PROGRESSIVE INSURANCE COMPANY, Plaintiff-Appellee, vs. TODD REED and RAM AUTOMOTIVE, INC., d/b/a ADVANTAGE CHEVROLET, BRIAN MARTIN, JEANETTE MARTIN, Defendants-Appellees, GENERAL CASUALTY INSURANCE COMPANY, Defendant-Appellant.
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IN THE COURT OF APPEALS OF IOWA
No. 6-682 / 05-1696
Filed November 30, 2006
PROGRESSIVE INSURANCE COMPANY,
Plaintiff-Appellee,
vs.
TODD REED and RAM AUTOMOTIVE, INC.,
d/b/a ADVANTAGE CHEVROLET, BRIAN MARTIN, JEANETTE MARTIN,
Defendants-Appellees,
GENERAL CASUALTY INSURANCE COMPANY,
Defendant-Appellant.
________________________________________________________________
Appeal from the Iowa District Court for Linn County, Patrick R. Grady,
Judge.
General Casualty Insurance Company appeals the district court’s ruling on
cross-motions for summary judgment.
AFFIRMED AND REMANDED WITH
INSTRUCTIONS.
Philip H. Dorff of Hopkins & Huebner, P.C., Des Moines, for appellant.
Joe Barron and Scott J. Beattie of Peddicord, Wharton, Spencer & Hook,
LLP, Des Moines, for appellee Progressive Insurance Company.
Heard by Mahan, P.J., and Miller and Vaitheswaran, JJ.
2
VAITHESWARAN, J.
An insurance company asks us to address the following contentions: (1)
whether coverage was excluded based on the execution of a release; and (2) if
coverage was not excluded, whether the amount to be paid should be a
proportion of certain statutorily prescribed minimums or a proportion of the policy
limits. We affirm and remand.
I. Background Facts and Proceedings
Todd Reed test drove a pickup truck from a dealership known as RAM
Automotive. Before he began the test drive, he and the dealership’s manager
signed a “Customer Test Drive Release.” During the test drive, a trailer Reed
was pulling detached from the pickup and struck another car.
At the time of the accident, RAM Automotive was insured by General
Casualty Insurance Company and Reed was insured by Progressive Insurance
Company. The companies questioned their obligations to provide coverage for
the accident. Ultimately, Progressive filed a petition for declaratory judgment to
obtain resolution of the coverage issue. Progressive alleged it had no duty to
defend or indemnify Reed because its policy served as “excess” to the primary
coverage provided by General Casualty. General Casualty responded that the
release Reed signed barred coverage under its policy.
The insurance companies submitted the issues to the district court on
cross-motions for summary judgment. Both companies agreed that their policies
contained clauses excluding coverage for contractual obligations, as well as
clauses that limited coverage to amounts in excess of other insurance.
3
The district court first considered the effect of the release signed by Reed.
The court concluded the release did not trigger General Casualty’s contract
exclusion. The district court next considered the effect of the excess clauses in
both policies. The court concluded that the clauses were “mutually repugnant,”
requiring proration of the losses between the two insurers.
The court’s
disposition was as follows: “Progressive and General Casualty must share
responsibility for the costs of Reed’s defense and any damages assessed
against him pro rata, based on their combined policy limits.”
Both insurers appealed, but Progressive later dismissed its appeal.
II. Contract Exclusion; Effect of Release
General Casualty’s policy contained an exclusion for “[c]ontractual
obligations,” defined as “[l]iability resulting from any agreement by which the
‘insured’ accepts responsibility for the ‘loss.’” 1 General Casualty argues that the
test drive release triggered this contract exclusion.
The release stated in
pertinent part:
I will return the vehicle in the same condition as I left in and will be
responsible for all damages made to the vehicle. I have adequate
insurance to cover any physical damage or liability arising out of my
operation of the vehicle.
The district court concluded the release language did not expressly obligate
Reed to hold RAM Automotive harmless and to accept responsibility for the
1
The parties do not dispute that this is the key language. Therefore, we will use it. We
note, however, that the insurance policy was not included in the summary judgment
record and the policy contained in the Appendix is numbered and lettered differently.
4
loss. 2 We review this conclusion for errors of law. Green v. Racing Ass’n of
Cent. Iowa, 713 N.W.2d 234, 238 (Iowa 2006).
A release is defined as “[t]he relinquishment, concession, or giving up of a
right, claim, or privilege, by the person in whom it exists or to whom it accrues, to
the person against whom it might have been demanded or enforced.” Korsmo v.
Waverly Ski Club, 435 N.W.2d 746, 748 (Iowa Ct. App. 1988) (citing Black’s Law
Dictionary 1453 (4th ed. 1968)). The parties agree the release is a contract.
Stetzel v. Dickenson, 174 N.W.2d 438, 439 (Iowa 1970) (“A release is a contract,
and its validity is governed by the usual rules relating to contract.”). The parties
also appear to agree that “the insured” in General Casualty’s policy is Reed
rather than RAM Automotive. 3 Cf. Aid Ins. Co. (Mut.) v. United Fire & Cas. Co.,
445 N.W.2d 767, 771 (Iowa 1989) (essentially rejecting argument that driver of
dealership’s vehicle was not an insured under dealership’s insurance policy);
Union Ins. Co. (Mut.) v. Iowa Hardware Mut. Ins. Co., 175 N.W.2d 413, 417 (Iowa
1970) (same). The only disagreement relates to whether, by signing the release,
Reed “accept[ed] responsibility for the loss” within the meaning of General
Casualty’s policy exclusion for contractual obligations.
On this question, we
believe the release language is ambiguous. See Pedersen v. Bring, 254 Iowa
288, 294, 117 N.W.2d 509, 513 (1962) (“Ambiguity appears when a genuine
2
The court also noted that Progressive’s policy contained a similar contract exclusion.
The court stated: “Furthermore, because Reed did not accept responsibility for the
injuries suffered by [the driver of the other vehicle], the ‘liability assumed’ exclusion
contained in Progressive’s policy also does not come into effect.”
3
At oral argument, counsel for General Casualty suggested that a customer of RAM
Automotive would not be considered “an insured” under its policy. Counsel later
conceded that General Casualty was not pursuing this argument, as it had not previously
been raised.
5
doubt appears as to the meaning of a contract.”). On the one hand, the release
could simply be read as a representation that Reed had insurance.
This is
Progressive’s contention. On the other hand, the release could be read to mean
that Reed accepted responsibility for the loss, thereby effectively holding the
dealership harmless. This is General Casualty’s contention. Both readings are
reasonable and we believe “a genuine uncertainty exists concerning which of
[the] two reasonable interpretations is proper.” Walsh v. Nelson, 622 N.W.2d
499, 503 (Iowa 2001) (citation omitted). Under these circumstances, the contract
is to be construed against the party who drafts or furnishes the instrument.
Kinney v. Capitol-Strauss, Inc., 207 N.W.2d 574, 577 (Iowa 1973). This would be
RAM Automotive and its insurer, General Casualty. See Bashford v. Slater, 250
Iowa 857, 866, 96 N.W.2d 904, 909 (1959). Accordingly, we accept the reading
of the release advocated by Progressive; the release assured RAM Automotive
that Reed had damage and liability insurance but did not obligate Reed to
“accept responsibility for the loss.” Based on this reading, we are persuaded that
the district court did not err in concluding “the release form signed by Reed does
not exclude General Casualty from having a duty to defend or indemnify Reed.”
III. Pro Rata Liability
As noted, both insurance polices contained clauses limiting coverage if
there was other insurance. General Casualty does not challenge the district
court’s conclusion that in such a situation, the clauses are mutually repugnant
and the loss is prorated between the insurers. AID Ins. Co., 445 N.W.2d at 769
(citing Union Ins. Co., 175 N.W.2d at 418). General Casualty only appeals “the
calculation of prorated shares.”
6
The district court did not make this calculation but cited with approval a
recent Iowa Supreme Court decision that prescribed a proration method. See
Federated Ins. v. Iowa Mut. Ins. Co., 659 N.W.2d 207, 210 (Iowa 2003). General
Casualty argues we should follow the method in Federated, which would allow its
pro rata share of liability to be calculated based on statutorily prescribed
minimums rather than its policy limit of $1,000,000. Progressive counters that
the Federated proration method is not mandated and we should follow an Indiana
opinion that apportioned liability based on the limits set forth in the policy. See
Indiana Ins. Co. v. Federated Mut. Ins. Co., 415 N.E.2d 80, 89 (Ind. Ct. App.
1981).
In light of Federated, we see no reason to look to Indiana law. Federated
involved virtually identical facts. There, a car dealership’s escape clause limited
liability to the “compulsory or financial responsibility law limits.” Federated, 659
N.W.2d at 208.
The court looked to this language in prorating the insurers’
obligations, even though the language was contained within a clause found to be
mutually repugnant to the policy language in the driver’s policy. The court then
looked to one of our financial responsibility laws, Iowa Code section 321A.21,
and determined that the statutory limit was $40,000. Id. The personal auto
liability policy issued to the test driver had a limit of $300,000 per accident. Id.
The court combined these policy limits to arrive at a total of $340,000. Id. at 209.
The court then approved a calculation apportioning a settlement amount of
$265,000 and concluded that each carrier was responsible for 77.94 percent of
its policy limits. Id. at 210.
7
As in Federated, General Casualty’s policy restricts coverage based on
“the compulsory or financial responsibility law limits.” The statutory limit now is
$20,000 for bodily injury or death of one person in any one accident. 4 Iowa Code
§ 321A.21(2)(b) (2005). 5 Given the language of General Casualty’s policy and
the language of Federated, we conclude $20,000 is the appropriate limit for
General Casualty.
Turning to the calculation, Progressive’s policy limit is $500,000.
This
figure must be added to the $20,000 figure we adopt for General Casualty, to
arrive at a combined policy limit of $520,000. The parties agree that Reed and
the injured driver reached a settlement of $180,000, but this fact is not in our
record.
Nor is there a calculation of the prorated obligations or an entry of
judgment in those amounts. For these reasons, we affirm the district court’s
summary judgment ruling but remand with instructions to prorate the obligations
in a manner consistent with this opinion and to enter judgment in this sum. See
Union Ins. Co., 175 N.W.2d at 419.
AFFIRMED AND REMANDED WITH INSTRUCTIONS.
4
5
The parties appear to agree that the statutory limits for injury to one person apply.
Progressive suggests, in the alternative, that the amount used to calculate General
Casualty’s liability should be the amount prescribed by Iowa Code section 322.4(8),
which requires automobile dealers to have financial liability coverage up to $100,000 per
person and $300,000 per occurrence. See Iowa Code § 322.4(8). The Iowa Supreme
Court did not rely on this statutory provision in Federated. Therefore, neither do we.
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