Grange Ins. Ass'n, Corp. v. Roberts

Decision Date06 March 2014
Docket NumberNo. 69356–5–I.,69356–5–I.
CourtWashington Court of Appeals
PartiesGRANGE INSURANCE ASSOCIATION, a Washington corporation, Respondent, v. Elizabeth and Wesley ROBERTS, husband and wife, and the marital community composed thereof; Appellants.

OPINION TEXT STARTS HERE

Elena Luisa Garella, Attorney at Law, Seattle, WA, Patrick L. Vail, Cogdill Nichols Rein Wartelle Andrews, Everett, WA, for Appellants.

Michelle Menely, Gordon Thomas Honeywell Malanca Peterson, Seattle, WA, for Respondent.

LAU, J.

¶ 1 An insurer's duty to defend arises “if the insurance policy conceivably covers the allegations in the complaint, whereas the duty to indemnify exists only if the policy actually covers the insured's liability.” Woo v. Fireman's Fund Ins. Co., 161 Wash.2d 43, 53, 164 P.3d 454 (2007) (emphasis omitted). Grange Insurance Association issued an insurance policy to Jane and Wes Roberts.1 The policy imposes on Grange a duty to defend its insureds but excludes intentional conduct from the duty to defend. Rebecca Brandis sued Roberts, alleging various torts stemming from Roberts's intentional conduct. The trial court ruled in a declaratory judgment action that Grange owed Roberts no duty to defend against the Brandis complaint. Because Roberts's insurance policy provides no conceivable coverage for the allegations in the Brandis complaint, the trial court properly granted declaratory judgment in Grange's favor.

FACTS

¶ 2 This coverage dispute began with litigation between siblings. That Trust and Estate Dispute Resolution Act (TEDRA) lawsuit involved sisters Rebecca Brandis, Suella Hershaw, Myra Converse, and Myrna Seifert 2 against their sister, Jane Roberts, and her husband, Wes. Brandis sought to set aside transfers of real and personal property their now deceased mother, Elizabeth, made to Roberts. The Brandis complaint also sought damages alleging that Roberts obtained the property transfers by engaging in fraudulent acts, exerting undue influence over their mother, “actively interfer[ing] with their mother, and making false statements and “bad mouth[ing] them. The complaint also alleged that Roberts's conduct resulted in the loss of an expected inheritance, loss of a parent-child relationship, and emotional distress/outrage.

¶ 3 Regarding interference and outrage, the complaint alleged:

Jane isolated Elizabeth from her longtime friends and family. Jane actively interfered with the relationship between Elizabeth and her family and friends, including her other children. Jane made false statements about and “badmouthed” those other parties in order to so intentionally interfere with their relationships. Jane's behavior towards the other family members, including making false accusations regarding prior child abuse claims, went beyond the bounds of decency, atrocious, and intolerable. The family and friends experienced extreme emotional distress as a result of Jane's interference with their relationships with Elizabeth, which were adversely affected.

The complaint's request for relief sought, among other things, “a judgment for damages based on [Roberts's] tortious interference with expected inheritance,” “a judgment for damages based on [Roberts's] tortious interference with the parent/child relationship,” and “a judgment for damages based on outrage caused by [Roberts's] outrageous conduct which proximately caused severe emotional distress.”

¶ 4 Roberts's Grange policy provisions provide coverage—subject to certain exclusions—for bodily injury and property damage liability (coverage H) and personal and advertising injury liability (coverage I). Coverage H provides in relevant part:

COVERAGE H—BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement

a. We will pay those sums that an insured becomes legally obligated to pay as damages because of bodily injury or property damage to which this insurance applies. We will have the right and duty to defend an insured against any suit seeking those damages.

However, we will have no duty to defend an insured against any suit seeking damages for bodily injury or property damage to which this insurance does not apply.

....

b. This insurance applies to bodily injury and property damage only if:

(1) The bodily injury or property damage is caused by an occurrence....

....

2. Exclusions

This insurance does not apply to:

a. Expected Or Intended Injury

Bodily injury or property damage expected or intended from the standpoint of an insured....

SECTION V—DEFINITIONS

....

2. Bodily injury means bodily injury, sickness or disease sustained by a person, and includes death resulting from any of these at any time.

....

17. Occurrence means an accident, including continuous or repeated exposure to substantially the same general harmful conditions.

¶ 5 Coverage I provides in relevant part:

COVERAGE I—PERSONAL AND ADVERTISING INJURY LIABILITY

1. Insuring Agreement

a. We will pay those sums that an insured becomes legally obligated to pay as damages because of personal and advertising injury to which this insurance applies. We will have the right and duty to defend an insured against any suit seeking those damages.

However, we will have no duty to defend an insured against any suit seeking damages for personal and advertising injury to which this insurance does not apply.

....

2. Exclusions

This insurance does not apply to personal and advertising injury:

a. Knowing Violation Of Rights Of Another

Caused by or at the direction of an insured with the knowledge that the act would violate the rights of another and would inflict personal and advertising injury.

b. Material Published With Knowledge Of Falsity

Arising out of oral or written publication of material, if done by or at the direction of an insured with knowledge of its falsity.

....

SECTION V—DEFINITIONS

....

18. Personal and advertising injury means injury, including consequential bodily injury, arising out of one or more of the following offenses:

....

d. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products, or services.

e. Oral or written publication, in any manner, of material that violates a person's right of privacy.

¶ 6 In June 2010, Roberts tendered defense of the Brandis lawsuit to Grange. Grange accepted the tender under a full reservation of rights and retained defense attorney Tom Heller to represent Roberts. Grange informed Roberts that their policy may not provide coverage and asserted its right to “file a declaratory judgment action asking a court of law to determine that Grange has no duty to defend the potential lawsuit and/or to pay any judgment or settlement of the claims being asserted.”

¶ 7 In September 2010, Grange filed an action for declaratory relief seeking a determination of its duty to defend and indemnify Roberts in the underlying action. The complaint alleged that Grange had no duty to defend or indemnify Roberts because no “occurrence” happened as defined under the insurance policy, some or all of Brandis's claims alleged no “bodily injury” or “property damage” within the policy's coverage, and exclusions applied to those claims falling under “bodily injury,” “property damage,” or “ personal and advertising injury.” Summonses were sent to Roberts and each of the Brandis plaintiffs in the underlying suit.3

¶ 8 In June 2011, Roberts filed an answer, affirmative defenses, and a counterclaim alleging bad faith by Grange. The counterclaim alleged, “By filing the Coverage Action, Grange has breached its fiduciary duties to [Roberts] and committed the tort of insurance bad faith. For Grange to prevail in the Coverage Action, Grange will necessarily be required to allege facts that, if proved true, would be detrimental to [Roberts's] defense in the Underlying Tort Action.” Roberts argued, “By seeking to prevail in the Coverage Action, Grange will effectively be helping Jane's siblings to prove their case against her in the Underlying Tort Action.”

¶ 9 Grange moved for summary judgment, requesting a ruling that it had no duty to defend Roberts in the underlying action. Roberts filed an opposition and a cross motion to stay. The basis for the motion to stay was the same as that asserted in Roberts's counterclaim: “Any attempt by Grange to offer proof that Jane possessed the intent required to invoke the exclusions at issue would work directly against [Roberts's] efforts to avoid liability in the underlying action, and would therefore constitute bad faith.”

¶ 10 The court granted Grange's summary judgment motion in July 2011:

[The court] DECLARES that the claims being made against defendants [Jane] and John Doe Roberts in the underlying action of Brandis, et. al. v. Elizabeth Roberts, et. al., Snohomish County Cause No. 08–4–00999–3 do not trigger coverage under Grange's Policy No. FP01010054 and, thus, that Grange has no duty to indemnify, or to continue providing a defense to Roberts for the claims being made in the underlying [case]. Consequently, Grange may cease providing a defense to Roberts.

The court's order did not specifically address Roberts's counterclaim. The parties agree that by considering and ruling on the summary judgment motion, the trial court implicitly denied Roberts's cross motion to stay.

¶ 11 Shortly after the court determined Grange had no duty to defend, Roberts tendered defense to a second insurer, Unigard Insurance Company. Unigard defended under a reservation of rights for a period of time, but is no longer providing coverage.

¶ 12 More than a year after the trial court granted Grange's summary judgment motion, Roberts asserted that the July 2011 order was not a final order because the bad faith counterclaim was never formally dismissed. Grange filed a motion for clarification of the court's summary judgment order. Grange argued that the court effectively dismissed Roberts's counterclaim when it denied the ...

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