Federated American Ins. Co. v. Strong

Citation689 P.2d 68,102 Wn.2d 665
Decision Date04 October 1984
Docket NumberNo. 50228-5,50228-5
PartiesFEDERATED AMERICAN INSURANCE CO., Respondent, v. Clyde STRONG, Petitioner.
CourtUnited States State Supreme Court of Washington

Ries & Kenison, Harry E. Ries, Moses Lake, for petitioner.

Murray, Dunham & Murray, Matt Murray, Seattle, for respondent.


This is a declaratory judgment action, brought to determine whether an insurance policy purchased by Clyde Strong provides him with liability and collision coverage with respect to certain automobile collisions. The trial court and Court of Appeals held that there was no coverage. We reverse.

In December 1977, Clyde Strong's wife Lisa, while driving his Oldsmobile Toronado automobile, intentionally collided with two other automobiles. Lisa first drove the Toronado into an automobile driven by Constance A. Lindell; then, she drove the Toronado around the Lindell automobile and rammed a second automobile driven by Karl L. Reuble. Putting the Toronado into reverse, Lisa backed into the Lindell automobile, and then drove around it and hit the Reuble automobile a second time. Lisa finally turned the Toronado around and chased Ms. Lindell, who had left her automobile and was attempting to retreat up an embankment.

At the time of the collisions, Clyde and Lisa Strong had been separated for several months; Lisa was using the Toronado with Clyde's permission.

The Toronado was insured by Federated American Insurance Company (FAIC). The policy provided both liability and collision coverage. Approximately 16 months after the collision, FAIC filed a declaratory judgment action, seeking a declaration of no coverage under its policy for any damages or injuries arising out of the December 1977 collisions. Clyde Strong denied FAIC's allegation that its insurance policy provided no coverage. He also counterclaimed, alleging that FAIC had breached its insurance contract by failing to provide him with a defense to an action filed against him by Karl Reuble, and that FAIC had violated the Consumer Protection Act. In an amendment to his counterclaim, Clyde sought reimbursement from FAIC for $3,500 physical damages to the Toronado.

The trial court held that the FAIC insurance policy did not provide coverage to either Clyde or Lisa Strong for any damages or injuries arising out of the collisions of December 1977. The Court of Appeals, Division III, affirmed. Federated Am. Ins. Co. v. Strong, 36 Wash.App. 256, 673 P.2d 873 (1983). We accepted discretionary review.


We must first decide whether Clyde Strong is entitled to liability coverage under the FAIC policy. Under the terms of the policy's liability section, FAIC agreed:

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

A. bodily injury, sickness or disease, including death resulting therefrom, hereinafter called "bodily injury," sustained by any person;

B. injury to or destruction of property, including loss of use thereof, hereinafter called "property damage";

arising out of the ownership, maintenance or use of the owned automobile or any non-owned automobile, and COMPANY shall defend any suit alleging such damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but COMPANY may make such investigation and settlement of any claim or suit as it deems expedient.

The policy, however, contains the following exclusion of liability coverage:

Exclusions: This policy does not apply under the Liability Section:

* * *

(b) to bodily injury or property damage caused intentionally by or at the direction of the insured; ...

The following finding of fact was made by the trial court:

That on or about December 12, 1977 the defendant Lisa M. Strong was driving said 1975 Oldsmobile Toronado automobile when she intentionally and at her direction caused said automobile to collide on two occasions with the automobile owned and driven by Karl L. Rueble [sic] and an automobile owned and driven by Constance A. Lindell, said collisions occurring on Interstate Highway 90 approximately 5.3 miles east of Moses Lake, Washington.

(Italics ours.) Clyde Strong did not challenge this finding of fact on appeal. Therefore, the facts so found are the established facts in this case. Painting & Decorating Contractors of Am., Inc. v. Ellensburg Sch. Dist., 96 Wash.2d 806, 814, 638 P.2d 1220 (1982). Since Lisa Strong intentionally collided with the two vehicles, she is excluded from liability coverage under the FAIC policy.

However, Clyde Strong argues that the policy exclusion does not apply to him. He relies on Unigard Mut. Ins. Co. v. Spokane Sch. Dist. 81, 20 Wash.App. 261, 579 P.2d 1015 (1978). In Unigard, an 11-year-old boy broke into a school building and set fire to the contents of a trash can. The fire spread, causing extensive damage to the building. The school district sued the boy and his parents, alleging that they had negligently failed to supervise and control him. Unigard, at 262-63, 579 P.2d 1015. The family's insurance company sought a declaratory judgment that it was not obligated to defend or indemnify the parents or the boy, relying on a policy exclusion which provided:

"This policy does not apply ... to bodily injury or property damage which is either expected or intended from the standpoint of the insured."

(Italics omitted.) Unigard, at 262, 579 P.2d 1015. The Unigard court held that, as to the boy, the fire damage was the expected result of an intentional act, so that the insurance company had no duty to defend or indemnify him. Nevertheless, the Unigard court held that the insurance company had a duty to defend and indemnify the parents, reasoning as follows:

The policy extends defense and indemnification to "the Insured," and it excludes from coverage intentional acts resulting in injury or damage "expected or intended from the standpoint of the insured." The parties concede the boy and the Hensleys are all "insureds" under the policy. In such instances, where coverage and exclusion is defined in terms of "the insured," the courts have uniformly considered the contract between the insurer and several insureds to be separable, rather than joint, i.e., there are separate contracts with each of the insureds. The result is that an excluded act of one insured does not bar coverage for additional insureds who have not engaged in the excluded conduct.

(Footnote omitted.) Unigard, at 265-66, 579 P.2d 1015.

Applying the Unigard reasoning to the present case, we hold that the plain terms of the FAIC insurance policy entitle Clyde Strong to liability coverage. Liability coverage is provided to "the insured." Coverage is excluded for injury or damage caused intentionally by "the insured." Since coverage and exclusion have been defined in terms of "the insured," there are separate contracts between FAIC and its insureds, and the excluded act of Lisa Strong does not bar coverage for Clyde Strong.

Our conclusion that Clyde Strong has liability coverage is reinforced by a severability clause contained in the policy:

The insurance afforded under the Liability Section applies separately to each insured against whom claim is made or suit is brought, but the inclusion herein of more than one insured shall not operate to increase the limits of COMPANY'S liability.

(Italics ours.)

The terms of an insurance policy must be understood in their plain, ordinary and popular sense. Clear and unambiguous language is not to be modified under the guise of construing the policy. Farmers Ins. Co. v. Miller, 87 Wash.2d 70, 73, 549 P.2d 9 (1976). The severability clause included in the FAIC policy clearly and unambiguously provides that liability coverage applies separately to each insured. It follows that FAIC cannot deny coverage to one separate insured, Clyde Strong, based upon the intentional acts of another insured, Lisa Strong.

Despite the plain terms of its policy, FAIC argues it need not provide Clyde Strong with liability coverage since provision of such coverage would violate public policy. FAIC's argument is based on U.S.F. & G. Ins. Co. v. Brannan, 22 Wash.App. 341, 589 P.2d 817 (1979). Brannan involved a husband who shot his two business partners. His insurer brought a declaratory judgment action seeking an adjudication that there was no coverage or duty to defend under its homeowner's policy. The Brannan court agreed on two grounds. First, because the jury had found that the shooting arose out of business pursuits, the court held that an exclusion for injury or damage "arising out of business pursuits of any Insured" applied. Second, concluding that the husband's intentional torts created community liability, the court held that public policy prevented the provision of insurance coverage to the community. Starting from the premise that public policy prevents an insured from benefiting from his wrongful acts, the Brannan court reasoned as follows:

To permit the other spouse, in this case the wife, to get the benefit of the insurance would mean that the community would benefit from the wrongful act of one of its members. This would be contrary to public policy. Unigard does not support this result even though there are separate insureds. The community must accept the fact that there would be no insurance if one of its insureds should commit an act which is excluded and which binds the community. Otherwise, this would result in the anomalous situation of John Brannan's property indirectly having insurance coverage when, by his acts, he excluded himself from coverage.

(Italics ours.) Brannan, at 349, 589 P.2d 817.

In other words, where there is community liability for the acts of the tortfeasor spouse, the Brannan court concluded that provision of liability coverage to the community would violate public policy by indirectly benefiting the tortfeasor spouse. However, Brannan is distinguishable, since the...

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