Hanneman v. Continental Western Ins. Co., 970179

• Decision Date: 05 March 1998
• Docket Number: No. 970179,970179
• Citation: 1998 ND 46,575 N.W.2d 445
• Parties: Larry HANNEMAN and Linda Hanneman, individually, and Linda Hanneman as Personal Representative of the Estate of Dawn Marie Hanneman, Plaintiffs and Appellants, v. CONTINENTAL WESTERN INSURANCE COMPANY, Defendant, Appellee and Cross-Appellee, and Lee G. Kurry, Defendant, Appellee and Cross-Appellant. Civil
• Court: North Dakota Supreme Court

Page 445

575 N.W.2d 445

1998 ND 46

Larry HANNEMAN and Linda Hanneman, individually, and Linda Hanneman as Personal Representative of the Estate of Dawn Marie Hanneman, Plaintiffs and Appellants, v. CONTINENTAL WESTERN INSURANCE COMPANY, Defendant, Appellee and Cross-Appellee and Lee G. Kurry, Defendant, Appellee and Cross-Appellant.

Civil No. 970179.

Supreme Court of North Dakota.

March 5, 1998.

Bryan L. Van Grinsven (argued) and Steven C. Lian, Farhart, Lian, Maxson, Louser & Zent, P.C., Minot, for plaintiffs and appellants.

Thomas O. Smith (argued) and Lawrence E. King, Zuger Kirmis & Smith, Bismarck, for defendant, appellee, and cross-appellee Continental Western Ins. Co.

Michael J. Hagburg (argued) and Randall J. Bakke, Smith Bakke Hovland & Oppegard, Bismarck, for defendant, appellee, and cross-appellant Lee G. Kurry.

VANDE WALLE, Chief Justice.

¶1 Larry and Linda Hanneman, individually, Linda Hanneman as Personal Representative of the Estate of Dawn Marie Hanneman, and Lee G. Kurry appealed the Judgment of the Ward County District Court entered after an order for declaratory relief in favor of Continental Western Insurance Company. We affirm.

I

¶2 On July 15, 1995, Dawn Hanneman and her friend Tracy Marchant drove to a street dance in Granville, North Dakota. The two traveled in Dawn Hanneman's 1993 Pontiac Grand Prix. Lee Kurry was also at the street dance but arrived separately with some friends. Kurry did not drive his own vehicle to Granville.

¶3 Dawn Hanneman and Kurry were acquaintances. They saw each other that night at the Branding Iron Bar in Granville. After spending about 45 minutes with Dawn Hanneman, Kurry left the Branding Iron and went across the street to the Sore Thumb, another bar in Granville. After midnight Dawn Hanneman and Kurry met again at the Branding Iron. They decided to attend an after-the-bar party at Buffalo Lodge Lake. Believing she was too intoxicated to drive, Dawn Hanneman asked Kurry to drive her Grand Prix.

¶4 Dawn Hanneman's friend, Tracy Marchant, wanted to go home. So the three drove to Marchant's home in Surrey, North Dakota, where she was dropped off.

¶5 After dropping off Marchant at her home, Kurry and Dawn Hanneman proceeded to Kurry's home in Surrey "to see what [he] had to drink...." Kurry grabbed a partially filled fifth of Tequila, plastic cups, and a "fuzz buster." Kurry then drove to a convenience store to purchase some orange juice as a drink mix. Kurry drove Dawn Hanneman in her Grand Prix to the Buffalo Lodge Lake party. Kurry was unfamiliar with the area and received directions from Dawn.

¶6 The two left the party at around 4:30 in the morning with Kurry again behind the wheel. Kurry took a wrong turn while leaving Buffalo Lodge Lake, and ultimately drove on a paved road he thought was U.S. Highway 2 West. Actually, Kurry and Dawn Hanneman were traveling on a paved county road north of Granville. They came to a "T" in the road. The car continued through the paved intersection onto a gravel road. Kurry lost control of the vehicle and although the gravel road curved, the vehicle failed to negotiate the curve and vaulted 47 feet through the air striking the back-slope of the ditch where it became airborne. The vehicle finally came to rest upside down on the far bank of a small creek.

¶7 Dawn Hanneman was pronounced dead at the scene.

¶8 Larry and Linda Hanneman, individually, and Linda Hanneman as Personal Representative of the Estate of Dawn Marie Hanneman, filed a wrongful death action against Lee Kurry. Ohio Casualty Insurance Company, the Hannemans' insurance carrier, defended Kurry in the wrongful death action.

¶9 Kurry had a commercial auto policy with Continental Western Insurance Company. The named insured under the Continental policy was Lee Kurry doing business as Decorators Unlimited. The policy provided liability coverage for "all sums an 'insured' legally must pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies, caused by an 'accident' and resulting from the ownership, maintenance or use of a covered 'auto'."

¶10 Under the "COVERED AUTOS" section of the policy the insured could select from several numbered "Symbol" options to provide coverage, including:

"SYMBOL DESCRIPTION

1 = ANY 'AUTO'.

* * * * * *

7 = SPECIFICALLY DESCRIBED 'AUTOS'. Only those 'autos' described in ITEM THREE of the Declarations for which a premium charge is shown (and for Liability Coverage any 'trailers' you don't own while attached to any power unit described in ITEM THREE).

8 = HIRED 'AUTOS' ONLY. Only those 'autos' you lease, hire, rent or borrow. This does not include any 'auto' you lease, hire, rent, or borrow from any of your employees or partners or members of their households.

9 = NONOWNED 'AUTOS' ONLY. Only those 'autos' you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes 'autos' owned by your employees or partners or members of their households but only while used in your business or your personal affairs."

(Emphasis added). Kurry selected Symbol options 7, 8, and 9. He did not select coverage for "ANY 'AUTO' " which was the coverage available under Symbol 1.

¶11 The Hannemans submitted a claim, seeking the limits of the Continental Western policy. They asserted Dawn Hanneman's death was covered under Symbol 8 because Kurry "borrowed" Dawn Hanneman's vehicle at the time of her death. Continental denied coverage for the death of Dawn Hanneman. The Hannemans brought this declaratory judgment action on May 21, 1996, naming Continental and Kurry as defendants.

¶12 On July 8, 1996, the Hannemans signed a document purportedly releasing Kurry of personal liability in connection with the death of Dawn Hanneman. The agreement provided in part,

"[a]ll other claims, except as to Continental Western Insurance Company's insurance coverage, are hereby released by the Hannemans, including, but not limited to any claim for personal liability by Lee Kurry and including any claim for damages in excess of insurance coverage. The claim against Continental Western Insurance Company is the only claim being reserved by Hannemans. If it is determined that there is no coverage by Continental Western Insurance Company for Lee Kurry, then all claims by Hannemans against Lee Kurry are hereby extinguished."

(Emphasis retained). After concerns over the validity of the July 8, 1996, agreement, the Hannemans and Kurry signed a Miller-Shugart agreement on March 11, 1997. See Sellie v. North Dakota Ins. Guar. Ass'n, 494 N.W.2d 151 (N.D.1992) (recognizing the validity of a release of the type used in Miller v. Shugart, 316 N.W.2d 729 (Minn.1982)). The district court concluded the Miller-Shugart agreement accomplished little because the July agreement had already released Kurry from any further personal liability arising from either the wrongful death action or declaratory judgment action.

¶13 After the July 8, 1996, agreement was executed, Ohio Casualty paid its policy limits of $50,000.00. With its policy limits expended, Ohio Casualty claimed its duty to defend Kurry was terminated and ended its defense of Kurry.

¶14 As a result, Kurry asked his insurer, Continental Western, to assume his defense in the declaratory judgment action. Continental refused because Kurry was not exposed to personal liability in the declaratory judgment action. Continental also based its refusal to provide coverage on a portion of their policy stating, "we have no duty to defend 'suits' for 'bodily injury' or 'property damage' or a 'covered pollution cost or expense' not covered by this Coverage Form." Kurry filed a cross claim against Continental as a result of its refusal to pay his legal bills.

¶15 After a procedural blizzard, replete with retaliating motions upon motions, the matter was heard before the district court. In the Hannemans' action, the court held in favor of Continental, because Dawn Hanneman remained in possession and control of the vehicle. Thus, the court concluded, Kurry did not "borrow" the vehicle; he was a designated driver. The court also held in favor of Continental on Kurry's cross claim, concluding Kurry needed no defense after the July 8, 1996, agreement, because he could not be held personally liable.

II

¶16 On the Hannemans' appeal, they argue the district court erred in interpreting the policy. First, the Hannemans contend the district court erroneously interpreted the policy to require a business use in order to have coverage under the Continental Western policy. Second, the Hannemans argue the court erred in its conclusion that Kurry did not "borrow" Dawn Hanneman's vehicle.

A. Standard of Review

¶17 Continental submits the standard of review is "clearly erroneous" under Rule 52(a) of the North Dakota Rules of Civil Procedure because the district court made a finding of fact the Hanneman vehicle was not borrowed. The parties' Stipulation of Facts permitted the district court to make any findings of fact necessary to resolve the coverage issue, and the district court found Lee Kurry was driving Dawn Hanneman's vehicle at her behest and under her direction. The district court concluded the term "borrow" is synonymous with lease, hire, and rent expressing "the idea of receiving something from another for one's own use." Applying this interpretation to the aforementioned finding, the district court ultimately concluded the Continental policy did not provide coverage because Kurry was a "designated driver" and as such, "possession and control of the vehicle" remained with Dawn Hanneman.

¶18 While the "designated driver" inference may be a finding of fact, ¹ the interpretation of "borrow" and determination of coverage were conclusions of law.

¶19 Review of a declaratory judgment decree is carried out under the same standards as any other case. N.D.C.C. § 32-23-07; American Hardware Mut. Ins. Co. v. Dairyland Ins. Co., 304 N.W.2d 687, 689 (N.D.1981)....