Grinnell Mutual Reinsurance Co. v. Thompson

2010 ND 22, 778 N.W.2d 526, 2010 N.D. LEXIS 29, 2010 WL 537060

• Court: North Dakota Supreme Court
• Decided: February 17, 2010
• Docket: 20090250
• Status: Published

Opinions

VANDE WALLE, Chief Justice.

[¶ 1] Grinnell Mutual Reinsurance Company appealed from the district court’s judgment ordering Grinnell to provide coverage or indemnification to Shelly Thompson with regard to a collision between a semi-trailer owned by Foltz Trucking, Inc. and a vehicle driven by Shelly Thompson. The district court also ordered Grinnell to defend Shelly Thompson against any actions arising out of the collision. Finally, the district court declared Foltz, FBF Leasing, Inc., Gary Johnson, or Continental Western Insurance Company have, or could have, claims against Grinnell arising out of the collision. We reverse the district court’s judgment, because Shelly Thompson did not have permission to drive the vehicle and the Financial Responsibility Laws do not set minimum levels of insurance coverage for nonpermissive operators.

I.

[¶2] Shelly .Thompson and Norman Thompson are married and live together.

Norman Thompson owns a 1995 Buick Regal. Shelly Thompson has no ownership interest in the Buick. In 2005, Grinnell issued an insurance policy to Norman Thompson that covered three vehicles, including a 1995 Buick Regal. Norman Thompson is listed in the policy as the “named insured.” As used in the policy, “you” and “your” are defined as:

1. The “named insured” shown in the Declarations; and

2. The spouse if a resident of the same household.

The policy provides:

A. We will pay damages for “bodily injury” or “property damage” for which any “insured” becomes legally responsible because of an auto accident. ... We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur.... We have no duty to defend any suit or settle any claim for “bodily injury” or “property damage” not covered under this policy.

B. “Insured” as used in this Part means:

1. You or any “family member” for the ownership, maintenance or use of any auto or “trailer”.

2. Any person using “your covered auto”.

The policy exclusions state:

A. We do not provide Liability Coverage for any “insured”:

1. Who intentionally causes “bodily injury” or “property damage”.

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8. Using a vehicle without a reasonable belief that that “insured” is entitled to do so. This Exclusion (A.8.) does not apply to a “family member” using “your covered auto” which is owned by you.

The policy also states, “When this policy is certified as future proof of financial responsibility, this policy shall comply with the law to the extent required.”

[¶ 3] In November 2005, Shelly Thompson drove the Buick without Norman Thompson’s permission. The Buick collided with a semi-trailer owned by Foltz and driven by Foltz’s employee, Johnson. Following the collision, Shelly Thompson told a highway patrol officer she wanted to commit suicide, but did not want to hurt anyone else. Responding to a doctor’s questions, Shelly Thompson confirmed she wanted to kill herself and she tried to drive into the semi-trailer.

[¶ 4] In May 2007, Foltz sued Norman and Shelly Thompson for damages arising out of the collision. Grinnell provided a defense for the Thompsons against Foltz’s lawsuit, subject to its right to deny coverage or withdraw. Foltz and its insurance company, Continental Western Insurance Company, made a demand on Grinnell, claiming Grinnell is liable for the damages arising out of the collision. In October 2007, Grinnell sought a declaratory judgment that it is not obligated to provide coverage or a defense to the Thompsons with regard to the collision between the Buick and the semi-trailer, and that Foltz, FBF, Johnson, and Continental have no claim against Grinnell because of Norman Thompson’s policy.

[¶ 5] In October 2008, Foltz, FBF, and Continental filed a motion for partial summary judgment, asking the district court to declare “that Grinnell is liable for any damage caused by [Shelly] Thompson’s use of the motor vehicle, whether intentional or not, up to the minimum liability limits for property damage established by North Dakota law.” Grinnell then filed its own motion for summary judgment. In its memorandum opinion, the district court cited Hughes v. State Farm Mut. Auto. Ins. Co., 236 N.W.2d 870, 883 (N.D.1975), stating:

The “important particulars as the coverage required by § 39-16.1-11,” as summarized in Hughes, are: (1) limits of liability not less than the dollar amounts listed in N.D.C.C. § 39 — 16.1—11 (2)(b); (2) insuring the named insured and any other person driving said motor vehicle with the permission of the named insured; and (3) insuring such persons against loss arising out of the ownership, maintenance or use of such insured motor vehicle within the United States of America or the Dominion of Canada.

The district court stated Norman Thompson is the named insured of Grinnell’s policy and Shelly Thompson did not have permission to drive the Buick. The district court concluded Grinnell’s policy did not comply with the requirements of N.D.C.C. § 39-16.1-11, as described in Hughes, because it provides “coverage for auto accidents rather than for loss imposed by law.” The district court stated further, “[A] limitation to only provide coverage for damages that the insured becomes responsible for because of an auto accident is in conflict with the minimum requirements, the minimum requirement of providing coverage for loss from liability imposed by law will prevail.”

[¶ 6] The district court concluded, “In summary, because Norman’s policy with [Grinnell] provides broader coverage than is required for whom coverage is applicable, and the policy provides narrower coverage than required for liability imposed by law under the Financial Responsibility Laws, [Grinnell]’s motion is DENIED, and Defendants’ motion is GRANTED.” (Emphasis in original).

II.

[¶ 7] On appeal, Grinnell argues N.D.C.C. § 39-16.1-11 does not require it to provide coverage to Shelly Thompson because she drove the Buick without the permission of Norman Thompson, the named insured. Grinnell argues the policy’s exclusion for intentional acts applies. Foltz, FBF, and Continental argue the policy’s Conformity Clause, stating “this policy shall comply with the law to the extent required,” dictates Grinnell must provide coverage as described in N.D.C.C. § 39 — 16.1—11 (2)(b) “against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of such motor vehicles.” They also argue Shelly Thompson qualifies as a “named insured” under the policy because she and Norman Thompson are treated equally under the policy.

[f 8] This Court’s standard of review on summary judgment is well-established:

Under N.D.R.Civ.P. 56, summary judgment is a procedural device for promptly resolving a controversy on the merits without a trial if there are no genuine issues of material fact or inferences that can reasonably be drawn from undisputed facts, or if the only issues to be resolved are questions of law. The party moving for summary judgment must show there are no genuine issues of material fact and the case is appropriate for judgment as a matter of law. A district court’s decision on a motion for summary judgment is a question of law that we review de novo on the record. In determining whether summary judgment was appropriately granted, we view the evidence in the light most favorable to the party opposing the motion, giving that party the benefit of all favorable inferences which can reasonably be drawn from the record.

Kambeitz v. Acuity Ins. Co., 2009 ND 166, ¶ 8, 772 N.W.2d 632 (quoting Bragg v. Burlington Res. Oil & Gas Co. LB, 2009 ND 33, ¶ 5, 763 N.W.2d 481). Neither party argues there is a genuine issue of material fact precluding summary judgment.

[¶ 9] This Court reviews a district court’s interpretation of a statute de novo:

Interpretation of a statute is a question of law fully reviewable on appeal. Our primary goal in statutory construction is to ascertain the intent of the legislature, and we first look to the plain language of the statute and give each word of the statute its ordinary meaning. When the wording of a statute is clear and free of all ambiguity, the letter of it is not to be disregarded under the pretext of pursuing its spirit. If, however, the statute is ambiguous or if adherence to the strict letter of the statute would lead to an absurd or ludicrous result, a court may resort to extrinsic aids, such as legislative history, to interpret the statute. A statute is ambiguous if it is susceptible to meanings that are different, but rational. We presume the legislature did not intend an absurd or ludicrous result or unjust consequences, and we construe statutes in a practical manner, giving consideration to the context of the statutes and the purpose for which they were enacted.

State v. Brown, 2009 ND 150, ¶ 15, 771 N.W.2d 267 (quoting In re M.W., 2009 ND 55, ¶ 6, 764 N.W.2d 185).

[¶ 10] The interpretation of an insurance contract is also a question of law fully reviewable on appeal. Schleuter v. Northern Plains Ins. Co., 2009 ND 171, ¶ 8, 772 N.W.2d 879 (citing ACUITY v. Burd & Smith Constr., 2006 ND 187, ¶ 7, 721 N.W.2d 33). We have also described the standards for construing an insurance contract:

Our goal when interpreting insurance policies, as when construing other contracts, is to give effect to the mutual intention of the parties as it existed at the time of contracting. We look first to the language of the insurance contract, and if the policy language is clear on its face, there is no room for construction. If coverage hinges on an undefined term, we apply the plain, ordinary meaning of the term in interpreting the contract. While we regard insurance policies as adhesion contracts and resolve ambiguities in favor of the insured, we will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage. We will not strain the definition of an undefined term to provide coverage for the insured. We construe insurance contracts as a whole to give meaning and effect to each clause, if possible. The whole of a contract is to be taken together to give effect to every part, and each clause is to help interpret the others.

Id. (quoting Ziegelmann v. TMG Life Ins. Co., 2000 ND 55, ¶ 6, 607 N.W.2d 898) (internal quotes omitted). “Exclusions from coverage ... must be clear and explicit and are strictly construed against the insurer.” Id. (quoting Nationwide Mut. Ins. Cos. v. Lagodinski, 2004 ND 147, ¶ 9, 683 N.W.2d 903) (omission in original). However, this Court “will not rewrite a contract to impose liability on an insurer if the policy unambiguously precludes coverage.” Id. (quoting Lagodinski at ¶ 9).

[¶ 11] North Dakota’s “Financial Responsibility Laws” are found in N.D.C.C. chapters 39-16 and 39-16.1. Hughes, 236 N.W.2d at 877. The Financial Responsibility Laws state a motor vehicle liability policy, as defined by those statutes:

Must insure the person named therein and any other person, as insured, using such motor vehicle or motor vehicles with the express or implied permission of such named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of such motor vehicles within the United States of America or the Dominion of Canada, subject to limits exclusive of interest and costs, with respect to each such motor vehicle, as follows: twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and subject to said limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and twenty-five thousand dollars because of injury to or destruction of property of others in any one accident.

N.D.C.C. § 39 — 16.1—11 (2)(lb). This Court has stated, “[T]he terms of a motor vehicle liability policy issued and delivered in this State must provide at least the minimum coverage outlined in § 39-16.1-11. Such provisions are express declarations by the Legislature of the public policy of this State, and as such are implicit in the contract of insurance.” Hughes, 236 N.W.2d at 885 (citing Wildman v. Gov’t Employees’ Ins. Co., 48 Cal.2d 31, 307 P.2d 359 (1957); Jenkins v. Mayflower Ins. Exch., 93 Ariz. 287, 380 P.2d 145 (1963)). We summarized the coverage required, “[S]uch coverage must insure all permissive operators against loss for liability, within certain monetary limits, for damages imposed by law.” Id. at 883-84.

[¶ 12] Section 39-16.1-ll(2)(b), N.D.C.C., requires a minimum level of coverage for “the person named therein and any other person, as insured, using such motor vehicle or motor vehicles with the express or implied permission of such named insured.” If Shelly Thompson is neither a named insured, nor a person using the vehicle with the permission of the named insured, then Grinnell need not provide the minimum coverage required by N.D.C.C. § 39—16.1—ll(2)(b), and the language of the policy controls.

[¶ 13] Foltz, FBF, and Continental assert Shelly Thompson is a “named insured.” They argue Shelly and Norman Thompson are equal under the policy because, according to the policy, “you” and “your” include “[t]he ‘named insured’ shown in the Declarations; and ... [t]he spouse if a resident of the same household.” They further argue the policy considers Shelly Thompson to be an owner of the Buick, because the policy describes the Buick as “[y]our covered auto” and Shelly is included in the term “your.” The Financial Responsibility Laws do not define the term “named insured.” They do, however, require an insurance policy to “state the name and address of the named insured.” N.D.C.C. § 39-16.1-11(4). Grin-nell’s policy lists Norman Thompson as the “named insured” and lists his address. The district court found Norman Thompson to be the policy’s named insured. While Shelly Thompson is an “insured” under the policy, she is not the “named insured.” Other courts have determined that when a motor vehicle liability policy includes the spouse of the “named insured” in the definition of “you” and “your,” that spouse does not enjoy “named insured” status. See Odom v. Farmers Ins. Co., 216 Ariz. 530, 169 P.3d 120, 122 n. 1 (Ariz. Ct.App.2007); Nationwide Mut. Ins. Co. v. Buffetta, 230 F.3d 634, 639 n. 3 (3d Cir. 2000). Norman Thompson alone is the “named insured” with regard to Grinnell’s policy and the Financial Responsibility Laws.

[¶ 14] The parties do not dispute that Shelly Thompson drove the Buick without Norman Thompson’s permission. Shelly Thompson is thus a nonpermissive operator, not a named insured or a person using the vehicle with the named insured’s permission. The Financial Responsibility Laws require coverage for “all permissive operators against loss for liability, within certain monetary limits, for damages imposed by law.” Hughes, 236 N.W.2d at 884. The Financial Responsibility Laws do not require any minimum level of coverage for nonpermissive operators, such as Shelly Thompson. The coverage Grinnell must provide for Shelly Thompson is thus dictated by the terms of Grinnell’s policy, not the Financial Responsibility Laws.

[¶ 15] Grinnell’s policy provides greater coverage under some circumstances than is required by the Financial Responsibility Laws. Grinnell’s policy provides coverage for auto accidents in which a family member of the named insured uses the vehicle without permission. The policy, to that extent, provides coverage beyond what is required by the Financial Responsibility Laws, because the Financial Responsibility Laws do not require a minimum level of coverage for nonpermissive users. Grinnell is free to offer greater coverage than is required by the Financial Responsibility Laws in its policy if it chooses to do so. See Grinnell Mut. Reins. Co. v. Farm & City Ins. Co., 2000 ND 163, ¶ 16, 616 N.W.2d 353 (“The statute does not prevent insurers from providing broader coverage than is statutorily required”) (citing Haser v. Maryland Cas. Co., 78 N.D. 893, 896, 53 N.W.2d 508, 510 (1952); 7 Lee R. Russ, Couch on Insurance § 109.21 (3d ed. 1997)). Because Grinnell provides greater coverage in one area, it is not required to provide greater coverage than is required by the Financial Responsibility Laws under all circumstances. Grinnell’s policy excludes coverage for intentionally caused bodily injury or property damage, regardless whether the operator is a family member. We do not decide whether such an intentional acts exclusion is permissible under the Financial Responsibility Laws as applied to someone who is required by the Financial Responsibility Laws to be covered. Here, the language of the policy controls. Because the Financial Responsibility Laws do not require a minimum level of coverage for Shelly Thompson, a nonpermissive operator, Grinnell can exclude coverage for her intentional collision with the semi-trailer.

[¶ 16] Foltz, FBF, Continental, and the district court cite Hughes for the proposition that intentional acts exclusions are not enforceable because all motor vehicle liability policies must provide the minimum levels of coverage required by the Financial Responsibility Laws. Hughes concerned a motor vehicle liability policy that contained a “household, or family, exclusion clause” that excluded coverage for “bodily injury to any insured or any member of the family of an insured residing in the same household as the insured.” Hughes, 236 N.W.2d at 877. We explained the “three essential elements of coverage which a ‘motor vehicle liability policy’ must provide, if issued pursuant to the terms of Chapter 39-16.1, N.D.C.C.”:

1. Limits of liability of not less than ten thousand dollars because of bodily injury or death to one person in any one accident; twenty thousand dollars because of bodily injury or death to two or more persons in any one accident; and five thousand dollars because of injury to or destruction of property in any one accident; and

2. Insuring the named insured and any other person driving said motor vehicle with the permission of the named insured; and

3. Insuring such persons against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such insured motor vehicle within the United States of America or the Dominion of Canada.

Id. at 883 (emphasis omitted). We stated, “[T]he terms of a motor vehicle liability policy issued and delivered in this State must provide at least the minimum coverage outlined in § 39-16.1-11. Such provisions are express declarations by the Legislature of the public policy of this State, and as such are implicit in the contract of insurance.” Id. at 885 (citing Wildman, 307 P.2d 359; Jenkins, 380 P.2d 145). This Court held the “household, or family, exclusion clause” was not enforceable under the Financial Responsibility Laws. Id. at 885.

[¶ 17] Foltz, FBF, and Continental assert the three essential elements of N.D.C.C. § 39-16.1-11 must be read into Grinnell’s policy. However, the three essential elements must be read together. Element 2 requires coverage for “the named insured and any other person driving said motor vehicle with the permission of the named insured.” Id. at 883. The coverage described in Element 3 is only required for “such persons,” the persons described in Element 2. Id. Shelly Thompson is not one of the persons described in Element 2 because she is neither the named insured nor a person driving the motor vehicle with the named insured’s permission. The coverage Grinnell must provide for Shelly Thompson is controlled by the language of the policy, not the Financial Responsibility Laws. According to the terms of its policy, Grinnell is permitted to exclude coverage for Shelly Thompson’s intentional act.

III.

[¶ 18] We reverse the district court’s judgment and remand to enter a judgment denying Foltz’s, FBF’s, and Continental’s motion for partial summary judgment and granting Grinnell’s motion for summary judgment.

[¶ 19] DALE V. SANDSTROM and DANIEL J. CROTHERS, JJ., concur.