Northern Ins. Co. of New York v. Ekstrom

• Decision Date: 18 December 1989
• Docket Number: No. 88SC336,88SC336
• Citation: 784 P.2d 320
• Parties: NORTHERN INSURANCE COMPANY OF NEW YORK, Petitioner and Cross-Respondent, v. Anne L. EKSTROM, Respondent and Cross-Petitioner.
• Court: Colorado Supreme Court

Page 320

784 P.2d 320

58 USLW 2385

NORTHERN INSURANCE COMPANY OF NEW YORK, Petitioner and Cross-Respondent, v. Anne L. EKSTROM, Respondent and Cross-Petitioner.

No. 88SC336.

Supreme Court of Colorado En Banc.

Dec. 18, 1989.

Hall & Evans, Eugene O. Daniels and Malcolm S. Mead, Denver, for petitioner and cross-respondent.

Bruce H. DeBoskey, P.C., Bruce H. DeBoskey, David L. Hiller, and Shelly B. Don, P.C., Shelly B. Don, Denver, for respondent and cross-petitioner.

Justice ERICKSON delivered the Opinion of the Court.

Northern Insurance Company of New York (Northern) petitioned for certiorari asserting that the court of appeals, in Northern Insurance Co. v. Ekstrom, 762 P.2d 741 (Colo.App.1988), erred in holding that comprehensive general liability and special multi-peril liability coverage that excluded liability for injuries arising out of the ownership, operation and use of an automobile did not exclude a claim based on negligent entrustment of an automobile. Anne L. Ekstrom cross-petitioned for certiorari to review that part of the court of appeals decision that found Northern was liable for postjudgment interest only on the amount of the policy's liability limit. We granted both petitions and now reverse the court of appeals determination that coverage was provided for the negligent entrustment claim. Since our conclusion that the Northern policy excludes coverage for a claim of negligent entrustment renders the interest issue moot, we now dismiss Ekstrom's cross-petition for certiorari. Accordingly, we reverse and return this case to the court of appeals with directions to remand to the district court with directions to vacate the judgment for Ekstrom and to enter judgment for Northern.

I.

Ekstrom was injured when her car was struck by a truck driven by Kenneth Hobbie, an employee of Mallow Plating Works, Inc. (Mallow), Northern's insured. It is unclear from the record whether the truck driven by Hobbie was owned by Mallow. Ekstrom contends the truck was actually owned by an officer of Mallow, and was on loan to the company when the accident occurred. ¹ At the time of the accident, Mallow was insured by Maryland Casualty Company (Maryland) under an automobile liability policy with a limit of $500,000 per occurrence. Mallow was also insured under a liability policy issued by Northern. The Northern policy contained both comprehensive general liability and special multi-peril liability provisions, and also had a liability limit of $500,000 per occurrence. Under the comprehensive general liability portion, the policy provided that:

The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

Coverage A bodily injury or

Coverage B property damage

to which this insurance applies caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage....

The special multi-peril coverage provision in the policy is similar, but applies to bodily injury or property damage "arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises."

Both coverages provided that the policy did not apply

to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of

(1) any automobile or aircraft owned or operated by or rented or loaned to any insured, or

(2) any other automobile or aircraft operated by any person in the course of his employment by any insured....

Ekstrom filed suit against Mallow, Hobbie, and the owner of the truck, alleging that Mallow was liable for the negligence of Hobbie under the doctrine of respondeat superior. Additionally, Ekstrom alleged that Mallow negligently entrusted the vehicle to Hobbie, and was negligent in hiring, retaining and supervising Hobbie. Trial was to a jury which found, through special verdict forms, that Mallow was negligent in hiring, retaining, supervising and entrusting the vehicle to Hobbie, and that Mallow's negligence was the proximate cause of injury to Ekstrom. The jury awarded Ekstrom damages in the amount of $1,982,000. Judgment was entered against Mallow and Hobbie for $1,982,000 together with prejudgment interest in the amount of $294,179 and $3,100 in costs, for a total of $2,279,279. Maryland deposited the $500,000 policy limit and approximately $301,000 in interest on the entire judgment into the registry of the court.

In July 1985, Ekstrom brought a garnishment proceeding against Maryland, seeking the proceeds of the Northern liability policy. Pursuant to a stipulation, Northern replaced Maryland as the garnishee. The parties also stipulated that although Maryland and Northern were subsidiaries of the same corporate parent, they were separate corporate entities sharing a single claims adjustment office. The stipulation further provided that employees of Maryland evaluated the respondent's claims for both Maryland and Northern. In responding to the writ of garnishment, Northern denied that it held or possessed any personal property belonging to Mallow, stating that the policy did not cover claims against its insured for negligent entrustment of an automobile. The trial court found in favor of Ekstrom, and entered judgment against Northern for $500,000. Ekstrom was also awarded postjudgment interest on the policy limit of $500,000, although she claimed that she was entitled to interest on the entire outstanding judgment. The court of appeals affirmed the order of the trial court after both parties appealed.

We granted Northern's petition for certiorari to review the court of appeals decision that the policy covered a claim for negligent entrustment of an automobile, ² and also granted respondent's cross-petition for review of that part of the decision affirming the allowance of postjudgment interest on the policy limit only. We must determine whether a general liability policy that excludes liability for injuries arising out of the ownership, operation and use of an automobile provides coverage for a claim of negligent entrustment of an automobile.

II.

The court of appeals, relying on United Fire and Casualty Co. v. Day, 657 P.2d 981 (Colo.App.1982), held that the coverage and exclusionary provisions of the Northern general liability policy were ambiguous in the context of a claim for negligent entrustment of an automobile, and construed the automobile exclusion as not barring recovery by Ekstrom on her claim of negligent entrustment.

In Day, the court of appeals held that a homeowner's liability policy did not exclude a claim based on negligent entrustment of an automobile. The policy in Day excluded liability for "bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of ... any motor vehicle owned or operated by, or rented or loaned to any insured." In finding that the automobile exclusion clause in Day was ambiguous in the context of a claim for negligent entrustment of an automobile, the court of appeals concluded that liability for negligent entrustment arises out of the personal conduct of the insured, and that the personal conduct did not involve the use of an automobile. Id. at 983. The court found that the automobile exclusion did not precisely exclude claims based on personal conduct of the insured that existed separately from the use of the automobile and, accordingly, held that the claim based on negligent entrustment of an automobile was not excluded from coverage under the homeowner's liability policy. Id. at 984.

III.

Coverage of Ekstrom's claims under Mallow's automobile liability policy is not at issue here. The automobile insurer's liability was extinguished when it deposited the automobile policy limit along with interest into the registry of the court. The issue is whether a claim of negligent entrustment of an automobile is excluded by the terms of the comprehensive general liability and special multi-peril liability coverage provisions. The policy specifically excludes liability for injury arising out of the ownership, operation and use of an automobile.

Unless there is an ambiguity in the terms of a policy, a court should avoid strained interpretations and enforce an insurance contract as written. Republic Ins. Co. v. Jernigan, 753 P.2d 229, 232 (Colo.1988). A court may not rewrite an unambiguous contract. Urtado v. Allstate Ins. Co., 187 Colo. 24, 26, 528 P.2d 222, 223 (1974). Ambiguous policy language is construed in favor of the insured, Coxen v. Western Empire Life Ins. Co., 168 Colo. 444, 448, 452 P.2d 16, 18 (1969), but the terms of a policy must be given effect according to their ordinary meaning in the absence of ambiguity, In re Estate of Daigle, 634 P.2d 71, 79 (Colo.1981). A provision in a policy is ambiguous when it is reasonably susceptible to more than one meaning. Harrison Western Corp. v....