Builders Mut. Ins. v. North Main Const., COA04-1717.

• Decision Date: 21 February 2006
• Docket Number: No. COA04-1717.,COA04-1717.
• Citation: 625 S.E.2d 622
• Court: North Carolina Court of Appeals
• Parties: BUILDERS MUTUAL INSURANCE COMPANY, Plaintiff v. NORTH MAIN CONSTRUCTION, LTD, Gajendra Sirohi, and wife, Poonam Sirohi, Defendants.

Page 622

625 S.E.2d 622

BUILDERS MUTUAL INSURANCE COMPANY, Plaintiff v. NORTH MAIN CONSTRUCTION, LTD, Gajendra Sirohi, and wife, Poonam Sirohi, Defendants.

No. COA04-1717.

Court of Appeals of North Carolina.

February 21, 2006.

Appeal by plaintiff from order entered 19 October 2004 by Judge Howard E. Manning, Jr., in Wake County Superior Court. Heard in the Court of Appeals 20 September 2005.

Pinto, Coates, Kyre & Brown, P.L.L.C., by Richard L. Pinto and John I. Malone, Jr., Greensboro, for plaintiff-appellant.

Pulley, Watson, King & Lischer, P.A., by Guy W. Crabtree, Esq., Durham, for defendants-appellees Gajendra Sirohi and Poonam Sirohi.

CALABRIA, Judge.

Builders Mutual Insurance Company ("plaintiff") appeals from the trial court's order granting partial summary judgment in favor of Gajendra and Poonam Sirohi ("Sirohi defendants"). We reverse and remand to the trial court for entry of summary judgment in favor of plaintiff.

Plaintiff is the insurance provider for North Main Construction, Ltd. ("North Main"), under two policies, a Commercial Auto Liability Policy and a Commercial Insurance Policy. The only policy at issue in this case is the Commercial Insurance Policy. Plaintiff sought a declaratory judgment in the Wake County Superior Court that it had no duty to defend or indemnify North Main and Ronald F. Exware, Jr. ("Exware") under the Commercial Insurance Policy.

The underlying facts in the case sub judice, as alleged in plaintiff's complaint for declaratory relief, are as follows:

9. The specific allegations against the defendants North Main and Exware assert that (a) Exware received a citation for DWI and careless and reckless driving at the time that he became involved in and caused the accident with Poonam Sirohi, (b) Exware's seven year driving record included several citations and driving convictions, including three speeding charges and a charge of transporting an open container after consuming, under [N.C. Gen. Stat. § 20-138.7], and (c) North Main allowed Exware to drive the company van despite Exware's poor driving record.

10. . . . [T]he plaintiffs specifically allege that North Main was negligent in that (a) North Main knew that its employee, Ronald F. Exware, Jr., was operating one of their vehicles after having received a citation on July 17, 2001 for driving on the wrong side of the road, (b) North Main knew or should have known that Exware's driving record was extremely poor, to the extent that his operation of a motor vehicle would likely cause great risk and danger to others such as the Plaintiff, (c) although North Main knew or should have known that Exware had a bad driving record, North Main provided a company van to Exware, (d) by ignoring Exware's bad driving record and in providing Exware a company vehicle despite his bad driving record, North Main failed to exercise due care for its employees['] safety and for the safety of others traveling upon the public highway such as the plaintiff Poonam Sirohi, (e) failed to enforce a proper policy governing the safe use of its company vehicles, and failed to exercise due care to ensure its employees were safe drivers and failed to exercise due care for the safety of others traveling upon the public highway, and (f) negligently entrusted a vehicle to Exware.

11. The specific factual allegations in the amended complaint assert (a) employees such as crew chiefs, foremen and officers of North Main, who supervised crews were required to come into the North Main office headquarters from time to time to deliver time sheets and pick up pay checks for their crews, and for other reasons, (b) often while in North Main company headquarters, the crew chiefs, foremen, supervisors and officers of North Main would consume beer and smoke marijuana together and with each other, (c) the senior officers of North Main were aware of the alcohol and marijuana consumption that took place on the company premises both during and after normal working hours, and did nothing to prevent or stop this behavior even though it was known that these individuals would return to work and possibly operate company machinery or equipment, or would leave operating company vehicles, and (d) the conduct of the officers of North Main in condoning the above described conduct, created an atmosphere of tolerance and acceptance of alcohol and drug use among the employees while working or operating company vehicles, machinery or equipment, and which conduct in turn was likely to lead to incidents causing death or injury to others.

12. Based on these additional factual allegations, the amended complaint includes additional allegations of negligence on the part of North Main in that North Main was negligent in that it (a) failed to properly hire, supervise, and retain its employees, (b) participated and condoned conduct by its employees that was likely to lead to death or injury to others, and (c) created and fostered an atmosphere among its employees and officers that the consumption of alcohol and drugs and the use of the company vehicles and equipment was permissible.

The Sirohi defendants further alleged that both Exware's negligence and North Main's negligence resulted in their injuries when Exware drove while intoxicated, crossed the median on Interstate 40, and struck the Sirohi defendants with North Main's automobile.

The trial court heard plaintiff's declaratory judgment action on 11 August 2004. Plaintiff made a motion for judgment on the pleadings, which was converted to a motion for summary judgment, and the Sirohi defendants also made a motion for summary judgment. On 19 October 2004, after reviewing the insurance policy at issue, Judge Manning granted plaintiff's motion as to all claims for negligent entrustment and negligent driving; however, he granted the Sirohi defendants' motion as to negligent hiring, negligent supervision, and negligent retention. Plaintiff appeals.

The question presented for our review is whether the trial court properly declared, as a matter of law, that plaintiff's commercial general liability policy[,]. . . issued to North Main Construction Company, does provide coverage for the claims asserted by the [Sirohi defendants] against the plaintiff's insured, North Main Construction, in the underlying action. . . and plaintiff's motion for summary judgment as to all claims for negligent hiring, supervision, and/or retention is DENIED, and [the Sirohi defendants'] motion for summary judgment as to all claims . . . for negligent hiring, supervision, and/or retention is ALLOWED.

In accordance with the North Carolina Rules of Civil Procedure, summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen.Stat. § 1A-1, Rule 56(c) (2005). In deciding the motion, "all inferences of fact . . . must be drawn against the movant and in favor of the party opposing the motion." Cater v. Barker, ___ N.C.App. ___, ___, 617 S.E.2d 113, 116 (2005) (citations and internal quotations omitted). "The party moving for summary judgment has the burden of establishing the lack of any triable issue." Id. (citations omitted).

A trial court's ruling on a motion for summary judgment is reviewed de novo by this Court. Va. Elec. & Power Co. v. Tillett, 80 N.C.App. 383, 385, 343 S.E.2d 188, 191 (1986). On appeal, we review materials presented to the trial court and determine whether there is a genuine issue as to any material fact and if any party is entitled to judgment as a matter of law. Oliver v. Roberts, 49 N.C.App. 311, 314, 271 S.E.2d 399, 401 (1980). Plaintiff admits a duty to defend North Main against "any `suit' seeking damages for `bodily injury' or `property damage' to which [the insurance policy at issue] . . . appl[ies]." Because "an insurer's duty to defend the insured is broader than its duty to provide liability coverage," Wilkins v. American Motorists Insurance Co., 97 N.C.App. 266, 269, 388 S.E.2d 191, 193 (1990) (citations omitted), we need not consider whether the Sirohi defendants will ultimately prevail in the underlying action. Id. This Court has held,

[t]he duty to defend is determined by the facts as alleged in the pleadings of the lawsuit against the insured; if the pleadings allege any facts which disclose a possibility that the insured's potential liability is covered under the policy, then the insurer has a duty to defend. If, however, the facts alleged in the pleadings are not even arguably covered by the policy, then no duty to defend exists. Any doubt as to coverage must be resolved in favor of the insured.

Id. (citations omitted).

It is uncontested in this case that there are no material issues of fact. We, therefore, limit our analysis to whether the trial court properly determined that the Sirohi defendants were entitled to judgment as a matter of law.

The Commercial Insurance Policy excluded from coverage the following:

g. Aircraft, Auto or Watercraft

"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."

We initially address whether, under precedent regarding the "arising out of" language in similar insurance policy exclusions, the trial court properly granted summary judgment for the defendants on the negligent hiring, supervision, and retention claims. In reviewing the insurance policy at issue, we are mindful of the rule of construction that "provisions of insurance policies . . . which extend coverage must be construed liberally so as to provide coverage whenever possible by reasonable construction." State Capital Ins. Co. v. Nationwide Mut. Ins. Co., 318 N.C. 534, 538, 350 S.E.2d 66, 68 (198...