Aetna Casualty & Surety Co. v. Brethren Mutual Insurance

Liss, J., delivered the opinion of the Court. The Aetna Casualty and Surety Company (Aetna) and its insured, J. William Boniface (Boniface), appellants, filed a declaratory judgment action in the Circuit Court for Baltimore County, seeking a declaration that an insurance policy issued to Boniface by The Brethren Mutual Insurance Company (Brethren), appellee, provided him with coverage for certain claims made against him by one Henry L. Barnett (Barnett). They also sought a declaration: 1) that Brethren is responsible for certain attorneys’ fees and other costs incurred by Aetna in defending Boniface against the claims being made against him by Barnett, and 2) that Brethren must pay the attorneys’ fees and other costs incurred by Boniface and Aetna in pursuing the declaratory judgment action. On February 14, 1977, a hearing on the merits of the declaratory judgment action was held before Judge Marvin J. Land, who denied all of the requested declarations.

This appeal was taken from that decision. The facts are not disputed, and the parties have set forth in the joint record extract filed in this appeal an agreed statement of facts which we will accept as the factual basis for this controversy. That statement, with minor amendments, we repeat here verbatim: “J. William Boniface and William Boniface, as partners, owned and operated a farm in Harford County, Maryland, known as Bonita Farm, which consisted of a total of one hundred acres with approximately eighty acres being devoted to the breeding and raising of young, thoroughbred race horses — including the pasturing of these horses, and the remainder being comprised of the private ¹⁹⁹ residences of J. William Boniface and William Boniface; barns for the purpose of stabling horses; ... an indoor training track; an outdoor training race track; and a small amount of unused woodland. J. William Boniface and William Boniface owned brood mares which they kept at Bonita Farm for breeding, and depending on the quality of the foals produced, they would either sell them or train them for racing.

They also entered horses into races at tracks away from Bonita Farm. In addition, at Bonita Farm they bred, raised, and trained thoroughbred race horses owned by others. “On September 15, 1972, Boniface purchased for $1,300 a brood mare known as Sasal, which until December 8, 1973 was kept at Bonita Farm solely for breeding purposes; . . . she was never raced, nor was she ever in training for racing. Although she was bred in the Spring of 1973 she was barren and was, therefore, kept in a field away from the mares in foal. At some time late in the night of December 7, or early in the morning of December 8, 1973, Sasal escaped from the field on Bonita Farm in which she had been pasturing, and on December 8, 1973, she was involved in a collision on Creswell Road in Harford County with an automobile being driven by Barnett.

As a result of the injuries Mr. Barnett sustained in the collision, he brought suit against Boniface [which has been stayed pending the outcome of this case], alleging that Sasal was running loose on Creswell Road due to the negligence of Boniface in that she had escaped through an open gate in the fence surrounding the field where she had been pasturing. “On December 7 & 8,1973, Aetna had in full force and effect a policy of insurance titled, ‘Manufacturers’ and Contractors’ Liability Policy’ (No. 98PS71499), under which Boniface, inter alia, was a named insured and which obligated Aetna to ²⁰⁰ provide Boniface with a defense to the law suit brought against him by Barnett and to pay to the limits of the policy, $100,000, any monies which Boniface is found to be legally obligated to pay Barnett as a result of the collision involving Sasal. In addition, the Aetna policy contained the following provision: Other Insurance. The insurance afforded by this policy is primary insurance except when stated to apply in excess of or contingent upon the absence of other insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the company’s liability under this policy shall not be reduced by the existence of such other insurance.

When both this insurance and other insurance apply to the loss on the same basis, whether primary, excess or contingent, the company shall not be liable under this policy for a greater proportion of the loss than that stated in the applicable contribution provision below: (a) Contribution by Equal Shares. If all of such other valid and collectible insurance provides for contribution by equal shares, the company shall not be liable for a greater proportion of such loss than would be payable if each insurer contributes an equal share until the share of each insurer equals the lowest applicable limits of liability under any one policy or the full amount of the loss is paid, and with respect to any amount of loss not so paid the remaining insurers then continue to contribute equal shares of the remaining amount of the loss until each such insurer ²⁰¹ has paid its limit in full or the full amount of the loss is paid. (b) Contribution by Limits. If any of such other insurance does not provide for contribution by equal shares, the company shall not be liable for a greater proportion of such loss than the applicable limit of liability under this policy for such loss bears to the total applicable limit of liability of all valid and collectible insurance against such loss. “In addition, on December 7 & 8, 1973, Boniface was a named insured under a policy of insurance (No. 51648) issued by Brethren, which provided fire and extended coverage and which included a ‘Farmers’ Comprehensive Personal Liability Endorsement’.

Under the terms of this endorsement which also contained $100,000 limits, Brethren was obligated to: I. COVERAGE L - PERSONAL LIABILITY The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements. ²⁰² “The policy also contained an exclusion which provided that coverage does not apply: (b) to bodily injury or property damage arising out of (1) business pursuits of any insured except (i) activities therein which are ordinarily incident to non-business pursuits and (ii) farming, or (2) the rendering of or failing to render professional services. “It also defined farming to include, ‘the operation of roadside stands maintained principally for the sale of the insured’s farm products.’ In addition, the policy contained the following provision: Other insurance. The insurance afforded by this endorsement is primary insurance except that with respect to loss arising out of the ownership, maintenance, operation, use, loading or unloading of 1) any automobile or midget automobile at the insured premises, or 2) watercraft, or any land public conveyance, this insurance shall be excess insurance over any other valid and collectible insurance available to the insured. When both this insurance and other insurance apply to the loss on the same basis, whether primary, excess or contingent, the company shall not be liable under this policy for a greater proportion of the loss than that stated in the applicable contribution provision below: (a) Contribution by Equal Shares. If all of such other valid and collectible insurance provides for contribution by equal shares, ²⁰³ the company shall not be liable for a greater proportion of such loss than would be payable if each insurer contributes an equal share until the share of each insurer equals the lowest applicable limit of liability under any one policy or the full amount of the loss is paid, and with respect to any amount of loss not so paid the remaining insurers then continue to contribute equal shares of the remaining amount of the loss until each such insurer has paid its limit in full or the full amount of the loss is paid.

(b) Contribution by Limits. If any of such other insurance does not provide for contribution by equal shares, the company shall not be liable for a greater proportion of such loss than the applicable limit of liability under this endorsement for such loss bears to the total applicable limit of liability by all valid and collectible insurance against such loss. “Pursuant to the terms of their respective policies, Aetna and Brethren retained separate counsel to represent Boniface in the suit filed against him by Barnett and Boniface also retained personal counsel to represent him. In May of 1975, the counsel retained by Brethren withdrew his appearance on behalf of Boniface; and since that date, counsel retained by Aetna, along with personal counsel for Boniface, has represented Boniface in the Barnett suit. In addition, Brethren advised all concerned that it was denying coverage to Boniface for any damages he may be found liable to pay to Barnett. “As a consequence of the denial of coverage by Brethren, Boniface and Aetna brought a declaratory judgment action in the Circuit Court ²⁰⁴ for Baltimore County in which they requested a declaration: that the policy issued by Brethren is applicable to the claims being made by Barnett against Boniface; that under the applicable terms of the Aetna and the Brethren policies Brethren is obligated to pay, up to $100,000, one half of any monies which Boniface is found liable to pay to Barnett; that Brethren is obligated to pay one half of the legal fees and costs incurred in defending Boniface in the suit brought against him by Barnett; and that Brethren is obligated to pay the legal fees and costs incurred in pursuing the declaratory judgment action.

At a hearing on the merits on February 14, 1977, the requested declarations were denied, [and it is from these judgments that Aetna and Boniface have filed this appeal].” (Footnotes omitted; emphasis in original). (1) The agreed statement of facts in this case establishes that on the date of the accident which forms the subject matter of this appeal, Boniface was the named insured under the broad coverage of the insurance policy issued by Brethren which provided fire and extended coverage and included a farmers’ comprehensive personal liability endorsement. Under the terms of the endorsement, with policy limits of $100,000, Brethren was obligated to pay all damages which the insured might become legally obligated to pay because of bodily injury or property damage and to defend any suit which might arise out of any occurrence covered by the endorsement. The policy contained an exclusion which provided that coverage did not extend to bodily injury or property damage arising out of the business pursuits of the insured but did provide coverage for such activities which were ordinarily incident to non-business pursuits and farming; farming was so defined as to include “the operation of roadside stands maintained principally for the sale of the insured’s farm products.” ²⁰⁵ It is conceded that Aetna, by reason of the policy issued to its insured, Boniface, was required to furnish indemnity in the amount of $100,000 and to furnish a defense to any suit filed against him within the coverage of the policy.

Aetna and Boniface jointly contend, however, that Brethren was required to supplement Aetna’s coverage and defense up to an additional amount of $100,000 because the incident arose out of Boniface’s activities in “farming” rather than out of business pursuits. Brethren in its policy did not undertake to define the word “farming”. It seems clear to us that the language used in the exclusionary clause admits of more than one meaning and is equivocal at best. This requires us to apply the test recited in C & H Plumbing and Heating, Inc. v. Employers Mutual Casualty Co., 264 Md. 510 , 287 A. 2d 238 (1972), to determine whether there is an ambiguity in the policy.

Quoting from 1 Couch on Insurance 2d (1959) at 824, the Court stated the applicable test as: “not what the insurer intended its words to mean, but what a reasonably prudent person applying for insurance would have understood them to mean. The criterion is ambiguity from the standpoint of a layman, not from that of a lawyer.” 264 Md. at 515 . We have no difficulty in concluding that the failure of the policy to define the word “farming” creates an ambiguity so far as the exclusionary clause is concerned. Once having reached this conclusion, we must apply those rules of interpretation of an insurance contract which were most recently stated by Chief Judge Murphy in Aragona v. St. Paul Fire and Marine Insurance Co., 281 Md. 371 , 378 A. 2d 1346 (1977): “Insurance contracts, like other contracts, must be read as a single document and construed as a whole to ascertain what the parties really meant.

Federal Ins. Co. v. Allstate Ins. Co., 275 Md. 460 , 341 A. 2d 399 (1975); Automobile Ins. Co. v. Thomas, 153 Md. 253 , 138 A. 33 (1927).

In other words, the primary purpose in construing insurance contracts is to ascertain and effectuate ²⁰⁶ the intention of the parties, U.S.F. & G. v. Nat. Pav. Co., 228 Md. 40 , 178 A. 2d 872 (1962); Life Insurance Co. v. Plummer, 181 Md. 140 , 28 A. 2d 856 (1942), and the language employed in the policy is to be afforded its ordinary and usually accepted meaning. C & H Plumbing v. Employers Mut., 264 Md. 510 , 287 A. 2d 238 (1972); State Farm Mutual v. Treas, 254 Md. 615 , 255 A. 2d 296 (1969).

When the language is unambiguous and plain as to its meaning, construction of the insurance contract is within the province of the courts, and Maryland has not adopted the rule, followed in many jurisdictions, that an insurance policy is to be most strongly construed against the insurer. Travelers Ins. Co. v. Benton, 278 Md. 542 , 365 A. 2d 1000 (1976); Gov’t Employees Insur. v. DeJames, 256 Md. 717 , 261 A. 2d 747 (1970). Where, however, the language of an insurance contract is ambiguous, construction is for the jury and the ambiguity is to be resolved against the company which prepared the policy and in favor of the insured.

American Cas. Co. v. Aetna Cas., 251 Md. 677 , 248 A. 2d 487 (1968); Gov’t Employees Insur. v. DeJames, supra.” Slip Opinion at 4-5. In a declaratory judgment proceeding, the trial court may sit not only to determine issues of law but as the trier of the facts, and its conclusions as to the facts will not be disturbed unless found to be clearly erroneous. Rule 1086.

The declaratory proceeding is appropriate for the purpose of construing an insurance policy and determining the rights and obligations of insurer and insured under its provisions. World Insurance Co. v. Perry, 210 Md. 449 , 124 A. 2d 259 (1956); Commercial Casualty Insurance Co. v. Webb, 210 Md. 8 , 121 A. 2d 832 (1956). The appellants here chose to institute the declaratory proceeding in such a manner that the court, rather than a jury, was required to resolve the factual dispute as to what the intended coverage of the Brethren policy was. It therefore becomes our task to examine the factual conclusions ²⁰⁷ of the trial court and determine whether or not they were clearly erroneous.

Daniel Webster, the great orator, once said, “When tillage begins, other arts follow. The farmers, therefore, are the founders of human civilization.” 1 Be that as it may, it does not help us in determining when a farmer is engaged in farming. The very definitions of the controlling words in the Brethren policy disclose nuances which are surprising to the casual reader. 2 A careful examination of a number of dictionaries convinces us that the following definitions are those applicable to the