Ed. Winkler & Son, Inc. v. Ohio Cas. Ins. Co.

• Decision Date: 05 March 1982
• Docket Number: No. 896,896
• Citation: 51 Md.App. 190,441 A.2d 1129
• Parties: ED. WINKLER & SON, INC. et al v. The OHIO CASUALTY INSURANCE COMPANY, et al.
• Court: Court of Special Appeals of Maryland

Page 190

51 Md.App. 190

441 A.2d 1129

ED. WINKLER & SON, INC. et al v. The OHIO CASUALTY INSURANCE COMPANY, et al.

No. 896.

Court of Special Appeals of Maryland.

March 5, 1982.

Joseph P. Rieger, Towson, for appellants.

John E. Mudd, Towson, with whom were Douglas W. Biser and Mudd & Harrison, Towson, on the brief, for appellees.

Argued before GILBERT, C.J., and MOYLAN and WILNER, JJ.

WILNER, Judge.

We are concerned here with a question of insurance coverage. Is appellee, Ohio Casualty Insurance Co., obliged under its Special Multi-Peril Policy to defend appellant, its insured, ¹ in an action brought against appellant by Nina and Benjamin Cromwell? The Circuit Court for Baltimore County answered in the negative and we shall do likewise.

The Cromwells sued appellant for slander, malicious prosecution, and false arrest. They alleged in their Declaration that, while a customer in appellant's jewelry store on October 30, 1980, Mrs. Cromwell was wrongfully accused by appellant of stealing a $600 diamond and substituting for it a $20 zircon. When Mrs. Cromwell denied the accusation and refused to "replace" the diamond, appellant called the police, repeated and embellished his accusation, and caused Mrs. Cromwell to be arrested. As a result of the arrest, it was claimed, Mrs. Cromwell was detained for several hours in a police station, questioned, and strip-searched. Subsequently, according to the Declaration, it was shown that the alleged zircon was indeed a real diamond, that Mrs. Cromwell had done nothing wrong, and that appellant ultimately "decided not to prosecute."

In support of her action for damages, Mrs. Cromwell claimed "pecuniary loss, humiliation, embarrassment, indignity, mental anguish, fright, emotional distress, physical trauma, nervous upset and damage to reputation" and the Cromwells together claimed "loss of consortium, society, affection and assistance of the other."

When presented with the Cromwells' "suit papers," appellant demanded that appellee defend the action in accordance with its policy, and, when it declined to do so, appellant brought this proceeding for declaratory judgment. The court, as noted, declared that the policy did not afford coverage for this type of action, and thus decided that appellee was not obliged to defend appellant or to pay any resulting judgment.

In St. Paul Fire & Marine Insurance Company v. Pryseski, --- Md. ---, 438 A.2d 282 (1981), the Court of Appeals instructed us that:

"In determining whether a liability insurer has a duty to provide its insured with a defense in a tort suit, two types of questions ordinarily must be answered: (1) what is the coverage and what are the defenses under the terms and requirements of the insurance policy? (2) do the allegations in the tort action potentially bring the tort claim within the policy's coverage? The first question focuses upon the language and requirements of the policy, and the second question focuses upon the allegations of the tort suit. At times these two questions involve separate and distinct matters, and at other times they are intertwined, perhaps involving an identical issue." Id. at ---, 438 A.2d at 285.

We start with the first question-what coverage is afforded by the policy?

The relevant policy language here is as follows:

"The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies, caused by an occurrence, and arising out of the ownership, maintenance or use of the insured premises and all operations necessary or incidental to the business of the named insured conducted at or from the insured premises, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company's liability has been exhausted by payment of judgments or settlements." (Emphasis supplied.)

The key phrase, in terms of this dispute, is that which we have underscored: "damages because of bodily injury ... to which this insurance applies, caused by an occurrence...." An "occurrence" is defined in the policy as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured." (Emphasis supplied.)

The word "accident," unfortunately, is not defined in the policy. The term "bodily injury" is so defined, however; it means "bodily injury, sickness or disease sustained by any person which occurs during the policy period, including death at any time resulting therefrom."

It is apparent from these provisions that coverage is afforded in this case if, from the allegations in the Cromwells' Declaration, it appears that (1) any of the injuries claimed by the Cromwells are "bodily injuries" or "property damage," and (2) such injuries were "caused by an occurrence." The first of these is not really in doubt; appellee does not dispute that at least some of the injuries claimed by the Cromwells amount to "bodily injuries." The real issue is the second one, and, given the definition of "occurrence" and the lack of any suggestion that the Cromwells' injuries arose from any "continuous or repeated exposure to conditions," it boils down in the end to whether the injuries were caused by an "accident." Coverage here depends on the interpretation of the word "accident," in light of the allegations in the Declaration.

This is the type of issue that is "intertwined" between the two considerations mentioned by the Court in Pryseski; it involves both an interpretation of policy language and a careful look at the tort action. We proceed with this synthesis by restating the general principle laid down in Brohawn v. Transamerica Insurance Co., 276 Md. 396, 407-08, 347 A.2d 842 (1975):

"The obligation of an insurer to defend its insured under...