This summary was computer-generated without any editorial revision. It is not official, has not been checked for accuracy, and is NOT citable.
Facts
The Plaintiff, while employed by Kerr Distributing Inc. and driving his own vehicle, struck and injured a road worker, leading to a lawsuit against him. The Plaintiff's insurer settled the claims, and the Plaintiff assigned his rights to pursue claims against other potentially liable insurers. The Plaintiff later sued the Defendants, alleging they were liable for failing to defend him under insurance policies issued to his employer (paras 4-5).
Procedural History
- District Court of Otero County: Granted summary judgment in favor of the Defendants, finding they were not liable for failing to provide a defense to the Plaintiff. The court also awarded costs as sanctions against the Defendants but denied the Plaintiff's motion for default judgment (paras 2-3, 10).
Parties' Submissions
- Plaintiff: Argued that the Defendants breached their duty to defend him under the insurance policies, that the policies contained repugnant clauses that should be disregarded, and that the trial court erred in awarding only costs as sanctions instead of a default judgment (paras 2, 12, 16, 26).
- Defendants: Contended that the Plaintiff was not covered under the policies, that their refusal to defend was justified, and that the trial court erred in awarding costs against them as they were the prevailing parties. Alternatively, they argued that the amount of costs awarded was improper (paras 2, 27-28).
Legal Issues
- Did the Defendants breach their duty to defend the Plaintiff under the insurance policies?
- Were the clauses in the insurance policies repugnant, thereby invalidating the exclusion of coverage for the Plaintiff?
- Did the trial court err in awarding costs as sanctions against the Defendants instead of granting a default judgment?
- Was the amount of costs awarded against the Defendants appropriate?
Disposition
- The Court of Appeals affirmed the trial court's grant of summary judgment in favor of the Defendants, finding no coverage for the Plaintiff under the policies.
- The Court of Appeals reversed the trial court's supplemental order imposing costs against the Defendants and remanded the matter for further proceedings to clarify the basis for the award (paras 3, 36-37).
Reasons
Per Donnelly J. (Hartz CJ and Wechsler J. concurring):
Duty to Defend: The court found that the Defendants had no duty to defend the Plaintiff because the policies explicitly excluded coverage for the owner of a "hired automobile," which applied to the Plaintiff's situation. The allegations in the underlying lawsuit did not suggest coverage under the policies, and the exclusion was clear and unambiguous (paras 12-14, 24).
Repugnancy of Clauses: The court rejected the Plaintiff's argument that the exclusion of coverage for the owner of a hired automobile was repugnant to other provisions in the policies. The exclusion did not nullify the grant of coverage but instead provided meaningful coverage for other scenarios, such as vehicles rented by the employer. The language was not ambiguous, and the Plaintiff could not have reasonably expected coverage (paras 16-24).
Sanctions and Costs: The court held that the trial court did not abuse its discretion in declining to impose a default judgment as a sanction, as such measures are reserved for extreme circumstances. However, the trial court's award of costs against the Defendants lacked specific findings of willfulness, bad faith, or other misconduct. The case was remanded for the trial court to provide detailed findings and conclusions regarding the basis for the award of costs (paras 26-35).