RENDERED: AUGUST 19, 2022; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2021-CA-0683-MR
NATIONWIDE GENERAL APPELLANT
INSURANCE COMPANY
APPEAL FROM LETCHER CIRCUIT COURT
v. HONORABLE JAMES W. CRAFT, II, JUDGE
ACTION NO. 18-CI-00240
MELISSA STURGILL APPELLEE
OPINION
REVERSING AND REMANDING
** ** ** ** **
BEFORE: ACREE, GOODWINE, AND L. THOMPSON, JUDGES.
ACREE, JUDGE: Appellant, Nationwide General Insurance Company, appeals
the Letcher Circuit Court’s June 2, 2021 order granting summary judgment in
favor of Appellee, Melissa Sturgill. Finding the circuit court erred, we reverse.
BACKGROUND
On April 10, 2018, Hiram Caudill was driving a 1992 Peterbilt
Rollback flatbed truck, when he collided with Appellee’s vehicle. Triple Lee
Contracting, LLC (Triple Lee), a Kentucky business, owned the truck. Mr.
Caudill’s wife, Minerva Caudill, owned and operated Triple Lee. Triple Lee held a
commercial insurance policy with National Indemnity Insurance (NII) to provide
coverage for the truck. At the time of the accident, Mr. Caudill was using the truck
to deliver logs on behalf of Triple Lee.
Triple Lee did not directly employ or compensate Mr. Caudill.
However, he would occasionally help by delivering logs to wholesale purchasers,
among other tasks. In her deposition, Mrs. Caudill agreed her husband “had free
access” to use the Peterbilt truck, and Triple Lee made the truck available to him
“any time he wanted to use it.”
At the time of the accident, two of Appellant’s insurance policies (the
Agreements) provided certain coverage for vehicles belonging to Mr. Caudill as
the “named insured.” Each policy covered two different vehicles. The Peterbilt
truck was not listed as a covered vehicle in either policy. The Agreements contain
identical terms of coverage.
Appellee filed suit against Mr. Caudill and Triple Lee for negligence,
compensatory damages, and punitive damages following the automobile accident.
Appellee then filed a Petition for Declaratory Judgment against Appellant, wherein
Appellee sought additional coverage under the Agreements, notwithstanding that
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the Peterbilt truck was not a vehicle expressly covered. The trial court bifurcated
the original personal injury action and the declaratory judgment action.
Both Appellee and Appellant moved for summary judgment in the
declaratory judgment action. Appellee argued the agreements provided coverage
because the terms were sufficiently broad to cover Mr. Caudill’s use of the
Peterbilt truck at the time of the collision. Appellant argued to the contrary. The
circuit court agreed with Appellee and granted summary judgment in her favor.
This appeal followed.
STANDARD OF REVIEW
The parties agree there are no genuine issues of material fact, making
this a case involving only contract interpretation. “The interpretation of a contract,
including determining whether a contract is ambiguous, is a question of law to be
determined de novo on appellate review.” Kentucky Shakespeare Festival, Inc. v.
Dunaway, 490 S.W.3d 691, 695 (Ky. 2016) (citation omitted).1
ANALYSIS
We conclude that the trial court erred in granting summary judgment
in favor of Appellee. While the Agreements do contemplate potential coverage for
1
We note that Appellant’s brief deviates significantly from the requirement of Kentucky Rules
of Civil Procedure (CR) 76.12(4)(c)(v) because it fails to demonstrate in its argument section
that each argument presented therein was properly preserved for appellate review. We choose
not to strike Appellant’s brief, though controlling precedent gives us the power to do so at our
discretion. This decision should not be interpreted as indicating a policy of leniency.
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a vehicle Mr. Caudill drives other than one which would qualify as a “covered
auto,” there are also exclusions from coverage. Upon application of Kentucky’s
jurisprudence interpreting insurance contracts, we conclude the Agreements’
language describing the exclusion show as a matter of law that Appellant is not
obligated to provide coverage for damages resulting from the accident.
If the language of an insurance contract has two constructions, “the
one most favorable to the insured must be adopted.” Wolford v. Wolford, 662
S.W.2d 835, 838 (Ky. 1984) (citing Louisville Gas & Elec. v. Am. Ins., Co., 412
F.2d 908 (6th Cir. 1969)). But, “where not ambiguous, the ordinary meaning of
the words chosen by the insurer is to be followed.” James Graham Brown Found.,
Inc. v. St. Paul Fire & Marine Ins., Co., 814 S.W.2d 273, 279 (Ky. 1991) (citing
Washington Nat’l Ins. v. Burke, 258 S.W.2d 709 (Ky. App. 1953)).
The Agreements specifically provide what vehicles are covered by the
policies in their Definitions:
J. “Your covered auto” means:
1. Any vehicle shown in the Declarations.
2. A “newly acquired auto.”
3. Any “trailer” you own.
4. Any auto or “trailer” you do not own while used as a
temporary substitute for any other vehicle described in
this definition which is out of normal use because of its:
a. Breakdown;
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b. Repair;
c. Servicing;
d. Loss; or
e. Destruction.
Although Appellant contends this definition specifically excludes from coverage
any accident occurring while Mr. Caudill was driving a non-covered vehicle,
subsequent portions of the Agreements do not support that interpretation. They do,
however, provide as follows:
PART A – LIABILITY COVERAGE
INSURING AGREEMENT
A. We will pay damages for “bodily injury” or “property
damage for which any “insured” becomes legally
responsible because of an auto accident. . . . We will
settle or defend, as we consider appropriate, any
claim or suit asking for these damages. . . . We have
no duty to defend any suit or settle any claim for
“bodily injury” or “property damage” not covered
under this policy.
B. “Insured” as used in this Part means:
1. You or any “family member” for the ownership,
maintenance or use of any auto or “trailer.”
2. Any person using “your covered auto.”
The Agreements are plainly and unambiguously drafted to contemplate situations
in which Appellant is obligated to provide coverage to Mr. Caudill for his
operation of vehicles other than a “covered auto.” Appellant is required to provide
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coverage if any “insured” is involved in an auto accident, and the Agreements
specifically define “insured” to include Mr. Caudill while using any auto.
That is different than the interpretation Appellant wants to give the
Agreements. Appellant prefers an interpretation of “insured” as anyone who
operates a “covered auto.” And yet, if Appellant wanted the Agreements to
provide coverage to Mr. Caudill only while he is driving a “covered auto,” then the
Agreements could have explicitly so stated.
However, the undisputed facts of this case, when applied to the
Agreements’ exclusion provisions, clearly exclude Mr. Caudill’s operation of the
Peterbilt truck from coverage as a matter of law. “[E]xclusion clauses do not grant
coverage; rather, they subtract from it.” Kemper Nat’l Ins. Cos. v. Heaven Hill
Distilleries, Inc., 82 S.W.3d 869, 872 (Ky. 2002) (quoting Harrison Plumbing &
Heating, Inc. v. New Hampshire Ins., 681 P.2d 875, 880 (Wash. App. 1984)).
“Because coverage exclusions are ‘contrary to the fundamental protective purpose
of insurance,’ they are ‘strictly construed against the insurer’ and ‘will not be
extended beyond their clear and unequivocal meaning.’” Id. at 873 (quoting
Diamaco, Inc. v. Aetna Cas. and Sur. Co., 983 P.2d 707, 711 (Wash. App. 1999)).
“In Kentucky, the exclusionary or limiting language in policies of automobile
insurance must be clear and unequivocal and such policy language is to be strictly
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construed against the insurance company and in favor of the extension of
coverage.” Nationwide Mut. Ins. Co. v. Hatfield, 122 S.W.3d 36, 39 (Ky. 2003).
In its order, the trial court determined there was no genuine issue
regarding the material facts that Mr. Caudill was not an employee of Triple Lee
and that he was not performing employment duties for Triple Lee at the time of the
accident. Finding Mr. Caudill was not an employee of Triple Lee but instead was a
“consensual driver,” the trial court concluded that Appellee was entitled to
judgment as a matter of law.
The Agreements contain two exclusions related to the operation of
vehicles for compensation or while engaged in business. As relevant to the present
appeal, the two exclusions provide as follows:
EXCLUSIONS
A. We do not provide Liability Coverage for any
“insured”:
....
5. For that “insured’s” liability arising out of
the ownership or operation of a vehicle
while it is being used:
....
a. To carry persons or property for a fee or
compensation. . . .
7. Maintaining or using any vehicle while that
“insured” is employed or otherwise engaged
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in any “business” (other than farming or
ranching) not described in Exclusion A.6.
This exclusion (A.7.) does not apply to the
maintenance or use of a:
a. Private passenger auto;
b. Pickup or van; or
c. “Trailer” used with a vehicle described in
a. or b. above.
The record is clear Mr. Caudill was not an employee of Triple Lee at
the time he was involved in the accident, nor has he ever been an employee or
independent contractor of Triple Lee. But the record also shows without dispute
that a purchaser paid Triple Lee $721.99 for the logs Mr. Caudill was transporting.
Mr. Caudill also stated in his deposition he assisted his wife by lending a hand at
Triple Lee because “financially, what helps her helps him.”
Regardless, the above exclusions are inherently ambiguous. The
Agreements’ coverage exclusion for carrying property for a fee or compensation
could be interpreted broadly to mean Appellant will not provide coverage in any
instance where Mr. Caudill either is paid while operating a vehicle or when Mr.
Caudill carries property which is then sold; conversely, the exclusion could be
construed narrowly to deny coverage when Mr. Caudill is compensated directly.
Similarly, the coverage exclusion for the use of a vehicle while Mr. Caudill is
employed or otherwise engaged in business could be read broadly to mean that
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coverage is excluded for any instance where operation of a vehicle is related to
profit-generating activities; the exclusion could also be construed narrowly to
mean that coverage is only excluded where Mr. Caudill is operating a vehicle
pursuant to an employment or independent contractor relationship or where Mr.
Caudill is being paid directly.
When strictly construing the above exclusions against Appellant and
in favor of Mr. Caudill, as Kentucky law requires, these exclusions do not operate
to exclude the accident from coverage. When read narrowly, these exclusions
contemplate situations where an insured driver is operating a vehicle as an
employee, while performing employment duties, or to be compensated directly.
As the trial court noted in its order, Mr. Caudill lacked an employment relationship
with Triple Lee. Mr. Caudill was not an independent contractor and was not paid
directly for operating the Peterbilt truck. Accordingly, as a matter of law, the
above exclusions do not release Appellant from its obligation to provide coverage
for the accident.
However, the Agreements provide a third exclusion relevant to this
appeal, which Appellant offered for the trial court’s consideration, and for this
Court’s consideration in its brief. (Appellant’s brief, p. 2.) This exclusion
provides as follows:
B. We do not provide Liability Coverage for the
ownership, maintenance, or use of:
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....
2. Any vehicle, other than “your covered auto,”
which is:
a. Owned by you; or
b. Furnished or available for your regular use.
There is no ambiguity in this exclusion-from-coverage provision. If the record
shows no genuine issue of material fact that the Peterbilt truck was available for
Mr. Caudill’s regular use, the Agreements provide no liability coverage if he is
involved in an accident while driving it.
Upon review of the record, there is no genuine dispute that the
Peterbilt truck was available for Mr. Caudill’s regular use, and Mr. Caudill’s
access to the truck is clearly a material fact relative to the applicability of the above
exclusion. Both Mr. Caudill and Mrs. Caudill expressly testified in their
depositions that Mr. Caudill could use the Peterbilt truck whenever he wanted to
use it. All that is required by the plain language of this exemption is that the truck
is available for Mr. Caudill’s regular use, not that Mr. Caudill used the truck on a
regular basis or in a regular manner. The “available for your regular use”
exclusion applies here.
Where no genuine issue of material fact exists within an appellate
record, we owe no deference to a trial court’s assessment of the record or its
application of law to facts when it granted summary judgment. Hammons v.
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Hammons, 327 S.W.3d 444, 448 (Ky. 2010) (citing CR 56.03). Thus, even upon
strictly construing the above exclusion in favor of the insured as Kentucky
jurisprudence requires, we find that the trial court erred in determining that
Appellee was entitled to summary judgment as a matter of law.
Because we have determined that Appellant was not obligated to
provide insurance coverage for the accident and therefore that Appellee was not
entitled to summary judgment, we need not reach Appellant’s other arguments
which we deem moot.
CONCLUSION
Based on the foregoing, we reverse the Letcher Circuit Court’s June 2,
2021 order granting summary judgment in favor of Appellee and remand this case
with instructions to enter summary judgment in favor of Appellant.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
C.V. Reynolds Daniel F. Dotson
Lisa Stumbo Whitesburg, Kentucky
Prestonsburg, Kentucky
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