Employers' Fire Ins. Co. v. Western Guar. Fund Services, 94CA1482

• Decision Date: 08 February 1996
• Docket Number: No. 94CA1482,94CA1482
• Citation: 924 P.2d 1107
• Parties: EMPLOYERS' FIRE INSURANCE COMPANY, Plaintiff-Appellee, v. WESTERN GUARANTY FUND SERVICES, Defendant-Appellant. . I
• Court: Colorado Court of Appeals

Page 1107

924 P.2d 1107

EMPLOYERS' FIRE INSURANCE COMPANY, Plaintiff-Appellee, v. WESTERN GUARANTY FUND SERVICES, Defendant-Appellant.

No. 94CA1482.

Colorado Court of Appeals,

Div. I.

Feb. 8, 1996.

Rehearing Denied May 2, 1996.

Certiorari Denied Oct. 15, 1996.

Mark Sisun & Associates, P.C., Steven P. Hemmerle, Denver, for Plaintiff-Appellee.

Rodman & Ross-Shannon, David L. Murphy, Denver, for Defendant-Appellant.

Opinion by Judge CRISWELL.

The defendant, Western Guaranty Fund Services (Western), appeals from a summary judgment which declared that a general liability policy issued by plaintiff, Employers' Fire Insurance Company (Employers), provided no coverage for claims asserted against certain of the other defendants (the Digbys), who were insureds under both the Employers' primary policy and under an excess liability policy issued by a carrier whose rights and liabilities have been assumed by Western. Simultaneously with the entry of such decree, the trial court also denied Western's motion to assert a counterclaim against Employers. We agree with the trial court that Employers' policy did not provide any coverage for the claims asserted against the Digbys. Therefore, we affirm.

Employers' policy was in effect from October 1, 1980, to

October 1, 1983. Under its terms, Employers agreed to:

pay on behalf of [the Digbys] all sums which [they] shall become legally obligated to pay as damages because of ... property damage caused by an occurrence ... and [Employers] shall have the right and duty to defend any suit against [the Digbys] seeking damages on account of such ... property damage .... (emphasis supplied)

Pertinent to the issues presented here are three other provisions of this policy.

First, "property damage" is defined to include:

loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period; (emphasis supplied)

Second, "occurrence" is defined as an accident ... which results in property damage neither expected nor intended from the stand point of [the Digbys]....

The term, "accident," is not defined by the policy.

Finally, the policy provides that, except under specified types of agreements, none of which are involved here, it does not apply to any "liability assumed by the [Digbys] under any contract or agreement."

In August 1980, more than a month before Employers' policy became effective, certain of the other defendants (the Yeagers) filed suit against the Digbys in the United States District Court for the District of Mississippi. The claims asserted in their complaint had their genesis in a 1978 transaction between the Digbys and the Yeagers. At that time, the two parties, both of whom were the owners and operators of interstate trucking companies, entered into a written lease and purchase agreement, which was subject to the approval of the Interstate Commerce Commission (I.C.C.), pursuant to which the Digbys sought to acquire certain certificates of public necessity and convenience issued to the Yeagers by the I.C.C., as well as the business equipment used by the Yeagers under those certificates.

Pending I.C.C. approval, the Digbys took possession of the Yeagers' certificates and all of the described equipment, pursuant to temporary authority granted by the I.C.C. In addition, the parties entered into a separate agreement whereby the Yeagers agreed to consult with, and not to compete with, the Digbys, and the Digbys agreed to make certain monetary payments to the Yeagers.

The Yeagers' Mississippi complaint alleged that, prior to July 1, 1980, the I.C.C. had approved the transaction, but had placed conditions upon it that were unacceptable to the Digbys. As a result, the Digbys exercised their right under the purchase and lease agreement to rescind that agreement.

The Yeagers alleged that the Digbys had violated the terms of both the purchase and lease agreement and the consulting and non-competition agreement in several respects. Western acknowledges that many of the claims asserted by the Yeagers (such as their claim that the Digbys had failed to make proper payments under the consulting agreement) did not describe risks covered by Employers' policy. It asserts, however, that their complaint could reasonably be interpreted to allege a "property damage" claim within that policy's coverage.

In this respect, the Yeagers alleged that, after the purchase and lease agreement was terminated, the Digbys had "intentionally and willfully refused to return the leased equipment and the authority [I.C.C. certificates]" to the Yeagers. They also asserted that the Digbys had "converted the equipment and authority to [their] own use by continuing to transport commodities under [the Yeagers'] ICC authority." It was alleged that the Digbys were still "willfully and maliciously" refusing to return the Yeagers' property to them.

In addition, the Yeagers' complaint also alleged that the purchase and lease agreement required the Digbys to make the payments called for by certain liens encumbering some of the equipment delivered to them. However, it was asserted that, because the Digbys did not want to acquire some of the Yeagers' equipment, but did so only to "strike a bargain," the Digbys "fail[ed] to make payments on some equipment to cause foreclosure and/or repossession of equipment that [the Digbys] never wanted to initially lease." It was alleged that this occurred in October 1978, some two years before Employers' policy became effective.

There is no evidence that Employers was given any notice of this litigation until August 1985, some four years after it was started and shortly after the Yeagers filed an amended complaint, the pertinent allegations of which are summarized above. At that time, the Digbys requested that a defense be provided to them under the policy and, in doing so, described the Yeagers' complaint as one which alleged that the Digbys had:

converted motor vehicle equipment ... failed to make payments under a Consulting and Non-Compete Agreement ... and conspired to deprive [the Yeagers] of their business including their equipment.

In addition, in 1986 Employers was informed that discovery in the Mississippi action had revealed that the Digbys had allegedly sold some of the equipment to third parties in 1982.

Ultimately, on appeal to the United States Court of Appeals for the Fifth Circuit, the Mississippi litigation was dismissed for lack of personal jurisdiction over the Digbys. And, in May 1990, two actions were commenced by the Yeagers in the Arkansas federal district court.

The complaint in the Arkansas litigation that is the subject of this action repeats, substantially verbatim, the Yeagers' former allegations. Thus, it is alleged that the Digbys had failed to make lien payments so that foreclosure upon certain pieces of equipment would occur; that they had "intentionally and willfully" refused to return the Yeagers' equipment, so that they could "wanton[ly] and malicious[ly]" exploit the Yeagers' business; and that the Digbys "participated in schemes to acquire title to property leased" from the Yeagers.

Shortly after the commencement of the litigation in Arkansas, Employers filed its complaint in the instant action, seeking a declaration that the claims asserted by the Yeagers were not among the risks covered by its policy. At about the same time, it sent a letter to the Digbys and Western that outlined some seven reasons why it asserted that it had no duty to defend the Digbys. It then notified them of the commencement of this action, but said that Employers would "participate in the defense" of the Digbys in the Arkansas litigation, pending resolution of the question. Finally, however, Employers' letter specifically "reserve[d] any and all rights it has or may have under any policy" insuring the Digbys.

While this action has been pending, the Arkansas litigation was concluded by the entry of a final judgment dismissing all of the Yeagers' claims, except for the claim based upon the Digbys' failure to make the payments called for by the consulting and non-competition agreement. The Digbys were then dismissed from this action, and none of their rights are implicated by Western's appeal.

Thereafter, Western and Employers each sought the entry of summary judgment in its favor. Western also sought to add a counterclaim to its responsive pleading to allege that Employers' letter agreeing to participate in the Digbys' defense constituted a separate contract requiring it to do so, which it breached by failing to share in the defense costs expended by Western.

Employers' motion for summary judgment was grounded upon several alternative legal assertions, and in granting its motion, the trial court expressly adopted each of them. In addition, it summarily denied Western's motion to amend its pleadings. It is from the resulting judgment that Western has taken its appeal.

I.

While the trial court relied upon several grounds for reaching the conclusion that the Employers' policy did not apply to the claims asserted by the Yeagers, before us both parties have argued that the question whether the Yeagers' pleadings described any "occurrence" during the effective term of that policy is the central one. We agree, and because we conclude that no such "occurrence" can reasonably be said to have been described, we affirm the trial...