Progressive County Mut. Ins. Co. v. Sink

• Decision Date: 15 May 2003
• Docket Number: No. 01-0534.,01-0534.
• Citation: 107 S.W.3d 547
• Parties: PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY, Petitioner, v. Paul SINK, Respondent.
• Court: Texas Supreme Court

107 S.W.3d 547

PROGRESSIVE COUNTY MUTUAL INSURANCE COMPANY, Petitioner, v. Paul SINK, Respondent.

No. 01-0534.

Supreme Court of Texas.

Argued October 9, 2002.

Decided May 15, 2003.

Rehearing Denied July 3, 2003.

Robert Alan York, David W. Holman, Holman & Keeling, P.C., Mark Lapidus, Burck Lapidus & Lanza, Houston, for petitioner.

Robert Glen Moll, Hill Rivkins & Hayden LLP, Houston, for respondent.

Justice OWEN delivered the opinion of the Court, in which Justice HECHT, Justice ENOCH, Justice JEFFERSON, Justice SMITH, and Justice WAINWRIGHT joined.

This case concerns coverage for a "temporary substitute" vehicle under the standard Texas Personal Auto Policy. The issue is whether the policy provides liability coverage when the insured, whose own vehicle is disabled, takes and drives an automobile owned by someone who is not a family member without permission or the reasonable belief that he has permission and is involved in an auto accident with a third party. The trial court correctly held that there is no liability coverage under these circumstances, and the court of appeals therefore erred in reversing the trial court.¹ Accordingly, we reverse the court of appeals' judgment and render judgment that the plaintiff, who is the person with whom the insured collided, take nothing.

I

Joshua McCauley's pickup truck became disabled. He was at that time employed by Alamo Rent-A-Car, and while on the job, he took one of its rental cars to drive to a location that is not disclosed in the record to get his tools so that he could attempt to repair his truck. It is uncontested that McCauley did not obtain permission from Alamo to use any of its vehicles and did not believe that he had permission to use the car in question. While returning to work in Alamo's car, McCauley was involved in an accident with Paul Sink.²

Sink sued McCauley and obtained a favorable judgment that was subsequently discharged in bankruptcy. Sink then commenced this action against McCauley's auto insurance carrier, Progressive County Mutual Insurance Company, under its policy insuring McCauley's truck. Sink claimed that he was a third-party beneficiary of McCauley's policy and sought benefits under that policy's liability coverage. There were additional proceedings in the trial court, not material to our decision, that we do not recount. We focus only on the trial court's disposition of the thirdparty beneficiary claim by Sink against Progressive, which was severed from Sink's other claims.

A jury was empaneled on Sink's severed claim against Progressive, and opening statements were made. However, the trial court then dismissed the jury, concluding that there were no fact issues and only a question of law existed. The trial court then determined that the vehicle owned by McCauley's employer was not covered by the insurance policy issued for McCauley's truck. The court of appeals agreed that there were no factual disputes, and the parties did not contend otherwise.³ But the court of appeals construed the unambiguous policy provisions differently from the trial court and therefore reversed the trial court's judgment and remanded the case so that Sink's claim under McCauley's liability policy could proceed.⁴ The only issue presented to us today is the proper interpretation of the policy.

II

The liability coverage section of the policy provides that Progressive "will pay damages for bodily injury or property damage for which any covered person becomes legally responsible because of an auto accident." The policy contains a broad exclusion that precludes coverage for any person who uses a vehicle without a reasonable belief that he or she is entitled to do so, but the policy also states that the exclusion does not apply to an insured or an insured's family member who uses "your covered auto":

EXCLUSIONS

A. We do not provide Liability Coverage for any person:

....

8. Using a vehicle without a reasonable belief that that person is entitled to do so. This exclusion (8.) does not apply to you or any family member while using your covered auto.⁵

The policy's definition of "your covered auto" contains, among other things, the reference to a "temporary substitute" vehicle:

G. "Your covered auto" means:

....

4. Any auto or trailer you do not own while used as a temporary substitute for any other vehicle described in this definition [e.g., a vehicle identified in the policy Declarations or a vehicle acquired by the insured during the policy period] which is out of normal use because of its:

a. breakdown;

b. repair;

c. servicing;

d. loss; or

e. destruction.

The court of appeals concluded that a vehicle used by an insured or an insured's family member as a temporary substitute for another vehicle that is "out of normal use" is covered, even if used without the permission of the owner.⁶ The court reasoned that paragraph 8 of the exclusions expressly does not apply to "your covered auto," which includes a "temporary substitute vehicle."⁷ Accordingly, the court of appeals held that because McCauley "was driving a temporary substitute vehicle because his own vehicle had become disabled," it did not matter that he drove the "substitute vehicle" without permission.⁸

Progressive argued in the court of appeals and maintains before this Court that although there is no definition in its policy of what constitutes a "temporary substitute" vehicle, courts should look to the definition of "temporary substitute automobile" used in the Texas standard policy form that preceded the current one. Alternatively, Progressive contends that the term "temporary substitute" should be given its commonly understood meaning, which, it argues, is that a substitute vehicle must be used with the permission of its owner or at least a reasonable belief that the owner consented.

Auto insurance policy forms were formerly adopted by the State Board of Insurance and are now adopted within the Texas Department of Insurance,⁹ and with certain exceptions not relevant here, carriers providing motor vehicle insurance can only use a form adopted by the Board.¹⁰ The Texas Personal Auto Policy ("TPAP"), the standard form policy that is at issue in this case, was adopted by the Board to be effective in 1981 and was amended in 1983. The standard form in effect prior to then, called the Texas Family Automobile Policy, expressly defined "temporary substitute automobile" and said that any temporary substitute must be used "with the permission of the owner":

DEFINITIONS

....

"temporary substitute automobile" means any automobile or trailer, not owned by the named insured, while temporarily used with the permission of the owner as a substitute for the owned automobile or trailer when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction.

When the Board of Insurance adopted the TPAP, it said:

Due to the certain [sic] differences between the Texas Personal Auto Policy and the Texas Family Automobile Policy, which the Texas Personal Auto Policy replaces, the Board is of the opinion that some expression of its intent is desirable. The promulgation of the Texas Personal Auto Policy in place of the Texas Family Automobile Policy is intended by the State Board of Insurance to state more clearly the contract between the insured and insurer. The State Board of Insurance herein states its intention to be that unless the Texas Personal Auto Policy has clearly changed the scope and nature of a coverage from that provided by the Family Automobile Policy, the courts should be guided by prior decisions construing the provisions of the Family Automobile Policy.¹¹

We must look at the revised policy as a whole and the words used in that policy to determine whether the Board's deletion of a definition for "temporary substitute automobile" "clearly changed the scope and nature of a coverage from that provided by the Family Automobile Policy."¹² Similarly, we must look to the revised policy to determine whether it expanded coverage for "temporary substitute" vehicles simply because exclusion 8 does not apply to an insured or an insured's family member while using "your covered auto," which includes the term "temporary substitute" vehicle.

It is well settled that the general rules of contract construction apply to the interpretation of insurance contracts.¹³ If a contract as written "can be given a definite or certain legal meaning," then it is unambiguous as a matter of law.¹⁴ However, an insurance contract is ambiguous and will be interpreted in the manner that "most favors coverage" if it is "subject to more than one reasonable interpretation."

¹⁵

In general, a court construing a contract "must strive to give effect to the written expression of the parties' intent" by "read[ing] all parts of a contract together."¹⁶ In cases like this, however, where the policy forms are mandated by a state regulatory agency, the actual intent of the parties is not material¹⁷ We held almost fifty years ago in United States Insurance Co. of Waco v. Boyer that when construing such policies, we look to determine the ordinary, everyday meaning of the words to the general public.¹⁸ We said,

now with the insurance business regulated and the policy forms prescribed by a State Insurance Commission, the court in construing a policy determines the everyday meaning of the words to the general public — the meaning of the words `in common parlance' — `the usual and popular understanding of the term.' As a practical matter, the actual intent involved in the precise words is as much or more the intent of the Insurance Commission which prescribes the wording of the policy as it is the intent of the parties. It is unlawful to issue a policy in words other than those expressly approved by the Insurance Commission, and every insurance company selling this type of insurance is required to word its policies precisely alike. Uniform policies are necessary to a uniform rate structure, which in...