Kelly v. Aetna Cas. & Sur. Co., 49046-5

• Decision Date: 13 October 1983
• Docket Number: No. 49046-5,49046-5
• Citation: 100 Wn.2d 401,670 P.2d 267
• Court: Washington Supreme Court
• Parties: Terrence W. KELLY, Petitioner, v. The AETNA CASUALTY & SURETY COMPANY, a foreign corporation, Respondent.

Page 401

100 Wn.2d 401

670 P.2d 267

Terrence W. KELLY, Petitioner, v. The AETNA CASUALTY & SURETY COMPANY, a foreign corporation Respondent.

No. 49046-5.

Supreme Court of Washington En Banc.

Oct. 13, 1983.

Morrow, Longfelder, Tinker & Kidman, Kerry D. Kidman, Seattle, for petitioner.

Randall & Danskin, Robert T. Carter, Spokane, for respondent.

ROSELLINI, Justice.

Petitioner, Terrence Kelly, seeks recovery under the terms of an umbrella policy issued by respondent, Aetna Casualty and Surety Company. The trial court dismissed petitioner's contract action, holding that no coverage was provided by the underlying automobile liability policy or the umbrella policy. The Court of Appeals affirmed. We granted review and now affirm the Court of Appeals.

This coverage dispute arose under the terms of two policies issued to Dr. George Schneider. The first policy was a general automobile liability policy through United Services Automobile Association (USAA). The policy insured Dr. Schneider against damages arising out of the ownership or use of an owned automobile. That policy defined owned automobile as follows:

(a) a private passenger ... automobile described in this policy for which a specific premium charge indicates that coverage is afforded, [or]

* * *

(c) a private passenger ... automobile ownership of which is acquired by the named insured during the policy period, provided

* * *

(2) the company insured all private passenger ... automobiles owned by the named insured on the date of such acquisition and the named insured notifies the company during the policy period or within 30 days after the date of such acquisition of his election to make this and no other policy issued by the company applicable to such automobile Clerk's Papers, at 307. As is typical with most such policies, the declaration page of the policy listed vehicles that were specifically insured. On the day of the accident, the vehicle involved was not listed as an owned vehicle.

Dr. Schneider's second policy was an umbrella policy issued by respondent Aetna Casualty and Surety Company (Aetna). This policy applied only to losses in excess of the USAA policy limits. Its policy limit was $1 million. It included as insured "any person ... while using an automobile ... owned by ... the named insured with permission of the named insured". Clerk's Papers, at 295. The policy issued by Aetna did not define the term "ownership".

The present dispute concerns coverage for an accident occurring on April 14, 1973. On that day, petitioner was injured while a passenger in a car driven by Dr. Schneider's 21-year-old son, Kenneth.

The accident vehicle's title certificate mistakenly listed Dr. George Schneider as both the registered and legal owner of the vehicle, although the evidence tended to establish that the car was owned by Kenneth. The circumstances surrounding the purchase of the vehicle are as follows:

The accident vehicle was purchased in March 1973. At the time, Kenneth was emancipated and involved in divorce proceedings. Lacking the money to purchase a car, Kenneth asked his father to finance it. Dr. Schneider agreed, obtained a personal loan and Kenneth selected his car. Dr. Schneider described the arrangement:

Our mutual intent was that the automobile was to be Kenneth M. Schneider's, that I was making this purchase of it possible by taking the loan for the purchase price, and that he would repay me for all payments I made upon the loan, upon the same basis that I paid the loan at the bank. It was intended that Kenneth M. Schneider should show as registered owner on the title certificate, and that I should show on the title also as "legal owner", and should physically hold the title certificate, to give me security for Kenneth M. Schneider's reimbursement to me of the loan payments.

It was intended that Kenneth M. Schneider should insure the automobile, and he agreed to do so. Prior to the purchase I told him that he should do so, and he answered that he was arranging it. A week or two after the purchase I asked him whether he had done so, and he indicated that he had seen someone concerning it but that he had not done it yet. Prior to the accident I did nothing to have this automobile of Kenneth M. Schneider's placed under the protection of my own automobile insurance policy, which was issued by United Services Automobile Association, of San Antonio, Texas, since I then presumed that Kenneth M. Schneider would obtain his own insurance as agreed.

Clerk's Papers, at 111-12.

Several weeks later, the vehicle was involved in the accident which injured petitioner. Kenneth had not obtained insurance for the car.

Petitioner brought a personal injury action against Kenneth and Dr. George Schneider. Dr. Schneider obtained dismissal on summary judgment, apparently arguing that he had no control over the vehicle. His affidavit submitted in conjunction with the summary judgment motion stated:

At all times it was understood and agreed between myself and Kenneth M. Schneider that the automobile described herein was owned by him and was his own automobile for his own use and enjoyment and that I had no control over his use of it.

Clerk's Papers, at 113.

Following the accident, Dr. Schneider's attorney contacted USAA and arranged for Kenneth's vehicle to be added to the policy retroactive to before the accident.

The case proceeded to trial and petitioner obtained a judgment of $848,028 against Kenneth. Since Dr. Schneider was dismissed from the action, no personal judgment was entered against him or his wife. Nonetheless, USAA paid its full policy limits of $100,000 to the plaintiff.

Petitioner then brought the instant action against Aetna to recover the remaining $748,000 pursuant to the umbrella policy. Aetna denied coverage, arguing that the car was not owned by Dr. Schneider and therefore Kenneth Schneider was not covered under the terms of the policy. Both parties moved for summary judgment. The trial court granted Aetna's motion and dismissed the case. Petitioner appealed, the Court of Appeals affirmed and we granted review. We hold that neither policy provided coverage and affirm for the reasons set out in the unpublished decision of the Court of Appeals ( Kelly v. Aetna Cas. & Sur. Co., 32 Wash.App. 1025 (1982)), as well as those discussed below.

As noted above, Aetna's umbrella policy provides personal liability coverage for Dr. Schneider and "any person ... using an automobile ... owned by, loaned to, or hired for use by or on behalf of the named insured." Clerk's Papers, at 295. Since there is no judgment against Dr. Schneider, the petitioner is entitled to recover only if he succeeds in placing Kenneth Schneider under the terms of the policy by application of the above clause. To do so, he must establish that the accident vehicle was owned by Dr. Schneider. Therein lies the problem.

Petitioner advances several arguments to support his contention that the 1968 Dodge was "owned" by Dr. Schneider. His basic argument is that USAA's decision to add the vehicle to the policy and pay its policy limits binds Aetna. ¹ To support this contention, petitioner produced affidavits of several individuals who work in the insurance industry, two of whom were employed by the Washington State Insurance Commissioner. These affidavits described an insurance industry standard under which umbrella policies are construed at least as broadly as the underlying policy.

Petitioner refers to this concept of reading an umbrella policy in light of the policy provision contained in the underlying automobile policy as meshing. Petitioner cites no authority for this proposition but insists that this is because the concept is so well accepted in the insurance industry that it has never been questioned.

Petitioner's argument fails because no coverage was available under...