LDS Hosp., a Div. of Intermountain Health Care, Inc. v. Capitol Life Ins. Co.

• Decision Date: 31 October 1988
• Docket Number: Nos. 20990,21056,INTER-MOUNTAIN,s. 20990
• Citation: 765 P.2d 857
• Parties: LDS HOSPITAL, A DIVISION OF INTERMOUNTAIN HEALTH CARE, INC., a Utah corporation, Plaintiff and Appellant, v. CAPITOL LIFE INSURANCE COMPANY, Defendant and Appellee, and Joel Miller and Marsha Miller, Defendants and Appellants.CLINIC, INC., Plaintiff and Appellant, v. CAPITOL LIFE INSURANCE COMPANY, Defendant and Appellee, and Joel Miller, Defendant and Appellant.
• Court: Utah Supreme Court

Page 857

765 P.2d 857

LDS HOSPITAL, A DIVISION OF INTERMOUNTAIN HEALTH CARE, INC., a Utah corporation, Plaintiff and Appellant, v. CAPITOL LIFE INSURANCE COMPANY, Defendant and Appellee, and Joel Miller and Marsha Miller, Defendants and Appellants.

INTER-MOUNTAIN CLINIC, INC., Plaintiff and Appellant, v. CAPITOL LIFE INSURANCE COMPANY, Defendant and Appellee, and Joel Miller, Defendant and Appellant.

Nos. 20990, 21056.

Supreme Court of Utah.

Oct. 31, 1988.

Thomas A. Duffin, Hans M. Scheffler, Salt Lake City, for LDS Hosp. and Inter-Mountain Clinic, Inc.

Ronald J. Yengich, Salt Lake City, for Joel Miller and Marsha Miller.

David W. Slagle, Salt Lake City, for Capitol Life Ins. Co.

HALL, Chief Justice:

Plaintiffs LDS Hospital and Inter-Mountain Clinic ("Hospitals") appeal a trial court order denying Hospitals' motion for summary judgment and granting defendant Capitol Life Insurance Company's ("Capitol") motion for no cause of action in regard to its liability under an accident insurance contract. We reverse.

The facts are not in dispute. In October 1981, defendant Joel Miller ("Miller"), while driving intoxicated, struck a vehicle driven by Robert Heinz. The accident was a head-on collision. Heinz died approximately five minutes after the accident occurred, while Miller lived and incurred medical expenses of over $150,000. After Heinz's death, Miller pleaded guilty to manslaughter pursuant to the provisions of Utah Code Ann. § 76-5-205 (1978) (amended 1985). Prior to trial on this cause of action, the parties stipulated that Miller did not deliberately injure or intend to harm Heinz or cause his death. Furthermore, the parties agreed that Miller was an insured under his wife's policy with Capitol. However, Capitol alleged that in this case Miller was not covered under the health and accident policy inasmuch as his medical expenses arose out of an exception provision of the insurance contract. That exception provides in part as follows:

General Exceptions.

If the Insured Person is not legally liable for payment, this policy will not pay a benefit. In addition, it does not pay

G. arising out of an attempt at assault or felony....

Upon consideration, the trial court denied Hospitals' motion for summary judgment against Capitol, granted Capitol's motion for no cause of action, and assessed liability for the incurred medical expenses against Miller. On appeal, the cases were consolidated. Hospitals argue that since Capitol's insurance policy, and specifically the exclusion upon which Capitol relied to deny coverage, is ambiguous and uncertain, the trial court failed to apply the recognized rules of construction and erred in denying Hospitals' motion for summary judgment and granting Capitol's motion for no cause of action. We agree.

The interpretation of a written contract may be a question of law determined by the words in the agreement. ¹ In this regard, we recently stated that a cardinal rule in construing the contract is to give effect to the intentions of the parties and, if possible, these intentions should be gleaned from an examination of the text of the contract itself. ² Additionally, it is axiomatic that a contract should be interpreted so as to harmonize all of its provisions and all of its terms, which terms should be given effect if it is possible to do so. If a trial court interprets a contract as a matter of law, as was the case here, we accord its construction no particular weight and review its actions under a correction-of-error standard. ³

Recognizing such principles, this Court, similar to courts in many jurisdictions, has long subscribed to the view that any ambiguity or uncertainty in the language of an insurance policy must be resolved in favor of coverage. Also, since the policy is drawn by the insurer, ambiguities are construed against that party. ⁴ One acknowledged rationale underlying this sound determination is the need to afford the insured the protection he or she endeavored to secure by paying premiums. ⁵ The test to be applied in determining the ambiguity of a contract has been stated by this Court as follows:

Would the meaning [of the language of the insurance contract] be plain to a person of ordinary intelligence and understanding, viewing the matter fairly and reasonably, in accordance with the usual and natural meaning of the words, and in the light of existing circumstances, including the purpose of the policy[?] ⁶

We have previously applied this test and the liberal construction requirement when interpreting an exclusionary clause contained in an insurance policy. Indeed, in Browning v. Equitable Life Assurance Society, ⁷ we stated:

When an insured claims a right to recover under the accident provisions of the policy, all he need do is bring himself within the field therein defined and show his injury or disability was proximately and predominantly caused through violent, external and accidental means. He then has brought himself within the policy, and the terms thereof have been met.... When he brings himself within the insuring clause he has made his case ... and any exceptions or conditions which would then deny him relief, take him out of the indemnity provisions, render them inoperative as to him, are matters of defense, and the burden thereof rests upon the insurer........

... [L]imitations, exceptions or conditions which may relieve the insurer from liability, which may be set forth in the policy outside of the language of the insuring clause, or which may exist outside of the policy entirely, must be made and established by the insurer to escape liability thereunder. ⁸

Similarly, the Supreme Court of Washington, sitting en banc, has reiterated:

There are certain basic principles that apply in any examination of exclusionary clauses in insurance contracts. Chief among these is that exclusionary clauses are to be most strictly construed against the insurer. The policy should be interpreted in accordance with the way it would be understood by the average person purchasing insurance. It must not be forgotten that the purpose of insurance is to insure, and that construction should be taken which will render the contract operative, rather than inoperative. A construction which contradicts the general purpose of the contract or results in a hardship or absurdity is presumed to be unintended by the parties.

These are principles that are not confined to Washington law, but are of nationwide application. The courts of other states have elaborated upon these rules. As stated by the court in Aetna Casualty and Surety Company v. Haas :

"Exclusion clauses are strictly construed against the insurer, especially if they are of uncertain import. An insurer may, of course, cut off liability under its policy with a clear language, but it cannot do so with that dulled by ambiguity. As with the provisions of the policy as a whole, so also with the exceptions to the liability of the insured, the language must be construed so as to give the insurer the protection which he reasonably had a right to expect; and to that end any doubts, ambiguities and uncertainties arising out of the language used in the policy must be resolved in his favor."

As noted by the court in Harris Jolliff & Michel, Inc. v. Motorists Mut. Ins. Co., [21 Ohio App.2d 81, 255 N.E.2d 302]:

"Where exceptions, qualifications or exemptions are introduced into an insurance contract, a general presumption arises to the effect that that which is not clearly excluded from the operation of such contract is included in the operation thereof." ⁹

In the instant case, Capitol is seeking to escape liability by relying upon an exclusionary clause which is susceptible of several interpretations. However, in view of the above-noted rules and principles of construction, Capitol has not sufficiently demonstrated how the contract "exception" in question should allow it to "escape liability thereunder." ¹⁰ Instead, Capitol alleges that the language and terms of the policy are not ambiguous and that it has met its burden of proof in this case by the mere fact that the insured pleaded guilty to a felony. ¹¹ We disagree.

First, even if Capitol's construction of the subject provision was accurate, Capitol has not established the required causal relationship between the insured's injuries and a felony violation of law. Indeed, as expressed by the Colorado Supreme Court in Penn Mutual Life Insurance Co. v. Gibson, ¹² in order to relieve the insurer of liability in such situations, the insured must have been actually engaged in a felony at the time and place of the injury. In Penn Mutual, the insured, while driving under the influence of alcohol, caused an accident which resulted in his death. The insurer declined to pay accidental death benefits because the death resulted from "the commission by the [i]nsured of an assault or felony." ¹³ The Colorado Supreme Court, viewing the issue as one of causation, stated:

In the instant case the insured's death is not the death "of another" under C.R.S. '53, 40-2-10. And, the question of an assault under C.R.S. '53, 40-2-11 is not involved since such was neither alleged nor was the requisite intent proved.... As to the insured, the event which caused his death, was his collision with another automobile which was precipitated by his wrongful (but non-felonious) acts of driving while intoxicated and operating his vehicle in a reckless manner. The fact that [another individual] was also injured is not what caused [the insured's] death. A fortiori the death was not the result of a felony under the statute. ¹⁴

In urging this Court to adopt the reasoning of the Penn Mutual case, Hospitals argue that Miller's injuries in this case were caused by and were a direct consequence of the accident, which was precipitated by his wrongful (but nonfelonious) act of driving while intoxicated. As such, Miller's injuries did not "arise out of" a felony. Indeed, the felony upon which Capitol...