Allstate Ins. Co. v. Atwood

• Decision Date: 12 April 1990
• Docket Number: No. 84,84
• Citation: 572 A.2d 154,319 Md. 247
• Parties: ALLSTATE INSURANCE COMPANY v. John ATWOOD et al. Sept. Term 1987.
• Court: Maryland Court of Appeals

Page 247

319 Md. 247

572 A.2d 154

ALLSTATE INSURANCE COMPANY v. John ATWOOD et al.

No. 84 Sept. Term 1987.

Court of Appeals of Maryland.

April 12, 1990.

Motion for Reconsideration Denied May 25, 1990.

Charles E. Wilson, Jr. (Thomas Patrick Ryan and McCarthy, Wilson & Ethridge, on the brief), Rockville, for appellant.

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

American Insurance Association by J. Snowden Stanley, Jr., E. Charles Dann, Jr. and Semmes, Bowen & Semmes, on the brief), Baltimore, amicus curiae.

Argued before MURPHY, C.J., ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL ^*, JJ.

ELDRIDGE, Judge.

In Brohawn v. Transamerica Ins. Co., 276 Md. 396, 347 A.2d 842 (1975), this Court held that an insurer, prior to trial of a tort suit against its insured, ordinarily could not obtain a declaratory judgment concerning policy coverage, where the coverage issue was essentially the same as an issue to be decided in the pending tort case. This case presents the question of when an insurer may litigate this type of coverage issue.

I.

The relevant facts may be briefly stated. The father of Raymond F. Dacek, III brought a tort suit, individually and as the father of Raymond, in the Circuit Court for Montgomery County, alleging that the defendant John Atwood, a minor, caused serious injury to Raymond's face. The complaint contained alternative counts based on negligence and battery.

At the time of the alleged injury, John Atwood lived with his parents who had a homeowner's insurance policy with Allstate Insurance Company that provided, in pertinent part, as follows:

"[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."

The policy, however, contained an exclusion for "bodily injury ... intentionally caused by an insured person." John Atwood was an insured under the policy.

Before the tort suit came to trial, Allstate filed a declaratory judgment action, seeking a declaration that the insured's act was intentional and therefore excluded from coverage. The circuit court dismissed the action, without prejudice, stating that a decision on the issue was premature and citing this Court's decision in Brohawn v. Transamerica Ins. Co., supra, 276 Md. 396, 347 A.2d 842. Allstate did not appeal from that dismissal.

The tort suit subsequently went to trial. After the presentation of evidence, the case was submitted to the jury on alternative grounds; the jury found for the plaintiffs on the negligence count. ¹ Judgment was entered in the tort case in accordance with the jury's verdict, and no appeal was taken in that case.

Thirteen days after the entry of judgment in the tort case, Allstate began the present proceeding by bringing a separate declaratory judgment action in the Circuit Court for Montgomery County, naming Atwood and Dacek as defendants, and seeking the same declaration which it had earlier sought. Both Atwood and Dacek moved to dismiss the declaratory judgment action, arguing that Allstate was bound by the jury's determination of negligence. The circuit court dismissed the action, and Allstate appealed to the Court of Special Appeals.

Both in the circuit court and in the Court of Special Appeals, Allstate argued that the principles set forth in this Court's opinion in Brohawn v. Transamerica Ins. Co., supra, did not preclude Allstate from bringing, after the tort suit, this declaratory judgment action in which Allstate could litigate whether the injury was caused by an intentional action. The Court of Special Appeals rejected Allstate's argument and affirmed. Allstate Ins. Co. v. Atwood, 71 Md.App. 107, 523 A.2d 1066 (1987). The intermediate appellate court concluded that the decision in Brohawn v. Transamerica Ins. Co., supra, permitted an insurance company to intervene as a party in the tort action. The court thus stated (71 Md.App. at 111-112, 523 A.2d at 1068):

"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."

The court went on to state that, because Allstate had not intervened as a party in the tort action, Allstate was bound by the jury's determination that the injury was caused by negligence rather than battery.

Thereafter we granted Allstate's petition for a writ of certiorari.

II.

Preliminarily, we believe that it would be useful to review briefly the scope of our opinion in Brohawn v. Transamerica Ins. Co., supra, as it relates to litigating a question of insurance coverage prior to the trial of a pending tort case.

This Court stated in Brohawn that a declaratory judgment action, prior to the trial of a pending tort action, would ordinarily be appropriate in certain instances to resolve questions of policy coverage, "where those questions are independent and separable from the claims asserted in a pending suit by an injured third party." 276 Md. at 405, 347 A.2d at 848. Examples include contentions that the insured failed to comply with contractual cooperation or notification provisions, or failed to pay premiums. Ibid. See Northern Assurance Co. v. EDP Floors, 311 Md. 217, 223, 225-226, 533 A.2d 682 (1987) (interpretation of an exclusion in an insurance policy); St. Paul Fire & Mar. Ins. v. Pryseski, 292 Md. 187, 438 A.2d 282 (1981) (interpretation of coverage language in policy); Truck Ins. Exch. v. Marks Rentals, 288 Md. 428, 430-431, 418 A.2d 1187, 1188-1189 (1980) (interpretation of language of endorsement extending insurance coverage to insured); Bankers & Ship. Ins. v. Electro Enter., 287 Md. 641, 644-645, 415 A.2d 278, 280-281 (1980) (interpretation of policy exclusion denying coverage when insured airplane was not operated by two named pilots). In the present case, as in Brohawn, however, the issue to be resolved in the declaratory judgment proceeding is the same as an issue in the tort action. The issue presented in both proceedings is whether Atwood intentionally struck Dacek III or negligently injured him. As was the case in Brohawn, a pre-tort trial declaratory judgment would ordinarily be inappropriate under these circumstances. ²

Allstate argues that where the insured's conduct raises an insurance coverage issue which is the same as an issue presented in a pending tort suit, the Brohawn prohibition against use of a pre-tort trial declaratory judgment action to resolve the coverage dispute has led to collusion between plaintiffs' and defendants' counsel in tort cases. Allstate claims that, in order to manipulate insurance coverage, plaintiffs' attorneys bring suits for "negligent rape, negligent sodomy, ... and negligent sexual molestation." (Petitioner's Brief at p. 15). Allstate describes the following scenario (ibid.): "The carrier, obligated to defend, and the defense attorney, obligated to protect his client's best interests, [are] forced to settle these claims or face trial where all parties' interests [are] best served only if a jury return[s] a verdict finding that even the most obvious and blatant criminal and/or intentional acts were ... negligent conduct."

Although Brohawn generally prohibits declaratory judgments, before the trials of pending tort suits, to resolve issues presented in the tort actions, Brohawn did not hold that this prohibition is absolute. Where the allegations in the tort suit against the insured obviously constitute a patent attempt to recharacterize, as negligent, an act that is clearly intentional, we believe that a declaratory judgment action prior to the trial of the tort case is permissible.

The Supreme Court of Colorado, in Troelstrup v. District Court, 712 P.2d 1010 (Colo.1986), addressed a similar issue. In an earlier opinion, Hartford Ins. Group v. District Court, 625 P.2d 1013, 1016 (Colo.1981), the Colorado Supreme Court, with respect to the use of pre-tort trial declaratory judgments, had reached a conclusion like that reached by this Court in Brohawn. In Hartford Ins. Group, however, in generally prohibiting the use of pre-tort trial declaratory judgment actions, the Colorado Supreme Court observed (625 P.2d at 1017): "This is not a case in which the tort action against the insured is based on conduct that is patently outside the terms of the insurance contract." In Troelstrup, the tort plaintiff alleged that the insured had committed, in effect, a "negligent" sexual assault upon the plaintiff. The Colorado Court held that in situations where "the nature and character of the act is such that the intent to inflict injury may be inferred as a matter of law," a declaratory judgment action before the tort trial is appropriate. 712 P.2d at 1013. To the same effect is Western Nat. Assur. Co. v. Hecker, 43 Wash.App. 816, 719 P.2d 954 (1986), also involving an alleged "negligent" sexual assault.

For cases addressing when an intent to injure may be inferred as a matter of law, see, e.g., Transamerica Ins. Group v. Meere, 143 Ariz. 351, 359-360, 694 P.2d 181, 189-190 (1984) (if defendant acted in self-defense, "with no basic purpose to injure, the exclusion will not apply.... If ... [the defendant] acted in self-defense ..., but negligently used force greater than necessary ... [the conduct] is ... within the coverage of the policy and not within the exclusion"); Globe American Cas. Co. v. Lyons, 131 Ariz. 337, 340, 641 P.2d 251, 254 (App.1981) (insured suffering from "mental derangement which deprived her of her capacity to act in accordance with reason" did not as a matter of law act intentionally within the meaning of the exclusion); Allstate Ins. Co. v. Kim W., 160 Cal.App.3d 326, 331-332, 206 Cal.Rptr. 609, 612-613 (1984) (...