Ohio Cas. Ins. Co. v. Carman Cartage Co.

• Citation: 262 Neb. 930,636 N.W.2d 862
• Decision Date: 21 December 2001
• Docket Number: No. S-00-915.,S-00-915.
• Parties: The OHIO CASUALTY INSURANCE COMPANY, Appellee, v. CARMAN CARTAGE COMPANY, INC., doing business as Carman Cartage Co., Appellant.
• Court: Supreme Court of Nebraska

636 N.W.2d 862

262 Neb. 930

The OHIO CASUALTY INSURANCE COMPANY, Appellee, v. CARMAN CARTAGE COMPANY, INC., doing business as Carman Cartage Co., Appellant.

No. S-00-915.

Supreme Court of Nebraska.

December 21, 2001.

James Allen Davis, Fremont, and Travis Thorne Bennington, of Davis & Associates, for appellant.

Kevin J. Dostal and Thomas M. Locher, Omaha, of Locher, Cellilli, Pavelka & Dostal, L.L.C., for appellee.

HENDRY, C.J., and WRIGHT, CONNOLLY, GERRARD, STEPHAN, and MILLER-LERMAN, JJ.

STEPHAN, Justice.

In this declaratory judgment action, the district court for Douglas County determined as a matter of law that under a commercial inland marine insurance policy, the insurer had no duty to defend a property damage claim against its insured and was therefore entitled to summary judgment in its favor. We reach the same conclusion and therefore affirm.

BACKGROUND

Carman Cartage Company, Inc. (Carman Cartage), is a common carrier engaged in the interstate truck transport of cargo within the United States. The Ohio Casualty Insurance Company (Ohio Casualty) issued a commercial inland marine insurance policy insuring Carman Cartage for the period January 1, 1997, to January 1, 1998. The policy included a "Trucker's Motortruck Cargo Coverage Form" which obligated Ohio Casualty to pay for loss to property for which the insured was "liable by law as a common carrier ... under tariff, bill of lading or shipping receipt" when the loss was caused by one of several occurrences, including fire, explosion, accidental collision, and other perils. This form further provided that "[t]he most we will pay for `loss' is the applicable Limits of Insurance shown in the Declarations," which state a limit of $100,000 per unit.

On February 6, 1997, Carman Cartage was transporting a cargo of beef under contract with American President Lines (APL) when an accident occurred, resulting in damage to the cargo. APL asserted a cargo loss claim against Carman Cartage in the approximate amount of $140,000. Carman Cartage notified Ohio Casualty of the claim and stated its position that the loss had a maximum value of $86,999.66. After investigating the loss and attempting unsuccessfully to settle the claim within the policy limit of $100,000, Ohio Casualty paid that amount to APL on behalf of Carman Cartage. Ohio Casualty obtained a receipt for this payment but did not secure a release of claims on behalf of Carman Cartage. Subsequently, APL filed suit against Carman Cartage seeking approximately $40,000 over and above the payment made by Ohio Casualty. Carman Cartage tendered defense of this claim to Ohio Casualty, which rejected the tender based upon a denial that it had a duty to defend under the terms of the policy.

Ohio Casualty then brought this action for a declaratory judgment determining its rights and obligations under the policy. Carman Cartage counterclaimed, alleging negligent failure to secure a waiver of claims, breach of fiduciary duty, and breach of contract. Ohio Casualty moved for summary judgment, which the district court granted based upon its determination that Ohio Casualty had merely a right and not a duty to defend under the plain language of the policy. Carman Cartage perfected this timely appeal, which we removed to our docket on our own motion pursuant to our authority to regulate the dockets of the appellate courts of this state. See Neb.Rev.Stat. § 24-1106(3) (Reissue 1995).

ASSIGNMENTS OF ERROR

Carman Cartage assigns that the trial court erred (1) when it ruled that Ohio Casualty did not owe Carman Cartage a duty to defend it from the third-party suit, (2) when it failed to recognize the common-law principle that an insurer owes its insured a fiduciary duty to secure a release of claims on behalf of its insured when it pays a third-party claim in full, and (3) in granting summary judgment when genuine issues of material fact exist regarding whether Ohio Casualty knowingly overpaid the third-party claim and whether the cargo was a total loss.

STANDARD OF REVIEW

The interpretation of an insurance policy is a question of law. Tighe v. Combined Ins. Co. of America, 261 Neb. 993, 628 N.W.2d 670 (2001). In an appeal from a declaratory judgment, an appellate court, regarding questions of law, has an obligation to reach its conclusion independently of the conclusion reached by the trial court. Continental Western Ins. Co. v. Conn, 262 Neb. 147, 629 N.W.2d 494 (2001).

Summary judgment is proper when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Woodward v. Andersen, 261 Neb. 980, 627 N.W.2d 742 (2001); Dossett v. First State Bank, 261 Neb. 959, 627 N.W.2d 131 (2001). In reviewing a summary judgment, an appellate court views the evidence in a light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Skinner v. Ogallala Pub. Sch. Dist. No. 1, 262 Neb. 387, 631 N.W.2d 510 (2001).

ANALYSIS

The term "inland marine coverage" encompasses a variety of specialized insurance coverages, including coverage for loss or damage to goods while in transit. 11 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 154:3 at 154-11 (rev. ed.1998). Inland marine insurance "function[s] basically as a form of property insurance, even though the policy may explicitly contemplate that the value of the property will be payable to the owner rather than the insured." 11 Russ & Segalla, supra, § 154:5 at 154-14. In this case, it is undisputed that the loss in question was of a type covered under the policy and that the policy limit was $100,000. The issues presented are whether the insurer had either a duty to defend under the policy or a common-law duty to obtain a release of the insured as part of any settlement with the claimant.

DUTY TO DEFEND

In construing liability insurance policies, we have held that an insurer's duty to defend is broader than its duty to indemnify. John Markel Ford v. Auto-Owners Ins. Co., 249 Neb. 286, 543 N.W.2d 173 (1996); Allstate Ins. Co. v. Novak, 210 Neb. 184, 313 N.W.2d 636 (1981). The nature of the duty to defend is defined by the insurance policy as a contract. Union Ins. Co. v. Land and Sky, Inc., 247 Neb. 696, 529 N.W.2d 773 (1995). In this case, however, we are not considering a liability insurance policy, but, rather, an inland marine policy providing trucker's motor truck cargo coverage. The threshold question is not the nature or scope of a duty to defend, but, rather, whether any such duty exists under the policy.

An insurance policy is a contract. Callahan v. Washington Nat. Ins. Co., 259 Neb. 145, 608 N.W.2d 592 (2000). In an appellate review of an insurance policy, the court construes the policy as any other contract to give effect to the parties' intentions at the time the writing was made. Where the terms of a contract are clear, they are to be accorded their plain and ordinary meaning. Austin v. State Farm Mut. Auto. Ins. Co., 261 Neb. 697, 625 N.W.2d 213 (2001); Callahan v. Washington Nat. Ins. Co., supra.

An insurer's duty to defend is usually a contractual duty, rather than one imposed by operation of law. 14 Russ & Segalla, supra, § 200:5. Thus, we look to the insurance policy itself to determine whether Ohio Casualty undertook a duty to defend Carman Cartage under its commercial inland marine insurance policy.

Carman Cartage asserts that such a duty arises from a portion of the policy conditions entitled "Privilege to Adjust With Owner," which provides:

In the event of "loss" involving property of others in your care, custody or control, we have the right to:

1. Settle the "loss" with the owners of the property. A receipt for payment from the owners of that property will satisfy any claim of yours.

2. Provide a defense for legal proceedings brought against you. If provided, the expense of this defense will be at our cost and will not reduce the applicable Limit of Insurance Under this insurance.

Ohio Casualty argues that this language creates a right but not a duty to defend.

Although we have not had occasion to determine whether this precise policy language creates a duty to defend, we considered similar language in Cornhusker Agrl. Assn. v. Equitable Gen. Ins. Co., 223 Neb. 618, 392 N.W.2d 366 (1986). That case posed the question of whether an excess liability insurer undertook a duty to defend based upon the following policy language:

"The Insured shall be responsible for the investigation, settlement or defense of any claim made or suit brought or proceeding instituted against the insured which no underlying insurer is obligated to defend....

"The company shall have the right and shall be given the opportunity to associate with the insured or its underlying insurers, or both, in the defense and control of any claim, suit or proceeding which involves or appears reasonably likely to involve the company and in which event the insured, such insurers and the company shall cooperate in all things in defense of such claim, suit or proceeding."

(Emphasis in original.) Id. at 626-27, 392 N.W.2d at 371-72. We held that "[t]he trial court correctly found that the language... `expressly give[s] Equitable the right to defend [but] do[es] not provide an express duty to defend.'" (Emphasis in original.) Id. at 627, 392 N.W.2d at 372.

Case law from other jurisdictions is also instructive on the issue. In B & D Appraisals v. Gaudette Machinery Movers, 752 F.Supp. 554 (D.R.I.1990), a machine being shipped by a common carrier was damaged in transit. When the owner brought suit to recover its loss, the carrier notified its insurance company, which refused to participate in its defense. The applicable portion of the policy provided:

"The

...