State Farm Insurance Co. v. Roberts

State Farm Insurance Co. v. Roberts  (95-115); 166 Vt. 452; 697 A.2d 667

[Filed 6-Jun-1997]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.


                            No. 95-115


State Farm Mutual Automobile                 Supreme Court
Insurance Company
                                             On Appeal from
    v.                                       Addison Superior Court

David Roberts, Lyle Webb, Nationwide         January Term, 1996
Mutual Insurance Company & Cooperative
Fire Insurance Association of Vermont


Edward J. Cashman, J.

       Robert G. Cain and William D. Riley of Paul, Frank & Collins, Inc.,
  Burlington, for plaintiff-appellee

       James A. Dumont and John J. Cotter, Law Clerk (On the Brief), of
  Sessions, Keiner, Dumont & Barnes P.C., Middlebury, for
  defendant-appellant/cross-appellee Webb

       John Davis Buckley of Theriault & Joslin, P.C., Montpelier, for
  defendant-appellee Nationwide Mutual Insurance Company

       Richard P. Foote of Conley & Foote, Middlebury, for
  defendant-appellee/cross-appellant Cooperative Fire Insurance Association
  of Vermont

PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.


       DOOLEY, J.  This declaratory judgment action concerns the contractual
  liability of three insurance companies with respect to an underlying tort
  suit brought by Lyle Webb after he was injured while unloading an engine
  from his truck into David Roberts' garage.  In response to the parties'
  motions for summary judgment, the superior court ruled that both Roberts'
  automobile and homeowner insurers had a duty to defend and indemnify him. 
  The court also ruled that the accident was not covered under Webb's
  automobile policy, and it dismissed Webb's bad-faith cross-claim against
  his insurer.  Roberts' homeowner's insurer appeals,

 

  arguing that a coverage exclusion applies.(FN1)  We agree and reverse.

       On the evening of January 21, 1991, Webb drove his uninsured dump
  truck to Roberts' home to drop off an engine for Roberts' pickup truck. 
  Webb's visit was unexpected; apparently, Webb was repaying Roberts for some
  snowplowing Roberts had done for Webb.  Because Roberts had no immediate
  use for the engine, he decided to store it in his garage.  Webb backed his
  dump truck to the garage entrance, tilted the bed of the truck to
  facilitate unloading the engine, and opened the tailgate.  In order to
  slide the engine to the garage floor, the two men placed a piece of plywood
  at the end of the tailgate to form a ramp.  They attempted to slide the
  engine from the truck bed, down the plywood ramp, and onto the garage
  floor.  Each man kept one foot in the bed of the truck and placed one foot
  on the plywood board.  As they began to push the engine down the ramp, the
  ramp slipped from its position, causing Webb to fall into the garage wall
  and onto the floor, where the engine  rolled on his hand.  Webb sued
  Roberts, claiming he was injured as the result of Roberts' negligence in
  directing that the plywood be placed on an icy area of the garage floor.

       At the time of the accident, three insurance policies were in force. 
  Roberts had an automobile policy from State Farm Mutual Automobile
  Insurance Company that contained a provision covering liability for use of
  a nonowned vehicle.  Roberts also had a homeowner's policy from Cooperative
  Fire Insurance Company of Vermont that excluded coverage for liability
  resulting "directly or indirectly" from "the ownership, operation,
  maintenance, use, occupancy, renting, loaning, entrusting, supervision,
  loading or unloading by an insured of motorized vehicles."  Webb had an
  automobile policy issued by Nationwide Mutual Insurance Company that
  covered another truck he owned, but did not cover the dump truck involved
  in this litigation.  That policy contains uninsured-underinsured motorist
  coverage.

       In its summary judgment order, the superior court ruled that (1) State
  Farm was required

 

  to defend and indemnify Roberts under its nonowned-vehicle policy
  provision; (2) Cooperative Fire was required to defend and indemnify
  Roberts notwithstanding the automobile exclusion in its homeowner's policy
  because one of the alleged causes of the accident was an included risk --
  ice on the garage floor; and (3) Nationwide was not required to extend
  uninsured-motorist coverage to the claim, and thus did not act in bad faith
  in denying coverage, because it did not insure Webb's dump truck, and
  Roberts was an insured motorist.  Only Webb and Cooperative Fire appealed
  from the order.

       Following the declaratory judgment ruling, Webb's tort suit went to
  trial and resulted in a defendant's verdict, which was affirmed on appeal
  to this Court.  The resolution of the underlying suit has mooted the
  dispute over whether Nationwide was required to extend uninsured-motorist
  coverage to Webb's claim.  It has also mooted any dispute over Cooperative
  Fire's obligation to indemnify Roberts.  There remains, however, a live
  dispute over the cost of the defense of the underlying suit between State
  Farm and Cooperative Fire.  We must, therefore, decide Cooperative Fire's
  appeal of the superior court's decision that Cooperative Fire had an
  obligation to defend Roberts.

       The issue turns on whether the doctrine of concurrent causation
  applies in light of the language of the policy and the facts surrounding
  the accident.  Under that doctrine, if the liability of an insured arises
  from concurrent but separate nonvehicle-related and vehicle-related
  negligent acts, and the nonvehicle-related act is an included risk under
  the insured's homeowner's policy, coverage exists even though the policy
  contains an automobile exclusion. 7A J. Appleman, Insurance Law and
  Practice § 4500, at 179-80 (1979).  In other words, if an occurrence is
  caused by a risk included within the policy, coverage may not be denied
  merely because a separate excluded risk was an additional cause of the
  accident.  Id. at 179.

       The leading case on the concurrent causation doctrine is State Farm
  Mut. Auto. Ins. Co. v. Partridge, 514 P.2d 123 (Cal. 1973).  In that case,
  after filing the trigger of a pistol to create a "hair trigger action," the
  insured and a friend headed with the pistol into rough terrain hunting
  jackrabbits in their four-wheel-drive vehicle.  When the vehicle hit a
  bump, the pistol discharged

 (Page 4)

  and injured the friend, who sued the insured.  The homeowner's policy
  insurer denied coverage, relying on a policy provision that excluded
  coverage for bodily injury "arising out of" the use of any motor vehicle. 
  The California Supreme Court held that the claim of the friend was covered
  because both vehicle-related and nonvehicle-related risks proximately
  caused the injury and the insured's liability.  Id. at 132.  According to
  the court,

     Here, . . . an insured risk (the modification of the gun)
     combined with an excluded risk (the negligent use of the car) to
     produce the ultimate injury.  Although there may be some question
     whether either of the two causes in the instant case can be properly
     characterized as the "prime," "moving" or "efficient" cause of the
     accident we believe that coverage under a liability insurance policy
     is equally available to an insured whenever an insured risk
     constitutes simply a concurrent proximate cause of the injuries.

  Id. at 130 (footnotes omitted).

       In applying this holding to a variety of fact patterns in later cases,
  the California appellate courts have focused on whether the act that gave
  rise to the alleged liability under the homeowner's policy was independent
  of the act that constituted use of the vehicle.  See, e.g., Daggs v.
  Foremost Ins. Co., 196 Cal. Rptr. 193, 196 (Ct. App. 1983) (no coverage
  under premises liability policy because conduct of insureds in failing to
  design safe motorcross race course was dependent upon use of motor
  vehicles); Safeco Ins. Co. v. Gilstrap, 190 Cal. Rptr. 425, 427 (Ct. App.
  1983) (no liability under homeowner's policy because conduct of insureds in
  negligently entrusting vehicle to their son, who was in accident with
  another vehicle, was dependent upon and related to use of motor vehicle);
  Allstate Ins. Co. v. Jones, 188 Cal. Rptr. 557, 561 (Ct. App. 1983) (no
  liability under homeowner's policy for improperly loading rebar on truck,
  where truck collided with car and rebar flew out and hit driver of car,
  because negligent conduct depended upon truck's movement to become
  hazardous).

       Although Cooperative Fire argues that we should not adopt the
  concurrent-causation doctrine, at least not in light of the wording of its
  policy, it urges alternatively that we embrace a restatement of the
  elements of the doctrine in Garvey v. State Farm Fire & Casualty Co, 227 Cal. Rptr. 209 (Ct. App. 1986).  Under the court's analysis in that case,
  when included

 

  nonvehicle-related and excluded vehicle-related acts concur to cause an
  accident, coverage exists under the homeowner's policy notwithstanding the
  automobile exclusion if either (1) the same loss could have occurred even
  absent the vehicle-related cause; or (2) the same loss could not have
  occurred absent the vehicle-related cause, but the nonvehicle-related cause
  set in motion the vehicle-related cause.  Id. at 219 n.10.  The court,
  which reversed a directed verdict for the insureds in this first-party
  property loss case,(FN2) acknowledged that its analysis did not resolve all
  potential coverage scenarios, such as when two dependent causes
  simultaneously contribute to a loss but neither cause sets the other in
  motion.  Id.

       The California Supreme Court affirmed Garvey, but did not explicitly
  adopt the district court's analysis, because it refused to extend Partridge
  to first-party property-loss cases, stating that Partridge "should be
  utilized only in liability cases in which true concurrent causes, each
  originating from an independent act of negligence, simultaneously join
  together to produce injury."  Garvey v. State Farm Fire & Casualty Co., 770 P.2d 704, 705 (Cal. 1989).

       Courts in several other jurisdictions have adopted the
  concurrent-causation doctrine set forth in Partridge, although there has
  been no consensus on the legal test for determining when included and
  excluded causes are sufficiently independent to invoke the doctrine.  For
  the most part, determination of whether coverage exists has been heavily
  dependent on the particular facts of each case.  See, e.g., Waseca Mut.
  Ins. Co. v. Noska, 331 N.W.2d 917, 923 (Minn. 1983) (coverage existed under
  homeowner's policy, notwithstanding automobile exclusion, because
  nonvehicle-related act of placing live embers in uncovered barrel, before
  placing barrel in insured's truck, concurred with driving of truck to cause
  fire); Allstate Ins. Co. v. Watts, 811 S.W.2d 883, 888 (Tenn. 1991)
  (concurrent-causation doctrine applies if loss resulted "in substantial
  part" from included risk, even if excluded risk was originating cause;
  coverage existed where injury resulted from insured dropping and kicking
  pan of flaming liquid during

 

  repair of vehicle in insured's garage); Lawver v. Boling, 238 N.W.2d 514,
  521-22 (Wis. 1976) (where insured's son-in-law was injured during collapse
  of rigged lift chair that was raised and lowered by moving pickup truck,
  homeowner's policy would cover accident notwithstanding automobile
  exclusion if injuries resulted, "even in part," from included risk); cf.
  Salem Group v. Oliver, 607 A.2d 138, 140 (N.J. 1992) (because act of
  serving alcohol to minor does not depend on insured's ownership of motor
  vehicle, homeowner's insurer had duty to defend insured against claim
  alleging social host liability).

       Some courts, however, have refused to apply the concurrent-causation
  doctrine so as to nullify an unambiguous automobile exclusion that denies
  coverage for occurrences arising out of the use of a motor vehicle.  See
  Northern Assurance Co. v. EDP Floors, Inc., 533 A.2d 682, 689-90 (Md. 1987)
  (no coverage under general business liability policy for claim of negligent
  supervision of drunken employee whose operation of hydraulic lift on truck
  caused injury; policy's automobile exclusion, which unambiguously denied
  coverage for injuries "arising out of" use of motor vehicle, did not
  require that use of truck be sole cause of injury); Vanguard Ins. Co. v.
  Clarke, 475 N.W.2d 48, 53 (Mich. 1991) (no compelling legal or policy
  reason for applying concurrent-causation doctrine to nullify unambiguous
  automobile exclusion in homeowner's policy; given potential for double
  recovery under homeowner's and automobile policies, insured could not have
  reasonably contemplated coverage under exclusion for injuries resulting
  from his closing garage door before falling asleep in car with engine
  running); Krempl v. Unigard Sec. Ins. Co., 850 P.2d 533, 535 (Wash. Ct.
  App. 1993) (concurrent-causation doctrine does not apply when exclusion
  unambiguously denies coverage for injuries "arising out of" use of
  automobile; accordingly, no coverage exists where injuries resulted from
  attempt to remove jury-rigged fuel pump from automobile).

       On at least two occasions, we have addressed the effect of multiple
  causes of an accident on insurance coverage for damages arising out of that
  accident.  In Town of South Burlington v. American Fidelity Co., 125 Vt.
  348, 215 A.2d 508 (1965), the Town sought coverage from its insurer after
  being sued for damages resulting from injuries incurred when a leaking
  culvert

 

  pipe created a hole in a street.  The insurer denied coverage based on a
  policy provision excluding "coverage for liability arising from the
  existence of streets and sidewalks."  Id. at 349, 215 A.2d  at 510.  Noting
  that persons had a statutory right to recover damages from injuries caused
  by defective culverts but not streets or sidewalks, this Court had "no
  difficulty" in finding that the insurer had a duty to defend because the
  complaint alleged that the accident and injury originated in the defective
  culvert.  Id. at 350-51, 215 A.2d  at 511.  According to the Court, "the
  mere fact that the leaking culvert brought about the hole in Spear Street
  does not displace the causation from the culvert to the street and bring
  the street and sidewalk exclusion into operation."  Id. at 351, 215 A.2d  at
  511.

       Similarly, in Valente v. Commercial Ins. Co., 126 Vt. 455, 236 A.2d 241 (1967), the insured died from a combination of a fall from a loading
  platform and arteriosclerosis.  The insurer refused to pay a death benefit
  under an accident insurance policy because the policy required that the
  loss result "directly and independently of all other causes from accidental
  Bodily injury."  Id. at 458, 236 A.2d  at 243.  We held that the policy
  language meant that the accidental injury must be a "proximate and
  predominant producing cause" of death, but need not be the exclusive cause. 
  Id. at 462, 236 A.2d  at 245.  We affirmed a jury finding that the insured
  died of accidental bodily injury.  Id. at 463, 236 A.2d  at 246.

       Although neither Valente nor South Burlington explicitly adopted the
  concurrent-causation doctrine, the opinions are consistent with use of that
  doctrine.  We conclude that the concurrent-causation doctrine is a logical
  extension of our precedents and adopt it for determining whether liability
  coverage is excluded by a use exclusion of the type involved here.

       Cooperative Fire argues that despite our adoption of the
  concurrent-causation doctrine, it should not apply in this case because (1)
  its automobile exclusion unambiguously and broadly denied coverage for
  injuries "directly or indirectly" associated with motor vehicles, and thus
  the court's application of the doctrine effectively rewrote the insurance
  contract between it and Roberts; (2) the exclusion is consistent with the
  reasonable expectations of the parties to the contract; and (3) the ice was
  not an independent cause of the injuries because the same loss

 

  could not have occurred absent the excluded risk and the included risk did
  not set in motion the excluded risk.  We take these arguments in turn.

       As Cooperative Fire points out, courts adopting the
  concurrent-causation doctrine have construed automobile exclusions
  containing the phrase "arising out of" rather than the instant phrase
  "results directly or indirectly from."  We see no significant difference in
  the meaning of the phrases, however.  Indeed, the courts have acknowledged
  the breadth and lack of ambiguity in the "arising out of" exclusion
  language.  See Lawver, 238 N.W.2d  at 518 (phrase "arising out of" is very
  broad and comprehensive, requiring only that there be some causal
  relationship between injury and risk for which coverage is provided). 
  Nevertheless, they have applied the concurrent-causation doctrine not on
  the basis that the exclusion language is narrow or ambiguous, but rather on
  the basis that coverage for a loss resulting from an included risk may not
  be denied merely because an excluded risk was an additional cause of the
  loss.  See Partridge, 514 P.2d  at 129 (even assuming automobile exclusion
  is not ambiguous, coverage exists under homeowner's policy as long as
  included risk was concurrent proximate cause of accident); Lawver, 238 N.W.2d  at 521 (Partridge did not base its decision on existence of
  exclusion's ambiguity, but rather found that included and excluded risks
  concurred in causing injury).(FN3)  In essence, we accepted the same argument
  in Valente.  We agree with these courts that application of the
  concurrent-causation doctrine does not depend on ambiguity in the language
  of the automobile exclusion.

       In so holding, we do not depart from our oft-stated principle that
  insurance contracts "must be interpreted according to their terms and the
  evident intent of the parties, as gathered from the contract language." 
  Cooperative Fire Ins. Ass'n v. Gray, 157 Vt. 380, 383, 599 A.2d 360, 362 (1991).  Rather, we emphasize that this principle is designed to
  avoid binding insurers to coverage that the parties did not reasonably
  contemplate.  See City of Burlington v. National Union Fire Ins. Co., 163
  Vt. 124, 130, 655 A.2d 719, 722 (1994) (court will not adopt construction
  of policy that "would distort the purpose of the liability insurance
  policy" by imposing on insurer risk of contractual loss); State v. Glens
  Falls Ins. Co., 132 Vt. 97, 99, 315 A.2d 257, 258 (1974) (where
  interpretation urged would encompass risk neither contemplated by type of
  policy nor intended to be undertaken by carrier, carrier is entitled to
  fair construction that reflects understanding of parties).  In short, our
  focus is on the agreement contemplated by the parties.

       The reasonable expectations of the parties are important in
  considering the scope of coverage provided in insurance contracts because
  such contracts, largely adhesive in nature, often contain boilerplate terms
  that are not bargained for, not read, and not understood by the insureds. 
  Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co., 682 P.2d 388,
  395 (Ariz. 1984); see R. Keeton & A. Widiss, Insurance Law: A Guide to
  Fundamental Principles, Legal Doctrines, and Commercial Practices § 5.5, at
  559, 563 (1988) (courts are increasingly resolving issues of causation
  involving insurance policy terms by considering scope of coverage in terms
  of protecting insured's reasonable expectations); Appleman, supra § 4500,
  at 179-80 (concurrent coverage exists where coverage of risk that exists
  independently of use of motor vehicle is reasonably contemplated by
  parties).  Therefore, in determining the reasonable expectations of the
  parties to an insurance contract, we must consider the policy in its
  entirety with an eye toward its general purpose.  See Darner Motors Sales,
  682 P.2d  at 398 (under reasonable-expectation rule, no effect is given to
  boilerplate terms that are contrary to purpose of transaction as known to
  contracting parties); Salem Group v. Oliver, 590 A.2d 1194, 1197 (N.J.
  Super. Ct. App. Div. 1991) (when construing insurance policies, courts must
  search for reasonable expectations of parties in keeping with express
  general purposes of policy).

       The purpose of Cooperative Fire's policy "was to insure other
  liabilities outside the area of motor vehicles."  Medlar v. Aetna Ins. Co.,
  127 Vt. 337, 343, 248 A.2d 740, 745 (1968).

 

  Its interpretation of the phrase "results directly or indirectly from,"
  however, "would unjustifiably outrun the risk intended to be insured
  against."  Glens Falls, 132 Vt. at 101, 315 A.2d  at 259.  For instance,
  were we to accept Cooperative Fire's position, coverage could be denied if
  Roberts himself slipped on ice while unloading the truck, or even if he
  slipped and fell on the basement stairs while carrying objects unloaded
  from the truck.  See Watts, 811 S.W.2d  at 887 (adopting insurer's
  interpretation of phrase "arising out of" to include any causal
  relationship would exclude coverage, for example, if injured party had
  fallen down flight of stairs while retrieving tool from insured's house to
  aid in repairing vehicle); cf. Aetna Casualty & Sur. Co. v. State Farm Mut.
  Auto. Ins. Co., 380 A.2d 1385, 1388 (D.C. 1977) (coverage existed under
  homeowner's policy notwithstanding automobile exclusion where injured party
  slipped on basement stairs while carrying materials unloaded from car).  We
  do not think the parties reasonably contemplated such a result when Roberts
  purchased his general liability homeowner's policy.

       Finally, we must determine whether the superior court correctly
  applied the doctrine of concurrent causation to this case to find that
  Cooperative Fire had a duty to defend.  As stated above, Cooperative Fire's
  main argument on this point is that the concurrent causes should be
  independent of each other, as set out in the court of appeals decision in
  Garvey, and that requirement is not met.  In addressing this question, we
  first emphasize that this is not truly a concurrent-causation case.  Webb
  has not alleged that Roberts was negligent in any respect other than
  directing the placement of the plywood ramp on the ice-covered floor.  The
  concurring cause, if it can be described as such, was the unloading of the
  engine from the truck bed and down the ramp.  There is no allegation that
  any negligence was involved in the unloading operation, apart from the
  placement of the ramp.

       These facts are comparable to those in Daggs v. Foremost Ins. Co.,
  where the tort plaintiff was injured, while participating in a motorcycle
  race, when he ran into the chain-link barrier fence surrounding the race
  course.  The course-owners' liability carrier denied coverage under a
  policy exclusion for injuries arising out of the use of mobile equipment
  while being used

 

  in organized racing.  The insured alleged that the negligent design of the
  fence was a concurrent cause under Partridge.  The court disagreed,
  stating:

     The only reasonable interpretation of the allegations of plaintiff's
     underlying complaint is that [insured] . . . failed to make the
     motorcycle course safe for the organized racing event in which
     plaintiff was participating.  There is but one negligent act of the
     insured, not two as in Partridge, and this cause of the injuries is
     not independent of the policy exclusion.

  196 Cal. Rptr.  at 196.

       Webb's real complaint against Roberts was that Roberts made the act of
  unloading the engine unsafe by placing the plywood ramp on the ice.  It is
  the unloading of the truck that is explicitly excluded from the policy
  coverage.  We are unable to separate the alleged act of negligence from the
  policy exclusion.  We agree with the California courts that the negligence
  on which coverage is premised must somehow be independent of the conduct
  excluded from the policy.  Accordingly, we hold that concurrent causation
  does not apply, and the superior court erred in finding coverage under
  Cooperative Fire's policy.

       Reversed.

                              FOR THE COURT:



                              _______________________________________
                              Associate Justice



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                                  Footnotes



FN1.  Webb also appealed, arguing that he was entitled to
  uninsured-motorist coverage under his automobile policy.  Because the
  underlying suit has been resolved adversely to Webb, this appeal is moot,
  and we do not consider it.


FN2.  If the insured is seeking coverage against loss or damage
  sustained by the insured, the claim is first party in nature; on the other
  hand, if the insured is seeking coverage against liability of the insured
  to another, the claim is third party in nature.  Garvey v. State Farm Fire
  & Casualty Co., 770 P.2d 704, 705 n.2 (Cal. 1989).


FN3.  Cooperative Fire misstates the comments of the court in Lawver
  v. Boling, 238 N.W.2d 514, 521 (Wis. 1976) regarding the phrase "directly
  or indirectly."  According to Cooperative Fire, the court in Lawver
  "expressly indicated" that it would have upheld the automobile exclusion at
  issue had the exclusion contained the words "directly or indirectly."  To
  the contrary, the court stated that it had recently given a broad
  construction to the phrase "arising out of," and that it had rejected the
  argument that the phrase was ambiguous for failing to make clear that the
  exclusion applied regardless of whether the injuries were caused by conduct
  directly or indirectly related to the use of a motor vehicle.  Id.