Opinion
No. 56992-9-I.
December 18, 2006.
Appeal from a judgment of the Superior Court for King County, No. 04-2-04249-6, Jay V. White, J., entered September 9, 2005.
Counsel for Appellant(s) Andrew H. Salter, Salter Joyce Ziker PLLC, Seattle, WA, 98101-1627.
Todd W Wyatt, Salter Joyce Ziker, Seattle, WA, 98101-1627.
Counsel for Defendant(s) James Aldon Cathcart, Morton McGoldrick PS, Tacoma, WA, 98402-5293.
Counsel for Respondent(s) Michael Simpson Rogers, Reed McClure, Two Union Square, Seattle, WA, 98101-1363.
Affirmed by unpublished opinion per Coleman, J., concurred in by Grosse and Dwyer, JJ.
The estate of Edward Alderette appeals the trial court's judgment that the State Farm contractors liability insurance policy purchased by Zahnow Brothers Tile, Inc., does not provide coverage for the personal injury and property damage caused by Joshua Johnson, a Zahnow Brothers Tile, Inc., employee. Johnson caused an accident that damaged Alderette's vehicle and inflicted injuries that caused Alderette's death. Johnson caused the accident while driving from a park and ride after work in a truck he purchased from Zahnow Brothers Tile, Inc. The contractors liability insurance policy at issue only provides coverage for automobile related claims if the automobile was a "nonowned auto" used in the corporation's business. Employees are "insureds" under the policy only if acting within the scope of their employment. We affirm the trial court because Johnson was outside the scope of his employment when he caused the accident, the truck was not used in connection with the corporation's business, and the terms "scope of employment" and "own" are not ambiguous.
FACTS
The Truck
Brothers Brian Zahnow and Brandon Zahnow formed a partnership called "Zahnow Brothers Tile" (the partnership) on August 21, 2001. The partnership operated the tile installation business previously operated by Brian as a sole proprietorship. On September 28, 2001, the partnership purchased a 1998 Ford Ranger truck. The truck was registered in the name of Brian D. Zahnow, dba Zahnow Tile. Ford Motor Credit was the lienholder on the truck and was listed on the title as the legal owner. State Farm issued an automobile insurance policy on the truck, with Zahnow Brothers Tile as the named insured.
Brian and Brandon incorporated their tile installation business on January 9, 2002, naming it "Zahnow Brothers Tile, Inc." (the corporation). Brian was the president and Brandon the vice president; each brother owned 50 percent of the stock, and each brother was a director. After incorporation, the corporation paid the monthly payments for the loan on the truck. The corporation paid all expenses for the truck, including insurance, fuel and maintenance. It deducted truck expenses and depreciation for tax purposes and represented to the IRS on its 2002 income tax return that it owned the truck. Brian used the truck primarily for corporate business.
On May 20, 2002, the corporation requested that the named insured for the State Farm automobile insurance policy on the truck be changed to Zahnow Brothers Tile, Inc. The brothers did not change the name of the registered owner from the partnership to the corporation because they did not want to jeopardize the loan, which was not satisfied in full.
Joshua Johnson
Brian originally hired Joshua Johnson as a helper in 2000, when Johnson was 16 years old. At the time, Brian operated a sole proprietorship and had no other employees. Brian lived within a couple miles of Johnson and would drive Johnson to work. Johnson did not have a driver's license and had no other way to get to work.
Brian's business grew and became a union shop in 2001. In its agreement with the union, the business was not required to provide transportation to the jobsite. Johnson joined the union. He would often work at a jobsite that Brian was not driving to in the morning. Brian also moved to Milton, making driving Johnson to work inconvenient. In 2002, Brian drove Johnson to work infrequently. Instead, Johnson would frequently ride to work in a carpool organized by fellow workers. Johnson obtained his driver's license on August 21, 2002, and would, on occasion, drive a vehicle owned by his parents to the location where the carpool would meet.
The Sale of the Truck
The brothers considered selling the truck to Johnson. They discussed the terms of the sale and agreed to sell the truck to Johnson. Johnson was excited to be purchasing the truck. On September 28, 2002, the brothers signed a bill of sale providing: "Zahnow Bros. Tile Inc. sold to Joshua Johnson the above described 1998 Ford Ranger for 300.00 down and assumption of payments of 186.00 per month." That same day, Brian gave the truck's keys to Johnson. Johnson then drove the truck to his home. Johnson had continuous possession of the truck until the accident on October 21, 2002. Brian and Johnson both understood at the time they signed the bill of sale that Johnson had purchased the truck.
Above the language of the bill of sale was a photocopy of the insurance card for the State Farm automobile insurance policy issued to the corporation on the truck. Brian and Johnson agreed that the corporation would maintain its auto liability insurance policy on the truck for 30 days, giving Johnson time to acquire his own insurance. On October 3, the corporation added Johnson as an additional driver under its State Farm auto liability policy on the truck.
About a week after the signing of the bill of sale, Brandon suggested to Johnson that he not make significant changes to the truck, such as raising or lowering it, until the loan was satisfied in full. Johnson was angry about this suggestion because he believed he owned the truck. The trial court found that this suggestion was not part of the agreement between the parties.
After purchasing the truck, Johnson bought and installed floor mats and a steering wheel cover. He paid for an oil change and fuel and was not reimbursed by the corporation for either. He used the truck for personal use, including driving his girlfriend, brother, and friends. He drove it to and from his girlfriend's house.
Johnson testified that he did not think he owned the truck and that he believed limitations were placed on its use. He testified that he believed he could not sell the truck. The court did not find this testimony credible. It found that this testimony was influenced by Johnson's sympathy for Alderette and for those who were close to him.
The Accident
On the morning of October 21, 2002, Johnson drove the truck to a park and ride, where a co-worker, Anthony Persons, picked up him and another co-worker to carpool to work. After work, Persons drove Johnson back to the park and ride. Johnson left the park and ride in his truck, heading home. On his way home, he caused the accident that resulted in Alderette's death.
Johnson called Brian from the scene of the accident. Brian went to the accident and told police that he was the owner of the truck. The trial court found that he made these statements out of a desire to make sure Johnson would have coverage under the State Farm auto insurance policy.
At the time of the accident, Johnson was named as an insured on the State Farm automobile liability policy for the truck. State Farm paid the estate the liability coverage limit for that policy.
The Contractors Liability Insurance Policy
State Farm issued the corporation a contractors liability insurance policy. This policy was in effect at the time of the accident. In general, the policy does not cover bodily injury or property damage arising out of the use of automobiles. The policy contains an exception, however, for "non-owned autos." The policy provides as follows:
Under Coverage L, this insurance does not apply:
7. to bodily injury or property damage arising out of the ownership, maintenance, use or entrustment to others of any aircraft, auto or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and loading or unloading.
This exclusion does not apply to:
. . .
e. bodily injury or property damage arising out of the use of any non-owned auto in your business by any person other than you[.]
"You" and "your" refer to the corporation. The policy defines "non-owned auto" as "any auto you do not own, lease, hire or borrow which is used in connection with your business." The policy provides that employees are "insured" but "only for acts within the scope of their employment by you."
The Trial
The trial arose out of two lawsuits: (1) a personal injury lawsuit filed by the estate against the corporation, Brian and his former wife, Brandon and his wife, and Johnson and (2) a declaratory judgment action filed by State Farm relating to coverage under the contractors liability policy. The parties stipulated that Johnson's negligence was the sole cause of the automobile accident. One of the purposes of the trial was to determine whether there was coverage under the contractors liability policy for the estate's claims.
The court concluded that the contractors liability policy did not provide coverage for the estate's claims. In the court's ruling, it found that the corporation owned the truck and then sold it to Johnson on September 28, 2002. It found that Johnson was the owner of the truck at the time of the accident, making the truck a "non-owned auto," but there was still no coverage because he was outside the scope of his employment when he caused the accident.
The court also concluded, in the alternative, that coverage was excluded even if another party owned the truck, such as the partnership or one of the Zahnow brothers personally, because the truck was not used in connection with the corporation's business (for the same reasons that Johnson was outside the scope of his employment when he caused the accident). We affirm for the reasons stated below.
ANALYSIS
Coverage Under The Contractors Liability Policy
State Farm argues that the contractor liability policy's nonowned auto exception does not provide coverage. Employees are insured under the nonowned auto exception only for acts within the scope of their employment. Additionally, a nonowned auto must be "used in connection with your business." The facts relating to whether Johnson was within the scope of his employment and whether the truck was used in connection with the corporation's business are uncontested. We conclude that the nonowned auto exception does not provide coverage because Johnson was outside the scope of his employment when he caused the accident and the truck was not used in connection with the corporation's business.
Johnson was not an insured under the policy because he was outside the scope of his employment at the time of the accident. A worker is not acting within the scope of employment while going to or from the employer's place of business. Elder v. Cisco Constr. Co. 52 Wn.2d 241, 244, 324 P.2d 1082 (1958). Under an exception, a worker is in the course of employment while going to or from work in a vehicle furnished by his employer as an incident to his employment pursuant to custom or contractual obligation. Westinghouse Elec. Corp. v. Dep't of Labor Indus., 94 Wn.2d 875, 880, 621 P.2d 147 (1980). The trial court found that the corporation "was not required by custom or contract to supply any workers with trucks" or "transportation to jobsites." CP 1103. This finding of fact is a verity on appeal because the estate does not challenge it. Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 808, 828 P.2d 549 (1992). Johnson was outside the scope of his employment at the time of the accident because (1) a worker is not acting within the scope of employment while going to or from the employer's place of business and (2) Johnson was not furnished with the truck as an incident to his employment pursuant to custom or contractual obligation.
State Farm argues that this exception for vehicles furnished by an employer should not apply here because it is taken from workers compensation law, where "course of employment" is arguably a broader concept than "scope of employment." We do not have to decide whether this exception should apply outside the context of a workers compensation case because we conclude that the truck was not furnished to Johnson by the corporation as an incident to his employment pursuant to custom or contractual obligation.
There is also no coverage because the truck was not used in connection with the corporation's business. The exception for nonowned autos provides coverage for "bodily injury or property damage arising out of the use of any non-owned auto in your business by any person other than you." The policy defines "non-owned auto" as "any auto you do not own, lease, hire or borrow which is used in connection with your business." The truck was not used in connection with the corporation's business for the same reasons Johnson was outside the scope of his employment when he caused the accident. Additionally, there is no record of him ever using the truck at work.
Ambiguous Policy Language
The estate argues that if a reasonable lay person could believe that Johnson was within the scope of his employment when he caused the accident, then "scope of employment" is ambiguous and the court must conclude that Johnson was within the scope of his employment when he caused the accident. The trial court was not required to adopt an interpretation of the facts that results in coverage. The trial court was required to construe ambiguous policy language in favor of the person claiming coverage. Dairyland Ins. Co. v. Ward, 83 Wn.2d 353, 358, 517 P.2d 966 (1974). But it was not required to construe facts relating to coverage in favor of the person claiming coverage. See Wear v. Farmers Ins. Co., 49 Wn. App. 655, 658, 745 P.2d 526 (1987) ("Construing ambiguities against insurance companies is a rule of insurance contract construction, not a rule of verdict construction.")
The estate relies on Robinson v. PEMCO Ins. Co., 71 Wn. App. 746, 862 P.2d 614 (1993) for its theory of insurance policy interpretation. In Robinson, the court stated, "The nonowned vehicle clause at issue is an inclusionary clause, which is liberally construed to provide coverage." Robinson, 71 Wn. App. at 750. First, the Robinson court did not state that in interpreting such clauses, the court must construe facts relating to coverage in favor of the person claiming coverage. Second, the nonowned vehicle inclusionary clause in Robinson was very different from the owned vehicle exclusion at issue here. The policy in Robinson provided the named insured with coverage for "other cars you use with THE permission of the owner." Robinson, 71 Wn. App. at 749. The court engaged in a lengthy discussion of the purpose of the provision, which was to "protect the insured on those infrequent occasions when he is driving other people's vehicles which might not be insured." Robinson, 71 Wn. App. at 751. In contrast, the obvious purpose of the exclusion in the State Farm contractors liability policy is to exclude coverage for automobile-related claims, except under limited circumstances. Robinson is not helpful in deciding this case because it concerned a wholly different kind of insurance provision.
Additionally, "scope of employment" is not an ambiguous term in this case. If policy language is clear and unambiguous, the court must enforce it as written and may not modify the contract or create ambiguity where none exists. Transcontinental Ins. Co. v. Washington Pub. Utils. Dists. Util. Sys., 111 Wn.2d 452, 456, 760 P.2d 337 (1988). Where the common person would understand that a term has legal significance, the court will give the term its legal meaning. State Farm Mut. Auto. Ins. Co. v. Ruiz, 134 Wn.2d 713, 720, 952 P.2d 157 (1998) (giving the term "residing with" its legal meaning). Here, the common person would understand that "scope of employment" has a legal meaning. The court correctly gave "scope of employment" its legal meaning.
"Own" is also not an ambiguous term in the context of this case. "Own" is not defined in the policy. The court first looks to the dictionary definition. State Farm v. English Cove Assocs., 121 Wn. App. 358, 364, 88 P.3d 986 (2004). Webster's Third International Dictionary 1612 (1969) defines "own" as "[t]o have or hold as property or appurtenance: have a rightful title to, whether legal or natural: possess." Washington courts have identified the chief indicia of ownership of property as the right to its possession, use and enjoyment, and to sell or otherwise dispose of it according to the will of the owner. English Cove, 121 Wn. App. at 364. This court has held that "own" is not ambiguous in the context of an insurance policy. See English Cove, 121 Wn. App. at 367 — 69 ("own" not ambiguous in the context of an exclusion in a general liability policy purchased by a condominium developer). Ownership of a vehicle is a question of fact. See Coffman v. McFadden, 68 Wn.2d 954, 960, 416 P.2d 99 (1966) (ownership of a vehicle under the family car doctrine is a question of fact to be resolved by the jury).
Here, the facts regarding the ownership of the truck were disputed. This does not mean, however, that the term "own" was ambiguous as used in the policy. "The intent of the insurance contract is to be determined from the language viewed in context with the factual circumstances." Gingrich v. Unigard Sec. Ins. Co., 57 Wn. App. 424, 430-31, 788 P.2d 1096 (1990). In determining ownership, the court should examine the indicia of ownership (right to possession, use and enjoyment, and to sell or otherwise dispose of property according to the will of the owner) and the nature of the transaction by which the indicia of ownership are acquired. Gingrich, 57 Wn. App. at 430-31.
The trial court determined ownership in this way and found that Johnson was the owner of the truck. The bill of sale stated that "Zahnow Bros. Tile Inc. sold to Joshua Johnson the above described 1998 Ford Ranger." Brian and Johnson testified that they understood at the time they signed the bill of sale that Johnson had purchased the truck. Johnson testified that he was excited to be purchasing the truck. Johnson had continuous possession of the truck from the day he signed the bill of sale until the day of the accident. Johnson bought and installed floor mats and a steering wheel cover. He used the truck for personal use, including driving his girlfriend, brother, and friends. The court concluded that "own" was not ambiguous in the context of this case.
The estate argues that under Farmers Ins. Co. v. USFG Co., 13 Wn. App. 836, 537 P.2d 839 (1975), the term "ownership" is always ambiguous in a nonowned automobile clause. The Farmers court held that the term "owner" in a nonowned vehicle clause was ambiguous. Farmers 13 Wn. App. at 843. The estate's reliance on Farmers is misplaced, however, for four reasons. First, the Farmers court did not hold that "owner" was always ambiguous in an insurance policy. The Farmers court limited its conclusion to the insurance policy at issue in that case. See Farmers 13 Wn. App. at 843 ("In view of the rules of construction and our determination that the term `owner' is ambiguous as used in Farmers policy . . .) (emphasis added). Second, the court in Gingrich declined to follow Farmers, stating that "[t]he precise holding of Farmers has not been followed in Washington." Gingrich, 57 Wn. App. at 430 n. 5. The Gingrich court instead followed the "more recent Washington cases which view the matter as an issue of law." Gingrich, 57 Wn. App. at 430. In determining ownership, the Gingrich court examined the indicia of ownership (right to possession, use and enjoyment, and to sell or otherwise dispose of property according to the will of the owner) and the nature of the transaction by which the indicia of ownership are acquired. Gingrich, 57 Wn. App. at 430-31. The trial court in this case determined the issue of ownership in the same way. Third, Farmers is factually dissimilar because the issue there was whether a consignee had authority to give a third party permission to use a vehicle under an automobile liability insurance policy. This case concerns a contractors liability policy that generally excludes automobile related claims. Finally, Farmers is irrelevant because the policy at issue in this case does not provide coverage no matter who owned the truck. If the corporation owned the truck, there is no coverage because the policy only covers "non-owned autos." If another party owned the truck, such as Johnson or the partnership, there is no coverage because Johnson was outside the scope of his employment at the time of the accident and the truck was not used in the corporation's business.
For the foregoing reasons, we affirm.