Unigard Mut. Ins. Co. v. Martin, 1

Decision Date19 August 1982
Docket NumberNo. 1,CA-CIV,1
Citation134 Ariz. 144,654 P.2d 292
PartiesUNIGARD MUTUAL INSURANCE COMPANY, a Washington corporation, Plaintiff-Appellee, v. Phillip C. MARTIN, Defendant-Appellant. 5303.
CourtArizona Court of Appeals
OPINION

RICHARD M. DAVIS, Judge Pro Tem.

The question in this case is whether, under a policy of liability insurance issued to a corporate business and its sole owner which excluded from coverage "[a]ll personal acts and activities" of the individual owner "not in direct conduct of the business", the insurer could be liable for the owner's negligence in operating a boat on a businessmen's annual fishing trip. We conclude as did the trial court, that it cannot.

Kirby Martin and his wife are the sole stockholders in Dyna-Form Industries, Inc., a Phoenix enterprise engaged in making and installing aluminum patio covers, carports and the like. Kirby Martin is the president and treasurer of the corporation and is in charge of its sales program. In 1975, the plaintiff-appellee Unigard Mutual Insurance Co. issued a "Special Multi-Peril" insurance policy to "Dyna-Form Industries, Inc., Kirby Martin, an individual and Martin Brothers, Ltd." as its named insureds. 1 The policy included a general liability coverage for bodily injuries caused by the insured. The policy as issued also includes the following provision, on a separate sheet, entitled "Exclusion of Personal Liability":

In consideration of the premium for which this policy is written, it is understood and agreed that coverage hereunder shall not apply to the Individual and Spouse named below with respect to:

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2. All personal acts and activities not in direct conduct of the business of the named Insured;

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Named Individual and Spouse KIRBY MARTIN

In April, 1978, during the term of the policy, Kirby Martin and his father, the defendant-appellant Phillip C. Martin, went on a fishing trip to Lake Powell. This camping and fishing expedition was the annual outing of a group called the "Arizona Bass-Ters", comprised of 100 men engaged in business in the Phoenix area. Originally, the group consisted mainly of officers of Knoell Construction Co., a homebuilder, and its subcontractors. By 1978, some 10 years after its founding, the group included men engaged in a variety of other pursuits. The sole activity of the Bass-Ters as such was their one annual fishing trip to originally Roosevelt Lake, and later Lake Powell. Kirby Martin responded to questions directed to him in a sworn statement given to appellee's counsel following the accident as follows:

Q. [by appellee's counsel]: And what is the purpose of this group?

A. Well, really it's R and R for a bunch of contractors and subcontractors that have worked together for years. It was started by the Knoell family of Knoell Homes, and at the time I was a subcontractor of theirs when it began and still do work for them.

And it just grew and grew with other contractors and businessmen that were more or less affiliated through the years until we cut it off at roughly 100 people due to the fact that we camp uplake 60 miles and it's pretty hard waiting on that many people.

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Q. And is the object of each year's outing to go out, have fun, and catch bass?

A. Yes, I would say it's a combination of that and renewing associations with guys that you might not have seen all year that you have done some business with and only because you were so busy.

It's an outing of, as I said, businessmen, suppliers, and contractors that are in 90 percent of the cases somewhat affiliated, intermingled, or whatever. So, it's kind of a--it's a fun and business type thing. I would have to lean more towards fun, but there has been business derived out of the trip.

Kirby Martin was a Bass-Ter. Phillip Martin was not. Phillip accompanied his son on the fishing trip as a guest. Phillip was not and never had been an employee of Dyna-Form Industries. He was retired from other employment in California. Phillip paid his own trip expenses.

There was a banquet for the group on Wednesday night at the Wahweap Lodge on Lake Powell. The subject accident occurred on Thursday morning, while Kirby Martin was operating the boat he had brought to Lake Powell and Phillip Martin was sitting in the bow. The boat was titled in the name of Dyna-Form Industries, Inc. As the boat proceeded up-river toward the campsite, it hit an unexpectedly large wake and Phillip was thrown forcibly against the windshield and suffered severe injuries.

Phillip claimed coverage for his injuries under the Unigard policy on the basis of Kirby's asserted negligence. Unigard resisted the claim and filed the instant declaratory judgment proceeding. The trial court held on Unigard's motion for summary judgment that Kirby's acts were personal and not in the direct conduct of Dyna-Form's business, and that consequently there was no coverage by reason of the exclusion quoted above.

It is appellant's theory that the Bass-Ters outing, "although in part leisure, was, and for a number of years had been, an integral part of Kirby Martin's sales function at Dyna-Form Industries." In connection with that contention, appellant cites the following testimony given by Kirby at a deposition:

Q. And when you joined the Bass-Ters organization, insofar as your state of mind was concerned at that time, did you consider the Bass-Ters organization as a potential source of new business?

A. Yes. I did.

Q. Describe why the Bass-Ters organization was--you viewed it at that time as a potential source of new business.

A. Well, mainly in getting to know the principals more; the owner, Frank Knoell, and his son, who is running the operation, and the other management personnel who all went and developing a little better relationship and, hence, more business, which we did.

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Q. Would it be a fair statement to say that a significant element and the reason that you joined the Bass-Ters was the business potential that it presented to you?

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A. It was mutual thought. I had confidence there would be some business derived and that there would be some pleasure had.

A. And would the same be true as to the reasons that you continued with the Bass-Ters after you joined it; that you were confident that it would derive business in addition to being a function in which you'd have a fun time?

A. Yes.

Q. And, in fact, is that what has transpired over the eight or nine years that you have been associated with the Bass-Ters?

A. Yes, It has.

Initially, we note that in his reply brief, appellant makes a very short argument to the effect that the exclusion in regard to the acts of Kirby Martin only applies to him personally, and not to Dyna-Form Industries, which appellant perceives as being present at the fishing trip through its agent, Kirby Martin. This argument comes too late. It was not presented to the trial court, see Sullins v. Third and Catalina Construction Partnership, 124 Ariz. 114, 602 P.2d 495 (App.1979), and it was not presented in this court in appellant's opening brief. See United Bank v. Mesa N.O. Nelson Co., Inc., 121 Ariz. 438, 590 P.2d 1384 (1979). We accordingly decline to consider it.

On the question effectively presented by the appeal, neither party has found any authority closely in point. 2 Appellant has cited a number of workmen's compensation cases in support of an argument that the test should be whether Kirby Martin was in the course of his employment by Dyna-Form while he was on this fishing trip. 3 Lawrence v. Industrial Commission, 78 Ariz. 401, 281 P.2d 113 (1955); Truck Ins. Exchange v. Industrial Commission, 22 Ariz.App. 158, 524 P.2d 1331 (1974); Lybrand, Ross Bros. & Montgomery v. Industrial Commission, 36 Ill.2d 410, 223 N.E.2d 150 (1967); Linderman v. Cownie Furs, 234 Iowa 708, 13 N.W.2d 677 (1944). The workmen's compensation test is not the one to be applied here. In workmen's compensation proceedings, the objective is to have industry fully bear its share of human injury as a cost of doing business, and the compensation law is liberally construed to achieve that objective. Ocean Accident & Guarantee Corp., Ltd. v. Industrial Commission, 32 Ariz. 265, 257 P. 641 (1927). In the present case, by contrast, the rights of the parties are spelled out in a contract. Appellant has alluded to public policy as a reason not to construe the insurance contract as contended for by appellee, but insurance of this nature is not mandatory and where coverage is not publicly mandated the parties may contract as they see fit. New York Underwriters Ins. Co. v. Superior Court, 104 Ariz. 544, 456 P.2d 914 (1969). We must accordingly reject application of these authorities advanced by appellant. 4

Somewhat more to the point in view of the language of the exclusion at issue here are the federal tax cases cited by appellee which construed 26 U.S.C. § 274(a)(1)(B) prior to its amendment in 1978. Prior to 1978, this section...

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3 cases
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