Pending before the Court are cross motions for summary judgment. Plaintiffs Transcontinental Insurance Company and Transportation Insurance Company (Transcontinental or plaintiff) filed a complaint for declaratory judgment seeking a determination of whether the insurers have a duty to defend or indemnify defendants Rainwater Construction Company (Rainwater) and Rickey Kitchen against the actions filed against them in the Circuit Court of Craighead County, Arkansas.*fn1 The state court action is for damages arising from a motor vehicle accident on October 19, 2005, when a trailer owned by Rainwater became detached from the truck that was pulling it, also owned by Rainwater and driven by Kitchen, and crashed into a vehicle occupied by Michael New and Scott Lane. The News and the Lanes are each seeking compensatory damages in the amount of $5 million, and are each seeking punitive damages in the amount of $1 million. Plaintiff contends that the insurance policies of Rainwater do not establish any coverage for the accident and that therefore Transcontinental does not have a duty to defend or pay for any of the claims of the News or the Lanes.
The facts are not in dispute. Rather, the question is interpretation of the insurance contract. Rainwater held two insurance policies which are relevant to this action, an automobile liability insurance policy and a commercial umbrella insurance policy both of which were issued by Transcontinental and both of which had effective dates of March 18, 2005 to March 18, 2006.*fn2 Both policies were in full force and effect on October 19, 2005, the date of the accident which gives rise to the underlying state court action against Rainwater.
The automobile insurance policy contained a provision that: Transcontinental "will pay all sums an "insured" legally must pay as damages because of "bodily injury" or property damage" to which [the] insurance applies, caused by an "accident" and resulting form the ownership, maintenance or use of a covered "auto."*fn3 The policy further provides that an insured includes Rainwater and anyone else while using with the insured's permission a covered "auto" owned, hired or borrowed from the insured.
The auto policy contains an "named excluded driver" provision, which excludes Rickey Kitchen. In particular, the endorsement to the policy names Kitchen as an excluded driver and further provides that the insurance does not apply to any claims, damages, expenses or "loss"
1. Arising out of the maintenance, operation or use of any "auto" by the "named excluded driver" whether or not such maintenance, operation or use was with the express or implied permission of any "insured" or the owner of the "auto" and/or,
2. For any negligence which may be imputed to any "insured" by law arising out of the maintenance, operation or use of any "auto" by the "named excluded driver" including, but not limited to, any claims against any "insured" for negligent driving, negligent retention and/or negligent entrustment.
The umbrella policy provides coverage under certain circumstances over and above that which is provided by the underlying automobile policy. If coverage is found under the automobile liability policy, then the umbrella policy also provides coverage.
When the automobile policy was renewed by agent Steven Shoemaker, Rainwater discovered that Rickey Kitchen, one its employees, had his driver's license suspended. As a result Kitchen was named on the named driver exclusion dated April 7, 2005. On April 18, 2005, the state court released the suspension of Kitchen's driver's license and he obtained a new driver's license on July 22, 2005.
On October 19, 2005, at approximately 12:15 p.m. Michael New was a passenger in a truck by Scotty Lane that was owned by the City of Jonesboro. Kitchen was traveling in a truck owned by Rainwater company which had a trailer loaded with pipe attached to it. As Kitchen was crossing an overpass the trailer he was towing came off the vehicle. The trailer crossed the median and struck the vehicle occupied by New and Lane, seriously injuring them.*fn4 It is undisputed that the trailer came loose from the truck because of an improper latching mechanism which Rainwater used. It is undisputed that Kitchen was not negligent in his operation of the truck.
The issue, quite simply, is whether the injuries sustained by defendants arose from the use, operation or maintenance of the vehicle by Kitchen. If so, the claim is precluded by the excluded driver provision unless there is some basis to find that Kitchen should not be excluded.
Under Arkansas law it is well settled that we must give effect to the plain meaning of unambiguous language in an insurance policy without resort to rules of construction . If language is ambiguous, however, we will construe the language "liberally in favor of the insured and strictly against the insurer." If language is susceptible of one interpretation favorable to the insured and another favorable to the insurer, we must adopt the interpretation favorable to the insured. Like all contracts, insurance contracts receive "a practical, reasonable, and fair interpretation, consonant with the apparent object and intent of the parties in light of their general object and purpose." We construe language in light of "its plain, ordinary, and popular sense." Different clauses of an insurance contract are read together to harmonize all parts because it is error to give effect to one clause over another when the two clauses are reconcilable. We will not adopt a construction that "neutralizes any provision of a contract" if we can construe the contract to give effect to all provisions.
Ohio Cas. Ins. Co. v. Union Pacific Railroad Co, . 2006 WL 3476477, *4 (8th Cir.(Ark. (C.A.8 (Ark.),2006)(citations omitted). Furthermore, an exclusionary clause, as is the case here, is "strictly interpreted, with all reasonable doubts resolved in favor of the insured." Arkansas Farm Bureau Ins. Companies v. Jackson, 27 Ark. App. 273, 276 (1989).
Both plaintiffs and defendants rely on Hisaw v. State Farm Mut. Auto. ins. Co., 353 Ark. 668 (2003) to support their positions. In Hisaw , the underinsured motorist coverage covered any claims arising out of the use, maintenance or operation of an underinsured vehicle. The underinsured vehicle was driven by a drunker underinsured motorist into a ditch. Hisaw, a volunteer firefighter, was called to the scene. Hisaw was insured as the door swung shut when he went to retrieve something from the vehicle. The Arkansas Supreme Court gave a broad interpretation to "arising under" and rejected a proximate-cause and "but-for" analysis. Id. at 679-81. An injury arises out of the use of an insured vehicle, "if it is shown that some causal connection exists between the liability-causing event and the proper use of the vehicle." Id. at 680 (citations omitted).
The Eighth Circuit in Ohio Casualty recently addressed the issue of "arising under." In that case, Tri-State had entered into a contract with the railroad to provide traffic control services at the railroad construction sites. A train collided with a vehicle driven by Joseph Johnson at a railroad crossing. A the time of the accident, Tri-State was providing traffic control services at the work site. However, when the accident occurred, construction had temporarily ceased and the railroad foreperson had released the Tri-State flaggers for lunch. The district court found that there was not a causal connection between Tri-State's work and the Johnson accident. The Eighth Circuit, giving "arising out of" a broad interpretation in favor of coverage, disagreed. "A ...