Progressive Insurance Company v. Reed, No. 6-682/05-1696 (Iowa App. 11/30/2006)
| Decision Date | 30 November 2006 |
| Docket Number | No. 6-682/05-1696,6-682/05-1696 |
| Parties | PROGRESSIVE INSURANCE COMPANY, Plaintiff-Appellee, v. TODD REED and RAM AUTOMOTIVE, INC., d/b/a ADVANTAGE CHEVROLET, BRIAN MARTIN, JEANETTE MARTIN, Defendants-Appellees, GENERAL CASUALTY INSURANCE COMPANY, Defendant-Appellant. |
| Court | Iowa Court of Appeals |
Appeal from the Iowa District Court for Linn County, Patrick R. Grady, Judge.
General Casualty Insurance Company appeals the district court's ruling on cross-motions for summary judgment.
AFFIRMED AND REMANDED WITH INSTRUCTIONS.
Philip H. Dorff of Hopkins & Huebner, P.C., Des Moines, for appellant.
Joe Barron and Scott J. Beattie of Peddicord, Wharton, Spencer & Hook, LLP, Des Moines, for appellee Progressive Insurance Company.
Heard by Mahan, P.J., and Miller and Vaitheswaran, JJ.
An insurance company asks us to address the following contentions: (1) whether coverage was excluded based on the execution of a release; and (2) if coverage was not excluded, whether the amount to be paid should be a proportion of certain statutorily prescribed minimums or a proportion of the policy limits. We affirm and remand.
Todd Reed test drove a pickup truck from a dealership known as RAM Automotive. Before he began the test drive, he and the dealership's manager signed a "Customer Test Drive Release." During the test drive, a trailer Reed was pulling detached from the pickup and struck another car.
At the time of the accident, RAM Automotive was insured by General Casualty Insurance Company and Reed was insured by Progressive Insurance Company. The companies questioned their obligations to provide coverage for the accident. Ultimately, Progressive filed a petition for declaratory judgment to obtain resolution of the coverage issue. Progressive alleged it had no duty to defend or indemnify Reed because its policy served as "excess" to the primary coverage provided by General Casualty. General Casualty responded that the release Reed signed barred coverage under its policy.
The insurance companies submitted the issues to the district court on cross-motions for summary judgment. Both companies agreed that their policies contained clauses excluding coverage for contractual obligations, as well as clauses that limited coverage to amounts in excess of other insurance.
The district court first considered the effect of the release signed by Reed. The court concluded the release did not trigger General Casualty's contract exclusion. The district court next considered the effect of the excess clauses in both policies. The court concluded that the clauses were "mutually repugnant," requiring proration of the losses between the two insurers. The court's disposition was as follows: "Progressive and General Casualty must share responsibility for the costs of Reed's defense and any damages assessed against him pro rata, based on their combined policy limits."
Both insurers appealed, but Progressive later dismissed its appeal.
General Casualty's policy contained an exclusion for "[c]ontractual obligations," defined as "[l]iability resulting from any agreement by which the `insured' accepts responsibility for the `loss.'"1 General Casualty argues that the test drive release triggered this contract exclusion. The release stated in pertinent part:
I will return the vehicle in the same condition as I left in and will be responsible for all damages made to the vehicle. I have adequate insurance to cover any physical damage or liability arising out of my operation of the vehicle.
The district court concluded the release language did not expressly obligate Reed to hold RAM Automotive harmless and to accept responsibility for the loss.2 We review this conclusion for errors of law. Green v. Racing Ass'n of Cent. Iowa, 713 N.W.2d 234, 238 (Iowa 2006).
A release is defined as "[t]he relinquishment, concession, or giving up of a right, claim, or privilege, by the person in whom it exists or to whom it accrues, to the person against whom it might have been demanded or enforced." Korsmo v. Waverly Ski Club, 435 N.W.2d 746, 748 (Iowa Ct. App. 1988) (citing Black's Law Dictionary 1453 (4th ed. 1968)). The parties agree the release is a contract. Stetzel v. Dickenson, 174 N.W.2d 438, 439 (Iowa 1970) (). The parties also appear to agree that "the insured" in General Casualty's policy is Reed rather than RAM Automotive.3 Cf. Aid Ins. Co. (Mut.) v. United Fire & Cas. Co., 445 N.W.2d 767, 771 (Iowa 1989) (); Union Ins. Co. (Mut.) v. Iowa Hardware Mut. Ins. Co., 175 N.W.2d 413, 417 (Iowa 1970) (same). The only disagreement relates to whether, by signing the release, Reed "accept[ed] responsibility for the loss" within the meaning of General Casualty's policy exclusion for contractual obligations. On this question, we believe the release language is ambiguous. See Pedersen v. Bring, 254 Iowa 288, 294, 117 N.W.2d 509, 513 (1962) (). On the one hand, the release could simply be read as a representation that Reed had insurance. This is Progressive's contention. On the other hand, the release could be read to mean that Reed accepted responsibility for the loss, thereby effectively holding the dealership harmless. This is General Casualty's contention. Both readings are reasonable and we believe "a genuine uncertainty exists concerning which of [the] two reasonable interpretations is proper." Walsh v. Nelson, 622 N.W.2d 499, 503 (Iowa 2001) (citation omitted). Under these circumstances, the contract is to be construed against the party who drafts or furnishes the instrument. Kinney v. Capitol-Strauss, Inc., 207 N.W.2d 574, 577 (Iowa 1973). This would be RAM Automotive and its insurer, General Casualty. See Bashford v. Slater, 250 Iowa 857, 866, 96 N.W.2d 904, 909 (1959). Accordingly, we accept the reading of the release advocated by Progressive; the release assured RAM Automotive that Reed had damage and liability insurance but did not obligate Reed to "accept responsibility for the loss." Based on this reading, we are persuaded that the district court did not err in concluding "the release form signed by Reed does not exclude General Casualty from having a duty to defend or indemnify Reed."
As noted, both insurance polices contained clauses limiting coverage if there was other insurance. General Casualty does not challenge the district court's conclusion that in such a situation, the clauses are mutually repugnant and the loss is prorated between the insurers. AID Ins. Co., 445 N.W.2d at 769 (citing Union Ins. Co., 175 N.W.2d at 418). General Casualty only appeals "the calculation of prorated shares."
The district court did not make this calculation but cited with approval a recent Iowa Supreme Court decision that prescribed a proration method. See Federated Ins. v. Iowa Mut. Ins. Co., 659 N.W.2d 207, 210 (Iowa 2003). General Casualty argues we should follow the method in Federated, which would allow its pro rata share of liability to be calculated based on statutorily prescribed minimums rather than its policy limit of $1,000,000. Progressive counters that the Federated proration method is not mandated and we should follow an Indiana opinion that apportioned liability based on the limits set forth in the policy. See Indiana Ins. Co. v. Federated Mut. Ins. Co., 415 N.E.2d 80, 89 (Ind. Ct. App. 1981).
In light of Federated, we see no reason to look to Indiana law. Federated involved virtually identical facts. There, a car dealership's escape clause limited liability to the "compulsory or financial responsibility law limits." Federated, 659 N.W.2d at 208. The...
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