Nationwide Mut. Ins. Co. v. Nolan

• Decision Date: 18 November 1999
• Docket Number: 98-SC-0475-DG.
• Citation: 10 S.W.3d 129
• Parties: NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant, v. Allen W. NOLAN and Janice Nolan, Appellees.
• Court: United States State Supreme Court — District of Kentucky

10 S.W.3d 129

NATIONWIDE MUTUAL INSURANCE COMPANY, Appellant, v. Allen W. NOLAN and Janice Nolan, Appellees.

98-SC-0475-DG.

Supreme Court of Kentucky.

November 18, 1999.

Rehearing Denied February 24, 2000.

Paul J. Bishop, Wayne J. Carroll, Edward H. Bartenstein, MacKenzie & Peden, P.S.C., Louisville, for Appellant.

Bryan J. Dillon, Louisville, for Appellee.

KELLER, Justice.

Allen W. ("Wayne") and Janice Nolan borrowed a truck from a friend so that they could help their son, Robert, move back to Kentucky from Massachusetts. During the move, while Robert was driving, the truck ran off the road in West Virginia and Wayne and Janice Nolan were injured. The injured Nolans brought a negligence action against their son and sought recovery as passengers under the Nationwide Mutual Insurance Company ("Nationwide") policy insuring the truck. The trial court granted summary judgment in favor of Nationwide on the basis that the Nolans were excluded from coverage under the language of the insurance policy which disclaimed coverage for "any insureds." The policy defined "insureds" as "persons ... entitled to protection [under the policy]." Under the policy's auto liability coverage, a permissive user is entitled to protection if he is "legally responsible for the use" of the automobile. Were Wayne and Janice Nolan, as a matter of law, legally responsible for the use of the truck at the time of the accident and thereby excluded from recovery? We conclude that the question of Wayne and Janice Nolan's legal responsibility must be resolved as a factual issue and affirm the Court of Appeals.

The relevant sections of the Nationwide Auto Policy read:

DEFINITIONS

. . .

2. the words "THE INSURED", "AN INSURED", and "ANY INSURED" mean or refer to the persons and organizations specifically indicated as entitled to protection under the coverage being described.

. . .

AUTO LIABILITY COVERAGE PROPERTY DAMAGE AND BODILY INJURY LIABILITY COVERAGE. Under this coverage, if you become legally obligated to pay damages resulting from the ownership, maintenance, use, loading or unloading of your auto, we will pay such damages. Anyone living in your household has this protection. Also protected is any person or organization who is legally responsible for the use of your auto and uses it with your permission. This permission may be expressed or implied....

. . .

AMENDATORY ENDORSEMENT — LIABILITY COVERAGE EXCLUSIONS

With this endorsement, the policy is amended as follows:

AUTO LIABILITY

COVERAGE EXCLUSIONS

The following exclusion is added to read: It does not cover bodily injury to any insured or any resident family member in an insured's household ....

Nationwide successfully argued to the trial court that Wayne and Janice Nolan could not recover under the policy because the Auto Liability Coverage Exclusion specifically exempts coverage for "bodily injury to any insured." Nationwide argues that the language of the section governing Auto Liability Coverage (known as an Omnibus Clause) establishes that Wayne and Janice Nolan fall within the "any insured" language because they were legally responsible for the use of the truck and they used it with permission. The parties do not dispute that Wayne and Janice Nolan used the vehicle with proper permission, and the issue this Court must resolve is whether, at the time of the accident, they were legally responsible for the use of the truck. "Legally responsible" is not defined anywhere within the policy, and we are asked to interpret the phrase in order to assess the correctness of the trial court's summary judgment.

Nationwide argues that the phrase should be construed to extend coverage to Wayne and Janice Nolan because, as permissive users of the vehicle, they had legal duties to fulfill in connection with the vehicle's operation. Wayne and Janice Nolan argue that this language contemplates coverage only when permissive users of the vehicle incur legal liability, and that they are entitled to recover under the policy unless a jury apportions liability to them. The construction issue turns, therefore, on whether the "legally responsible" language contemplates a factual determination of liability or whether the parties intended the language to cover any duty of care on the part of a permissive user which exists as a matter of law. We conclude that the policy language refers to the factual issue of liability.

Although the parties devote large sections of their briefs on the question of whether this insurance contract should be interpreted under Kentucky or Indiana law, we find it unnecessary to engage in an interest analysis because our resolution is reached by applying principles of contract construction which are common to both states. The words employed in insurance policies, if clear and unambiguous, should be given their plain and ordinary meaning. Eli Lily and Co. v. Home Insurance Company, Ind., 482 N.E.2d 467, 470 (1985); Buckingham Life Insurance Company v. Winstead, Ky., 454 S.W.2d 696, 697 (1970). "The trial court must give effect to what the parties expressly agreed upon" instead of "plac[ing] a strained interpretation thereon contrary to the intent of the parties ...." Stucker v. College Life Insurance Company of America, 139 Ind.App. 422, 438, 208 N.E.2d 731, 739 (1965). Policies should be interpreted according to the parties' mutual understanding at the time they entered into the contract and "[s]uch mutual intention is to be deduced, if possible, from the language of the contract alone." Simpsonville Wrecker...