Walle Mut. Ins. Co. v. Sweeney, 870063

• Decision Date: 01 February 1988
• Docket Number: No. 870063,870063
• Citation: 419 N.W.2d 176
• Parties: WALLE MUTUAL INSURANCE COMPANY, Plaintiff and Appellee, v. Charles D. SWEENEY, Donald L. Rawlings for the benefit of himself, Defendants and Appellants.
• Court: North Dakota Supreme Court

Page 176

419 N.W.2d 176

WALLE MUTUAL INSURANCE COMPANY, Plaintiff and Appellee, v. Charles D. SWEENEY, Donald L. Rawlings for the benefit of himself, Defendants and Appellants.

No. 870063.

Supreme Court of North Dakota.

Feb. 1, 1988.

Letnes, Marshall, Fiedler & Clapp, Ltd., Grand Forks, for plaintiff and appellee; argued by Jay H. Fiedler.

Stefanson, Landberg & Plambeck, Moorhead, Minn., for defendant and appellant Rawlings; appearance by Randolph E. Stefanson.

Bruce E. Bohlman, Ltd., Grand Forks, for defendant and appellant Sweeney; argued by Michael E. Juntunen.

LEVINE, Justice.

Defendants Charles D. Sweeney and Donald L. Rawlings appeal from a judgment of the Grand Forks County district court declaring that the plaintiff, Walle Mutual Insurance Co., is not obligated to defend or indemnify Sweeney from claims of wrongful death arising from Sweeney's automobile collision with Gerald Rawlings on July 17, 1985. We affirm.

In 1980 Sweeney purchased automobile insurance issued by General Casualty Co. from Bill Fruhwirth of the Larimore Insurance Agency, Larimore, North Dakota. In 1981 General Casualty reduced Sweeney's liability limits to $25,000 per person for bodily injury, $50,000 per accident for bodily injury, and $10,000 per accident for property damage.

In 1982 Sweeney purchased from Duane Larson, of the Elk Valley Bank, presently First American Bank, in Larimore, North Dakota, a farm liability policy written by Walle Mutual Insurance Co. with liability limits of $300,000. The farm policy excluded coverage of claims arising out of the "ownership, maintenance, operation, use, loading or unloading of ... any motor vehicle owned or operated by, or rented or loaned to any insured." The policy defines "motor vehicle" as:

"A land motor vehicle, trailer or semitrailer designed for travel on public roads (including any machinery or apparatus attached thereto) but does not include, except while being towed by or carried on a motor vehicle, any of the following: utility, boat, cab or home trailer, recreational motor vehicle, crawler or farm-type tractor, farm implements or, if not subject to motor vehicle registration, any equipment which is designed for use principally off public roads." [Emphasis added.]

In 1983 Sweeney purchased from Larson a personal liability catastrophe policy, also known as an umbrella policy, written by St. Paul Fire and Marine Insurance Co. This policy provided coverage of up to one million dollars for bodily injury liability exceeding $250,000 per person arising from the operation of Sweeney's automobiles.

When Larson sold Sweeney the umbrella policy, he told Sweeney to ask General Casualty, Sweeney's automobile insurance carrier, to increase Sweeney's automobile coverage because the gap between the $25,000 limits of the automobile policy and the $250,000 floor of the umbrella policy left Sweeney partially uninsured. Sweeney attempted to have his automobile policy limits raised, but General Casualty declined to raise them at that time.

Sweeney renewed the General Casualty automobile policy, the Walle Mutual farm policy, and the St. Paul Fire and Marine umbrella policy in every year material to this action.

The incident giving rise to this declaratory judgment action occurred at the intersection of a county road and United States Highway 2 near Larimore, North Dakota, on July 17, 1985. Sweeney, driving a pickup which was used solely for farming purposes, was returning to his father's farm with parts for a combine. As Sweeney crossed Highway 2, his pickup collided with a westbound vehicle driven by Gerald Rawlings, who was killed. Donald L. Rawlings, the surviving father of Gerald Rawlings, filed a wrongful death action against Sweeney.

Walle Mutual then brought a declaratory judgment action against Sweeney and Donald L. Rawlings, seeking a declaration that Sweeney's pickup is a "motor vehicle" and not a "farm implement," and is thus excluded from coverage under the farm policy. After a bench trial the district court concluded that "the relevant language [i.e., "motor vehicle" and "farm implements"] contained in the policy of insurance issued by Walle Mutual Insurance Company is ambiguous as held by the North Dakota Supreme Court in Heitkamp v. Milbank Mutual Ins. Co., 383 N.W.2d 834 (N.D.1986)." However, the district court found that neither Walle Mutual nor Sweeney intended the farm policy to cover a wrongful death claim arising from the operation of Sweeney's pickup truck. The court also found that Sweeney had no reasonable expectation that the Walle Mutual policy would cover his pickup. Based on these findings of fact, the district court concluded that Sweeney was not entitled to a defense or indemnity by Walle Mutual in the wrongful death suit brought by Donald L. Rawlings. The district court granted declaratory judgment in favor of Walle Mutual, and Sweeney and Rawlings appealed.

There are two issues on appeal: (1) Whether a trial court is bound as a matter of law to strictly construe an ambiguous insurance contract in favor of the insured regardless of the applicability of other rules of contractual interpretation; (2) Whether the trial court's finding that neither Sweeney nor Walle Mutual expected or intended the farm policy to cover a pickup is clearly erroneous. Neither side disputes the trial court's determination that the policy language is ambiguous.

Defendants argue that the district court erred as a matter of law in failing to construe the ambiguous insurance policy strictly in favor of the insured. They claim that once an insurance policy is ambiguous, there is automatic coverage as a matter of law. They rely on our oft-repeated refrain that "any ambiguity or reasonable doubt as to the meaning of the policy is to be strictly construed against the insurer and in favor of the insured." See, e.g., Farmland Mutual Ins. Co. v. Farmers Elevator, Inc., 404 N.W.2d 473, 477 (N.D.1987). However, this principle is based on NDCC Sec. 9-07-19, which reads:

"In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist. The promisor is presumed to be such party, except in a contract between a public officer or body, as such, and a private party, and in such case it is presumed that all uncertainty was caused by the private party." [Emphasis added.]

See Conlin v. Dakota Fire Ins. Co., 126 N.W.2d 421, 425 (N.D.1964). Thus, NDCC Sec. 9-07-19 is applicable only when the "preceding rules," namely, Secs. 9-07-01 through 9-07-18, ¹ fail to resolve the ambiguity. Of the preceding rules, Secs. 9-07-03 and 9-07-12 have particular significance in construing an ambiguous contract. The strict construction rule contained within Sec. 9-07-19 is a rule of last resort and is not applicable to frustrate any clear intentions of the parties. 2 Couch on Insurance 2d, 15:74 at 357 (1984). See also 13 Appleman, Insurance Law and Practice, Sec. 7403 at 306-07, 331-32 (1976).

This court may have invited defendant's argument by unnecessarily resorting to the strict construction rule in order to fortify a result, thereby obscuring the preceding statutory rules of contract interpretation. See 2 Couch, supra Sec. 15:69 at 320. See, e.g., Heitkamp, 383 N.W.2d at 834 (jury verdict of coverage supported by evidence of intent); Henson v. State Farm Fire &amp Casualty Co., 252 N.W.2d 200 (N.D.1977) (holding based on estoppel theory).

In several cases, discussed below, there appears to be a leap from a finding of ambiguity directly to a finding of coverage. However, upon careful examination, these cases are not inconsistent with cases that do give other rules of contractual interpretation their statutorily mandated priority over the strict construction rule. See, e.g., Thiel Industries v. Western Fire Ins. Co., 289 N.W.2d 786 (N.D.1980) (applying NDCC Sec. 9-07-16, rule that written part of contract controls printed part); Haugen v. Auto-Owners Ins. Co., 191 N.W.2d 274 (N.D.1971) (applying NDCC Sec. 9-07-06, rule that contract is to be interpreted as a whole).

In Aid Ins. Services, Inc. v. Geiger, 294 N.W.2d 411 (N.D.1980), at issue was whether a comprehensive general liability policy issued by Aid Insurance to Geiger afforded coverage for a property damage award against Geiger. The policy contained one clause excluding "property damage to work performed by or on behalf of [Geiger] arising out of the work or any portion thereof...." Another clause excluded from coverage "liability assumed by [Geiger] under any contract or agreement except an incidental contract," and excluded from this exclusion, liability for breach of warranty of workmanlike performance. The trial court granted summary judgment in favor of Geiger. The parties agreed on appeal there were no issues of fact; the only issue was whether the policy covered property damages awarded in a separate lawsuit. We found the exclusion clauses ambiguous, and relying on the rule of strict construction against the insurer, ² we held that Geiger's property damage liability was covered by the Aid Insurance policy.

In Geiger, strict construction was the only effective statutory aid for the interpretation of the ambiguous language. Neither party introduced evidence of the parties' intent at the time of contracting, so the "mutual intention of the parties" was not ascertainable. NDCC Sec. 9-07-03. ³ Nor was there evidence of the circumstances under which the contract was made. NDCC Sec. 9-07-12.

We could discuss in detail similar cases where this court resorted to strict construction to resolve contractual ambiguity. However, it suffices to say that in Corwin Chrysler-Plymouth, Inc. v. Westchester Fire Ins. Co., 279 N.W.2d 638 (N.D.1979); Williams v. Niesen, 261 N.W.2d 401 (N.D.1977); Mills v. Agrichemical Aviation, Inc., 250 N.W.2d 663, 673 (N.D.1977) (special concurrence authored by Chief Justice Erickstad and joined by a majority of...