Home Ins. Co. v. Rice

• Decision Date: 02 August 1991
• Citation: 585 So.2d 859
• Parties: The HOME INSURANCE COMPANY v. Arthur M. RICE. 1900437.
• Court: Alabama Supreme Court

Page 859

585 So.2d 859

The HOME INSURANCE COMPANY v. Arthur M. RICE.

1900437.

Supreme Court of Alabama.

Aug. 2, 1991.

James R. Shaw and William G. Gantt of Huie, Fernambucq & Stewart, Birmingham, for appellant.

Charles C. Pinckney and R. Alan Deer of Lange, Simpson, Robinson & Somerville, Birmingham, for appellee.

ALMON, Justice.

The Home Insurance Company ("The Home") appeals from the entry of a partial summary judgment, made final pursuant to Rule 54(b), Ala.R.Civ.P., in favor of its insured, Arthur M. Rice, in Rice's action against The Home to compel it to defend him in two lawsuits ¹ filed against him.

The Home issued to Rice a "claims made" errors and omissions insurance policy that The Home contends covered only Rice's actions as a real estate agent or broker. This policy was in effect from October 9, 1984, through October 9, 1985. Actions were filed against Rice by Ernest Ross and George Miller on February 7, 1985, and April 9, 1985, respectively, stating claims that arose out of Rice's activities in connection with a retirement community in Birmingham, Alabama.

Upon receiving each complaint, Rice immediately notified W. Marshall Cullifer, The Home's local agent from whom Rice had purchased his policy. Cullifer, in turn, immediately forwarded a copy of each complaint to The Home. In each initial letter to The Home notifying it of a lawsuit, Cullifer relayed the same information. The following is the entire letter from Cullifer to The Home dated April 2, 1985:

"Please see enclosed letter dated March 22, 1985 from the insured and suit papers attached thereto re Ernest Ross ... vs Bank South, N.A., Et Al, and respond on behalf of the insured within time limit allowed by the court. Note that insured has retained an attorney to answer and defend this suit. Please contact the insured and/or his attorney and advise re his questions pertaining to payment of fees, procedures, etc. Please keep us informed."

(Emphasis added.) The Home acknowledged receipt of, and assigned a file number for, the Ross and Miller claims on April 22, 1985, and April 29, 1985, respectively. Following each of these acknowledgments, specifically, on April 24, 1985, and May 8, 1985, The Home contacted John Grenier, of the Birmingham law firm of Lange, Simpson, Robinson & Somerville, whom Rice had previously contacted regarding defending him in the Ross and Miller actions. In two substantively identical, successive letters to Mr. Grenier, the first referring to the Ross action and the second referring to the Miller action, The Home wrote the following:

"This will confirm our agreement of recent date to retain your firm to represent the interests of our above named Insured [Arthur M. Rice]. We have established the above claim number for the referenced claim. Please note this number on your file and include this number on all correspondence with this company regarding this claim."

______

"Enclosed is a copy of our file guidelines. Please review these guidelines and advise us immediately of any difficulties in complying with them."

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"We look forward to receiving your initial report and evaluation within the next 30 days."

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"Thank you in advance for your anticipated courtesy and cooperation."

These two letters, by which The Home retained Mr. Grenier to represent Rice in the Ross and Miller actions, did not contain any reservation of The Home's right to deny an obligation to defend Rice.

During the course of the next several months, Mr. Grenier and his firm sent The Home several items of correspondence, including a status report on the consolidated Ross/Miller actions and periodic invoices for costs and legal services rendered in Rice's defense. It was not until approximately 13 months after The Home had retained Mr. Grenier that an Atlanta law firm retained by The Home notified Mr. Grenier that The Home had "declined" coverage for Rice and refused to provide for his defense in the Ross/Miller actions. Rice filed this action against The Home, contending that The Home was contractually obligated to defend the Ross/Miller actions, or, alternatively, that The Home was obligated, by the theories of waiver and estoppel, to provide Rice's defense. Following the trial court's entry of summary judgment in favor of Rice, The Home now appeals to this Court.

Initially, we address The Home's contention that the trial court's summary judgment in favor of Rice, "though specifically requiring The Home to pay attorney's fees incurred by Rice in a defense of the Ross and Miller actions, in effect creates coverage by estoppel in contravention of Alabama law." Upon a thorough review of the record, including Rice's motion for partial summary judgment and the trial court's order granting that motion, we find no merit in The Home's contention that the trial court has created coverage by estoppel. Rice's motion specifically sought only a summary judgment on the issue of The Home's duty to defend Rice, and the trial court's order from which The Home now appeals holds only that Rice was entitled to a judgment on the issue of The Home's duty to defend. There has been no ruling by the trial court that in any way affects The Home's duty to provide coverage for the claims asserted against Rice. "It is well established [in this state] that the insurer's duty to defend is more extensive than its duty to pay." Burnham Shoes, Inc. v. West American Ins. Co., 504 So.2d 238 (Ala.1987), quoting Ladner & Co. v. Southern Guaranty Ins. Co., 347 So.2d 100 (Ala.1977).

Having confined our opinion to the question of The Home's duty to defend, we now consider whether the summary judgment was proper in this case.

"In Campbell Piping Contractors, Inc. v. Hess Pipeline Co., 342 So.2d 766 (Ala.1977), this Court adopted the general rule with respect to the right of an insurer to withdraw a defense already undertaken without a reservation of the right to question at a later time its obligation to defend under the contract:

" 'The doctrine of estoppel is said to be founded upon principles of equity,...