63 F.3d 974 (10th Cir. 1995), 93-3282, Bankwest v. Fidelity & Deposit Co. of Maryland

Docket Nº:93-3282.
Citation:63 F.3d 974
Party Name:BANKWEST, a Kansas corporation, Plaintiff-Appellant, v. FIDELITY & DEPOSIT COMPANY OF MARYLAND, a Maryland corporation, Defendant-Appellee.
Case Date:August 21, 1995
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

Page 974

63 F.3d 974 (10th Cir. 1995)

BANKWEST, a Kansas corporation, Plaintiff-Appellant,



corporation, Defendant-Appellee.

No. 93-3282.

United States Court of Appeals, Tenth Circuit

August 21, 1995

        Rehearing Denied Sept. 22, 1995.

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[Copyrighted Material Omitted]

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        Jeffrey S. Nelson (William R. Sampson with him on the brief), Shook, Hardy & Bacon, Overland Park, KS for plaintiff-appellant.

        Bruce B. Waugh (John K. Sherk and Carol Zuschek Smith with him on the brief), Gilliland & Hays, Kansas City, MO for defendant-appellee.

        Before MOORE, BARRETT, and HENRY, Circuit Judges.

        HENRY, Circuit Judge.

        Plaintiff-appellant Bankwest appeals the district court's order granting summary judgment to defendant-appellee Fidelity Deposit Company of Maryland (Fidelity). The district court ruled that Fidelity had no duty to defend or indemnify Bankwest in conjunction with a lawsuit filed by two customers who alleged Bankwest had damaged their reputation. See Bankwest v. Fidelity & Deposit Co., 832 F.Supp. 313 (D.Kan.1993) We exercise jurisdiction under 28 U.S.C. Sec. 1291, reverse the decision of the district court, and remand for further proceedings.


        In 1987, Harlan Dale House and Cora House sued Bankwest (then known as the Goodland State Bank & Trust Company) in Kansas state court alleging that, in 1985, Bankwest orally agreed to extend them an $800,000 line of credit. The Houses alleged that in exchange for that line of credit they agreed to grant Bankwest a $1,000,000 "fourth Deed of Trust" on real estate they owned in Vail, Colorado. Applt's App. at 237. According to the Houses, they had previously granted three deeds of trust on the same Colorado property: a $40,000 first deed of trust to the First National Bank of Windsor, a $100,000 second deed of trust to the same bank, and a $100,000 third deed of trust to the First Bank of Vail. As part of the alleged oral contract, Bankwest agreed not to interfere with the Houses' existing lines of credit with these other banks.

        The Houses' petition further alleged that, approximately sixty days after negotiation of the oral agreement, Bankwest's president sent letters to the Windsor and Vail banks stating that both banks were "estopped from making any future advancements" to the Houses. Id. at 238. The Houses also maintained that, from October 1985 until April 1986, Bankwest refused to honor its promise to extend them the $800,000 line of credit.

        According to the Houses, in May 1986, Bankwest "renewed its prior agreement to extend a full [$800,000] line of credit to plaintiffs and not to impair or interfere with plaintiffs' existing lines of credit with First National Bank of Windsor and First Bank of Vail, as consideration for plaintiffs' pledge of the fourth Deed of Trust." Id. at 239. Subsequently, the Windsor bank sent a proposed agreement to Bankwest's president acknowledging the subordination of Bankwest's fourth deed of trust to the prior deeds of trust. Bankwest's president refused to sign the agreement. As a result, the Houses alleged, the Windsor bank initiated foreclosure proceedings against the Vail property, and they were compelled to file bankruptcy in order to avoid a forced sale.

        The Houses' petition asserted three causes of action: (1) a claim that Bankwest breached the agreement to extend the $800,000 line of credit and not to interfere with the Houses' existing lines of credit with other banks; (2) a claim that Bankwest's actions as to the Houses' lines of credit with other banks "were intentional and with malice, and amounted to an interference with the business relationship and interference with contract," id. at 241; and (3) a claim that Bankwest obtained the fourth deed of trust by false pretenses in that Bankwest had no intention of honoring the conditions upon which the Houses had tendered it. The Houses sought compensatory and punitive damages, as well as a declaratory judgment that the fourth deed of trust was void.

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        At the time of the filing of the Houses' lawsuit, Fidelity had issued several liability insurance policies to Bankwest. Only one of these policies is relevant to this appeal: Fidelity's Special Multi-Peril Policy for Financial Institutions (the multi-peril policy). 1 The multi-peril policy provided coverage for bodily injury, property damage, and personal injury. The personal injury section stated, in part:

        The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of injury (herein called "personal injury") sustained by any person or organization and arising out of one or more of the following offenses committed in the conduct of the named insured's business:


        B. the publication or utterance of a libel or slander or of other defamatory or disparaging material ...;


if such offense is committed during the policy period within the United States of America, its territories or possessions, or Canada, and the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements.

        Id. at 292-93 (emphasis added).

        Shortly after receiving the Houses' petition, Bankwest's attorney sent a letter to Fidelity's insurance agent requesting Fidelity to defend the action. On October 5, 1987, Fidelity acknowledged receipt of the Houses' petition. However, in a letter dated May 31, 1988, Fidelity stated to Bankwest that it would not defend the lawsuit. Bankwest made several subsequent requests for a defense, but Fidelity refused. In September 1990, the Houses and Bankwest reached a settlement. The Houses received $400,000 in cash from Bankwest and forgiveness of a debt in the amount of $53,993.49. In turn, the Houses dismissed the suit against Bankwest.

        In June 1992, Bankwest filed this diversity action, alleging that Fidelity had breached the insurance contract by refusing to defend the Houses' lawsuit and indemnify it for the settlement. Bankwest sought to recover the costs incurred in defending the Houses' suit, the amount paid to the Houses under the terms of the settlement, attorneys' fees, costs, and prejudgment interest.

        Both parties filed motions for summary judgment. Bankwest argued that the multi-peril policy's reference to "the publication or utterance of a libel or slander or of other defamatory or disparaging material" was broad enough to include the Houses' lawsuit because the Houses alleged that they had been disparaged by Bankwest's letters to the Colorado banks and sought damages for loss of reputation. Fidelity responded that the policy covered only the specific claims listed and that, because none of the claims in the Houses' lawsuit were listed in the multi-peril policy, it had no duty to defend or indemnify Bankwest.

        In granting summary judgment to Fidelity, the district court reasoned that the House lawsuit did not involve the publication of defamatory or disparaging material. The court stated that the only possible defamatory or disparaging publications were the letters that Bankwest sent to the Colorado banks. However, it concluded:


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