Great West Cas. Co. v. Mich. Millers Mut. Ins. Co.

Great West Casualty Company, a Nebraska corporation, appellee,

v.Michigan Millers Mutual Insurance Company, appellant.

No. A-10-136

Nebraska Court Of Appeals

Filed September 28, 2010.

Tanya J. Janulewicz, of Leininger, Smith, Johnson, Baack, Placzek & Allen, for appellant.

James W. Ellison and Leland K. Kovarik, of Kovarik, Ellison & Mathis, P.C., for appellee.

MEMORANDUM OPINION AND JUDGMENT ON APPEAL

Appeal from the District Court for Buffalo County: John P. Icenogle, Judge. Reversed and remanded with directions.

Irwin, Sievers, and Carlson, Judges.

Sievers, Judge.

This liability coverage dispute arises out of an accident in Buffalo County, Nebraska, that occurred on November 4, 2006, when a northbound semi-trailer truck pulled out from a stop sign onto U.S. Highway 30 into the path of an eastbound car that clearly had the right of way. Two occupants in the vehicle were injured, and a third was killed. The semi was owned by Richard Sullwold and insured by Great West Casualty Company (Great West). The semi was being used by Agri Co-op of Holdrege by agreement with Sullwold and was being driven by Agri Co-op's employee, Donald Stone, who was in the course of his employment at the time of the accident. Agri Co-op is insured by Michigan Millers Mutual Insurance Company (Michigan Mutual). The issue is which of the two insurers, Michigan Mutual or Great West, has the primary liability coverage for the accident. Great West paid approximately $225,000 to settle the claims from the car's passengers. As a result, Great West filed an action in the district court seeking a declaration that its coverage was only excess and that it was entitled to judgment against Michigan Mutualfor the amounts it paid to adjust and settle the personal injury claims from the accident of November 4. The district court entered judgment in favor of Great West, and Michigan Mutual now appeals to this court. Because we find that both insurers' coverage was excess, we apply the doctrine of mutual repugnancy, which means that the insurer for the semi, Great West, has the primary coverage. Thus, we reverse the decision of the district court and remand the cause with directions.

FACTUAL AND PROCEDURAL BACKGROUND

Sullwold was the owner of a semi-tractor and a grain trailer that he began using to haul grain for Agri Co-op around November 1, 2006. When Sullwold was going to be unavailable for several days, LeLand Stone of Agri Co-op asked if Agri Co-op could use his equipment while he was gone, with the understanding that Donald Stone would drive it and that Sullwold would be compensated for the use of his equipment. In this conversation, there was no discussion whatsoever about liability insurance or assumption of liability by either party in the event of accident and/or injury. The arrangement was never reduced to writing, but its terms as outlined above are not disputed. The accident happened within days of the making of this arrangement.

After the accident, Great West promptly employed an adjuster, Jeffry White, who gathered information about the accident, took a number of statements, and reported periodically to Great West. Ultimately, White was able to settle the claims of the two injured occupants of the vehicle, and in early July 2007, Great West concluded all of the occupants' claims by the settlement of the claim of the occupant of the vehicle who died as a result of the accident, in the amount of $175,000.

Michigan Mutual was put on notice of those settlements by a December 14, 2006, letter from John Fitzsimmons of Great West to Nancy Walder of Michigan Mutual, in which Fitzsimmons asserted that Michigan Mutual's coverage was primary and Great West's coverage was only excess. Fitzsimmons' letter also renewed a request, apparently made earlier by telephone to Walder, that he be provided with a copy of the Michigan Mutual policy covering Agri Co-op, plus, in the letter he "tendered" the defense and handling of the claims to Michigan Mutual. Walder was also advised that if Michigan Mutual did not assume the "further handling of this matter; [Great West], keeping the third party claimants best interests in mind, will continue with the investigation, evaluation and good faith settlement of all claims" and would then look to Michigan Mutual for indemnification of all losses and expenses. As outlined above, Great West had settled all three claims by June 5, 2007, and this action was filed September 25. Additional facts will be set forth as required in our analysis.

DISTRICT COURT DECISION

In an order of March 18, 2009, deciding the parties' competing motions for summary judgment, the district court for Buffalo County first found that the arrangement for the usage of Sullwold's equipment by Agri Co-op was a "bailment contract." The court then found that Michigan Mutual's coverage was primary, because the bailee assumed the tort liability of the bailor, citing as its authority an unreported opinion of the Ohio Court of Appeals, Auto Owners Ins. Co. v. Motorists Mut. Ins. Co., No. CA91-07-121, 1992 WL 236861 (Ohio App. Sept. 21, 1992) (unpublished opinion). The court then discussed Great West's coverage on the semi, which was outlined in the policy issued to its owner, Sullwold. The court noted the provision that Great West policy's coverage was excess "'over any other collectible insurance or self insurance...' when the covered auto, which Sullwold's semi would be, is used by a trucker." However, the trial court found that there was an issue of fact to be resolved as to whether Agri Co-op was a "trucker." The court further found that Michigan Mutual's claim that Great West could not recover its payments because such were "voluntary" could not be resolved via summary judgment.

These remaining issues were tried to the district court in November 2009, and a decision was issued on January 6, 2010. The district court found that Agri Co-op was in fact engaged in the business of transporting property for hire and thus was a "trucker," making Great West's coverage excess, and, as stated, the court had previously determined that Michigan Mutual's coverage was primary.

The court rejected Michigan Mutual's argument that Great West made "voluntary" payments which allegedly prevented Great West from being reimbursed for such. Therefore, judgment was rendered against Michigan Mutual and in favor of Great West for the sum of $25,409.60 for its payments on the claim of one of the surviving occupants, $13,091 on the claim of the other surviving occupant, and $175,000 on the claim of the occupant who died. Also included in the judgment were Great West's out-of-pocket expenses in resolving the claims in the amount of $12,354, for a total judgment of $225,854.60.

assignments of error

Michigan Mutual assigns error to the grant of partial summary judgment finding that Michigan Mutual's coverage was primary and to the district court's finding, after trial, that Great West's coverage was only excess coverage. Michigan Mutual also assigns as error the district court's finding that Great West did not make voluntary payments as well as the district court's refusal to grant its motion for a new trial.

STANDARD OF REVIEW

The meaning of an insurance policy is a question of law, in connection with which an appellate court has an obligation to reach its own conclusions independently of the determination made by the lower court. Auto-Owners Ins. Co. v. Home Pride Cos., 268 Neb. 528, 684 N.W.2d 571 (2004). In construing insurance policy provisions, a court must determine from the clear language of the policy whether the insurer in fact insured against the risk involved. Id. When an appellate court reviews an insurance policy, the court construes the policy as it would any other contract to give effect to the parties' intentions when the contract was made, and when the terms of a contract are clear, they are to be given their plain and ordinary meaning. Id.

ANALYSIS

Because the Michigan Mutual policy is 283 pages and the Great West policy is 67 pages, we concentrate on the determinative coverage provisions of the policies. Neither party disputes that its policy provides liability coverage to Agri Co-op and the driver of the semi, Donald Stone, for the accident of November 4, 2006. Rather, the coverage issue as between the two insurance carriers is which carrier has the primary coverage and which has the excess coverage. We notethat the liability limits of both are $1 million. Thus, there will be no excess to pay because one policy or the other will cover all damages in issue.

Is Michigan Mutual Coverage Primary?

We begin our analysis of this question by setting forth the key portions of the Michigan Mutual policy. It is conceded that this policy provides liability coverage for "hired autos," brief for appellant at 13, which the policy defines as "those 'autos' you lease, hire, rent, or borrow." There is no dispute that Sullwold's semi was borrowed, albeit for unspecified compensation by Agri Co-op, and thus it was a "hired auto" for which there was coverage under the Michigan Mutual policy. To determine the extent of such coverage, we look to the "General Conditions" of the policy under "5. Other Insurance, " which states: "For any covered 'auto' you own, this Coverage Form provides primary insurance. For any covered 'auto' you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance." Great West concedes that it provides "other collectible insurance" on the semi. Because Sullwold's semi was not owned by Agri Co-op, but was borrowed and rented from Sullwold, the semi was a "hired auto." Therefore, the Michigan Mutual policy language quoted above clearly makes the Michigan Mutual coverage for the semi excess coverage.

However, despite the foregoing clear Michigan Mutual policy language, the district court used an analysis premised on the law of bailment garnered from an unreported decision of the Ohio Court of Appeals to conclude on...