An unpublished opinion of the North Carolina Court of Appeals does not constitute
controlling legal authority. Citation is disfavored, but may be permitted in accordance
with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
NO. COA13-83
NORTH CAROLINA COURT OF APPEALS
Filed: 21 January 2014
NAYLOR CONCRETE CONSTRUCTION CO., INC.,
Plaintiff
Mecklenburg County
v.
No. 10 CVS 7027
MID-CONTINENT CASUALTY COMPANY,
Defendant
Appeal by plaintiff from order entered 2 April 2012 by
Judge W. Erwin Spainhour in Mecklenburg County Superior Court.
Heard in the Court of Appeals 13 August 2013.
Grimes Teich Anderson, LLP, by Scott M. Anderson and
Jessica E. Leaven; Farah & Farah, P.A., by Kevin M. Elwell,
for Plaintiff.
Yates, McLamb & Weyher, L.L.P., by Rodney E. Pettey and
Jennifer D. Maldanado, for Defendant.
ERVIN, Judge.
Plaintiff Naylor Concrete Construction Company, Inc.,
appeals from an order entering summary judgment in favor of
Defendant Mid-Continent Casualty Company with respect to
Plaintiff’s claim that Defendant had unlawfully refused to
provide coverage for Plaintiff in a tort action brought by an
individual employed by CDI Contractors, LLC, one of Plaintiff’s
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subcontractors, against Plaintiff. On appeal, Plaintiff
contends that the trial court erroneously granted summary
judgment in Defendant’s favor on the grounds that an exclusion
obviating the necessity for Defendant to provide coverage for an
employee of an insured should not be construed so as to
encompass the employee of a subcontractor because (1) the
relevant exclusion, which had been drafted by Defendant, was
ambiguous and should, for that reason, be construed in such a
manner as to afford coverage under the “reasonable expectations”
doctrine; (2) an endorsement modifying the exclusion at issue in
this case was couched in unduly obscure and technical language
and had been unfairly hidden within the policy; and (3), even if
the relevant exclusion was not itself ambiguous, that language,
when read in conjunction with the policy’s severability
provision, precluded the entry of summary judgment in
Defendant’s favor. After careful consideration of Plaintiff’s
challenges to the trial court’s order in light of the record and
the applicable law, we conclude that the trial court’s order
should be affirmed.
I. Factual Background
A. Substantive Facts
On 15 August 2004, CDI entered into an agreement with
Dillard’s, Inc., for the construction of a retail facility at
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Northlake Mall in Charlotte. On 15 September 2004, CDI entered
into a subcontract with Plaintiff relating to work to be
performed on the Dillard’s project. According to the agreement
between CDI and Plaintiff, Plaintiff was required to indemnify
CDI for any liability arising from work performed in connection
with the Dillard’s project and to obtain various types of
insurance coverage, including workers’ compensation and general
liability insurance, under which both Plaintiff and CDI would be
covered.
In compliance with this and similar contractual
obligations, Plaintiff had obtained a policy of commercial
general liability insurance from Defendant applicable to the
year beginning 1 April 2004, which policy designated Plaintiff
as the named insured and, under a blanket endorsement, treated
CDI as an additional insured. According to the policy that
Plaintiff procured from Defendant, Defendant would provide
coverage for bodily injury occurring during the policy period
and defend the named insureds in the event that a claim arising
from a covered injury was asserted against one or more of them.
The policy that Plaintiff procured from Defendant also included
a number of exclusions, including an “Employer’s Liability”
exclusion which provided that no coverage would be afforded for
bodily injury claims arising out of employment by “any insured.”
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On 30 December 2004, Jennifer Marshall, a CDI employee, was
working at the construction site when a backhoe operated by one
of Plaintiff’s employees struck her and pinned her between the
wheel of the backhoe and a nearby column. As a proximate result
of this accident, Ms. Marshall sustained a number of serious
injuries, including four cracked ribs, four pelvic fractures,
and a punctured colon. A workers’ compensation claim brought by
Ms. Marshall against CDI arising from this accident was
eventually settled.
On 30 October 2007, CDI instituted an action against
Plaintiff pursuant to N.C. Gen. Stat. § 97-10.2 for the purpose
of obtaining an award of damages from Plaintiff stemming from
the injuries that Ms. Marshall had sustained and the resulting
necessity for CDI to provide workers’ compensation benefits to
Ms. Marshall. On 17 December 2007, Defendant sent a letter to
Plaintiff for the purpose of informing Plaintiff that Defendant
would not provide Plaintiff with a defense in that action on the
grounds that it was investigating the extent, if any, to which
CDI’s claim was covered under the relevant policy. On 28
December 2007, Ms. Marshall filed a complaint alleging that she
was entitled to recover damages from Plaintiff as the result of
the injuries that she had sustained because of the negligence of
Plaintiff’s employee. On 11 February 2008, Defendant sent a
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letter to Plaintiff declining to provide Plaintiff with a
defense or coverage in either case.
On 6 August 2008, a motion filed by Ms. Marshall seeking
leave to intervene in the action brought against Plaintiff by
CDI was allowed. On 11 August 2008, Ms. Marshall voluntarily
dismissed the action that she had brought against Plaintiff. In
an order filed on 3 November 2008, the trial court determined
that Ms. Marshall was the real party in interest in the action
that had originally been filed against Plaintiff by CDI and that
“the caption of [the] action” should reflect that fact in the
future. After a bench trial in that case, the trial court
entered a judgment on 18 May 2009 awarding Ms. Marshall more
than $1,000,000 in damages.
B. Procedural Facts
On 29 March 2010, Plaintiff filed a complaint seeking a
declaration that Defendant should have provided it with coverage
and a defense in the action which led to the entry of the 18 May
2009 judgment and the recovery of damages for unfair and
deceptive trade practices, a bad faith refusal to provide
coverage and a defense, and breach of contract.1 On 12 October
2011, Defendant filed a motion seeking the entry of summary
judgment in its favor on the grounds that, among other things,
1
In its brief, Plaintiff expressly abandoned its bad faith
and unfair and deceptive trade practices claims.
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Ms. Marshall was “an employee of an additional insured under the
Policy and the Employer’s Liability Exclusion Endorsement
precludes coverage to an employee of any insured.” On the same
date, Plaintiff filed a motion seeking the entry of summary
judgment in its favor. On 2 April 2012, the trial court entered
an order granting Defendant’s motion for summary judgment,
denying Plaintiff’s motion for summary judgment, and dismissing
Plaintiff’s complaint with prejudice. Plaintiff noted an appeal
to this Court from the trial court’s order.
II. Legal Analysis
A. Choice of Law
As an initial matter, we must identify the law which
governs the resolution of this case. In its complaint,
Plaintiff contended that, although the policy had been issued
and delivered in Oklahoma, North Carolina law should be applied
for the purpose of resolving the present case on the grounds
that the policy in question should be deemed to be a North
Carolina contract pursuant to N.C. Gen. Stat. § 58-3-1. On the
other hand, Defendant contended in the trial court that this
case should be resolved in accordance with Oklahoma law.
Although Plaintiff appears to have conceded the correctness of
Defendant’s position for purposes of the proceedings on appeal,
an evaluation of the parties’ apparent agreement that Oklahoma
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law must be utilized to resolve the present dispute remains
appropriate.
“Traditionally, lex loci or the law of the place where a
contract is made determines matters bearing on the execution,
interpretation, and validity of the contract.” Home Indem. Co.
v. Hoechst Celanese Corp., 128 N.C. App. 113, 119, 493 S.E.2d
806, 810 (1997). According to N.C. Gen. Stat. § 58-3-1:
All contracts of insurance on property,
lives, or interests in this State shall be
deemed to be made therein, and all contracts
of insurance the applications for which are
taken within the State shall be deemed to
have been made within this State and are
subject to the laws thereof.
Although the provisions of N.C. Gen. Stat. § 58-3-1 apply in the
event that “a close connection exists between this State and the
interests insured by an insurance policy,” “the mere presence of
the insured interests in this State at the time of an accident
does not constitute a sufficient connection to warrant
application of North Carolina law.” Fortune Ins. Co. v. Owens,
351 N.C. 424, 428, 526 S.E.2d 463, 466 (2000).
The undisputed information contained in the present record
establishes that Defendant is an Oklahoma corporation which is
not registered to do business in North Carolina and that the
policy in question in this proceeding was both issued and
delivered in Oklahoma. For that reason, the only connection
-8-
between the policy at issue and this State is the fact that the
Dillard’s store at which Ms. Marshall was injured is located in
North Carolina. According to Fortune, such a connection does
not suffice to establish that North Carolina law should be
applied for the purpose of resolving the dispute between the
parties. As a result, given that the traditional “lex loci”
rule remains applicable in this jurisdiction and that the policy
in question in this case was “made” in Oklahoma, we agree with
the parties that we are required to apply Oklahoma law in
determining whether the trial court erred by granting summary
judgment in favor of Defendant.
B. Standard of Review
Although, as we have already noted, we must apply the
substantive law of Oklahoma, we are required to follow our own
procedural rules in resolving the dispute between the parties.
See Harco Nat’l Ins. Co. v. Grant Thornton, LLP, 206 N.C. App.
687, 690, 698 S.E.2d 719, 722 (2010) (quoting Boudreau v.
Baughman, 322 N.C. 331, 335, 368 S.E.2d 849, 853-54 (1988))
(stating that “[o]ur traditional conflict of laws rule is that
matters affecting the substantial rights of the parties are
determined by lex loci, the law of the situs of the claim, and
remedial or procedural rights are determined by lex fori, the
law of the forum”), disc. review denied, 365 N.C. 77, 706 S.E.2d
-9-
235 (2011). As a result, the applicable standard of review in
this case is the one dictated by North Carolina, rather than
Oklahoma, law.
“Orders of summary judgment are reviewed de novo by this
Court and the evidence is reviewed in the light most favorable
to the non-moving party.” Integon Nat’l Ins. Co. v.
VillaFranco, __ N.C. App. __, __, 745 S.E.2d 922, 925 (2013).
As a result, an order granting summary judgment in favor of a
particular party will be upheld when, viewed in the light most
favorable to the non-movant, “the pleadings, deposition, answers
to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue of
material fact” and that the prevailing party “is entitled to a
judgment as a matter of law.” Lunsford v. Renn, 207 N.C. App.
298, 303-04, 700 S.E.2d 94, 97 (2010) (quoting N.C. Gen. Stat. §
1A-1, Rule 56(c)), disc. review denied, 365 N.C. 193, 707 S.E.2d
244 (2011). We will now utilize this standard of review in
order to determine whether the trial court correctly granted
summary judgment in Defendant’s favor.
C. Employer’s Liability Provision
In its initial challenge to the trial court’s order,
Plaintiff contends that, in accordance with Oklahoma’s
“reasonable expectations” doctrine, the employer’s liability
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exclusion must be construed in such a manner as to give effect
to the parties’ expectations, which were, according to
Plaintiff, that the exclusion in question would only apply to
claims for which the named insured’s workers’ compensation
coverage was available. In Plaintiff’s view, given that Ms.
Marshall was employed by CDI and given that Ms. Marshall’s
injuries would not be covered by Plaintiff’s workers’
compensation insurance, the exclusion upon which Defendant
relies did not operate to bar Plaintiff’s request for coverage.
We do not find Plaintiff’s contention persuasive.
The “reasonable expectations” doctrine was adopted in
Oklahoma in Max True Plastering Company v. United States
Fidelity and Guaranty Company, 912 P.2d 861 (Okla. 1996).
“Under the reasonable expectations doctrine, the objectively
reasonable expectations of applicants, insureds and intended
beneficiaries concerning the terms of insurance contracts are
honored even though painstaking study of the policy provisions
might have negated those expectations.” Max True Plastering
Co., 912 P.2d at 862-63. As a result, under the “reasonable
expectations” doctrine, “if the insurer or its agent creates a
reasonable expectation of coverage in the insured which is not
supported by policy language, the expectation will prevail over
the language of the policy.” Id. at 864. On the other hand,
-11-
the doctrine upon which Plaintiff relies is subject to
reasonable limits given that, “[i]f the doctrine is not put in
the proper perspective, insureds could develop a ‘reasonable
expectation’ that every loss will be covered by their policy and
courts would find themselves engaging in wholesale rewriting of
insurance policies.” Id. at 868. For that reason, the
“reasonable expectations” doctrine only applies “to cases in
which policy language is ambiguous and to situations where,
although clear, the policy contains exclusions masked by
technical or obscure language or hidden exclusions.” Id. at
870.
1. Clarity of Policy Language
The first issue which we must address in order to determine
the applicability of the “reasonable expectations” doctrine is
whether the relevant policy provision is ambiguous. “It is
settled under Oklahoma’s extant jurisprudence that ascertaining
whether the terms of an insurance policy are ambiguous is for
the Court to determine as a matter of law.” Bituminous Cas.
Corp. v. Cowen Constr. Inc., 55 P.3d 1030, 1033 (Okla. 2002). A
careful examination of the relevant provisions of the policy
which Plaintiff procured from Defendant establishes that the
exclusion upon which Defendant relies is not ambiguous.
The exclusion at issue in this case provides that:
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This insurance does not apply to:
. . . .
“Bodily Injury” to:
(1) An “employee” of any Insured arising
out of and in the course of:
(a) Employment by any insured; or
(b) Performing duties related to the
conduct of the insured’s business;
or
. . . .
This exclusion applies:
(1) Whether the insured may be liable as an
employer or in any other capacity;
. . . .
(3) To liability assumed by any insured
under an “Insured contract”
According to the definitional provisions contained in the
policy, the term “insured” includes “any person or organization
qualifying as such under” the provision entitled “Who is An
Insured.” As a result, according to an endorsement in the
policy, the class of “insureds” included “[a]ny person or
organization for whom the named Insured has agreed by written
‘insured contract’ to designate as an additional insured subject
to all provisions and limitations of this policy.” In view of
the fact that the term “insured contract” is defined, in
pertinent part, in the policy as “[t]hat part of any other
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contract or agreement pertaining to your business . . . under
which you assume the tort liability of another party to pay for
‘bodily injury’ or ‘property damage’ to a third person or
organization” and the fact that Plaintiff had agreed to
indemnify CDI from any loss which CDI sustained as a result of
Plaintiff’s conduct, CDI was an additional insured for purposes
of the insurance policy that Plaintiff had purchased from
Defendant. As a result, according to Defendant, the relevant
exclusion unambiguously precludes a finding of coverage in this
instance because Ms. Marshall, as an employee of CDI, was
employed by and injured in the course and scope of her
employment with “any insured.”
According to Plaintiff, on the other hand, the language in
which the relevant exclusion is couched is ambiguous because the
result reached by analyzing the policy language in a literal
manner is contrary to the established purposes of and intentions
underlying similar exclusions on the grounds that such a literal
reading of the exclusion in question would unfairly leave
Plaintiff devoid of coverage in a situation which commonly
exists in the construction industry. Although Plaintiff’s
arguments have equitable appeal, we are unable to square them
with the fact that the reference to “any insured,” which is the
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operative policy language for purposes of our present inquiry,
is clear and unambiguous.
As all of the parties to this case acknowledge, an
insurance policy is a contract. According to well-established
Oklahoma law, “[t]he language of a contract is to govern its
interpretation, if the language is clear and explicit, and does
not involve an absurdity.” 15 Okla. Stat. § 154. Moreover,
“[w]hen a contract is reduced to writing, the intention of the
parties is to be ascertained from the writing alone, if
possible, subject, however, to the other provisions of this
article.” 15 Okla. Stat. § 155. Finally, “[a] contract may be
explained by reference to the circumstances under which it was
made, and the matter to which it relates.” 15 Okla. Stat. §
163. As a result, during the contract construction process:
[a] contract must be considered as a whole
so as to give effect to all its provisions
without narrowly concentrating upon some
clause or language taken out of context.
The language in a contract is given its
plain and ordinary meaning unless some
technical term is used in a manner meant to
convey a specific technical concept. The
court must interpret a contract so as to
give effect to the intent of the parties at
the time the contract was formed.
Mercury Inv. Co. v. F. W. Woolworth Co., 706 P.2d 523, 529
(Okla. 1985) (footnotes omitted) (citing 15 Okla. Stat. §§ 152,
157 and 160 (1985)). However, “[w]hen [the] terms [in which a
-15-
contract is couched] are unambiguous and clear, the employed
language is accorded its ordinary, plain meaning and enforced so
as to carry out the parties’ intentions.” Bituminous Cas.
Corp., 55 P.3d at 1033. In view of the fact that the parties do
not dispute that CDI was an “insured” as that term is used in
the relevant policy provision and that “any” is neither a
defined nor a “technical term . . . used in a manner meant to
convey a specific technical concept,” the term “any” must be
“given its plain and ordinary meaning,” during the process which
we utilize in determining whether the expression in question is
ambiguous. Mercury Inv. Co., 706 P.2d at 529.
Although “[a] contract term is ambiguous if it can be
interpreted as having two different meanings,” Equity Ins. Co.
v. City of Jenks, 184 P.3d 541, 544 (Okla. 2008), the
alternative meanings upon which a finding of ambiguity must
necessarily rest must arise from the relevant contractual
language rather than from some other source. For that reason,
the practical construction of an agreement,
as evidenced by the acts and conduct of the
parties, is available only in the event of
an ambiguity. But where a contract is
complete in itself and, as viewed in its
entirety, is unambiguous, its language is
the only legitimate evidence of what the
parties intended. The intention of the
parties cannot be determined from the
surrounding circumstances, but must be
gathered from a four-corners’ examination of
the contractual instrument in question.
-16-
Mercury Inv. Co., 706 P.2d at 529 (emphasis omitted). This
fundamental principle is illustrated in Bituminous Casualty
Corporation, in which patients at a hospital contracted lead
poisoning from what appeared to be the negligent construction of
a dialysis center. The insurance policy at issue in that case
excluded claims for “[b]odily injury or property damage arising
out of the actual, alleged or threatened discharge, dispersal,
release or escape of pollutants,” with pollutants being defined
as “any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids,
alkalis, chemicals and waste.” Bituminous Cas. Corp., 55 P.3d
at 1031 n.1. Although the insured argued that the policy
provision was intended to exclude purely environmental
pollutants, a category which did not include lead, the Oklahoma
Supreme Court rejected this assertion, holding that:
Nowhere in the policy’s lexicon is there
language employed which would sustain
finding-as suggested by the insured-the
pollution exclusion clause only excluded
from coverage that bodily injury and/or
property damage which occurred when the
general “environment” was damaged by the
insured’s acts. An insured cannot insist
upon a strained construction of relevant
policy language in order to claim a patent
ambiguity exists nor can it contradict the
written instrument’s plain terms under the
guise of a latent ambiguity.
-17-
Id. at 1034. As a result, in order to establish that an
ambiguity sufficient to invoke the “reasonable expectations”
doctrine exists in this instance, the plain language of the
relevant policy provision must be susceptible to at least two
reasonable interpretations.
A careful analysis of the relevant policy language shows
that the expression “any insured” is clear and unambiguous. As
an initial matter, the word “any,” when read in context, means
“every.” Webster’s New World College Dictionary 64 (4th ed.
2006). In addition, given that “[t]he whole of a contract is to
be taken together, so as to give effect to every part, if
reasonably practicable, each clause helping to interpret the
others,” 15 Okla. Stat. § 157; see also Mercury Inv. Co., 706
P.2d at 529, we note that the policy in question has both an
employer liability exclusion and a separate exclusion applicable
to situations in which workers’ compensation coverage is
available, a fact which severely undercuts Plaintiff’s
suggestion that the employer exclusion was only intended to
operate in instances in which the named insured’s workers’
compensation coverage had been implicated. Even within the
employer liability exclusion, the policy specifically states
that the exclusion applies “[w]hether the insured may be liable
as an employer or in any other capacity,” a fact which indicates
-18-
that the relevant policy provision should be read broadly to
apply to a wide variety of situations, including instances such
as those before us in this case. As a result, we believe that
the clear and unambiguous language of the employer liability
exclusion demonstrates that Defendant was not obligated to
provide coverage in any situation, regardless of its nature, in
which the injured party was employed by a named insured.
The appellate courts in Oklahoma have, on at least one
prior occasion, evaluated the meaning of “any insured.” In BP
America, Inc. v. State Auto Property & Casualty Insurance
Company, 148 P.3d 832 (2005), the Oklahoma Supreme Court
considered a case in which the plaintiff, which had entered into
a construction contract with Rowland Construction, Inc.,
purchased general liability and automobile liability policies
under which Rowland was designated as the named insured and the
plaintiff was listed as an additional insured. After an
employee of Rowland was involved in a motor vehicle accident in
which several non-employee third parties were injured or killed,
the plaintiff sought to obtain a judgment ordering the defendant
to provide coverage under the general liability policy. 148
P.3d at 833-35. In response to the plaintiff’s claim, the
defendant argued that it was not obligated to provide coverage
on the grounds that the relevant language in the general
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liability policy excluded coverage in the event that the injury
for which recovery was sought stemmed from the operation of a
motor vehicle by “any insured.” Id. at 836. On appeal, the
Oklahoma Supreme Court considered whether the “term ‘any
insured’ in an ‘Auto Exclusion’ clause of a commercial general
liability policy exclude[d] from coverage all automobile
occurrences attributable to any of the insureds,” id. at 833;
determined that the term “any insured” was unambiguous and “that
to rule otherwise would require [the court] to ignore the clear
language of an exclusion and expand the policy terms well beyond
the parties’ reasonable expectations,” id. at 838-39; and held
that “adopting the position advanced by the insured would
require that [the court] unilaterally convert a general
liability policy-without motor vehicle coverage–into a [sic]
automotive liability policy.” Id. at 839.
Although Defendant argues that BP America controls the
outcome of that case, we are not prepared to take such an
expansive view of the decision in question. Instead, as
Plaintiff suggests, BP America is distinguishable from the
present case in a number of respects. First, the question
certified to the Oklahoma Supreme Court in BP America revolved
around the proper interpretation of an automobile exclusion
contained in a general liability policy rather than an employer
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liability exclusion contained in a commercial liability policy.
Secondly, the injured party in BP America, unlike the injured
party in this case, had no relationship to either of the named
insureds. Finally, the plaintiff in BP America argued that the
term “any” should be interpreted to mean “the” instead of “all,”
id. at 836, while Plaintiff, in addition to acknowledging that
“any” means any, simply argues that, given the absence of
qualifying language, “any” is open to two reasonable
interpretations in light of the purpose underlying the relevant
exclusion and should, for that reason, be deemed ambiguous. As
a result, given that the exact issue before us in this case was
not before the Oklahoma Supreme Court in BP America, we are
unable to conclude that BP America absolutely controls the
outcome in this case. On the other hand, the approach taken by
the Oklahoma Supreme Court in BP America is consistent with the
approach that we have deemed appropriate in this case and
provides an obvious indication that the result that we have
reached in this case is consistent with the manner in which the
Oklahoma courts would resolve the present issue in the event
that it was presented to them for determination. See also All
American Ins. Co. v. Burns, 971 F.2d 438, 445 (10th Cir. 1992)
(first omission in original) (holding that, under Oklahoma law,
a provision contained in a comprehensive liability policy issued
-21-
to a religious organization excluding coverage for “personal
injury [claims] arising out of the willful violation of a penal
statute . . . committed by or with the knowledge . . . of any
insured” was “clear and unambiguous”), and Farmers Ins. Co. v
McClain, 603 F.2d 821, 823 (10th Cir. 1979) (holding that, under
Oklahoma law, a household exclusion contained in an automobile
liability policy providing that coverage was not available for
“the liability of any insured for bodily injury to (a) any
member of the same household of such insured except servants, or
(b) the Named insured,” was clear and unambiguous” and “was
clearly intended to be applicable to permissive users as well as
the named insured”).2
In seeking to persuade us that the relevant policy
provision is ambiguous, Plaintiff also directs our attention to
a number of decisions from other jurisdictions. Although
Plaintiff acknowledges, as Defendant demonstrates in its brief,
that there are other decisions from across the country which
find similar policy language to be clear and unambiguous,
Plaintiff asserts that we should find the decisions upon which
2
At one point in its brief, Plaintiff also appears to
suggest that we should disregard BP America on the grounds that
it was wrongly decided. However, given that our role in this
case is limited to attempting to determine how the Oklahoma
courts would decide the issue which is before us in this case,
it would be inappropriate for us to evaluate the extent, if any,
to which we believe that the BP America court should have
reached a different result.
-22-
it relies to be persuasive for purposes of resolving the issue
which has been presented for our decision in this case. A
careful examination of each of the decisions upon which
Plaintiff relies establishes that all of them are
distinguishable from this case in ways that we find to be
material.
Although the United States District Court for the District
of Utah held in Cyprus Plateau Mining Corporation v.
Commonwealth Insurance Company, 972 F. Supp. 1379, 1382 (D. Utah
1997), that an exclusion providing that the “Policy [did] not
cover Personal Injury including Bodily Injury to any employee of
any Insured under [the] policy for which the Insured or his
indemnitee may be held liable,” would, when read literally,
exclude coverage in a situation similar to this one, the Court
still found the relevant policy language to be ambiguous,
stating that:
given the purposes of the Commonwealth
policies–to protect the insured from claims
brought by persons other than their own
employees and to avoid coverage that
duplicated the worker’s compensation
coverage already available–and the
circumstances in which Cyprus was named as
an additional insured–to increase rather
than decrease its coverage–it cannot be said
that the language of the exclusion can be
interpreted only to mean that any claim of
any employee of any insured against any
insured is excluded from coverage.
-23-
972 F. Supp. at 1385. In light of the fact that the policy at
issue in Cyprus Plateau, unlike the policy at issue here,
included a reference to “the Insured” in addition to the
reference to “any insured” and the fact that the Cypress Plateau
Court appears to have based its decision on the perceived intent
of the parties rather than the language in which the policy in
question is couched, we do not believe that the logic employed
and result reached in Cyprus Plateau is consistent with the
result which would be reached in this case by an Oklahoma court.
Similarly, in Transport Indemnity Company v. Wyatt, 417 So.
2d 568, 570 (Ala. 1982), the Alabama Supreme Court held that an
exclusion contained in a corporate liability policy excluding
“any OCCURRENCE which caused BODILY INJURY to any employee of
any INSURED arising out of or in the course of his employment by
any INSURED” was ambiguous on the grounds that “[t]he wording
could be interpreted to mean either only singularly ‘any one of
the insureds’ or could apply “collectively to the whole group of
insureds.” However, the Court failed to explain, based on an
analysis of the relevant policy language, why this ambiguity
existed. Although the claims that were asserted against the
insureds involved in Wyatt might have been covered by workers’
compensation, the policy in question does not appear to have
contained any language like that found in the policy at issue
-24-
here specifically providing that the exclusion applied
regardless of the capacity in which the insured was held liable.
As a result, we do not believe that Wyatt reflects the result
that would be reached by the Oklahoma courts in the event that
they were called upon to construe the policy language at issue
here.
Finally, in Pacific Indemnity Company v. Transport
Indemnity Company, the California Court of Appeals examined an
automobile liability “‘policy [that did] not apply to any
liability for bodily injury, . . . of any employee of any
Insured arising out of and in the course of his employment by
any Insured’” and held, in reliance upon its decision in
Pleasant Valley Lima Bean Growers Ass’n v. Cal-Farm Ins. Co.,
142 Cal App. 2d 126, 133-34, 298 P.2d 109, 113-14 (1956), that
the reference to “any insured” was ambiguous on the grounds
that:
[t]he phrase “any employee of any insured”
is susceptible to two interpretations: it
could mean any employee of any insured who
is seeking protection under the policy or it
could mean any employee of any insured under
the contract, whether or not that insured is
seeking protection under the policy. It is
unnecessary to show which interpretation is
more logical.
81 Cal. App. 3d 649, 653, 656, 146 Cal. Rptr. 648, 649, 651
(1978) (omissions in the original). Aside from the fact that
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the Pacific Indemnity Court simply asserted, rather than
demonstrated, that the relevant policy language was susceptible
to both of the interpretations set out in its opinion, nothing
in Pacific Indemnity suggests that the additional factors upon
which we have relied in determining that the policy language at
issue here was not ambiguous, such as the separate exclusion for
situations involving workers’ compensation coverage and the
language providing that the exclusion applied regardless of the
capacity in which the insured was held liable, were present in
that case. As a result, we do not believe that the result
reached in Pacific Indemnity reflects the approach that would be
adopted by the Oklahoma courts in the event that they were
called upon to decide the present case.3
A careful examination of the arguments advanced in
opposition to the result reached in the trial court’s order
indicates that Plaintiff would have this Court focus on the
perceived general purposes underlying the inclusion of employer
exclusions in insurance policies, the inequities that would
allegedly result from the adoption of the position reflected in
3
The same factors persuade us that the logic adopted by the
California Court of Appeals in United States Steel Corporation
v. Transport Indemnity Company, 241 Cal. App. 2d 461, 474, 50
Cal. Rptr. 576, 384-85 (1966), is not reflective of the approach
which would be adopted in this case in the event that the
Oklahoma courts were to address the issues before us in this
case in light of the law applicable in that jurisdiction.
-26-
the trial court’s order, and other general policy considerations
in order to ascertain whether the relevant policy provision is
ambiguous rather than upon an examination of the actual policy
language. Put another way, Plaintiff’s argument rests, for the
most part, upon a number of equitable or policy-based
justifications for interpreting the reference to “any insured”
in the relevant policy in such a manner as to trigger the
application of the “reasonable expectations” doctrine rather
than advancing an analysis of the literal language of the
employer exclusion that demonstrates the existence of an
ambiguity in the relevant policy language.4 For that reason, the
approach which Plaintiff would apparently have us adopt suffers
from the deficiency that it relies, contrary to controlling
Oklahoma law, upon factors other than the plain meaning of the
relevant policy provision to establish the necessary
“ambiguity.” As a result, given that Plaintiff has failed to
offer any textual support for a determination that the term “any
insured” is ambiguous and given that our reading of the language
4
Plaintiff does contend that the fact that the exclusion in
question is titled “Employer’s Liability” rather than
“Employers’ Liability” creates the ambiguity necessary to
trigger application of the “reasonable expectations” doctrine.
However, we are unable to see why the use of a singular heading
should negate the unambiguous language which appears in the text
of the relevant policy provision given that this exclusion would
be applicable to each insured as well as to the insured
collectively.
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of the employer liability exclusion indicates that no such
ambiguity exists, we conclude that Plaintiff’s initial challenge
to the trial court’s order lacks merit.
2. Obscurity of Endorsement
As we have already noted, the “reasonable expectations”
doctrine may apply “to cases in which . . ., although clear, the
policy contains exclusions masked by technical or obscure
language or hidden exclusions.” Max True Plastering Co., 912
P.2d at 870. According to Plaintiff, the modified version of
the employer liability exclusion contained in the commercial
general liability policy at issue here was adopted by means of a
modification to the relevant policy “buried on page 53 of the
endorsements that follow the Policy” that changed the prior
reference to “the insured” to “any insured.”5 In light of these
facts, Plaintiff contends that, even if the language of the
employer exclusion is clear and unambiguous, we should construe
the relevant policy language in a manner favorable to Plaintiff
given that the language in question was both “technical or
5
Aside from the arguments advanced in the text, Plaintiff
advances other contentions in support of its “hidden
endorsement” assertion. In view of the fact that these
additional arguments rely on the allegedly ambiguous nature of
the employer exclusion and the fact that we have already
determined that the relevant policy language is clear and
unambiguous, we need not address this aspect of Plaintiff’s
“hidden endorsement” argument any further.
-28-
obscure” and “hidden.” We do not find Plaintiff’s argument
persuasive.
According to the undisputed record evidence, the policy
that Plaintiff had procured from Defendant had been renewed on
multiple occasions. In view of the length of time that had
passed since the date upon which the policy was initially
issued, a number of endorsements had been issued for the purpose
of modifying the original policy language, including the
language in which the employer liability endorsement was
couched. The sixth page of the policy includes a list of
endorsements and a specification of the states to which each
endorsement applies. The endorsement at issue here, ML 1276, is
included in this list and states, at the very top of the
relevant page on which it appears, “THIS ENDORSEMENT CHANGES THE
POLICY. PLEASE READ IT CAREFULLY.” As a result of the fact
that each endorsement was set forth on a separate page, the fact
that the presence of the master list facilitated the
policyholder’s ability to identify each endorsement, and the
fact that the endorsement heading was set out in capital
letters, the manner in which the endorsement in question was
implemented and couched more than sufficed to put Plaintiff on
notice that the policy had been changed. Although Plaintiff
argues that other approaches that Defendant might have taken
-29-
would have been clearer, that fact, standing alone, does not
suffice to establish that Defendant “hid” the change to the
employer liability exclusion worked by the endorsement in
question. In addition, the language in which the modified
version of the employer exclusion is couched does not, at least
to us, appear to be technical or obscure. In spite of
Plaintiff’s argument to the contrary, we are unable to see how
the expression “any insured” can be deemed to fall into the
category of “technical or obscure” expressions. Unless we were
to hold that any and all endorsements triggered the operation of
the “reasonable expectations” doctrine, a result that would
clearly conflict with Oklahoma law, we cannot conclude that the
endorsement at issue here was couched in “obscure and technical”
language or “hidden” from Plaintiff. As a result, we conclude
that the endorsement at issue here was not such as to authorize
the use of the “reasonable expectations” doctrine to interpret
the employer liability exclusion in the manner contended for by
Plaintiff.
D. Severability Provision
Finally, Plaintiff argues that, even if the language in
which the employer exclusion is couched is clear and unambiguous
and even if the modified version of the employer liability
exclusion set out in the relevant endorsement was neither
-30-
“hidden” nor couched in “obscure and technical” language, the
severability clause contained in the policy that Plaintiff
procured from Defendant created a sufficient ambiguity to permit
us to construe the policy in a manner favorable to Plaintiff.
More specifically, Plaintiff contends that, given that the
employer liability exclusion excludes claims asserted by “any”
employee arising out of the claimant’s employment with “any”
insured and given that, in light of the language in which the
severability clause is couched, Plaintiff should be viewed as
the only insured for purposes of applying the language of the
employer exclusion, it is, for that reason, entitled to receive
coverage under the policy in question. Plaintiff’s argument
lacks merit.
The severability provision upon which Plaintiff’s argument
rests provides that:
Except with respect to the Limits of
Insurance, and any rights or duties
specifically assigned in this Coverage Part
to the first Named Insured, this insurance
applies:
a. As if each Named Insured were the only
Named Insured; and
b. Separately to each insured against whom
claim is made or “suit” is brought.
According to Plaintiff, the language of the severability clause
indicates that the policy in question applies separately to each
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insured, thereby precluding an interpretation of the employer
exclusion which treats multiple entities as “insureds.”
Although this argument has surface appeal, it was specifically
rejected in BP America, in which the Oklahoma Supreme Court
addressed the issue of whether the existence of an auto
exclusion and a separation of insureds clause identical to the
one at issue here rendered the policy in question ambiguous for
purposes of Oklahoma law. BP America, 148 P.3d at 833. In
considering the merits of an argument indistinguishable from
that advanced by Plaintiff in this case, the court concluded
that the “purpose of severability is not to negate plainly
worded exclusions” and that “exclusions are read separately and
operate independently from the general declaration identifying
events which will not be covered.” Id. at 841-42 (emphasis
omitted). Although Plaintiff attempts to distinguish BP America
on the grounds that it involved an automobile exclusion rather
than an employer exclusion, we note that BP America and this
case both involved general liability policies, addressed
identical issues and policy language, and used language of
considerable breadth. For that reason, even though BP America
may not absolutely control the resolution of the issue that is
before us, it does provide considerable light on the manner in
which the Oklahoma courts have viewed issues similar to the one
-32-
before us in this case. Moreover, the BP America Court clearly
declined to follow the decisions in United States Fidelity and
Guaranty Company v. Globe Indemnity Company, 60 Ill. 2d 295,
299, 327 N.E.2d 321, 323 (1975) (holding that a severability
provision provided coverage to an additional insured for
injuries suffered by an individual employed by a named insured
despite the presence of an employer liability exclusion), and
Atchison, Topeka and Santa Fe Railway Company v. St. Paul
Surplus Lines Insurance Company, 328 Ill. App. 3d 711, 716, 767
N.E.2d 827, 831 (2002) (holding, in reliance upon U.S. Fid. &
Guar. Co., that “the separation clause contained in the St. Paul
policy provide[d] separate coverage” for each insured “as if
each was separately insured with a distinct policy”), and
implicitly rejected the logic of the decisions in Cook v.
Country Mutual Insurance Company, 126 Ill. App. 3d 446, 447-48,
466 N.E.2d 587, 588 (1984) (reversing, in reliance upon U.S.
Fid. & Guar., a trial court determination that an employer
liability exclusion obviated the defendant from providing
coverage given the presence of a severability clause), and
Shelby Realty LLC v. National Surety Corporation, 2007 U.S.
Dist. Lexis 29482 *10 (S.D.N.Y. 2007) (holding that “the
Employee Exclusion, read in conjunction with the Separation of
Insureds Clause, does not relieve National of its obligation to
-33-
indemnify Shelby for the Personal Injury Action”),6 on the theory
that “most courts addressing the issue of whether a severability
clause will render a clear and unambiguous exclusionary
provision doubtful determine that the clear language of the
exclusion must prevail.”7 148 P.3d at 841. As a result, the
language of the severability clause contained in the policy that
Plaintiff purchased from Defendant does not suffice to support a
determination that the employer exclusion is ambiguous and
subject to interpretation in Plaintiff’s favor on the basis of
the “reasonable expectations” doctrine.
III. Conclusion
For the reasons set forth above, we conclude that none of
Plaintiff’s challenges to the trial court’s order have merit and
that the trial court did not err by granting summary judgment in
Defendant’s favor. Although a number of policy-oriented
6
A number of courts have criticized Shelby Realty, stating
that it does not “accurately reflect[] the current state of the
case law in New York,” Richner Development, LLC v. Burlington
Insurance Company, 2009 N.Y. Misc. Lexis 5221 *8 (N.Y. Sup. Ct.
2009), aff’d 81 App. Div. 3d 705, 916 N.Y.S. 2d 211 (2011), and
that it represents a minority position. Nautilus Ins. Co. v. K.
Smith Builders, Ltd., 725 F. Supp. 2d 1219, 1229 (D. Haw. 2010).
7
We also note that the employer liability exclusion at issue
in two of the three cases upon which Plaintiff relies references
a “protected person,” Atchison, Topeka and Santa Fe Railway
Company, 328 Ill. App. 3d at 713, 767 N.E.2d at 828, or “an
insured,” Cook, 126 Ill. App. 3d at 446, 466 N.E.2d at 587,
rather than “any insured,” a fact that renders these decisions
distinguishable on policy language grounds as well as
inconsistent with BP America.
-34-
objections can be advanced in opposition to the result that we
believe to be required under Oklahoma law, we are compelled by
the applicable Oklahoma decisions to focus upon the language of
the policy rather than upon the broader considerations upon
which Plaintiff urges us to rely. As a result, given that the
language of the employer exclusion is clear and unambiguous when
applied to the present set of facts, the trial court’s order
should be, and hereby is, affirmed.
AFFIRMED.
Judges McGEE and STEELMAN concur.
Report per Rule 30(e).