Equine Assisted Growth v. Carolina Cas.

• Decision Date: 23 July 2009
• Docket Number: No. 20080277-CA.,20080277-CA.
• Citation: 2009 UT App 200,216 P.3d 971
• Parties: EQUINE ASSISTED GROWTH AND LEARNING ASSOCIATION, Plaintiff and Appellant, v. CAROLINA CASUALTY INSURANCE COMPANY, Defendant and Appellee.
• Court: Utah Court of Appeals

216 P.3d 971

2009 UT App 200

EQUINE ASSISTED GROWTH AND LEARNING ASSOCIATION, Plaintiff and Appellant, v. CAROLINA CASUALTY INSURANCE COMPANY, Defendant and Appellee.

No. 20080277-CA.

Court of Appeals of Utah.

July 23, 2009.

James L. Harris Jr., Salt Lake City, for Appellant.

Gregory J. Sanders and Patrick C. Burt, Salt Lake City, for Appellee.

Before Judges THORNE, DAVIS, and McHUGH.

OPINION

THORNE, Associate Presiding Judge:

¶ 1 Equine Assisted Growth and Learning Association (EAGALA) appeals from the district court's dismissal of its action against Carolina Casualty Insurance Company (Carolina Casualty), the issuer of EAGALA's non-profit organization liability insurance policy (the Policy). We reverse the district court's order and remand the matter for further proceedings.

BACKGROUND

¶ 2 In November 2005, Greg Kersten, a former EAGALA employee,¹ sued the individual members of EAGALA's board of trustees, seeking monetary and injunctive relief. Although Kersten's complaint was captioned as if the plaintiff was EAGALA itself and was verified by Kersten as "President and CEO" of EAGALA, Kersten in fact had no authority to sue on EAGALA's behalf at the time the complaint was filed. Kersten briefly obtained a temporary restraining order giving him control of EAGALA before the board members could demonstrate to the district court that Kersten was no longer affiliated with EAGALA and had no standing to sue in its name. The district court dissolved the temporary restraining order upon the board members' showing, and Kersten ultimately dismissed the case.² EAGALA incurred substantial costs defending itself and its board members against Kersten's miscaptioned suit.

¶ 3 EAGALA notified Carolina Casualty of Kersten's complaint and requested coverage for the costs of its defense. However, Carolina Casualty denied coverage. The Policy excludes from coverage claims brought "by, on behalf of, or in the right of [EAGALA]" (the insured versus insured clause), and Carolina Casualty claimed that the Kersten complaint was such an excluded claim because it was captioned in EAGALA's name. Carolina Casualty maintained its denial of coverage even after EAGALA informed it that Kersten had no relationship with EAGALA at the time of the suit. EAGALA then brought this suit against Carolina Casualty to establish coverage for the costs of defending against Kersten's unsuccessful suit.

¶ 4 Carolina Casualty sought judgment on the pleadings, arguing that on the face of its initiating complaint, Kersten's suit fell within the terms of the insured versus insured clause. EAGALA sought to introduce extrinsic evidence to demonstrate that Kersten had no authority to sue in EAGALA's name and that Kersten's suit was therefore not "by, on behalf of, or in the right of" EAGALA, but the district court concluded that such evidence could not be considered. The district court then compared the language of the Kersten complaint to the language of the insured versus insured clause and, finding that the Kersten complaint fell within the scope of the clause, granted judgment on the pleadings to Carolina Casualty. EAGALA appeals.

ISSUE AND STANDARD OF REVIEW

¶ 5 EAGALA argues that judgment on the pleadings was inappropriate in light of EAGALA's proffered extrinsic evidence demonstrating that the Kersten complaint was brought "by, on behalf of, or in the right of" Kersten individually, rather than "by, on behalf of, or in the right of" EAGALA. Whether judgment on the pleadings was appropriate in this case depends on whether the district court erred in failing to consider EAGALA's extrinsic evidence. This issue presents a question of law that we review for correctness. Cf. Fire Ins. Exch. v. Therkelsen, 2001 UT 48, ¶ 26, 27 P.3d 555 (implying that appellate determination of extrinsic evidence question is appropriate if contractual language is in the record).

ANALYSIS

¶ 6 EAGALA argues that the district court erred by refusing to consider extrinsic evidence that EAGALA had offered in opposition to Carolina Casualty's motion for judgment on the pleadings. In Fire Insurance Exchange v. Therkelsen, 2001 UT 48, 27 P.3d 555, the Utah Supreme Court addressed the circumstances under which extrinsic evidence must be considered, and when it may not be, in determining whether an insurance company has the duty to defend an insured against a claim. See id. ¶¶ 20-26. The Therkelsen court stated:

[W]hether extrinsic evidence is admissible to determine whether an insurer has a duty to defend an insured turns on the parties' contractual terms. If the parties make the duty to defend dependent on the allegations against the insured, extrinsic evidence is irrelevant to a determination of whether a duty to defend exists. However, if, for example, the parties make the duty to defend dependent on whether there is actually a "covered claim or suit," extrinsic evidence would be relevant to a determination of whether a duty to defend exists.

Id. ¶ 25 (second emphasis added). Thus, the question in this case is whether the Policy's insured versus insured clause is triggered by the facial...