Pablo v. Moore

• Decision Date: 24 February 2000
• Docket Number: No. 99-507.,99-507.
• Citation: 995 P.2d 460,2000 MT 48,298 Mont. 393
• Court: Montana Supreme Court
• Parties: Thomas Milfred PABLO and Clifford Duran, Plaintiffs and Respondents, v. Scott Allen MOORE, Gabe Lorentz, K.G. Paving, Inc., a Montana corporation; and Rod Tinseth & Associates, an assumed business name for a Montana business entity, and First Financial Insurance Company, a foreign corporation, Defendants and Appellants. Thomas Milfred Pablo, Lynn Pablo and Clifford Duran, Plaintiffs, v. The State of Montana, Defendant and Third-Party Plaintiff, v. Scott Allen Moore, K.G. Paving, Inc., a Montana corporation, and K.G. Contracting, Inc., a Montana corporation, Defendants and Third-Party Defendants.

995 P.2d 460

2000 MT 48

298 Mont. 393

Thomas Milfred PABLO and Clifford Duran, Plaintiffs and Respondents, v. Scott Allen MOORE, Gabe Lorentz, K.G. Paving, Inc., a Montana corporation; and Rod Tinseth & Associates, an assumed business name for a Montana business entity, and First Financial Insurance Company, a foreign corporation, Defendants and Appellants.

Thomas Milfred Pablo, Lynn Pablo and Clifford Duran, Plaintiffs, v. The State of Montana, Defendant and Third-Party Plaintiff, v. Scott Allen Moore, K.G. Paving, Inc., a Montana corporation, and K.G. Contracting, Inc., a Montana corporation, Defendants and Third-Party Defendants.

No. 99-507.

Supreme Court of Montana.

Submitted on Briefs January 6, 2000.

Decided February 24, 2000.

Kimberly L. Towe, Browning, Kaleczyc, Berry & Hoven, Helena, Montana, For Appellants.

James A. Manley, Law Offices of Manley & O'Rourke-Mullins, Polson, Montana, Ann Brodsky, Special Assistant Attorney General, Helena, Montana, Dana Christensen, Christensen, Moore, Cockrell & Cummings, Kalispell, Montana, F. Lloyd Ingraham, Ingraham Law Firm, Ronan, Montana, Daniel W. Hileman and Shelly F. Brander, Kaufman, Vidal & Hileman, Kalispell, Montana, Gary Kalkstein, Axelberg & Kalkstein, Missoula, Montana, Jack Jenks, Phillips & Boyer, P.C., Missoula, Montana, For Respondents.

Chief Justice J.A. TURNAGE delivered the Opinion of the Court.

¶ 1 The Twentieth Judicial District Court, Lake County, entered summary judgment in favor of the plaintiffs, Thomas and Lynn Pablo and Clifford Duran, concluding that K.G. Paving, Inc.'s, general commercial liability insurance policy with First Financial Insurance Company provided coverage for the plaintiffs' injuries sustained in a motor vehicle accident. We affirm.

¶ 2 The issue is whether the District Court erred in granting summary judgment to the plaintiffs on the coverage issue.

¶ 3 This case arose out of a September 12, 1996 motor vehicle accident on U.S. Highway 93 in Pablo, Montana. The accident occurred when a truck driven by Scott Allen Moore struck the rear end of an automobile which Thomas Milfred Pablo was driving and in which Lynn Pablo was a passenger. The impact forced the Pablo vehicle into an oncoming vehicle driven by Clifford Duran.

¶ 4 At the time of the accident, Moore was transporting a landscaping tractor for his employer, K.G. Paving, Inc., a Montana corporation. Gabe Lorentz was the principal owner and operator of K.G. Paving. Lorentz and K.G. Paving were covered by a First Financial Insurance Company commercial general liability insurance policy which provided liability insurance for negligent acts of the corporation or its employees, including Lorentz. The policy was purchased through Rod Tinseth & Associates.

¶ 5 The Pablos and Duran filed complaints, which were joined in District Court, alleging that they sustained serious injuries in the accident. They allege that Lorentz was negligent in his hiring, training, and supervision of Moore. The plaintiffs also allege that Lorentz negligently failed to warn of a known danger, in that Lorentz drove past the accident site approximately ten minutes before the accident and saw a large cloud of dust created by a State of Montana highway broom truck which obscured visibility on the road. The plaintiffs allege that Lorentz was negligent in failing to use his cellular phone to notify his employee, Moore, of the hazardous road condition ahead. The plaintiffs have further alleged that Lorentz and K.G. Paving are liable for damages under a theory of respondeat superior.

¶ 6 The First Financial insurance policy provides, in relevant part:

We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies. We will have the right to defend against "suit" seeking damages.

First Financial conceded that the claim arose during the policy period and fell within the definitions of bodily injury and occurrence. Therefore, the policy would provide coverage for Lorentz and K.G. Paving unless coverage is denied by an exclusion.

¶ 7 The insurance policy excludes coverage for:

"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."

The policy further excludes coverage for:

"Bodily injury" or "property damage" arising out of:

(1) The transportation of "mobile equipment" by an "auto" owned or operated by or rented or loaned to any insured[.]

The term "arising out of" is not defined in the policy.

¶ 8 The plaintiffs moved for summary judgment that the First Financial insurance policy provides coverage for Lorentz and K.G. Paving on their negligence claims. They argued that Lorentz's negligent hiring, training, supervision, and his negligent failure to warn did not "arise out of" the ownership, maintenance, use or entrustment of an auto. In the alternative, they argued that the term "arising out of" is ambiguous and must be construed in their favor.

¶ 9 First Financial cross-moved for summary judgment, contending that the policy of insurance is a general commercial liability policy, not an automobile liability policy, and was not intended to cover the plaintiffs' injuries sustained in a motor vehicle accident. It argued that coverage was excluded under both the exclusion for damages arising out of the use of an automobile and the exclusion for damages arising out of the transportation of mobile equipment.

¶ 10 The District Court ruled that the term "arising out of" is ambiguous. Construing the instrument against the drafter-insurer, the court then ruled that coverage for this accident is not excluded under the above policy language. The court certified its partial summary judgment as final for purposes of appeal pursuant to Rule 54(b), M.R.Civ.P.

Standard of Review

¶ 11 This Court reviews an appeal from summary judgment de novo, based on the same criteria applied by the district court. Counterpoint, Inc. v. Essex Ins. Co., 1998 MT 251, ¶ 7, 291 Mont. 189, ¶ 7, 967 P.2d 393, ¶ 7. Under Rule 56(c), M.R.Civ.P., if there are no genuine issues of material fact, then summary judgment is proper if the moving party is entitled to a judgment as a matter of law.

¶ 12 The interpretation of an insurance contract is a question of law. Wellcome v. Home Ins. Co. (1993), 257 Mont. 354, 356, 849 P.2d 190, 192. This Court reviews a conclusion of law to determine whether it is correct. Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603.

Discussion

¶ 13 Did the District Court err in granting summary judgment to the plaintiffs on the coverage issue?

¶ 14 On appeal, First Financial first argues that its insurance policy is not ambiguous and that it clearly excludes coverage for this accident under both the "auto" exclusion and the "transport of mobile equipment" exclusion. This hinges upon whether the phrase "arising out of," as used in both exclusions is ambiguous. The District Court characterized this as a question of first impression in Montana.

¶ 15 In that regard, we note that this Court has recently declared that the phrase "arising out of the use" is ambiguous in another insurance context. In Wendell v. State Farm Mut. Auto. Ins. Co., 1999 MT 17, 293 Mont. 140, 974 P.2d 623, this Court construed the phrase "arising out of the use" in an uninsured motorist benefit provision of an automobile liability insurance policy. The Court ruled that the phrase, which was not defined in the policy, was ambiguous because it is reasonably subject to more than one interpretation. Wendell, at ¶ 53. The Court also stated that a split of authority from courts attempting to construe a phrase demonstrates that the phrase has more than one reasonable interpretation. Wendell, at ¶ 29.

¶ 16 A similar rationale may be applied to the words "arising out of" as used in both exclusionary clauses at issue in the present case. As the District Court stated, "First Financial, having declined to define the term, is not well-positioned to argue that the term is only capable of the one interpretation suggested by First Financial." The phrase is reasonably subject to more than one interpretation. This is also demonstrated by the split of authority, described in the parties' briefs and the District Court's findings, conclusions, and order, on the meaning of the words "arising out of" in exclusionary clauses relating to the use of motor vehicles. We conclude that, like in Wendell, the phrase "arising out of" as used but not defined in the First Financial insurance policy, is ambiguous.

¶ 17 In interpreting an ambiguous clause, we are guided by general principles regarding contract law as applied to insurance contracts. If the terms of an insurance policy are ambiguous, obscure, or open to different constructions, the construction most favorable to the insured or other beneficiary must prevail, particularly if an ambiguous provision attempts to exclude the liability of the insurer. Head v. Central Reserve Life of N. Am. Ins. Co. (1993), 256 Mont. 188, 200, 845 P.2d 735, 742.

¶ 18 In Wendell, the Court adopted an expansive fact-intensive test to determine whether an accident "arose out of the use" of a vehicle for purposes of uninsured motorist insurance coverage. The Court then remanded for a factual determination of whether the...