Farmers Mut. Ins. Co. Of Neb. v. Federated Mut. Ins. Co.

18 Neb.App. 513

788 N.W.2d 806

John F. BECKMAN and Farmers Mutual Insurance Company of Nebraska, appellants,

v.FEDERATED MUTUAL INSURANCE COMPANY, also known as and doing business as Federated Insurance, et al., appellees.

No. A-09-975.

Court of Appeals of Nebraska.

Aug. 10, 2010.

Syllabus by the Court1. Summary Judgment: Appeal and Error. An appellate court will affirm a lower court's granting of summary judgment if the pleadings and admissible evidence offered at the hearing show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

2. Summary Judgment: Appeal and Error. In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment was granted and gives such party the benefit of all reasonable inferences deducible from the evidence.

3. Contracts: Judgments: Appeal and Error. The meaning of a contract is a question of law, in connection with which an appellate court has an obligation to reach its conclusions independently of the determinations made by the court below.

4. Insurance: Contracts: Motor Vehicles: Liability. Where an excess insurance clause in a driver's automobile liability policy and a no-liability clause in the automobile owner's liability policy apparently conflict, the no-liability clause is ineffective and the driver's insurance excess.

5. Insurance: Contracts. If the terms of an insurance policy are clear and unambiguous, then those terms will be enforced.

6. Summary Judgment: Appeal and Error. When cross-motions for summary judgment have been ruled upon by the district court, the appellate court may determine the controversy that is the subject of those motions or may make an order specifying the facts that appear without substantial controversy and direct such further proceedings as it deems just.

7. Insurance: Contracts. An insurer may limit its liability and impose restrictions and conditions upon its obligations under an insurance contract as long as the restrictions and conditions are not inconsistent with public policy or statute.

Thomas A. Grennan and Francie C. Riedmann, of Gross & Welch, P.C., L.L.O., Omaha, for appellants.

Michael G. Mullin and Amy L. Van Horne, of Kutak Rock, L.L.P., Omaha, for appellees Federated Mutual Insurance Company and Sid Dillon Chevrolet-Oldsmobile-Pontiac, Inc.

MOORE and CASSEL, Judges.

CASSEL, Judge.

INTRODUCTION

This case is an insurance coverage dispute arising out of an accident in which the driver was operating a temporary substitute vehicle provided by a car dealership. Because both the policy insuring the driver and the dealership's policy insuring the vehicle purport to transfer liability to the other insurance policy, we conclude that the policies contain mutually repugnant language. We therefore apply the rule that in such situations, the policy covering the vehicle provides primary coverage and the policy covering the driver is excess. We reverse the district court's decision to the contrary and remand the cause with direction.

BACKGROUND

The facts in this case are not disputed. On July 31, 2006, John F. Beckman took his stepdaughter's vehicle to Sid Dillon Chevrolet-Oldsmobile-Pontiac, Inc. (Sid Dillon), to have repairs performed on the vehicle. Sid Dillon provided Beckman with a substitute vehicle, a 2005 Chevrolet Malibu owned by Sid Dillon, and gave him permission to operate the vehicle. On that same day, Beckman was involved in an accident with a bicyclist, Clinton R. Sedivy, while operating the Malibu.

At the time of the accident, Beckman was insured by Farmers Mutual Insurance Company of Nebraska (Farmers Mutual). At that time, Sid Dillon and the Malibu were insured by Federated Mutual Insurance Company (Federated).

As is pertinent to the instant case, Beckman's Farmers Mutual policy provided as follows regarding coverage:

COVERAGE FOR THE USE OF OTHER AUTOMOBILES

This liability coverage extends to the use, by an insured, of a newly acquired automobile, a temporary substitute automobile, or a non-owned automobile....

....

IF THERE IS OTHER LIABILITY COVERAGE

.... 3. Temporary Substitute Automobile, Non-Owned Automobile, Trailer.

If a temporary substitute automobile ... has other vehicle liability coverage on it, then this coverage is excess.

If a temporary substitute automobile ... has other vehicle liability coverage on it, or is self-insured under any motor vehicle financial responsibility law, a motor carrier law or any similar law, then this coverage is excess over such insurance or self-insurance.

The Malibu fits Farmers Mutual's definition of a temporary substitute automobile.

In pertinent part, Sid Dillon's Federated policy covering the Malibu provides as follows regarding who is an insured under the policy:

3. Who Is An Insured

a. The following are “insureds” for covered “autos”:

(1) You for any covered “auto”.

(2) Anyone else while using with your permission a covered “auto” you own, hire or borrow except:

....

(d) Your customers, if your business is shown in the Declarations as an “auto” dealership. However, if a customer of yours:

(i) Has no other available insurance (whether primary, excess or contingent), they are an “insured” but only up to the compulsory or financial responsibility law limits where the covered “auto” is principally garaged.

(ii) Has other available insurance (whether primary, excess or contingent) less than the compulsory or financial responsibility law limits where the covered “auto” is principally garaged, they are an “insured” only for the amount by which the compulsory or financial responsibility law limits exceed the limit of their other insurance.

On two occasions, Farmers Mutual tendered coverage for the accident to Federated. In letters dated October 17, 2007, and February 21, 2008, Federated denied tender.

For purposes of simplification, from this point forward, we refer to the appellants collectively as “Farmers Mutual” and we refer to the appellees collectively as “Federated.”

On October 24, 2008, Farmers Mutual filed a complaint for declaratory judgment. Farmers Mutual requested that the court enter a judgment declaring the following:

a. That the Federated policy provides the primary coverage as to the Sedivy claim;

b. That Federated owes a defense to ... Beckman herein;

c. That the Farmers Mutual coverage is excess;

d. That the defense costs incurred to date by Farmers Mutual in defending Beckman [in the case Sedivy filed against Beckman] shall be reimbursed by Federated; and

e. That Federated owes indemnification to ... Beckman herein, in the event that any judgment is entered against ... Beckman in the [case Sedivy filed against Beckman].

Federated filed a motion to dismiss which alleged that Farmers Mutual had failed to state a valid claim for recovery under Nebraska law, and Farmers Mutual filed a motion for summary judgment. The court treated the motion filed by Federated as a summary judgment motion, because evidence was offered in support of the motion. Based upon the evidentiary record-which included both insurance policies, the complaint Sedivy had filed against Beckman, and a stipulation of facts-the court granted summary judgment in favor of Federated.

Farmers Mutual timely appeals.

ASSIGNMENTS OF ERROR

Farmers Mutual makes five assignments of error, which we consolidate to the central question presented by this appeal: whether the district court erred in determining that Farmers Mutual's policy, rather than Federated's policy, afforded primary coverage under the undisputed facts.

STANDARD OF REVIEW

An appellate court will affirm a lower court's granting of summary judgment if the pleadings and admissible evidence offered at the hearing show that there is no genuine issue as to any material facts or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Community Dev. Agency v. PRP Holdings, 277 Neb. 1015, 767 N.W.2d 68 (2009). In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment was granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Id.

The meaning of a contract is a question of law, in connection with which an appellate court has an obligation to reach its conclusions independently of the determinations made by the court below. Davenport Ltd. Partnership v. 75th & Dodge I, L.P., 279 Neb. 615, 780 N.W.2d 416 (2010).

ANALYSIS

The question before this court is whether the Farmers Mutual insurance policy or the Federated insurance policy provided primary coverage. The resolution of this question depends upon the effect of the clause in Federated's insurance policy that excludes as an insured all customers of an automobile repair shop, except those without sufficient liability insurance, and in that case, only to the extent required by law.

The district court concluded, and Federated now asserts in its appellate brief, that because Beckman had his own liability insurance policy sufficient to comply with financial responsibility requirements, Beckman did not fit the definition of an insured under Federated's policy.

On appeal, Farmers Mutual argues that the district court erred in interpreting the Federated policy. Farmers Mutual asserts that the above-described term in the Federated policy is mutually repugnant with the term in the Farmers Mutual policy which provides that where the policyholder is driving a “non-owned” vehicle, the Farmers Mutual policy is excess coverage. If the two automobile insurance policies are mutually repugnant, longstanding Nebraska law places the responsibility for primary coverage on the insurance policy covering the vehicle, which in this case would be the Federated policy. See Allied Mut. Ins. Co. v....