Midwest Cas. Ins. Co. v. Whitetail

• Decision Date: 13 July 1999
• Docket Number: No. 990038.,990038.
• Citation: 1999 ND 133,596 N.W.2d 341
• Parties: MIDWEST CASUALTY INSURANCE COMPANY, Plaintiff, Appellant and Cross-Appellee, v. Dorothy WHITETAIL, Defendant, Theresa Anderson, Defendant, Appellee and Cross-Appellant, and Quentin Bruce Whiteman, Defendant.
• Court: North Dakota Supreme Court

596 N.W.2d 341

1999 ND 133

MIDWEST CASUALTY INSURANCE COMPANY, Plaintiff, Appellant and Cross-Appellee, v. Dorothy WHITETAIL, Defendant, Theresa Anderson, Defendant, Appellee and Cross-Appellant, and Quentin Bruce Whiteman, Defendant.

No. 990038.

Supreme Court of North Dakota.

July 13, 1999.

Jerome C. Kettleson, Pearce & Durick, Bismarck, for plaintiff, appellant and cross-appellee.

Peter K. Halbach, Haugland, Halbach and Halbach, Devils Lake, for defendant, appellee and cross-appellant.

VANDE WALLE, Chief Justice.

[¶ 1] Midwest Casualty Insurance Company (Midwest) appealed from a summary judgment declaring Midwest has a duty to defend and potentially indemnify Dorothy Whitetail and Quentin Bruce Whiteman in an action for damages brought against them by Theresa Anderson. We hold the trial court erred in refusing to determine the material question of fact whether Whiteman had permission to operate Whitetail's vehicle. We, therefore, reverse and remand for an evidentiary hearing on that issue and a determination of policy coverage and Midwest's duty to defend.

I

[¶ 2] Whiteman is Whitetail's adult son. On February 1, 1993, Whiteman, while driving Whitetail's 1981 Chevrolet automobile, was involved in a one-car rollover accident. On the date of the accident, Whitetail carried liability insurance on the automobile with Midwest. Anderson, a passenger in the automobile, was seriously injured. She sued Whiteman, alleging his driving was "reckless, careless and negligent" and was the proximate cause of her injuries. She also sued Whitetail, alleging liability, under theories of negligent entrustment and the family car doctrine, for expressly or impliedly permitting her son to use the automobile.

[¶ 3] Midwest filed a declaratory judgment action under N.D.C.C. ch. 32-23, for a declaration Whitetail's insurance policy "does not provide coverage for the claim made against ... Whiteman." It named Whitetail, Whiteman and Anderson as defendants in the declaratory judgment action. Midwest later filed a motion requesting summary judgment "against all defendants" on the ground Whiteman is not a named insured under the policy. Anderson also filed a motion for summary judgment, asking the court to declare that the automobile liability policy does provide coverage for Whitetail and Whiteman.

[¶ 4] The trial court construed the insurance policy as providing coverage only if Whitetail had given permission for Whiteman to drive her automobile on the day of the accident. The court concluded this issue of permissive use constituted a question of material fact. However, the court refused to decide the question in this declaratory judgment action. Instead, the court reasoned, "[i]f Anderson's allegations of permission are proven in the underlying action, Midwest is obligated to provide coverage." The court concluded Midwest has a duty to defend Whitetail and Whiteman in Anderson's underlying action, because there is potential coverage under the policy. The court ordered entry of a summary judgment declaring Midwest has a duty to defend and to potentially indemnify Whitetail and Whiteman in Anderson's underlying action. Midwest appealed and Anderson cross-appealed. Because it could dispose of Midwest's issue, we consider the cross-appeal first.

II

[¶ 5] In her cross-appeal, Anderson contends any relative of Whitetail is an insured driver under the Midwest liability insurance policy, irrespective of whether the relative had permission to drive Whitetail's automobile. Anderson argues the trial court therefore erred in concluding the question of permissive use is a material fact question on the coverage issue. In deciding this issue we construe and apply Whitetail's policy. In Close v. Ebertz, 1998 ND 167, ¶ 12, 583 N.W.2d 794, we summarized the framework for construing an insurance policy:

The interpretation of an insurance policy is a question of law, fully reviewable on appeal. This Court reviews the trial court's interpretation by independently construing and examining the insurance policy. We look first to the language of the insurance contract, and if the language is clear on its face, there is no room for construction. If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract. Although insurance policies are contracts of adhesion, and we will resolve ambiguities in favor of the insured when appropriate... we will not strain the definition to provide coverage for the insured.

(Citations omitted.)

The relevant provisions of Whitetail's policy provide:

LIABILITY COVERAGE

We will pay damages which any insured person is legally liable because of bodily injury and property damage arising out of the ownership, maintenance or use of your insured car.

....

ADDITIONAL DEFINITIONS USED IN THIS PART ONLY

1) Insured person or insured persons means

(A) You.

(B) A relative or a resident using your insured car;

(C) Any other person using your insured car.

(D) Any other person or organization with respect only to legal liability for acts or omissions of:

(1) Any person covered under this part while using your insured car; or

(2) You using any car other than your insured car if the car is not owned or hired by that person or organization.

However, no person shall be considered an insured person if the person uses your insured car without having your permission.

(Emphasis added.) Under the policy, "no person" using Whitetail's car is insured if the use is without her permission. Anderson argues the exclusion clause only applies to persons otherwise deemed insured persons under subpart (D). We disagree. The disputed provision is in our view clear and unambiguous. It applies to all users of Whitetail's car. A contrary conclusion would be at best strained and would lead to an unreasonable result. Sellie v. North Dakota Ins. Guar. Ass'n, 494 N.W.2d 151 (N.D.1992) (holding term in insurance policy means what a reasonable person would think it meant).

[¶ 6] If the drafters intended the permissive use exclusion to apply only to persons under subpart (D) they easily could have written "no person under subpart (D)" shall be deemed an insured person if driving without the owner's permission. No such restricting language is included in the clause. Furthermore, the disputed clause is not located within or under subpart (D), but rather is extended under the paragraph heading, so as to indicate it relates to the entire paragraph. Applying the disputed clause only to subpart (D) is not intuitively reasonable. Subpart (D) refers to liability of a "person or organization" who is not a driver but who is liable for the acts or omissions of someone who has driven the insured auto. The issue of permissive use obviously cannot apply to such "person or organization," who has neither driven nor used the insured vehicle. Likewise, the permissive use clause has no practical application to subpart (D)(2), which deals with the policy owner's use of a vehicle other than the insured vehicle.

[¶ 7] We conclude the permissive use clause unambiguously stands on its own and excludes coverage to any person driving the insured car without the owner's permission. Other courts have similarly construed comparable clauses as denying coverage to any person using an insured auto without the owner's permission. See State Farm Mut. Auto. Ins. Co. v. Scheel, 973 S.W.2d 560, 565 (Mo.App. W.D.1998)

; see also State Farm Mut. Auto. Ins. Co. v. Kelly, 132 Wis.2d 187, 389 N.W.2d 838, 840 (1986). Under Whitetail's policy with Midwest, "no person" is insured who drives the insured's auto without permission. Consequently, Whiteman was an insured person under the policy at the time of the accident only if he was driving the car with Whitetail's permission.

III

[¶ 8] The trial court determined the issue of whether Whiteman was driving with Whitetail's permission presented a material question of fact about which there was conflicting evidence. In support of their cross motions for summary judgment, the parties submitted affidavits showing conflicting statements were made by Whiteman and Whitetail about whether Whiteman was driving the car with Whitetail's permission on the day of the accident. Having determined this fact question of permissive use was both material and dispositive on the policy coverage issue, the trial court, nevertheless, refused to resolve it in this declaratory judgment action. [¶ 9] Ordinarily, an insurer has a duty to defend an underlying action against its insured if the allegations in the complaint give rise to potential liability or a possibility of coverage under the insurance policy. Nodak Mut. Ins. Co. v. Heim, 1997 ND 36, ¶ 11, 559 N.W.2d 846. The trial court reasoned, if Anderson's allegation that Whiteman was driving with Whitetail's permission was assumed to be true, Midwest would have a duty to defend and to indemnify both Whiteman and Whitetail in Anderson's underlying tort action against...