Opinion ID: 1658164
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Heading: Interpretation of the Policy's Automobile Exclusion Provision.

Text: Well-established principles govern our interpretation of this insurance policy, a form of written contract. Iowa Rule of Appellate Procedure 14(f)(14) provides: In the construction of written contracts, the cardinal principle is that the intent of the parties must control; and except in cases of ambiguity, this is determined by what the contract itself says. The object of contract interpretation is to ascertain from the language the intent of the contracting parties at the time the contract was made. Home Federal Savings and Loan Association v. Campney, 357 N.W.2d 613, 617 (Iowa 1984). When, as here, neither party offers extrinsic evidence concerning the meaning of the relevant contract language, the process of construing or interpreting the meaning of the words used is a matter for the court to decide as a question of law. Farm Bureau Mutual Insurance Co. v. Sandbulte, 302 N.W.2d 104, 108 (Iowa 1981); Connie's Construction Co. v. Fireman's Fund Insurance Co., 227 N.W.2d 207, 210 (Iowa 1975). Ambiguity exists if, after the application of pertinent rules of interpretation to the face of the instrument, a genuine uncertainty results as to which one of two or more meanings is the proper one. Fraternal Order of Eagles v. Illinois Casualty Co., 364 N.W.2d 218, 221 (Iowa 1985) (quoting Gendler Stone Products Co. v. Laub, 179 N.W.2d 628, 631 (Iowa 1970)). We construe ambiguous insurance policy provisions in a light favorable to the insured because insurance policies constitute adhesion contracts. Gateway State Bank v. North River Insurance Co., 387 N.W.2d 344, 346 (Iowa 1986). It is therefore incumbent upon an insurer to define clearly and explicitly any limitations or exclusions to coverage expressed by broad promises. Id. at 346; Bankers Life Co. v. Aetna Casualty & Surety Co., 366 N.W.2d 166, 169 (Iowa 1985). In examining an insurance policy, however, we will not write a new contract of insurance between the parties where there is no ambiguity. Stover v. State Farm Mutual Insurance Co., 189 N.W.2d 588, 591 (Iowa 1971). We avoid straining the words and phrases of the policy to impose liability that was not intended and was not purchased. Gateway, 387 N.W.2d at 346; State Farm Auto Insurance Co. v. Malcolm, 259 N.W.2d 833, 835 (Iowa 1977). We are benefited in construing the automobile exclusion in this Farm-Guard policy because in two previous cases we have interpreted very similar language in other farm liability insurance policies. In Stover we held as a matter of law that the automobile exclusion clause unambiguously precluded the insured from requiring the insurer to indemnify and defend him against a claim by a farm employee who was loading a truck at another farm. 189 N.W.2d at 591-92. Thereafter, in Farm Bureau Mutual Insurance Co. v. Sandbulte , we held as a matter of law that a similar provision was unambiguous and clearly excluded coverage of a motor vehicle operated by an employee some distance from the insured's premises. 302 N.W.2d at 108. Turning to the specific exclusionary language of this policy, quoted above, and the facts concerning Norma Cairns' collision, we likewise conclude that the language is unambiguous and excludes coverage for the named insured Earl Cairns. The trial court accepted the Cairns interpretation that the final clause of paragraph B.1operated by a farm employee of the insured while engaged in the employment of the insuredcould be read separately from the words automobiles not owned by in the preceding clause. Under that interpretation of the policy Grinnell Mutual had a duty to defend Earl Cairns regardless of who owned the automobile, because the wrongful death claimant had alleged Norma was Earl's employee. We disagree with the trial court, finding that interpretation strained and unreasonable. Grinnell Mutual correctly reads this automobile exclusion provision to apply equally to use of owned automobiles in connection with operations by independent contractors and use of owned automobiles by farm employees. Both exceptions to the exclusion apply only when the automobile being used is not owned by, rented or leased to an insured. Norma Cairns, owner of the automobile, fell within the policy's definition of an insured. Ambiguity is not present merely because the provision could have been worded more clearly or precisely than it in fact was. Fraternal Order of Eagles, 364 N.W.2d at 221. When a sentence contains several antecedents and several consequents, the words are to be applied to the subjects that seem most properly related by context and applicability. 2A Sutherland Statutory Construction § 47.26 (1984). In exploring statutory intent, we have consistently reasoned that qualifying words and phrases ordinarily refer only to the immediately preceding antecedent. State v. Kluesner, 389 N.W.2d 370, 371 (Iowa 1986); State v. Lohr, 266 N.W.2d 1, 3 (Iowa 1978); 2A Sutherland Statutory Construction at § 47.33. We apply a similar analysis here. See 4 S. Williston, A Treatise on the Law of Contracts § 600, at 285 (1961). In doing so, we adhere to the proposition that a contract should be read and interpreted as an entirety rather than seriatim by clauses, Archibald v. Midwest Paper Stock Co., 176 N.W.2d 761, 763 (Iowa 1970); see 13 J. Appleman, Insurance Law and Practice § 7383, at 45 (1976). Moreover, we concentrate on the commonly accepted and ordinary meaning of the language used. Campney, 357 N.W.2d at 617. Our application of the doctrine of the last preceding antecedent produces a contextually sound interpretation which is also consistent with the very nature of a farm liability policy. The operation of automobiles owned by an insured is a separate and distinct risk from the type for which persons ordinarily purchase farm liability insurance. See Sandbulte, 302 N.W.2d at 113-14. Although the trial court determined as an issue of fact that Earl Cairns was not Norma's employer and was therefore not entitled to indemnity under the farm liability policy, it held that Grinnell Mutual had a duty to defend him in the wrongful death action because the plaintiff had alleged she was his employee. We conclude that Grinnell Mutual was not obligated to indemnify or defend Earl Cairns in that lawsuit. The duty to defend arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial. McAndrews v. Farm Bureau Mutual Insurance Co., 349 N.W.2d 117, 119 (Iowa 1984) (quoting 7C J. Appleman, Insurance Law and Practice § 4684, at 83 (Berdahl ed. 1979)); see also 14 G. Couch, Couch on Insurance 2d § 51:51, at 501 (1982). Grinnell Mutual had excluded liability coverage of a collision involving an owned vehicle away from the premises regardless whether its operator was an employee. Grinnell Mutual therefore had the right to refuse to defend Earl in this lawsuit, because the facts alleged in the petition did not create a potential liability which Grinnell Mutual's policy would cover. The trial court erred in entering judgment against Grinnell Mutual for its refusal to defend the wrongful death claim.