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The full case caption appears at the end of this opinion. ON DENIAL OF PETITION FOR REHEARING KIDWELL, Justice This is an insurance policy interpretation case. Plaintiff Daniel Asevedo Martine’wasinjured in an automobile collision while on duty as a reserve police officer for the City ofRathdrum (City). He recovered a portion of his losses from worker’s compensation and thenfiled a claim under the uninsured motorist provision of the City’s insurance policy. Theinsurance company refused to pay the claim, contending that the injuries to Martine’wereexcluded from uninsured motorist coverage. The district court granted summary judgment forthe insurance company, and Martine’appeals. I. FACTS AND PROCEDURAL HISTORY On September 3, 1994, Martine’was injured in a head-on collision with an uninsuredmotorist while on duty as a reserve police officer for the City. As a result of the accident,Martine’received extensive injuries which required prolonged hospitalization and physicaltherapy. Martine’collected partial compensation for his injuries under worker’s compensation.In an attempt to recover the rest of his damages, he filed a claim with the City’s insurance carrier under the uninsured motorist provision of the policy. The City’s policy was underwritten byrespondent Idaho Counties Risk Management Program (ICRMP), and was sold to the Citythrough the insurance agency of James E. Dickinson (Dickinson Insurance), which is also arespondent. ICRMP based its denial of Martinez’s claim on two exclusions to the policy: 1) injuriescovered by worker’s compensation, and 2) to employees of the insured. On May 9, 1995,Martine’and his wife filed a complaint against both respondents for denial of the claim, allegingseveral theories of liability. They argued that the exclusions from coverage were against publicpolicy, and that the respondents had breached their contract of insurance with the City. Theyalso claimed that Dickinson Insurance had negligently failed to provide the City with adequateinsurance, and that Martine’was injured as a third-party beneficiary of the City’s policy.Additionally, they sought damages for Martinez’s injuries under the policy. Finally, Martinezargued that the exclusions violated the Unfair Claims Settlement Practices Act (UCSPA).On October 23, 1995, defendant ICRMP filed a motion for summary judgment arguingthat Martinez’s injuries were excluded from coverage by the terms of the policy. While thedistrict court found that the policy was ambiguous as to the uninsured motorist coverage, itnevertheless granted partial summary judgment for ICRMP and Dickinson Insurance on thebreach of contract and UCSPA causes of action. However, the district court reasoned that therewere issues of material fact as to the claims regarding the uninsured motorist coverage.Following the district court’s grant of partial summary judgment, the respondents filed amotion to reconsider. They urged that the only issue concerning the uninsured motoristexclusion was one of law rather than of fact, and that the exclusions were not contrary to Idaholaw. On March 7, 1997, Martine’moved the district court for summary judgment, primarilyciting the district court’s determination that the policy was ambiguous. Martine’reasoned thatwhere the policy was admittedly in force and the exclusion had been ruled ambiguous, there wasno legal basis for denying him coverage.On June 27, 1997, the district court entered summary judgment for the respondents,foreclosing the rest of Martinez’s claims. This determination was based on the respondentsZoriginal motion for summary judgment of March 9, 1996. Martine’appealed the grant ofsummary judgment. II. STANDARD OF REVIEW On appeal from the grant of a motion for summary judgment, this Court employs thesame standard as that used by the district court originally ruling on the motion. McKay v.Owens, 130 Idaho 148, 152, 937 P.2d 1222, 1226 (1997). On review, summary judgment isproper if the pleadings, depositions, and admissions on file, together with the affidavits, if any,show that there is no genuine issue as to any material fact, and that the moving party is entitled tojudgment as a matter of law.] I.R.C.P. 56(c). This Court liberally construes all disputed facts infavor of the non-moving party, and draws all reasonable inferences and conclusions supported bythe record in favor of the party opposing the motion. Bon’v. Sudweeks, 119 Idaho 539, 541, 808P.2d 876, 878 (1991). If reasonable people could reach different conclusions or draw conflictinginferences from the evidence, summary judgment must be denied. Id. However, if the evidencereveals no disputed issues of material fact, and the moving party is entitled to judgment as amatter of law, then the grant of summary judgment is appropriate. Allen v. Blaine County, 131Idaho 138, 140, 953 P.2d 578, 560 (1994). III. ANALYSIS A. The Exclusions to the Uninsured Motorist Coverage Are Illusory and Void asAgainst Public Policy Under I.C. D DD D 41-2502. Martine’argues that the policy issued by ICRMP is ambiguous and as such, should beconstrued in favor of finding coverage. Martine’also contends that because the exclusions in thepolicy are so all-inclusive, no claimant will be able to collect under the uninsured/underinsuredmotorist provision. The determination of whether a contract is ambiguous is a question of law upon whichthis Court exercise free review. Mutual of Enumclaw Life Ins. Co. v. Lincoln, 131 Idaho 454,455, 958 P.2d 1140, 1141 (1997); DBSI/TRI v. Bender, 130 Idaho 796, 802, 948 P.2d 151, 157(1997); Kessler v. Tortoise Dev., Inc., 130 Idaho 105, 107, 937 P.2d 417, 419 (1997). When thisCourt finds that language in the policy is ambiguous, this Court must determine “what areasonable person in the position of the insured would have understood the language of thecontract to mean.” City of Boise v. Planet Ins. Co., 126 Idaho 51, 55, 878 P.2d 750, 754 (1994). The policy issued to the City contains the following coverage provisions: GENERAL INSURING AGREEMENT I. NAMED ASSURED It is agreed that the unqualified word Assured] wherever used in this Insuranceincludes not only the Named Assured but also: 2. under Section III, any person while using an owned automobile or a hiredautomobile, and any person or organization legally responsible for the use thereof,provided the actual use of the automobile is by the Named Assured or with hispermission . . . . SECTION III – AUTOMOBILE LIABILITY INSURING AGREEMENT A – AUTOMOBILE LIABILITY: . . . B – AUTOMOBILE MEDICAL PAYMENTS: . . . C – UNINSURED/UNDERINSURED MOTORIST: uninsured/underinsured motorist insurance shall be afforded in respect of any occurrence to the minimumextent permitted by the law of the State in which each owned or hired automobileis principally garaged, but only if the law of such State required the Assured tohave such insurance and the Assured has otherwise failed to comply with suchlaw. EXCLUSIONS APPLICABLE TO SECTION III THIS SECTION DOES NOT APPLY: (a) To bodily injury or property damage which the Assured intended orexpected or reasonably could have expected. (b) To damage or destruction of property owned by the Assured. (c) To any obligation for which the Assured may be held liable under anyworkers’compensation, unemployment compensation, disability benefitslaw, employers liability or under any similar law or to bodily injuries toany employee or to any liability for indemnity or contribution brought byany party for bodily injuries to any employee. 1. The policy is ambiguous as to uninsured motorist coverage. Martine’contends, and the district court stated, that the policy coverage under SectionIII(C) is ambiguous. This section sets forth the scheme as to when the uninsured/underinsuredmotorist coverage is applicable. Under Section III(C) uninsured/underinsured motorist coverageis extended in every policy to the minimum extent permitted by law . . . but only if the law ofsuch State required the Assured to have such insurance and the Assured has otherwise failed tocomply with such law.] ICRMP has stated in its pleadings that this section should be interpretedto mean simply that if the State of Idaho requires uninsured/underinsured motorist coverage, thensuch coverage is automatically extended; and if uninsured/underinsured motorist coverage is notrequired, then no such coverage exists. Under I.C. D 41-2502, Idaho does not require uninsured/underinsured motorist coverageon all policies. This is the crux of I.C. D 41-2502, which provides in pertinent part that:No policy insuring against loss resulting from liability imposed by law for bodilyinjury . . . arising out of the . . . use of a motor vehicle shall be delivered or issuedfor delivery in this state with respect to any motor vehicle registered or principallygaraged in this state unless coverage is provided therein or supplemental thereto,in limits for bodily injury or death as set forth in section 49-117, Idaho Code, . . .under provisions approved by the director of the department of insurance, for theprotection of persons insured thereunder who are legally entitled to recoverdamages from owners or operators of uninsured motor vehicles because of bodilyinjury . . . . The named insured shall have the right to reject such coverage, whichrejection must be in writing . . . . Id.While under a slightly different set of facts, this Court has ruled that I.C. D 41-2502 doesnot require uninsured/underinsured motorist protection in every policy. Miller v. Farmers Ins.Co. of Idaho, 108 Idaho 896, 898, 702 P.2d 1356, 1358 (1985). In Miller, the issue was whetherI.C. D 41-2502 required uninsured/underinsured motorist protection in every policy, and if so,whether exclusions to the policy would violate that requirement. Id. While the Court found thatthe claimant was not an insured under the policy, it additionally found that I.C. D 41-2502 doesnot require uninsured/underinsured motorist coverage. Id. (From [I.C. DD 41-2502 & 49-233]it is clear that while liability insurance is mandatory, uninsured motorist coverage is not. What ismandatory under I.C. D 41-2502 is that the uninsured motorist coverage be offered at the time ofpurchase of liability insurance.] (emphasis in original)). Therefore, since uninsured/underinsured motorist coverage is not required under Idaholaw, the clear and unambiguous language of Section III(C) leads to the conclusion that the Citydid not purchase, and was not provided, uninsured/underinsured motorist coverage. However,what seems clear becomes ambiguous when ICRMP argues in its pleadings, and the declarationspage affirms, that the City did purchase uninsured/underinsured motorist coverage, and that suchcoverage was in place at the time of the accident. This Court is unable to understand how theCity was covered at the time of the accident when the clear language of the policy excludesuninsured/underinsured motorist coverage in states that do not require it. Clearly a policy isambiguous when those who drafted it cannot agree on its interpretation. 2. By Use Of Definitions And Exclusions, The Policy Creates Only anIllusion of Uninsured Motorist Coverage.While Martine’agrees that he was excluded from uninsured/underinsured motoristcoverage because of the employee exclusion, he urges that the coverage is illusory because everypossible claimant can be excluded. Upon reviewing the policy, we find merit to this argument.To maintain a claim under this policy, a claimant injured in an accident with an uninsuredmotorist would first need to fit within the definition of an insured under the policy. In the policyissued to the City, the general insuring agreement defines who is an insured for uninsured/underinsured motorist protection. Policy Provisions: (specifically set forth previously). 1. Using the vehicle. To be covered under the uninsured/underinsured motoristsection, the claimant must have been using the automobile at the time of theaccident. 2. Legally responsible for the automobile. In addition to using the automobile, theinjured party must also have been legally responsible for the use of the vehicle atthe time of the accident. Once both of these requirements have been met, a claimant must then demonstrate thatthe exclusions do not apply. The exclusions to the uninsured/underinsured motorist coverage areas follows: Exclusions: (specifically set forth previously) (a) Reasonably expected. Any bodily injury or property damage which the Cityexpected or reasonably could have expected is excluded. (b) Insured’s property. Any property owned by the City which is damaged in anaccident is excluded from uninsured/underinsured motorist coverage. (c) Bodily injuries to Employees. This excludes any person who could file a claimunder workers’compensation, unemployment compensation, disability benefits,employers liability, or for indemnity or contribution by any person for bodilyinjuries to an employee. Upon review of these requirements and exclusions, it appears that if any actual coveragedoes exist it is extremely minimal and affords no realistic protection to any group or class ofinjured persons. The declarations page of the policy contains language and words of coverage,then by definition and exclusion takes away the coverage. The fact that there might be somesmall circumstance where coverage could arguably exist does not change the reality that, whenthe policy is considered in its entirety, the City was receiving only an illusion of coverage for itspremiums. This Court will not allow policy limitations and exclusions to defeat the precisepurpose for which the insurance is purchased. Bonner County v. Panhandle Rodeo Ass ‘n, Inc.,101 Idaho 772, 776, 620 P.2d 1102, 1106 (1980) ([T]he ambiguous circumstance in which apolicy has been issued purportedly providing coverage but with exclusionary provisions which,if applied, would narrow that coverage to defeat the very purpose or object of the insurance.] ). ICRMP has cited several cases wherein this Court has upheld certain exclusions to theuninsured motorist coverage. See, e.g., Hammon v. Farmers Ins. Co. of Idaho, 109 Idaho 286,287, 289, 707 P.2d 397, 398, 400 (1985) (approving uninsured motorist exclusions which limitedcoverage to vehicles known to be uninsured or hit-and-run] vehicles that had come into physicalcontact with the insured person or vehicle); Miller v. Farmers Ins. Co. of Idaho, 108 Idaho 896,899, 702 P.2d 1356, 1359 (1985) (upholding exclusion from uninsured motorist coverage of arelative of the insured who owns an automobile and lives with insureds). However, in each ofthese cases, this Court was asked to consider the application of only one exclusion. Our holdingin this matter does not conflict with these or other similar decisions. In these prior cases, eachpolicy exclusion, independent of the others, was valid. However, in this case, where the all-encompassingexclusions are used in such a way as to prevent coverage, the policy provisionmust fail.In addition to finding that the policy is illusory, we further find for Martine’on thefollowing substantive grounds. 3. The Policy Issued by ICRMP is Void as Against Public Policy asContained in I.C. D DD D 41-2502.As explained above, I.C. D 41-2502 requires that each automobile policy of insuranceissued in Idaho must be accompanied by an offer of uninsured/underinsured motorist coverage.While the coverage is not mandatory, it can only be rejected in a writing, signed by the insured.Id. In the policy issued to the City, the only offer of uninsured/underinsured motorist coveragewas contained in Section III(C). This section, as previously explained, providesuninsured/underinsured motorist coverage only if such is mandated. Sinceuninsured/underinsured motorist coverage is not mandated, the policy by its wordingautomatically withholds uninsured/underinsured motorist coverage in every policy sold.Therefore, since uninsured/underinsured motorist coverage, under the terms of this policy, willnever be provided in Idaho, uninsured/underinsured motorist coverage was never offered to theCity when it purchased the policy. Thus, this policy was issued in violation of I.C. D 41-2502.4. The Policy Must Be Enforced To Provide Coverage For Martinez. The general rule is that contracts which violate public policy are illegal andunenforceable. Miller v. Haller, 129 Idaho 345, 351, 924 P.2d 607, 613 (1996). When the Courtfinds that a contract is unenforceable, it will leave the parties in the same situation in which itfinds them. Whitney v. Continental Life and Accident Co., 89 Idaho 96, 105, 403 P.2d 573, 579(1965). This Court has recognized, however, that finding an insurance contract void andunenforceable may defeat the purpose for which a statute has been enacted. In such a case, theCourt has enforced the policy. Williams v. Continental Life & Accident Co., 100 Idaho 71, 74,593 P.2d 708, 711 (1979). In Williams, the plaintiff was the widow of a debtor who had several life insurancepolicies issued in connection with various bank loans. Id. at 71-72, 593 P.2d at 708-09. Thetotal value of the policies exceeded the $10,000 statutory cap placed on the policies by I.C. D 41-2005. When the debtor died the insurer paid the $10,000 statutory limit, but argued that theremaining two policies were void because they conflicted with the statute. Id. Upon review, thisCourt held that the policy should be enforced because the insurer was estopped from denying thelegality of the contract it created. Id. at 74, 593 P.2d at 711. This result was just, reasoned theCourt, because holding the policy void would frustrate the purpose of the statute. Additionally,the Court found the result fair because there was no reason why the insured should notreasonably and justifiably rely upon the superior knowledge and expertise of the insurer for fullcompliance with the law.] Id. In the present case, the City purchased a policy from ICRMP that was ambiguous as tothe nature and extent of its uninsured/underinsured motorist coverage. Following the reasoningabove, we hold that even though the contract is illegal for violating I.C. D 41-2502, justice andfairness require the contract be enforced. ICRMP argues and the declarations page states that itspolicy provides coverage. This coverage is then taken away by the exclusions. Since the policycreates only an illusion of coverage it is necessary that coverage for this case be afforded toMartinez, and ICRMP is estopped from denying coverage because of the illusion of coverage ithas created. Therefore, we remand to allow Martine’to pursue his legal remedies set forth in hisoriginal complaint. IV. CONCLUSION The insurance contract provisions pertaining to uninsured/underinsured motorist coverageissued to the city of Rathdrum by ICRMP were illusory, and the provisions are further voidbecause of ICRMP’s failure to offer uninsured/underinsured motorist protection when the policywas issued. Therefore, we hold that the uninsured/underinsured motorist coverage contained inthe policy applies to Martinez’s claim. The decision of the district court is vacated andremanded for proceedings consistent with this decision. Costs are awarded to appellants. No attorney fees are awarded on appeal. Justices SILAK and SCHROEDER CONCUR. Chief Justice TROUT, DISSENTING, Because I believe that the insurance contract is not illusory, I respectfully dissent fromthe Court’s opinion in this case. According to the majority opinion, the contract is illusorybecause, once the ambiguous uninsured motorist provision is construed against ICRMP, thecontract purports to provide uninsured motorist coverage but then essentially excludes allpersons who could claim such coverage in the policy exclusions. Under the terms of the policy,the Automobile Liability section of the insurance contract extends coverage to any person usingan owned automobile or a hired automobile, and any person or organization legally responsiblefor the use thereof, provided the actual use of the automobile is by the Named Assured or withhis permission, . . . .] The majority interprets this provision as requiring that a claimant under thepolicy be both using the vehicle and legally responsible for the use of that vehicle. Therefore,because the only persons who could qualify as claimants under this language are employees, andemployees are denied coverage under the policy exclusions, the majority finds that the contract isillusory.While I would agree that the majority’s interpretation of the contract renders the contractillusory, I believe that this interpretation is unnecessarily narrow. Under the ordinary rulesgoverning the interpretation of contracts, [i]f the contract is clear and unambiguous, the courtgives effect to the language employed according to its ordinary meaning.] Bilow v. Preco, Inc.,132 Idaho 23, 27, 966 P.2d 23, 27. In my view, the ordinary meaning of the policy extendscoverage not just to any person using and legally responsible for the use of a City owned or hiredvehicle, but rather to any person using the vehicle, as well as any person or organization legallyresponsible for the use of that vehicle. I believe that this interpretation is mandated by the use ofthe word organization] in the second part of the sentence. Clearly an organization cannot use]the vehicle, but they can be legally responsible for its use. Therefore, the use of the wordorganization] indicates that this provision was intended to make it clear that, in the case of anaccident in which the person using the City vehicle is at fault, the contract will cover not just asuit against the City and the person operating the vehicle, but also the person or organizationwho authorized the use of the vehicle. Consequently, in order to claim coverage under thecontract, a claimant would only have to fall under one of the two categories – that they were aperson using the vehicle, or that they were a person or organization legally responsible for theuse of the vehicle. Thus, the contract provides coverage, specifically uninsured motoristcoverage, to any person, not a city employee, who is using a city owned or hired automobile.Under this interpretation, uninsured motorist coverage would therefore be extended to any non-employeesriding in City owned vehicles, a significant group of people. Therefore, because I believe that the contract extends coverage to a significant number ofpeople, I believe that the contract is not illusory. Consequently, I would affirm the districtcourt’s grant of summary judgment to ICRMP. Justice WALTERS, CONCURRING IN CHIEF JUSTICE TROUT’S DISSENT ANDWRITING SPECIALLY. I agree with Chief Justice Trout’s analysis in this case and particularly concur in herdetermination that — contrary to the conclusion asserted by the majority — the insurance policy inquestion does not require that a person both use the vehicle and be responsible for its use beforecoverage attaches. The majority reaches its conclusion as an adjunct to finding that the policy isillusory. I disagree with that approach and suggest, instead, that it would be more reasonable touphold the validity of the policy. Accordingly, I would construe the policy to afford coverage.An authorized person obviously can use] an automobile by riding in it, withoutindependently also being responsible] for the vehicle’s use. Such a person should be affordedcoverage under the terms of the policy as well as someone who may have a right to coverageflowing from that person’s responsibility for the use of the vehicle. Common examples of suchusers who might be transported in a city-owned police vehicle might be prisoners, juveniledetainees, and persons committed to mental facilities and who are being transported to detentiondestinations; persons who might be transported to medical facilities in emergency situations;nonemployee passengers, such as family members, who are not covered by worker’scompensation; city-sponsored senior citizen transportation programs; the user of a city vehicle byloan from the city where the user is not an employee of the city; nonemployee passengers whoare allowed to ride with city officials on business trips to attend conferences; the use of the cityvehicle in a parade by a nonemployee; a repairman road-testing the vehicle, as a passenger, afterworking on the vehicle; the use of a vehicle commandeered by a state patrolman as a passenger;.ride-along programs for Boy Scouts or high school students learning about law enforcementactivities; and hitch-hikers who have been given a ride by an authorized operator of the vehicle.These examples demonstrate the purpose behind the coverage provision of the policy. The policy affords coverage to people who might be injured in an accident with an uninsuredmotorist, while riding in a city vehicle and without being responsible] for use of the cityvehicle. The additional exclusion for employees, who are limited to the worker’s compensationlaw in their claims against the city, is reasonable and not illusory. There should not be coverageunder the policy for Martinez, who was injured by an uninsured motorist, while Martine’wasacting in the course of his employment as a city patrolman.
Martinez v. Idaho Counties Reciprocal Management Program IN THE SUPREME COURT OF THE STATE OF IDAHO Docket No. 23981 DANIEL ASEVEDO MARTINEZ, JR. and NANCY MARTINEZ, husband and wife, Plaintiffs-Appellants, v. IDAHO COUNTIES RECIPROCAL MANAGEMENT PROGRAM (ICRMP), a reciprocal company domiciled in Boise, Idaho and its producer JAMES D. DICKINSON INSURANCE, INC. d/b/a DICKINSON INSURANCE AND FINANCIAL SERVICES, HEREBY WITHDRAWN Defendants-Respondents. 2000 Opinion No. 43 Filed: April 28, 2000 Coeur d’Alene, April 1999 Term Frederick C. Lyon, Clerk THE COURT’S PRIOR OPINION IS SUBSTITUTE OPINION DATED DECEMBER 17, 1999 Appeal from the District Court of the First Judicial District, Stateof Idaho, Kootenai County. Hon. James F. Judd, District Judge. The decision of the district court is vacated and remanded. Harvey Richman, Coeur d’Alene, for appellants. Hamlin & Sasser, P.A., Boise, for respondent ICRMP. Geoffrey M. Wardle argued. Elam & Burke, P.A., Boise, for respondent Dickinson.
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