Employers' Fire Ins. Co. v. Beals

• Decision Date: 03 April 1968
• Docket Number: No. 138-A,138-A
• Citation: 103 R.I. 623,240 A.2d 397
• Parties: The EMPLOYERS' FIRE INSURANCE COMPANY v. Chester K. BEALS et al. ppeal.
• Court: Rhode Island Supreme Court

Page 397

240 A.2d 397

103 R.I. 623

The EMPLOYERS' FIRE INSURANCE COMPANY v. Chester K. BEALS et al.

No. 138-Appeal.

Supreme Court of Rhode Island.

April 3, 1968.

[103 R.I. 636] Jordan, Hanson & Curran, Providence, for plaintiff; A. Lauriston Parks, Providence, of counsel.

Almonte, Lisa & Pisano, Providence, for defendants Chester K. Beals, Francis A. Beals and Chester K. Beals, Jr.; Peter A. Almonte, Carl B. Lisa, Providence, of counsel.

Hugo G. Caroselli, Providence, for defendants John Marzocchi, Alfred Marzocchi and Clara Marzocchi; Dominique S. Pavao, Providence, of counsel.

OPINION

KELLEHER, Justice.

The Employers' Fire Insurance Company, the insurer, issued a homeowners policy to Alfred and Clara Marzocchi, husband and wife. The Marzocchis together with their minor son, John, reside in Cumberland. The insurer concedes that John is an insured as that term is defined in its policy. The insurer filed a complaint in the superior court seeking a declaratory judgment that it was not required to defend or indemnify John Marzocchi for certain injuries he allegedly caused one of his schoolmates. The case is before us on the insurer's appeal from an order of the superior court dismissing its complaint on the ground that it failed to state a claim upon which relief could be granted.

The incident which gave rise to this action occurred in Providence on May 24, 1965, at St. Dunstan's Day School. On that day, John Marzocchi and one Chester K. Beals, Jr., both of whom were third-grade pupils, were in attendance at their class. The usual classroom routine was suddenly interrupted when John, for some reason not evident in this record, struck Chester in the right eye with a lead pencil. As a result of this tragic circumstance, Chester suffered grave injury and is reported to be permanently deprived of vision in his stricken eye.

The policy in which John is an insured defines under Insuring Agreements the insurer's obligation as follows:

"(a) Liability: To 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, and the Company shall defend any suit against the Insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent **."

The policy, however, contains under Special Exclusions a clause which provides that no coverage is afforded if the "*** bodily injury or property damage [was] caused intentionally by or at the direction of the Insured ***."

The insurer in the instant action has joined as defendants John, Chester and Chester's parents. In its complaint, the insurer alleges that John "intentionally struck" Chester with a pencil and therefore, by operation of its exclusionary clause referred to above, it disclaims any obligation to defend John or indemnify him against any damages which he might be obligated to pay as a consequence of the injury he inflicted on Chester.

The superior court appointed a guardian ad litem for each of the minor defendants. John's guardian denies that his ward intentionally injured his schoolmate.

Some two and one-half months after the filing of the insurer's complaint, Chester and his parents on March 27, 1967 commenced a civil action against John, his parents St. Dunstan's Day School and the third-grade teacher. The complaint consists of six counts. In each count, Chester seeks to recover $250,000 for his injuries while his parents seek the sum of $50,000 for their consequential damages. That part of the complaint relative to the present action contains an allegation which declares that John Marzocchi "negligently and carelessly, or willfully or maliciously" caused the pencil to strike Chester.

In dismissing the insurer's complaint, the trial justice observed that the uniform declaratory judgments act (G.L.1956, chap. 30 of title 9) was not designed to compel an injured person, himself not being a party to the insurance contract, to litigate issues in a declaratory judgment action which would otherwise be tried in the pending tort suit. In short, to use the words of the trial justice, the declaratory judgment should not be used to force the parties to have "a dress rehearsal" of an important issue expected to be tried in the injury suit. We concur in this statement.

In its appeal, the insurance company urges us to reverse the trial justice's denial of its request for a declaratory judgment. What prompts insurer's request therefor is its desire to have its obligations under the insurance contract to defendants in this case clearly defined by the court.

The insurer maintains that the facts in the present controversy present it with a perplexing dilemma which can only be resolved by a declaratory judgment. It seeks to have decided by a declaratory proceeding whether or not the injury complained of by Chester was intentionally inflicted by John or was in the alternative the result of an accident. If this issue were decided, insurer's obligation to defend and indemnify would be clearly settled and all the parties would presumably act in accordance with its determination. The insurer further asserts that a failure to have this issue resolved before the trial on the injury causes a sharp conflict of interest to arise between itself and the insured. This conflict can be concisely described as follows: the prime interests of the insurer would best be served by an adjudication that the injury to Chester was caused intentionally, for in such an event insurer owes no duty to defend or indemnify insureds; contrariwise, the prime interests of the insured would best be served by either an adjudication that the injury to Chester was the result of a pure accident--for in such an event the insurer clearly owes a duty to defend--or alternatively was the result of the negligent conduct of defendant, in which case insurer would be obliged to defend and indemnify insured up to the extent of its policy limits. Moreover, if the insurer attempts to exculpate itself from obligations under the policy by a showing that the injury to Chester was intentionally caused, it would expose the insured to greater personal liability and a possible award of punitive damages. See Harbin v. Assurance Co. of America, 308 F.2d 748 (10th Cir.1962). This polarization of interest, argues the insurer, makes it imperative that the above issue be disposed of before the principal tort suit, otherwise attorneys designated to represent the insured by the insurer would be asked to represent simultaneously two different parties with irreconcilable interests.

The narrow issue raised by this appeal is whether or not the trial justice in denying insurer's request for a declaratory judgment so abused his discretion as to warrant a reversal of his actions. For the reasons which follow, we think he acted with propriety and accordingly uphold his decision.

Initially we wish to point out that although the trial justice dismissed the complaint below under rule 12(b)(6) of the rules of civil procedure of the superior court, to wit, failure of the complaint to set forth a claim upon which relief could be granted, the test as to the correctness of this ruling is not that which we laid out in Bragg v. Warwick Shoppers World, Inc., R.I., 227 A.2d 582, and more recently in Buszta v. Souther, R.I., 232 A.2d 396. Our declaratory judgments act is concerned with a remedy, the granting of which is purely discretionary. This discretionary power remains intact despite the technical sufficiency of the complaint to withstand a 12(b)(6) motion or its apparent efficacy to invoke the court's jurisdiction. cf. Empire Fire & Marine Ins. Co. v. Goodman, 147 Mont. 396, 412 P.2d 569. Thus, even if the complaint contains a set of facts which bring it within the scope of our declaratory judgments act, there is no duty imposed thereby on the court to grant such relief, but rather the court is free to decide in the exercise of its discretion whether or not to award the relief asked for. We point out, however, that this discretion is not absolute and its exercise is subject to appropriate appellate review. See G.L.1956, § 9-30-7.

The utility of a declaratory judgment action in liability insurance cases cannot be denied, for it is a remedy readily adaptable to controversies in which there is a hassle over the coverage offered by a policy as applied to a crystallized set of facts. 20 Appleman, Insurance Law and Practice, § 11332 at 109. Oftentimes it is the most expeditious and fairest method by which an insurer can secure an advance determination as to its contractual duty to defend or indemnify one of its policyholders. 6A Moore, Federal Practice (2d ed.), p57:19, p. 3111. Use of a declaratory action can be effectively summoned to resolve a wide variety of legal and factual issues which are peculiarly common to insurance cases; for example, it can be employed to dispose of issues relating to policy liability limits, waiver of rights, forfeiture of rights for alleged nonpayment of premiums and ownership, assignment or beneficiary rights. 3 Barron & Holtzoff, Federal Practice and Procedure, § 1264, pp. 282-86. Thus when uncertainty exists as to the precise obligations and rights flowing between an insurer and an insured by reason of a contract of insurance, a declaratory action could well provide the much needed source of enlightenment and clarification in order that both parties can proceed to litigate issues fully aware of the responsibilities and duties, if any, each may owe to the other.

Although there may be a recognized need for a declaration of rights emanating from an insurance contract, it is nonetheless proper for a court in the exercise of its discretion to refuse to grant a declaratory judgment under certain circumstances. Certainly before such a judgment is awarded, the court must carefully examine and weigh...