Jackson v. Nationwide Mutual Insurance Co.

FILED BY CLERK
IN THE COURT OF APPEALS SEP 30 2011
STATE OF ARIZONA
DIVISION TWO COURT OF APPEALS
DIVISION TWO

ANTHONY JACKSON and LETICIA ) 2 CA-CV 2011-0001
JACKSON, a married couple, ) DEPARTMENT B
)
Plaintiffs/Appellants, ) OPINION
)
v. )
)
NATIONWIDE MUTUAL INSURANCE )
COMPANY, a foreign insurance )
company; AMCO INSURANCE )
COMPANY, a foreign insurance company, )
)
Defendants/Appellees. )
)

APPEAL FROM THE SUPERIOR COURT OF PIMA COUNTY

Cause No. C20086091

Honorable Paul E. Tang, Judge

AFFIRMED

Goldberg & Osborne
By David J. Diamond and D. Greg Sakall Tucson
Attorneys for Plaintiffs/Appellants

Goering, Roberts, Rubin, Brogna, Enos
& Treadwell-Rubin, P.C.
By William L. Rubin and Elizabeth L. Warner Tucson
Attorneys for Defendant/Appellee
Nationwide Mutual Insurance Company

K E L L Y, Judge.
¶1 Anthony and Leticia Jackson appeal from the trial court‟s grant of Appellee

Nationwide Mutual Insurance Company‟s motion for summary judgment and the denial

of the Jacksons‟ motion for new trial in this declaratory action against Nationwide and its

subsidiary AMCO Insurance Company (collectively “Nationwide”).1 The Jacksons argue

the court erred in concluding that A.R.S. § 20-259.01, Arizona‟s Uninsured Motorist Act

(UMA), did not require Nationwide to offer uninsured motorist coverage under the

Businessowner‟s Policy it had provided to an automobile service and repair station. They

contend that because Nationwide failed to offer such coverage, it must be imputed to the

policy, providing uninsured motorist coverage for injuries Anthony Jackson sustained

while riding as a passenger in his own vehicle, when it was being driven by a service

station employee and was struck by another vehicle. For the following reasons, we

affirm.

Background

¶2 Although we view the facts in the light most favorable to the party against

whom summary judgment was granted, Andrews v. Blake, 205 Ariz. 236, ¶ 12, 69 P.3d 7,

11 (2003), here the parties filed a joint stipulated statement of facts in connection with

their separate motions for summary judgment. The facts set forth below are taken from

that stipulation. In January 2005, Anthony Jackson had mechanical problems with his

automobile and stopped at a Chevron repair station. Jackson had planned to leave his

1
Consistent with the parties‟ arguments, we treat the two policies at issue in this
case as having been issued by Nationwide.

2
vehicle at the station, but, as the parties stipulated, a Chevron employee “offered to show

Jackson how to drive the [vehicle] with its mechanical problems.” Jackson accepted, and

the employee drove Jackson‟s vehicle with Jackson in the passenger seat. After

Jackson‟s vehicle entered a roadway adjacent to the Chevron station, it was struck by

another vehicle driven by Eduardo Martinez and Jackson was injured. Neither Martinez,

who was at fault, nor his vehicle was insured.

¶3 Chevron carried two insurance policies, a Business Auto Policy (BAP)

issued by Nationwide and a Businessowner‟s Policy (BOP) issued by AMCO. The

policies were issued by the same agent at the same time as part of the same transaction,

and were effective for the same time period.

¶4 The BAP provided coverage for a wide range of risks for motor vehicles

used in Chevron‟s business. Under the policy, Nationwide provided liability coverage for

bodily injury or property damage caused by an accident involving a “covered „auto.‟”2

The policy also contained an uninsured motorist (UM) endorsement under which

Nationwide agreed to “pay all sums the „insured‟ is legally entitled to recover as

compensatory damages from the owner or driver of an „uninsured motor vehicle.‟”

¶5 The BOP is a commercial general liability (CGL) policy. It provides

coverage for losses such as damage to Chevron‟s building and premises, loss of property,

and equipment breakdown. It also provides liability and medical payment coverage,

2
Chevron was a named insured “for any covered „auto.‟” “Covered auto” includes
automobiles Chevron did not “own, lease, hire, rent or borrow that are used in connection
with [the] business.”

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subject to a general exclusion for losses arising out of the use of automobiles. Section

2(g) of the BOP specifies that the policy does not apply to “„[b]odily injury‟ or „property

damage‟ arising out of the ownership, maintenance, use or entrustment to others of any

. . . „auto‟ . . . owned or operated by or rented or loaned to any insured.” But, this

exclusion is replaced by a garage liability endorsement that extends limited automobile

coverage for Chevron‟s garage operations.3 Specifically, it provides that the bodily

injury and property damage liability coverages in the BOP would apply to “[t]he

operation by an insured of your „customer‟s auto‟ in the course of your „garage

operations.‟” The BOP did not contain a UM endorsement, and Nationwide did not offer

UM coverage to Chevron for the BOP.

¶6 After the Jacksons recovered damages under the UM endorsement to

Chevron‟s BAP,4 they filed a complaint for declaratory judgment seeking a judicial

determination that UM coverage should be imputed to the BOP. As previously noted, the

Jacksons and Nationwide filed motions for summary judgment and stipulated that the

only issue to be decided was “whether [Nationwide] was required to offer UM coverage

to [Chevron] on the BOP.” After a hearing, the trial court granted Nationwide‟s motion

for summary judgment and denied the Jacksons‟ motion. The Jacksons filed a motion for

3
“„Garage operations‟ means the ownership, maintenance or use of premises for
the purpose of a business of servicing, repairing, parking or storing „customer‟s autos.‟”
“Customer‟s auto” means a customer‟s motor vehicle left with the garage business for
“service, repair, storage or safekeeping.” “„Garage operations‟ also includes all
operations necessary or incidental to the performance of garage operations.”
4
Nationwide concedes that Jackson‟s vehicle was covered under the BAP as a non-
owned auto. Uninsured motorist benefits were paid in accordance with the policy.

4
new trial, in which they argued the court erred in finding Nationwide was not required to

offer UM coverage on the BOP and essentially reurged the arguments they had made on

summary judgment. The court denied the motion and this appeal followed.

Discussion

¶7 In its lengthy minute entry granting Nationwide‟s motion for summary

judgment, the trial court concluded Nationwide was not required to offer Chevron UM

coverage when it issued the BOP, relying, in part, on § 20-259.01(L) and case law

interpreting that provision. See, e.g., Petrusek v. Farmers Ins. Co. of Ariz., 193 Ariz.

552, 975 P.2d 142 (App. 1998) (interpreting former § 20-259.01(K), now renumbered as

subsection (L)). The court concluded the BOP was a general commercial liability policy

that provided excess5 liability coverage and was not a primary automobile liability

insurance policy. On appeal, the Jacksons contend the court erred, arguing the BOP was

a primary motor vehicle insurance policy subject to the requirements of § 20-259.01(A).

¶8 “We review the denial of a motion for new trial . . . for an abuse of

discretion.” Mullin v. Brown, 210 Ariz. 545, ¶ 2, 115 P.3d 139, 141 (App. 2005). We

review de novo a grant of summary judgment and must decide whether the trial court

correctly applied the law. See Valder Law Offices v. Keenan Law Firm, 212 Ariz. 244,

¶ 14, 129 P.3d 966, 971 (App. 2006). We likewise review the interpretation of a statute

de novo. State v. Wilson, 200 Ariz. 390, ¶ 4, 26 P.3d 1161, 1164 (App. 2001). Similarly,

5
Although the BOP had a clause indicating its coverage was excess, the parties
agreed at oral argument that because the BAP had a similar clause, the two clauses
invalidated each other and should not be considered.

5
interpretation of an insurance contract is a question of law we review de novo. First Am.

Title Ins. Co. v. Action Acquisitions, LLC, 218 Ariz. 394, ¶ 8, 187 P.3d 1107, 1110

(2008).

¶9 We begin with the UMA. Section 20-259.01(A) provides, in relevant part,

as follows:

Every insurer writing automobile liability or motor vehicle
liability policies shall make available to the named insured
thereunder and by written notice offer the insured and at the
request of the insured shall include within the policy
uninsured motorist coverage which extends to and covers all
persons insured under the policy, in limits not less than the
liability limits for bodily injury or death contained within the
policy. The selection of limits or rejection of coverage by a
named insured or applicant on a form approved by the
director is valid for all insureds under the policy. . . .

“[T]he purpose of the [UMA] is „to guarantee that responsible drivers will have an

opportunity to protect themselves and their loved ones as they would others.‟” Estate of

Ball v. Am. Motorists Ins. Co., 181 Ariz. 124, 127, 888 P.2d 1311, 1314 (1995), quoting

Ormsbee v. Allstate Ins. Co., 176 Ariz. 109, 112, 859 P.2d 732, 735 (1993). To carry out

this purpose, § 20-259.01(A) mandates that insurers offer UM coverage to their insureds

in the form of “written notice.”

¶10 Because the UMA mandates that an insurer offer UM coverage for every

automobile liability policy issued to an Arizona insured, the proper remedy for failing to

do so is “to include the coverage in the policy by operation of law.” Ins. Co. of N. Am. v.

Superior Court, 166 Ariz. 82, 85-86, 800 P.2d 585, 588-89 (1990). However, the

legislature has excepted from this provision “any general commercial liability policy,

6
excess policy, umbrella policy or other policy that does not provide primary motor

vehicle insurance.” § 20-259.01(L).

¶11 “When interpreting statutes, our primary goal is to give effect to” the

legislature‟s intent in enacting the provisions. Bither v. Country Mut. Ins. Co., 226 Ariz.

198, ¶ 8, 245 P.3d 883, 885 (App. 2010). And, “[t]he best indication of legislative intent

is the plain language of the statute.” Id. Here the language of § 20-259.01 is clear; it

requires the insurer issuing automobile or motor vehicle liability policies to offer UM

coverage unless certain exceptions apply.

¶12 Nationwide contends the BOP policy falls within the exception set forth in

§ 20-259.01(L), and it was not, therefore, required to offer UM coverage to Chevron

when it issued that policy. The Jacksons concede the BAP provided primary auto

insurance for Chevron and they agree the BOP is a general commercial policy, or CGL

policy. But, they argue, “by virtue of the [garage liability] endorsement, the BOP is not a

standard CGL policy” as contemplated by § 20-259.01(L). Rather, they contend the

endorsement converted the BOP to a second policy providing “primary automobile

liability coverage for [Chevron]‟s garage operations.” They insist the BOP “was written

and intended . . . as a primary automobile liability policy when an employee is driving a

customer‟s automobile.” Thus, the Jacksons maintain, “under A.R.S. § 20-259.01(A) and

(L), Nationwide was obligated to offer UM coverage under both primary policies,” and,

because no such offer was made under the BOP, coverage should be imputed by law.

See id.

7
¶13 The Jacksons rely on St. Paul Fire and Marine Insurance Co. v. Gilmore,

168 Ariz. 159, 812 P.2d 977 (1991), in support of their argument that the BOP provided

primary automobile insurance. In Gilmore, an employee driving in the course of her

employment was injured by a negligent motorist. Id. at 161, 812 P.2d at 979. After she

exhausted her own insurance, she sought to recover from her employer‟s CGL policy. Id.

The CGL policy contained automobile insurance but uninsured motorists coverage had

not been offered on the policy. Id. Our supreme court held that because the policy

provided automobile liability insurance, § 20-259.01(A) required the insurer to offer UM

coverage. Id. at 167, 812 P.2d at 985.

¶14 Following Gilmore, the legislature amended § 20-259.01 to include the

exception now contained in § 20-259.01(L).6 See 1993 Ariz. Sess. Laws, ch. 207, § 1.

Division One of our court concluded in Petrusek, 193 Ariz. 552, ¶ 17, 975 P.2d at 146,

that the legislature intended the exception to overrule Gilmore‟s requirement that insurers

offer UM coverage when general commercial liability policies include automobile

liability coverage. In Petrusek, an employee was injured while driving during the course

of business. Id. ¶ 2. Her employer carried a BAP as well as a CGL policy. Id. ¶ 3. The

employee sought to recover from the CGL policy, which provided auto coverage only as

excess insurance. Id. ¶¶ 3-5, 12. She argued that because her personal insurance

6
At the time it was enacted the exception was contained in § 20-259.01(I). See
1993 Ariz. Sess. Laws, ch. 207, § 1. We refer to the exception by its current designation
as § 20-259.01(L).

8
coverage had lapsed,7 her employer‟s CGL policy became primary insurance. Id. ¶ 13.

We rejected this argument, noting that the legislative history of § 20-259.01(L)

“indicates that the legislature intended to overrule Gilmore‟s holding that required

insurers to offer UIM coverage in connection with general commercial liability policies

providing automobile liability insurance.”8 Id. ¶ 17. We reasoned that

[t]he plain language of the statute shows an intent to eliminate
the requirement that insurers offer [underinsured motorist]
coverage when selling automobile liability coverage provided
„in connection with‟ a broad range of „non-primary‟ type
policies, including but not limited to commercial general
liability, excess, and umbrella policies. Thus, the exception
applies as long as the policy is not intended to be the first or
only source of insurance coverage.

Id. ¶ 15.

¶15 Here the BOP issued to Chevron provides typical commercial general

liability coverage. The BAP, issued at the same time, provides the type of coverage

typically found in a motor vehicle liability policy, including UM coverage. The BAP was

issued to Chevron at the same time as the BOP, it covered the same policy period and the

insured was offered UM coverage in connection with the transaction. Under these

circumstances, we conclude the BOP was not “intended to be the first or only source of

[automobile liability] insurance coverage” and the UMA does not apply to it.9 Id.

7
We agree with the Jacksons that Petrusek‟s argument differs from their own. But,
as discussed below, we find the reasoning of Petrusek equally applicable here.
8
The Jacksons agree the legislature intended to overrule Gilmore by enacting the
language contained in § 20-259.01(L).
9
Although Petrusek addressed underinsured motorist (“UIM”) coverage, its
reasoning is equally applicable to UM coverage. See § 20-259.01 (exception contained in
9
¶16 The Jacksons also argue that, “consistent with . . . [A.R.S.] § 28-4010, the

[garage liability] endorsement set forth that the [BOP] provides primary automobile

liability coverage in situations such as when an employee is driving a customer‟s

vehicle.” Section 28-4010(A) sets forth the following presumption:

If two or more policies affording valid and collectible motor
vehicle liability insurance apply to the same motor vehicle
that is involved in an occurrence out of which a liability loss
arises and one of the policies affords coverage to a named
insured engaged in the business of selling, repairing,
servicing, delivering, testing, road testing, parking or storing
motor vehicles, both of the following are conclusively
presumed:

1. If at the time of loss the motor vehicle is being operated
by a person engaged in one of the businesses or by the
person‟s employee or agent, the insurance afforded by the
policy issued to the person engaged in the business is primary
and the insurance afforded by any other policy is excess.

¶17 In support of their argument that § 28-4010 establishes the BOP provided

primary automobile insurance in this situation, the Jacksons rely on Nationwide Mutual

Insurance v. CNA Insurance Co., 159 Ariz. 368, 767 P.2d 716 (App. 1988), and State

Farm Mutual Automobile Insurance Co. v. Fireman’s Fund Insurance Co., 149 Ariz.

179, 717 P.2d 858 (1986).10 But neither case addresses a situation involving a

determination of priority between two policies held by the same garage owner. To the

subsection L applies to both UM and UIM coverage). And, although the Jacksons are
correct that Petrusek did not involve a garage liability endorsement, its statement of what
the statute requires is equally applicable in this context.
10
These decisions refer to A.R.S. § 28-1170.01, the predecessor to § 28-4010. See
1997 Ariz. Sess. Laws, ch. 87 § 12 (renumbering as § 28-4010); 1995 Ariz. Sess. Laws,
ch. 132, § 3; 1978 Ariz. Sess. Laws, ch. 183, § 2.

10
contrary, in Nationwide, we held that § 28-4010 is intended to apply “where there are

multiple carriers” to “requir[e] that the insurer for the negligent driver will usually be the

primary carrier.” 159 Ariz. at 370, 767 P.2d at 718.

¶18 The trial court concluded, and we agree, that “the statutory dictates of

[§ 28-4010] are inapposite” here. We find nothing in the plain language of § 28-4010

that suggests the legislature intended the provision to apply to determine priority between

two policies issued to the same garage owner. See City of Tucson v. Clear Channel

Outdoor, Inc., 209 Ariz. 544, ¶ 71, 105 P.3d 1163, 1178 (2005) (in interpreting statutes,

we look first to language of statute and give words used their plain meaning). Rather, the

conclusive presumptions of § 28-4010 were intended to “plac[e] primary liability on the

party who is most responsible for the loss and thus encourag[e] the negligent party to use

due care.” John Deere Ins. Co. v. W. Am. Ins. Group, 175 Ariz. 215, 218, 854 P.2d 1201,

1204 (App. 1993). These considerations would not be served where both policies are

issued to the same party “engaged in the business of . . . repairing . . . motor vehicles.”

§ 28-4010. And, as Nationwide pointed out at oral argument, because § 28-4010

addresses only priority of payment for a motor vehicle accident when an insured is

involved in certain automobile businesses, it is not relevant to our determination of

whether the BOP offered primary automobile insurance.

¶19 In sum, because the BOP is a CGL policy “not intended to be the first or

only source of insurance coverage,” Petrusek, 193 Ariz. 552, ¶ 15, 975 P.2d at 146, it

“does not provide primary motor vehicle insurance,” and falls within the exception

created by § 20-259.01(L). Accordingly, the policy is not subject to the written notice

11
requirement of § 20-259.01(A), and UM coverage is not imputed based on Nationwide‟s

not having offered it. As previously noted, the Jacksons‟ motion for new trial essentially

repeated the arguments that had been made on summary judgment. For the reasons stated

above, the court did not abuse its discretion in denying either that motion or the Jacksons‟

motion for summary judgment.

Disposition

¶20 We affirm the trial court‟s grant of Nationwide‟s motion for summary

judgment and its denial of the Jacksons‟ motions for summary judgment and new trial.

/s/ Virginia C. Kelly
VIRGINIA C. KELLY, Judge

CONCURRING:

/s/ Garye L. Vásquez
GARYE L. VÁSQUEZ, Presiding Judge

/s/ Philip G. Espinosa
PHILIP G. ESPINOSA, Judge

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