Gabrelcik v. National Indemnity Co.

131 N.W.2d 534, 269 Minn. 445, 1964 Minn. LEXIS 798

• Court: Supreme Court of Minnesota
• Decided: November 13, 1964
• Docket: 39,262
• Status: Published

Opinions

Rogosheske, Justice.

Action for a declaratory judgment to determine whether the “Temporary Substitute Automobile” provision of an automobile liability policy afforded protection to plaintiff during her operation of a non-described vehicle. Defendant National Indemnity Company appeals from a judgment in favor of plaintiff. The question of the coverage of the policy was submitted upon stipulated facts.

Plaintiff and her husband, Frank Gabrelcik, are residents of the same household. She operates a one-car taxi business under the name of Fridley Cab Company under a license from the city of Fridley. Her husband operates a used-car lot and service garage under the name of Frank’s Used Cars. Both businesses are operated individually from the same premises. The policy named “Mary Gabrelcik D/B/A Fridley Cab Company” as the insured and specifically described a 1952 Plymouth automobile as the insured vehicle. The declarations of the policy revealed that the automobile was to be used for commercial purposes as a taxi. Plaintiff was required to file, and did file, a copy of the policy with the city to secure her license to operate a taxi. The Plymouth automobile was owned by plaintiff’s husband and registered in the name of Frank’s Used Cars. It was, however, used exclusively by plaintiff in her taxicab business until February 13, 1962, when it became disabled and was taken to her husband’s garage for repairs. A 1953 Ford automobile, owned by her husband and also registered in the name of Frank’s Used Cars, was loaned to plaintiff for temporary use in her business. This vehicle was a part of her husband’s stock of used cars. While the Plymouth was still disabled, the Ford automobile was involved in an accident when being used as a taxicab. A passenger in the taxicab claimed injury and instituted an action against plaintiff for damages.

The action before us was commenced upon the claim that the policy provided coverage for the Ford automobile under its “Temporary Substitute Automobile” clause, which extended coverage to the insured for the operation of—

“* * * an automobile not owned by the named insured or his spouse if a resident of the same household, while temporarily used as a substitute for the described automobile when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction.” The defendant insurer refused coverage on the ground that the Ford was not a “Temporary Substitute Automobile” within the meaning of the foregoing clause since the vehicle was owned by a spouse of the named insured who resided in the same household.

The trial court found for the plaintiff upon the grounds that borrowing the vehicle represented a commercial transaction between the husband and wife; that the insurer’s risk was not increased thereby; and that Frank’s Used Cars is a separate legal entity so that the ownership of the vehicle by the husband does not come within the meaning of the clause excluding coverage on a vehicle owned by the spouse of the named insured.

There are two obvious purposes for the language of the policy which excludes coverage on a substituted automobile if it is owned by the spouse of the named insured who resides in the same household. One purpose is to prevent the same policy from being used to provide coverage for vehicles other than those for which a premium has been paid. The second purpose is to avoid the potentiality of factual disputes, as in the case before us, concerning coverage for other vehicles that are owned by the named insured’s spouse.¹

We recognize that the overall purpose of a substituted-vehicle clause in an insurance policy is to benefit the insured and that the clause is to be construed liberally in favor of the insured.² However, the insurer is entitled to rely upon language of the policy designed to accomplish reasonable and justifiable objectives.³

The insurance contract represents the entire agreement between the parties. When the language of the policy is unambiguous, courts are not at liberty to use a process of judicial construction to graft into the plain language of a policy an intention to afford coverage when no such intention appears from the language of the policy or otherwise.⁴ Any construction of the policy must do no more than give effect to the plain meaning of the language.⁵

Plaintiff does not contend that the “Temporary Substitute Automobile” clause is ambiguous, as such a claim would be unreasonable in view of the language of the clause. Moreover, plaintiff concedes that if the Ford automobile were registered in the name of her husband rather than in the name of Frank’s Used Cars, the clause would exclude coverage for the automobile in question. Thus, plaintiff by her choice presents the narrow issue of whether the manner of registering permits the substitute vehicle to be regarded as not owned by plaintiff’s spouse within the contemplation of the policy.

We fail to see how the fact that plaintiff’s spouse is the owner of the vehicle in question is changed for insurance purposes by the manner in which it is registered with the state. Whether the vehicle is registered in the husband’s name or in the name of the business which he owns and operates as a sole proprietorship, the result is the same; namely, that this vehicle was owned by the insured’s spouse who resided in the same household.⁶ The only plausible theory upon which the policy could be held to afford coverage is that under the circumstances it should be declared void as against public policy. The provisions of the city ordinance under which a copy of the policy was filed are not before us. Plaintiff neither advanced this theory below nor here and we find no cases involving similar facts where such a theory was applied. Were the action brought by the injured party after judgment, considerations of public policy might well dictate a different result.⁷

On the narrow question presented and the arguments advanced by plaintiff we are asked to ascertain the intention of the parties to the contract from the language of the clause in question. No one associated with defendant was called to testify. The record is silent as to defendant’s knowledge of the nature of plaintiff’s business, the requirements of the city ordinance, or as to who filed the policy with the licensing authority. While the stipulated facts strongly suggest that in fairness the defendant ought to afford plaintiff the insurance protection she believed she had purchased, the contractual language restricting coverage when applied to the relevant facts compels the conclusion that any vehicle owned by plaintiff’s spouse was not thereby intended to be covered. Even though the policy covered a commercial operation and no prejudice resulted through simultaneous operation of two vehicles, settled principles of contract law require us to give effect to the plain meaning of the language of the policy.

Reversed.

1 See, Utilities Ins. Co. v. Wilson, 207 Okla. 574, 251 P. (2d) 175.

2 See, Allstate Ins. Co. v. Roberts, 156 Cal. App. (2d) 755, 320 P. (2d) 90; Central Nat. Ins. Co. v. Sisneros (D. N. Mex.) 173 F. Supp. 757; Lloyds America v. Ferguson (5 Cir.) 116 F. (2d) 920.

3 See, Harte v. Peerless Ins. Co. 123 Vt. 120, 183 A. (2d) 223 (substitution clause not to be unreasonably extended to materially increase risk contemplated by insurer).

4 See, Bobich v. Oja, 258 Minn. 287, 104 N. W. (2d) 19; Simon v. Milwaukee Auto Mutual Ins. Co. 262 Minn. 378, 115 N. W. (2d) 40.

5 Tomlyanovich v. Tomlyanovich, 239 Minn. 250, 58 N. W. (2d) 855, 50 A. L. R. (2d) 108; Phil G. Ruvelson, Inc. v. St. Paul Fire & Marine Ins. Co. 235 Minn. 243, 50 N. W. (2d) 629; Rein v. New York Life Ins. Co. 210 Minn. 435, 299 N. W. 385.

6 Although there are some decisions that suggest certain courts would reach a result different from ours in the instant case, we do not consider their reasoning controlling here. Moreover, they may be readily distinguished by their peculiar fact situations. See, e. g., St. Paul-Mercury Ind. Co. v. Heflin (W. D. Ark.) 137 F. Supp. 520; Farley v. American Auto Ins. Co. 137 W. Va. 455, 72 S. E. (2d) 520, 34 A. L. R. (2d) 933.

7 As between actions by the insured and the injured person, different considerations are present when the policy of insurance is required as a condition for obtaining a municipal license to operate a vehicle for hire. In such a situation, as here, there is considerable authority holding that after the injured party has obtained a judgment against the insured, if it remains unsatisfied, he may collect it from the insurer and is not subject to policy defenses that the insured would be. The rationale is that the licensing authority requires insurance coverage for the public’s protection and this rule prevents thwarting that objective. Royal Ind. Co. v. Olmstead (9 Cir.) 193 F. (2d) 451, 31 A. L. R. (2d) 635; Kruger v. California Highway Ind. Exch. 201 Cal. 672, 258 P. 602; Pan-American Cas. Co. v. Basso (Tex. Civ. App.) 252 S. W. (2d) 505; Gillard v. Manufacturers Ins. Co. 93 N. J. L. 215, 107 A. 446; Ott v. American Fidelity & Cas. Co. 161 S. C. 314, 159 S. E. 635, 76 A. L. R. 4; Annotations, 76 A. L. R. 23, 231, and 123 A. L. R. 950, 991. Most of these cases have involved the insured’s violation of the policy’s requirements that he give notice of an accident or notice of the filing of an action or that he cooperate with the insurer in any legal action. The policy behind the rule would seem to suggest that the insurer’s defense asserted here would not be good in an action between the insurer and the injured person. For reasons not apparent from the record, the injured passenger, Donna Sarazin, and her husband, Frank Sarazin, were joined as defendants to this action, but they filed no responsive pleading seeking affirmative relief. Their action seeking damages from plaintiff, her husband, and others has been filed, but the status of that action is not disclosed by the record.