Allstate Ins. Co. v. Novak

• Decision Date: 18 December 1981
• Docket Number: No. 43566,43566
• Parties: ALLSTATE INSURANCE COMPANY, Appellee, v. Sharon NOVAK and Tony Novak, Appellants.
• Court: Nebraska Supreme Court

Page 636

313 N.W.2d 636

210 Neb. 184

ALLSTATE INSURANCE COMPANY, Appellee, v. Sharon NOVAK and Tony Novak, Appellants.

No. 43566.

Supreme Court of Nebraska.

Dec. 18, 1981.

Syllabus by the Court

1. Declaratory Judgments. In order to maintain an action for declaratory judgment under the provisions of Neb.Rev.Stat. § 25-21,149 (Reissue 1979), there must be an actual controversy. It cannot be used to decide the legal effect of a state of facts which are future, contingent, or uncertain. There must, at the time that the declaration is sought, be an actual justiciable issue.

2. Insurance: Damages. An injury resulting from an act committed by an insured in self-defense is not, as a matter of law, an expected or intended act within the meaning of a policy of insurance exempting bodily injuries or property damages which are either expected or intended from the standpoint of the insured.

3. Insurance: Damages. An insurer has a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy. The insurer may not confine its investigation to the allegations of the petition filed by the party claiming damages.

Robert C. Wester of Schirber Law Offices, P. C., Papillion, for appellants.

John P. Miller of Miller & Rowen, P. C., Omaha, for appellee.

Heard before KRIVOSHA, C. J., McCOWN, CLINTON and WHITE, JJ., and RIST, District Judge.

KRIVOSHA, Chief Justice.

The appellants, Sharon Novak and Tony Novak, husband and wife, hereafter referred to as Novak, appeal from a declaratory judgment entered by the District Court for Sarpy County, Nebraska, holding in effect that the appellee, Allstate Insurance Company (Allstate), is neither obligated to defend Novak nor pay any judgment rendered against Novak under the terms of a certain policy of insurance issued by Allstate to Novak. We believe that the action of the trial court was in error and must be reversed.

The act which gives rise to our having to consider the applicability of the instant policy concerns an alleged assault and battery by Tony Novak against one Terry Stewart. The controversy, however, between Novak and Stewart has not, as yet, been resolved. Therefore, we are unable to know what the ultimate determination of that question will be. Our inability to know the result of that dispute is a key factor in our determination of this case.

The evidence presented to us in this case consists of the petition filed by Stewart in his case against Novak, plus certain depositions taken in the action between Allstate and Novak. The record discloses that the occurrence giving rise to this litigation took place on September 28, 1978. At that time Stewart was helping a friend with the construction of an addition or garage to the friend's house located next to the home owned by the Novaks. Mrs. Novak, in a statement stated that Mr. Stewart had been using abusive language toward her and that he had urinated in or near their yard in front of her. When her husband, Mr. Novak, arrived home at approximately 7:30 to 8:30 that evening, she informed him of what had taken place. According to Mrs. Novak, Mr. Novak immediately proceeded to the construction site where Mr. Stewart was working. In his deposition, Mr. Novak stated that he asked the owner of the house if his bathroom was working and why he, the owner, had allowed Mr. Stewart to urinate in his yard.

Novak further testified that at this point Stewart began to hurl obscene epithets at Novak and at the same time started moving toward him. Novak indicated that he had no idea whether Stewart had something in his fist with which he was going to strike Novak but that his tone of voice, his selection of words, and his sudden movement toward Novak led Novak to believe that Stewart was about to strike him, either with his fist or perhaps with a beer bottle.

Novak maintains that he then instinctively acted in self-defense by striking Stewart in the face. Mr. Stewart was knocked to the ground and ran away immediately after being hit.

Stewart, on the other hand, maintains by deposition that he was sitting down on the partially built wall and that he never said anything to Novak before Novak struck him. Stewart further denied that he had made any obscene comments to Mrs. Novak or had urinated in the Novak yard. The owner of the premises, in his deposition, testified that he spoke to Novak across the building but could not remember what they said. He testified that he did not know Mr. Stewart had urinated in Novak's yard.

Thereafter, Stewart filed an action against Mr. Novak in the District Court for Sarpy County, Nebraska. In his petition he alleged that Novak "without any cause or provocation therefor ... willfully, wantonly and maliciously struck (Stewart) from the side with great force and violence ...."

At the time of the alleged altercation the Novaks owned a certain policy of insurance issued by Allstate. The pertinent portion of the policy provides in part as follows: "Allstate agrees to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence. Allstate shall have the right and duty, at its own expense, to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, but may make such investigation and settlement of any claim or suit as it deems expedient." (Emphasis supplied.)

The Novaks called upon Allstate to provide them with a defense to Stewart's lawsuit and to pay any sums which Novak might legally be obligated to pay because of bodily injury to Stewart. Allstate refused to either provide a defense or to pay any damages, on the basis that the action by Novak, as claimed by Stewart, was not covered by the policy. Its position was based upon an exclusion in the policy which provided in part as follows: "This policy does not apply ... (f) to bodily injury or property damage which is either expected or intended from the standpoint of the Insured." Specifically, Allstate maintains that by reason of our decisions in State Farm Fire & Cas. Co. v. Muth, 190 Neb. 248, 207 N.W.2d 364 (1973), and Jones v. Norval, 203 Neb. 549, 279 N.W.2d 388 (1979), it is under no obligation under the terms of the policy to either provide a defense or to pay any damages.

It occurs to us that there are two separate and distinct obligations provided for by this contract of insurance. In the first instance, Allstate agrees to pay on behalf of the insured all sums which the insured shall become legally obligated to pay because of bodily injury. That is one contractual obligation existing between Allstate and Novak. The second obligation, which is separate and apart from the obligation to pay, is the "right and duty ... to defend any suit against the Insured." (Emphasis supplied.) See, Satterwhite v. Stolz, 79 N.M. 320, 442 P.2d 810 (1968); Travelers Indemnity Company v. East, 240 So.2d 277 (Miss.1970); Yakima Cement Prod. Co. v. Great American Ins. Co., 14 Wash.App. 557, 544 P.2d 763 (1975).

Not only does the carrier have a right to defend but it has a corresponding duty to do so. This duty is rather broad in that the policy provides that the carrier has a duty to defend even though the suit is "groundless, false or fraudulent." That is to say, the duty to defend is greater than the obligation to pay. There is no requirement that there must be a reasonable likelihood of recovery or even a good faith claim. It is possible by reason of the language of this policy that the company may be obligated to defend a groundless, false, or fraudulent claim though it may not ultimately be required to make any payment.

We first address the question of whether we can at this time declare whether the carrier has an obligation to pay. The simple fact of the matter is that until the facts in this case are resolved the court cannot determine Allstate's obligation to pay and cannot therefore grant declaratory judgment on that question. In order to maintain an action for declaratory judgment under the provisions of Neb.Rev.Stat. § 25-21,149 (Reissue 1979), there must be an actual controversy. It cannot be used to decide the legal effect of a state of facts which are future, contingent, or uncertain. There must, at the time that the declaration is sought, be an actual justiciable issue. See Miller v. Stolinski, 149 Neb. 679, 32 N.W.2d 199 (1948). The question now presented to us is whether we can judicially determine whether Allstate is required to make payment on behalf of Novak. However, until it is determined that Novak is legally obligated to pay Stewart, the question of Allstate's obligation is uncertain and contingent. See Firemen's Ins. Co. of Newark, New Jersey v. Burch, 442 S.W.2d 331 (Tex.1968). Unless it can be said that Stewart is entitled to a summary judgment against Novak on his cause of action, we cannot determine Allstate's obligation to pay on behalf of Novak. Allstate does not have an obligation to pay for all acts committed by the insured even though the act by the insured may produce an injury covered by the policy. It is obligated to pay only if the insured becomes legally obligated to pay. Allstate, under the facts presented to the court, may never be required to pay because Novak may never become legally obligated to pay. The distinction between this case and the cases of State Farm Fire & Cas. Co. v. Muth, supra, and Jones v. Norval, supra, are significant. In both Muth and Jones, judgments were already obtained against each insured who was already legally obligated to pay before the declaratory judgment action was brought by the carrier against the insured.

We are not suggesting by this opinion that there may never be an appropriate instance where the carrier may seek declaratory relief prior to the insured's...