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

• Decision Date: 04 October 1993
• Docket Number: No. 90-258,90-258
• Citation: 860 P.2d 1094
• Parties: FIRST 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).
• Court: Wyoming Supreme Court

Page 1094

860 P.2d 1094

FIRST 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).

No. 90-258.

Supreme Court of Wyoming.

Oct. 4, 1993.

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

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

George E. Powers of Godfrey & Sundahl, Cheyenne, for amicus curiae.

Before MACY, C.J., THOMAS, CARDINE and TAYLOR, JJ., and BROWN, J. Retired.

CARDINE, Justice.

Continental Insurance Company (Continental) brought a declaratory judgment action against First Wyoming Bank (Bank) seeking a determination that Continental's policy did not provide the claimed coverage. The trial court granted Continental summary judgment on all of the Bank's claims. The Bank appealed, and in our opinion issued January 19, 1993, we affirmed the summary judgment except that we reversed with respect to the duty to defend and remanded for further proceedings consistent with our opinion. 860 P.2d 1064. Continental petitioned, and, on February 24, 1993, we entered an order granting the petition for rehearing. We now conclude that Continental did not have a duty to defend the Bank and affirm the summary judgment granted by the trial court.

Affirmed.

In the original appeal appellants raised these issues:

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. (Paragraph 7 of Order Granting Partial Summary Judgment).

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. (Paragraph 8 of Order Granting Partial Summary Judgment).

3) That the complaints of Robinson and Russell did not allege property damage as defined by the policy. (Paragraph 9 of Order Granting Partial Summary Judgment).

4) That the complaints of Robinson and Russell did not allege loss of use of tangible property caused by an occurrence. (Paragraph 10 of Order Granting Partial Summary Judgment).

5) That the coverage provided by Continental did not extend to the Bank's alleged breach of contract. (Paragraph 11 of Order Granting Partial Summary Judgment).

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. (Paragraph 12 of Order Granting Partial Summary Judgment).

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. (Paragraph 13 of Order Granting Partial Summary Judgment).

FACTS

Our opinion described in detail the lengthy history of this case, First Wyoming Bank v. Continental Ins. Co., 860 P.2d 1064, 1068-70 (Wyo., 1993). Since we review this case only on a narrow issue of law, we recite its unique and detailed procedural history only insofar as it is necessary.

The Robinsons and Russells began borrowing money from First Wyoming Bank in 1976 and 1978 respectively. In 1983-84, the Robinsons and Russells sought additional monies from the Bank to fund a Montana lawsuit, pay back income taxes, and make mortgage payments on a house. According to their complaint, an officer of the Bank had told the Robinsons and Russells that their requests had been approved and they would be receiving the money. However, no money appeared. The Robinsons and the Russells sued First Wyoming Bank in United States District Court.

First Wyoming Bank contacted its comprehensive general liability insurance carrier, Continental, about the Robinson/Russell suits. Continental answered with a reservation of rights letter. The letter indicated that the policy provided no coverage for the Robinson/Russell claims. The letter also indicated that the only area where coverage was debatable was on the Robinson/Russell claim for emotional distress.

Since Continental had reserved its rights, First Wyoming hired its own lawyer to defend them in the Robinson/Russell litigation. The federal court granted the Bank summary judgment on the claims for negligence, breach of fiduciary duty and RICO. Only the claims for fraud and breach of contract remained. Those two remaining claims were settled by the Bank.

Thereafter, the Bank's attorney wrote Continental several letters accusing Continental of, among other claims, a bad faith refusal to admit coverage and defend the lawsuit against the Bank. Being unable to resolve the coverage dispute, Continental filed a declaratory judgment action in Wyoming District Court seeking a determination of no coverage under the comprehensive general liability policy for the Robinson/Russell litigation. The Bank answered the complaint and asserted a counterclaim which alleged a bad faith refusal to acknowledge coverage and defend and sought costs, damages for the settlement, and punitive damages for the Robinson/Russell litigation.

The district court's order granting summary judgment held that the Robinson/Russell complaints did not allege bodily injury or property damage as defined by the insurance policy and that the coverage provided by Continental did not extend to the Bank's alleged breach of contract with the Robinsons and Russells. In essence, the court found that the Robinson/Russell complaints sounded in contract and not in negligence, the court stating that:

Where a complaint sounds in contract and not negligence, the mere use of the word negligence alone cannot turn the On appeal, Justice Urbigkit, writing for the plurality, agreed that there was no coverage and thus no obligation to indemnify the bank for the settlement, thus affirming that part of the district court's summary judgment order. First Wyoming Bank, 860 P.2d at 1070. This plurality of the court, however, reversed the summary judgment with respect to the duty to defend and bad faith issues and remanded for trial of those issues.

complaint into a cause of action for negligence.

Addressing the duty to defend, the plurality opinion held that "the significant involvement of a negligence complaint in the litigation created a duty to defend unless the particular character of the claim for damage resulting from negligence establishes, as a matter of law, that coverage under any construction of the pleadings could not be invoked." First Wyoming Bank, 860 P.2d at 1082. The opinion concluded: "Issues of the duty to defend and scope and extent of that duty raised by the negligence complaint were improperly determined by the summary judgment granted to the insurer to deny duty to defend." First Wyoming Bank, 860 P.2d at 1083.

Justice Urbigkit's opinion affirmed the trial court's order granting summary judgment in all but one respect, the duty to defend based on the claim of negligence. Therefore, the case was remanded for trial on the duty to defend and on the bad faith counterclaim. After that opinion was issued, Continental filed a petition for rehearing, which we granted.

Two basic tenets of law guide our examination of this dispute. First,

[w]hen reviewing the trial court's grant of summary judgment, we examine the case in the same manner as the trial court. Our task requires that we make a dual finding that no genuine issue of material fact exists, and that the prevailing party was entitled to judgment as a matter of law. When considering questions of law, we accord no special deference to the district court's determination. [citations omitted]

Davidson v. Sherman, 848 P.2d 1341, 1343 (Wyo.1993). We also note that this court must affirm summary judgment if it "is sustainable on any legal ground appearing in the record." Deisch v. Jay, 790 P.2d 1273, 1278 (Wyo.1990).

Second, an insurance policy is a contract and is subject to the general rules of contract construction. St. Paul Fire & Marine Ins. Co. v. Albany County School Dist. No. 1, 763 P.2d 1255, 1258 (Wyo.1988). When the policy terms are ambiguous, we construe the policy in favor of the insured. Id. (citing State Farm Fire & Casualty Co. v. Paulson, 756 P.2d 764 (Wyo.1988); Worthington v. State, 598 P.2d 796 (Wyo.1979)). On the other hand, if the policy language is clear and unambiguous, "the rule of strict construction against the insurer does not apply, and the policy must be interpreted in accordance with the ordinary and usual meaning of its terms." St. Paul Fire & Marine, 763 P.2d at 1258.

DUTY TO DEFEND

Regarding the duty to defend, we have held that the duty of an insurer to defend a claim is broader than the duty of the insurer to indemnify. Aetna Ins. Co. v. Lythgoe, 618 P.2d 1057, 1061 (Wyo.1980) (citing Lanoue v. Fireman's Fund American Ins. Cos., 278 N.W.2d 49 (Minn.1979); Boston Ins. Co. v. Maddux Well Serv., 459 P.2d 777 (Wyo.1967)). Analysis of the duty to defend is not made based on the ultimate liability of the insurer to indemnify the insured or on the basis of whether the underlying action is groundless or unsuccessful. Lythgoe, 618 P.2d at 1061 (citing Employers' Fire Ins. Co. v. Beals, 103 R.I. 623, 240 A.2d 397 (1968); Burger v. Continental Nat'l American Group, 441 F.2d 1293 (6th Cir.1971)). Instead, we analyze the duty to defend by examining the facts alleged in the complaint that the claim is based upon. Lythgoe, 618 P.2d at 1061 n. 2. See also Garvis v. Employers Mut. Casualty Co., 497 N.W.2d 254, 258 (Minn.1993); County of Columbia v. Continental Ins. Co., 189 A.D.2d 391, 595 N.Y.S.2d 988,...