Firco, Inc. v. Fireman's Fund Ins. Co.

• Decision Date: 01 September 1959
• Court: California Court of Appeals Court of Appeals
• Parties: FIRCO, INC., a corporation, Outlet Investments, Inc., a corporation, and Sam Hedrin Mining Company, a corporation, Plaintiffs and Appellants, v. FIREMAN'S FUND INSURANCE COMPANY, a corporation, Defendant and Respondent. Civ. 9588.

Page 311

343 P.2d 311

173 Cal.App.2d 524

FIRCO, INC., a corporation, Outlet Investments, Inc., a corporation, and Sam Hedrin Mining Company, a corporation, Plaintiffs and Appellants, v. FIREMAN'S FUND INSURANCE COMPANY, a corporation, Defendant and Respondent.

Civ. 9588.

District Court of Appeal, Third District, California.

Sept. 1, 1959.

Rehearing Denied Oct. 1, 1959.

Hearing Denied Oct. 28, 1959.

Guernsey Carson, San Francisco, for appellants.

Hall, Henry, Oliver & McReavy, by Stephen McReavy, San Francisco, for respondent.

VAN DYKE, Presiding Justice.

This is an appeal from a declaratory judgment entered in an action brought by plaintiffs, as assured, against Fireman's Fund Insurance Company, as insurer. The judgment being adverse to plaintiffs, they appeal.

Respondent issued sequential public liability policies designated as 'Logger's General Comprehensive Coverage' (hereinafter called 'the policy'), containing the following insuring agreements:

'* * * To pay on behalf of the assured all sums which the assured shall become legally obligated to pay as damages because of injury to or destruction of property of others, * * * arising out of an occurrence directly connected with the logging operations of the assured or other operations of the assured incidental to such logging operations including but not limited to:

* * *

* * *

'2. Damage to or destruction of timberlands and/or standing timber and/or felled and/or bucked timber, the property of others.'

The policy further provided:

'7. Defense and Appeal: The company shall:

'(A) Defend in the name of the assured any claim or suit in excess of the 'deductible limits' brought against the assured, even though groundless, false or fraudulent, to recover damages on account of such alleged property damage; * * *.'

After the issuance of the policy an action was begun in the Superior Court for the County of Humboldt by Pacific Lumber Company, a corporation, which we will refer to as the Humboldt action, charging that plaintiffs herein, the assured under said policy, had entered upon the lands of the plaintiff and maliciously, wantonly and without leave had cut down and removed 207,480 feet of redwood trees and 263,020 feet of Douglas fir to the plaintiffs' damage in the sum of $10,547.65. The prayer was for treble damages. In this action plaintiffs, appellants here, charged, and it was admitted, that when process in the Humboldt action was served upon them they demanded of respondent that it furnish a defense to said Humboldt action, that respondent refused to do so, and that by reason of said refusal appellants would be required to retain counsel to defend themselves in the Humboldt action and might be required ultimately to pay a judgment. It was further alleged that an actual controversy existed between the parties in that appellants contended and respondent denied that the policy obligated respondent to furnish a defense to the Humboldt action.

The trial court found that the complaint in the Humboldt action charged, in substance, that the plaintiffs and appellants herein had intentionally entered upon the lands of the plaintiff in the Humboldt action and had cut down and removed its trees; that the cutting and removal of the quantity of timber involved could only have been accomplished by a series of many separate and intentional acts of human agents, and in so doing appellants must be held to have intended and anticipated the consequences naturally flowing therefrom, i. e., injury to the freehold. The court concluded that the rights and obligations of the parties depended upon the allegations of the complaint in the Humboldt action and the terms of the policy considered together; that the claim asserted in the Humboldt action was a claim for 'damage to or destruction of timberlands' as said phrase was used in the said policy; but that the injuries complained of did not arise out of an 'occurrence' as that term is used in the policy, and that plaintiffs therefore were entitled to no relief. Judgment in accordance therewith was entered and this appeal followed.

We think that upon a consideration of the allegations of the complaint in the Humboldt action and the insuring clauses of the policy the judgment must be reversed with instructions to the trial court to enter judgment declaring that respondent is obligated to defend the Humboldt action on behalf of its assured.

Under the policy the obligation of respondent to defend an action brought against its assured is broader than its obligation to pay indemnity. The obligation to defend the assured must arise upon the commencement of the action. At that time it is obvious there may be considerable doubt whether the complaint counts upon a liability of the assured covered by the policy. This can be in part illustrated by the defense provisions of the policy which declare that the defense will be afforded even though the action against the assured be groundless, false, or fraudulent. Also there may be considerable doubt whether the complaint in the action against the assured contains allegations of fact, directly or inferentially stated, that can result in a judgment against the assured which the insurer under its policy would have to pay. Whether, therefore, when...