Aetna Cas. & Sur. Co. v. Cochran

• Decision Date: 01 September 1994
• Docket Number: No. 41,41
• Citation: 337 Md. 98,651 A.2d 859
• Parties: AETNA CASUALTY & SURETY COMPANY v. Robert COCHRAN. ,
• Court: Maryland Court of Appeals

Page 98

337 Md. 98

651 A.2d 859

AETNA CASUALTY & SURETY COMPANY v. Robert COCHRAN.

No. 41, Sept. Term, 1994.

Court of Appeals of Maryland.

Jan. 12, 1995.

John B. Kaiser (Kevin J. McCarthy, McCarthy, Bacon & Costello, on brief), Lanham, for petitioner.

William S. Barton (Karen L. Smith, Urner, Nairn, Barton & Williams, on brief), Hagerstown, for respondent.

Argued before MURPHY, C.J., and ELDRIDGE, RODOWSKY, CHASANOW, KARWACKI, BELL and RAKER, JJ.

CHASANOW, Judge.

This appeal arises out of an action filed by Robert Cochran (Cochran) against Aetna Casualty & Surety Company (Aetna) seeking a declaration that Aetna had a duty to defend Cochran in a tort action filed against him. That tort action was instituted by Victoria and Robert Beyer in the Circuit Court for Washington County (the Beyer action). The Beyers filed a complaint against Cochran alleging assault, battery and loss of consortium stemming from an altercation which occurred at the offices of J. Edward Cochran and Company, Inc. (J. Edward Cochran). At the time of the alleged incident, J. Edward Cochran held two liability insurance policies issued by Aetna. ¹ As an officer, employee, stockholder and director of J. Edward Cochran, Cochran was covered under those insurance policies. Upon receiving the Beyer complaint, Cochran wrote Aetna to notify it of the complaint and to request that Aetna provide him with representation in the Beyer action. In that letter, Cochran informed Aetna that Victoria Beyer interjected herself into an altercation between himself and his brother, Edward W. Cochran, Jr. At a March 19, 1990 meeting with representatives of Aetna, Cochran explained that any injuries sustained by Victoria Beyer occurred while Cochran was defending himself against an assault by his brother. ² After receiving Cochran's letter, Aetna advised Cochran that it was reserving its right to disclaim coverage. In a subsequent letter, Aetna refused to defend Cochran in the Beyer action based on an exclusion in the insurance policies. That exclusion provided:

"This insurance does not apply to:

a. 'Bodily injury' or 'property damage' expected or intended from the standpoint of the 'insured.' This exclusion does not apply to 'bodily injury' resulting from the use of reasonable force to protect persons or property."

After Aetna refused to defend Cochran in the Beyer action, Cochran hired private counsel for his defense. Subsequently, Cochran filed a complaint against Aetna in the Circuit Court for Allegany County seeking a declaratory judgment that Aetna had a duty to defend Cochran in the Beyer action and that Aetna be required to pay the attorney's fees incurred in connection with the declaratory judgment action. Cochran argued that there was a potentiality that the alleged intentional torts in the Beyer action were covered under the insurance policies and thus, Aetna had a duty to defend him in that action.

Aetna filed a motion for summary judgment contending that it properly refused to defend Cochran because the alleged assault and battery are intended acts which are specifically excluded from coverage under the insurance policies. Cochran then filed a cross motion for partial summary judgment reiterating his position that because "the Aetna policies expressly cover[ ] injuries that might be intended or expected from the standpoint of the insured if they result from the use of reasonable force to protect persons or property," the allegations in the Beyer action establish a potentiality of coverage under the insurance policies. Subsequent to a hearing on the motions for summary judgment, the circuit court, (Sharer, J.), issued a memorandum and order granting Aetna's motion for summary judgment and denying Cochran's cross motion for partial summary judgment. The circuit court held that Aetna had no duty to defend Cochran in the Beyer action because "the claim is not covered by the Aetna [policies], nor is there a potentiality of coverage" under those policies. Cochran appealed the circuit court's judgment to the Court of Special Appeals which reversed the circuit court and held that a " 'potentiality of coverage' existed on the face of the Beyer complaint" and Aetna had a duty to defend Cochran in that action. Cochran v. Aetna Casualty, 99 Md.App. 350, 362, 637 A.2d 509, 514 (1994). We granted certiorari to consider whether Aetna has a duty to defend Cochran in the Beyer action. 335 Md. 341, 643 A.2d 441.

I.

In Brohawn v. Transamerica Ins. Co., 276 Md. 396, 347 A.2d 842 (1975), this Court held that an insurance company has a duty to defend its insured for all claims which are potentially covered under an insurance policy. In Brohawn we stated:

"The obligation of an insurer to defend its insured under a contract provision ... is determined by the allegations in the tort actions. If the plaintiffs in the tort suits allege a claim covered by the policy, the insurer has a duty to defend. Even if a tort plaintiff does not allege facts which clearly bring the claim within or without the policy coverage, the insurer still must defend if there is a potentiality that the claim could be covered by the policy."

276 Md. at 407-08, 347 A.2d at 850 (citations omitted) (emphasis in original).

In Brohawn, suit was instituted against Mary Brohawn alleging assault or, in the alternative, negligence as a result of a physical altercation between Brohawn and two nursing home employees. Prior to the institution of the tort suit, Brohawn had pled guilty to criminal assault as a result of the same altercation. After Brohawn notified her insurance company of the tort suit, the insurance company filed a declaratory judgment action seeking a ruling that it had no duty to defend Brohawn. In the declaratory judgment action, the insurance company argued that Brohawn's guilty plea to criminal assault established that she committed an intentional tort which was specifically excluded from coverage under her insurance policy. In holding that the insurer could not obtain a declaratory judgment that it did not have a duty to defend based on the evidence of the guilty plea, we noted that while the insurer "may believe that the evidence of the guilty plea would establish that any injuries sustained ... were the result of intentional acts by Mrs. Brohawn, this belief will not relieve [the insurer] of its duty to defend its insured in suits which allege an unintentional tort covered by the policy." Brohawn, 276 Md. at 408, 347 A.2d at 850. Thus, because the allegations in the tort complaint established a potentiality of coverage under Brohawn's insurance policy, the insurer had a duty to defend and could not escape that duty by obtaining a declaratory judgment based on extrinsic evidence that Brohawn's actions were not covered under the insurance policy.

To ascertain when an insurer is under a duty to defend an insured in accordance with Brohawn, this Court, in St. Paul Fire & Marine Ins. Co. v. Pryseski, 292 Md. 187, 438 A.2d 282 (1981), articulated the following two-part inquiry:

"In determining whether a liability insurer has a duty to provide its insured with a defense in a tort suit, two types of questions ordinarily must be answered: (1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy? (2) do the allegations in the tort action potentially bring the tort claim within the policy's coverage? The first question focuses upon the language and requirements of the policy, and the second question focuses upon the allegations of the tort suit."

292 Md. at 193, 438 A.2d at 285. To answer these two inquiries as they pertain to the facts of the instant case, we must ascertain the scope and limitations of coverage under the Aetna insurance policies and then determine whether the allegations in the Beyer action would potentially be covered under those policies.

In answering the first Pryseski inquiry, we focus on the terms of the insurance policies themselves to determine the scope and limitations of their coverage. See Mitchell v. Maryland Casualty, 324 Md. 44, 56, 595 A.2d 469, 475 (1991); Mut. Fire, Marine & Inland Ins. v. Vollmer, 306 Md. 243, 250, 508 A.2d 130, 133 (1986). In construing the terms of the insurance contract, we must accord the terms their "customary, ordinary, and accepted meaning." Mitchell, 324 Md. at 56, 595 A.2d at 475; Cheney v. Bell National Life, 315 Md. 761, 766, 556 A.2d 1135, 1138 (1989). In Pacific Indemnity Co. v. Interstate Fire & Casualty Co., 302 Md. 383, 488 A.2d 486 (1985), this Court stated that:

"An insurance contract, like any other contract, is measured by its terms unless a statute, a regulation, or public policy is violated thereby. To determine the intention of the parties to the insurance contract ... we construe the instrument as a whole ... [and] should examine the character of the contract, its purpose, and the facts and circumstances of the parties at the time of execution."

302 Md. at 388, 488 A.2d at 488 (citations omitted).

When we apply the terms of the insurance policies at issue in the instant case and accord those terms their "ordinary and accepted meaning," the pertinent language of those insurance policies is clear. The policies exclude from coverage bodily injury or property damage resulting from "intended" or "expected" acts. The policies state, however, that the "exclusion does not apply to 'bodily injury' resulting from the use of reasonable force to protect persons or property." The exception to the exclusion must be construed to limit the applicability of the policies' exclusion for intended or expected acts. Thus, the insurance policies exclude from coverage bodily injury or property damage which was intended or expected from the standpoint of the insured, while the insurance policies provide coverage for bodily injury resulting from the use of reasonable force to protect persons or property even if that bodily injury was expected or intended from the standpoint...