Progressive Northern Ins. Co. v. Argonaut Ins. Co.

Decision Date26 April 2011
Docket NumberNo. 2010–370.,2010–370.
Citation161 N.H. 778,20 A.3d 977
PartiesPROGRESSIVE NORTHERN INSURANCE COMPANYv.ARGONAUT INSURANCE COMPANY and another.
CourtNew Hampshire Supreme Court

OPINION TEXT STARTS HERE

Wiggin & Nourie, P.A., of Manchester (Gordon A. Rehnborg, Jr. and Mary Ann Dempsey on the brief, and Mr. Rehnborg orally), for Progressive Northern Insurance Company.Primmer Piper Eggleston & Cramer, of Littleton (Gregory M. Eaton on the brief and orally), for Argonaut Insurance Company.Mallory & Friedman, PLLC, of Concord (Mark L. Mallory on the brief and orally), for Craig Kelly.A.W. Perkins Law Offices, PLLC, of Concord (Arthur W. Perkins on the memorandum of law), and Phillips Law Office, PLLC, of Concord (Roger B. Phillips on the memorandum of law), for Martin and Linda Morasse.DALIANIS, C.J.

Argonaut Insurance Company (Argonaut) appeals a ruling of the Superior Court ( Smukler, J.) denying its motion for summary judgment and granting summary judgment to Craig Kelly and partial summary judgment to Progressive Northern Insurance Company (Progressive). We affirm.

The following facts were either found by the trial court or are undisputed by the parties. On June 7, 2006, Kelly left his car for service at Tom's Auto Sales (Tom's), which his parents own and operate. Tom's loaned Kelly a 1991 Honda Accord to use while his car was being serviced. The next day, Kelly was involved in a car accident with Martin Morasse. Subsequently, Morasse and his wife brought suit against Kelly alleging negligence and loss of consortium. At the time of the accident, Kelly had a personal automobile insurance policy issued by Progressive with liability limits of $100,000 per person; Tom's had a garage insurance policy issued by Argonaut with liability insurance limits of $25,000 and $750,000, depending upon the circumstances.

Argonaut investigated the accident and concluded that Kelly's use of the vehicle was personal and that he was not a scheduled driver on the policy. Accordingly, Argonaut concluded that it would only provide a defense to Kelly under the $25,000 limit set forth in the policy's “Additional Garage Limitations” endorsement (endorsement). Argonaut identified Progressive as the primary insurer and contended that Progressive was obligated to defend and indemnify Kelly in the Morasse lawsuit. Progressive then sued Argonaut, asserting that Argonaut must defend and indemnify Kelly under Argonaut's $750,000 policy limit. Both insurers moved for summary judgment. The trial court concluded that Argonaut was obligated to provide primary liability coverage up to $750,000 and that Progressive's policy provides excess coverage. The trial court also ruled that Progressive must pay its pro rata share of defense costs. This appeal followed.

In reviewing a trial court's summary judgment ruling, we consider the affidavits and other evidence, and all inferences properly drawn from them, in the light most favorable to the non-moving party. Furbush v. McKittrick, 149 N.H. 426, 429, 821 A.2d 1126 (2003). Summary judgment may be granted only where no genuine issue of material fact is present, and the moving party is entitled to judgment as a matter of law. Id. We review the trial court's application of the law to the facts de novo. Id.

“In New Hampshire, an insurer's obligation to defend its insured is determined by whether the cause of action against the insured alleges sufficient facts in the pleadings to bring it within the express terms of the policy.” Marikar v. Peerless Ins. Co., 151 N.H. 395, 397, 855 A.2d 1246 (2004) (quotation omitted). Thus, our analysis begins with an examination of the insurance policy language. Id. The interpretation of insurance policy language, like any contract language, is ultimately an issue of law for this court to decide. Id. We look to the plain and ordinary meaning of the policy's words in context. Id. Policy terms are construed objectively, and when the terms of a policy are clear and unambiguous, we accord the language its natural and ordinary meaning. Id. When an insurance policy's language is ambiguous, however, and one reasonable interpretation favors coverage, we construe the policy in the insured's favor and against the insurer. Id.

Argonaut's primary argument is that its liability in this case is limited to the financial responsibility law limit of $25,000, see RSA 259:61 (Supp.2010), pursuant to the endorsement. The endorsement states:

The limits for Liability Coverage applicable to “bodily injury”, “property damage” or “loss” arising out of the use of covered “autos” owned by you and “furnished or available for regular use” of owners, partners, officers, employees, spouses, children or relatives of yours or any other person are reduced to the compulsory or financial responsibility law limits for any claim arising from an “accident” which occurs while a covered “auto” is being driven by any driver who is not listed on this endorsement. “Furnished or available for regular use” means the right to frequent use of an “auto” for purposes that are not necessary or incidental to [“]garage operations[.”] This limitation does not apply to the persons named in the Schedule of Drivers Furnished “Autos.”

The parties agree that, pursuant to the endorsement, Argonaut's coverage is limited to $25,000 when the covered auto is: (1) owned by the named insured; (2) used by a driver not listed on the schedule; (3) used “for purposes that are not necessary or incidental to [‘]garage operations[’]; and (4) used by a driver who has the “right to frequent use” of the covered auto. Because the parties agree on this construction, we will apply it. There is no dispute as to the first two elements—Kelly was using a covered auto owned by the named insured and he was not a driver listed on the schedule. The parties dispute whether the third and fourth elements are also met.

We begin by addressing the third element: whether Kelly was using the covered auto “for purposes that are not necessary or incidental to [‘]garage operations.[’] Argonaut suggests that we should not consider this element because Progressive did not previously make this argument before the trial court. We disagree. The issue of the interpretation of Argonaut's endorsement is properly preserved for our review and is a question of law, which we review de novo. Concord Gen. Mut. Ins. Co. v. Green & Co. Bldg. & Dev. Corp., 160 N.H. 690, 693 (2010).

The endorsement requires us to consider whether Kelly was using a covered vehicle for “purposes that are not necessary or incidental to [‘]garage operations.[’] The policy defines [g]arage operations” as

the ownership, maintenance or use of locations for garage business and that portion of the roads or other access that adjoin these locations. “Garage operations” includes the ownership, maintenance or use of the “autos” indicated in Section I of this Coverage Form as covered “autos”. “Garage operations” also include all operations necessary or incidental to a garage business.

(Emphasis added.)

Progressive asserts that, based upon the second sentence of this definition, “garage operations” includes all use of the covered vehicles. Argonaut appears to argue that the definition should be read as a whole such that a person's use of a covered auto must be necessary or incidental to a garage business. There is support for both interpretations. Compare Spangle v. Farmers Ins. Exchange, 166 Cal.App.4th 560, 82 Cal.Rptr.3d 763, 769–70 (2008), with Lambert v. Northwestern Nat. Ins. Co., 115 Idaho 780, 769 P.2d 1152, 1155–56 (1989). However, adopting Progressive's construction would render the endorsement a nullity, which we will not do. See Weeks v. Co–Operative Ins. Cos., 149 N.H. 174, 177–78, 817 A.2d 292 (2003) (interpreting policy in manner that would render exclusion meaningless is not reasonable); Int'l Surplus Lines Ins. Co. v. Mfrs. & Merchants Mut. Ins. Co., 140 N.H. 15, 19, 661 A.2d 1192 (1995) (language in insurance policy not presumed to be mere surplusage). Accordingly, we accept Argonaut's construction that “garage operations” includes the use of a covered auto for operations that are necessary or incidental to a garage business. Even applying this definition, Tom's provided the accident vehicle, a “covered auto,” to Kelly as a “loaner” while his car was being repaired at Tom's; thus, his use was incidental to Tom's garage business. See Henry ex rel. Weis v. General Cas. Co., 225 Wis.2d 849, 593 N.W.2d 913, 919 (1999). Therefore, Kelly's use of the “loaner” fits the definition of “garage operations.”

Because Kelly's use of the accident vehicle fell within “garage operations,” the third element of the endorsement is, therefore, not met. Accordingly, even if we assume that Kelly met the fourth element of the endorsement, in that he had a “right to frequent use” of the covered auto,...

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