Herwig v. Enerson & Eggen, 79-1474

• Decision Date: 17 June 1980
• Docket Number: No. 79-1474,79-1474
• Citation: 98 Wis.2d 38,295 N.W.2d 201
• Court: Wisconsin Court of Appeals
• Parties: Gary W. HERWIG, Plaintiff-Appellant, v. ENERSON & EGGEN, a partnership, Defendant and Third-Party Plaintiff-Appellant, Gehl Company, a corporation, Defendant, Robert Herwig, Sr., Third-Party Defendant, Iowa National Mutual Insurance Company, Third-Party Defendant-Respondent.

Page 201

295 N.W.2d 201

98 Wis.2d 38

Gary W. HERWIG, Plaintiff-Appellant, v. ENERSON & EGGEN, a partnership, Defendant and Third-Party Plaintiff-Appellant Gehl Company, a corporation, Defendant Robert Herwig, Sr., Third-Party Defendant Iowa National Mutual Insurance Company, Third-Party Defendant-Respondent.

No. 79-1474.

Court of Appeals of Wisconsin.

Submitted on Briefs April 23, 1980.

Opinion Released June 17, 1980.

Opinion Filed June 17, 1980.

James C. Bohl and Quale, Hartmann, Bohl & Evenson, Baraboo, on briefs for plaintiff-appellant.

Bruce R. Rasmussen, Beaver Dam, on briefs for third-party plaintiff-appellant.

Ward I. Richter and Bell, Metzner & Seibold, S.C., Madison, on brief for third-party defendant-respondent.

Before DONLIN, P. J., and FOLEY and DEAN, JJ.

FOLEY, Judge.

Gary Herwig and Enerson & Eggen appeal from a judgment dismissing their causes of action against Iowa National Mutual Insurance Company, Enerson & Eggen's insurer. ¹ Gary Herwig was injured while operating a machine owned by Enerson & Eggen, but in the possession of his father, Robert Herwig. Iowa National denied coverage claiming that Robert Herwig had rented the machine from Enerson & Eggen and that the policy excluded machines that were rented. After a trial to the court, the court found that the transaction between Herwig and Enerson & Eggen was a rental and concluded that there was, therefore, no coverage. Because we conclude that the transaction was not an excluded rental within the meaning of the insurance policy, we reverse.

The construction of an insurance policy is a matter of law, RTE Corporation v. Maryland Casualty Company, 74 Wis.2d 614, 247 N.W.2d 171 (1976), and we determine questions of law independently with no deference to the conclusions reached by the trial court. American Mutual Liability Insurance Company v. Fisher, 58 Wis.2d 299, 206 N.W.2d 152 (1973). Our objective in interpreting an insurance contract is to ascertain and carry out the intention of the parties. Home Mutual Insurance Company v. Insurance Company of North America, 20 Wis.2d 48, 121 N.W.2d 275 (1963).

Where no ambiguity exists in the terms of the policy, we will not engage in construction but will rather merely apply the policy terms. Rabinovitz v. Travelers Insurance Co., 11 Wis.2d 545, 105 N.W.2d 807 (1960). Whether ambiguity exists depends on the meaning the provision or term would have to a reasonable person of ordinary intelligence. 13 Appleman, Insurance Law & Practice § 7384 (1976). Furthermore, any ambiguity should be resolved by examining the policy as a whole as well as the purpose of the clause or term in question in an attempt to determine the intent of the parties. 13 Appleman, supra § 7385.

Words used in an insurance contract should be given their common, everyday meaning, Schmidt v. Luchterhand, 62 Wis.2d 125, 214 N.W.2d 393 (1974), and should be interpreted reasonably so as to avoid absurd results. Olguin v. Allstate Insurance Company, 71 Wis.2d 160, 237 N.W.2d 694 (1976). The test of coverage is what a reasonable person in the position of the insured would have believed to be covered, Olguin, supra, and the reasonable expectations of coverage of the insured should be honored. Handal v. American Farmers Mutual Casualty Company, 79 Wis.2d 67, 255 N.W.2d 903 (1977). Public policy favors finding coverage where the policy terms permit it. Handal, supra; 13 Appleman, supra § 7386.

All parties agree that this dispute should be resolved as a matter of law. At trial, the witnesses testified consistently as to what occurred between Enerson & Eggen and Robert Herwig. There is no dispute as to the underlying facts. The only factual dispute the trial court perceived was whether the transaction was a rental. We agree that this is the one dispute in the case, but conclude that whether the transaction was a rental excluding coverage under the policy is a question of law and not of fact. We will, therefore, determine the issue independently relying on the undisputed underlying facts.

Robert Herwig had been interested in purchasing a machine from Enerson & Eggen, but wanted to try it out first to see if it was suitable for use in his business. Enerson & Eggen agreed to let him use the machine for one day. The terms were that if Herwig decided to purchase the machine, he would pay no fee for the one day of use. If, however, he elected to return the machine, he would pay a fee of $7 for each hour of use. This fee was intended to cover Enerson & Eggen's cost of cleaning and restoring the machine after one day's use so the machine could still be sold as a new machine. Enerson & Eggen made no profit on the transaction if a sale did not result. Gary Herwig was injured during this one-day tryout. Robert Herwig subsequently returned the machine to Enerson & Eggen and paid $50, which he thought was the agreed price for cleaning the machine. Both parties to the transaction testified that it was not intended as a rental. Furthermore, Robert Herwig actually purchased a different machine shortly after the tryout.

We agree with Iowa National that the term "rental" is unambiguous and requires no construction. Iowa National urges that we accept the dictionary definition of rental, which it characterizes as "payment for use." ² It contends that since Robert Herwig paid for the use of the machine, the transaction was clearly a rental. This is not, however, the issue in this case. The issue is whether the transaction between Enerson & Eggen and Robert Herwig was a rental agreement excluded from insurance coverage under the terms of the policy. To resolve this issue, we must look instead to the intent of the rental exclusion, the meaning an ordinary person would give to the term rental, and the reasonable expectations of coverage of Enerson & Eggen. In examining these questions, we will avoid an interpretation that leads to an absurd result and will, consistent with public policy, favor coverage.

The intent of a rental exclusion is to limit the risk the insurer has undertaken. If an insured both sells and rents machines, the risk involved is greater than if the insured merely sells machines. In the business of Enerson & Eggen,...