W. Agric. Ins. Co. v. Arbab-Azzein

Decision Date11 March 2020
Docket Number#29051
Citation940 N.W.2d 865
Parties WESTERN AGRICULTURAL INSURANCE COMPANY, Plaintiff and Appellee, v. Altayeb ARBAB-AZZEIN, Defendant, and Alaaldeen Mussa, Defendant and Appellant.
CourtSouth Dakota Supreme Court

MARK D. O'LEARY, Sioux Falls, South Dakota, Attorney for plaintiff and appellee.

WILLIAM J. WETERING of Hedeen, Hughes & Wetering, Worthington, Minnesota, Attorneys for defendant and appellant.

JENSEN, Justice

[¶1.] On October 24, 2013, Altayeb Arbab-Azzein was driving multiple passengers in a van when it rolled over in a single-vehicle accident. One of the passengers, Alaaldeen Mussa, suffered serious injuries in the accident. Mussa brought an action against Arbab-Azzein for personal injuries. Arbab-Azzein had purchased a motor vehicle insurance policy through Western Agricultural Insurance Company (Western Ag). Western Ag denied coverage and refused to defend Arbab-Azzein, relying upon policy provisions excluding coverage for any vehicle being used to carry people for a fee. Thereafter, Western Ag filed this declaratory judgment action against Arbab-Azzein and Mussa to determine coverage. Following a bench trial, the circuit court determined Western Ag’s policy exclusions were applicable and denied coverage for the accident. Mussa appeals. We affirm the circuit court’s decision.

Background

[¶2.] Mussa lived in Sioux Falls and worked at the JBS Swift plant in Worthington, Minnesota. Mussa did not own a vehicle and regularly rode with his co-worker, Arbab-Azzein, who owned a fifteen-passenger van. Arbab-Azzein drove Mussa and other co-workers from Sioux Falls to the Worthington Swift plant each day, a round-trip of approximately 125 miles.

[¶3.] Arbab-Azzein purchased his van in 2012 for the purpose of driving himself and others to work at Swift. Before he bought the van, Arbab-Azzein rode to work in another co-worker’s van under a similar arrangement. Arbab-Azzein was the sole driver of the van he purchased. Most of his passengers did not have driver’s licenses. Arbab-Azzein typically drove ten to fifteen passengers each day. He met them at a Hy-Vee grocery store in Sioux Falls, but occasionally Arbab-Azzein picked up some passengers at their homes. Each passenger paid Arbab-Azzein at least $40 per week regardless of the number of passengers commuting. Some passengers believed Arbab-Azzein was operating a business. However, Arbab-Azzein did not keep track of payments received, transportation expenses, or whether he made a profit. He did not claim any of the payments received from his co-workers as income on his tax returns. Arbab-Azzein believed the $40 weekly price per passenger covered the cost of gas, tires, oil changes, insurance, and vehicle maintenance, but he did not attempt to track or calculate these expenses.

[¶4.] The Western Ag automobile insurance policy purchased by Arbab-Azzein included medical payments and liability coverage. The policy contained a "vehicle used for a fee" exclusion applicable to each coverage. The exclusion for vehicle liability coverage provided: "Vehicle Used for a Fee. There is no coverage while any vehicle is being used to carry people for a fee. This exclusion does not apply to a shared-expenses car pool." The exclusion for medical payments coverage provided: "Vehicle Used For a Fee or Rented to Others. There is no coverage while any vehicle is being used to carry people or property for a fee or is rented to others."

[¶5.] The day before the accident that injured Mussa, Arbab-Azzein was in a minor accident with his van. Because Arbab-Azzein could not use his vehicle on October 24, he borrowed another fifteen-passenger van from a friend to transport himself and at least fourteen others to work.1 While returning from work, Arbab-Azzein lost control of the van, causing it to roll over. Mussa filed a lawsuit against Arbab-Azzein for his injuries.

[¶6.] After Western Ag denied coverage and refused to defend, Arbab-Azzein and Mussa entered into an agreement for a stipulated judgment against Arbab-Azzein in the amount of $1,500,000. The agreement provided that Mussa would not collect the judgment against Arbab-Azzein in exchange for Arbab-Azzein’s assignment of his rights under the insurance policy.2

[¶7.] Western Ag brought this declaratory action against Mussa and Arbab-Azzein seeking a determination that there was no coverage for the accident under the "vehicle used for a fee" exclusions. Following a two-day bench trial, the circuit court entered findings of fact and conclusions of law and a judgment determining that Western Ag had no contractual obligation to defend Arbab-Azzein or provide indemnity for the accident. Mussa appeals, raising several arguments in support of his claim that the circuit court erred in determining there was no coverage under the "vehicle used for a fee" exclusions.

Standard of Review

[¶8.] "We review a declaratory judgment under SDCL 21-24-13 ‘as we would any other judgment or order.’ " N. Star Mut. Ins. Co. v. Peterson , 2008 S.D. 36, ¶ 8, 749 N.W.2d 528, 531 (quoting Gloe v. Union Ins. Co. , 2005 S.D. 30, ¶ 7, 694 N.W.2d 252, 256 ). "Insurance contract interpretation ... [is] a question of law, reviewable de novo, with no deference given to the [circuit] court’s legal conclusions." Auto-Owners Ins. Co. v. Hansen Hous., Inc. , 2000 S.D. 13, ¶ 10, 604 N.W.2d 504, 509 (citing Nat'l Farmers Union Prop. and Cas. Co. v. Universal Underwriters Ins. Co. , 534 N.W.2d 63, 64 (S.D. 1995) ).

[¶9.] "We review the circuit court’s findings of fact under the clearly erroneous standard." Nelson v. Farmers Mut. Ins. Co. of Neb. , 2004 S.D. 86, ¶ 5, 684 N.W.2d 74, 76 (citing City of Deadwood v. Summit, Inc. , 2000 S.D. 29, ¶ 9, 607 N.W.2d 22, 25 ). Findings of fact will not be disturbed unless the Court is "firmly and definitely convinced a mistake has been made." In re Estate of Trautman , 2006 S.D. 39, ¶ 9, 713 N.W.2d 600, 603 (quoting Parks v. Cooper , 2004 S.D. 27, ¶ 20, 676 N.W.2d 823, 839 ).

Analysis and Decision

[¶10.] "When an insurer invokes a contract exclusion to disallow coverage, ‘the insurer has the burden of proving that the exclusion applies.’ " Auto-Owners Ins. Co. , 2000 S.D. 13, ¶ 10, 604 N.W.2d at 509 (quoting Am. Family Mut. Ins. Co. v. Purdy , 483 N.W.2d 197, 199 (S.D. 1992) ). However, "the insured bears the burden of proving that coverage exists through an exception" to the exclusion. Demaray v. De Smet Farm Mut. Ins. Co. , 2011 S.D. 39, ¶ 9, 801 N.W.2d 284, 287.

[¶11.] "[The] 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." Ass Kickin Ranch, LLC v. N. Star Mut. Ins. , 2012 S.D. 73, ¶ 10, 822 N.W.2d 724, 727 (quoting Stene v. State Farm Mut. Auto. Ins. Co. , 1998 S.D. 95, ¶ 14, 583 N.W.2d 399, 402 ). "[I]nsurance policies must be subject to a reasonable interpretation and not one that amounts to an absurdity." Id. (quoting Prokop v. N. Star Mut. Ins. Co. , 457 N.W.2d 862, 864 (S.D. 1990) ). "If the terms of an insurance contract are susceptible to different interpretations" the policy provision is ambiguous, and the Court will "adopt the interpretation most favorable to the insured." Auto-Owners Ins. Co. , 2000 S.D. 13, ¶ 10, 604 N.W.2d at 509 (citing Chord v. Reynolds , 1999 S.D. 1, ¶ 14, 587 N.W.2d 729, 732 ); accord N. Star Mut. Ins. Co. , 2008 S.D. 36, ¶ 10, 749 N.W.2d at 531. However, the "fact that the parties differ as to the contract’s interpretation does not create an ambiguity." Ass Kickin Ranch, LLC , 2012 S.D. 73, ¶ 9, 822 N.W.2d at 727 (quoting Zochert v. Nat'l Farmers Union Prop. & Cas. Co. , 1998 S.D. 34, ¶ 5, 576 N.W.2d 531, 532 ). Moreover, "mere absence of a definition does not alone create ambiguity." N. Star Mut. Ins. Co. , 2008 S.D. 36, ¶ 9, 749 N.W.2d at 531.

[¶12.] Mussa initially argues that Western Ag failed to meet its burden to show the "vehicle used for a fee" exclusions precluded coverage in this case. This first argument can be easily disposed of as there is ample evidence that Arbab-Azzein was charging a weekly flat fee of $40, and in some instances $45, to transport each passenger. The number of passengers would at times vary, but the rate charged by Arbab-Azzein did not change based upon the number of passengers riding in the van. The evidence supports the circuit court’s finding that "it is crystal clear from the evidence that Arbab-Azzein was charging a flat fee to transport his co-workers to the Swift facility daily."

[¶13.] Western Ag met its burden to prove the "vehicle used for a fee" exclusions were applicable for both medical payments and liability coverage. See Auto-Owners Ins. Co. , 2000 S.D. 13, ¶ 10, 604 N.W.2d at 509. Because the medical payments exclusion precludes coverage without exception, the circuit court correctly concluded that the policy did not provide coverage for medical expenses arising from the accident. In contrast, the liability coverage exclusion provides an exception for a "shared-expenses car pool." We then consider whether this exception applies to provide liability coverage.

[¶14.] The policy does not define "shared-expenses car pool." As such, Mussa claims the phrase is ambiguous because it is susceptible to differing interpretations and should have been interpreted most favorably to the insured. See Ass Kickin Ranch, LLC , 2012 S.D. 73, ¶ 9, 822 N.W.2d at 727. He also argues that the circuit court erred in reading the phrase "shared-expenses car pool" too narrowly. The circuit court relied on Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co. (Meridian I ), 659 N.E.2d 207 (Ind. Ct. App. 1995), vacated by Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co. (Meridian II ), 698 N.E.2d 770 (Ind. 1998), which limited the term "car pool" solely to arrangements where participants take turns driving and the expenses are proportionally shared between all the participants.3 Mussa asserts that because of the...

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