Bruceton Bank v. U.S. Fidelity and Guar. Ins. Co.

• Decision Date: 14 April 1997
• Docket Number: No. 23398,23398
• Citation: 486 S.E.2d 19,199 W.Va. 548
• Court: West Virginia Supreme Court
• Parties: BRUCETON BANK, a West Virginia Corporation, and Mimi Shaffer, Plaintiffs Below, Appellees v. UNITED STATES FIDELITY AND GUARANTY INSURANCE COMPANY, Defendant Below, Appellant.

Page 19

486 S.E.2d 19

199 W.Va. 548

BRUCETON BANK, a West Virginia Corporation, and Mimi Shaffer, Plaintiffs Below, Appellees v. UNITED STATES FIDELITY AND GUARANTY INSURANCE COMPANY Defendant Below, Appellant.

No. 23398.

Supreme Court of Appeals of West Virginia.

Submitted March 18, 1997.

Decided April 14, 1997.

Syllabus by the Court

1. "A circuit court's entry of a declaratory judgment is reviewed de novo." Syl. pt. 3, Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995).

2. "Where an insured is required to retain counsel to defend himself in litigation because his insurer has refused without valid justification to defend him, in violation of its insurance policy, the insured is entitled to recover from the insurer the expenses of litigation, including costs and reasonable attorney's fees." Syl. pt. 1, Aetna Casualty & Surety Co. v. Pitrolo, 176 W.Va. 190, 342 S.E.2d 156 (1986).

3. Where, under a commercial general liability policy and a related commercial umbrella liability policy issued to a bank, insurance coverage is provided for certain injuries and damages caused by an "occurrence" or an "incident," and the policies expressly equate the terms "occurrence" and "incident" with an "accident," no such insurance coverage, or duty to defend or investigate by the insurer, arises, where the underlying case against the bank, concerning the denial of a loan, is grounded upon breach of contract and is in the nature of a lender liability action. Although a case in the nature of a lender liability action would, ordinarily, be foreign to the risk insured against as reflected by such insurance policies, included in the consideration of whether the insurer has a duty to defend is whether the allegations in the complaint against the bank are reasonably susceptible of an interpretation that the claim may be covered by the terms of the insurance policies. To the extent that the syllabus point in Farmers & Mechanics Mutual Fire Insurance Company v. Hutzler, 191 W.Va. 559, 447 S.E.2d 22 (1994), differs from these principles, it is hereby clarified.

Peter G. Zurbuch, Busch & Talbott, L.C., Elkins, for Appellant.

Harry M. Rubenstein, Kay, Casto, Chaney, Love & Wise, Morgantown, John R. Hoblitzell, Kay, Casto, Chaney, Love & Wise, Charleston, for Appellees.

McHUGH, Justice.

This declaratory judgment action is before this Court upon an appeal from the final order of the Circuit Court of Monongalia County, West Virginia, entered on December 18, 1995. As reflected in that order, the circuit court held that the appellant, the United States Fidelity and Guaranty Insurance Company (hereinafter USF & G), had a duty to defend the appellees, the Bruceton Bank and Mimi Shaffer, a loan officer at the bank, with regard to an underlying lender liability action filed against the appellees by Thomas Cueto and Carol Cueto. As a result of the ruling now being appealed, USF & G was ordered to reimburse the appellees in the amount of $34,182 in litigation expenses.

This Court has before it the petition for appeal, all matters of record and the briefs and argument of counsel. For the reasons stated below, and particularly in view of this Court's recent decision in State Bancorp, Inc., v. United States Fidelity and Guaranty Insurance Company, 199 W.Va. 99, 483 S.E.2d 228 (1997), we reverse the final order. Moreover, we remand this action to the circuit court for the entry of an order dismissing this matter from the circuit court's docket.

The Facts

In April 1992, Thomas Cueto and Carol Cueto applied for a $60,000 to $72,000 loan at a Monongalia County branch office of the Bruceton Bank. The Cuetos sought the loan in order to purchase a home to locate upon their property in Taylor County, West Virginia. According to the Cuetos, Bruceton Bank loan officer Mimi Shaffer verbally assured them that the loan would be approved as soon as they sold the home they occupied at that time in Monongalia County. As indicated in the final order, the Cuetos asserted that they sold their Monongalia County home in reliance upon Ms. Shaffer's assurances, before they were able to locate a new home upon their Taylor County property. The Bruceton Bank, however, denied the Cuetos' loan application.

Based upon the above, the Cuetos filed the underlying action against the bank and Ms. Shaffer. The action was styled Cueto, et al., v. Bruceton Bank, et al., Civil Action No. 94-C-140 (Monongalia County), and the complaint alleged causes of action for breach of contract, bad faith, fraudulent misrepresentation, negligence, constructive fraud, promissory estoppel and discrimination. Importantly, as the record indicates, all of the allegations of the complaint arose from two related events, i.e., the assurances of Ms. Shaffer and the denial of the Cuetos' loan application. ¹

During the period in question, the Bruceton Bank was covered by two insurance policies issued by USF & G. Those insurance policies, more particularly described below, were a commercial general liability policy (CGL) and a commercial umbrella liability policy (CUL). ² Based upon the policies, the Bruceton Bank presented the Cueto claim to USF & G for defense and confirmation of indemnification. However, by letter dated June 28, 1994, USF & G denied coverage, indicating that the Cueto claim was not within the scope of the two policies. As the USF & G letter stated: "Since there is no provision in your coverage forms that would trigger coverage, we must advise you that we will be unable to provide you with a defense." Thereafter, the Bruceton Bank and Mimi Shaffer employed their own attorney to defend the Cueto action. Although the Cueto action was ultimately dismissed, the bank and Ms. Shaffer incurred substantial expenses during the litigation.

In December 1994, the Bruceton Bank and Mimi Shaffer filed the current declaratory judgment action against USF & G. See W. Va.Code, 55-13-1 [1941], et seq. According to the Bruceton Bank and Mimi Shaffer, USF & G had a duty under both the commercial general liability and commercial umbrella liability policies to provide a defense with regard to the Cueto claim. Following a hearing conducted in April 1995, the circuit court entered the final order of December 18, 1995, holding that USF & G had a duty to defend the Bruceton Bank and Mimi Shaffer in the Cueto action. In particular, viewing the Cueto complaint as primarily alleging breach of contract, the circuit court stated: "The Court finds that the alleged breach of contract constituted an 'occurrence' as contemplated in the insurance policies, and thereby falls within the coverage of the insurance policies." As a result, the circuit court ordered USF & G to reimburse the Bruceton Bank and Mimi Shaffer in the amount of $34,182 in litigation expenses, with regard to both the Cueto action and the declaratory judgment action. This appeal followed.

The USF & G Policies

As indicated above, the Bruceton Bank was covered by a commercial general liability policy (CGL) and a commercial umbrella liability policy (CUL) issued by USF & G. Under Coverage A of the CGL policy, USF & G agreed to pay "those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies." Importantly, as clarified under Coverage A, the CGL insurance applied to bodily injury and property damage only where the bodily injury or property damage was caused by an "occurrence." The term "occurrence" was defined in the CGL policy as meaning "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." (emphasis added). Excluded from Coverage A of the CGL policy was bodily injury or property damage "expected or intended from the standpoint of the insured."

Under Coverage B, entitled "Personal and Advertising Injury Liability," of the CGL policy, USF & G agreed to pay "those sums that the insured becomes legally obligated to pay as damages because of 'personal injury' or 'advertising injury' to which this coverage part applies." Whereas advertising injury under the CGL policy included injuries arising from the publication of defamatory material, the phrase "personal injury" was defined in the policy as including an injury arising from "[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy [.]"

On the other hand, the commercial umbrella liability policy (CUL) issued by USF & G contained, in Coverage A, an "Excess Liability" provision. Under that provision, USF & G agreed to pay "those sums, in excess of the amount payable under the terms of any 'underlying insurance,' that the insured becomes legally obligated to pay as damages because of 'injury' to which this insurance applies [.]"

Moreover, under Coverage B of the CUL policy, entitled "Extended Liability," USF & G agreed to pay "those sums that the insured becomes legally obligated to pay as damages because of 'injury' to which this insurance applies.... The 'injury' must be caused by an 'incident.' " The term "injury" was defined in the CUL policy as including bodily injury, property damage, advertising injury and personal injury. The term "incident" was defined as including "an accident." (emphasis added). As with the CGL policy, the phrase "personal injury" was defined in the CUL policy as including an injury arising from "[t]he wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy [.]" Finally, under Coverage B of the CUL policy, the phrase "bodily injury" was defined as "bodily injury, sickness, disease, disability, humiliation, shock, mental anguish or mental injury sustained by a person, including death resulting from any of these at any time."

Standard of Review

In syllabus point 3 of Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995), this Court held: "A circuit court's entry of a declaratory judgment is reviewed de novo." See also syl. pt. 1, Randolph County...