LeMars Mut. Ins. Co. v. Joffer

• Decision Date: 21 January 1998
• Docket Number: No. 96-1516,96-1516
• Parties: LEMARS MUTUAL INSURANCE COMPANY, Appellee, v. John H. JOFFER and Ruth Joffer, Appellants.
• Court: Iowa Supreme Court

Page 303

574 N.W.2d 303

LEMARS MUTUAL INSURANCE COMPANY, Appellee, v. John H. JOFFER and Ruth Joffer, Appellants.

No. 96-1516.

Supreme Court of Iowa.

Jan. 21, 1998.

David J. King of the Blake Law Office, Sioux Falls, SD, for appellants.

Timothy A. Clausen of Klass, Stoos, Stoik, Mugan, Villone & Phillips, L.L.P., Sioux City, for appellee.

Considered by HARRIS, P.J., and LARSON, CARTER, LAVORATO, and SNELL, JJ.

SNELL, Justice.

Defendants appeal the district court's order denying their motion for summary judgment and granting plaintiff's motion for summary judgment regarding uninsured motorist coverage under insurance policies purchased by defendants from plaintiff. We affirm.

I. Background Facts and Proceedings

On October 16, 1993, defendants John and Ruth Joffer were involved in a two-car accident in South Dakota while driving their 1986 Buick LeSabre. The driver of the other car involved was determined to be at fault, but the driver did not have automobile insurance. At the time of the accident, the Joffers were insured under two separate policies with plaintiff LeMars Mutual. One policy, which covered their personal vehicles, including the Buick, provided uninsured motorist coverage with a limit of $25,000 per person and $50,000 per accident. The other policy, a business automobile policy which covered a 1975 International two-ton truck, also provided uninsured motorist coverage with a limit of $500,000.

At the time of the accident, the Joffers were conducting farm business--obtaining supplies for the fall harvest--but were unable to drive the International truck because it was inoperable. Thus, they drove their Buick that day. LeMars paid the Joffers the limits of the uninsured motorist coverage pursuant to the personal automobile policy. The Joffers also sought uninsured motorist coverage under the business policy. LeMars tentatively denied coverage and filed a petition for declaratory judgment requesting the court to rule that the business automobile policy did not provide coverage to the Joffers for the injuries stemming from the October 1993 accident. LeMars subsequently filed a motion for summary judgment requesting the court to find as a matter of law that the policy did not provide coverage for the Joffers. The Joffers resisted the motion and filed their own motion for summary judgment, arguing that coverage existed under the business policy.

The district court granted LeMars' motion for summary judgment, finding that an owned-but-not-insured exclusion contained in the business automobile policy was valid and prevented coverage for an accident in the Buick, which was not insured under the business policy. The court rejected the Joffers' contention that the policy's "temporary substitute" clause provided them with coverage. On appeal, the Joffers argue that the district court erred as follows: (1) in interpreting the temporary substitute clause as not applicable to them; (2) in finding that the owned-but-not-insured exclusion applied because application of the exclusion would invalidate the temporary substitute vehicle clause, an inconsistent result rendering the coverage illusory; and (3) in declining to find that the doctrine of reasonable expectations required the court to invalidate the owned-but-not-insured exclusion.

II. Scope and Standard of Review

Our review from a district court's ruling on a motion for summary judgment is for errors at law. Summary judgment is appropriate only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Iowa R. Civ. P. 237(c); C-Thru Container Corp. v. Midland Mfg. Co., 533 N.W.2d 542, 544 (Iowa 1995). In determining whether a genuine issue of fact exists, we consider the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any. Iowa R. Civ. P. 237(c). To decide if the moving party has met this burden, we review the record in the light most favorable to the nonmoving party, in this case the defendants. C-Thru Container, 533 N.W.2d at 544.

III. Applicable Policy Provisions and Law

The uninsured and underinsured motorist coverage portion of the business policy provides as follows:

B. WHO IS AN INSURED

1. You.

2. If you are an individual, any "family member".

3. Anyone else "occupying" a covered "auto" or a temporary substitute for a covered "auto". The covered "auto" must be out of service because of its breakdown, repair, servicing, loss or destruction.

4. Anyone for damages he is entitled to recover because of "bodily injury" sustained by another "insured".

C. EXCLUSIONS

This insurance does not apply to any of the following:

....

4. "Bodily injury" sustained by you while "occupying" or struck by any vehicle owned by you which is not a covered "auto".

The Joffers argue that via the temporary substitute clause found in paragraph B(3), they were covered under the business policy at the time of the accident, even though they were driving the Buick, arguably not a covered auto. LeMars contends that by the clear language of the policy, the temporary substitute clause does not apply to the Joffers, but rather applies to "anyone else" (other than the Joffers) driving a covered auto or a temporary substitute for a covered auto. Moreover, LeMars argues that the owned-but-not-insured exclusion found in C(4) clearly excludes the Joffers from coverage because they were driving the Buick at the time of accident, which they owned but which was not a covered auto under the policy. In response, the Joffers argue that the owned-but-not-insured exclusion renders the temporary substitute coverage illusory and that the doctrine of reasonable expectations supports a finding of coverage under the terms of the policy.

The primary issues on appeal require us to interpret and construe several provisions of the business automobile policy issued to the Joffers by LeMars Mutual. Our rules of contract interpretation and construction peculiar to insurance policies apply. Ferguson v. Allied Mut. Ins. Co., 512 N.W.2d 296, 298 (Iowa 1994). Interpretation and construction "are technically distinct exercises with regard to resolving insurance contract problems." Id. at 299 (citing Connie's Constr. Co. v. Fireman's Fund Ins. Co., 227 N.W.2d 207, 210 (Iowa 1975)). Interpretation requires a court to determine the meaning of contractual words. Id. This is a question of law for the court unless the meaning of the language depends on extrinsic evidence or a choice among reasonable inferences to be drawn. Id.; see also A.Y. McDonald Indus., Inc. v. Insurance Co. of N Am., 475 N.W.2d 607, 618 (Iowa 1991). Construction of an insurance policy requires the court to determine its legal effect. Ferguson, 512 N.W.2d at 299. The proper construction of an insurance contract is always an issue of law for the court. Id.

The cardinal principle in the construction and interpretation of insurance policies is that the intent of the parties at the time the policy was sold must control. Id.; A.Y. McDonald, 475 N.W.2d at 618. Except in cases of ambiguity, the intent of the parties is determined by the language of the policy. A.Y. McDonald, 475 N.W.2d at 618 (citing Cairns v. Grinnell Mut. Reins. Co., 398 N.W.2d 821, 823 (Iowa 1987); Iowa R.App. P. 14(f)(14)). "An ambiguity exists if, after the application of pertinent rules of interpretation to the policy, a genuine uncertainty results as to which one of two or more meanings is the proper one." Id. Because of the adhesive nature of insurance policies, their provisions are construed in the light most favorable to the insured. Ferguson, 512 N.W.2d at 299; A.Y. McDonald, 475 N.W.2d at 619. Exclusions from coverage are construed strictly against the insurer. Ferguson, 512 N.W.2d at 299.

We are mindful of the above-stated rules of interpretation and construction as we determine the issues before us.

IV. Temporary Substitute Clause

The temporary substitute clause is found in the portion of the policy defining who is an insured for purposes of uninsured and underinsured motorist coverage. The Joffers are clearly insureds under paragraphs B(1) and B(2). The Joffers contend they are also insureds under paragraph B(3) and therefore the temporary substitute clause applies to them. Paragraph B(3) extends uninsured and underinsured coverage to "anyone else 'occupying' a covered 'auto' or a temporary substitute for a covered 'auto'." The term "anyone else" is not defined in the policy. The insurer and insureds offer different meanings for the term. LeMars contends the term "anyone else" is intended to exclude those categories of insureds previously described, while the Joffers argue that "anyone else" is intended to be inclusive, making the temporary substitute clause applicable to all categories of insureds previously named.

When words or phrases are undefined in a policy we do not give them a technical or legal meaning. Rather, undefined words are given their ordinary meaning. If the words are susceptible to two reasonable interpretations, the interpretation favoring the insured is adopted. However, a mere disagreement between the parties regarding the meaning of undefined terms does not automatically establish an ambiguity. A.Y. McDonald, 475 N.W.2d at 619. In determining the ordinary meaning of undefined terms in a policy, we commonly refer to dictionaries. See, e.g., id. at 619-20 (meaning of "damages"); Witcraft v. Sundstrand Health & Disability Group Benefit Plan, 420 N.W.2d 785, 788 (Iowa 1988) (meaning of "illness"); North Star Mut. Ins. Co. v. Holty, 402 N.W.2d 452, 455 (Iowa 1987) (meaning of "apparatus").

As noted previously, the interpretation of insurance policy terms is a matter of law for the court unless extrinsic evidence exists as to the meaning of the terms. Ferguson, 512 N.W.2d at 299. The Joffers contend that representations made by their insurance agent constitute extrinsic evidence and should be considered by the court in...