Progressive Casualty Insurance v. Owen , 519 F.3d 1035 ( 2008 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PROGRESSIVE CASUALTY INSURANCE 
COMPANY, No. 06-35677
Plaintiff-Appellant,
v.  D.C. No.
CV 05-16-BU-RWA
ARLENE OWEN, OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the District of Montana
Richard W. Anderson, Magistrate Judge, Presiding
Argued and Submitted
December 6, 2007—Seattle, Washington
Filed March 26, 2008
Before: M. Margaret McKeown and Richard R. Clifton,
Circuit Judges, and William W Schwarzer,* District Judge.
Opinion by Judge Schwarzer
*The Honorable William W Schwarzer, Senior United States District
Judge for the Northern District of California, sitting by designation.
3039
PROGRESSIVE CASUALTY INS. v. OWEN 3041
COUNSEL
Robert J. Phillips and Amy O. Duerk, Phillips & Bohyer,
P.C., Missoula, Montana, for the plaintiff-appellant.
3042 PROGRESSIVE CASUALTY INS. v. OWEN
Robert G. McCarthy, McCarthy Law Office, P.C., Butte,
Montana, for the defendant-appellee.
OPINION
SCHWARZER, District Judge:
Progressive Casualty Insurance Company (“Progressive”)
appeals the district court’s summary judgment in favor of
Arlene Owen (“Arlene”) and its denial of summary judgment
in favor of Progressive. Progressive argues that the district
court improperly rewrote an insurance policy issued to Owen
Trucking to include Arlene as a named insured. Progressive
also argues that the district court erred in denying Progres-
sive’s summary judgment motion because Arlene was not
occupying an insured auto at the time of her accident. We
agree, and we therefore reverse the judgment of the district
court.
FACTS AND PROCEDURAL HISTORY
Arlene is the former vice-president, secretary, and director
of Owen Trucking, a corporation whose sole shareholders
were Arlene and her ex-husband, Curtis Owen (“Curtis”).
Owen Trucking was in the business of hauling talc from talc
mines. Arlene worked at Owen Trucking for two to four hours
per week doing office work. Progressive issued a commercial
auto insurance policy to Owen Trucking for twelve of its
vehicles. The declarations pages, which are expressly made
part of the policy, listed the named insured as “BENNETT
OWENTRUCKING I.” The declarations also listed ten driv-
ers, not including Arlene. Arlene’s name does not appear on
the declarations pages or anywhere else in the policy. The
policy was silent regarding coverage for officers, directors,
owners, or employees.
PROGRESSIVE CASUALTY INS. v. OWEN 3043
On the day of the accident that gave rise to this case,
Arlene was assisting her friend Craig Cornell (“Cornell”) in
loading and tying down hay bales on a semi-truck and trailer
owned by Cornell. Cornell was not an employee of Owen
Trucking and his truck was not insured under Owen Truck-
ing’s policy. Arlene had driven the truck, with Cornell as pas-
senger, to the loading site. At the site, while Arlene was
standing approximately 15 feet from the truck, the loaded hay
bales shifted and a hay bale fell on her, causing serious, dis-
abling injuries. Arlene recovered $862,000 from the insurer of
Cornell’s truck. She also received $100,000 under the
underinsured motorist coverage of her personal auto insurance
policy. She then made a claim on Progressive for underin-
sured motorist and medical benefits payments under Owen
Trucking’s policy.
Progressive filed an action in the U.S. District Court for the
District of Montana seeking a declaratory judgment that
Arlene was not covered under Owen Trucking’s policy. The
parties filed cross-motions for summary judgment. The dis-
trict court granted Arlene’s motion and denied Progressive’s.
The court held that it was “impossible to discern” who was
covered under the underinsured motorist and medical benefits
provisions. The court further held that this ambiguity created
illusory coverage in violation of public policy because a cor-
poration cannot suffer bodily injuries and incur medical bills.
The court concluded that it had “no other choice” but to
rewrite the policy to include Arlene as a named insured.
Because the court held that Arlene was a named insured, it did
not reach the question whether Arlene was occupying a cov-
ered auto under Owen Trucking’s policy. Progressive filed a
timely notice of appeal.
DISCUSSION
I. Standard of Review
We review the district court’s grant of summary judgment
de novo. Alaska Right to Life Comm. v. Miles, 441 F.3d 773,
3044 PROGRESSIVE CASUALTY INS. v. OWEN
780 (9th Cir. 2006). “Viewing the evidence in the light most
favorable to the nonmoving party, [the Court] must determine
whether there are any genuine issues of material fact and
whether the district court properly applied the relevant sub-
stantive law.” Id. The law of Montana applies in this diversity
action. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
[1] Interpretation of an insurance policy is a question of
law. Miller v. Title Ins. Co. of Minn., 987 P.2d 1151, 1154
(Mont. 1999). “In interpreting insurance contracts, the words
of the policy are to be understood in their usual meaning;
common sense controls.” Dakota Fire Ins. Co. v. Oie, 968
P.2d 1126, 1131 (Mont. 1998). A policy is ambiguous “only
when the contract taken as a whole in its wording and phrase-
ology is reasonably subject to two different interpretations.”
Canal Ins. Co. v. Bunday, 813 P.2d 974, 977 (Mont. 1991).
“If the language of a contract is unambiguous and subject to
only one meaning, there is no basis for the interpretation of
the policy coverage under the guise of ambiguity.” Id.
II. The Policy Language
The underinsured motorist provision (UIM) of the policy
provides:
Subject to the Limits of Liability, if you pay the pre-
mium for Underinsured Motorist Coverage, we will
pay for damages, other than punitive or exemplary
damages, which an insured is legally entitled to
recover from the owner or operator of an underin-
sured auto because of bodily injury:
1. Sustained by an insured.
2. Caused by an accident.
3. Arising out of the ownership, maintenance, or
use of an underinsured auto.
(Bolding in original.)
PROGRESSIVE CASUALTY INS. v. OWEN 3045
The policy defines an “insured” for purposes of the UIM
coverage as follows:
a. If the named insured is a person:
i. You or a relative.
ii. Any other person occupying your insured
auto.
iii. Any person who is entitled to recover dam-
ages covered by this endorsement because
of bodily injury sustained by a person in
i. or ii. above.
b. If the named insured is a corporation, partner-
ship, organization or any other entity that is not
a living person:
i. Any person occupying your insured auto.
ii. Any person who is entitled to recover dam-
ages covered by this endorsement because
of bodily injury sustained by a person
described in i. above.
The declarations page of the policy identifies “BENNETT
OWENTRUCKING I” as the named insured. Accordingly,
only section (b) under the definition of “insured” is relevant
under the policy. The policy defines “you” as “the named
insured.” It defines “your insured auto” as “any auto
described in the Declarations and any auto you replace it
with.” “[I]nsured auto” is further described as
c. Any auto not owned by you while you are tem-
porarily driving it as a substitute for any other
auto described in this definition because of its
withdrawal from normal use due to breakdown,
repair, servicing, loss, or destruction.
The medical benefits section of the policy is substantially
similar. It provides coverage for medical and funeral expenses
3046 PROGRESSIVE CASUALTY INS. v. OWEN
due to bodily injury sustained by an “insured” and caused by
an accident arising out of the ownership, maintenance and use
of any auto. The medical benefits section provides that if the
named insured is a person, “insured” means the named
insured or a relative while occupying an insured auto. “In-
sured” also includes any other person occupying an insured
auto. As described above, the policy defines “insured auto” as
any auto listed in the declarations and any auto not owned by
the named insured that is being used as a substitute for a cov-
ered auto because of breakdown, repair, servicing, loss, or
destruction.
III. The District Court’s Rationale
The court began its analysis by quoting the insuring agree-
ment (quoted above) providing for the payment of damages
for “bodily injury.” It then observed:
Thus, it would be reasonable to expect that a com-
mercial policy that purports to provide uniquely
human benefits must have intended to extend those
benefits to some person or persons. The question is
who?
Progressive Cas. Ins. Co. v. Owen, 456 F. Supp. 2d 1205,
1208.
The court went on to answer that question:
Where, as here, an exact answer is totally impossible
to discern from the shifting provisions of the policy,
it would be reasonable to expect that the individuals
covered for these benefits would include, at a mini-
mum, the owners, officers, and directors of the cor-
poration. Certainly no express policy provision
excludes them.
Id.
PROGRESSIVE CASUALTY INS. v. OWEN 3047
The court next focused on the policy definition of “named
insured”, which in the case of a corporate insured, includes
“any person occupying your insured auto.” It then looked to
the clause providing coverage for “any auto not owned by you
while you are temporarily driving it as a substitute.” This def-
inition, the court found, made no sense because “a corporation
cannot drive an auto.” Thus, the court “[could] come to no
conclusion other than to add human named insureds as to
those coverages that by their very nature can only apply to
humans.” Id. at 1210.
IV. Analysis
A.
In focusing its analysis on the substitute vehicle provision,
the district court ignored the more broadly applicable policy
definition of “insured” as “any person occupying your insured
auto.” That provision makes it clear that the policy intends to
provide “uniquely human benefits . . . to some person or per-
sons.” It thus cuts the ground from under the district court’s
ruling that the terms of the policy require the addition of
human named insureds.
[2] In construing policy language, the Montana Supreme
Court “will read the insurance policy as a whole, and will if
possible reconcile its various parts to give each meaning and
effect. . . . Furthermore, in determining the contract’s purpose
and intent, [it] [will] examine the contract as a whole, giving
no special deference to any specific clause.” Farmers Alliance
Mutual Ins. Co. v. Holeman, 961 P.2d 114, 119 (Mont. 1998)
(citations omitted). Here, the district court, while ignoring the
general definition of insured, focused its attention narrowly
on the substitute vehicle provision and the words “while you
are temporarily driving it.” That provision, however, is deriv-
ative from the broad definition of insured, extending coverage
from persons occupying insured vehicles to those in vehicles
used as temporary substitutes. Reasonably interpreted, the
3048 PROGRESSIVE CASUALTY INS. v. OWEN
provision’s intent is to extend the same benefits to persons
occupying a substitute vehicle as to those in owned vehicles.
The result we reach is consistent with the district court’s prior
decision in Hanson v. Employers Mut. Cas. Co., 336 F. Supp.
2d 1070 (D. Mont. 2004), holding that “as long as it is legal
for an insurer to sell an automobile liability policy to a corpo-
ration which is the named insured, it is legal for the insurer
to limit the class of covered individuals to those who are
occupying covered vehicles at the time they are injured.” We
therefore conclude that the provision provides coverage to
“any person” driving a vehicle as a temporary substitute for
a vehicle named in the policy. The district court erred in
reforming the policy to provide coverage to all owners, offi-
cers, and directors of the corporate named insured, regardless
of whether they were occupying an insured auto.
B.
[3] While we thus disagree with the district court’s reading
of the policy, the question remains whether Arlene Owen,
while not a named insured under the policy, was entitled to
recover under the UIM coverage if she was occupying an
insured auto at the time of her accident. It is undisputed that
Arlene was not using an auto owned by Owen Trucking at the
time of the accident. Accordingly, Arlene would be covered
only if the truck she was using was a temporary substitute
vehicle. As defined by the policy, a temporary substitute auto
is any auto not owned by Owen Trucking that is used as a
substitute for an auto listed in the declarations “because of its
withdrawal from normal use due to breakdown, repair, servic-
ing, loss, or destruction.” Thus, Arlene was covered only if
she intended to use an Owen Trucking vehicle but could not
because the vehicle was withdrawn from normal use due to
breakdown, repair, servicing, loss, or destruction. Progressive
was entitled to summary judgment if, viewing the evidence in
the light most favorable to Arlene, there was no genuine issue
of fact regarding whether Arlene was using a substitute vehi-
cle. Miles, 441 F.3d at 780.
PROGRESSIVE CASUALTY INS. v. OWEN 3049
[4] Arlene alleged that on the day of her accident, she did
not use an Owen Trucking vehicle because “more than one of
our vehicles was always broken down, in for repairs, or being
serviced.” Other affiants, such as Arlene’s brother Robert
McNee, also generally alleged that Owen Trucking’s vehicles
were frequently withdrawn from use for repairs. This evi-
dence does not establish, however, that Arlene used Cornell’s
truck because a specific Owen Trucking vehicle that she
intended to use was actually withdrawn from service. At
most, it establishes that she used Cornell’s vehicle because
she assumed that an Owen Trucking vehicle she wanted to use
was unavailable.
[5] Arlene also alleged that she used Cornell’s vehicle “as
a substitute for one of the vehicles owned by [Owen Truck-
ing]” but did not allege that she substituted Cornell’s vehicle
because of the withdrawal from use of an Owen Trucking
vehicle due to breakdown, servicing, repair, loss, or destruc-
tion. Arlene could have substituted Cornell’s vehicle for any
number of reasons not mentioned under the policy. Accord-
ingly, this evidence is also insufficient to satisfy the policy
requirements.
[6] In order to obtain coverage under the substitute auto
provision, Arlene must produce evidence either that she
intended to use a specific vehicle covered under Owen Truck-
ing’s policy but could not because of its unavailability, or that
she would have used one of several or even all of the vehicles
covered under the policy, but could not because all of the
vehicles she would have used were unavailable. There is no
evidence in the record, however, regarding which covered
vehicle or vehicles Arlene would have used but for its
unavailability. Progressive is therefore entitled to summary
judgment because Arlene has presented no evidence that she
was using Cornell’s truck in place of an Owen Trucking vehi-
cle that was withdrawn from use because of breakdown,
repair, servicing, loss, or destruction.
3050 PROGRESSIVE CASUALTY INS. v. OWEN
CONCLUSION
For the reasons stated, the judgment of the district court is
reversed and the case is remanded for further proceedings
consistent with this opinion.
REVERSED AND REMANDED.