A.J. Cameron Sod Farms, Inc. v. Cont'l Ins. Co.
| Decision Date | 18 September 1997 |
| Docket Number | No. 92–577.,92–577. |
| Citation | 142 N.H. 275,700 A.2d 290 |
| Parties | A.J. CAMERON SOD FARMS, INC. v. CONTINENTAL INSURANCE COMPANY & another. |
| Court | New Hampshire Supreme Court |
Upton, Sanders & Smith, Concord (Russell F. Hilliard, on the briefs and orally), for plaintiff.
Ouellette, Hallisey, Dibble and Tanguay, P.A., Dover (William L. Tanguay, on the briefs and orally), for defendant Continental Insurance Company.
McDonough & O'Shaughnessy, P.A., Manchester (Robert G. Whaland, on the brief and orally), for defendant United States Fire Insurance Company.
The plaintiff, A.J. Cameron Sod Farms, Inc., appeals the Superior Court's (Temple, J.) determination that: (1) defendant Continental Insurance Company's (Continental) comprehensive general liability policy (CGL policy) did not provide coverage for the underlying plaintiffs' claim (Smiths' claim); (2) Continental was not estopped to deny coverage under the CGL policy; (3) the plaintiff's institution of the declaratory judgment action to determine coverage under the CGL policy was untimely under RSA 491:22 (1983) ; and (4) reformation of defendant United States Fire Insurance Company's (U.S.Fire) excess policy (umbrella policy) based on mutual mistake was not warranted. We affirm.
Robert Schulte, the plaintiff's general manager, purchased and maintained the plaintiff's insurance policies. Schulte obtained coverage through two different insurance agents, the Bergeron Agency (Bergeron) and the Dunlap Agency (Dunlap). Schulte procured several policies through Bergeron, including a $1.5 million business automobile policy with Aetna Casualty and Surety Company (Aetna). The plaintiff also had a U.S. Fire umbrella policy issued by Crum and Forster Commercial Insurance Company through Dunlap. The umbrella policy for business automobile coverage attached at $1.5 million, thus requiring the insured to have $1.5 million in underlying business automobile coverage to prevent a gap in coverage. When the umbrella policy was renewed on September 21, 1984, the schedule of underlying coverages (schedule A) listed the Aetna business automobile policy as providing $1.5 million in underlying coverage.
In the fall of 1984, Bergeron was in the process of severing its relationship with Aetna and shifting all of its coverages to American Universal Insurance, Inc. (American) and Continental. Instead of renewing the plaintiff's $1.5 million business automobile policy with Aetna on September 21, 1984, Bergeron issued a binder to the plaintiff for business automobile coverage in the amount of $1.5 million with American. When American advised Bergeron that it would not issue a business automobile policy for an amount in excess of $1 million, Bergeron issued a second binder providing $1 million in business automobile coverage to the plaintiff on October 3, 1984. Upon notification that American would not provide $1 million in business automobile coverage, Bergeron issued a third binder for $500,000 in coverage on October 4, 1984.
Bergeron put a handwritten note on the third binder, which stated: "Insd. knows 500,000 limit in effect and has increased umbrella [at] Dunlap." On October 5, 1984, the plaintiff increased the liability limit on the U.S. Fire umbrella policy from $2 million to $3 million. The limit was increased again to $5 million in June 1985. The $1.5 million attachment point of the umbrella policy was not changed.
Dunlap and U.S. Fire were unaware of the change in carriers and the decrease in the plaintiff's business automobile coverage. Schedule A was not amended to reflect the reduction in underlying coverage.
On July 22, 1985, Bobby Smith, an employee of Erosion Control Specialists, Inc. (Erosion Control) was injured when he fell from atop bales of hay in a truck Erosion Control leased from the plaintiff. In February 1989, Bobby and Tammy Smith initiated a negligence action against the plaintiff.
At the time of the accident, in addition to the $500,000 business automobile policy with American and the umbrella policy with U.S. Fire, the plaintiff had with Continental a $500,000 business automobile policy and the CGL policy which provided coverage of $1 million.
In December 1991, Continental and U.S. Fire disclosed their respective policy limits. Continental stated it would indemnify the plaintiff only up to $500,000, pursuant to the terms of the plaintiff's business automobile policy. U.S. Fire would not indemnify the plaintiff for any amount less than $1.5 million. The plaintiff contends that it then first became aware of the gap in coverage between the underlying business automobile policies and the U.S. Fire umbrella policy. The plaintiff instituted a declaratory judgment action to establish that Continental was estopped from denying coverage under its CGL policy and, alternatively, that the plaintiff was entitled to reformation of the U.S. Fire umbrella policy based on the parties' mutual mistake as to the amount of underlying business automobile coverage available to the plaintiff.
After a two-day bench trial, the superior court ruled that Continental was not estopped to deny coverage under the CGL policy because the plaintiff did not bring the declaratory judgment action within the six-month time limitation mandated by RSA 491:22 and otherwise failed to establish the elements of estoppel. The court further ruled that the plaintiff was not entitled to reformation of the U.S. Fire umbrella policy based on mutual mistake. The court later clarified the order to state that coverage did not exist under the CGL policy for the Smiths' claim. The plaintiff appeals.
The plaintiff first argues that the superior court erred in ruling that Continental had no duty to defend and indemnify the plaintiff pursuant to the CGL policy. This court ultimately determines the proper construction and interpretation of contracts such as insurance policies. See Connolly v. Galvin , 120 N.H. 219, 221, 412 A.2d 428, 429 (1980). "We construe the language of an insurance policy as would a reasonable person in the position of the insured based on a more than casual reading of the policy as a whole," Haley v. Allstate Ins. Co. , 129 N.H. 512, 514, 529 A.2d 394, 396 (1987), and we "will honor the reasonable expectations of the policyholder." Town of Epping v. St. Paul Fire & Marine Ins. Co. , 122 N.H. 248, 252, 444 A.2d 496, 498 (1982). Where an express exclusion is implicated by a factual situation, "the question is whether the ordinary layman in the position of the insured could reasonably be expected to understand that certain exclusions qualified the policy's grants of coverage." N.H. Insurance Co. v. Schofield , 119 N.H. 692, 694, 406 A.2d 715, 717 (1979) (quotation omitted).
Whether Continental's CGL policy provides coverage turns on a comparison of the Smiths' claim and the motor vehicle exclusion. See A.B.C. Builders v. American Mut. Ins. Co. , 139 N.H. 745, 749, 661 A.2d 1187, 1190 (1995). The exclusion provides:
The plaintiff relies on the Smiths' claim in a supplementary pretrial statement that the plaintiff negligently failed to properly instruct, train, and supervise its employees to bring the insured-against risk within the scope of coverage of the CGL policy.
The parties have acknowledged that there may have been two versions of the CGL policy exclusions and the plaintiff's version of the exclusions may not have exempted liability for damage resulting from entrustment of a vehicle to others. Nevertheless, the plaintiff does not claim the language of the CGL policy exclusion is ambiguous. See Brouillard v. Prudential Prop. & Cas. Ins. Co. , 141 N.H. 710, 712, 693 A.2d 63, 65 (1997) (). Regardless of the applicable version, we find that the CGL policy provides no coverage for the Smiths' claim, and thus the plaintiff is not entitled to coverage under the CGL policy.
Claims of negligent entrustment or supervision are precluded by automobile exclusions in homeowner's or comprehensive general liability policies because coverage turns on the use of the instrumentality that causes the injury, rather than on the legal theory of liability asserted against the insured. See, e.g., Hanover Ins. Co. v. Grondin , 119 N.H. 394, 399–400, 402 A.2d 174, 178 (1979) ; Lumbermens Mut. Cas. Co. v. Kosies , 124 Ariz. 136, 602 P.2d 517, 519 (App.1979) ; Northern Insurance Co. of New York v. Ekstrom , 784 P.2d 320, 323 (Colo.1989) ; Farmers Ins. Group v. Nelsen , 78 Or.App. 213, 715 P.2d 492, 494 (1986). Because acts such as negligent supervision and training are incidental to or intertwined with the ownership, operation, or use of the vehicles involved in an accident, they fall within the scope of automobile exclusions in liability policies. See, e.g., Standard Mut. Ins.Co. v. Bailey , 868 F.2d 893, 898 (7th Cir.1989) ; American States Ins. v. Porterfield , 844 S.W.2d 13, 15 (Mo.Ct.App.1992).
In the present case, the underlying action for negligent supervision and training was triggered only when Smith was injured as a result of the July 1985 accident. See Scarfi v. Aetna Cas. & Sur. Co. , 233 N.J.Super. 509, 559 A.2d 459, 463 (App.Div.1989). Any injuries sustained in that accident resulted from the ownership, maintenance, use, or loading of the plaintiff's truck. See id. Further, the purpose of the exclusion is related to the purpose of comprehensive general liability insurance in general; namely, "to cover all hazards incident to the operation of a business with the exception of certain excluded risks, including those involved in the ownership [,] maintenance, use or entrustment of an ‘auto.’ " Oakley Transport, Inc. v. Zurich Ins. Co. , 271 Ill.App.3d 716, 208 Ill.Dec. 177, 648 N.E.2d 1099, 1107 (1995). Premiums that were...
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