American National Property & Casualty Co. v. Sorensen , 362 P.3d 909 ( 2013 )

Opinion

CHRISTIANSEN, Judge:

T1 This case involves a dispute over whether a homeowner's insurance policy excludes coverage for an all-terrain vehicle (ATV) accident that occurred in a residential subdivision,. - American National Property and Casualty Company (American National) appeals the district court's award of summary judgment in favor of the passenger in the ATV accident, Stephen Dane Olsen. We affirm.

BACKGROUND

T2 The ATV accident giving rise to this action occurred in Highland, Utah on November 17, 2006. Karen Simmons had just purchased the ATV on the date of the accident. Simmons's seventeen-year-old son, Corey Sorensen was driving the new ATV with two passengers, one of whom was Olsen, when it tipped over and landed on Olsen, injuring his leg. ‘

T3 Sorensen was driving the ATV near Simmons's residence in a residential subdivision known as "the Highlands." The Highlands is a "planned unit development" and includes a park located to the east of Simmons's property. 'The park is defined in the Highlands homeowners association's covenants, conditions, and restrictions. (CC & Rs) as a "common area." Specifically, the CC & Rs define "common area" as "all the real property and improvements, including without limitation, any recreation facilities, land-seaped areas and private roadways and walkways, which are owned by the Association for the common use and enjoyment of all of the Owners." For purposes of summary judgment only, the parties. agreed that the accident occurred in the Highlands® common area.

T4 At the time of the ATV accident, Simmons's residence was covered by a homeowner's insurance policy issued to her by American National. Simmons's homeowner's policy provided coverage up to the limits of lability for any claim for damages brought against her as an insured because of bodily injuries The policy also covered, medical expenses incurred by others injured "on the insured location" or injured "off the insured location, if the bodily injury ... [was] caused by the activities of any insured." Section II of Simmons's insurance policy also contained the following exelusions:

1. Coverage E-Personal Liability and Coverage F-Medical Payments to Others do not apply to bodily i mgury or property damage ,

[[Image here]]

h. - arising out of the ownership, maintenance, use, loading, or unloading of motor vehicles or all other motorized land conveyances, including any trailers, owned or operated by or rented or «loaned to any insured.

This exclusion does not apply to a motorized land conveyance designed for assisting the handicapped or for the maintenance of an insured location ...:

[[Image here]]

k. arising out of the entrustment by . any insured to any person any. of the following:

[[Image here]]

(8) a motor vehicle or any other motorized land conveyance,

L- arising out of statutorily imposed vi- , carious parental lability for the actions of a child or minor using:

[[Image here]]

(3) a motor vehlcle or any other motorized land conveyance ...[²]

Additionally, in subsection 8(c) of the insurance policy definitions, “motorwehicle” is defined, in relevant part, as "a motorized golf cart, snowmobile, or other motorized land vehicle owned by any insured and designed for recreational use off public roads, while off an insured location." (Emphasis added.)

15 In 2007, as a result of the injuries he sustained in the ATV accident, Olsen sued Simmons, Sorensen, and American National in a personal injury action separate from the present action, After Olsen filed the personal injury action, Simmons filed a claim against her homeowner's policy with American National,. Following an investigation into the accident, American National denied Simmons's claim for coverage. Then, in May 2008, American National filed the present action against Sorensen and Simmons and filed an amended complaint in March 2009 adding Olsen as a defendant." American National sought a declaratory judgment that it did not have a duty to defend Simmons and Sorensen and that the insurance policy excluded coverage for Olsen's injuries resulting from the ATV accident.

T6 American National and Olsen filed cross-motions for summary judgment. .In its motion for summary judgment, American National asserted that the insurance policy unambiguously excluded coverage pursuant to the motor vehicle. exelusions contained in the policy because an ATV falls within the policy's definition of a motor vehicle and the bodily injury suffered by Olsen resulted from a motor vehicle accident. In his combined cross-motion for summary judgment and opposition memorandum, Olsen argued that the motor vehicle exclusions did not apply to the ATV accident, because the accident occurred on an "insured location." Thus, Olsen argued that the policy's exclusions were not triggered because the ATV did not fall within the policy's definition of a motor vehicle, which only defined an ATV as 'a vehicle "while off an insured location."

T7 The district court denied American National's motion for summary judgment, determining that the injuries suffered by Olsen in the ATV accident were not excluded from coverage.³ The district court concluded that the undisputed material facts

establish that the common area where the accident occurred is an "insured location" under Simmons'[s] homeowner's insurance policy. Even though the vehicle was a motorized land vehicle designed [for] recreational use off public roads, it was operated on an insured location. Coverage is therefore not excluded under the policy.

On (January 27, 2011, the court entered a declaratory judgment denying American National's motion for summary judgment, explaining, in relevant part,

1. The matenal facts pertamlng to the issues raised in the pleadings are undisputed, and based on those facts, the Court concludes that the accident occurred at an "insured location."

2. The insurance policy's exclusions from coverage asserted by the plaintiff do not apply....

[[Image here]]

4, Because the accident occurred at an "insured location," the policy of insurance issued by [American National] to ... Simmons provides coverage for the accident in question, and [American National] has a duty to defend Sorensen and Simmons and .to cover losses sustained by them as a result of the accident in question to the extent of the policy limits.

American National appeals.

SSUE AN D STANDARD OF REVIEW

11 8 Amemcan National argues that the district court erred in denying its motion for summary judgment and in ruling that the insurance policy unambiguously provides cov-erage for the ATV accident. "A grant of summary judgment is proper when there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law." American Nat'l Fire Ins. Co. v. Farmers Ins. Exch., 927 P.2d 186, 188 (Utah 1996) (citing Utah R. Civ. P. 56(c)). With respect to the district court's interpretation of the insurance policy, "[an insurance policy is merely a contract between the insured and the insurer and is construed pursuant to the same rules applied to ordinary contracts." Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272, 1274 (Utah 1998). "The dlstmct court's construction of contract language is glven no particular weight and is reviewed for correctness as a matter of law." Doctors' Co. v. Drezga, 2009 UT 60, 19, 218 P.3d 598.

ANALYSIS

T9 American National's central argument is that the district court erroneously determined that it had a duty to defend Sorensen and Simmons and to provide coverage under the policy. Because the accident occurred on the common area of the Highlands development, rather than on Simmons's property, American National contends that the ATV accident did not occur on an "insured location." And if the accident did not occur on an "insured location," the ATV falls within subsection 8(e)'s definition of "motor vehicle" and Simmons's claim is consequently barred by the motor vehicle exclusions. American National argues, therefore, that the district court erred in ruling that the accident occurred on an "insured location" as defined under the homeowner's policy.

10 In the alternative, American National argues that even if we determine that the common area of Simmons's residential subdivision is an "insured location" under the poli-ey, no coverage exists pursuant to the motor vehicle exclusions because the ATV is also a "motorized land conveyance" within the meaning of the policy. American National contends that although the policy does not define "motorized land conveyance," according to a common-sense definition, an ATV is clearly <a motorized land conveyance. And because the "while off an insured location" language appears only in the definition of a "motor vehicle;" that limitation does not apply to motorized land conveyances. Thus, American National argues that the motor vehicle exclusions apply regardless of whether the accident occurred on or off an insured location.⁴

Resolution of. both arguinents requires our interpretation of the policy language. Although no Utah court has specifically analyzed the policy language at issue, we have the benefit of several longstanding principles of law from which to analyze the pertinent policy language. First, "(Hosur ance policies are generally interpreted according to rules of contract interpretation." Utah Form Bureau Ins, Co. v. C’V’OOk,‘ 1999 UT 47, 15, 980 P.2d 685. As we would for contract language, we "interpret words in insurance policies according to their usually accepted meanings and in light of the insurance policy as a whole" Id. Furthermore, "[plolicy terms are harmonized with the poh— cy as a whole, and all provisions should be given effect if possible." Id.

112 Second, " 'insurance policies should be construed liberally in favor of the insured and their beneficiaries so as to promote and not defeat the purposes of insurance" Fire Ins. Exch. v. Oltmanns, 2012 UT App 280, 1 6, 285 P.8d 802 (quoting United States Fid. & Guar. Co. v. Sandt, 854 P.2d 519, 521-22 (Utah 1998)). "'It follows that ambiguous or uncertain language in an insurance contract that is fairly susceptible to different interpretations should be construed in favor of coverage' and 'provisions that limit or exclude coverage should be strictly construed against the insurer'" Id. (quoting Sandt, 854 P.2d at 522—23), accord LDS Hosp. v. Capitol Life Ins. Co., 765 P.2d 857, 858 (Utah 1988); Browning v. Equitable Life Assurance Soc'y, 94 Utah 570, 80 P.2d 348, 352 (1988). Further, "in strictly construing exclusions, we give them effect only when they use language which clearly and unmistakably communicates to the insured the specific cireumstances under which the expected coverage will not be provided.'" Fire Ins. Exch., 2012 UT App 280, 16, 285 P.3d 802 (quoting Crook, 1999 UT 47 15, 980 -P.2d 685).

113 Additionally, once the insured has established the right of coverage under the insuring clause and lability coverage is triggered, the insurer has the burden to demonstrate that exclusions exist under which it can deny coverage. As explained in Browning,

. When an insured claims a right to recover under the accident provisions of the policy, all he need do is bring himself within the field therein defined.... He then 'has brought himself within the policy, and the . terms thereof have been met. ... When he brings himself within the insuring clause he has made his case ... and any exceptions or conditions which would then deny him relief, take him out of the indemnity provisions, [or] render them inoperative as to him, are matters of defense, and the burden thereof rests upon the insurer.... [Llimitations, exceptions or - conditions "which may relieve the insurer from liability, which may be set forth in the policy outside of the language of the insuring clause, or which may exist outside of the policy entirely, must be made and established by the insurer to escape lability thereunder.

80 P.2d at 850-51. With these principles in mind, we first consider whether the Highlands common area on which the accident occurred was an insured location.

* I. The Common Area Is an Insured Location.

1-14 American National argues that it can deny liability coverage under any of the niotor vehicle exclusions contained in the pol-fey because the accident occurred off an insured location and the ATV therefore qualifies as a motor vehicle, As explained below, * we do not agree with American National's interpretation of the term "insured location."

T15 According to the policy, all three of the motor vehicle exclusions are triggered by the insured's use or entrustment of a "motor vehicle." The applicable definition of "motor vehicle" is found in subsection 8g) of the policy's definitions and includes "a motorized golf cart, snowmobile, or other motorized land vehicle owned by any insured and designed for recreational use off public roads, while off an insured location." - (Emphasis added.) The parties do not dispute that the ATV is a "motorized land vehicle" "owned by an insured" and "designed for recreational use off public roads." Rather, they dispute only whether the ATV accident occurred on or "off an insured location," or in other words, whether the common area where the ATV accident occurred is an msured location.

‘lT16 Relevant to our 1nqu1ry the pohcy defines the term "insured locatlon” 28,

a. the residence premises;

. b. the part of any other premises, other structures, and grounds, used by you as a residence and which is shown in the Declarations, or which is acquired by you during the policy period for your use as a residence;

c. any premises used by you in connection 'with the premises included in [a or b abovel;....

No Utah appellate court has spemflcally addressed whether the common area of a residential subdivision is an "insured location." But courts in several other jurisdictions have considered the question of what constitutes an "insured location," and, we look to their analyses and to the policy's language and structure to guide our determination. See Arndt v. First Interstate Bank of Utah, NA, 1999 UT 91, T17, 991 P.2d 584 (explaining that in the absence of Utah precedent, appellate courts look to Utah statutes and "case law from other jurisdictions for guidance"). Courts in other jurisdictions have adopted several different tests to determine whether a location is used in connection with the residence premises. These tests include the "repeated use," "Cintegral use," "property ownership and legal right to use," "foreseeable use," and "actual use" tests. In Arro-wood Indemmity Co. v. King, 605 F.3d 62 (2d Cir.2010), the Second Circuit certified several questions relevant to interpretation of an insurance policy to the Connectlcut Supreme Court, and in presentmg its questions, surveyed the case law and prov1ded a helpful explanation of some of these tests. See id. at Ti-T7; see also Royal Indem. Co. v. King, 512 F.Supp.2d 117, 126-27 (D.Conn.2007); Arrowood Indem. Co. v. King, 804 Conn. 179, 39 ASd 712, 719-28 (2012). We provide a summary of these tests to illustrate the widely-varied interpretations of similar policy language. | j

117 One test that has been applied to determine if a motor vehicle was located on an "insured location" and any premises "used in connection with" the resident premises is whether the insured repeatedly used the area where the accldent occurred in connection with the residence. Seq, e.g., Allstate Ins. Co. v. Drumheller, 185 Fed.Appx. 152, 160 (8d Cir.2006) (holding that an ATV accident that occurred 800 yards from the residence on a sewer easement that was not the insured's property, was covered under the policy as occurring on an "insured location" because "[the insured's] regular recreational use of the property in question was 'in connection with' his residence"); Farmers New Century Ins. Co. v. Angerson, No. 4:04-CV-2608, 2008 WL 288622, at *14 (M.D.Pa. Jan. 22, 2008) (concluding that an ATV accident that occurred on a path near the insured's residence was covered as oc"curring on an insured location because the insured and his son "made frequent use of the area in which the accident occurred," "repeatedly [riding] the ATV from their property into the adjacent woods and back for recreational and home-improvement purposes"); Nationwide Mut. Ins, Co. v. Pre-vatte, 108 N.C.App. 152, 428 §.E.2d 90, 92 (1992) (holding that an ATV accident that occurred on the part of a trail owned by the insureds' neighbor was an insured location because the insureds, used the trail "in connection with [their] residence" for several years and always started and ended using the trail from their property); State Farm Fire & Cas, Co. v. MacDonald, 850 A2d 707, 710-11 (Pa.Super.Ct.2004) (determining that an ATV accident that occurred on adjacent land not owned by the insured was covered because the insured "repeatedly rode his ATV from his property onto the adjacent field and back" and had therefore "used the adjacent field in connectlon with his residence prenuses”)

18 Another test is Whether the accident occurred in a location that was integral to the insured's use of the residence. Seq, eg., Massachusetts - Prop. - Ins. - Underwriting Ass'n v. Wynn, 60 Mass.App.Ct. 824, 806 N.E.2d 447, 451-52 (2004) (holding that the policy did not provide coverage for an ATV accident that occurred on a beach, not owned by the insured, which was located across a stream and a parking lot, thus rejecting the repeated use test and stating, "the term "insured location' is intended and appropriately. understood to be limited to the residence and. premises integral to its use as a residence"); Tilinois Farmers Ins, Co. v. Coppa, 494 N.W.2d 508, 506 (Minn.Ct.App.1998) (concluding that where the ATV accident occurred in an adjacent hayfield not owned by the insured, " 'insured location' was . not meant to describe adjacent, non-owned land on which an ATV might be used"). A related approach to consider is the foreseeability of the use of the site of the accident, Seq, eg., Uticg Mut. Ins. Co. v. Fontneau, TO Mass. App.Ct. 558, 875 N.E.2d 508, 514 (2007) (analyzing the character of use of a dirt track between two owned properties as well as the distance between the residence and the accident site to conclude that the risk associated with that activity and site was reasonably foreseeable to the insurance company and was, therefore, a covered location and a connected activity).

19 Another common determination in an "insured location" analysis is the ownership or legal right to use the area where the accident occurred.. Courts using this ap- . proach generally conclude that ownership or the legal right to use an area weighs.in favor of determining that the area is an insured location. See, ag, Uguccioni v. United States Fid. & Guar. Co., 408 PaSuper. 511, 597 A2d 149, 150 (1991) (holding that a private street used to access the ingured residence in a private residential development was an insured location for coverage of an ATV accident occurring on the street); Northern See. Ins. Co. 'v. Rossitto, 171 Vt. 580, 762 A.2d 861, 864-65 (2000) (holding that an ATV accident that occurred on the insureds' right-of way easement leading to their insured "camp" was covered because "the term 'insured location encompasse[d] [the insureds'] right-of-way").

T 20 Related to the question of whether the insured has a legal right to the site of the accident, is a determination of whether the site was owned publicly, or privately by someone other than the insured. This issue often arises in conjunction with homeowners assomatmns See, eg., United Servs. Auto., Ass'n v. Parry, 158 Ariz. 88, 761 P.2d 157, 158-60 (App. 1988) {concluding that the insurance policy did not cover a go-cart accident that occurred when a boy landed in a private residential development's water retention basin; 'even though that area was a "common area" of the development, it was not an insured location because it was designed for "run-off" and, as such, was not a "premise" and because it was some distance from the insured's residence); Arrowood Indem. Co. v. King, 304 Conn. 179, 89 A.Bd 712, 719-23 (2012) (holding that the dead-end road where the ATV accident occurred was not an insured location because according to the warranty deed for the insured's homeowners association, the dead-end road was not one of the roads on which the insured had a right to travel, because it was not a private road within the private residential development between the insured's residerice and the pub-lie road); Elliott v. State Farm Fla. Ins. Co., 61 So.8d 502, 505 (Fla.Dist.Ct.App.2011) (concluding that the insurance policy did not cover a golf cart accident that occurred a few blocks from the residence on a private road in a gated community); Shelter Mut. Ins. Co. v. Davis, No. 05-0456, 2006 WL 929239, at *5 (Iowa Ct. App. Apr. 12, 2006) (holding that a road within a homeowners association on which an ATV accident occurred was the "functional equivalent" of a public road). '

121 In determining whether the common. area in the Highlands development is qn‘ "insured location," we are guided by the cases set forth above and agree that an ownership interest in the area on which the accident occurred is determinative here. We are also bound by the directive in Utah law to construe the policy "liberally in favor of the insured and their beneficiaries so as to promote and not defeat the purposes of insurance." - Fire Ins. Exch. v. Oltmanns, 2012 UT App 230, 16, 285 P.3d 802 (citation and internal quotation marks omitted). The policy definition of "insured location" has no contiguity requirement, and therefore, there is no clear language in the policy that excludes the common area from the definition of an insured location simply because it is not contiguous with the residence premises. Also, even though the policy defines "insured location" as "any premises used by [the insured] in connection with" "the residence premises" or "the part of any other premises," this definition is not contingent upon repeated use by the insured and we see no other basis in the policy language to impose such a requirement here, The policy does not further define "premises" apart from residence premises or require that the premises be subject to a particular property right. Instead, the policy provides only that an insured location is "any premises used by [the insured] in connection with" the "residence premises" or "the part of any other premises, other structures, and grounds, used by [the insured] as a residence."

122 Accordingly, the policy language defining "insured location" and "any premises used ... in connection with" the residence premises "is fairly susceptible to different interpretations." See id. (citation and internal quotation marks omitted).. We therefore liberally construe the provisions in favor of the insured. See id. Moreover, because the insured location provision arises in the definition of "motor vehicle," which itself arises in the motor vehicle exelusions from liability coverage, we strictly construe these exclusions against the insurer. See id. ("[PJrovi-sions that limit or exclude coverage should be strictly construed against the insurer," (citation and internal quotation marks omitted)). We give effect to the motor vehicle exclusions, and thus to the motor vehicle definition, only to the extent "they use language which clearly and unmistakably communicates to the insured the specific civeum-stances under which the expected coverage will not be provided." See id. (quoting Utah Farm Bureau Ins. Co. v. Crook, 1999 UT 47, 1 5, 980 P.2d 685).

123 Therefore, after considering the language of the policy in this case, the policy as a whole, the undisputed facts, and the above factors, we interpret "any premises used by [the insured] in connection with" "the residence premises" or "the part of any other premises, other structures, and grounds, used by [the insured] as a residence" in favor of coverage:; Based on the CC & Rs, "Every owner shall have a right and easement of ingress and egress and of enjoyment in, to and over the Common Area which shall be appurtenant to and shall pass with title to every Lot...." Further, although "lot" is limited to a residential lot and specifically excludes the common area, every lot owner is a member of the homeowners association, and that membership "shall be pertinent to and may not be separated from the fee Ownership of such Lot," which means that every lot owner has a right of enjoyment to the common area. - Homeowners within the association therefore have at least some type of ownership interest in and right to use the common area in connection with their residential premises, These factors weigh in favor of the common area being an insured location. To the extent it is a close question, we construe the policy in favor of coverage.

124 We thereforé conclude that the insured in this planned development would have reasonably expected that an ATV accident in the common area would be covered under the policy because based on the CC & Rs, it was a premises used in connection with the residence premises. We recognize that resolution of this issue presents a close question, but given the connection between the residential premises and the common area for a homeowner's use and enjoyment of the property, we determine that the common area is an insured location for purposes of coverage.

IL The Motor. Vehicle Exclusiéns Do Not Exclude Coverage Under, the Cireumstances of this Case.

25 American National alternatively argues that eyen if the court determines that the common area is an insured location, it must still deny coverage for the accident under the motor vehicle exclusions.⁵ American National asserts that the ATV is not only a "motor vehicle" but also a "motorized land conveyance." 'The policy does not separately define motorized land conveyance, but the term is included in the motor vehicle exclusions. Exelusion (1)(h) states that coilrerage is excluded for bodily injury "arising out of the ownership, maintenance, use, loading, or unloading of motor vehicles or all other motorized land conveyances." Exelusions (1)(k) and provide that coverage is excluded for bodily injury "arising out of the entrustment by any insured to any person" of a motor vehicle or motorized land conveyance or "arising out of statutorily imposed viearious parental liability for the actions of-a child or -minor using" "a motor véhicle 'or any other motorized land conveyance."

126 According to American 'National, because an ATV is commonly defined as a motorized land conveyance, it does not fall within subsection 8(c)'s definition of "motor vehicle." Subsection 8(c)'s definition of "motor vehicle" hinges on whether the vehicle is used "while off an insured location." American National contends, therefore, that regardless of whether the common area is an insured location, because the ATV is a motorized land conveyance, it is not subject to the "insured location" limitation of the motor vehicle definition. -

27 As previously noted, "in strictly construing exclusions, we give them effect only when they use language which clearly and unmistakably communicates to the insured the specific cireumstances under which the expected coverage will not be provided." Fire Ins. Exch. v. Oltmanns, 2012 UT App 280, € 6, 285 P.3d 802 (citation and internal quotation marks omitted). An ATV may intuitively be a "motorized land conveyance." However, that term is 'not defined in the policy. Nor does the policy clearly and unmistakably communicate that use of a motorized land conveyance excludes coverage even when operated on an insured location. Due to this ambiguity and the similarity of the terms, the policyholder may believe that a motorized land conveyance is also a motor vehicle, subject to the "motor vehicle" definition providing that "a motorized golf cart, snowmobile, or other motorized. land vehicle owned by any insured and. designed for recreational use off public roads, while off an insured location," and may believe the corollary that a "motorized land vehicle owned by an insured and designed for recreational use off public roads, while [on ] an insured location" is not a motor vehicle. Accordingly, we. construe this "ambiguous or uncertain language ... that is fairly susceptible to different interpretations .:. in favor of coverage." See id. - (citation and internal quotation marks omitted). We therefore conclude that the motor vehicle exclusions do not exclude coverage under the cireamstances of this case.

CONCLUSION

28 Pursuant to our interpretation of the insurance policy, the common area on which the ATV accident ocqurred is an insured location, Therefore, American National has a duty to defend Sorensen and Simmons and to provide coverage to them up to the policy limits for any losses arising from the ATV accident in accordance with the insurance policy. Accordingly, we affirm the district court's denial of American National's inotion for summary judgment.

2 . Because exclusion (1)(h), excluswn (1)(k), and exclusion (1)(/) of Section II all implicate the definition of "motor vehicle," which is critical to this analysis, we refer to the exclusions collectively as the "motor vehicle exclusions."

3 ; The district court's memorandum decision denying American National's motion for summary judgment was silent as to the resolution of Olsen's cross-motion for summary judgment, as was the district court's declaratory judgment. However, in this matter, by denying plaintiff American National's motion as a matter of law, the district court necessarily granted Olsen's cross-motion. >

4 . On summary Judgment Olsen argued that even if the district court ruled that the ATV accident occurred off an insured location, and thus that the ATV was a motor vehicle, the exception to the Section II(1)(h) motor vehicle exclusion-stating that the "exclusion does not apply to a motorized land conveyance designed for assisting the handicapped or for the maintenance of an insured location"-applied because the ATV was used for the maintenance of the insured location, On appeal, American National argues that the district court erred in failing to rule that the undisputed evidence established that Olsen's use of the ATV did not qualify under this exception. In light of our resolution of the insured location issue, we need not reach this issue.

5 . On appeal, Olsen argues that American National did not preserve this issue. However, American National clearly presented this argument below.