St. Paul Fire and Marine Ins. Co. v. Schilling

Decision Date14 September 1994
Docket Number18508,Nos. 18492,s. 18492
Citation520 N.W.2d 884,43 A.L.R.5th 827
PartiesST. PAUL FIRE AND MARINE INSURANCE COMPANY, Plaintiff and Appellee, v. Jason SCHILLING, Pamela K. Godfrey, and Farmers Insurance Exchange, Defendants and Appellants. and YMCA of Rapid City, South Dakota, Defendant.
CourtSouth Dakota Supreme Court

James L. Hoy of Hoy and Hoy, Sioux Falls, for plaintiff and appellee.

Jerry D. Johnson of Banks, Johnson & Colbath, Rapid City, for defendants and appellants Jason Schilling and Farmers Ins. Exchange.

Wayne F. Gilbert of Johnson Huffman, P.C., Rapid City, for defendant and appellant Pamela K. Godfrey.

MILLER, Chief Justice.

This is an appeal from summary judgment granted to St. Paul in a declaratory judgment action determining it had no duty to defend or indemnify Jason Schilling in an underlying negligence action. We affirm.


Pamela K. Godfrey (Godfrey) was the director of the Rapid City YMCA gymnastics program in the summer of 1989. On Friday, August 11, 1989, Godfrey and four male gymnasts drove to Minot, North Dakota, in a YMCA van to attend a weekend gymnastics clinic. On the return trip Sunday afternoon, Godfrey requested that one of the gymnasts, Jason Schilling (Schilling), drive the van between Minot and Bismarck, North Dakota. Apparently Schilling fell asleep while driving, the van left the road and Godfrey was injured in the resulting accident. Godfrey filed suit against Schilling in August, 1992, alleging his negligence caused her injuries.

At the time of the accident, Schilling carried personal auto liability coverage with Farmers Insurance Exchange (Farmers). The YMCA was insured with St. Paul Fire & Marine Insurance Company (St. Paul) under policies for commercial general liability, auto liability protection, and umbrella access liability protection. When Godfrey filed suit against him, Schilling requested that St. Paul provide his defense and indemnify him for any liability in the negligence action. St. Paul retained counsel to defend Schilling under a full reservation of rights.

In December, 1992, St. Paul brought a declaratory judgment action against Schilling, Godfrey, the YMCA, and Farmers to determine its duty to defend or indemnify Schilling with respect to the claims asserted in the negligence action. Following a hearing, the trial court concluded that St. Paul had met its burden of proving there was no coverage under its policy for claims asserted in the underlying action. The court entered an order granting St. Paul summary judgment on August 11, 1993.

Schilling and Farmers served notice of appeal in September, 1993. Godfrey served notice in October, 1993. By stipulation of counsel, the parties agreed to consolidation of the actions for this appeal.


Whether ambiguity exists in a contract is a question of law. North River Ins. Co. v. Golden Rule Constr. Co., 296 N.W.2d 910, 912 (S.D.1980); Delzer Constr. Co. v. South Dakota State Bd., 275 N.W.2d 352 (1979). This court reviews questions of law de novo. King v. John Hancock Mut. Life Ins. Co., 500 N.W.2d 619, 621 (S.D.1993).

Summary judgment is proper when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Krambeck v. Sunshine Insurance, 505 N.W.2d 131, 132 (S.D.1993); Garrett v. BankWest, Inc., 459 N.W.2d 833, 837 (S.D.1990). Summary judgment will be affirmed if there exists any basis which would support the trial court's ruling. King, 500 N.W.2d at 621.


In the automobile liability policy issued to the YMCA, St. Paul agreed to pay amounts "you and others protected under this agreement are legally required to pay for a covered bodily injury or property damage claim resulting from an accident involving the ownership, use, maintenance, loading or unloading of a covered auto." "You" means the YMCA as the named insured. The policy also contains an omnibus provision which defines "other protected persons" who will be provided coverage under the policy. The omnibus provision states:

Who is protected under this agreement

Anyone to whom you have given permission to use a covered auto you own, rent, or borrow. 1

St. Paul goes on to argue that, in spite of the fact that Schilling is an omnibus insured, the policy provides no coverage for on-the-job injuries, worker's compensation or injuries to a fellow employee. The relevant policy exclusions provide:

Exclusions--Claims We Won't Cover

Workers' compensation. We won't cover obligations that protected persons or their insurance companies have under workers' compensation, unemployment compensation, disability benefits or similar loss. Nor will we cover your obligation to retain money someone else paid because of bodily injury to an employee of any protected person. But this exclusion doesn't apply to liability you assume under a covered contract.

On-the-job. We won't cover any claim for bodily injury to an employee of any protected persons arising out of his or her job. We also won't cover injury to a spouse, child, parent, brother, or sister of that employee[.]

Injury to a fellow employee. We won't cover any claim for bodily injury to a fellow employee of any protected person arising out of his or her job.

Although the trial court did not specifically state which policy provision it relied upon in granting summary judgment for St. Paul, it is clear from the authorities the court cited and the arguments of the parties in this appeal that it relied on the on-the-job provision. 2

St. Paul argues that because Godfrey was an employee of the YMCA, and the YMCA is one of "any protected persons," the on-the-job exclusion applies and eliminates coverage where the injured person is an employee of the named insured under the policy. Schilling and Godfrey contend that the on-the-job exclusion exempts from liability coverage only an insured who is the employer of the injured employee, not an additional insured who does not himself employ the injured person. Basically, their argument is that the on-the-job exclusion precludes coverage only for an insured who was the employer of the injured employee at the time of the accident.

Although the language in insurance contracts is to be construed liberally in favor of the insured and strictly against an insurer, that rule of construction applies only when the language of the contract is ambiguous. An insurance contract's language must be construed according to its plain and ordinary meaning and a court cannot make a forced construction or a new contract for the parties. City of Fort Pierre v. United Fire & Cas. Co., 463 N.W.2d 845 (S.D.1990); Rapid City Regional Hosp. v. South Dakota Ins. Guar., 436 N.W.2d 565 (S.D.1989); Grandpre v. Northwestern Nat'l Life Ins. Co, 261 N.W.2d 804 (S.D.1977). Further, the scope of coverage of an insurance policy is determined from the contractual intent and the objectives of the parties as expressed in the contract. City of Fort Pierre, 463 N.W.2d at 848; Black Hills Kennel Club, Inc. v. Fireman's Fund Indem. Co., 77 S.D. 503, 94 N.W.2d 90 (1959).

The on-the-job exclusion states specifically that coverage will be excluded for claims of an employee of "any protected persons." It does not limit the exclusion only to employees of "the named insured" nor does it limit coverage only to claims of an employee of "the protected" person. The trial court did not find this language ambiguous, nor do we. Moreover, to find ambiguity in the policy and extend coverage to Schilling would provide more coverage to an omnibus insured than to the named insured who contracted for and purchased the policy. There is no language in the policy expressing an intent by the named insured to purchase more insurance coverage for an omnibus insured than it had for itself.

In Birrenkott v. McManamay, 65 S.D. 581, 276 N.W. 725 (1937), this Court analyzed a similar provision when an employee was injured riding on a motorcycle driven by a fellow employee. The driver was found to be negligent and, when the judgment was returned unsatisfied, the injured employee attempted to recover damages under the employer's liability insurance policy. The employer's policy exempted from liability coverage "employees of the assured." The injured employee argued that the exemption clause should be limited to exclude coverage only for the named insured. This Court held:

Such an interpretation of the exemption clause would mean that the policy offered greater protection from liability to one who obtained the consent of the assured to use his vehicle than it offered to the assured himself. It is the opinion of this court that when the clause in the policy protecting any person operating the insured vehicle with the consent of the assured is invoked, that the person invoking said clause is placed in the same position as the named assured.

Birrenkott, 65 S.D. at 583, 276 N.W. at 726. The exemption clause contained in St. Paul's policy is more explicit than the clause in Birrenkott. It specifically exempts employees of "any protected persons," not only "employees of the assured."

Although there is a split of opinion, a number of courts agree with South Dakota's interpretation. Hartford Accident & Indem. Co. v. Continental Cas. Co., 273 F.Supp. 851, aff'd 384 F.2d 37 (6th Cir.1966) (applying Iowa law); Maryland Cas. Co. v. American Fid. & Cas. Co., 217 F.Supp. 688 (E.D.Tenn.1963), aff'd 330 F.2d 526 (6th Cir.1964) (applying Tenn. law); Farmers Elevator Mut. Ins. Co. v. Carl J. Austad & Sons, Inc., 366 F.2d 555 (8th Cir.1966) (applying North Dakota law); Kelly v. State Auto. Ins. Assoc., 288 F.2d 734 (6th Cir.1961) (applying Kentucky law); United States Fid. & Guar. Co. v. Western Cas. & Sur. Co., 195 Kan. 603, 408 P.2d 596 (1965); Travelers Ins. Co. v. American Cas....

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