First Wyoming Bank, N.A., Jackson Hole v. Continental Ins. Co.

Decision Date19 January 1993
Docket NumberNo. 90-258,90-258
Citation860 P.2d 1064
PartiesFIRST WYOMING BANK, N.A., JACKSON HOLE, a Wyoming banking association; and First Wyoming Bancorporation, a Wyoming corporation, Appellants (Defendants), v. CONTINENTAL INSURANCE COMPANY, a foreign corporation, Appellee (Plaintiff).
CourtWyoming Supreme Court

William M. McKellar of Boley & McKellar, P.C., Cheyenne, for appellants.

Patrick J. Murphy of Williams, Porter, Day & Neville, P.C., Casper, for appellee.

Before MACY, C.J., THOMAS and CARDINE, JJ., and URBIGKIT * and BROWN, JJ. (Retired).

URBIGKIT, Justice, Retired.

This appeal presents a wide array of liability policy coverage questions arising when the insured banking institution was sued, tendered defense to its liability carrier with negative results, settled with the third-party claimant on its lender liability litigation, and now defends insurer's declaratory judgment coverage escape litigation. The appeal comes on summary judgment granted to the liability carrier on issues of policy coverage. This is the third time the litigation has been before this court and we reverse the dispositive summary judgment and remand the case to the district court.

After the borrower versus the bank litigation had been settled, which appellee Continental Insurance Company (Continental) had declined to defend under its comprehensive general insurance coverage, the insurer filed a state court declaratory judgment action to determine whether the insurance policy coverages written for the First Wyoming Bank, N.A., Jackson Hole (First Wyoming Bank) and its parent bank holding corporation provided for either the duty to defend or any indemnity obligation.

The case first appeared in this court in Continental Ins. Co. v. Ranck, Judge of the District Court, Teton County, Wyoming, No. 88-32 (February 24, 1988), where we reversed an order dismissing plaintiff's complaint and remanded for consideration of the question of privilege for documents requested in discovery production motions. The case returned to this court by a further peremptory writ in Continental Ins. Co. v. First Wyoming Bank, N.A., 771 P.2d 374 (Wyo.1989), which resulted in another remand to require a further hearing on the same issues.

After district court reassignment pursuant to this court's decision in Continental Ins. Co., 771 P.2d 374, another district court judge considered the case and granted a motion for summary judgment in favor of the insurer in all regards without deciding the issues for which the remand had been granted. The summary judgment order effectively terminated the litigation. In essence, the district court decided that, as a matter of law, the original lender liability lawsuits against the bank were not covered by the comprehensive liability policy for either defense or indemnity and, consequently, neither privilege of adjuster files nor bad faith counterclaim issues needed to be addressed. 1

We reverse and remand.

I. ISSUES PRESENTED

Recognizing that this appeal considers coverage questions under a comprehensive liability insurance policy after First Wyoming Bank had been subjected to two parallel suits by dissatisfied borrowers, complicated statements of appellate issues are now provided. Furthermore, sub-issues of the more broadly stated general issues are also raised in the extended briefing which is presented. Appellants, First Wyoming Bank and First Wyoming Bancorporation, question in detail:

I. Whether the trial court erred in granting summary judgment in favor of Continental by concluding the following:

1) That the allegations in the Robinson and Russell complaints did not allege bodily injury as defined by the terms of the insurance policy. * * *

2) That the allegations of emotional injury, economic injury, personal distress, and injury to their business reputations as alleged by Robinson and Russell in their complaints do not constitute bodily injury. * * *

3) That the complaints of Robinson and Russell did not allege property damage as defined by the policy. * * *

4) That the complaints of Robinson and Russell did not allege loss of use of tangible property caused by an occurrence. * * *

5) That the coverage provided by Continental did not extend to the bank's alleged breach of contract. * * *

6) That the phrase "legally obligated to pay as damages because of bodily injury or property damage" refers to liability imposed by law for torts and not to damages for breach of contract, except contracts for indemnity. * * *

7) That the complaints filed by both Robinson and Russell were in contract and not negligence, although the lawsuits included a one-sentence claim for negligence. Where complaints sound in contract and not negligence, the mere use of the word negligence alone cannot turn the complaint into a cause of action for negligence. * * *

Appellants also define their argument sequentially:

Rules of Construction & Interpretation

Insurance Coverage Issue

[a] Bodily Injury

[b] Property Damage

[c] Occurrence

[d] Contractual Liability Coverage

Doctrine of Reasonable Expectations

Duty to Defend

Application to Facts

[a] Allegation of Negligence

[b] Allegations of Bodily Injury and Property Damage

[c] Allegations Regarding Breach of Contract

Appellee, Continental, compresses the issues in initial statement:

1. Did the District Court correctly conclude that Continental Insurance Company did not provide coverage to its insured, First Wyoming Bank, for the acts and omissions alleged by the Robinsons and the Russells in their federal court lawsuits?

2. Did the District Court correctly conclude that Continental Insurance Company had no duty to defend its insured, First Wyoming Bank, in the federal court lawsuits filed by the Robinsons and Russells?

3. Did the District Court correctly conclude that First Wyoming Bank has no viable claim for bad faith where Continental Insurance Company provided no applicable insurance to the Bank, where Continental had no duty to defend the Bank in the Robinson and Russell cases, and where Continental did not breach its insurance contract with the Bank?

Appellee then restates in its Table of Contents:

Argument--No Coverage

[a] The Rules of Construction

[b] There is No "Bodily Injury"

[c] There is No "Property Damage"

[d] There is No "Occurrence." There is No Coverage for Fraud or Breach of Contract

[e] There is No Contractual Liability Coverage Because the Bank Never Assumed Any Liability

[f] There is No Duty to Indemnify Because There was No Loss

[g] The Court Should Not Adopt or Apply The Doctrine of Reasonable Expectations to Create Coverage Where None Exists

[h] Continental is Not Estopped From Denying Coverage

Argument--No Duty to Defend

[a] There is No Duty to Defend Claims Which Are Not Covered by the Policy

[b] There Was No Allegation or Proof of an "Occurrence"

[c] If There is a Duty to Defend, it Does Not Extend to the Bank's Counterclaims or to the Robinson/Russell Allegations of Intentional Acts

Argument--No Bad Faith

The dispositive finding and conclusion of the district court, which defined the basis for denial of coverage in summary judgment decision, stated:

6. An insurance policy is a contract and is subject to the general rules of contract interpretation and construction. If the policy language is clear and unambiguous, the rule of strict construction against an insured does not apply and the policy must be interpreted in accordance with the ordinary and usual meaning of its terms. * * *

7. The allegations in the Robinson and Russell complaints did not allege bodily injury as defined by the terms of the insurance policy.

8. The allegations of emotional injury, economic injury, personal distress, and injury to their business reputations as alleged by Robinson and Russell in their complaint do not constitute bodily injury. * * *

9. The complaints of Robinson and Russell did not allege property damage as defined by the insurance policy.

10. The complaints of Robinson and Russell did not allege loss of use of tangible property caused by an occurrence. Although Robinson and Russell alleged various economic injuries and damages as a result of the banks' alleged breach of contract those alleged damages were not property damage as defined by the insurance contract.

11. The coverage provided by plaintiff did not extend to the bank's alleged breach of contract. * * *

12. The phrase "legally obligated to pay as damages because of bodily injury or property damage" refers to liability imposed by law for torts and not to damages for breach of contract, except contracts for indemnity. * * *

13. The complaints filed by both Robinson and Russell were in contract and not negligence, although the lawsuits included a one sentence claim for negligence. Where a complaint[ ] sounds in contract and not negligence, the mere use of the word negligence alone cannot turn the complaint into a cause of action for negligence.

Based on the above findings, the district court concluded:

1. There are no material factual disputes.

2. The lawsuits filed by Robinson and Russell against the First Wyoming Bank of Jackson Hole did not involve allegations of bodily injury or property damage.

3. There is no insurance coverage for the intentional actions of fraud or breach of contract.

The partial summary judgment was granted on August 20, 1990 and followed by a general order granting summary judgment against appellants and in favor of appellee on all issues raised by both the complaint and the insured's comprehensive counterclaim alleging insurer bad faith. The summary judgment decisions provide the final order. The issues are: duty to defend, obligation of indemnity insurance coverage, and bad-faith insurer misconduct. In addition, we cannot totally ignore documents provided in camera to the district court about which privilege against discovery was claimed for which a court decision was never made and to which access by the insured for inspection was never granted (or denied) following...

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