Air Force Ass'n v. Phoenix Ins. Co., 89-2317
| Decision Date | 02 November 1989 |
| Docket Number | No. 89-2317,89-2317 |
| Citation | 896 F.2d 545 |
| Parties | Unpublished Disposition NOTICE: Fourth Circuit I.O.P. 36.6 states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Fourth Circuit. AIR FORCE ASSOCIATION, Plaintiff-Appellant, v. The PHOENIX INSURANCE COMPANY, Defendant-Appellee. . Argued: |
| Court | U.S. Court of Appeals — Fourth Circuit |
Charles Joseph O'Hara (Philip J. Walsh, Bromley, Brown & Walsh, on brief), for appellant.
Thomas M. Wochok, for appellee.
Before ERVIN, Chief Judge, BUTZNER, Senior Circuit Judge, and HIRAM H. WARD, Senior United States District Judge for the Middle District of North Carolina, sitting by designation.
In this action, an insured exhibition promoter, Air Force Association ("AFA"), brought suit against its insurance company, Phoenix Insurance Co. ("Phoenix"), to recover, under the terms of its insurance policy, legal fees arising from its successful defense in an earlier suit. In that prior litigation, Phoenix refused to defend AFA because it claimed that the insurance policy did not cover defending against potential liability arising from the type of loss sued upon in that case. AFA also alleges that Phoenix acted in bad faith in interpreting the policy in this manner. The federal courts have diversity jurisdiction of this action, and the law of Virginia applies to these issues.
The district court granted Phoenix's Motion for Summary Judgment. It held that Phoenix was not obligated under the policy to defend AFA in the earlier suit, and consequently that it did not act in bad faith. AFA appealed from that decision. We agree that there is no evidence to support AFA's claim that Phoenix acted in bad faith, but for the reasons discussed below we reverse the district court's conclusion that the insurance policy did not require Phoenix to defend AFA in the earlier litigation.
In 1984, AFA sponsored an aerospace exposition in Washington, D.C. AFA hired the Freeman Companies to provide assembly, disassembly, and freight handling services for the exhibitors at the exposition. One of those exhibitors, Alkan, a defense contractor, displayed its weapon carriage release ("the carriage") at the exposition. The carriage was designed to carry a bomb under the wing of an airplane. Somehow, during the exposition the carriage was lost or stolen. Alkan sued AFA and Freeman. Count I of Alkan's complaint alleged that the loss was the result of a breach of contract by AFA and Freeman. Count II alleged that the defendants were negligent in failing to provide reasonably adequate security for the exposition. AFA successfully defended the suit at trial, but a judgment was rendered against the Freeman Companies.
During the time of these events, Phoenix provided insurance coverage to AFA under a comprehensive general liability insurance policy. Phoenix is a wholly owned subsidiary of the Travelers Indemnity Company ("the Travelers"). After reviewing the policy, Phoenix reported to AFA that there was no coverage for the loss of Alkan's carriage and indicated that Phoenix had no obligation to provide indemnification or a defense in the Alkan matter.
The pertinent provisions of the insurance policy are as follows:
The Travelers will pay on behalf of the Insured [AFA] all sums which the Insured shall become obligated to pay by reason of the liability imposed by law upon the Insured, or assumed by the Insured under any oral or written contract or agreement, as damaged because of ... (b) property damage, to which this insurance applies, caused by an occurrence.
The policy defines "property damage" in pertinent part to mean:
(b) loss of use of tangible property which has not been physically injured or destroyed provided such a loss of use is caused by an occurrence during the policy period.
The policy defines "occurrence" as
an accident ... which results in bodily injury or property damage neither expected nor intended from the standpoint of the Insured; ...
In considering the specific language of the insurance policy, the district court correctly determined that the possibility of coverage under the terms of the policy depends on whether an "occurrence" had been alleged in the original lawsuit brought by Alkan. Because the pleadings did not allege any physical injury or damage to the carriage or any loss of use per se, the district court concluded that Alkan's complaint alleged only a loss or theft and not an "occurrence."
As noted by the district court, the determination of whether or not there is a duty to defend is determined from the pleadings in the original lawsuit. Donnelly v. Transportation Ins. Co., 589 F.2d 761, 765 (4th Cir.1978). If the complaint does not allege any facts which if proven would make the insurer liable under the policy, then the insurer has no duty to defend. Travelers Indemnity Co. v. Obenshain, 219 Va. 44, 245 S.E.2d 247, 249 (1978). The duty to defend is generally broader than the duty to...
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