Franklin v. Western Nat. Mut. Ins. Co.

• Decision Date: 08 January 1998
• Docket Number: Nos. C6-96-1684,C6-96-1748,s. C6-96-1684
• Citation: 574 N.W.2d 405
• Parties: James A. FRANKLIN, et al., Respondents, v. WESTERN NATIONAL MUTUAL INSURANCE COMPANY, petitioner, Appellant.
• Court: Minnesota Supreme Court

Page 405

574 N.W.2d 405

James A. FRANKLIN, et al., Respondents, v. WESTERN NATIONAL MUTUAL INSURANCE COMPANY, petitioner, Appellant.

Nos. C6-96-1684, C6-96-1748.

Supreme Court of Minnesota.

Jan. 8, 1998.

Rehearing Denied March 3, 1998.

Syllabus by the Court

1. A counterclaim for trespass, arising from a lease dispute, which plainly indicates that the litigation concerns the terms of a contract, does not trigger an insurer's duty to defend under an insurance policy covering "wrongful entry *** or other invasion of the right of private occupancy."

2. A counterclaim for trespass, arising from a lease dispute, which plainly indicates that the litigation concerns the terms of a contract, does not involve an "accidental occurrence" so as to trigger an insurer's duty to defend under the property damage provisions of a Comprehensive General Liability policy.

Gislason, Martin & Varpness, P.A., James T. Martin, Dan T. Ryerson, Edina, for Appellant.

Lapp, Laurie, Libra, Abramson & Thomson, Chtd., Richard T. Thomson, David A. Harbeck, Minneapolis, for Respondents.

Heard, considered and decided by the court en banc.

OPINION

GARDEBRING, Justice.

This case calls upon us to determine whether a counterclaim for trespass arising from a lease dispute triggers an insurer's duty to defend an insured under a Comprehensive General Liability policy and a broad form endorsement. Because we conclude that the counterclaim, although alleging trespass, was plainly grounded in a contract dispute, we hold that Western National owed no duty to defend Franklin against the counterclaim.

Respondent Franklin Outdoor Advertising Company ("Franklin") constructs and maintains outdoor advertising structures, many of which are located on land that Franklin leases for the purpose. Franklin purchased liability insurance from appellant Western National Mutual Insurance Company ("Western National"), including a Comprehensive General Liability ("CGL") Policy, insuring against bodily injury and property damage, and a Broad Form Comprehensive General Liability Endorsement ("broad form endorsement"), insuring against personal injury and advertising injury.

A dispute arose over one of Franklin's leases when the lessors, the Laudenbachs, wished to sell a portion of the leased property to a third party and claimed the right, pursuant to a clause in the lease, to terminate the lease and order the removal of Franklin's signs. The Laudenbachs sent Franklin a notice to vacate and Franklin refused to comply. Franklin commenced an action against the Laudenbachs in Stearns County, the situs of the property, seeking judicial construction of the lease under which Franklin erected and maintained its sign on the Laudenbach property. In their answer to the complaint, the Laudenbachs asserted numerous counterclaims, including, inter alia, fraud, breach of contract, and trespass. Under the count alleging "Trespass," the counterclaim asserted:

Franklin, Inc. intentionally refuses to remove its sign from the premises of Defendants, despite demand to remove said signs. Plaintiff has intentionally kept its signs on Defendants' property although not legally privileged to do so.

Relying on the trespass claim, Franklin tendered its defense to Western National, which refused to defend Franklin in the declaratory judgment action.

Franklin then commenced this action against Western National in Hennepin County, seeking indemnification and a declaratory judgment that Western National owed Franklin a duty to defend under the CGL policy, including the broad form endorsement. On July 15, 1994, Franklin was granted partial summary judgment in the underlying litigation, dismissing the Laudenbachs' trespass claim. Three days later, the trial court in Hennepin County granted Franklin partial summary judgment against Western National, holding that the Laudenbachs' counterclaim for trespass was "arguably covered" under the insurance policy and that Western National had a duty to defend Franklin. ¹ The court of appeals affirmed Western National's duty to defend, but remanded the case for reconsideration of attorney fees. We reverse.

Interpretation of an insurance policy, and its application to the facts of the case, are questions of law. Meister v. Western Nat'l Mut. Ins. Co., 479 N.W.2d 372, 376 (Minn.1992). The existence of a legal duty to defend or indemnify is also a legal question, which this court reviews de novo. Auto-Owners Ins. Co. v. Todd, 547 N.W.2d 696, 698 (Minn.1996). An insurer's duty to defend is distinct from and broader in scope than the duty to indemnify. Brown v. State Auto. & Cas. Underwriters, 293 N.W.2d 822, 825 (Minn.1980). We have consistently held that an insurer's duty to defend arises when any part of the claim against the insured is arguably within the scope of protection afforded by the policy. Auto-Owners, 547 N.W.2d at 698. An insurer seeking to escape the duty to defend bears the burden of establishing that all parts of a cause of action clearly fall outside the scope of coverage. Id.

An insurer may ordinarily determine whether a cause of action includes an "arguably covered" claim by comparing the wording of the policy to the allegations of the underlying complaint. Ross v. Briggs and Morgan, 540 N.W.2d 843, 847 (Minn.1995). However, the words of the complaint need not precisely match the words of the policy, they must simply put the insurance company on notice of a claim within the policy coverage. See Garvis v. Employers Mut. Cas. Co., 497 N.W.2d 254, 258 (Minn.1993). Any ambiguity regarding coverage is resolved in favor of the insured. SCSC Corp. v. Allied Mutual Ins. Co., 536 N.W.2d 305, 316 (Minn.1995).

Coverage under the Broad Form Endorsement

Franklin argues first that Western National owed a duty to defend under the broad form endorsement, which provided coverage in the event of personal injury. The endorsement's personal injury coverage is triggered by the occurrence of one of several enumerated types of actions, including "wrongful entry or eviction or other invasion of the right of private occupancy." Franklin contends that the trespass claim constituted a claim of an "invasion of the right of private occupancy." Western National, however, argues that since the underlying action was nothing...