Allstate Ins. Co. v. Atwood

• Decision Date: 01 September 1986
• Docket Number: No. 1098,1098
• Citation: 71 Md.App. 107,523 A.2d 1066
• Parties: ALLSTATE INSURANCE COMPANY v. John ATWOOD, et al. ,
• Court: Court of Special Appeals of Maryland

Page 107

71 Md.App. 107

523 A.2d 1066

ALLSTATE INSURANCE COMPANY v. John ATWOOD, et al.

No. 1098, Sept. Term, 1986.

Court of Special Appeals of Maryland.

April 15, 1987.

Charles E. Wilson, Jr. (McCarthy, Wilson, Ethridge & Quinn on the brief) Rockville, for appellant.

Alan S. Feld (Bulman, Dunie, Burke & Feld, Chartered on the brief) Bethesda, for appellees.

Argued before GILBERT, C.J., WEANT, J., and JAMES S. GETTY, Associate Judge of the Court of Special Appeals (retired), Specially Assigned.

GILBERT, Chief Judge.

This appeal is an outgrowth of an incident that occurred on Halloween night, 1983. In an apparently unprovoked attack, a teenager, John Atwood, struck Raymond Dacek III, a minor, in the face. Young Dacek, individually and through his father, sued Atwood in the Circuit Court for Montgomery County. The suit alleged that Dacek's injuries were caused by Atwood's negligence or deliberate assault and battery upon the youthful plaintiff.

At the time of the occurrence, Atwood resided with his parents, who had a policy of insurance with Allstate Insurance Company. That policy provided in pertinent part that Allstate

"will pay all sums arising from the same loss which an insured person becomes legally obligated to pay as damages because of bodily injury or property damage covered by this part of the policy ...

Exclusion. Losses We Do Not Cover.

1. We do not cover bodily injury or property damage intentionally caused by an insured person."

Believing that Atwood's striking of Dacek was an intentional act and thereby excluded from coverage under the contract of insurance, Allstate in December 1984 filed a "Bill of a Declaratory Relief." The Bill was dismissed without prejudice on the ground that it was premature.

Subsequently, Dacek's case against Atwood went to trial. The matter was submitted to the jury. That body returned its verdict in written form, as follows:

"

VERDICT SHEET

1. For whom do you find?

The Plaintiffs, Raymond F. Dacek and Raymond F. Dacek, III we find for the plaintiffs OR the Defendant _____

2. If you find for the Plaintiffs, under which theory do you find the Defendant liable?

Battery _____ OR Negligence negligence

3. In what amount do you find for Raymond F. Dacek $3007.00

4. In what amount do you find for Raymond F. Dacek, III $24,000.00"

Notwithstanding that the jury found only negligence insofar as Atwood's striking Dacek III was concerned, Allstate again filed a Bill for Declaratory Relief. The insurance company asserted that the injuries sustained by Dacek "were a direct result of ... [Atwood's] intentional act, were foreseeable and expected consequences of said act, and were therefore intentionally inflicted." Furthermore, Allstate averred, Atwood's deposition testimony constituted an admission of his intentional assault and battery on Dacek. That testimony, according to Allstate, read:

"Q. What was it you heard him, Raymond Dacek, say?

A. I asked him what he said, and he said, 'I was just making a nice comment can [sic] about your car.'

Q. Then what did you do?

A. I threw a punch.

Q. Did you punch of [sic] strike Raymond?

A. Yes.

Q. Where did it hit him?

A. In the face.

Q. What happened to him after of [sic] that?

A. He fell and ran away.

Q. Did you have any reason whatsoever to attempt to hurt him that evening?

A. No."

Atwood and Dacek both moved to dismiss the declaratory action. Following a hearing on the motions, Judge Stanley B. Frosh dismissed the action. Aggrieved, Allstate appealed.

The issue before us is whether the insurer who provides a defense for its insured in a tort case may, after disposition of the tort matter, relitigate the same issues and obtain a declaratory judgment that overrides a tort jury's verdict in the tort action.

Although Allstate was not a party to the suit in which the jury determined that Atwood's act of punching Dacek in the face was the result of negligence rather than battery, the insurer is, nevertheless, bound by that verdict.

In Brohawn v. Transamerica Insurance Company, 276 Md. 396, 347 A.2d 842 (1975), as in the instant case, a conflict of interest arose between an insurer and its insured. The conflict arose out of a complaint that alleged separate and alternative theories of negligence and assault and battery. Under the terms of the policy, the insured defendant was entitled to a defense in a suit against her for negligence but not assault and battery. The insurer, Transamerica, maintained that, because of a conflict of interest resulting from the issues of negligence and assault and battery, the coverage question should be resolved in a prior declaratory action.

Answering that contention by the insurer, the Court said:

"A declaratory judgment action prior to the trial of a tort action against the insured may under some circumstances be a valuable means of resolving questions of policy coverage where those questions are independent and separable from the claims asserted in a pending suit by an injured third party. An early resolution could avoid unnecessary expense and delay to the parties. Thus, where an insurance company claims lack of coverage because of the insured's failure to comply with contract provisions such as the cooperation or notification clause, or failure to pay premiums, a declaratory judgment would ordinarily be appropriate and should be granted. See Prashker v. United States Guarantee Company, 1 N.Y.2d 584, 136 N.E.2d 871, 875 (1956); Employers' Fire Insurance Company v. Beals, 103 R.I. 623, 340 A.2d 397, 401 (1968)." 276 Md. at 405, 347 A.2d at 848.

Brohawn, however, affirmed the dismissal of the declaratory judgment action, stating:

"If the issue upon which coverage is denied were not the ultimate issue to be determined in a pending suit by a third party, a declaratory judgment would be appropriate. But where, as here, the question to be resolved in the declaratory judgment action will be decided in pending actions, it is inappropriate to grant a declaratory judgment." 276 Md. at 406, 347 A.2d at 849.

That the Brohawn Court was keenly aware of the conflict of interest faced by the insurer is evident by the Court's comment:

"[A]n insured is not deprived of his contractual right to have a defense provided by the insurer when a conflict of interest between the two arises under circumstances like those in this case. When such a conflict of interest arises, the insured must be informed of the nature of the conflict and given the right either to accept an independent attorney selected by the insurer or to select an attorney himself to conduct his defense. If the insured elects to choose his own attorney, the insurer must assume the reasonable costs of the defense provided." 276 Md. at 414, 347 A.2d at 854.

At trial both plaintiff and defense counsel argued that Atwood's act was negligent rather than intentional. Allstate's contention that the act was intentional was not advanced to the fact finder. What seems to have been overlooked by Allstate in its reading of Brohawn is the Court's suggestion that, in the event of a conflict of interest, independent counsel be sought for the insured. 276 Md. at 414, 347 A.2d at 854. Implicit in that suggestion is the inference that the insurer might also be represented at trial so as to protect its interest.

We are urged by Allstate to hold that Brohawn applies only to declaratory judgments sought prior to trial of the underlying tort and has no post-tort trial application. Were we to adopt that view of Brohawn, its concern with judicial economy, finality of decisions, and avoidance of conflicting judgments would be totally thwarted.

Allstate finds support for its position in Glens Falls Ins. v. American Oil Co., 254 Md. 120, 254 A.2d 658 (1969). Brohawn, however, specifically circumscribed the holding of Glens Falls to its own particular facts. Consequently, that case affords Allstate no comfort. Even if Brohawn did not severely limit Glens Falls, the matter sub judice is readily distinguishable from...