Jaramillo v. Providence Washington Ins. Co.

• Decision Date: 16 February 1994
• Docket Number: No. 20191,20191
• Parties: Eugene JARAMILLO, Personal Representative of the Estate of Theodore R. Jaramillo, deceased; Plaintiff-Appellee, and Joe E. King and Linda King, as co-personal representatives of the Estate of Loreen King, Plaintiffs-Appellees, and Norman Lovato, Plaintiff-in-Intervention-Appellant, and Mary Frances Dimas, Plaintiff-in-Intervention-Appellant and Cross-Appellee v. PROVIDENCE WASHINGTON INSURANCE COMPANY, Defendant-Appellant, Cross-Appellant and Appellee.
• Court: New Mexico Supreme Court

Page 1343

871 P.2d 1343

117 N.M. 337

Eugene JARAMILLO, Personal Representative of the Estate of Theodore R. Jaramillo, deceased; Plaintiff-Appellee and Joe E. King and Linda King, as co-personal representatives of the Estate of Loreen King, Plaintiffs-Appellees and Norman Lovato, Plaintiff-in-Intervention-Appellant and Mary Frances Dimas, Plaintiff-in-Intervention-Appellant and Cross-Appellee v. PROVIDENCE WASHINGTON INSURANCE COMPANY Defendant-Appellant, Cross-Appellant and Appellee.

No. 20191.

Supreme Court of New Mexico.

Feb. 16, 1994.

[117 N.M. 338] Civerolo, Wolf, Gralow & Hill, P.A. Ellen M. Kelly, Albuquerque, for appellant Providence Washington Ins. Co.

Montoya, Murphy & Garcia, Donald D. Montoya, Santa Fe, for appellant Lovato.

Jones, Snead, Wertheim, Rodriguez & Wentworth, P.A., Arthur L. Jaramillo, Santa Fe, for appellee Jaramillo.

Berardinelli & Associates, David J. Berardinelli, Santa Fe, for appellees Joe E. and Linda King.

Simons, Cuddy & Friedman, Robert D. Castille, Santa Fe, for appellant Dimas.

OPINION

RANSOM, Chief Justice.

Each of the parties to this appeal having moved for rehearing on the filing of our opinion on January 19, 1994, which motions we deny, we withdraw that original opinion and substitute the following. We wish to state that it is not our intention to retreat from long-standing principles and rules of construction in the application and interpretation of insurance policies. Special rules quite rightly apply to such contracts in favor of persons who show that they are within the class of insureds that the provisions to be enforced were intended to benefit. We also wish to state why, despite the urging of both Appellant Providence Washington Insurance Company and Appellee Eugene Jaramillo, we do not believe it is appropriate to decide this case on the present state of the record and briefs of the parties.

This appeal involves uninsured motorist (UM) provisions of a commercial insurance policy. Coverage disputes arose as a result of a head-on collision between two vehicles during the early morning hours of December 16, 1990. One vehicle was owned by Capron Rentals, Inc., a company in the business of renting vehicles to the general public. Loreen King was the driver of the Capron vehicle. King and passenger Theodore Jaramillo were Capron employees and both were killed in the accident. Two other passengers, Mary Frances Dimas and Norman Lovato, were not Capron employees and both were injured.

Joe and Linda King, personal representatives of the estate of Loreen King, and Eugene Jaramillo, personal representative of the estate of Theodore Jaramillo, filed separate complaints for declaratory relief and motions for summary judgment seeking a determination that King and Jaramillo were entitled to stack uninsured motorist bodily injury coverages as named insureds in a policy issued by Providence Washington Insurance Company. The cases were consolidated below. Dimas and Lovato subsequently intervened in the consolidated proceedings to state their separate claims against Providence. In motions for summary judgment, Dimas and Lovato claimed that under the policy they also were expressly entitled to a share of any stacked coverage. Dimas additionally claimed that she was entitled to recover punitive damages under the policy regardless of the death of the tortfeasor.

The trial court ruled that the Providence policy expressly promises stacking of uninsured motorist bodily injury coverages and that the policy's definition of who is entitled to stack is ambiguous as a matter of law.¹ Believing that it was obliged by precedent, the court then construed this definitional ambiguity against Providence and in favor of King and Jaramillo, ruling that the employees were entitled to stack coverage on Capron's fleet of 100 cars. In separate decisions, the trial court denied the motions of Dimas and Lovato for summary judgment on the stacking issue, foreclosing their claim to a pro-rata share of the stacked policy benefits, and ruled that Dimas could make a claim for punitive damages notwithstanding the fact that the uninsured motorist was killed in the accident.

Under SCRA 1986, 12-201 (Repl.Pamp.1992) (appeal as of right), Providence has appealed from the judgment in favor of King and cross-appealed from the final order allowing Dimas to pursue a claim for punitive damages. Dimas and Lovato have appealed from the summary judgment in favor of Providence on the issue of stacking. Under SCRA 1986, 12-203 (Repl.Pamp.1992) (interlocutory appeals), Providence has been granted an appeal from a partial summary judgment in favor of Jaramillo. Finding that Providence is entitled to a trial on the merits of the stacking issue, we reverse the summary judgments in favor of King and Jaramillo. We affirm the trial court's judgments in favor of Providence and against Dimas and Lovato on the issue of stacking, and reverse on the issue of punitive damages.

Once ambiguity is determined to exist, grant of summary judgment is improper. On appeal from summary judgment, this Court must determine the applicable law and whether there exist genuine issues of material fact that preclude summary judgment under that law. See SCRA 1986, 1-056 (Repl.Pamp.1992); Agnew v. Libby, 53 N.M. 56, 57-58, 201 P.2d 775, 776 (1949). In the summary judgments granted in favor of King and Jaramillo, the trial court found that an ambiguity exists in the contract for uninsured motorist coverage. Providence argues that the court used an improper standard by which to resolve the ambiguity, and that the court erred in refusing to consider extrinsic evidence of the intentions of the parties (e.g., specific facts at issue under affidavits).

The court stated that it was bound to construe the ambiguity against the insurer and in favor of coverage, citing to Horne v. United States Fidelity & Guaranty Co., 109 N.M. 786, 791 P.2d 61 (1990), and Safeco Insurance Co. of America v. McKenna, 90 N.M. 516, 565 P.2d 1033 (1977), and that it was ignoring the affidavits submitted by Providence that evinced the intent of Capron (the named insured) and Providence. We believe that the trial court did, in fact, base its ultimate disposition of the King and Jaramillo summary judgment motions on an improper rule of construction. The trial court should have denied the motions and allowed the parties to go forward with evidence that would enable the court to determine the meaning of the contract during a trial on the merits.

Under the facts of this case, Horne does not control the interpretation of "named insured". It is well settled that the construction of an insurance policy is governed generally by the law of contracts. Vargas v. Pacific Nat'l Life Assurance Co., 79 N.M. 152, 155, 441 P.2d 50, 53 (1968). In this case, the trial court concluded that the insurance policy is ambiguous as to whether employees of Capron are entitled to stack coverage on Capron's fleet of vehicles. Applying Horne, the trial court construed the ambiguous policy language against Providence and allowed King and Jaramillo to stack coverage. In Horne, however, the issue of contract interpretation was whether an employee injured while occupying an insured business vehicle can stack benefits on other covered vehicles when class-one insureds under the policy are defined as "you or any family member." See Horne, 109 N.M. at 787, 791 P.2d at 62. There, a corporation as the named insured was "you", and this gave rise to an ambiguity as to whether "any family member" referred to employees of the company. Id. at 786-88, 791 P.2d at 61-63. The Court construed the ambiguity in favor of the employees, allowing them to stack coverage as "family members".

The Providence policy, on the other hand, defines class-one insureds as "you" and, if "you" is an individual, then family members are included as class-one insureds. "You" is defined as the named insured, Capron Rentals, Inc. The trial court, in its judgments on the motions of King and Jaramillo, found that neither were "family members" because the policy expressly limits coverage for family members to those situations where "you" is an individual rather than a corporation. We agree with the trial court that the Providence policy gives rise to no ambiguity under coverage for family members as found by the majority to exist in Horne. Nonetheless, the trial court concluded that the policy's language is ambiguous because the word "you" as applied to a corporation is susceptible to different meanings and, applying Horne, construed the ambiguous language against Providence thus permitting King and Jaramillo to stack coverage. We find that the trial court's application of Horne under the facts of this case is problematic and we set forth alternative principles of law to be applied to this case on remand and in future cases of this type.

Court may consider extrinsic evidence to make preliminary finding on question of ambiguity. Providence argues that the court erroneously concluded that the policy is ambiguous. It contends that because "you" is defined as the named insured and the corporation is the named insured, and because only the named insured is entitled to stack coverage, no ambiguity exists--the employees clearly are insured only as occupants of the vehicle. The court concluded that an ambiguity exists because the uninsured motorist provisions expressly allow the named insured to stack, but the named insured is a corporation not capable of sustaining bodily injury. The court refused to consider extrinsic evidence as to circumstances under which the parties contracted.

The court's decision having been reached before publication of our opinions in C.R. Anthony Co. v. Loretto Mall Partners, 112 N.M. 504, 817 P.2d 238 (1991), and Mark V, Inc. v. Mellekas, 114 N.M. 778, 845 P.2d 1232 (1993), it appears that the court considered only the contract language in arriving at its conclusion that an ambiguity exists. In C.R. Anthony and...