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[Editor's note: footnotes (if any) trail the opinion]


[2] TRUCK INSURANCE EXCHANGE, a reciprocal/inter-insurance exchange, Appellant,



[4] No. 15889-6-III

[5] Division Three

[6] Panel Nine



[8] File Date: 12/02/97

[9] Source of Appeal:

[10] Appeal from Superior Court of Grant County

[11] Docket No: 95-2-00108-1

[12] Judgment or order under review

[13] Date filed: 05/04/96

[14] Judge signing: Hon. Kenneth L. Jorgensen

[15] Judges:

[16] Authored by Frank L. Kurtz

[17] Concurring:

[18] Dennis J. Sweeney

[19] Kenneth H Kato

[20] Counsel Of Record:

[21] Counsel for Appellant(s)

[22] R. D. Lindahl
Bullivant Houser Bailey Pendergrass & Hoffman
300 Pioneer Tower
888 SW 5th Ave Ste 300
Portland, OR 97204-2089

[23] Counsel for Respondent(s)

[24] Nels A. Hansen
Hansen Law Firm
119 Basin St SW
P.O. Box 8
Ephrata, WA 98823-0008

[25] KURTZ, J.

[26] Truck Insurance Exchange appeals the decision of the trial court granting summary judgment in favor of its insured, Sidney L. Hiatt. Truck Insurance challenges the trial court's conclusion that Mr. Hiatt's policy with Truck Insurance grants coverage for injuries sustained by a worker employed by Mr. Hiatt in California. We decide the language of the policy provides coverage for the insured. For that reason, we affirm the decision of the trial court and award attorney fees to Mr. Hiatt.

[27] FACTS

[28] Sidney L. Hiatt has operated a family-run beekeeping business since 1968. The business is based in Washington, but also has business operations in California and North Dakota. The majority of the operations take place in North Dakota where the honey production takes place. The business operates in California for approximately one month each year.

[29] Prior to 1992, the business did not hire California residents to perform the seasonal work in California. Instead, employees from Washington or North Dakota were transported to California to perform the work in California on a temporary basis. Arrangements were made for these workers under the workers' compensation laws in Washington and North Dakota. In March 1992, the company departed from this practice and Thomas Alves, a California resident, was hired for a few weeks to perform the operations for the business in California. While working, Mr. Alves suffered an injury and incurred damages.

[30] Mr. Alves filed a claim for compensation under the California Workers' Compensation Act. When it was determined that the business had not provided for Mr. Alves under the California provisions, Mr. Alves apparently began proceedings against the California Uninsured Employers' Fund. The Employers' Fund in turn has a claim against Mr. Hiatt for reimbursement of any amount paid to Mr. Alves.

[31] Mr. Hiatt was insured by Truck Insurance Exchange of Farmers Insurance Group. Mr. Hiatt made a claim to Truck Insurance seeking to have Truck Insurance provide liability insurance coverage for the claim asserted by the Uninsured Employers' Fund. Mr. Hiatt was insured under a comprehensive liability policy with a stopgap endorsement, and a commercial general liability policy. The stopgap endorsement expressly required Mr. Hiatt to maintain workers' compensation insurance on his employees in Nevada, Washington, North Dakota, Ohio, West Virginia, and Wyoming.

[32] Mr. Hiatt contends Truck Insurance represented to him that there was coverage for Mr. Alves's claims. There is a notice in the record dated July 28, 1994, indicating that the insurer had received the claim and would begin an investigation. Apparently, representatives of the insured and the insurer attended a settlement conference in California in May 1993. Two insurance agents filed affidavits stating that they never told Mr. Hiatt that he had coverage for the claims in California. One of the agents stated that he sent Mr. Hiatt a letter on August 23, 1993, advising him that the insurance company was denying coverage.

[33] On February 7, 1995, Truck Insurance instituted this action to obtain a declaratory judgment in its favor on the coverage issue. Mr. Hiatt filed a counterclaim seeking coverage under the policy for all injuries claimed by Mr. Alves. The parties filed cross-motions for summary judgment. The trial court denied Truck Insurance's motion and granted summary judgment in favor of Mr. Hiatt. Based on its reading of the stopgap endorsement, the trial court concluded that there was coverage under the endorsement for the claims of Mr. Alves. Truck Insurance appeals.


[35] The appellate court engages in the same inquiry as the trial court when reviewing an order for summary judgment. McDonald v. State Farm Fire & Cas. Co., 119 Wn.2d 724, 730, 837 P.2d 1000 (1992). Summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. CR 56(c). The interpretation of an insurance policy is a matter of law. McDonald, 119 Wn.2d at 730.

[36] In construing the language of an insurance policy, the court will examine the contract as a whole. Ross v. State Farm Mut. Auto. Ins. Co., 132 Wn.2d 507, 515, 940 P.2d 252 (1997). "The policy should be given a fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance." Sears v. Grange Ins. Ass'n, 111 Wn.2d 636, 638, 762 P.2d 1141 (1988). If the language of the policy is unambiguous, the court must enforce it as written; however, if the policy provision is ambiguous, the court must attempt to discern and enforce the intent of the parties. Ross, 132 Wn.2d at 515.

[37] Exclusionary clauses are strictly construed against the insurer. Phil Schroeder, Inc. v. Royal Globe Ins. Co., 99 Wn.2d 65, 68, 659 P.2d 509 (1983), modified in part, 101 Wn.2d 830, 683 P.2d 186 (1984). The meaning of an exclusion must be determined by reading the policy as a whole and exclusionary clauses are to be harmonized with the coverage provisions where possible. Munn v. Mutual of Enumclaw Ins. Co., 73 Wn. App. 321, 325, 869 P.2d 99, review denied, 124 Wn.2d 1030 (1994). In view of the purpose of insurance, the construction should be taken which renders the contract operative rather than inoperative. Phil Schroeder, 99 Wn.2d at 68. Truck Insurance contends that the claim in question arises under the workers' compensation laws of California and that the stopgap provision excludes coverage for any obligation arising under the workers' compensation laws of any state. To support its position, Truck Insurance relies upon the express language of the policy and an explanation of the nature of stopgap insurance. Truck Insurance explains that while most work-related injuries are covered by workers' compensation coverage, in some situations the employee is not limited to benefits under the workers' compensation laws and the employer may be subject to civil liability. Stopgap provisions provide coverage to fill any gap that may exist between the coverage provided by the employer's workers' compensation coverage and the coverage provided by the employer's general liability policy. Truck Insurance argues that the stopgap endorsement here provides no coverage for claims arising within the scope of the workers' compensation laws. The coverage provided by the stopgap endorsement is described in the first paragraph of the endorsement. The provisions of this paragraph may be summarized as follows:

[38] (1) If the insured carries workers' compensation insurance on its employees to the extent provided by the laws of Nevada, North Dakota, Ohio, Washington, West Virginia, or Wyoming; and

[39] (2) an employee of the insured suffers bodily injury in the course of his employment; but

[40] (3) the circumstances of the employee's injury are such that the insured "is not fully released from liability for any claim resulting from such bodily injury;" then,

[41] (4) the insurance policy, subject to its other terms and conditions, shall cover the legal liability of the insured for such bodily injury.

[42] The second paragraph of the endorsement lists the exclusions. The endorsement states, in part, that the insurance provided by this endorsement shall not apply to "any premium, assessment, penalty, fine, or other obligation imposed by any Workmen's or Workers' Compensation law." The endorsement further provides that the premium for the endorsement shall be computed upon the remuneration earned by employees reported under the workers' compensation laws in the six named states.

[43] The parties apparently agree that Mr. Hiatt fulfilled his obligations under the first paragraph of the endorsement. Mr. Hiatt had employees in Washington and North Dakota and carried workers' compensation for them as required by the terms of the endorsement. The issue here is whether the exclusionary clause is applicable and serves to exclude coverage for any workers' compensation awards made to Mr. Alves under California law. Reading the endorsement as a whole, the wording of the exclusionary clause does not exclude coverage for Mr. Alves's claims in such a way as to be readily understood by the average purchaser of insurance. Where the initial paragraph contains references to the "claim" of an employee, the language of the exclusionary clause includes "premium, assessment, penalty, fine, or other obligation" imposed by "any" workers' compensation law. The grouping of these words implies that their meaning is limited. The term "any" is also problematic.

[44] The fact that the premium was computed based on the number of employees in the six states supports Truck Insurance's reading of the exclusionary clause, but is insufficient to overcome the difficulty caused by the choice of words in the exclusionary clause. Similarly, it is troubling to permit Mr. Hiatt to ignore the workers' compensation laws in a state where he employed a worker. Unfortunately, the language used in the exclusionary clause, along with the requirement that this language be construed against the insurer, compels a determination that there was coverage under the terms of the policy. In short, Truck Insurance did not draft the endorsement with the care required of an insurer wishing to exclude a potential risk from coverage. While there are arguments to be made in support of the construction urged by Truck Insurance, the simple fact remains that the language contained in the exclusionary clause does not clearly define the risks it seeks to exclude.

[45] Citing Olympic S.S. Co. v. Centennial Ins. Co., 117 Wn.2d 37, 811 P.2d 673 (1991), Mr. Hiatt contends that he is entitled to attorney fees and costs at both the trial court and the appellate court level. Although Mr. Hiatt requested attorney fees and costs in his answer and counterclaim, the trial court made no determination on this issue at summary judgment.

[46] Generally attorney fees are not recoverable in the absence of a contract term or statute allowing for their recovery. However, "{a}n insured who is compelled to assume the burden of legal action to obtain the benefit of its insurance contract is entitled to attorney fees . . . ." Olympic S.S., 117 Wn.2d at 54. These fees are recoverable whether or not the underlying insurance policy contains a provision for such fees. McGreevy v. Oregon Mut. Ins. Co., 128 Wn.2d 26, 33, 904 P.2d 731 (1995). RAP 18.1 permits the award of attorney fees on appeal if the applicable law grants the party the right to recover reasonable attorney fees or expenses on review.

[47] Mr. Hiatt is awarded fees and expenses incurred at the trial and appellate court levels. The case is remanded to the trial court for determination of the amount of fees and expenses. RAP 18.1(i).


[49] The judgment of the trial court is affirmed. Mr. Hiatt is awarded fees and expenses at the appellate and trial court levels. The case is remanded to the trial court for determination of the amount of fees and expenses. In view of our decision, it is not necessary to decide the other issues raised by Mr. Hiatt in his appeal.

[50] The majority of the panel has determined this opinion will not be printed in the Washington Appellate Reports, but it will be filed for public record pursuant to RCW 2.06.040.

[51] Kurtz, J.


[53] Sweeney, C.J.

[54] Kato, J.


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