Baron Oil Co. v. Nationwide Mut. Fire Ins. Co., AR-437

• Decision Date: 12 June 1985
• Docket Number: No. AR-437,AR-437
• Parties: 10 Fla. L. Weekly 1414 BARON OIL COMPANY, Appellant, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Appellee.
• Court: Florida District Court of Appeals

Page 810

470 So.2d 810

10 Fla. L. Weekly 1414

BARON OIL COMPANY, Appellant, v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Appellee.

No. AR-437.

District Court of Appeal of Florida,

First District.

June 12, 1985.

Brent M. Turbow, Jacksonville, for appellant.

Karen K. Cole and Noah H. Jenerette, Jr. of Boyd, Jenerette, Staas, Joos, Williams & Felton, Jacksonville, for appellee.

ZEHMER, Judge.

Baron Oil Company appeals an adverse summary judgment in Baron's suit against its insurer, Nationwide Mutual Fire Insurance Company, for breach of contract arising out of Nationwide's refusal to defend and provide liability insurance coverage in a malicious prosecution action against Baron by one of its former employees on the ground that a policy exclusion applicable to employees applied.

The material facts are undisputed. Baron's exposure to liability arose when, following its investigation of inventory shortages, Baron discharged its employee William Jones for misconduct. Baron supplied information developed in its investigation to law enforcement authorities and filed a criminal complaint against Jones. As a result, Jones was arrested and charged with grand theft. The charges against Jones were dismissed because of insufficient evidence to warrant prosecution.

Jones then filed suit against Baron for malicious prosecution. The original complaint did not allege or otherwise indicate that Jones was ever an employee of Baron or that his status as an employee might have any significance or relationship whatsoever to the suit for malicious prosecution. ¹ An amended complaint later filed by Jones alleged his employment relationship with Baron in the following language:

On and before November 29, 1980, Plaintiff, William Jones, was an employee of Defendant, Baron Oil Company, at its station located at 3425 Myrtle Avenue, Jacksonville, Florida.

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The complaints so made and information so supplied [to law enforcement authorities] consisted of Defendant's accusation that Plaintiff stole or embezzled large sums of money from Defendant while employed by Defendant as above described....

Upon receipt of the original complaint, Baron notified Nationwide of the suit and requested that Nationwide defend in accordance with the terms and conditions of the liability insurance policy. That policy provided Baron with general liability coverage for damages due to personal injury arising out of malicious prosecution. Regarding the duty to defend, the policy provided that Nationwide "shall have the right and duty to defend any suit against insured seeking damages on account of such personal injury even if any of the allegations of the suit are groundless, false or fraudulent." The policy also contained the following exclusion:

This insurance does not apply under the Personal Injury Liability Coverages:

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(c) To personal injury sustained by any person as a result of an offense directly or indirectly related to the employment of such person by the Named Insured.

Upon receipt of the original complaint, Nationwide, acting on information known to it apart from the allegations in the complaint, declined to provide defense of the action on the ground that the claim was not covered by its policy under the quoted exclusion in paragraph (c). Accordingly, Baron employed its own attorneys and defended the suit. After the amended complaint was filed, the action was tried and resulted in a judgment against Baron for $50,081 ($43,081 compensatory damages and $7,000 punitive damages), plus costs. Baron then demanded that Nationwide pay both the judgment and Baron's expenses in defending the action, including attorney's fees. Nationwide refused, and this suit was filed.

The court below concluded that the allegations in the original complaint against Baron were insufficient to determine whether Jones's action for malicious prosecution was directly or indirectly related to his employment by Baron and that there was no way to determine from the original complaint whether, in view of the exclusionary language, coverage existed. The court recited that Nationwide determined that the wrongful charge against Baron arose directly or indirectly out of Baron's employment of Jones and so notified Baron in ample time for Baron to secure its own attorney and present its own defense. These facts were likewise revealed in Jones's amended complaint. Finding that these facts clearly brought Jones's claim within exclusion (c), the court held that Nationwide had no obligation to provide coverage or defense, citing Tennessee Corp. v. Lamb Bros. Construction Co., 265 So.2d 533 (Fla. 2d DCA 1972), and entered summary judgment for Nationwide.

On appeal, Baron does not question the trial court's ruling that the actual facts as alleged in the amended complaint exclude coverage under the terms of subparagraph (c). Rather, Baron argues that the trial court erred in granting summary judgment because Nationwide's duty to defend must be determined solely from the allegations of the original complaint filed against Baron. The allegations in the original complaint clearly charged malicious prosecution within the general coverage provisions of the policy and did not allege any facts falling within the policy exclusion relating to employees. Baron contends that the duty to defend is broader than the duty to pay and that facts subsequently learned by investigation or amended pleadings indicating that the claim is not covered by the policy do not relieve the insurer from its obligation to defend. That being so, Baron argues, Nationwide was clearly obligated to defend on the basis of the original complaint, could not avoid this obligation by reliance on additional facts learned through its own investigation and allegations in the amended complaint, and is legally obligated to reimburse Baron for the full amount of the personal injury judgment for Jones, plus Baron's costs and attorney's fees incurred in defending the entire action.

Nationwide, on the other hand, contends that the complaint was silent on Jones's employment by Baron, so that whether the exclusion applied could not be determined from the face of the complaint. Nationwide contends that in this circumstance the general rule that allegations in the complaint control is subject to an exception which recognizes the insurer's right to investigate the facts and determine its duty to defend. Alternatively, Nationwide contends that allegations in a subsequent complaint which clearly bring the alleged claim within a policy exclusion excuse the insurer from providing a defense.

Initially, we note there is no dispute about the fact that Jones was in the employ of Baron when the events giving rise to the criminal charges against Jones occurred. Nor has Baron's brief disputed the cases cited by Nationwide that the existence of this fact brings this case within the terms of the policy exclusion. Butler v. Michigan Mutual Insurance Co., 402 So.2d 949 (Ala.1981); Binder v. McGehee, 393 So.2d 334 (La.App.1981), cert. denied, 397 So.2d 1359 (La.1981). We conclude, therefore, that under the true facts revealed by the amended complaint there is no coverage requiring Nationwide to indemnify Baron for the damages claimed by Jones. The critical question is whether Nationwide nevertheless had a duty to defend and, if so, the extent of Nationwide's liability to Baron for breach of that duty. In this regard we also take note that Baron's complaint does not charge Nationwide with bad faith. ²

The rule is firmly established in Florida that a liability insurer's obligation to defend a claim made against its insured must be determined from the allegations in the complaint. E.g., National Union Fire Insurance Co. v. Lenox Liquors, Inc., 358 So.2d 533 (Fla.1978); New Amsterdam Casualty Co. v. Knowles, 95 So.2d 413 (Fla.1957); State Farm Mutual Automobile Insurance Co. v. Universal Atlas Cement Co., 406 So.2d 1184 (Fla. 1st DCA 1982); Kings Point West, Inc. v. North River Insurance Co., 412 So.2d 379 (Fla. 2d DCA 1982); Federal Insurance Co. v. Applestein, 377 So.2d 229 (Fla. 3d DCA 1979); St. Paul Fire & Marine Insurance Co. v. Thomas, 273 So.2d 117 (Fla. 4th DCA 1973). The reason for this rule is aptly stated in Kings Point West, Inc.:

The Florida Supreme Court in National Union Fire Insurance Co. v. Lenox Liquors, Inc., supra, held that if coverage was not indicated by the allegations of the complaint, later stipulations filed in the action which indicate that insurance coverage would apply do not create a duty to defend. We hold that the reverse is also true. The later filings below, which tended to indicate that the damage claims pursued against appellant/insured were not covered by the insurance policy issued by appellee, do not defeat the duty to defend. Were this not the case, the indefiniteness as to whether the insurer should begin or should continue to defend a suit would create another major issue in many insurance lawsuits, placing insurer and insured on opposing sides. We think that result would not well serve either. With a duty to defend set by the initial pleading, each party knows his standing and need not examine every new document filed to determine if the claims may be focusing on noncovered damages.

412 So.2d at 380. The "later filings" referred to were depositions and other discovery documents that tended to establish a lack of coverage; but an amended complaint later filed contained the same allegations as the original complaint, which stated a claim within the coverage.

The duty to defend is distinct from and broader than the duty to indemnify the insured against damages assessed, and if the complaint alleges facts showing two or more grounds for liability, one being within the insurance coverage and the other not, the insurer is obligated to defend the entire suit. State Farm Mutual Automobile Insurance Co. v. Universal Atlas Cement Co., 406 So.2d 1184; Florida Farm Bureau Mutual Insurance Co....