance Company.Noble informed Gulf of the pending federal case and asked Gulf to defend the suit against Fuller.Gulf refused to defend the suit.Relying upon an auto exclusion in the CGL Policy, Gulf asserted that Fuller's injuries were not covered because the mobile studio used in the parade came within the definition of "auto" in the policy.Noble and Pacific defended the case against Fuller without the participation of Gulf.

Noble, Pacific, and Fuller entered into a settlement agreement pursuant to the terms of section 537.065, RSMo 1994.The agreement provided that Pacific would pay $187,500 to Fuller.Noble also agreed to have a consent judgment entered against it for $1,000,000, the limit of the CGL Policy.The federal district court entered the judgment on Fuller's claim that Noble was negligent in conducting the parade.Fuller dismissed all other claims.

On the same grounds that Gulf refused to defend the suit, it refused to pay the judgment.Gulf then filed a declaratory judgment action in the circuit court of Jackson County asking the state court to find that Fuller's injuries were not covered by the CGL Policy.Gulf also asked the trial court to hold the settlement agreement unenforceable against Gulf on the grounds that it was unreasonable, collusive, and obtained by fraud.Gulf later abandoned the fraud argument.

The trial court granted Fuller, Pacific, and Noble summary judgment on the issue of coverage.Finding the language of the policy ambiguous and resolving the ambiguity in favor of the insured, the trial court found that Fuller's injuries were covered under the CGL Policy.After conducting a trial on the validity of the settlement agreement, the trial court found the settlement to be unenforceable because the amount was unreasonable.

Both parties appealed.Fuller appealed the trial court's determination that the settlement was unreasonable.Gulf appealed the summary judgment finding that the CGL Policy covered Fuller's injuries.The court of appeals held that Fuller's injuries were not covered under the CGL Policy.The court, therefore, did not address the issue of reasonableness.This Court granted transfer.The judgment of the trial court is affirmed in part and reversed and remanded in part.

GULF'S APPEAL

The CGL Policy provides, in pertinent part:

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies....

Exclusions

This insurance does not apply to ...

g. 'Bodily injury' or 'property damage' arising out of the ownership, maintenance use or entrustment to others of any ... 'auto' owned or operated by ... any insured."

....

The CGL Policy contains a special events endorsement that provides in relevant part:

IT IS HEREBY UNDERSTOOD AND AGREED THAT THE FOLLOWING SHALL BE INCLUDED AS THE TERMS AND CONDITIONS OF THIS POLICY:

SPECIAL EVENTS SHALL INCLUDE ... PARADES ...

....

Subject otherwise to all the terms, limits and conditions of the Policy.

Gulf asserts that the language of the policy, including the policy exclusion, is plain and unambiguous; therefore, this Court must enforce the policy as written.Peters v. Employers Mut. Casualty Co., 853 S.W.2d 300, 302(Mo. banc 1993);Harrison v. M.F.A. Mut. Ins. Co., 607 S.W.2d 137, 142(Mo. banc 1980).Gulf contends that the plain meaning of the auto exclusion in the CGL Policy exempts Fuller's injuries from coverage under the policy."This insurance does not apply to ... bodily injury or property damage arising out of the ownership, maintenance, use or entrustment to others of any ... 'auto'... owned or operated by ... any insured."Although the special events endorsement states that the policy provides coverage for parades, the policy itself excludes coverage for bodily injury arising from the use of an auto owned or operated by Noble.Since Fuller was injured by a mobile studio, Gulf submits, the plain meaning of the auto exclusion acts to deny Fuller coverage.

Gulf contends that this Court must read the endorsement in conjunction with the terms of the entire policy, including the auto exclusion, to determine the plain meaning of the CGL Policy.Abco Tank & Mfg. Co. v. Fed. Ins. Co., 550 S.W.2d 193, 198(Mo. banc 1977).The special events endorsement itself does not provide coverage by its own terms; it merely defines the types of special events that may be covered by the terms of the policy.The endorsement states that it is "[s]ubject otherwise to all the terms, limits and conditions of the Policy."For example, just as the special events endorsement is subject to the policy liability limits, Gulf contends, so is the endorsement subject to all other terms of the policy.Gulf asserts that claims arising from parades are covered to the same extent that any claim is covered, that is, subject to all of the terms of the policy.

Fuller responds that the policy does provide coverage under the facts of this case.The special events endorsement states that it is, "Subject otherwise to all terms, limits and conditions of the Policy."(emphasis added).Fuller distinguishes "subject to" from "subject otherwise to."Fuller explains that if the special events endorsement had been "subject to" all terms of the policy, then the special events endorsement would have been modified by the terms, limits and conditions of the policy.Fuller notes that the phrase "subject to" is used in this way in other parts of the policy.In contrast, Fuller explains, because the phrase "subject otherwise to" was used, the special events endorsement is modified only by the portions of the policy that the endorsement itself does not supersede.Fuller explains that this is so because "otherwise" means "in different circumstances."WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY, UNABRIDGED 1598(1961).Fuller concludes that the special endorsement should be read to supersede other policy provisions where necessary to provide coverage for the listed special events.In other words, the special events endorsement is subject to all provisions of the policy except those that conflict with any special event covered in the endorsement.Fuller argues that if the CGL policy is not clear in providing coverage for liabilities arising from the parade, the policy is at least ambiguous.

Whether a policy is ambiguous is a question of law.General Am. Life Ins. Co v. Barrett, 847 S.W.2d 125, 131(Mo.App.1993).An ambiguity exists when there is duplicity, indistinctness, or uncertainty in the meaning of the language in the policy.Language is ambiguous if it is reasonably open to different constructions.Krombach v. Mayflower Ins. Co., 827 S.W.2d 208, 210(Mo. banc 1992).The use of the word "otherwise" creates such an uncertainty or indistinctness in this case; the language is reasonably open to both constructions advocated by the parties.While Gulf's argument appears to be persuasive initially, Fuller's focus on the word "otherwise" highlights the ambiguity in this policy."Subject otherwise to" arguably means something different than "subject to," because every word in a contract is to be given meaning if possible.Nichols v. Pendley, 331 S.W.2d 673, 676(Mo.App.1960).The fact that "subject to" was used elsewhere in the policy strengthens Fuller's argument that the word "otherwise" has a different meaning.While the policy does not simply state that the special events endorsement supersedes the automobile exception, the policy is at least ambiguous in that regard.

When policy language is ambiguous, it must be construed against the insurer.Krombach, 827 S.W.2d at 210.Because the CGL Policy is ambiguous, the language must be construed in favor of the insured.Fuller's injuries are covered by the CGL Policy.

Gulf asserts that if the Court finds ambiguity, the Court must attempt to harmonize the ambiguous sections.Haggard Hauling & Rigging Co. v. Stonewall Ins. Co., 852 S.W.2d 396, 401(Mo.App.1993).Reading the policy and the endorsement as a whole, Gulf contends that any possible ambiguity can be harmonized away.Gulf's argument disregards the validity of the interpretation that Fuller urges.Its plausibility is at least as great as that of Gulf's interpretation.

Gulf argues that this case is similar to Killian v. State Farm Fire & Casualty Co., 903 S.W.2d 215(Mo.App.1995), andAmerican States Ins. Co. v. Porterfield, 844 S.W.2d 13(Mo.App.1992).In Killian, the insureds allowed a young girl to ride on their moped at a partythey hosted.The girl crashed and was injured.The parents sued the insureds alleging negligent supervision and negligent entrustment of the moped.The insureds...