Kema Steel, Inc. v. Home Ins. Co.

• Decision Date: 11 December 1986
• Docket Number: CA-CV,Nos. 2,s. 2
• Citation: Kema Steel, Inc. v. Home Ins. Co., 153 Ariz. 315, 736 P.2d 798 (Ariz. App. 1986)
• Parties: KEMA STEEL, INC., an Arizona corporation; and Industrial Indemnity Company, a California corporation, Plaintiffs/Appellees, v. The HOME INSURANCE COMPANY, a New Hampshire corporation, Defendant/Appellant. 5934, 2 5935.
• Court: Arizona Court of Appeals

Page 798

736 P.2d 798

153 Ariz. 315

KEMA STEEL, INC., an Arizona corporation; and Industrial Indemnity Company, a California corporation, Plaintiffs/Appellees, v. The HOME INSURANCE COMPANY, a New Hampshire corporation, Defendant/Appellant.

Nos. 2 CA-CV 5934, 2 CA-CV 5935.

Court of Appeals of Arizona Division 2, Department A.

Dec. 11, 1986.

Reconsideration Denied Feb. 5, 1987.

Review Denied April 7, 1987.

Meyer, Vucichevich & Cimala by George R. Ferrin, Phoenix, for plaintiff/appellee Kema Steel, Inc.

Teilborg, Sanders & Parks by John C. Gemmill, Phoenix, for plaintiff/appellee Indus. Indem. Co.

Campana, Vieh & Strohm by James E. Vieh and William F. Shore, III, Scottsdale, for defendant/appellant.

OPINION

HOWARD, Presiding Judge.

This is an appeal from the granting of summary judgments in a declaratory judgment action. The genesis of this action was the filing by Charles W. Young and Linda A. Young of a complaint in the superior court naming as a defendant Kema Steel, Inc. The complaint alleged, inter alia, that Mr. Young was an employee of Kema Steel and that Kema Steel was negligent in failing to procure major medical insurance for Young and his dependents. In the complaint, the Youngs alleged that as a direct and proximate result of Kema Steel's negligence, they suffered bodily injuries (emotional distress). The Youngs also alleged that Kema Steel breached its contract to procure medical insurance for Young and as a direct result of that breach, the Youngs had suffered financial damage.

Kema Steel was insured by Home Insurance Company, which had issued Kema Steel a business-owner's insurance policy, including broad form comprehensive general liability coverage. Kema Steel requested Home Insurance to defend the lawsuit filed by the Youngs. Home Insurance refused to defend Kema Steel, claiming that the Home policy did not cover Kema Steel for the allegations made by the Youngs.

Kema Steel was also insured by Industrial Indemnity Company, which had issued an umbrella policy covering Kema Steel. As a result of Home's denial of the coverage and refusal to defend, Industrial Indemnity Company undertook the defense of Kema Steel.

Kema Steel and Industrial Indemnity filed a declaratory judgment action naming Home Insurance as a defendant, seeking a decision requiring Home Insurance to fulfill its contractual obligations to defend Kema Steel and to pay any judgment rendered in that action. Home Insurance filed a counterclaim seeking a determination that its policy did not provide coverage for the claim made by the Youngs and that Home was not required to defend Kema Steel. Cross motions for summary judgment were filed. The trial court denied Home's motion for summary judgment and granted Kema Steel's and Industrial Indemnity's motions for summary judgment, ruling that Home's policy provided coverage for both the breach of contract and negligence claims made by the Youngs. The court further ruled that Home was obligated to defendant Kema Steel and that the mental stress and suffering claimed by the Youngs as an element of their damages was included within Home's coverage for "bodily injury." The trial court awarded attorney's fees to both Kema Steel and Industrial Indemnity and ordered Home to reimburse Industrial Indemnity for the amount it expended, $70,000, in settling the Young claim. This appeal followed.

Home's policy contains the following language concerning its coverage:

"The company will...