Towns v. VT Mutual Insurance Co.

Towns v. VT Mutual Insurance Co.  (98-259); 169 Vt. 545; 726 A.2d 25

[Filed 26-Jan-1999]



                                 ENTRY ORDER

                       SUPREME COURT DOCKET NO. 98-259

                             JANUARY TERM, 1999


Richard F. Towns                     }	APPEALED FROM:
                                     }
                                     }
     v.	                             }	Lamoille Superior Court
                                     }	
Vermont Mutual Insurance Company     }
                                     }	DOCKET NO. 127-6-97 LeCv	


       In the above-entitled cause, the Clerk will enter:

       Plaintiff Richard Towns appeals from a grant of summary judgment in
  favor of defendant  Vermont Mutual Insurance Company, holding that
  defendant was not required to defend and  indemnify plaintiff under a
  homeowner's policy because plaintiff's liability for an unlawful landfill 
  arose from formerly owned property not included as an insured location
  under the instant policy.  We affirm.

       The parties do not dispute the facts.  Plaintiff owned property on
  Collins Hill in Johnson  from 1972 until he sold it on June 28, 1987. 
  Beginning June 29, 1987, plaintiff owned and  occupied a residence in
  Morrisville.  Plaintiff is a named insured under a homeowner's policy 
  issued by defendant that went into effect on the same date as his occupancy
  of the Morrisville  residence began, June 29, 1987, and that remained in
  effect through June 29, 1997.  The insured  location listed on the policy
  is plaintiff's residence in Morrisville. 

       On September 30, 1996, the Vermont Agency of Natural Resources issued
  an administrative  order alleging that, during the time plaintiff owned the
  Johnson property, he illegally disposed of  fill there.  Plaintiff notified
  defendant of the State's proceeding against him and demanded that defendant 
  defend him pursuant to the policy.  Defendant denied coverage.(FN1) 
  In June 1997,  plaintiff sued defendant for failure to defend and
  indemnify plaintiff.  On cross-motions for  summary judgment, the court
  ruled that the policy excludes coverage for plaintiff's personal  liability
  arising from the Johnson property because the Johnson property is not
  listed as a  residence premises and therefore is not an insured location. 
  Plaintiff appeals.

       At issue on appeal is interpretation of plaintiff's homeowner's
  insurance policy.  The  dispute in this case turns on the meaning of an
  exclusionary clause.  The exclusion to personal  liability coverage states
  in pertinent part:


     1.	Coverage E -- Personal Liability . . . do[es] not apply to "bodily 
        injury" or "property damage": . . . .

        e.	Arising out of a premises:


 


        (1) Owned by an "insured";
        (2) Rented to an "insured"; or
        (3) Rented to others by an "insured";

        that is not an "insured location."

  (Emphasis added.)  

       Plaintiff contends that the liability coverage exclusions bar coverage
  for damages arising  from premises currently owned by an insured that do
  not comprise an insured location.  He argues  that the policy covers any
  formerly owned property of the insured as such premises are not 
  specifically excluded by the definition.  Plaintiff maintains that, since
  ambiguity in insurance  contracts must be resolved against the drafter, see
  Garneau v. Curtis & Bedell, Inc., 158 Vt. 363,  367, 610 A.2d 132, 134
  (1992), we must adopt his reading of the uninsured location exclusion. 
  
       Defendant asserts that the provision should be interpreted as
  unambiguously excluding  premises previously owned by an insured.  To
  support this position, it cites to cases from other  jurisdictions that
  have held plaintiff's interpretation is an illogical and unreasonable
  reading of  similar provisions.  See State Farm Fire & Cas. Co. v. Thomas,
  756 F. Supp. 440, 445 (N.D.  Cal. 1991) (no reasonable homeowner or insurer
  would expect such a result); Wickner v.  American Reliance Ins. Co., 661 A.2d 1256, 1259 (N.J. 1995) (it would be illogical for policy  precluding
  coverage for property damages arising out of property owned by insured but
  unlisted  in policy to be interpreted to cover claims simply because
  insured sold property and hence no  longer "owned" property); see also
  Huntzinger v. Hastings Mut. Ins. Co., 143 F.3d 302, 314-317  (7th Cir.
  1998) (discussing issue and holding for insurance company on ground that
  policy did not  cover intentional dumping but only accidental property
  damage).  

       Before applying the rule of insurance contract construction that the
  language must be strictly  construed against the insurer, we must first
  conclude that the language or provision at issue is  ambiguous.  See 2 L.
  Russ & T. Segalla, Couch on Insurance § 21.11 (3d ed. 1995).  Although  we
  have no easy guidelines by which to gauge whether language in an insurance
  contract is  ambiguous, generally ambiguity exists if language is
  reasonably or fairly susceptible to different  interpretations.  See
  Northern Sec. Ins. Co. v. Hatch, 165 Vt. 383, 386, 683 A.2d 392, 394-95 
  (1996).  The fact, however, that a dispute has arisen over the proper
  interpretation of a contract  does not automatically render the language
  ambiguous.  See Isbrandtsen v. North Branch Corp.,  150 Vt. 575, 581, 556 A.2d 81, 85 (1988).  Further, a term of an insurance contract is not 
  ambiguous if its meaning can be ascertained by fair inference from other
  terms of the contract.  See 2 Russ & Segalla, supra, § 21.14.  We review
  the language of an insurance contract from  the perspective of what a
  reasonably prudent person applying for insurance would have understood  it
  to mean.  See id.  

       Plaintiff finds ambiguous the temporal aspect of "owned" as it is used
  in the uninsured  location exclusion and therefore urges us to construe the
  word against the insurer to exclude only  premises "currently owned."  He
  reaches the conclusion that the policy covers formerly owned  but currently
  uninsured premises by focusing narrowly on the word "owned" as it appears
  in the  exclusionary provision.  Yet, ambiguity does not arise by isolating
  a word or phrase from the  overall context of a contract.  See id.  By
  enclosing "insured location" within quotation marks,  the section
  specifically refers the reader back to the definitions.  

       Thus, we must consider that the policy defines "insured location"
  first and foremost as the  "residence premises" listed in the declarations
  section, here the Morrisville property.  It then  advances several
  additional meanings of "insured location" as, among others:  "premises . .
  . used  by you as a residence and . . . [w]hich is acquired by you during
  the policy period for your use


 

  as a residence"; "premises . . . [n]ot owned by an 'insured' . . . [w]here
  an 'insured' is  temporarily residing"; and "[l]and owned by or rented to
  an 'insured' on which a one- or two- family dwelling is being built as a
  residence for an 'insured.' "  Any ostensible lack of a temporal  qualifier
  for "owned" in the uninsured location exclusion dissipates in the context
  of the repeated  emphasis on premises -- whether rented or owned -- that
  are related to current or anticipated  residences of the insured.  It would
  be unreasonable to read the uninsured location exclusion apart  from the
  current or anticipated residence characteristics of an "insured location."  

       A fair inference from the definition of "insured location" is that the
  policy only covers  property where the insured currently resides or on
  which the insured is building a dwelling with  the intent of residing
  therein.  Since the contract coverage does not appear to extend to
  previously  owned premises in the first instance, a reasonable insured
  would not expect an exclusionary  provision to specifically prohibit such
  coverage.  We therefore conclude that the purported  ambiguity inhering in
  the word "owned" is not ambiguous when read together with the definition 
  of an "insured location."  See Isbrandtsen, 150 Vt. at 580, 556 A.2d  at 85
  (contracts must be read  in entirety, with eye toward giving effect to all
  material parts in order to form harmonious whole).  Plaintiff cannot by his
  forced reading of the homeowner's policy garner from the exclusionary 
  provision coverage that is not afforded in the general coverage provisions. 

       Affirmed.


BY THE COURT:


__________________________________________
James L. Morse, Associate Justice

__________________________________________
Denise R. Johnson, Associate Justice

__________________________________________
Marilyn S. Skoglund, Associate Justice

__________________________________________
Frederic W. Allen, Chief Justice (Ret.)
Specially Assigned

__________________________________________
Ernest W. Gibson, Associate Justice (Ret.)
Specially Assigned

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                                  Footnotes

FN1.  In addition to the ground for denial addressed herein, the
  defendant contends that coverage  does not exist because there was no
  "occurrence" since the dumping occurred outside the policy  period. The
  defendant further argues that the State's actions do not constitute a
  "suit" or "claim"  for damages as those terms are used by the policy and
  that there has not been "bodily injury" or  "property damage" as defined by
  the policy.