Holm v. Mutual Service Cas. Ins. Co.

• Decision Date: 23 December 1977
• Docket Number: No. 47333,47333
• Citation: 261 N.W.2d 598
• Parties: Rickie L. HOLM, Appellant, v. MUTUAL SERVICE CASUALTY INSURANCE COMPANY, and/or Mutual Service LifeInsurance Company, and/or Modern Service Life Insurance Company, Respondent.
• Court: Minnesota Supreme Court

Page 598

261 N.W.2d 598

Rickie L. HOLM, Appellant, v. MUTUAL SERVICE CASUALTY INSURANCE COMPANY, and/or Mutual

Service LifeInsurance Company, and/or Modern

Service Life Insurance Company, Respondent.

No. 47333.

Supreme Court of Minnesota.

Dec. 23, 1977.

Syllabus by the Court

1. The adaptation of a private corporation standard form insurance contract to cover a municipal corporation creates patent ambiguity in the policy language and permits reliance on extrinsic evidence to aid in interpreting the terms of the policy.

2. A police officer is not an executive officer of a municipal corporation within the terms of the general liability insurance policy and the facts of this case.

3. A hazard rating schedule attached to an insurance policy cannot be used to expand the category of persons insured under the policy.

4. Bodily injury resulting from a tortious battery administered by the driver of an automobile does not "arise out of the use" of the automobile within the meaning of an automobile liability insurance policy, where the battery is inflicted outside the automobile and the automobile is used merely to transport the driver to the scene of the battery.

Charles W. Anderson, Minneapolis, for appellant.

Lommen & Cole and Mark N. Stageberg, Minneapolis, for respondent.

Heard before SHERAN, C. J., and PETERSON and TODD, JJ., and considered and decided by the court en banc.

TODD, Justice.

Rickie L. Holm brought a civil suit against Ernest Converse for injuries he received while being placed under arrest by Converse, a policeman for the then village, now city, of Princeton. Converse died leaving no estate before the judgment in favor of Holm was entered, and Holm obtained from the representative of Converse's estate an assignment of the right to proceed against Mutual Service Casualty Insurance Company (Mutual), which was the insurer for the village of Princeton. Holm's subsequent action against Mutual was decided in favor of the insurance company. The trial court determined that the insurance policies in question afforded no individual coverage to Converse. We affirm.

Holm's injuries were received in September 1969 and the notice of claim required by Minn.St. 466.05, subd. 1, was timely filed against the village of Princeton. However, no action was commenced against the village within the one-year limitation period provided in § 466.05, subd. 1. The question of the village's vicarious liability for the actions of Converse under the doctrine of respondeat superior is thus not before us on this appeal.

At the time of the incident, Mutual provided general liability and automobile liability coverage to the village of Princeton. ¹ The policy was written on a form normally used for private corporations. The named insured was the village of Princeton. Other "persons insured" included "any executive officer" of the named insured. The automobile coverage extended to injuries caused by and arising out of the use, including loading and unloading, of any village vehicle. Each coverage applied only if any injury was caused by an "occurrence" as defined in the policy. The trial court found there was no coverage under either policy.

The issues on appeal are:

(1) Was Officer Converse an "executive officer" of the village of Princeton within the meaning of the insurance policy?

(2) Did Holm's injuries arise out of the "use" of the Princeton police car for which coverage was provided under the automobile policy?

(3) Did the infliction of bodily injury upon Holm by Officer Converse constitute an "occurrence" as that term is defined in the insurance policy?

1. The general liability policy issued by Mutual to the village of Princeton was a standard form policy, which was obviously written contemplating primary application to a private rather than a municipal corporation. Coverage under the policy expressly included not only the named insured (here the village of Princeton), but also "any executive officer, director or stockholder thereof while acting within the scope of his duties as such." It is plain that municipal corporations do not generally have executive officers, directors, and stockholders. Thus, the quoted clause is patently ambiguous, requiring this court to consider extrinsic evidence in order to determine the correct application of the policy. 1 Couch, Insurance (2d) §§ 15.57, 15.58.

2. Appellant Holm does not suggest that Officer Converse was either a "director" or "stockholder" of the village within the terms of the above-quoted policy language. He argues only that Converse was an "executive officer" of the village. Our inquiry, therefore, focuses on that term.

Other courts have had occasion to construe the term "executive officer" in the context of insurance policies covering private corporations, and we think the results they have reached are instructive by analogy. For example, in Bruce v. Travelers Insurance Co., 266 F.2d 781 (5 Cir. 1959), an oil worker was allegedly injured as a result of the negligence of a Gulf Refining Company drilling foreman. Relief was sought against Gulf's liability insurance carrier on the theory that the drilling foreman was an "executive officer" of Gulf within the terms of the applicable insurance policy. Judge Wisdom's opinion rejected plaintiff's contention, stating (266 F.2d 784):

"No court in this part of the world can ignore the common knowledge that a large oil company * * * has hundreds of employees and representatives in positions of great responsibility. But tool pushers, ramrods, supervisors, drilling superintendents, area superintendents, or other employees having responsible duties are not officers, under the unambiguous by-laws of Gulf Refining Company. Nor can it be said a tool pusher or a ramrod or a supervisor at a well location functions in an executive capacity, as 'executive officer' is understood in the ordinary acceptance of the term. The term implies some sort of managerial responsibility for the affairs of the corporation generally and it imports a close connection with the board of directors and high officers of the company." (Italics supplied.)

The rationale of the Bruce decision finds continued vitality in more recent opinions. In Lemmons v. Zurich Insurance Co., 403 F.2d 512 (5 Cir. 1968), it was held that neither a project superintendent nor a pipeline foreman was an "executive officer" under the insurance coverage of a pipeline construction company. The court based its holding on the fact that (1) neither of the employees in question held any of the corporate "offices" enumerated in the company's charter and bylaws, and (2) despite their rather broad supervisory authority, the superintendent and foreman did not bear the requisite managerial responsibility outline in Bruce v. Travelers Insurance Co. supra. Similarly, in United States Fidelity & Guaranty Co. v. Warhurst, 336 F.Supp. 1190 (N.D.Ala.1971), it was held that a department foreman of a stove manufacturing firm was not an executive officer under the firm's liability insurance policy. ²

In each of these cases, "executive officer" status in a private corporation turned on both the nature of the responsibility assumed by an individual and his formal designation as a company officer, either in the documents of incorporation or by someone authorized to create official positions. We believe that by identifying persons with similar responsibilities in municipal corporations, reasonable content can be given to the term "executive officer" as it applies to municipal corporations. Reasoning by analogy, then, a general definition might be framed as follows:

For the purpose of ascertaining the scope of coverage provided by a general liability policy covering a municipality, the executive officers of the municipal corporation are those persons whose position, power, and duties are established in the municipal charter and who are responsible for high-level governmental policymaking. Although somewhat broadly drawn, this definition would generally include a city's mayor or manager, councilmen, administrative board members, and department heads, while excluding employees whose duties are largely ministerial. ³

Considering the facts of the present case in light of this definition, we are convinced that Officer Converse was never an executive officer of the village of Princeton. While it is true that police officers do exercise quite substantial discretion in the course of their daily law enforcement activities, the decision-making responsibilities incumbent upon them are not of the character contemplated by the definition of "executive officer." That is, policemen's discretionary actions are not managerial or policy oriented, and are generally only short term in nature. Accordingly, we hold that Officer Converse was not an executive officer within the terms of the village's general liability policy. See, Petzak v. Graves, 33 Wis.2d 175, 147 N.W.2d 294 (1967); but cf. Bouis v. Employers Liability Assurance Corp., 160 So.2d 36 (La.App.1964). See, also, State v. Gardner, 88 Minn. 130, 92 N.W. 529 (1902).

Holm suggests that we merely accept the term "executive officer" at face value. Under this reasoning, because Converse was an officer and a member of the executive branch of government, it would follow that he was an "executive officer." There is some support for this position. See, Bouis v. Employers Liability Assurance Corp. supra; State v. Gardner, supra. However, we decline to accept such a simplistic view of the term. To do so would be to take the term "executive officer" out of context and attribute to it a meaning not contemplated by the contracting parties.

3. Appellant also relies on Ohio Farmers Insurance Co. v. Landfried, 348 F.Supp. 486 (W.D.Pa.1972), for the proposition that as a policeman Converse was covered by the liability policy whether or not he falls within the definition of "executive officer." In Landfried, a standard form policy nearly identical to the one in...