Parties to an insurance contract beware; a Missouri Court of Appeal’s analysis to determine the presence of an ambiguity in an insurance contract is more complex than meets the eye. In, Wolfe Automotive Group, LLC v. Universal Underwriters Insurance Company, the Eighth Circuit Court of Appeals affirmed the District Court for the Western District of Missouri’s decision denying that an insurer had a duty to defend its insured. The insured was a used-car dealership that had an umbrella policy that provided indemnity and defense against suits arising from the insured’s “wrongful repossession.”
The issue presented itself after the insured took possession of a vehicle in which it held a security interest after the debtor missed payments. The insured followed the repossession with a charge for accounting on the debtor’s account and for post-sale attorney’s and legal fees. The insured sued the debtor for the deficiency balance. The debtor filed a counterclaim alleging that the accounting and the legal fees constituted wrongful debt collection. The insured tendered the counterclaim to the insurer; however, the insurer refused coverage on the ground that the allegedly wrongful debt did not qualify as “wrongful repossession” as the term was used in the insurer’s policy.
In interpreting an insurance policy, absent ambiguity, Missouri Courts interpret the policy according to the plain meaning as understood by an ordinary insured of average intelligence. The Court of Appeals proceeded to analyze this case under the presumption that no ambiguity existed in the policy. However, in this case, both parties attached different meanings to the controlling term “wrongful repossession.” This would have seemed to indicate that the parties agreed that the term was ambiguous. However, the Court of Appeal noted that the fact that insurance policy terms may be subject to different interpretations does not automatically render the terms ambiguous. Instead, the Court of Appeals ruled that it is only when both interpretations of the policy terms are reasonable, that an ambiguity may be said to exist. Despite this aspect of its ruling, the Court of Appeals did not discuss in any details the reasonableness, or lack thereof, of the parties’ interpretations of the term “wrongful repossession.”
Ultimately, the Court of Appeals ruled that under the plain language of the policy, the umbrella coverage was not available to the insured for its alleged wrongful debt collection, since the court concluded that the policy applied only to repossession that itself was wrongful, not to wrongful debt-collection practices that may involve but are unrelated to repossession