City of Boise v. Planet Ins. Co.
| Decision Date | 03 June 1994 |
| Docket Number | No. 20788,20788 |
| Citation | 126 Idaho 51,878 P.2d 750 |
| Parties | , 9 IER Cases 1019 CITY OF BOISE, an Idaho municipal corporation, Dirk Kempthorne and Ken Morss, Plaintiffs-Appellants, v. PLANET INSURANCE COMPANY, a Wisconsin corporation, Defendant-Respondent. Boise, March 1994 Term |
| Court | Idaho Supreme Court |
Imhoff & Lynch, Boise, for appellants. Michael W. Moore, argued.
Cantrill, Skinner, Sullivan & King, Boise, for respondent. Robert D. Lewis, argued.
This is a municipal liability insurance case. We conclude that the insurance policy obligates the insurance company to pay damages awarded against the insured city, its mayor, and its fire chief, less the amount of self-insured retention.
THE BACKGROUND AND PRIOR PROCEEDINGS.
The City of Boise (the city) purchased a comprehensive insurance policy (the policy) from Reliance Insurance Company. The policy was underwritten by Planet Insurance Company of Wisconsin (the company), and included comprehensive general liability coverage (the liability coverage). The liability coverage provided "excess municipal liability insurance," with a liability limit of $900,000 per occurrence and with a $100,000 self-insured "retention" per occurrence.
The following portions of the policy are pertinent to this case:
The Company will pay on behalf of the Insured for the ultimate net loss in excess of the retention which the Insured shall become legally obligated to pay by reason of liability imposed by law or liability of others assumed by contract, insofar as the Named Insured may legally do so, for damages because of
Coverage B Property Damage
and caused by an occurrence during the policy period anywhere in the world.
....
This policy does not apply:
....
except with respect to liability of others assumed by the Insured under contract, to personal injury to or sickness, disease or death of any employee of the Insured arising out of and in the course of his employment by the Insured;
....
Errors and omissions means any actual misstatement or misleading statement or act or omission or neglect or breach of duty including misfeasance, malfeasance and nonfeasance by an Insured in their capacity as such.
....
Insured means the Named Insured [the city] and the following:
1. past or present employees, servants or elected ... officials of the Named Insured ... when acting in their capacity as such employees or elected or appointed officials;
....
Occurrence means an accident, event or error or omission during the policy period, including injurious exposure to conditions, which results in personal injury, property damage, or errors and omissions neither expected nor intended from the standpoint of the Insured.
Personal injury includes
1. Bodily injury, sickness, disease, disability, shock, fright; mental anguish, and mental injury, including death at any time resulting therefrom;
2. False arrest, false imprisonment, wrongful entry, wrongful eviction, wrongful detention, malicious prosecution and humiliation;
3. The publication or utterance of a libel or slander or of other defamatory or derogatory material, or a publication or utterance in violation of rights of privacy;
4. Piracy, unfair competition or idea misappropriation under an implied contract or infringement of copyright, title or slogan arising out of the Named Insured's advertising activities;
5. Racial, religious, sex, or age discrimination unless insurance thereof is prohibited by law; and
6. Assault and battery not committed by or at the direction of the Insured unless committed for the purpose of preventing or eliminating danger to person or property.
....
Retention means either the self insured retention of the Insured or the underlying insurance.... The self insured retention ... includes defense costs.
....
(Bold face type in the policy.)
Patrick Dunn filed a lawsuit (the Dunn litigation) against the city, the city's mayor (the mayor), and the city's fire chief (the fire chief). Dunn alleged that the fire chief had wrongfully demoted him from his position as deputy chief of operations in the city's fire department. Dunn also alleged that his efforts to communicate his concerns about management problems caused by the fire chief included constitutionally protected speech and expression and that his demotion and the failure of the mayor and the city to reinstate him was in retaliation for his efforts to communicate his concerns.
The city informed the company of the lawsuit and proceeded to conduct its own defense. During the course of the Dunn litigation, all of Dunn's claims were dismissed except one alleging violation of constitutionally protected speech. At the conclusion of the trial in the Dunn litigation, the trial court submitted this issue to the jury. The jury returned a special verdict finding that Dunn was involuntarily demoted in retaliation for his exercise of protected free speech. The jury awarded Dunn damages of $215,533 for loss of wages and benefits, and $46,608 for emotional distress. The trial court awarded Dunn attorney fees and costs, and entered a judgment (the judgment) for $288,419.52 imposing joint and several liability on the city, as well as the mayor and the fire chief in their official capacities.
Following the verdict in the Dunn litigation, the company informed the city that the policy did not provide coverage for the judgment. In the case now before us, the city, the mayor, and the fire chief sought a declaratory judgment declaring that the policy afforded coverage for the damages awarded in the judgment in the Dunn litigation. They also requested attorney fees pursuant to I.C. § 41-1839.
The company contended that the policy did not provide coverage for the damages awarded to Dunn and counterclaimed for a declaratory judgment in its favor. In reply to the company's counterclaim, the city, the mayor, and the fire chief asserted that the company was estopped from denying coverage for the Dunn litigation.
All the parties requested summary judgment. The trial court granted summary judgment in favor of the company. The trial court declared that the policy does not provide coverage for Dunn's wage loss award for the reason that there was no "occurrence" because the fire chief intentionally demoted Dunn, and because lower wages were an expected outcome of the demotion. The trial court also ruled that the policy does not provide coverage for Dunn's emotional distress award because the policy excludes coverage for personal injury to an employee arising out of the course of employment. The trial court ruled that while the company did not issue a reservation of rights letter during the pendency of the Dunn litigation, the company had no duty to defend or pay defense costs until the $100,000 retention was exhausted. This did not occur, the trial court said, until the judgment was paid. The trial court also concluded that the company did not control the city's defense of the Dunn litigation, and, therefore, had no duty to issue a reservation of rights letter or otherwise present a position on coverage.
The city, the mayor, and the fire chief appealed.
THE POLICY DOES NOT EXCLUDE COVERAGE FOR DUNN'S DAMAGES FOR EMOTIONAL DISTRESS.
The city, the mayor, and the fire chief assert that the policy does not exclude coverage for Dunn's damages for emotional distress. We agree.
The policy contains an exclusion (the employee personal injury exclusion), which states that the policy does not apply:
except with respect to liability of others assumed by the Insured under contract, to personal injury to or sickness, disease or death of any employee of the Insured arising out of and in the course of his employment by the Insured.
The definition of "personal injury" contained in the policy includes "mental anguish, and mental injury." This definition would encompass the emotional distress for which Dunn received an award of damages. The city, the mayor, and the fire chief contend, however, that the definition of "personal injury" contained in the policy does not apply to the employee personal injury exclusion because the term "personal injury" appears in bold face type in the definition, but not when it appears in the employee personal injury exclusion.
We note that in another section of the policy--section IA providing for insurance of the city's property--the policy gives clear significance to the use of bold face type: "Whenever a word appears in bold in Section IA of this policy, such word shall be defined as indicated below:". (Bold face in the policy.)
Because there is no similar statement in the liability coverage section of the policy, we might be led to conclude that the use of bold type in this section does not have the same significance as the use of bold type in section IA. On the other hand, we might be led to conclude that the statement in section IA about bold face type indicates its significance in the liability section also.
We also note the following clause appears in seven endorsements to the liability coverage portion of the policy: "The insurance under this endorsement applies to bodily injury and property damage only and does not apply to any other coverage afforded under the definition of personal injury." This statement clearly indicates that "bodily injury," which is not defined in the policy, is only a facet of personal injury. Otherwise, there would be no reason to restrict the application of the endorsements to "bodily injury" and eliminate "any other coverage afforded under the definition of personal injury."
The city, the mayor, and the fire chief also point out that if "personal injury" as used in the employee personal injury exclusion is given the meaning ascribed in the definition section of the liability coverage section, there is absolutely no reason for the company to have included the words "sickness, disease or death" in the exclusion...
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