Kern v. Liberty Mutual Insurance Company

• Decision Date: 15 August 1968
• Docket Number: No. 19102.,19102.
• Citation: 398 F.2d 958
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: David KERN, a Minor, by Arthur Kern, his Next Friend, Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Appellee.

398 F.2d 958 (1968)

David KERN, a Minor, by Arthur Kern, his Next Friend, Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Appellee.

No. 19102.

United States Court of Appeals Eighth Circuit.

August 15, 1968.

Thomas J. Motherway, of Hullverson, Richardson & Hullverson, St. Louis, Mo., for appellant; James E. Hullverson, of the same firm was on the brief with Thomas J. Motherway, St. Louis, Mo.

Ralph C. Kleinschmidt, of Evans & Dixon, St. Louis, Mo., for appellee and filed brief.

Before VAN OOSTERHOUT, Chief Judge, HEANEY, Circuit Judge, and REGISTER, Chief District Judge.

REGISTER, Chief District Judge.

This appeal is from a final judgment entered by the district court in which it was decreed that appellee's policy of insurance No. A02-243-55295 does not apply to nor insure against any legal liability on the part of Robert Appleby with respect to the claim of the appellant, David Kern. Jurisdiction of this declaratory judgment action is based on diversity of citizenship and the requisite amount in controversy. Judge Meredith, in his memorandum opinion reported at 274 F.Supp. 360, correctly and adequately states the relevant facts and questions presented. Reference will be made in this opinion to only those facts necessary for an understanding of the issues before us.

This suit arose out of an accident in which David Kern, a minor pedestrian, was seriously injured when struck by a motor vehicle operated by Robert Appleby. Appleby owned a 1962 Rambler station wagon which was insured by Liberty under a standard automobile liability policy applied for and delivered in Missouri. The Rambler automobile was not the vehicle involved in the accident. The involved vehicle was a Volkswagen bus, or station wagon, owned by the Ferguson Church of the Nazarene, and at the time was being used as a school bus for the transportation of students attending a parochial school operated by the church. At the time of the accident, Appleby was driving the Volkswagen in the course of his employment by the Ferguson Church of the Nazarene.

Plaintiff Kern instituted this action in the Circuit Court of the City of St. Louis against Liberty, and named therein Robert Appleby a nominal defendant. Upon application of Liberty the cause was removed to federal court and Appleby was realigned as a party plaintiff. In his complaint, plaintiff asks the court to construe the policy of insurance issued by Liberty and to declare the rights of the parties herein; that it find that the policy covered the insured (Appleby) under the circumstances of the described accident; and that it order Liberty to defend the suit which Kern has pending against Appleby and to pay, within the policy limits, any judgment for which Appleby may be held liable to Kern as a result of such suit. In its answer and counterclaim Liberty alleged that it is not obligated to defend Appleby or to pay on behalf of Appleby any sum which he may become obligated to pay to David Kern as damages because of injuries sustained in the subject accident.

The following provisions of the policy are decisive of the issues involved:

PART I — * * *

"Liability Coverage

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages, because of bodily injury or property damage, arising out of the ownership, maintenance or use of an owned automobile or a non-owned automobile, and the company shall defend any suit alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the company may make such investigation and settlement of any claim or suit as it deems expedient."

"Definitions

"When used with respect to Part I:

"`non-owned automobile\' means an automobile not owned by or furnished or available for the regular use of either the named insured or any resident of the same household, and includes, while used therewith, a home trailer not owned by the named insured or a utility trailer, but `non-owned automobile\' does not include a temporary substitute automobile;"

"Exclusions

"This policy does not apply:

"Under the Liability Coverage and, except with respect to bodily injury or death through being struck by a highway vehicle, under the Medical Expense and Accidental Death Benefit Coverages,

"(h) to a non-owned automobile while maintained or used by any person while such person is employed or otherwise engaged in any other business or occupation, but this exclusion does not apply to a private passenger automobile operated or occupied by the named insured or his private chauffeur or domestic servant, or a utility trailer used therewith;"

Appellant contends that the trial court erred in its findings and conclusions that (1) there was no "non-owned automobile" coverage, and (2) that the non-owned vehicle was not a "private passenger automobile" and therefore not within the exception to the employment exclusion.

It is undisputed that the policy of insurance here involved is a Missouri contract; that all policy conditions were complied with; that all significant events occurred in Missouri; and that Missouri law is applicable and controlling in the interpretation and construction of this policy.

In support of his first contention appellant argues, in substance, that because of the wording and punctuation of the following policy provision: "non-owned automobile means an automobile not owned by or furnished or available for the regular use of either the named insured or any resident of the same household," the vehicle here involved was insured, but that if it is not, there is a patent ambiguity in the policy and therefore, under the preferential rules of construction applicable in Missouri, the policy must be interpreted strictly in favor of the insured. Appellant's reasoning is that if so interpreted, the policy extends coverage to all vehicles, owned and non-owned; that the use of the disjunctive "or" requires an interpretation that coverage exists if the vehicle was either owned or non-owned; and that, since the vehicle here involved was non-owned, "* * * the vehicle fits the first part of the disjunctive definition, and qualifies as a non-owned automobile."

The well-established general principles of law applicable here, together with specific consideration of the rules of construction by which insurance contracts are to be measured in Missouri, were clearly stated by Judge Sanborn of this court in Massachusetts Bonding and Insurance Company v. Julius Seidel Lumber Co., 279 F.2d 861, at page 865, as follows:

"Perhaps the classical statement of the rule applicable to the construction of contracts of insurance is that of Mr. Justice Sutherland in Bergholm v. Peoria Life Ins. Co., 284 U.S. 489, 492, 52 S.Ct. 230, 231, 76 L.Ed. 416. He said:

`* * * It it true that where the terms of a policy are of doubtful meaning, that construction most favorable to the insured will be adopted. (Citations.) This canon of construction is both reasonable and just, since the words of the policy are chosen by the insurance company; but it furnishes no warrant for avoiding hard consequences by importing into a contract an ambiguity which otherwise would not exist, or, under the guise of construction, by forcing from plain words unusual and unnatural meanings.\'

`Contracts of insurance, like other contracts, must be construed according to the terms which the parties have used, to be taken and understood, in the absence of ambiguity, in their plain, ordinary, and popular sense. (Citation.) * * *\'

"The Supreme Court of Missouri has stated the rule as follows:

`* * * The policy is a contract. Plain and unambiguous language must be given its plain meaning. The contract should be construed as a whole; but, in so far as open to different constructions, that most favorable to the insured must be adopted. (Citation.) However, as said in 14 R.C.L., § 103, p. 931, the rule "does not authorize a perversion of language, or the exercise of inventive powers for the purpose of creating an ambiguity where none exists."

"Wendorff v. Missouri State Life Ins. Co., 318 Mo. 363, 1 S.W.2d 99, 101, 57 A.L.R. 615, 619; Aetna Life Insurance Company of Hartford, Connecticut v. Durwood, Mo., 278 S.W.2d 782, 786."

Also see: McMichael et al. v. American Insurance Company, 351 F.2d 665, 669 (8 Cir. 1965); Looney et al. v. Allstate Insurance Company, 392 F.2d 401, 405 (8 Cir. 1968); and Giokaris v. Kincaid, 331 S.W.2d 633, 86 A.L.R.2d 925 (Mo. 1960).

It is our opinion that an interpretation such as that suggested by the appellant violates many of the cardinal rules of interpretation of insurance contracts. Under Missouri law, and applicable principles generally, it is our duty, where possible, to give every clause of the insurance policy some meaning. Central Surety Insurance Corporation v. New Amsterdam Casualty Co., et al., 359 Mo. 430, 222 S.W.2d 76, 80 (1949). If the policy applied to all vehicles, both owned and non-owned, there would be no reason or purpose in defining such vehicles; such an interpretation would render meaningless this defining clause of the contract. It would, in effect, judicially strike the "non-owned automobile" definition from the policy. The phrase "owned and non-owned" automobiles appearing in the Insuring Agreement would have no significance and would be superfluous for the same reason. Further, such an interpretation, in our opinion, is strained and unreasonable, and requires "the exercise of inventive powers for the purpose of creating an ambiguity where none exists." Wendorff v. Missouri State Life Insurance Co., 318 Mo. 363, 1 S.W.2d 99, 101, 57 A.L.R. 615 (1927). A recognized basic...