Court of Appeals of Kentucky.
NAUTILUS INSURANCE COMPANY, Appellant
v.
GRAYCO RENTALS, INC., Appellee.
No. 2011–CA–002150–MR.
Feb. 1, 2013.
Appeal from Floyd Circuit Court, Action No. 11–CI–00356; John David Caudill, Judge.
Barry M. Miller, Matthew D. Ellison, Lexington, KY, for Appellant.
Jim G. Vanover, Pikeville, KY, for Appellee.
Before CAPERTON, DIXON, and TAYLOR, Judges.
OPINION
TAYLOR, Judge.
*1 Nautilus Insurance Company (Nautilus) brings this appeal from a Summary Judgment entered in the Floyd Circuit Court on November 9, 2011, in favor of Grayco Rentals, Inc. (Grayco). We reverse and remand.
Nautilus issued a “Commercial Lines Policy” (commercial liability policy) to Grayco on October 27, 2007. Grayco is located in Prestonsburg, Kentucky, and is in the business of renting heavy equipment for commercial and residential use. Grayco also rents trailers for transporting heavy equipment.
On June 13, 2008, Danny Rice went to Grayco to rent a mechanical excavator and a trailer upon which to haul the excavator. An employee of Grayco selected a double-axel trailer, loaded the excavator, and secured the excavator on the trailer for Rice. Thereafter, the trailer was attached to Rice’s pickup truck for transport. Shortly after leaving Grayco’s premises, Rice was involved in a motor vehicle accident and suffered extensive bodily injuries. Rice alleges that the excavator and trailer attached to his truck caused the accident.
Consequently, Rice filed a complaint against Grayco in the Floyd Circuit Court (Action No.2010–CA–00615). Therein, Rice alleged that Grayco’s employee(s) were negligent in the selection of the particular trailer and in the securing of the excavator to the trailer. As a result of this negligence, Rice claimed that the trailer began to swerve uncontrollably while being transported with Rice’s truck, thereby causing the accident. Upon the filing of Rice’s complaint, Grayco sought coverage from Nautilus under its commercial liability policy.
Nautilus then filed the underlying petition for declaration of rights (Action No.2011–CI–00356) seeking a determination as to whether its commercial liability policy extended coverage to Grayco in relation to Rice’s negligence claims. Both parties subsequently filed motions for summary judgment. In its motion, Nautilus argued that the commercial liability policy issued to Grayco excluded coverage for claims arising from the use of an “auto” per Section I(2)(g) and that the trailer Grayco rented to Rice constituted such an auto per Section V(2)(a) of the commercial liability policy. Thus, Nautilus maintained that there was no coverage for Rice’s negligence claims as the trailer was an auto under the commercial liability policy, and any claims related thereto were expressly excluded from coverage.
Conversely, Grayco argued that the commercial liability policy’s language was ambiguous and that the trailer was not an auto per the policy. Rather, Grayco argued that the trailer constituted “mobile equipment” pursuant to Section V(12)(f) and that Rice’s claims of negligence were covered under the commercial liability policy.
By order entered November 9, 2011, the circuit court granted summary judgment in favor of Grayco. The circuit court reasoned that the language of the commercial liability policy was ambiguous and that the trailer qualified as mobile equipment. And, the circuit court determined that as mobile equipment the commercial liability policy extended coverage to Grayco against Rice’s negligence claims. This appeal follows.
*2 Nautilus contends that the circuit court erroneously rendered summary judgment concluding that the commercial liability policy provided coverage to Grayco for Rice’s claims of negligence arising from the rental of the trailer and excavator. For the reasons hereinafter stated, we agree.
Summary judgment is proper where there exists no material issue of fact and movant is entitled to judgment as a matter of law. Kentucky Rules of Civil Procedure 56; Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky.1991). Resolution of this appeal centers upon the proper interpretation of the commercial liability policy issued by Nautilus to Grayco.
It is well-established that interpretation of an insurance contract presents a question of law, and our review proceeds de novo. Kemper Nat. Ins. Cos. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869 (Ky.2002). Generally, we are to afford words in an insurance contract their ordinary meaning, and, a court cannot create ambiguity in an insurance contract in an effort to extend coverage to the insured. Bituminous Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633 (Ky.2007).
In this case, we are specifically called upon to determine if coverage is provided under the commercial liability policy for Rice’s negligence claims related to Grayco’s rental of the trailer to Rice. In determining that coverage was provided under the commercial liability policy, the circuit court held that the “exclusionary language of [the policy] is ambiguous” and reasoned:
The policy specifically excludes from coverage all “autos,” and defines “autos” to include trailers. However, the policy specifically provided coverage over “mobile equipment,” defined “mobile equipment” as “[v]ehicles … maintained primarily for purposes other than the transportation of persons or cargo,” which arguably includes the trailer that is at issue in this matter.
Thus, the circuit court held that the trailer constituted mobile equipment under the commercial liability policy and, therefore, was not excluded from coverage under the policy. However, given the specific and unambiguous language of the applicable provisions in the commercial liability policy, we view the circuit court’s interpretation erroneous as a matter of law.
Under the language of the commercial liability policy, the trailer rented by Grayco to Rice qualified as an auto and was excluded from coverage under the terms of the policy.FN1 Specifically, Section I(2)(g) of the commercial liability policy excluded from coverage any bodily 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.” (Emphasis added.) And, “auto” is defined by Section V(2)(a) of the commercial liability policy as including “[a] land or motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment[.]” (Emphasis added.) As Section V(2)(a) plainly and clearly defines “auto” to include “trailer” or “semitrailer,” we think the trailer owned by Grayco and rented to Rice constitutes an auto. As an auto, any liability incurred by Grayco is excluded under the commercial liability policy by operation of Section I(2)(g). The language of Section I(2)(g) and Section V(2)(a) are plain and unambiguous.
FN1. The relevant language of the commercial liability policy is as follows:
Section I (2): Exclusions
This insurance does not apply to:
….
g. Aircraft, Auto or Watercraft
“Bodily injury” or “property damage” arising out of the ownership, maintenance, use or entrustment to others of any aircraft, “auto” or watercraft owned or operated by or rented or loaned to any insured….
Section V(2): “Auto” means:
a. A land or motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment[.]
Section V(12): “Mobile equipment” means any of the following types of land vehicles, including any attached machinery or equipment:
f. Vehicles … maintained primarily for purposes other than the transportation of persons or cargo.
*3 Alternatively, even if the circuit court were correct that an ambiguity exists upon whether the trailer constituted an auto under Section V(2)(a) or mobile equipment under Section V(12)(f), the ambiguity must be resolved in favor of Section V(2)(a) by interpreting the trailer as an auto. Under Section V(2)(a), auto is specifically defined as a trailer or semitrailer; on the other hand, under Section V(12)(f), mobile equipment is generally defined as “[v]ehicles … maintained primarily for purposes other than the transportation of persons or cargo.” When resolving such ambiguities between seemingly conflicting clauses, it is well-settled that a specific clause shall prevail over a general clause in an insurance contract. State Auto Mut. Ins. Co. v. Ellis, 700 S.W.2d 801 (Ky.App.1985). So, Section V(2)(a) definition of auto as including a trailer prevails as the more specific clause. As a consequence, Rice’s negligence claims related to the trailer are clearly excluded under the commercial liability policy.
In sum, we hold that coverage under the commercial liability policy is excluded as to Rice’s negligence claims related to Grayco’s rental of the trailer; thus, the circuit court erred as a matter of law in granting summary judgment to Grayco.
For the foregoing reasons, the Summary Judgment of the Floyd Circuit Court is reversed and remanded for proceedings consistent with this opinion.
ALL CONCUR
