Abrams v. General Star Indem. Co.

• Decision Date: 01 May 2003
• Parties: Stuart ABRAMS and Abrams, Inc., Plaintiffs, v. GENERAL STAR INDEMNITY COMPANY, Defendant.
• Court: Oregon Supreme Court

67 P.3d 931

335 Or. 392

Stuart ABRAMS and Abrams, Inc., Plaintiffs, v. GENERAL STAR INDEMNITY COMPANY, Defendant.

(CV 99-00769-DCA, SC S49593).

Supreme Court of Oregon.

Argued and Submitted March 10, 2003.

Decided May 1, 2003.

Michael H. Bloom, of Bloom & Schuckman, P.C., Portland, argued the cause and filed the brief for plaintiffs.

Lisa E. Lear, of Bullivant Houser Bailey, P.C., Portland, argued the cause and filed the brief for defendant. With her on the brief were Douglas G. Houser and Margaret M. Van Valkenburg.

Thomas M. Christ, of Cosgrave Vergeer Kester, LLP, Portland, filed the brief for amici curiae Mutual of Enumclaw Insurance Company, Farmers Insurance Company, Safeco Insurance Company, and Liberty Northwest Insurance Company.

Before CARSON, Chief Justice, and GILLETTE, DURHAM, RIGGS, De MUNIZ and BALMER, Justices.

BALMER, J.

This court accepted certification of the following question of law from the United States Court of Appeals for the Ninth Circuit (Ninth Circuit):

"Does an insurer have a duty to defend an insured under an insurance policy with an `intentional acts' exclusion if the complaint against the insured alleges a subjective intent to harm but the claim could be proven through unintentional conduct?"

See ORS 28.200 to 28.255 (describing certified question process); ORAP 12.20 (prescribing procedures for consideration of certified questions). We answer that question in the affirmative, for the reasons that follow.

We begin with the information that the Ninth Circuit provided about the underlying federal civil action. Southern Pacific Railway (Southern Pacific) possessed a number of rail van trailers that it leased to third parties on behalf of the owners of the trailers. An individual who worked for Southern Pacific, but who did not have authority to sell the trailers, sold some rail van trailers to Stuart Abrams and Abrams, Inc. (Abrams), the plaintiffs in this case, and kept the money. Abrams then sold many of the trailers to Beall Transport Equipment Company (Beall).

Once Southern Pacific discovered the theft of the trailers, it seized most of them from Beall. Beall then brought an action in state court against Southern Pacific, alleging conversion. Southern Pacific filed a third-party complaint against Abrams, alleging conversion. Abrams also brought an action in state court against Southern Pacific, alleging conversion, and Southern Pacific counterclaimed in that action for conversion. The two actions were consolidated for trial, and the trial court entered judgment against Abrams.¹

At the time of the alleged conversion, Abrams was insured by General Star Indemnity Company (General Star). According to the Ninth Circuit, the insurance policy required General Star "to defend Abrams in any suit alleging property damage caused by Abrams" and "excluded coverage for any damage that the insured intended to cause." Abrams had tendered Southern Pacific's third-party complaint and counterclaim (the complaints) to General Star, but General Star had refused to defend. After General Star rejected Abrams's tender, Abrams brought an action in state court against General Star for failing to defend and indemnify. General Star removed the action to federal district court, invoking that court's diversity jurisdiction.

General Star moved for summary judgment, arguing that it did not have a duty to defend Abrams because the complaints alleged that Abrams had acted with the subjective intent to cause harm and, thus, Abrams's conduct fell under the intentional-acts exclusion of the insurance policy. See, e.g., Allstate Ins. Co. v. Stone, 319 Or. 275, 278, 876 P.2d 313 (1994)

(exclusion for intentionally caused injury applies when insured intended to cause not just event that resulted in injury, but injury or harm itself). The district court agreed and entered judgment in General Star's favor. Abrams appealed, and the Ninth Circuit reversed in an unpublished memorandum opinion. On General Star's petition for rehearing, the Ninth Circuit withdrew its memorandum disposition and certified the duty-to-defend question to this court.

In its order certifying the question, the Ninth Circuit stated that Southern Pacific's complaints against Abrams stated claims for conversion and that conversion was a covered claim under the General Star insurance policy. In addition, the Ninth Circuit noted that the factual allegations of the complaints also included allegations that Abrams had acted with the subjective intent to cause harm. We have reviewed the complaints against Abrams and the relevant provisions of the insurance policy, and agree with the Ninth Circuit's conclusions. As noted above, under this court's cases, an insurance policy with an intentional-acts exclusion does not provide coverage for acts done with the subjective intent to cause harm. Abrams argues that, because the complaints state claims for conversion, General Star has a duty to defend, regardless of the allegations that, in committing the conversion, Abrams had acted intentionally. General Star responds that, because the complaints allege that Abrams had acted with the subjective intent to cause harm, General Star does not have a duty to defend.

Before answering the certified question, we address a threshold issue raised by amici curiae.² Amici argue that this court cannot answer the question as phrased because the question is so abstract that any answer that we offer will not be meaningful. The answer to any duty-to-defend question, they point out, depends on the specific wording of the insurance policy at issue. For that reason, they ask this court to rephrase the certified question to refer specifically to the wording of the duty-to-defend provision and to the "intended acts" exclusion of the General Star insurance policy.³

We agree with amici that whether a duty to defend exists in a particular case first depends on the specific wording of the specific insurance policy involved. As this court explained in Marleau v. Truck Insurance Exchange, 333 Or. 82, 89, 37 P.3d 148 (2001) (citing Ledford v. Gutoski, 319 Or. 397, 399, 877 P.2d 80 (1994)), in answering a duty-to-defend question, "we must examine two documents: the insurance policy and [the] complaint." In certifying to this court the question set out at the beginning of this opinion, the Ninth Circuit stated its conclusions that the Southern Pacific complaints against Abrams stated claims that were covered by the policy that General Star had issued to Abrams and that the complaints also included allegations of intentional conduct that were excluded by that policy. Indeed, the Ninth Circuit's conclusion that the complaints against Abrams stated a claim for conduct that was covered by the General Star policy provided the foundation on which that court posed the legal question to this court regarding the duty to defend under Oregon law. As noted, our review of the specific complaints and the policy provisions leads us to the same conclusion. Understood in context, therefore, the certified question is sufficiently concrete to be answered: Given that the complaints state a claim for covered conduct, does the fact that the complaints also include allegations of excluded conduct defeat the duty to defend?

We begin, as the parties do, with this court's decision in Marleau. In that case, the insurance policy covered "personal injury liability" and imposed on the insurer the duty to defend any action against the insured seeking damages for personal injury. The personal injury coverage included coverage for defamation, libel, and invasion of privacy, but excluded coverage for "personal injury * * * arising out of oral or written publication of material, if done by or at the direction of the insured with knowledge of its falsity." 333 Or. at 86, 37 P.3d 148. When a third party brought an action against the insured, alleging, among other claims, intentional infliction of emotional distress based on statements made by the insured, the insured tendered defense of the action to the insurer. One year after the tender, the insurer accepted the defense under a reservation of right to deny coverage. After settling the personal injury action, the insured brought an action against the insurer to recover costs associated with the first year of the litigation.

On review, the insured made the same argument that Abrams makes in this case, namely, that an insurer has a duty to defend if the allegations in the complaint, without amendment, state facts sufficient to constitute a claim for conduct that the policy covers, even if the complaint does not state those facts separately from facts that constitute a claim for excluded conduct. The insurer accepted that proposition but argued that, if the complaint required any amendment, even an amendment as to form, then the complaint did not, "without amendment," impose liability for a covered offense and no duty to defend existed. This court rejected the insurer's argument, emphasizing that a complaint need not plead a claim in perfect form to provide notice to the insurer and that that notice to the insurer provided the rationale undergirding the "without amendment" standard. Id. at 90-91, 37 P.3d 148. This court explained that an insurer has a duty to defend if allegations in a complaint, even if identified as a single claim for relief, in fact state more than one claim for relief, at least one of which is for conduct covered by the policy.⁴Id. at 91, 37 P.3d 148.

Despite this court's explanation in Marleau that an insurer has a duty to defend if the complaint against the insured states a claim for covered conduct, General Star argues that it nevertheless has no duty to defend in this case because the complaint, although stating a claim for conversion, includes allegations that Abrams had converted the property with the intent to cause harm to Southern Pacific. As authority for that argument, General Star relies on the following passage from this...