The opinion
Cite as 2014 Ark. App. 364
ARKANSAS COURT OF APPEALS
DIVISION I
CV-13-1061
No.
Opinion Delivered June 4, 2014
ACCEPTANCE INDEMNITY
INSURANCE COMPANY APPEAL FROM THE MILLER
APPELLANT COUNTY CIRCUIT COURT
[No. CV-11-522]
V.
HONORABLE JOE E. GRIFFIN,
SOUTHWEST ARKANSAS ELECTRIC JUDGE
COOPERATIVE CORPORATION and
CHARLES GLOVER
APPELLEES AFFIRMED
LARRY D. VAUGHT, Judge
This case presents a single issue for appeal relating to the appropriate interpretation of
an insurance policy. Specifically, we consider whether a portion of the policy’s exclusion
language unambiguously excludes coverage, thereby rendering the circuit court’s grant of
summary judgment against the insurer erroneous. After a careful review of the facts of the case
and the law of contract, we hold that because the contract at issue presented an ambiguity in its
stated purpose and its exclusionary language, coverage was required and affirm the circuit court.
Appellee Charles Glover’s employee, Robert Duran, suffered an electrical injury in the
course of his employment with Glover (doing business as Glover Trenching and Backhoe) while
performing work for appellee Southwest Arkansas Electric Cooperative Corporation. Prior to
the work, in February 2009, Glover and Southwest entered into a Special Services Contract
(SSC) under which Glover agreed to defend, indemnify, and hold Southwest harmless for all
claims “to all persons” and “including Glover’s employees” arising from the contract. In order
Cite as 2014 Ark. App. 364
to fulfill his obligation under the SSC, Glover purchased a policy of commercial general-liability
insurance (CGL) with appellant Acceptance Indemnity Insurance Company (“Acceptance”).
The Acceptance policy provided coverage for bodily injury for which the insured was
obligated to pay damages by reason of assumption of liability in an “insured contract.” The
policy defined “insured contract” as any contract or agreement pertaining to your business
“under which you assume the tort liability of another party to pay for ‘bodily injury’ or ‘property
damage’ to a third person or organization.”
Another provision of the policy, the “Action Over Exclusion,” stated in relevant part:
This exclusion applies:
(1) Whether any insured may be liable as an employer or in any other capacity; and
(2) To any obligation to share damages with or repay someone else who must pay
damages because of the injury.
Duran later sued Southwest for negligence for injuries he sustained when he was
electrocuted by Southwest’s transformer. Southwest filed a third-party complaint against Glover,
claiming that Glover was negligent and thus responsible for Duran’s injury and that Glover had
to indemnify it pursuant to the terms of the SSC. Glover sought coverage pursuant to his CGL
policy; however, Acceptance denied coverage pursuant to the Action Over Exclusion contained
in an addendum to the CGL policy.
Glover filed a declaratory-judgment action asking the circuit court to declare that his
policy with Acceptance obligated it to defend Glover in the lawsuit and indemnify him for any
loss. Acceptance answered, denying that the policy was furnished to fulfill Glover’s SSC
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obligations; denying that it was aware of Glover’s SSC with Southwest; and denying that it
assumed any of the SSC’s obligations.
Southwest also filed a petition to intervene in the action. Acceptance protested the
intervention; however, the court granted it on May 14, 2012, and Southwest’s complaint was
filed on May 22, 2012, in which it also sought to find insurance coverage for Glover. On May
20, 2013, Southwest filed for summary judgment, contending that an ambiguity in Glover’s
policy with Acceptance resolved coverage in favor of Glover. Acceptance responded with its
own brief and also filed for summary judgment.
On August 20, 2013, the court ordered Acceptance to participate in a mediation of
Duran’s lawsuit against Southwest. On September 5, 2013, the circuit court entered an order of
declaratory judgment where it adopted Southwest’s proposed interpretation of the policy, finding
the burden was on Acceptance to prove an exclusion applied to Glover’s claim and also that an
ambiguity must be construed against the insurer and in favor of the insured. The circuit court
also found Acceptance’s interpretation of the policy to be unreasonable because it left a gap in
coverage and would make it impossible for businesses to obtain coverage for contractual
indemnity. The court then granted Glover’s and Southwest’s motions for summary judgment.
Acceptance filed its timely notice of appeal on September 9, 2013, disputing the circuit court’s
interpretation of the insurance policy.
The law regarding the interpretation and construction of an insurance policy is well
settled in this state. The language in an insurance policy is to be construed in its plain, ordinary,
and popular sense. Norris v. State Farm Fire & Cas. Co., 341 Ark. 360, 16 S.W.3d 242 (2000). If
the language is unambiguous, effect will be given to the plain language of the policy without
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resorting to the rules of construction. Id. at 360, 16 S.W.3d at 243. “In considering the
phraseology of an insurance policy the common usage of terms should prevail when
interpretation is required.” Cont’l Cas. Co. v. Davidson, 250 Ark. 35, 42, 463 S.W.2d 652, 655
(1971). On the other hand, if the language is ambiguous, this court will construe the policy
liberally in favor of the insured and strictly against the insurer. Id. at 42–43, 463 S.W.2d at 655.
Language is ambiguous if there is doubt or uncertainty as to its meaning and it is fairly
susceptible to more than one reasonable interpretation. Id. at 43, 463 S.W.2d at 655–56.
Different clauses of an insurance contract must be read together and the contract
construed so that all of its parts harmonize, if that is at all possible; giving effect to one clause
to the exclusion of another on the same subject where the two are reconcilable is error. Id. at
43, 463 S.W.2d at 656. A construction that neutralizes any provision of a contract should never
be adopted if the contract can be construed to give effect to all provisions. Id. at 43, 463 S.W.2d
at 656 (citing Fowler v. Unionaid Life Ins. Co., 180 Ark. 140, 145, 20 S.W.2d 611, 613 (1929)
(“Every word in the agreement must be taken to have been used for a purpose, and no word
should be rejected as mere surplusage if the court can discover any reasonable purpose thereof
which can be gathered from the whole instrument.”)).
There are two possible interpretations of the policy at issue. The first is that there is no
ambiguity when read together and that the “Action Over Exclusion” permits no recovery for
bodily injury to an employee of the insured, regardless of the remaining provisions (and stated
purpose) of the policy. This interpretation unreasonable fails to give meaning and effect to the
entire policy. Furthermore, under this interpretation the stated object of the policy is not
accomplished.
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The second approach is that the police provides no coverage for an employee injured in
the course of employment unless the claim was made pursuant to an “insured contract.” Thus,
the injured employee has no right to damages unless his employer is bound by contract to
indemnify another. This reading gives meaning and effect to all provisions and allows for the
coverage that the general policy claimed to provide. And it is well settled that where an
interpretation that would justify coverage is reasonable, it is our duty to interpret it that way.
Ark. Farm Bureau Ins. Fed’n v. Ryman, 309 Ark. 283, 831 S.W.2d 133 (1992).
In this case, when the “Action Over Exclusion” and the “insured contract” provisions
of the contract are read together, they create an ambiguity, which must be construed in favor of
the insured. As such, we affirm the circuit court’s grant of summary-judgment against
Acceptance.
Affirmed.
GLADWIN, C.J., and BROWN, J., agree.
Waddell, Cole & Jones, P.A., by: Shane Baker and Justin E. Parkey, for appellant.
Friday, Eldredge & Clark, LLP, by: James C. Baker, Jr., and Kimberly D. Young, for appellee
Southwest Arkansas Electric Cooperative Corporation.
The Potter Law Firm, by: Thomas A. Potter and Joshua L. Potter, for appellee Charles Glover,
Jr.
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