Drake v. Mutual of Enumclaw Ins. Co.

• Decision Date: 24 May 2000
• Citation: 167 Or. App. 475,1 P.3d 1065
• Parties: Dale R. DRAKE and Bobbe Drake, husband and wife, Appellants, v. MUTUAL OF ENUMCLAW INSURANCE COMPANY, Respondent.
• Court: Oregon Court of Appeals

1 P.3d 1065

167 Or. App. 475

Dale R. DRAKE and Bobbe Drake, husband and wife, Appellants, v. MUTUAL OF ENUMCLAW INSURANCE COMPANY, Respondent.

(9807-04876; CA A104098)

Court of Appeals of Oregon.

Argued and Submitted December 3, 1999.

Decided May 24, 2000.

Donald A. Greig, Vancouver, WA, argued the cause for appellants. With him on the opening brief was Landerholm, Memovich, Lansverk & Whitesides, P.S., Vancouver.

Thomas M. Christ, Portland, argued the cause for respondent. With him on the brief was Mitchell, Lang & Smith.

Before LANDAU, Presiding Judge, and LINDER and BREWER, Judges.

BREWER, J.

The issue in this case is whether defendant Mutual of Enumclaw Insurance Company had a duty to defend its insureds, Dale and Bobbe Drake, in an action brought against them that included claims for undue influence, breach of fiduciary duty, and interference with economic relations. The trial court entered summary judgment for defendant, concluding that defendant had no duty to defend, because the complaint in the underlying action alleged conduct that was not covered under the insurance policies issued to plaintiffs. We affirm.

In 1996, plaintiffs purchased a homeowner's insurance policy from defendant that included personal liability and property damage coverage. At the same time, defendant also issued to plaintiffs a personal umbrella insurance policy that included personal liability and property damage coverages subject to a liability limit of $1,000,000. In January 1997, while both policies were in effect, Dallene Connell filed an action against plaintiffs in Marion County Circuit Court. Connell is Bobbe's sister. The overarching theme of Connell's complaint, which included eight separate claims, is that plaintiffs caused the sisters' mother, Mary Sullivan, to disinherit Connell in order to obtain a larger share of Sullivan's estate for themselves.

Shortly after being served, plaintiffs tendered the defense of the Connell action to defendant. Defendant rejected the tender and, as a consequence, plaintiffs had to retain counsel at their own expense in the Connell action.¹ In July 1998, plaintiffs initiated this action for a judgment declaring that defendant owes a duty to defend them in the Connell action and that defendant is liable for their defense costs. Defendant moved for summary judgment, arguing that each of Connell's claims alleged only intentional conduct and, therefore, did not allege an "occurrence" under the policies. Defendant also asserted that none of Connell's claims sought relief for a "personal injury" or "property damage," one of which must be alleged for coverage to exist. The trial court granted the summary judgment motion, holding that "defendant owes no duty to defend or indemnify plaintiffs against [the claims of] Dallene Connell * * *."

On appeal, plaintiffs argue that the trial court erred in concluding that defendant had no duty to defend them in the Connell action. The parties' dispute requires interpretation of the insurance policies and sorts into these questions: (1) whether any of Connell's claims alleges an "occurrence" within the meaning of the policies; and (2), if so, whether her complaint either alleges "property damage" or "personal injury" resulting from such an occurrence.

Because the material facts are not in dispute, we review the trial court's grant of summary judgment to determine whether defendant was entitled to judgment as a matter of law. ORCP 47 C; Jones v. General Motors Corp., 325 Or. 404, 420, 939 P.2d 608 (1997). Whether an insurer has a duty to defend presents a question of law, which is determined by comparing the terms of the insurance policy with the allegations of the complaint against the insured. Klamath Pacific Corp. v. Reliance Ins. Co., 151 Or.App. 405, 413, 950 P.2d 909 (1997),on recons. 152 Or.App. 738, 955 P.2d 340 (1998). If the complaint alleges facts that, if proved, would impose liability covered by the policy, the insurer must defend, even if some of the conduct alleged would not be covered. Ledford v. Gutoski, 319 Or. 397, 400, 877 P.2d 80 (1994); Timberline Equip. v. St. Paul Fire and Mar. Ins., 281 Or. 639, 645, 576 P.2d 1244 (1978).

We first summarize the relevant claims made by Connell against plaintiffs. Plaintiffs argue that three of Connell's claims are covered by the policies. The first claim, entitled "undue influence," alleges that the sisters' parents intended to leave their assets to their daughters in equal shares. As a result, they created revocable living trusts that named the sisters as equal beneficiaries. Connell and her husband were appointed as co-trustees. The Sullivans died within ten months of each other, in 1995 and 1996, with Dempsy Sullivan passing away first. The assets from Dempsy's trust were transferred to Mary's trust on his death. In the months before her death, Mary was in poor health. After Dempsy died, Mary became dependent on plaintiffs, who "regulated her * * * social, legal, and domestic affairs" and "isolat[ed] her from the outside world." Acting under the "undue influence" of plaintiffs and "guided by [their] judgment and advice," Mary amended the trust to substitute Bobbe as trustee in place of the Connells and deleted Dallene as a beneficiary of the trust. In addition, Mary sold property to plaintiffs for less than its actual worth and gave them gifts worth $474,158. Because of the changes to the trust, Connell received nothing from her parents' trusts, and plaintiffs received all of their assets.

The fourth claim in the Connell complaint is entitled "Breach of Fiduciary Duty * * *." That claim realleged Connell's earlier claims and also alleged that, as trustee, Bobbe owed Connell, as beneficiary, duties of loyalty, good faith and impartiality. Connell alleged that

"96.

"[Bobbe] knew that the intent of her mother and father was that the trusts be administered in such a way so as to share their gifts equally with their children. She breached this duty by unduly influencing her mother to transfer the assets of the Dempsy D. Sullivan Trust to the Mary M. Sullivan Trust and then removing Dallene Connell as a beneficiary of the Mary M. Sullivan Trust.

"97.

"She breached this fiduciary duty by self-dealing, imprudent investing and influencing her mother to make gifts without consideration to Dale Drake and herself.

"98.

"[Bobbe] also breached her duties as a co-trustee of Dempsy D. Sullivan's family trust by obtaining a loan for Dale Drake and herself from that trust.

"99.

"[Bobbe] breached the duty of loyalty to the beneficiaries by making decisions based solely on her personal interest in the trusts. She was a beneficiary of both trusts. She unduly influenced her mother to make decisions to benefit her personally.

"100.

"[Bobbe] breached the duty of impartiality to the beneficiaries by implementing a plan to exclude Dallene Connell from the gifts of their parents and to benefit only herself."

Connell alleged that, as a result of Bobbe's breach, Connell's expected inheritance was reduced and that, as a result of the "interference," Connell suffered emotional distress. The sixth claim in the Connell complaint, entitled "interference with economic relations," alleged that plaintiffs wrongfully interfered with Connell's expectancy in her mother's estate. Connell alleged that "[Bobbe] substituted herself for Dallene Connell, thereby becoming the sole beneficiary of the trusts and other assets owned by Mary M. Sullivan" and that Bobbe "accomplished this substitution by the use of undue influence over Mary M. Sullivan." Once again, Connell also realleged her earlier claims, sought to recover the economic loss to her expectancy, and alleged that she suffered emotional distress as a result of the "interference."

With the substance of the Connell claims in mind, we turn to the homeowners and umbrella policies issued by defendants. Both policies provide liability coverage, but the parties agree that, if anything, the coverage under the umbrella policy is more generous to plaintiffs. Accordingly, we confine our review to the relevant provisions of the umbrella policy. That policy covers claims for "personal injury" or "property damage" that is caused by an "occurrence." The policy defines those terms as follows:

"12. Occurrence means an accident, which happens anywhere during the policy period, whose effects are neither expected nor intended from the standpoint of any insured, [and] which results in:

"a. personal injury; or

"b. property damage.

"* * * * *

"13. Personal injury means:

"a. bodily injury including death, sickness or disease, disability or shock;

"b. mental anguish or mental injury;

"c. false arrest, detention or imprisonment, or malicious prosecution;

"d. libel, slander, or defamation of character;

"e. invasion of privacy, wrongful entry or eviction; [and]

"f. bodily injury arising from the use of reasonable force by you or at your direction if such injury arises for the purpose of protecting persons or property.

"* * * * *

"14. Property damage means physical injury to, destruction of, or tangible property." (Boldface in original.)

As the structure of the liability provisions of the policy makes clear, a covered claim may either be based on personal injury or property damage but, in any case, the alleged loss must be the result of an "occurrence." Because Connell's claims must arise from an occurrence within the meaning of the policy, we begin our discussion with that issue.

Under the policy, "occurrence" means "an accident." Although the policy provides that an accident must be "unexpected from the standpoint of any insured," it does not otherwise define the term. Thus, we examine its plain meaning. Hoffman Construction Co. v. Fred S. James & Co., 313 Or. 464, 469-70, 836 P.2d 703 (1992). That meaning for insurance policies that use these terms is well established and unambiguous. It does not focus on the intentionality of plaintiffs' conduct but, rather, looks to whether t...