A bad day for Fords
In June 2013, Bill Grant Ford, Inc., a car dealership, provided a 1998 Ford Taurus, which it owned, to John Sconce for use as a temporary substitute vehicle while his vehicle was undergoing repairs.
On June 29, 2013, Sconce’s son, Jesse, was driving the Taurus northbound on Missouri Route 123 when he allowed the vehicle to travel across the center line and collide with a vehicle traveling southbound on the same route. Gary Parkison was driving the other vehicle, a Ford Fusion; Judith Parkison and Betty Vest were passengers in the car. The Parkisons and Vest were injured in the accident, and Vest died as a result of her injuries. The Missouri Highway Patrol’s investigation determined that Jesse was at fault in the collision. Two passengers in the Taurus were also injured.
At the time of the collision, Jesse was insured under an automobile liability policy issued by Progressive Insurance Company that provided bodily injury coverage with limits of $25,000 per person and $50,000 per occurrence. The Taurus was insured under a garage liability policy issued to Bill Grant Ford by Owners Insurance Company.
The parties agreed that Jesse met the definition of a “garage customer” and thus qualified as an “insured person” under the Owners policy. The bodily injury liability limit under the garage liability portion of the policy was $1,000,000 per occurrence.
The garage liability part was supplemented by “Missouri Amendatory Endorsement—Garage Liability,” which contained an amendment to the “Other Insurance” section and included the clause that Owners contended precluded coverage in this case:
- Under SECTION VII—GENERAL CONDITIONS, E. OTHER INSURANCE, condition 4. is deleted and replaced with the following:
- This provision governs the relationship of this policy with insurance policies issued by insurance companies other than us. It does not define our limit of liability to pay any coverage provided by this policy and shall not be constructed to increase any limit of liability described under SECTION IV—LIMITS OF INSURANCE.
This insurance shall be, with respect to any auto to which this insurance applies:
- Primary insurance for any auto owned by you except when such auto is in the care, custody or control of a garage customer. When any auto owned by you is in the care, custody or control of a garage customer:
(1) No damages are collectible under this policy if there is other collectible insurance, whether primary, excess or contingent, available to the garage customer and the limits of such insurance are sufficient to pay damages up to the amount of the applicable financial responsibility limit.
(2) If there is no other collectible
insurance available to the garage customer, damages are collectible under this policy only up to the amount required by the applicable financial responsibility limit.
- Excess insurance over any other collectible insurance for any auto you do not own.
The above provision in the Missouri Amendatory Endorsement is followed by an amendment to Section IV—Limits of Insurance, which states:
- Under SECTION IV—LIMITS OF INSURANCE, COVERAGE A (Auto), 5. is deleted and replaced by the following:
- The limit of insurance shown in the Declarations for this coverage is the most we shall pay for all claims of one or more persons in any one occurrence regardless of:
- The number of insureds;
- The number of persons injured;
- The number of autos …;
- Whether this policy applies as primary or excess insurance.
After the collision, Gary Parkison, Judith Parkison, and John Vest (as class representative for the estate of Betty Vest) claimed coverage for damages under both the Progressive policy and the Owners policy. The two passengers in the Taurus also asserted claims. Progressive and Owners tendered an offer to all claimants collectively to settle all claims for a total of $100,000, with the division of those proceeds to be agreed upon by all claimants. The offer consisted of the $50,000 per-occurrence limits of the Progressive policy plus the $50,000 per-occurrence limits of the Owners policy.
Subsequently, the passengers in the Taurus settled their claims for negotiated shares of the $100,000 offer, releasing Jesse, Bill Grant Ford, Progressive, and Owners. Gary and Judith Parkison and John Vest also entered into a settlement agreement and release with Owners under which (1) each received his or her negotiated share of the $100,000 offer; and (2) they released Jesse, Bill Grant Ford, and Progressive. By express agreement, the Parkisons and Vest retained the right to pursue, via declaratory judgment, a portion of coverage under the Owners policy that was disputed by the parties.
Pursuant to the settlement agreement, Owners filed a petition for declaratory judgment against the Parkisons and Vest. Citing the Other Insurance clause in its policy, Owners requested a judicial declaration that it owed no further coverage under the policy because (1) Jesse was a garage customer with other valid and collectible insurance sufficient to meet the Missouri financial responsibility requirements; and (2) Owners had already paid its obligation to the Parkisons and John Vest under the financial responsibility law. The Parkisons and Vest filed an answer and counterclaim arguing that, among other things, Jesse was entitled to $1,000,000 in coverage under the Owners policy because the Other Insurance clause applied only to disputes between Owners and other insurers, which was not the case here.
Both parties moved for summary judgment, each citing the Owners policy in support of its respective position. The court granted the Parkisons’ and Vest’s motion for summary judgment and denied Owners’ motion. The court found that the Other Insurance clause expressly and unambiguously limited its application to disputes between insurance companies and did not apply to disputes involving garage customers. Therefore, the court explained, although Jesse was insured under the Progressive policy at the time of the collision, the Other Insurance clause in the Owners policy did not preclude coverage in this case. In reaching its decision, the court found that the Other Insurance clause was limited by the two introductory sentences and found it significant that the provision was not placed in the limits of liability section, the definition of who was an insured, or the exclusions section. Owners appealed.
On appeal, Owners argued that the Other Insurance clause unambiguously “eliminates liability coverage for a garage customer when the garage customer has other valid and collectible automobile liability insurance.” Owners asserted that the first introductory sentence did not limit the clause’s application to disputes between insurance companies. Rather, according to Owners, the first sentence explained that the existence of an insurance policy issued by an insurance company other than Owners was an “essential predicate” before the Other Insurance clause was triggered. Further, Owners contended the second introductory sentence merely reinforced that the Other Insurance clause was an exclusion rather than a limit on liability.
In contrast, the Parkisons and Vest asserted that the two introductory sentences limited the application of the Other Insurance clause to “define the rights of the insurer when multiple insurers cover the loss and they are debating their relative rights and obligations” and thus did not apply to this case. Additionally, they suggested that the second introductory sentence should be read consistently with the second provision of the Missouri Amendatory Endorsement, which restated that the only limits of liability were those presented in Section IV and they did not change regardless of whether the Owners policy applied as primary or excess coverage.
The court found that an ambiguity was created when the Other Insurance clause was read within the whole Missouri Amendatory Endorsement section and ruled that the ambiguity must be construed against Owners. The lower court’s grant of summary judgment in favor of the Parkisons and Vest was affirmed.
Owners Insurance Company vs. Parkison-Missouri Court of Appeals, Eastern District, Division 1-January 31, 2017- No. ED 103652