Facts
- American Economy Insurance Company issued an automobile liability policy to John Ebertz covering a 1979 Ford van.
- The policy’s liability coverage defined an “insured” to include the named insured and any “family member” residing in the household.
- The policy also contained a nonpermissive-use exclusion barring liability coverage for “any person” using a covered auto without a reasonable belief that the person was entitled to do so.
- On October 12, 1992, John Ebertz and his wife were at work when their 15-year-old son, Dominic Ebertz, skipped school, took the van, and drove around Devils Lake with a friend.
- Dominic had no driver’s license and did not have his father’s express or implied permission to take or drive the van.
- Dominic and his friend returned the van briefly before the parents came home for lunch, then hid in the van until the parents returned to work and drove again that afternoon.
- An off-duty police officer attempted to stop the van; Dominic fled and, during the pursuit, entered an intersection and collided with a vehicle driven by Randy Holtz.
- The collision caused the van to veer into a vehicle driven by Clifford Close, who suffered serious injuries.
- Dominic was charged with unauthorized use of the vehicle.
- Close pursued damages for his injuries, and American denied liability coverage based on the nonpermissive-use exclusion.
- John Ebertz sued American seeking coverage; the district court granted summary judgment for Ebertz, ruling the exclusion did not apply to a resident family member driver. American appealed.
Issues
- Does an auto policy exclusion denying coverage to “any person” using a covered vehicle without a reasonable belief of entitlement apply to a resident “family member” who otherwise qualifies as an insured?
- If the family member drove without the named insured’s express or implied permission, is the insurer entitled to summary judgment declaring no liability coverage?
Decision
- The North Dakota Supreme Court reversed the summary judgment entered for Ebertz and remanded with instructions to enter summary judgment for American.
- The court held the phrase “any person” in the exclusion is unambiguous and applies to family members as well as non-family drivers.
- Because it was not disputed on appeal that Dominic drove the van without his father’s express or implied permission, Dominic could not reasonably believe he was entitled to use it, and the exclusion barred liability coverage for the accident.
Legal Principles
- Interpretation of an insurance policy is a question of law, reviewed independently on appeal.
- Summary judgment is appropriate when no genuine dispute of material fact exists and the moving party is entitled to judgment as a matter of law.
- Courts enforce unambiguous insurance language as written and do not rewrite a policy to create coverage.
- Undefined terms are given their plain, ordinary meaning; “any person” means all persons without an implied exception for resident relatives.
- A “reasonable belief of entitlement” (nonpermissive-use) exclusion bars liability coverage when the driver lacks permission and cannot reasonably believe the use was authorized.
Conclusion
The North Dakota Supreme Court held that American’s “reasonable belief of entitlement” exclusion applied to Dominic even though he was a resident family member, and because Dominic drove the van without his father’s permission he lacked a reasonable belief he was entitled to use it; therefore, the policy provided no liability coverage for Close’s injuries and summary judgment was required for the insurer.