Truck Ins. Exch. v. Friend

• Decision Date: 15 November 2012
• Docket Number: C091034CV; A144902.
• Parties: TRUCK INSURANCE EXCHANGE, Plaintiff–Appellant, v. Joseph Ralph FRIEND, Jr., Defendant–Respondent.
• Court: Oregon Court of Appeals

253 Or.App. 527

291 P.3d 743

TRUCK INSURANCE EXCHANGE, Plaintiff–Appellant,

v.Joseph Ralph FRIEND, Jr., Defendant–Respondent.

C091034CV; A144902.

Court of Appeals of Oregon.

Argued and Submitted July 7, 2011.

Decided Nov. 15, 2012.

Thomas M. Christ, Portland, argued the cause for appellant. With him on the briefs were Julie A. Smith and Cosgrave Verger Kester LLP.

W. Eugene Hallman, Pendleton, argued the cause for respondent. With him on the briefs was Hallman & Dretke.

Before ARMSTRONG, Presiding Judge, and HASELTON, Chief Judge, and DUNCAN, Judge.

DUNCAN, J.

In this insurance-coverage dispute, defendant, Friend, was injured in an automobile accident. At the time, Friend was driving a 1967 Ford Mustang whose registered owner was Tamer Kehkia, the owner and president of TWW, Inc. (TWW), an auto dealer.¹ Friend sought underinsured motorist (UIM) benefits from TWWs insurer, Truck Insurance Exchange (Truck), under TWWs garage policy. Truck brought this action, seeking a declaration that Friend was not entitled to UIM benefits under TWWs policy because TWW did not own the Mustang. Friend counterclaimed, seeking a declaration that he was entitled to those benefits. The trial court granted summary judgment in favor of Friend, and Truck appeals, arguing that there are genuine issues of material fact regarding whether Friend is entitled to UIM benefits under TWWs policy. ² We agree and, therefore, reverse and remand.

I. FACTS AND PROCEDURAL HISTORY

On appeal of a grant of summary judgment, we review the record in the light most favorable to the nonmoving party to determine whether there are any genuine issues of material fact and whether the moving party is entitled to judgment as a matter of law. ORCP 47 C; Jones v. General Motors Corp., 325 Or. 404, 420, 939 P.2d 608 (1997).

As mentioned, Friend was injured while driving the Mustang, which was registered to Kehkia. Friend and Kehkia assert that TWW owned the Mustang. Friend was the registered secretary of TWW. Friend and Kehkia were also friends and partners in another business, Ground Zero Motor Sports. Friend did mechanical work at TWW approximately 10 to 12 hours per week, but he was not an employee of TWW.

Truck filed this declaratory judgment action because it believed that TWW did not own the Mustang and, therefore, that the policy it issued to TWW did not provide UIM benefits for Friend. In response, Friend asserted three counterclaims, each seeking a declaration that he was entitled to UIM benefits under the policy. On Truck's motion, the trial court dismissed Friend's second counterclaim. Then Friend moved for summary judgment, and the trial court granted that motion and entered a general judgment in favor of Friend. Truck appeals.

II. PARTIES' ARGUMENTS ON APPEAL

Truck argues that the trial court erred in granting summary judgment to Friend because genuine issues of material fact had to be resolved before the court could determine whether the policy provided UIM coverage for Friend.³ The parties identify three legal theories under which Friend might be entitled to UIM benefits under the policy. First, Friend asserts that the policy provided liability coverage for him and that ORS 742.502(2)(a)⁴ requires a policy's UIM coverage to mirror its liability coverage. Truck responds that the policy provided liability coverage for Friend only if TWW owned the Mustang, which, the parties agree, is a disputed issue of fact.

Second, Friend argues that TWW owned the Mustang as a matter of law under ORS 822.040(1)(d), which provides that an auto dealer “shall be considered the owner * * * of all vehicles in the dealer's possession and operated or driven by the dealer or the dealer's employees.” Truck responds that ORS 822.040(1)(d) is not relevant to the meaning of the term “owned” in the policy and, regardless, that application of that statute involves genuine issues of material fact.

Finally, Truck notes that another statutory provision regarding UIM, ORS 742.504,⁵ may mandate UIM coverage for Friend while he drove the Mustang but that, in order to have been covered under that statute, Friend must have been driving the Mustang with the “permission” of TWW. Truck asserts that “permission” also involves a disputed factual question.

III. ANALYSIS

In keeping with the parties' arguments, we address three questions: First, did the policy provide liability coverage for Friend as a matter of law? ⁶ Second, if not, did ORS 822.040(1)(d) mandate, as a matter of law, that TWW owned the Mustang? And, third, did ORS 742.504 require UIM coverage for Friend as a matter of law? We answer all three questions in the negative. As a result, Friend was not entitled to summary judgment because, as to each theory under which Friend might be entitled to UIM coverage, genuine issues of material fact remain unresolved.

A. Liability Coverage Under the Policy

As mentioned, Friend asserts that the policy provided liability coverage for him. Consequently, he argues, he had UIM coverage under the policy because, in his view, ORS 742.502(2)(a) requires a policy's UIM coverage to mirror its liability coverage. Accordingly, we begin by interpreting the policy to determine whether, as Friend contends, it provided liability coverage for Friend. Interpretation of an insurance policy is a matter of law. Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 469, 836 P.2d 703 (1992). Our goal is to determine the parties' intentions. Totten v. New York Life Ins. Co., 298 Or. 765, 770, 696 P.2d 1082 (1985). The policy “ ‘must be viewed by its four corners and considered as a whole.’ ” North Pacific Ins. Co. v. Hamilton, 332 Or. 20, 24, 22 P.3d 739 (2001) (quoting Denton v. International Health & Life, 270 Or. 444, 449–50, 528 P.2d 546 (1974)). All parts of the policy “must be construed to determine if and how far one clause is modified, limited, or controlled by others.” Denton, 270 Or. at 450, 528 P.2d 546.

The policy provides coverage for two categories of “insureds.” The first category is “you.” The policy states, “Throughout this policy the words ‘you’ and ‘your’ refer to the Named Insured[,]” and the policy identifies the “named insured” as “TWW Inc” and “Cornelius Auto Sales.” Under the policy, “you” is an insured “for any covered ‘auto[.]’ ” The “schedule of coverage and covered autos” indicates that “covered autos” for liability coverage is “any auto.” Thus, under the policy “you”—that is, TWW—has liability coverage for “[a]ny [a]uto.”

The second category of insured is “[a]nyone else while using with your permission a covered ‘auto’ you own, hire, or borrow with [certain exceptions.]” Thus, the policy provides, with certain exceptions, liability coverage for “anyone else” while using, with TWW's permission, any auto that TWW owns, hires, or borrows. Specifically, the policy provides:

“3. Who Is An Insured

“a. The following are ‘insureds' for covered ‘autos'

“(1) You for any covered ‘auto’

“(2) Anyone else while using with your permission a covered ‘auto’ you own, hire or borrow except

“(a) The owner or anyone else from whom you hire or borrow a covered ‘auto [.]’ This exception does not apply if the covered ‘auto,’ is a ‘trailer’ connected to a covered ‘auto’ you own

“(b) Your ‘employee’ if the covered ‘auto’ is owned by that ‘employee’ or a member of his or her household

“(c) Someone using a covered ‘auto’ while he or she is working in a business of selling, servicing, repairing, parking or storing ‘autos' unless that business is your ‘garage operations'

“(d) Your customers, if your business is shown in the Declarations as an ‘auto’ dealership[.] However, if a customer of yours

“(I) Has no other available insurance (whether primary, excess or contingent), they are an ‘insured’ but only up to the compulsory or financial responsibility law limits where the covered ‘auto’ is principally garaged

“(II) Has other insurance (whether primary, excess or contingent) less than the compulsory or financial responsibility law limits where the covered ‘auto’ is principally garaged, they are an ‘insured’ only for the amount by which the compulsory or financial responsibility law limits exceed the limit of their other insurance

“(e) A partner (if you are a partnership), or a member (if you are a limited liability company), for a covered ‘auto’ owned by him or her or a member of his or her household “(3) Anyone liable for the conduct of an ‘insured’ described above but only to the extent of that liability[.]”

Thus, in order to have liability coverage for “any auto,” Friend must be “you” under section 3a(1). Otherwise, he is “[a]nyone else” under section 3a(2) and is covered only “while using with your permission a covered ‘auto’ you own, hire or borrow.” (Emphasis added.) The policy language unambiguously indicates that Friend is not “you.” The policy provides that “you” is “the Named Insured.” The named insured is “TWW Inc” and “Cornelius Auto Sales.” Thus, the corporation, not Friend, is “you.”

Nevertheless, Friend contends that he is “you” because he is the secretary of TWW, the named insured. He argues that an understanding of the policy that limits “you” to the corporation itself—rather than to the corporation acting through its agents—would render the policy a nullity, because “corporations lack the ability to drive motor vehicles.” We reject that argument for two reasons.

First, the text of section 3a(2) demonstrates that “you” means only the corporation itself, not people who run or participate in the business. ⁷ Section 3a(2), which provides coverage for “anyone else,” contains five exceptions. Those exceptions list employees, partners, members (of a limited liability company), and customers of “you” in various circumstances. That implies that those people are “[a]nyone else” to the extent that they do not fall within any exception. For example, if a partner were “you,” the exception excluding coverage for partners under certain circumstances would be under the “you” section, not the ...