Health Care & Retirement Corp. v. St. Paul Fire & Marine Ins. Co.

• Decision Date: 25 September 1985
• Docket Number: Civ. A. No. 84-2288.
• Citation: Health Care & Retirement Corp. v. St. Paul Fire & Marine Ins. Co., 621 F. Supp. 155 (S.D. W.Va. 1985)
• Court: U.S. District Court — Southern District of West Virginia
• Parties: HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, an Ohio corporation; and American States Insurance Company, Plaintiffs, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant.

621 F. Supp. 155

HEALTH CARE AND RETIREMENT CORPORATION OF AMERICA, an Ohio corporation; and American States Insurance Company, Plaintiffs, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant.

Civ. A. No. 84-2288.

United States District Court, S.D. West Virginia, Charleston Division.

September 25, 1985.

Charles E. Hurt, Charleston, W.Va., for plaintiffs.

Norman K. Fenstermaker, Huntington, W.Va., for defendant.

MEMORANDUM ORDER

COPENHAVER, District Judge.

This matter is before the court upon the motion of the plaintiffs for summary judgment.

I. INTRODUCTION

This civil action was brought by the plaintiffs, Health Care and Retirement Corporation of America (hereinafter Health Care) and American States Insurance Company (hereinafter American), in an effort to recover from the defendant, St. Paul Fire & Marine Insurance Company (hereinafter St. Paul), the sum paid for settlement of a claim brought against Health Care and to recover the expenses incurred in connection with the defense of and settlement of the claim. The plaintiffs allege that St. Paul is a liability insurance company which issued to Health Care an insurance policy of comprehensive general liability insurance coverage from March 31, 1981, to March 31, 1982.¹ Complaint ¶ II. The parties are in agreement that the policy provided that St. Paul would pay all sums which Health Care should become legally obligated to pay as damages because of bodily injury caused by an occurrence of the kind insured against. Complaint ¶ II, Answer ¶ 2. Additionally, plaintiffs allege that the policy required St. Paul to provide Health Care with legal representation and costs with respect to actions instituted against Health Care. Complaint ¶ II.

It is further alleged that on or about December 16, 1981, Helen R. Dolin instituted an action against the plaintiff Health Care in various courts, including the United States District Court for the Southern District of West Virginia, alleging, in part, a breach of a construction contract for cleaning services which resulted in physical and mental pain and suffering for which Dolin sought damages in the amount of $200,000.00. Complaint ¶ III, Answer Exhibit A, Dolin v. Wolfe Industries, et al., C.A. 81-2512. The plaintiffs assert that the St. Paul policy provided coverage for mental anguish, mental injury or illness. Complaint ¶ III. Health Care allegedly notified St. Paul of the actions filed by Dolin. Complaint ¶ IV. According to the allegations set forth in the complaint, St. Paul refused to afford insurance coverage in part because it claimed that the action filed by Dolin alleged intentional acts on behalf of Health Care. Complaint ¶ IV. Health Care allegedly then informed St. Paul that its actions were not intentional and requested that St. Paul conduct an investigation and afford coverage. Complaint ¶ IV. St. Paul allegedly refused to investigate the claim. Complaint ¶ IV. St. Paul has denied that Health Care advised the defendant that the actions were not intentional and demands strict proof of the allegation. Answer ¶ 4.

The plaintiffs allege that American had issued unto Health Care an umbrella policy of insurance which was secondary and excess to the St. Paul policy. Complaint ¶ V. As a result of St. Paul's refusal to afford coverage, it is alleged that American, with full reservation of rights, undertook to afford Health Care a defense. Complaint ¶ V.

The plaintiffs claim that after extensive trial preparations and thorough investigation, it was deemed in their best interests to settle the Dolin claim. Complaint ¶ VI. According to the plaintiffs, on January 27, 1984, the Dolin claim was settled for the sum of $22,000.00. Complaint ¶ VI. Expenses incurred in the defense and settlement of the claim are said to be $11,161.12. Complaint ¶ VI. Thus, the plaintiffs demand judgment of and from St. Paul in the amount of $33,161.12, plus interest and costs. Complaint ¶ VII.

II. SUMMARY JUDGMENT

A. Contract or Agreement

Health Care and American have moved the court pursuant to Rule 56 of the Federal Rules of Civil Procedure for summary judgment that St. Paul owes unto the plaintiffs the costs of defense and expenses and the reasonable settlement sum expended for settlement of the personal injury claim of Helen R. Dolin.

St. Paul has asserted that coverage was denied because of the definition of the term occurrence in the policy with Health Care. The policy provides as follows:

"Occurrence" means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the Insured ....

In her suit against Health Care, Dolin in part alleges that she entered into a contract with Health Care which provided that she was to perform certain work and services for Health Care for which she was to be paid on both a lump sum and an hourly basis. Additionally, Dolin recited that there was an agreement made whereby Health Care would reimburse Dolin and pay her for additional work not contemplated in the contract. Dolin alleged in part that Health Care breached the contract and agreement.

The court observes that exclusion (a) of the Comprehensive General Liability Insurance policy specifically provided that "this insurance does not apply: (a) to liability assumed by the Insured under any contract or agreement ...." Thus, it appears from the plain language of the policy that there is no coverage for amounts of money owed to Dolin as a consequence of contracts for services or for extra work done by agreement.

The affidavit of Paul G. Sieben, vice president of Health Care, states that Dolin contracted with Health Care to provide janitorial services in buildings being constructed by Health Care. Sieben states that a dispute arose with Dolin regarding the amount due her under contracts. According to Sieben, Health Care was ordered by the United States Department of Housing and Urban Development (HUD) not to make further disbursements to Dolin under her contract because of Dolin's failure to pay wages to some of her employees and her failure to pay the scale of wages required by HUD. Sieben states that Dolin instituted various suits against Health Care in both state and federal courts and that several mechanics liens were filed by Dolin in various counties in West Virginia. After incurring expenses in trial preparation and the defense of the actions, Health Care settled all of the claims for the sum of $22,000.00. According to Sieben, Health Care "was willing to concede that the amount of $12,302.35 represented sums claimed that could have been claimed for extra cleaning services and the balance was for claimed personal injuries...." Plaintiffs' Motion for Summary Judgment, Affidavit of Paul G. Sieben.

St. Paul has submitted the affidavits of Marvin W. Masters and Helen Dolin. Masters, one of the attorneys for Dolin in the suits against Health Care, states that demand was made for personal injuries as well as contract damages. According to Masters, Health Care "consistently took the position that plaintiff was not entitled to any sum of money for personal injuries and settlement was arrived at through negotiations concerning the amounts under the contract as opposed to any consideration being given to mental or physical injury or suffering." Memorandum of St. Paul in Opposition to Motion for Summary Judgment, Exhibit A, Affidavit of Marvin W. Masters.

Dolin states that she claimed damages both as a result of personal injury and contract liability. In the final settlement, Dolin states that she did not receive all the money claimed for contract damages. According to Dolin, Health Care "took the position that I was not entitled to any sum of money for personal injuries, although, in the final settlement I signed a release for any and all damages, including personal injuries. I do not consider that the settlement included any amount of money for personal injuries." Id., Exhibit B, Affidavit of Helen Dolin.

St. Paul argues, based upon the affidavit of Sieben submitted by Health Care itself, that at most Health Care is entitled to only $22,000.00 less $12,302.25 and any of the defense costs attributable to defending the breach of contract. Moreover, St. Paul argues that in view of the affidavits of Masters and Dolin, it is questionable whether any of the settlement amount and the legal cost of defense are referrable to anything other than alleged amounts owed under contract or agreement.

Initially, the court observes that nowhere does Health Care argue that it is entitled to monies due under the contract. Instead, issue is taken with the affidavits of Dolin and Masters. Health Care submitted the affidavit of Charles E. Hurt, who was Health Care's attorney with regard to the suits brought by Dolin. Hurt states that all of the settlement negotiations were conducted with Dolin's counsel, Robert Taylor. According to Hurt, the position of Health Care throughout was that it was not indebted to Dolin for any sum, either for personal injuries or breach of contract. Hurt states that settlement negotiations were never based on any amount due under contract or for personal injuries, but when finally effected was based on a concession that Dolin may have been entitled to no more than $12,302.25 for extra cleaning services and that the balance represented Dolin's personal injury claim. Moreover, Hurt states that there was never any direct communication with Dolin. Hurt notes that with regard to Dolin's claims of mental depression, he was furnished a medical report of Dr. Gina M. Puzzuoli, a psychiatrist. The report is attached to the affidavit and concludes that as a result of the conflict with Health Care, Dolin suffered a major depression resulting in the need for psychotherapy and chemotherapy for at least a year. Hurt then states he had Dolin examined by Dr. William B. Rossman, who concluded that Dolin had a quite noticeable...