AMCO Ins. Co. v. Tri-Spur Inv. Co.

• Decision Date: 20 October 2004
• Docket Number: No. 29551.,29551.
• Citation: 101 P.3d 226,140 Idaho 733
• Parties: AMCO INSURANCE COMPANY, an insurance corporation, Plaintiff-Respondent, v. TRI-SPUR INVESTMENT COMPANY, an Idaho corporation, a/k/a Tri-Spur Investments, Inc., and John Bowen, an individual, Defendants-Appellants.
• Court: Idaho Supreme Court

101 P.3d 226

140 Idaho 733

AMCO INSURANCE COMPANY, an insurance corporation, Plaintiff-Respondent, v. TRI-SPUR INVESTMENT COMPANY, an Idaho corporation, a/k/a Tri-Spur Investments, Inc., and John Bowen, an individual, Defendants-Appellants.

No. 29551.

Supreme Court of Idaho, Boise, May 2004 Term.

October 20, 2004.

Rehearing Denied November 17, 2004.

Troupis & Summer, Chtd., Meridian, for appellants. Jay P. Clark argued.

Tolman Law Office, Twin Falls, for respondent. John O. Fitzgerald, II argued.

SCHROEDER, Chief Justice.

The District Court of Madison County granted AMCO Insurance Company's (AMCO) motion for summary judgment, holding that AMCO has no duty to defend or indemnify Tri-Spur for claimed damages arising from alleged civil rights violations. Tri-Spur maintains that the district court erred in ruling that the claims made against Tri-Spur did not encompass potential liabilities covered under the AMCO policy and that the civil rights exclusion in the AMCO policy is ambiguous and therefore unenforceable against Tri-Spur.

I. FACTUAL AND PROCEDURAL BACKGROUND

This case arose from litigation filed by the Equal Employment Opportunity Commission ("EEOC") against Tri-Spur in the Federal District Court of Utah on September 29, 2000. In that case the EEOC alleges that Tri-Spur violated Title VII of the Civil Rights Act—42 U.S.C. § 2000e ("Title VII")—and seeks "redress for unlawful sexual discrimination, sexual harassment and retaliation against a class of women."¹ Subsequently, Crystle Collins ("Collins") filed a complaint and amended complaint in intervention (collectively referred to as the "Utah Litigation").

Tri-Spur tendered defense of Collins' "non sexual harassment claims" to Allied Insurance Company pursuant to a policy of insurance (the "Policy"). Correspondence ensued between the insurer, AMCO, and attorneys representing Tri-Spur. Initially AMCO denied coverage but finally agreed to provide a defense reserving the right to seek declaratory relief.

AMCO filed this action seeking a declaratory judgment that it has no obligation to defend or indemnify Tri-Spur in the Utah litigation. Tri-Spur answered, claiming that AMCO is obligated to defend the Utah litigation and indemnify against resultant damages. Tri-Spur has also moved to amend its answer to include a counter-claim alleging bad faith based on AMCO's course of action subsequent to the filing of the Utah case.

Both parties filed for summary judgment: AMCO seeking relief from any further obligation to defend or indemnify Tri-Spur in the Utah Litigation; Tri-Spur seeking a declaration of AMCO's contractual duty of defense and indemnification in Utah.

The district court granted AMCO's motion for summary judgment.

II.

RELEVANT PORTIONS OF THE POLICY

COVERAGE D—BUSINESS LIABILITY

1. We will pay those sums that you become legally obligated to pay as damages because of "bodily injury", "property damage", "personal injury" or "advertising injury" to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under the COVERAGE EXTENSION—SUPPLEMENTARY PAYMENTS provision of this policy.

This insurance applies only:

a. To "bodily injury" or "property damage":

1) That occurs during the policy period; and

2) That is caused by an "occurrence". The "occurrence" must take place in the "coverage territory."

b. To "personal injury" caused by an offense:

1) Committed in the "coverage territory" during the policy period; and

2) Arising out of the conduct of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you.

c. To "advertising injury" caused by an offense committed:

1) In the "coverage territory" during the policy period; and

2) In the course of advertising your goods, products, or services.

2. We will have the right and duty to defend any "suit" seeking those damages. But

a. The amount we will pay for damages is limited as described in the BUSINESS LIABILITY AND MEDICAL EXPENSE LIMITS OF INSURANCE provision of this policy;

b. We may investigate and settle any claim or "suit" at our discretion; and

c. Our right and duty to defend ends when we have exhausted the applicable limit of insurance in the payment of judgments or settlements or medical expenses.

3. Damages because of "bodily injury" include damages claimed by any person or organization for care, loss of services or death resulting at any time from the "bodily injury".

4. "Property damage" that is loss of use of tangible property this is not physically injured will be deemed to occur at the time of the "occurrence" that caused it.

BUSINESS LIABILITY AND MEDICAL EXPENSES DEFINITIONS

1. "Advertising Injury" means injury arising out of one or more of the following offenses:

a. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services;

b. Oral or written publication of material that violates a person's right to privacy;

c. Misappropriation of advertising ideas or style of doing business; or

d. Infringement of copyright, title or slogan.

....

3. "Bodily Injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.

4. "Coverage Territory" means:

....

c. All parts of the world if:

1) The injury or damage arises out of:

a) Goods or products made or sold by you in the territory described above; or

b) The activities of a person whose home is in the territory described in a. above, but is away for a short time on your business; and

2) The insured's responsibility to pay damages is determined in a "suit" on the merits, in the territory described in a. above or in a settlement we agree to.

....

12. "Occurrence" means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

13. "Personal Injury" means injury, other than "bodily injury", arising out of one or more of the following offenses:

a. False arrest, detention or imprisonment;

b. Malicious prosecution;

c. Wrongful eviction from wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, by or on behalf of its owner, landlord or lessor;

d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or

e. Oral or written publication or material that violates a person's right of privacy.

....

15. "Property Damage" means

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that cause it; or

b. Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the "occurrence" that caused it.

BUSINESS LIABILITY AND MEDICAL EXPENSES EXCLUSIONS

1. With regard to BUSINESS LIABILITY coverage, this insurance does not apply to:

e. "Bodily injury" to:

1) A present or former "employee" of the insured arising out of and in the course of present or former employment by the insured; or

2) The spouse, child, parent, brother or sister of that "employee" or former "employee" as a consequence of 1) above.

3) Any person arising out of any federal, state or governmental civil rights violations or alleged violations.

This exclusion applies:

1) Whether the insured may be liable as an employer or in any other capacity; and

2) To any obligation to share damages with or repay someone else who must pay damages because of the injury.

III. THE DISTRICT COURT PROPERLY GRANTED AMCO'S REQUEST FOR SUMMARY JUDGMENT ON THE BASIS THAT AMCO HAS NO DUTY TO DEFEND OR INDEMNIFY TRI-SPUR IN THE UTAH LITIGATION

A. Standard of Review

The standard of review on appeal from an order granting summary judgment is the same standard that is used by the district court in ruling on the summary judgment motion. Baxter v. Craney, 135 Idaho 166, 170, 16 P.3d 263, 267 (2000). All disputed facts are to be liberally construed in favor of the non-moving party, and all reasonable inferences that can be drawn from the record are to be drawn in favor of the non-moving party. Eagle Water Company, Inc. v. Roundy Pole Fence Company, Inc., 134 Idaho 626, 628, 7 P.3d 1103, 1105 (2000). Summary judgment is appropriate only when the pleadings, depositions, affidavits and admissions on file show that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. I.R.C.P. 56(c).

B. Duty to Defend

"The duty to defend arises upon the filing of a complaint whose allegations, in whole or in part, read broadly, reveal a potential for liability that would be covered by the insured's policy." Hoyle v. Utica Mut. Ins. Co., 137 Idaho 367, 371-72, 48 P.3d 1256, 1260-61 (2002). Constr. Mgmt. Sys., Inc. v. Assurance Co. of Am., 135 Idaho 680, 682, 23 P.3d 142, 144 (2001); Union Warehouse & Supply Co., Inc. v. Illinois R.B. Jones, Inc., 128 Idaho 660, 667, 917 P.2d 1300, 1307 (1996); Kootenai County v. W. Cas. and Sur. Co., 113 Idaho 908, 910, 750 P.2d 87, 89 (1988) (citing State of Idaho v. Bunker Hill Co., 647 F.Supp. 1064, 1068 (D.Idaho 1986)). How and when an insurer must determine its potential for liability and duty to defend has also been established:

The problem that faces the insurers when a claim is made is determining if there is a potential for liability. However, ... since the advent of notice pleading there will likely be broad ambiguous claims made against the insured making it more difficult for the insurer to determine whether the insurance policy covers the claims.... [W]here there is doubt as to whether a theory of recovery within the policy coverage has been pleaded in the underlying complaint, or which is potentially included in the underlying complaint, the insurer must

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