Kline V. Farmers Ins. Exchange, No. A-07-325 (Neb. App. 6/10/2008)

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DAVID KLINE AND PATRICIA L. KLINE, APPELLANTS, v. FARMERS INSURANCE EXCHANGE, APPELLEE.

No. A-07-325.

Court of Appeals of Nebraska.

Filed June 10, 2008.

INBODY, Chief Judge, and IRWIN and CARLSON, Judges.

MEMORANDUM OPINION AND JUDGMENT ON APPEAL

INBODY, Chief Judge.

I. INTRODUCTION

David Kline and Patricia L. Kline appeal the decision of the district court for Douglas County finding that certain exclusions in their insurance policy, issued by Farmers Insurance Exchange (Farmers), precludes them from recovering under underinsured motorist coverage for injuries David sustained while driving a company vehicle. Because we find that the district court erred in granting summary judgment in favor of Farmers, we reverse, and remand for further proceedings.

II. STATEMENT OF FACTS

David and Patricia obtained an automobile insurance policy through Farmers providing underinsured benefits of $500,000 per person and $500,000 per accident. The only vehicle listed on this policy was the Klines' family vehicle, a 2001 Ford Windstar van. David was also a sole or majority shareholder in Blade Home Improvement, LLC (Blade), a Nebraska limited liability company. Blade owned a 1985 GMC Suburban which was insured through American Family Insurance Company (American Family) for collision and liability, and included underinsured motorist benefits of $100,000 per person and $300,000 per accident.

David was driving the GMC Suburban on December 29, 2001, when Donald C. Minard turned left in front of David's vehicle, causing a collision resulting in injuries to David. David and his wife, Patricia, filed suit against Minard, also naming American Family and Farmers as defendants, noting that it was expected that the amount of damages would require payment of underinsured motorist benefits under insurance policies issued by American Family and Farmers. The Klines amended their complaint seeking a determination of liability for the underinsured benefits under the insurance policies and payment under those policies.

Minard was dismissed from the case after his insurance company, Workman's Auto Insurance Company, paid its policy limits of $25,000 on his behalf. Before settlement with Minard, both American Family and Farmers were given notice and waived subrogation rights. American Family then paid its maximum per person coverage of $100,000 in underinsured benefits and was dismissed from the case. Farmers, the sole remaining defendant following these dismissals, filed a motion for summary judgment which was heard on July 11, 2006.

In support of its motion for summary judgment, Farmers relied upon two exclusions contained in the uninsured motorist/underinsured motorist section of its insurance policy with the Klines. The uninsured motorist/underinsured motorist section of the Farmers policy sets out the following exclusions:

This coverage does not apply to bodily injury sustained by a person:

1. While occupying any vehicle owned by you or a family member for which insurance is not afforded under this policy or through being struck by that vehicle.

. . . .

4. If the injured person was occupying a vehicle you do not own which is insured for this coverage under another policy.

Farmers argued that exclusion 1 applied if David owned the Suburban and that exclusion 4 applied if Blade owned the Suburban. The Klines argued that exclusion 1 did not apply because Blade owned the Suburban. In support of their argument, the Klines offered the American Family insurance policy listing Blade as the owner of the Suburban into evidence. Further, they also offered into evidence David's deposition testimony that Blade owned the Suburban. Both the American Family insurance policy and David's deposition were received into evidence at the summary judgment hearing.

Regarding exclusion 4, the Klines argued that the "this coverage" language was ambiguous. They claimed the language could refer to both the type of coverage and the amount of coverage and should be construed against Farmers, since Farmers drafted the insurance policy. The Klines also argued that if the district court did not find the language ambiguous and that the language referred only to the type of coverage, exclusion 4 violated public policy because it allowed Farmers to deny underinsured benefits whenever underinsured coverage was available in a lesser amount under another policy, preventing an insured from receiving full indemnification to the extent of the highest policy limit as permitted by Nebraska's stacking statute codified at Neb. Rev. Stat. § 44-6411 (Reissue 2004).

The district court rejected the Klines' arguments and found that, based on the evidence submitted by the parties, the Farmers policy excluded coverage whether David owned the Suburban or not. The court further found, as a matter of law, that the "this coverage" language contained in exclusion 4 was not ambiguous and referred only to the type of coverage, not the amount of coverage. The Klines have timely appealed.

III. ASSIGNMENTS OF ERROR

On appeal, the Klines contend that the district court erred in granting summary judgment in favor of Farmers based upon the court's determination that either (1) policy exclusion 1 applies or (2) policy exclusion 4 applies. The Klines claim that the district court erred in finding that policy exclusion 4 applied for two reasons: (a) The court erred in finding that the "this coverage" language in exclusion 4 was not ambiguous, and (b) in the alternative, the court erred in failing to find that exclusion 4 violates public policy.

IV. STANDARD OF REVIEW

Summary judgment is proper when the pleadings and evidence admitted at the hearing disclose no genuine issue regarding any material fact or the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law. Wolski v. Wandel, 275 Neb. 266, 746 N.W.2d 143 (2008); Erickson v. U-Haul Internat., 274 Neb. 236, 738 N.W.2d 453 (2007). In reviewing a summary judgment, an appellate court views the evidence in the light most favorable to the party against whom the judgment is granted and gives such party the benefit of all reasonable inferences deducible from the evidence. Wolski, supra; Erickson, supra.

V. ANALYSIS

In order to determine whether the district court properly granted summary judgment in favor of Farmers, we must determine the applicability of the language of the exclusions contained in the insurance policy between Farmers and the Klines.

An insurance policy is a contract between an insurance company and an insured, and as such, the insurance company has the right to limit its liability by including limitations in the policy definitions. Jones v. Shelter Mut. Ins. Cos., 274 Neb. 186, 738 N.W.2d 840 (2007); Continental Western Ins. Co. v. Conn, 262 Neb. 147, 629 N.W.2d 494 (2001).

1. IS POLICY EXCLUSION 1 APPLICABLE?

The Klines contend that policy exclusion 1 does not apply because Blade, not David, owned the Suburban. Exclusion 1, the "owned-but-not-insured-vehicle" exclusion, provides: "This coverage does not apply to bodily injury sustained by a person: 1. While occupying any vehicle owned by you or a family member for which insurance is not afforded under this policy or through being struck by that vehicle."

The American Family insurance policy and David's deposition testimony clearly set forth that Blade owned the Suburban. Farmers presented no evidence that Blade was a sham corporation and admits in its brief that it "has neither presented evidence about ownership nor argued that ownership is established at the present pretrial stage by evidence in the record." Brief for appellee at 11. Thus, viewing the facts in the light most favorable to the Klines, the only conclusion that can be reached from the evidence presented in support of Farmers' motion for summary judgment is that Blade owns the Suburban. Since Blade, not the Klines, owns the Suburban, exclusion 1 of the Farmers policy does not apply.

2. IS POLICY EXCLUSION 4 APPLICABLE?

The Klines also contend that policy exclusion 4 does not apply. The Klines claim that the district court erred in finding that policy exclusion 4 applied for two reasons: (a) The court erred in finding that the "this coverage" language in the contract exclusion is not ambiguous, and (b) in the alternative, the court erred in failing to find that exclusion 4 violates public policy. Exclusion 4, the "not-owned-but-insured vehicle" exclusion, provides: "This coverage does not apply to bodily injury sustained by a person . . . 4. If the injured person was occupying a vehicle you do not own which is insured for this coverage under another policy."

(a) Is "This Coverage" Language Contained in Exclusion 4 Ambiguous?

The Klines argue that exclusion 4 should not apply because the "this coverage" language contained therein is ambiguous, in that it could refer to the amount or type of coverage.

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). Where the terms of a contract are clear, they are to be accorded their plain and ordinary meaning. Poulton v. State Farm Fire & Cas. Cos., 267 Neb. 569, 675 N.W.2d 665 (2004). The language of an insurance policy should be read to avoid ambiguities, if possible, and the language should not be tortured to create them. Id. A contract, such as an insurance policy, is ambiguous when a word, phrase, or provision in the contract has, or is susceptible of, at least two reasonable but conflicting interpretations or meanings. Id. However, the fact that parties to a document have opposing interpretations of the document does not necessarily compel the conclusion that the document is ambiguous. Guerrier v. Mid-Century Ins. Co., 266 Neb. 150, 663 N.W.2d 131 (2003).

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