Rusthoven v. Commercial Standard Ins. Co. - 387 N.W.2d 642 (Minn. 1986)

Rule:

One of the ancient principles of contract law is that an ambiguous contract, especially an adhesion contract, is construed against the drafter. One of the fundamentals of insurance law, it follows, is that ambiguous language in an insurance policy is to be construed in favor of the insured. The result of such a construction, however, must not be beyond the reasonable expectations of the insured.

Facts:

The driver, who was operating a tractor-trailer in the course of his employment, claimed that an approaching car crossed over the center line and forced the tractor-trailer onto the shoulder, where the tractor-trailer slid into a ditch and overturned. The other car was not identified. The tractor-trailer was rented by the driver’s employer, which was insured under a trucker’s policy issued by the respondent insurance company. The policy provided liability insurance, personal injury protection, and uninsured motorist coverage, and covered commercial autos owned or rented by the employer. According to the policy, regardless of the number of covered autos, insureds, claims made or vehicles involved in the accident, the most the respondent insurance company will pay for all damages resulting from any one accident was the limit of uninsured motorists’ insurance shown in the declarations. The declaration sheet mentioned in the insurance policy did not set out a dollar limit of liability under uninsured motorists’ coverage, but referred to endorsement CA 21 07. The endorsement provided for a $25,000.00 liability limitation for each person, and a $50,000.00 liability limitation for each accident. The driver brought suit against the respondent insurer. Before trial, the parties submitted to the court the issues of the limit of the uninsured motorist coverage under the policy, The judge ruled that the applicable coverage under the policy was limited to $25,000.00. The court of appeals upheld the decision, holding that the only reasonable interpretation of respondent's policy limited the uninsured motorist coverage to $ 25,000. The present appeal followed. 

Issue:

Did the lower courts correctly hold that the only reasonable interpretation of respondent's policy limited the uninsured motorist coverage to $ 25,000? 

Answer:

No.

Conclusion:

Reversing, the court stated that although the policy could be read in ways that made two certain clauses harmonious, the interpretations led to contradictory results, with no further indication which meaning was intended by the parties. Thus, the court stated, the policy was ambiguous and was to be strictly interpreted against respondent. Under such an interpretation, the court stated, the liability limitation of the uninsured motorist provision of respondent's policy was $ 1,675,000, or $ 25,000 times the 67 leased vehicles insured, which the court found did not exceed the reasonable expectations of the insured and therefore was not an improper result.