Opinion ID: 170502
Heading Depth: 2
Heading Rank: 1

Heading: Interpretation of the Criminal-Conviction Exclusion

Text: Mr. Pompa argues that the criminal-conviction exclusion is ambiguous because the word convicted has two meanings. He acknowledges that it could refer to any conviction, whether obtained by guilty plea or after trial, but contends that it could also refer only to convictions after a trial. The district court erred, he asserts, in choosing the more expansive interpretation over his reasonable narrower interpretation. We disagree. Colorado law requires that ambiguities in an insurance policy be construed in favor of the insured. E.g., State Farm Mut. Auto. Ins. Co. v. Stein, 940 P.2d 384, 390 (Colo.1997). The prerequisite to application of this rule is a determination that the policy is ambiguous. Terms used in a contract are ambiguous when they are susceptible to more than one reasonable interpretation. Hecla Mining Co. v. N.H. Ins. Co., 811 P.2d 1083, 1091 (Colo.1991). The mere fact that the parties disagree on the meaning of a term does not establish ambiguity. See Nat'l Cos. Co. v. Great Sw. Fire Ins. Co., 833 P.2d 741, 746. Nor can a policy term be read in isolation to create an ambiguity in the policy as a whole where none exists. Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo.1994). In construing a term, a court should ascertain what a person of ordinary intelligence would understand the term to mean, Stein, 940 P.2d at 390, giving words their plain meaning according to common usage. Allstate Ins. Co. v. Starke, 797 P.2d 14, 18 (Colo.1990). To support their interpretations of the word conviction, both parties quote dictionary definitions. AFM offers: The act or process of judicially finding someone guilty of a crime; the state of having been proved guilty. Black's Law Dictionary 358 (8th ed.2004). Mr. Pompa, in turn, points to: In a general sense, the result of a criminal trial which ends in a judgment or sentence that the accused is guilty as charged. Black's Law Dictionary 333 (6th ed.1990). He asserts that his definition's appearance in a leading legal dictionary compels the conclusion that his interpretation is reasonable and the term thus ambiguous. Dictionaries, however, are imperfect yardsticks of ambiguity. New Castle County v. Hartford Accident & Indent. Co., 933 F.2d 1162, 1193-94 (3rd Cir. 1991). A word may take on a variety of meanings in different contexts. Dictionaries can inform us of all the accepted meanings, but not which of those meanings fits in a particular context. As one court perceptively observed: The mere fact that a word has more than one dictionary meaning, or that the parties disagree about the meaning, does not necessarily make the word ambiguous if the court concludes that only one meaning applies in the context and comports with the parties' objectively reasonable expectations. Thus it is inappropriate to create ambiguity by simply finding two different dictionary definitions of [a] word. . . . Dictionary definitions can shed only partial light on the reasonable understanding of an insured with regard to words in the context of a particular insurance policy. Sprangers v. Greatway Ins. Co., 182 Wis.2d 521, 514 N.W.2d 1, 7.(1994) (citation and footnote omitted). In particular, construction of a potentially ambiguous term in an insurance-policy provision requires consideration of the purpose of the provision. See Branscum v. Am. Cmty. Mut. Ins. Co., 984 P.2d 675, 678 (Colo.Ct. App.1999) (a court should consider the purpose of a policy in construing a policy term). The undoubted purpose of the criminal-conviction exclusion is to avoid extending coverage to liability stemming from acts that the government has decided to prosecute criminally and has prosecuted successfully. There would be no reason for the AFM policy to distinguish between a conviction obtained by a guilty plea and a conviction obtained after a trial. Mr. Pompa argues that an insured who is innocent of a crime may decide to plead guilty to a lesser offense rather than face the risk of being convicted of a more serious crime. But we are not persuaded that an insurer, or even an insured, would think that a guilty plea is so much less reliable than a trial verdict that a plea should be treated differently than a verdict for purposes of this policy exclusion. Mr. Pompa's sole case support for the distinction consists of decisions that distinguish between a guilty plea and a conviction at trial when resolving whether issue preclusion applies in a later civil case. See generally State Farm Fire & Cas. Co. v. Fullerton, 118 F.3d 374, 380-81 (5th Cir. 1997) (listing cases). The underlying rationale for issue preclusion, however, rests not so much on views regarding reliability as on concerns about excessive use of judicial resources: a party that has actually litigated an issue should not be given an extra bite at the apple. Thus, a party that has stipulated to a fact in a civil case (which would ordinarily be an indication that the fact is indisputable) is not barred by issue-preclusion doctrine from challenging the fact in later litigation because it has not yet actually litigated the issue. See Restatement (Second) of Judgments § 27 cmt. e (1982). The point in the cases relied upon by Mr. Pompa is not that one who pleads guilty is not convicted of the crime; rather, it is that guilt was not actually litigated to arrive at the conviction, just as a stipulated fact was not actually litigated to arrive at a civil judgment. See, e.g., Rawling v. City of New Haven, 206 Conn. 100, 537 A.2d 439, 445 (1988) (plea is not entitled to issue-preclusive effect because a plea is not the product of actual litigation); Aetna Cas. & Sur. Co. v. Niziolek, 395 Mass. 737, 481 N.E.2d 1356, 1363 (1985) ([N]o issue is actually litigated since the defendant declines to contest his guilt in any way. (brackets and internal quotation marks omitted)); Restatement (Second) of Judgments § 85 cmt (b) (similar). In any event, none of the issue-preclusion cases cited by Mr. Pompa states that a guilty plea is not a conviction. Not only has Mr. Pompa failed to provide a reason why the insurance company would want to exclude guilty pleas from the definition of convicted in the policy, but he has made no effort to show why an insured would prefer the more limited definition in acquiring the policy. To be sure, the narrower definition could result in coverage that would otherwise be excluded. Consider, however, the quandary in which that definition would place an insured accused of a crime. The pressure to plead guilty escalates when the insured knows that he will not receive insurance protection if he opts for a trial of the criminal charges and is convicted. For example, the desire to preserve his reputation could be overborne by a feeling of responsibility toward the economic well-being of his family. We doubt that a potential purchaser of the policy would be particularly pleased to learn that if he is charged with a crime, all he would need to do to preserve coverage is plead guilty. There being only one reasonable interpretation of the word convicted in this policy, we conclude that the district court did not err in holding that the policy unambiguously excluded coverage for the conduct for which Mr. Pompa pleaded guilty.