United Fire & Casualty Co. v. New Hampshire Insurance

684 F. Supp. 1030 (1988)

UNITED FIRE AND CASUALTY COMPANY, Plaintiff,
v.
NEW HAMPSHIRE INSURANCE COMPANY, Defendant.

No. 87-0521-CV-W.

United States District Court, W.D. Missouri, W.D.

May 13, 1988.

Gardiner B. Davis, David A. Sosinski, David V. Kenner, Spencer, Fane, Britt & Browne, Kansas City, Mo., for plaintiff.

John L. Hayob, Michael D. Matteuzzi, Niewald, Waldeck, Norris & Brown, Kansas City, Mo., for defendant.

MEMORANDUM AND ORDERS

JOHN W. OLIVER, Senior District Judge.

United Fire and Casualty Company (UFCC) has filed the above-styled action seeking a declaratory judgment against New Hampshire Insurance Company (NHIC). UFCC's complaint seeks a declaration that NHIC's insurance policy provided liability coverage for the personal injuries resulting from an automobile accident involving an auto owned by NHIC's insured, Royal Chevrolet, but operated at the time of the accident by an employee of UFCC's insured, J & K Clean-Up Company (J & K). In addition, UFCC is seeking indemnification from NHIC for the cost of defending two suits filed as the result of the above-noted accident and the cost of the settlements of those two suits.

The parties have filed cross-motions for summary judgment along with a joint stipulation of facts. The stipulation of the parties is attached hereto as Appendix A and incorporated by this reference as our findings of fact.

The parties have also filed suggestions in support of their respective motions for summary judgment. For the reasons we now state, we find and conclude that summary judgment in favor of defendant NHIC should be granted.

I

A.

NHIC contends that the "activity in question — the delivery by an employee of J & K Clean-Up of an automobile owned by Royal Chevrolet following the `detailing' of that vehicle at J & K's facility ... is expressly excluded by the plain wording of IV.D.1.b(2) of the NHIC insurance policy." Defendant's Brief at 1. We agree.

This Court's construction of the policy at issue is governed by the general rules relating to the construction of insurance policies in Missouri. Under Missouri law plain and unambiguous language must be given its plain meaning. See, e.g., Jordan v. United Equitable Life Insurance, 486 S.W.2d 664, 666-67 (Mo.App.1972). Missouri law also provides:

Exceptions to liability are to be construed to give the insured the protection which he reasonably has a right to expect. * * * These general rules do not, however, authorize a perversion of language or the exercise by the court of inventive powers for the purpose of creating an ambiguity. Our function is to give force and effect to the contract as it is written, * * * and the contract should receive reasonable interpretations in order to accomplish the intention of the parties.

Id.; see also McRaven v. F-Stop Photo Labs, Inc., 660 S.W.2d 459, 461-62 (Mo. App.1983).

The specific exclusionary clause which NHIC relies provides in pertinent part:

b. Anyone else is an insured while using with your permission a covered auto except:

. . . . .

(2) Someone using a covered auto while he or she is working in a business of selling, servicing, repairing or parking or storing autos unless the business is your garage operations.

IV.D.1.b(2). We find and conclude that this exclusionary clause unequivocally excludes coverage under the circumstances of this case.

The stipulated facts establish that at the time of the above-noted automobile accident, J & K Clean-Up was in the business of performing detail work on automobiles, i.e., interior and exterior washing and polishing on motor vehicles. Stip. ¶ 2. At the request of Royal Chevrolet, J & K periodically performed detail work on used cars owned by Royal Chevrolet. Stip. ¶ 4. As part of J & K's service agreement with Royal Chevrolet, J & K's employees were responsible for picking up automobiles which needed detail work at Royal Chevrolet's Harrisonville, Missouri dealership and returning the automobiles to Royal's dealership upon completion of the detailing work at J & K's Kansas City, Missouri shop. Id. J & K performed such pick up and delivery service each time it performed detailing work on Royal Chevrolet's automobiles. Id.

The stipulation of facts further establishes that an employee of J & K, after completion of a detailing job at the J & K shop, was returning an automobile owned by Royal Chevrolet to its Harrisonville dealership when the car struck the rear of a vehicle. Stip. ¶ 5.

In light of the above-stipulated facts, we find and conclude that Section IV.D.1.b.(2) unequivocally excludes coverage of the automobile in question. For the J & K employee who was delivering Royal Chevrolet's automobile at the time of the accident was clearly performing a service in furtherance of J & K's "business" of "servicing" automobiles.

B.

Plaintiff contends, however, that when J & K's employee was returning Royal Chevrolet's vehicle after completion of the detailing work, he was engaged in Royal Chevrolet's "garage operations" within the meaning of the NHIC policy.^[1] (Emphasis added). Plaintiff therefore contends that the exclusion embodied in Section IV.D. 1.b(2) is not applicable. Plaintiff's Brief at 5. Plaintiff's contention is untenable.

The facts of this case, specifically those set forth in part A of our opinion, establish that, contrary to plaintiff's contention, J & K's delivery of Royal Chevrolet's automobiles to Royal's Harrisonville dealership was an activity necessary and incidental to J & K's detailing business. See Weston v. Great Central Insurance Company, 514 S.W.2d 17, 22-24. (Mo.App.1974). ("Both by custom and agreement, the delivery of the car, following repairs and service was necessary and incidental to the operations of the station"). Applying the clear and unambiguous language of Section IV.D. 1.b(2), we find and conclude that NHIC's policy does not extend coverage to the activity resulting in the car accident at issue.

Our construction and application of Section IV.D.1.b(2) to the circumstances underlying this case is consistent with the decisions by Missouri and other State courts which involved automobile policies excluding coverage of an automobile while being used by any person engaged in the business of repairing or servicing motor vehicles. See, e.g., Weston v. Great Central Insurance Company, 514 S.W.2d 17 (Mo. App.1974); Humble Oil & Refining Company v. Lumberman's Mutual Casualty Co., 490 S.W.2d 640 (Tex.Civ.App.1973); 6C J. Appleman, Insurance Law and Practice § 4372 (1979 & Supp.1987). Those courts have uniformly applied the above-noted exclusion to accidents occurring while an automobile is being picked up or delivered by an automobile dealer or service station for purposes of repair or service.^[2]E.g., Weston, 514 S.W.2d at 24. Humble, 490 S.W.2d at 642. For those courts have found that such services are an integral and necessary part of the service station business. Weston, 514 S.W.2d at 24.

In so holding, the above-noted courts have emphasized that their application of the standard exclusion noted above to delivery of an automobile back to the bailor is consistent "with the rule in most states ... that the responsibility for the operation of a car in the course of its repair, extending to delivery, falls upon the bailee." Id. at 22.^[3]

In summary, we find that J & K's delivery of Royal's automobiles to Royal's Harrisonville dealership constitutes an integral and necessary part of J & K's detailing business. We therefore find and conclude that Section IV.D.1.b(2) of NHIC's policy unequivocally excludes coverage under the circumstances of this case.

Accordingly, it is

ORDERED (1) that plaintiff UFCC's motion for summary judgment should be and the same is hereby denied. It is further

ORDERED (2) that defendant NHIC's motion for summary judgment should be and the same is hereby granted. It is further

ORDERED (3) that the Clerk of the Court shall enter final judgment in favor of defendant and against plaintiff in accordance with Rule 58 of the Federal Rules of Civil Procedure.

APPENDIX A

STIPULATION OF FACTS

COME NOW plaintiff United Fire & Casualty Company (hereinafter "UFCC") and defendant New Hampshire Insurance Company (hereinafter "NHIC"), by and through their undersigned attorneys, and stipulate and agree as follows:

1. Royal Ventures, Inc. d/b/a Royal Chevrolet-Oldsmobile (hereinafter "Royal Chevrolet") is an automobile dealership located in Harrisonville, Cass County, Missouri.

2. Joe Jackson, d/b/a J & K Clean-up (hereinafter "J & K Clean-Up"), in December, 1985, owned and operated a business in Kansas City, Jackson County, Missouri, which performed "detail work" on automobiles. Detail work involved washing, polishing, cleaning the interior and cleaning the motor of a vehicle.

3. In December, 1985, Robert J. Wheeler was employed by J & K Clean-Up. Robert Wheeler's job duties included performing "detail work" and picking up and delivering cars before and after the "detail work" had been performed.

4. At the request of Royal Chevrolet, J & K Clean-Up periodically performed detail work on used cars owned by Royal Chevrolet. When Royal Chevrolet wanted a used car detailed, an employee of Royal Chevrolet would call an employee of J & K Clean-Up and inform such employee that Royal Chevrolet had a car that needed "detail work." An employee of J & K Clean-Up would then drive to Royal Chevrolet, pick up the car and return it to J & K Clean-Up where the car would be detailed. After detailing, an employee of J & K Clean-Up would return the vehicle to Royal Chevrolet. J & K Clean-Up was paid $60.00 per car for this service.

5. On December 2, 1985, Robert Wheeler was involved in an accident while working for J & K Clean-Up as he was returning a 1978 Chevrolet Caprice, which was owned by Royal Chevrolet, from J & K Clean-Up's facility in Kansas City, Missouri to Royal Chevrolet in Harrisonville, Missouri. More specifically, the accident occurred when Robert Wheeler negligently allowed the vehicle he was driving to strike the rear of a vehicle in which Linda Kelsay and Anne Grasher were passengers.

6. As a result of this accident, two lawsuits were filed, Grasher v. Wheeler, No. CV186-160CC, and Kelsay v. Wheeler, No. CV186-161CC, in the Circuit Court of Cass County, Missouri. Both lawsuits named Robert Wheeler, J & K Clean-Up and Royal Chevrolet as defendants, however, prior to disposition, Royal Chevrolet was dismissed by plaintiffs from both lawsuits. Prior to trial, both suits were settled for a total of $11,000.00. UFCC paid $7,102.03 in its defense of the two lawsuits.

7. At the time of the accident, UFCC provided liability insurance coverage to J & K Clean-Up pursuant to policy number GP 60-013 894. A true copy of this policy is attached hereto and incorporated herein by reference as Exhibit 1 [deleted for publication purposes].

8. At the time of the accident, NHIC provided liability insurance coverage to Royal Chevrolet pursuant to policy number GP XXX-XX-XX. A true copy of this policy is attached hereto and incorporated herein by reference as Exhibit 2 [redacted for purposes of publication].

9. UFCC has demanded that NHIC indemnify it for the amount paid in settlement ($11,000) and in defense of the case ($7,102.03). NHIC, however, has refused to indemnify UFCC and continues to refuse to do so.

EXHIBIT 2

YOUR GARAGE POLICY-QUICK REFERENCE
Beginning
On Page
DECLARATIONS AND SUPPLEMENTARY SCHEDULES—
Garage Policy
PART I—WORDS AND PHRASES WITH SPECIAL MEANING         1
PART II—WHICH AUTOS ARE COVERED AUTOS                 1
PART III—WHERE AND WHEN THIS POLICY COVERS            1
PART IV—LIABILITY INSURANCE                           1
A.   We Will Pay
B.   We Will Also Pay
C.   We Will Not Cover—Exclusions
D.   Who Is An Insured
E.   Our Limit Of Liability
F.   Out Of State Extensions Of Coverage
PART V—GARAGEKEEPERS INSURANCE                        3
A.   We Will Pay
B.   We Will Also Pay
C.   We Will Not Cover—Exclusions
D.   Who Is An Insured
E.   Our Limit Of Liability
PART VI—PHYSICAL DAMAGE INSURANCE                     4
A.   We Will Pay
B.   We Will Also Pay (Not Applicable to Dealers)
C.   We Will Not Cover—Exclusions
D.   We Will Also Not Cover—Additional Exclusions
(Applicable to Dealers)
E.   How We Will Pay—The Most We Will Pay
F.   Glass Breakage—Hitting A Bird Or Animal—
Falling Objects Or Missiles
PART VII—CONDITIONS                                   5
A.   Your Duties After Accident Or Loss—Filing A
Claim (includes procedures you should follow
in notifying us of any accident or loss)
B.   Other Insurance
C.   Our Right To Recover From Others
D.   Cancelling This Policy During The Policy Period
(includes procedures by which this policy
may be cancelled by you or us)
E.   Legal Action Against Us
F.   Inspection
G.   Changes
H.   Transfer Of Your Interest In This Policy
I.   No Benefit To Bailee—Physical Damage
Insurance Only
J.   Bankruptcy
K.   Appraisal For Physical Damage Losses
L.   Two Or More Policies issued By Us
IMPORTANT: This Quick Reference is not part of the Garage Policy and does not provide coverage. Refer to the Garage Policy itself
for the actual contractual provisions.
PLEASE READ THE GARAGE POLICY CAREFULLY.
Includes copyrighted material of Insurance Services Office, with its permission, Copyright, Insurance Services Office, 1977, 1979.
In return for the payment of the premium and subject to all the terms of this policy, we agree with you as follows:
-------------------------------------------------------------------------------------------------------------------
PART I — WORDS AND PHRASES WITH SPECIAL MEANING — READ THEM CAREFULLY.
-------------------------------------------------------------------------------------------------------------------
The following words and phrases have special meaning
throughout this policy and appear in boldface type
when used:
A. "You" and "your" mean the person or organization
shown as the named insured in ITEM ONE of the
declarations.
B. "We", "us" and "our" mean the company providing
this insurance.
C. "Accident" includes continuous or repeated exposure
to the same conditions resulting in bodily
injury or property damage the insured neither
expected nor intended.
D. "Auto" means a land motor vehicle, trailer or semitrailer.
E. "Bodily injury" means bodily injury, sickness or
disease including death resulting from any of
these.
F. "Garage operations" means the ownership, maintenance
or use of locations for garage business
and that portion of the roads or other accesses
that adjoin these locations. Garage operations includes
the ownership, maintenance or use of the
autos indicated in PART II as covered autos.
Garage operations also include all operations
necessary or incidental to a garage business.
G. "Insured" means any person or organization qualifying
as an insured in the WHO IS INSURED section
of the applicable insurance. Except with respect
to our limit of liability, the insurance afforded
applies separately to each insured who is seeking
coverage or against whom a claim is made or suit
is brought.
H. "Loss" means direct and accidental loss or
damage.
I. "Products" means the goods or products you made
or sold in a garage business.
J. "Property damage" means the damage to or loss of
use of tangible property.
K. "Trailer" includes semitrailer.
L. "Work you performed" includes work that someone
performed for you.

-------------------------------------------------------------------------------------------------------------------
PART II — WHICH AUTOS ARE COVERED AUTOS.
-------------------------------------------------------------------------------------------------------------------
A. ITEM TWO of the declarations shows the autos
which are covered autos for each of your coverages.
The numerical symbols explained in ITEM
THREE of the declarations describe which autos
are covered autos. The symbols entered next to a
coverage designate the only autos that are covered
autos.
B. OWNED AUTOS YOU ACQUIRE AFTER THE POLICY
BEGINS.
1. If symbols "21", "22", "23", "24", "25" or
"26" are entered next to a coverage in ITEM
TWO, then you already have coverage for autos
of the type described until the policy ends.
2. But, if symbol "27" is entered next to a coverage
in ITEM TWO, an auto you acquire will be
a covered auto for that coverage only if:
a. We already insure all autos that you own
for that coverage or it replaces an auto you
previously owned that had that coverage;
and
b. You tell us within 30 days after you acquire
it that you want us to insure it for that
coverage.
C. CERTAIN TRAILERS.
If the policy provides liability insurance, trailers
with a load capacity of 2,000 pounds or less are
covered autos for liability insurance.
-------------------------------------------------------------------------------------------------------------------
PART III — WHERE AND WHEN THIS POLICY COVERS.
-------------------------------------------------------------------------------------------------------------------
We cover bodily injury, property damage or losses that
occur during the policy period:
A. In the United States of America, its territories or
possessions, Puerto Rico or Canada or while the
covered auto is being transported between any of
these places.
B. Anywhere in the world if the bodily injury or
property damage is caused by one of your products
which is sold for use in the United States of
America, its territories or possessions, Puerto Rico
or Canada. The original suit for damages resulting
from such bodily injury or property damage must
be brought in one of these places.
-------------------------------------------------------------------------------------------------------------------
PART IV — LIABILITY INSURANCE.
-------------------------------------------------------------------------------------------------------------------
A. WE WILL PAY.
1. We will pay all sums the insured legally must
pay as damages because of bodily injury or
property damage to which this insurance applies
caused by an accident and resulting from
garage operations.
2. We have the right and the duty to defend any
suit asking for these damages. However, we
have no duty to defend suits for bodily injury
or property damage not covered by this policy.
Page 1
We may investigate and serve any claim or
suit as we consider appropriate. Our payment
of the LIABILITY INSURANCE limit ends our
duty to defend or settle.
B. WE WILL ALSO PAY.
In addition to our limit of liability we will pay for
the insured:
1. Up to $250 for cost of bail bonds (including
bonds for related traffic law violations) required
because of an accident we cover. We
do not have to furnish these bonds.
2. Premiums on appeal bonds in any suit we
defend.
3. Premiums on bonds to release attachments in
a suit we defend but only for bonds up to our
limit of liability.
4. All costs taxed against the insured in a suit we
defend.
5. All interest accruing after the entry of the
judgment in a suit we defend. Our duty to pay
interest ends when we pay or tender our limit
of liability.
6. Up to fifty dollars per day for loss of earnings
(but not other income) because of attendance
at hearings or trials at our request.
7. Other reasonable expenses incurred at our
request.
C. WE WILL NOT COVER — EXCLUSIONS.
This insurance does not apply to:
1. Liability assumed under any contract or agreement
except under a lease of a premises, an
easement, sidetrack agreement or an elevator
maintenance agreement.
2. Any obligation for which the insured or his or
her insurer may be held liable under any
workers' compensation or disability benefits
law or under any similar law.
3. Any obligation of the insured to indemnify
another for damages resulting from bodily
injury to the insured's employee.
4. Bodily injury to any employee of the insured
arising out of and in the course of his or her
employment by the insured. However, this
exclusion does not apply to bodily injury to
domestic employees not entitled to workers'
compensation benefits.
5. Bodily injury to any follow employee of the
insured arising out of and in the course of his
or her employment.
6. Property damage to property owned or held
for sale or being transported by the insured
or in the insured's care, custody or control.
7. Any covered auto while leased or rented to
others. This exclusion does not apply to a
covered auto you rent to one of your customers
while his or her auto is left with you for service
or repair.
8. Bodily injury or property damage caused by
the dumping, discharge or escape of irritants,
pollutants or contaminants. This exclusion
does not apply if the discharge is sudden and
accidental.
9. Covered auto while used in any professional
or organized racing or demolition contest or
stunting activity. This insurance also does not
apply while the auto is being prepared for such
a contest or activity.
10. Any watercraft or aircraft.
11. Property damage to any of your products or any
part of your products if caused by a defect
existing at the time it was sold or transferred
to another.

12. Property damage to work you performed if the
property damage results from any part of the
work itself or from the parts, materials or
equipment used in connection with the work.
13. Loss of use of other property not physically
damaged if caused by:
a. Your delay or failure in performing any
agreement or contract.
b. The failure of your products or work you
performed to meet the quality warranted
or the level of performance represented.
However, this exclusion, 13b, does not
apply if the loss of use was caused by
sudden and accidental damage to or destruction
of your products or work you
performed after they have been put to use
by someone other than the insured.
14. Damages claimed because of the recall of
your products or work you performed or other
property of which they form a part due to a
known or suspected defect or deficiency they
contain.
D. WHO IS AN INSURED.
1. For Covered Autos.
a. You are an insured for any covered auto.
b. Anyone else is an insured while using with
your permission a covered auto except:
(1) The owner of a covered auto you hire
or borrow from one of your employees
or a member of his or her household.
(2) Someone using a covered auto while
he or she is working in a business of
selling, servicing, repairing or parking
or storing autos unless the business is
your garage operations.
(3) Your customers, if your business is
shown in ITEM ONE of the declarations
as an auto dealership. However, if a
customer of yours:
(a) Has no other available insurance
(whether primary, excess or contingent),
he or she is an insured
but only up to the compulsory or
financial responsibility law limits
where the covered auto is principally
garaged.
(b) Has other available Insurance
(whether primary, excess or contingent)
less than the compulsory or
financial responsibility law limits
where the covered auto is principally
Page 2
garaged he or she is an
insured only for the amount by
which the compulsory or financial
responsibility law limits exceed the
limits of his or her other insurance.
c. Anyone liable for the conduct of an insured
described above is an insured but only to
the extent of that liability. However, the
owner or anyone else from whom you hire
or borrow a covered auto is an insured only
if that auto is a trailer connected to a
covered auto you own.
2. For Garage Operations Other Than Covered
Autos.
a. You are an insured.
b. Your employees, directors or shareholders
are insureds but only while acting within
the scope of their duties.
E. OUR LIMIT OF LIABILITY.
1. Regardless of the number of covered autos,
insureds, claims made or vehicles involved in
the accident, the most we will pay for all damages
resulting from any one accident is the
limit of LIABILITY INSURANCE shown in the
declaration. However, we will deduct $100
from the damages in any accident resulting
from property damage to an auto as a result of
work you performed.
2. All bodily injury and property damage resulting
from continuous or repeated exposure to
substantially the same conditions will be considered
as resulting from one accident.
F. OUT OF STATE EXTENSIONS OF COVERAGE.
1. While a covered auto is away from the state
where it is licensed we will:
a. Increase this policy's liability limits to meet
those specified by a compulsory or financial
responsibility law in the jurisdiction
where the covered auto is being used.
b. Provide the minimum amounts and types
of other coverages, such as "No-fault", required
of out of state vehicles by the jurisdiction
where the covered auto is being
used.
2. We will not pay anyone more than once for the
same elements of loss because of these extensions.

NOTES

[1] Plaintiff relies on the last clause of § IV.D.1.b.(2) which provides that the exclusion set forth in b(2) is not applicable if the business of the permissive user of the auto is "your [Royal Chevrolet's] garage operations."

Garage operations are defined as "all operations necessary or incidental to a garage business." NHIC's Policy § I.F.

[2] Plaintiff cites Dumas v. Hartford Accident and Indemnity Company, 181 So. 2d 841 (La.App. 1965), as authority for its contention that delivery is not an essential part of the services provided by a service station. Defendant, however, accurately points out that the "Dumas decision has been criticized by a number of courts" and that "most of the court's opinion in Weston v. Great Central Insurance Co., 514 S.W.2d 17 (Mo. App.1974), [cites] ... authority which rejects the Dumas decision." Reply Brief at 4. We therefore find plaintiff's reliance on Dumas untenable.

[3] Although plaintiff cites a plethora of cases in its suggestions in support, these cases are not directly on point and fail to support its contention that the detailing activities of J & K, including delivery, constitute the garage operations of Royal Chevrolet within the meaning of NHIC's policy.