United States Fidelity & Guaranty Co. v. Lightning Rod Mutual Insurance

  UNITED STATES FIDELITY & GUARANTY COMPANY, APPELLANT, v. LIGHTNING

                 ROD MUTUAL INSURANCE COMPANY, APPELLEE.

[Cite as United States Fid. & Guar. Co. v. Lightning Rod Mut. Ins. Co. (1997), 

80 Ohio St.3d 584

.]

Insurance — Automobile liability — Construction of policy — Exclusion of

      liability phrase “for a fee” ambiguous — Construed strictly against

      insurer and liberally in favor of insured.

   (No. 96-2516 — Submitted September 24, 1997 — Decided December 31,

                                       1997.)

 CERTIFIED by the Court of Appeals for Washington County, Nos. 95 CA 27 and

                                     95 CA 29.


      The facts of this case are not in dispute. Ina M. Spurlock, an employee of

The Pizza People, Inc., d.b.a. Domino’s Pizza (“Domino’s”), while using her car

to deliver a pizza, collided with a motorcycle and injured its operator, Robert

Shaw. Shaw sued Spurlock and Domino’s for personal injuries and presented a

claim to Lightning Rod Mutual Insurance Company (“Lightning Rod”), the

issuer of Spurlock’s personal automobile policy. Lightning Rod denied coverage

based on the following exclusion in its policy:


      “We do not provide Liability coverage for any person: * * * [f]or that

person’s liability arising out of the ownership or operation of a vehicle while it is

being used to carry persons or property for a fee. * * * ”


      Shaw then turned to United States Fidelity & Guaranty Company

(“USF&G”), the carriers of a business automobile policy issued to Domino’s.

USF&G undertook Spurlock’s defense under a reservation of rights and sought a

judgment declaring that Lightning Rod’s policy covers Spurlock for the accident.
      The parties stipulated all material facts and each moved for summary

judgment. Following the Tenth District Court of Appeals’ reasoning in Colonial

Ins. Co. of California v. Jermann (1995), 

102 Ohio App.3d 384

, 

657 N.E.2d 336

,

the trial court found the language of the exclusion in Lightning Rod’s policy

ambiguous as applied to the facts of the case and granted summary judgment to

USF&G on its complaint for declaratory judgment.           The court of appeals,

finding that the “for a fee” language unambiguously excluded the commercial use

at issue, reversed and certified its judgment as in conflict with Jermann. The

cause is now before the court upon our determination that a conflict exists.

                               __________________


      Robert H. Willard, for appellant.


      Andrew J. Mollica, for appellee.

                               __________________


      COOK, J.      The issue in this case is whether Lightning Rod’s policy

excluding coverage for operation of a vehicle carrying property “for a fee” covers

an insured who is paid an hourly wage and is reimbursed for mileage for making

deliveries but is not paid per delivery.


      “[W]ords and phrases used in an insurance policy must be given their

natural and commonly accepted meaning.” Gomolka v. State Auto. Mut. Ins. Co.

(1982), 

70 Ohio St.2d 166, 167-168

, 

24 O.O.3d 274, 275

, 

436 N.E.2d 1347, 1348

. A “fee” is defined as “[a] recompense for an official or professional

service or a charge or emolument or compensation for a particular act or service.

A fixed charge or perquisite charged as recompense for labor; reward,

compensation, or wage given to a person for performance of services or

something done or to be done.” Black’s Law Dictionary (6 Ed.1990) 614; see,


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also, Webster’s Third New International Dictionary (1986) 833 (with definitions

of “fee” as a fixed charge for various particular services). A determination of

whether Spurlock was carrying property “for a fee” will differ depending on

which part of the definition we look to, that is, whether a fee includes any

“compensation, or wage * * * for performance of services” or must be “for a

particular act or service.”


      Thus, Lightning Rod’s policy can be read two ways: first, as excluding

from coverage use of a vehicle to transport property when there is any kind of

payment to the insured, and second, as excluding coverage only when a fee is

paid specifically for the particular act of transporting property. Under the first

reading, Spurlock’s use of her car to deliver pizza would be excluded from

coverage because Domino’s was paying her an hourly wage. Under the second

reading, however, this use would not be excluded by the Lightning Rod policy,

since neither Domino’s nor its customers paid Spurlock a fee specifically for

delivering the pizza.         Under either reading, the policy excludes taxicabs

transporting persons specifically for a fee or moving vans transporting property

specifically for a fee. Only the first reading, however, excludes Spurlock’s

errands on behalf of her employer.


      “Where provisions of a contract of insurance are reasonably susceptible of

more than one interpretation, they will be construed strictly against the insurer

and liberally in favor of the insured.” King v. Nationwide Ins. Co. (1988), 

35 Ohio St.3d 208

, 

519 N.E.2d 1380

, at syllabus. “The insurer, being the one who

selects the language in the contract, must be specific in its use; an exclusion from

liability must be clear and exact in order to be given effect.” Lane v. Grange

Mut. Cos. (1989), 

45 Ohio St.3d 63, 65

, 

543 N.E.2d 488, 490

, citing Am. Fin.

Corp. v. Fireman’s Fund Ins. Co. (1968), 

15 Ohio St.2d 171

, 

44 O.O.2d 147

, 239

   

3 N.E.2d 33

. Because the “for a fee” exclusion is susceptible of more than one

interpretation, the trial court’s construction of it against Lightning Rod was

correct.


      Whether Lightning Rod intended to cover commercial use of Spurlock’s

vehicle is irrelevant because the policy language is imprecise. In fact, more than

commercial uses would be affected if Lightning Rod’s policy could be read as

excluding from coverage any use of a car to carry property when any payment to

the insured is involved (the only proposed interpretation of “for a fee” that would

exclude Spurlock). Incidental transport of items by an insured while “on the

clock” for an employer would also be encompassed by such a reading.


      Thus, as there is no genuine issue as to any material fact, USF&G is

entitled to judgment as a matter of law, and summary judgment was properly

granted. We therefore reverse the judgment of the court of appeals and remand

the cause for consideration of the issue of attorney fees.


                                                               Judgment reversed


                                                             and cause remanded.


      MOYER, C.J., F.E. SWEENEY and PFEIFER, JJ., concur.


      RESNICK, J., concurs separately.


      DOUGLAS, J., dissents.


      LUNDBERG STRATTON, J., dissents.

                               __________________

      ALICE ROBIE RESNICK, J., concurring.             I concur in the majority’s

resolution of this case, and join in reversing the judgment of the court of appeals



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and reinstating the judgment of the trial court on the certified issue. I write

separately to underscore the ambiguity of the “for a fee” exclusion.

      A special category of cases has emerged to cover the general fact pattern

presented by this case. These cases could be labeled “pizza delivery cases,”

although the basic issue could arise in any case which involves a similar delivery

of a product by an employee. Courts in various states have found the same or

like exclusions unenforceable in this type of “pizza delivery” case, concluding

that coverage was available to the delivery driver despite the exclusion.

Illustrative cases include Progressive Cas. Ins. Co. v. Metcalf (Minn.App.1993),

501 N.W.2d 690

; Am. Motorists Ins. Co. v. Travelers Ins. Co. (1993), 

604 N.Y.S.2d 475

, 

158 Misc.2d 257

; RPM Pizza, Inc. v. Automotive Cas. Ins. Co.

(La.1992), 

601 So.2d 1366

; Pizza Hut of Am., Inc. v. W. Gen. Ins. Co. (1991), 

36 Ark.App. 16

, 

816 S.W.2d 638

; United Serv. Auto. Assn. v. Couch

(Tenn.App.1982), 

643 S.W.2d 668

.

      Several Ohio courts of appeals addressing the issue have found the

exclusion inoperative and have required coverage. See, e.g., Progressive Ins. Co.

v. Heritage Ins. Co. (1996), 

113 Ohio App.3d 781

, 

682 N.E.2d 33

; Colonial Ins.

Co. of California v. Jermann (1995), 

102 Ohio App.3d 384

, 

657 N.E.2d 336

.

Like most of the decisions from other jurisdictions cited above, these courts have

employed an “ambiguity” analysis to find the exclusion unenforceable, generally

focusing on various definitions of what is a “fee” or a “charge.”

      However, as evidenced by the fact that this case comes to us as a certified

conflict, the view that the exclusion is unenforceably ambiguous is not a

unanimous one. In addition to the opinion below in the case sub judice, see, e.g.,

the dissenting opinion in Jermann, 

102 Ohio App.3d at 389

, 

657 N.E.2d at 339

(Deshler, J., dissenting); Dhillon v. Gen. Acc. Ins. Co. (Apr. 11, 1991), Tex.App.



                                         5
No. C14-90-00714-CV, unreported, 

1991 WL 51470

; Krauss v. DeRocili (Aug.

2, 1988), Del.Super.Ct. No. 86C-NO-60, unreported, 

1988 WL 90532

.

      Although the decisions that find the “for a fee” exclusions ineffective to

deny coverage typically on their faces narrowly rely on an “ambiguity” analysis

focusing on the word “fee,” many of the decisions, often without directly so

stating, appear to be influenced by the practical implications that would

accompany allowing the exclusion to operate. See, e.g., Progressive Cas. Ins.

Co. v. Metcalf, 

501 N.W.2d at 693-694

 (Davies, J., concurring specially),

recognizing some of the practical considerations underlying these types of cases,

and finding the exclusion unenforceable both on public policy grounds and upon

consideration of the consumer expectations of the insurance purchasing

employee.

      A narrow analysis focusing solely on the ambiguity of the word “fee,” with

differing results depending on how the employee is paid, or on whether the

employee’s delivery duties were minimal compared to other tasks, seems to be

incomplete, and to miss the additional point of a consideration of what the

exclusion actually attempts to accomplish, and of the context surrounding its

invocation. My ambiguity analysis thus goes beyond a narrow consideration of

the word “fee.” The ambiguity of the exclusion is broader, and is based both on

the imprecision in the word “fee” and on the practical considerations involved.

This ambiguity is present in all of these pizza delivery “for a fee” cases,

regardless of the minor differences in details among the cases, and militates

against enforcement of the exclusion.

      My understanding of this issue is based on the conviction that these “pizza

delivery” cases have underlying policy considerations distinctly different from

cases which do not involve localized product delivery, e.g., a case involving an



                                        6
over-the-road semi-trailer driver. Because my analysis focuses on some unique

aspects of the “pizza delivery” cases, the foregoing lists of cited cases include

only cases specifically presenting a pizza delivery fact pattern. Whether, and to

what extent, these considerations would apply in a case not involving “pizza

delivery” would depend on the particular facts of that case. Depending upon the

facts, a different scenario may require a totally different approach.

      The most desirable ultimate resolution of the overall problems presented in

these cases would be for the employer to specifically provide motor vehicle

insurance as primary coverage for its drivers who deliver pizzas with their own

vehicles, or, alternatively, for the employer to reimburse the employee for the

added cost of procuring insurance to specifically cover the act of delivery. The

employer then would bear the costs of insuring employee drivers and the vehicles

of employee drivers as one of the costs of doing business. As common practice

appears to be now, the employer often does not provide coverage for employees

who deliver with their own vehicles, but requires those employees to provide

their own insurance. Simultaneously, it appears that no consideration is given by

the employer to the possibility that a typical employee’s insurance policy, which

frequently contains a “for a fee” exclusion, might not cover the delivery driver in

the process of making, or returning from, a delivery.

      Appellee Lightning Rod expresses a valid concern when it points out that

an employer should bear legitimate costs of doing business by ensuring that

delivery employees are specifically covered, and that the employee’s insurance

company is penalized when the employee’s insurer is made to bear the cost

instead. Nevertheless, if that were the rationale for allowing the employee’s

insurer to deny coverage, in some situations the employee personally, not the

employer’s insurer, would be the one penalized. As a practical matter, it appears



                                         7
obvious that employees who deliver pizzas would often have no reason to

anticipate that their motor vehicle insurance would not cover them while they

were employed as delivery drivers, if they even thought about the matter at all.

Expecting delivery drivers to have a sophisticated appreciation of the scope of

this policy exclusion, and to bear the consequences of the exclusion, seems

unrealistic.   It seems particularly unfair to penalize those employees for an

exclusion in their policies that does not on its face explicitly, precisely, and

unmistakably inform them that delivering pizzas is an activity which is not

covered.

      In an ideal world, these problems could be circumvented by having the

employer ensure coverage of its employees who make deliveries with their own

vehicles, so that the employees’ personal policies would not be implicated.

However, since this is not an ideal world, we must resolve this case given all the

complexities underlying the situation. While we may like to see fundamental

changes in the motor vehicle insurance relationship between employers and

delivery employees, we cannot mandate that such changes should come about.

When all the factors in this case are taken into account, including the ambiguity

of the exclusion, the only practical alternative is to have the employee’s insurer

provide coverage.

                             __________________

      LUNDBERG STRATTON, J., dissenting. I believe the following facts are

pertinent to this case. Two months before the accident in question, Ina Spurlock

purchased a personal automobile insurance policy from Lightning Rod Mutual

Insurance Company. The insurance agent specifically asked Spurlock whether

she delivered pizzas for Domino’s and she replied that she did not. Therefore,

the agent sold Spurlock an insurance policy that excluded liability coverage for



                                        8
any accidents that occurred while “carry[ing] persons or property for a fee,”

instead of a commercial policy that would have provided liability coverage for

commercial deliveries.

      However, Spurlock’s duties for Domino’s did include the delivery of

pizzas. According to Lightning Rod, during a period of 143 days in 1991,

Spurlock delivered pizzas on 125 days. Domino’s records indicate that Spurlock

used the Domino’s vehicle only fifteen of those days. Furthermore, Domino’s

required all its pizza delivery drivers to carry liability insurance on their own

personal vehicles used for pizza deliveries.

      Domino’s paid Spurlock an hourly wage for delivering pizzas. It was the

same hourly wage she received for other duties performed for Domino’s. When

delivering pizza, Spurlock was reimbursed by Domino’s at eighteen cents per

mile, and she also may have received gratuities directly from customers.

      I disagree with the majority that various definitions of the word “fee”

create an ambiguity in what is otherwise an unambiguous exclusionary clause.

There is no need to read various meanings or connotations into the word “fee.”

A common, ordinary usage of the word is sufficient. The plain language of the

clause excludes coverage to Spurlock because she was carrying property (pizza)

for a fee (hourly wage). The pizza delivery driver’s hourly wage could constitute

either a “fee” defined as “compensation, or wage * * * for performance of

services,” or a fee “for a particular act or service” of delivering the pizzas at that

time. Black’s Law Dictionary (6 Ed.1990) 614. As Judge Deshler pointed out in

his well-reasoned dissent in Colonial Ins. Co. of California v. Jermann (1995),

102 Ohio App.3d 384, 389

, 

657 N.E.2d 336, 339

, “This is an attempt to

manufacture ambiguity by creating a distinction without a difference.” See, also,

Dhillon v. Gen. Acc. Ins. Co. (Apr. 11, 1991), Tex.App. No. C14-90-00714-CV,



                                          9
unreported, 

1991 WL 51470

; Krauss v. DeRocili (Aug. 2, 1988), Del.Super.Ct.

No. 86C-NO-60, unreported, 

1988 WL 90532

.

      The fact is that Spurlock was not gratuitously delivering pizzas for

Domino’s or for the persons who ordered the pizzas. She was being paid to

deliver the pizzas. Whether it be a driver who exclusively delivers pizzas, or one

like Spurlock whose job purportedly included duties in addition to delivering for

Domino’s, the person making the delivery is being paid to use his or her vehicle

for the purpose of delivering pizzas at a particular time.

      Furthermore, the majority’s opinion sanctions an employer’s shifting the

risk of doing business upon the employee.          An inherent risk of Domino’s

business is the risk of injury to its driver-employees delivering pizzas. Domino’s

recognized this risk and insured against it by purchasing a business policy from

USF&G. The parties admitted at oral argument that if Spurlock’s individual

policy did not provide coverage for this accident, then the USF&G policy would.

However, the majority’s opinion now shifts any risk of doing business from

Domino’s and places the cost of this risk upon Domino’s employees. This is an

unfair and inequitable result, particularly since it is Domino’s that receives the

financial benefit from the sale and delivery of its pizzas. The majority opinion

allows an employer to refuse to supply its drivers with a company vehicle and,

instead, to require its employees to place their own vehicles into commercial use.

These employees will now be forced to bear the increased costs of a commercial

insurance policy so that they may continue to deliver pizzas for the financial

benefit of their employer.

      Finally, the majority refuses to consider that, by using his or her own

vehicle to make the deliveries, the pizza delivery driver is placing that vehicle

into commercial use. This is a risk that the insurance company did not anticipate



                                         10
or contemplate when issuing its policy to the insured. In fact, the exclusionary

language at issue proves that Lightning Rod specifically did not intend to insure

the vehicle for any such commercial uses. Using common sense, one can discern

a difference between the employee who uses his or her own vehicle for an

isolated, solitary errand for an employer and the employee who is repeatedly

required to drive his or her personal vehicle in the regular course of company

business. Lightning Rod should not be held accountable for risks it did not

intend to insure.

      The Lightning Rod policy was issued to an individual for personal use. If

the vehicle insured under the policy is to be used for anything other than personal

use, i.e., business or commercial use, this requires different coverage.

      Consequently, for the above reasons, I respectfully dissent and would

affirm the court of appeals.




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