Safeco Ins. Co. v. Lindberg

• Decision Date: 10 October 1986
• Docket Number: C6-85-1141,Nos. C2-85-1119,s. C2-85-1119
• Parties: SAFECO INSURANCE COMPANY, Petitioner, Appellant, v. Larry LINDBERG, Defendant and Third Party Plaintiff, Respondent, Kim Barrett, Respondent, Continental Brokers Corporation, et al., Third Party Defendants, Respondents.
• Court: Minnesota Supreme Court

Page 146

394 N.W.2d 146

SAFECO INSURANCE COMPANY, Petitioner, Appellant, v. Larry LINDBERG, Defendant and Third Party Plaintiff, Respondent Kim Barrett, Respondent Continental Brokers Corporation, et al., Third Party Defendants, Respondents.

Nos. C2-85-1119, C6-85-1141.

Supreme Court of Minnesota.

Oct. 10, 1986.

Syllabus by the Court

Ambiguity in the watercraft exclusion of a homeowner's policy is to be resolved in favor of the insured.

Robert W. Ketterling, Jr., Brian J. Love, Minneapolis, for Safeco Ins. co.

Larry Lindberg, Ham Lake, for Lindberg.

Keith J. Broady, Minneapolis, Robert J. Johnson, Minneapolis, for Barrett.

William Majerus, Minneapolis, for Continental.

Heard, considered, and decided by the court en banc.

SIMONETT, Justice.

This case involves the applicability of a watercraft exclusion in a homeowner's liability policy. The court of appeals held the exclusion inapplicable. We affirm.

Defendant-respondent Larry Lindberg purchased a homeowner's policy from plaintiff-appellant Safeco Insurance Company in July 1978, effective for the policy period July 13, 1978, to July 13, 1979. At the time Lindberg purchased the policy, he did not own a boat and motor, but in May 1979, he purchased a 14-foot boat with a 55-horsepower motor. When the policy came up for renewal about a month and a half later, Lindberg renewed the Safeco policy for the period July 13, 1979, to July 13, 1980. At no time did Lindberg ever report his acquisition of the high-powered boat to Safeco. On June 22, 1980, near the end of the renewal period, Lindberg had an accident with his boat, injuring defendant-respondent Kim Barrett.

Safeco denied coverage for Kim Barrett's claim on the ground the insured had failed to report acquisition of the boat prior to the "inception of the policy," as required by the watercraft exclusion, and brought this declaratory judgment action to confirm its denial. The trial court agreed with Safeco and held there was no coverage. The court of appeals reversed, finding the watercraft exclusion inapplicable. Safeco Insurance Co. v. Lindberg, 380 N.W.2d 219 (Minn.Ct.App.1986). We granted Safeco's petition for further review.

Safeco's policy states it does not apply to claims--

arising out of the ownership, maintenance, operation, use * * * of any watercraft * * * powered by an outboard motor(s) singly or in combination of more than 25 total horsepower, if such outboard motor(s) is owned by any insured at the inception of this policy and not endorsed hereon (emphasis added),

but the exclusion then goes on to say--

unless the insured reports in writing to this company within 45 days after acquisition his intention to insure the outboard motor or combination of outboard motors, ownership of which was acquired prior to the policy term. (Emphasis added.)

The issue is what is meant by the phrases "inception of the policy" and "acquired prior to the policy term"? Presumably, these phrases are equivalent. Safeco says each policy renewal is the inception of a new policy, and, because Lindberg owned his boat prior to the inception of the policy renewal on July 13, 1979, and failed to report it, the watercraft exclusion applies to the accident which subsequently happened. On the other hand, respondents claim the renewal policy is a continuation of the original policy, which extends the policy term for an additional year; because Lindberg did not own the boat at the inception of the original policy on July 13, 1978, the exclusion does not apply.

Safeco relies on Hauer v. Integrity Mutual Insurance Co., 352 N.W.2d 406, 408 (Minn.1984), where we said, "[T]he general rule is that upon each renewal an entirely new and independent contract of insurance is created and is governed by the laws in effect on the date of the renewal," citing Taylor v. American National Insurance Co., 264 Minn. 21, 117 N.W.2d 408 (1962), and Steele v. Great Eastern Casualty & Indemnity Co., 158 Minn. 160, 197 N.W. 101 (1924). A close reading of these three cases reveals, as the court of appeals also noted, that the general rule in Hauer is that policy renewals are new contracts to the extent they are governed by statutes in effect on the date of renewal. Here we do not have a question of the applicability of a new legislative enactment. Here the status of a policy renewal comes up in the context of construing only language in the policy itself. Thus, we must look to the policy language to determine whether "inception of the policy" or, alternatively stated, "acquired prior to the policy term" means the beginning of the initial policy term or the beginning of each renewal term.

Ordinarily, one would think an insurance company would require an insured who acquires a high-powered boat to report the boat promptly to the company so that coverage can be provided and a premium for the increased risk charged. If acquisition of the boat is not reported, the boat is never covered. Or there could be a variation of the after-acquired automobile clause, where an auto policy affords coverage for an after-acquired automobile but only if reported to the company within so many days. But this is...