LAMBE REALTY INV. v. Allstate Ins. Co.

• Decision Date: 21 March 2000
• Docket Number: No. COA99-503.,COA99-503.
• Citation: 527 S.E.2d 328,137 NC App. 1
• Parties: LAMBE REALTY INVESTMENT, INC., Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.
• Court: North Carolina Court of Appeals

527 S.E.2d 328

137 NC App. 1

LAMBE REALTY INVESTMENT, INC., Plaintiff, v. ALLSTATE INSURANCE COMPANY, Defendant.

No. COA99-503.

Court of Appeals of North Carolina.

March 21, 2000.

Morgan & Yankanich, P.A., by Eric C. Morgan, Kernersville, for plaintiff-appellee.

Burton & Sue, L.L.P., by Gary K. Sue and James D. Secor, III, Greensboro, for defendant-appellant.

TIMMONS-GOODSON, Judge.

This appeal arises out of an action brought by Lambe Realty Investment, Inc. ("LRI") seeking a declaratory judgment determining its rights under a commercial liability policy issued to it by Allstate Insurance Company ("Allstate"). The relevant facts follow.

On 19 May 1997, John C. and Tammy L. Kippe ("the Kippes") filed a lawsuit ("the underlying action" or "the underlying complaint") against LRI asserting claims for breach of contract, negligence, breach of warranty, breach of implied covenant of quiet enjoyment, constructive eviction, and unfair and deceptive trade practices. The underlying complaint alleges that the Kippes owned a 1991 Redmon Flamingo mobile home and that they had leased a lot at the East Forsyth Trailer Park on which to park the home. The trailer park was owned and operated by LRI. In 1995, the Kippes entered into a contract with LRI wherein LRI agreed to move the Kippes' mobile home to a new site in the town of East Bend, North Carolina. Under the terms of the agreement, the Kippes were to pay $300, and LRI was to pay the balance of the costs of moving and setting up the home, which included preparing a proper foundation, placing the home on that foundation, and securing the home in place. According to the underlying complaint, LRI moved the home to the new site but left it in an uninhabitable position. When LRI refused to do any further work, the Kippes undertook to reposition the home themselves and suffered severe damage, which rendered the home a total loss.

At the time the Kippes filed the underlying action, LRI had a commercial liability insurance policy with Allstate. Clarence Lambe, the president of LRI, became aware of the suit and notified his Allstate agent, Bob Hicks, of the litigation on or about 22 July 1997. Hicks reported the lawsuit to the Allstate Claims Office, and Monty Hall, a claims representative, informed Hicks that he would process the claim. Upon further investigation, however, Hall determined that LRI's policy excluded coverage for the underlying action instituted by the Kippes. Therefore, on 21 August 1997, Hall sent a letter to LRI denying any duty to defend it in the underlying action or to indemnify it against any recovery by the Kippes.

On 4 November 1997, LRI initiated the present action for declaratory relief against Allstate. The complaint seeks a judicial determination that Allstate owes LRI a duty both to defend it in the underlying action and to indemnify it for any resulting judgment or settlement. Following some discovery, LRI filed a motion for partial summary judgment on the issue of whether Allstate had a duty to defend LRI in the underlying action. The trial court conducted a hearing on the motion and, on 19 January 1999, entered judgment in favor of LRI. The court certified the order as immediately appealable pursuant to Rule 54(b) of the North Carolina Rules of Civil Procedure. Allstate filed timely notice of appeal.

Before addressing the merits of Allstate's appeal, we must examine whether the order directing partial summary judgment for LRI is immediately appealable. An interlocutory order, such as the one here, is immediately appealable in only two instances. The first is when the trial court enters a final judgment with respect to one or more, but less than all of the parties or claims, and certifies the judgment for immediate review under Rule 54(b) of the Rules of Civil Procedure. DKH Corp. v. Rankin-Patterson Oil Co., 348 N.C. 583, 585, 500 S.E.2d 666, 668 (1998). The second instance is when the order "affects a substantial right and will work injury to the appellant[ ] if not corrected before final judgment." Perry v. Cullipher, 69 N.C.App. 761, 762, 318 S.E.2d 354, 356 (1984).

In the present case, the trial court certified that partial summary judgment order as immediately appealable pursuant to Rule 54(b). Although certification of an order under Rule 54(b) makes appellate review mandatory, "the trial court may not, by certification, render its decree immediately appealable if `[it] is not a final judgment.'" Sharpe v. Worland, 351 N.C. 159, 162, 522 S.E.2d 577, 579 (1999)(quoting Lamb v. Wedgewood South Corp., 308 N.C. 419, 425, 302 S.E.2d 868, 871 (1983)). With respect to the order in this case, the trial court apparently recognized that it was not a final judgment and certified it for immediate review based on the court's determination that the order "effects (sic) a substantial right of the parties." We agree with the court's conclusion that the order affects a substantial right.

As noted by the Supreme Court of Ohio,

The duty to defend is of great importance to both the insured and the insurer. If an insurer mistakenly refuses to defend its insured, the adverse consequences can be great. "When an indemnitor wrongfully refuses to defend an action against an indemnitee, the indemnitor is liable for the costs, including attorney fees and expenses, incurred by the indemnitee in defending the initial action and in vindicating its right to indemnity in a third-party action brought against the indemnitor." (Citation omitted.) On the other hand, if the insurer is required to defend an insured, "* * * [the insurer] may try an expensive negligence case which a court may later hold is not within the terms of the policy. * * *" (Citation omitted.)

The duty to defend is equally important to the insured. If the insurance company refuses to defend, then the insured often must choose to settle the suit as quickly as possible in order to avoid costly litigation, bring a declaratory judgment action against the insurer seeking a declaration that there is a duty to defend, or defend the suit without help from the insurer.

Thus, the duty to defend involves a substantial right to both the insured and the insurer.

General Accident Ins. Co. v. Insurance Co. of North America, 44 Ohio St.3d 17, 21-22, 540 N.E.2d 266, 271 (1989). Accordingly, we conclude that the order of partial summary judgment on the issue of whether Allstate has a duty to defend LRI in the underlying action affects a substantial right that might be lost absent immediate appeal. Having determined that the appeal is properly before us, we proceed to our analysis of the contentions raised by the parties.

At the outset, Allstate argues that the trial court improvidently granted LRI's motion for summary judgment on the question of whether, under the terms of the policy issued to LRI, Allstate had a duty to defend LRI in the underlying action brought by the Kippes. Allstate contends that the Kippes' complaint alleges facts which conclusively establish that their damages were not covered by LRI's policy and, therefore, Allstate had no duty to defend LRI in the underlying action. For the reasons hereinafter given, we conclude that the trial court committed no error and affirm the order of summary judgment.

In reviewing the propriety of summary judgment, this Court's task is to determine whether the pleadings and other evidentiary materials show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Yamaha Corp. v. Parks, 72 N.C.App. 625, 325 S.E.2d 55 (1985); N.C.R. Civ. P. 56(c). The instant case concerns the construction of language used in the policy of insurance issued by Allstate to LRI. If the policy language as applied to the facts conclusively shows that Allstate has a duty to defend LRI in the underlying action, then the trial court was correct in entering summary judgment for LRI.

"There is no statutory requirement that an insurance company provide its insured with a defense." Brown v. Lumbermens Mut. Casualty Co., 326 N.C. 387, 391, 390 S.E.2d 150, 152 (1990). Nevertheless, an insurance provider may commit itself to such a responsibility under the terms of an insurance policy. Id. Thus, an insurer's duty to defend an action brought against its insured is determined by the language in the policy, id. at 392, 390 S.E.2d at 153, and this duty "is absolute when the allegations of the complaint bring the claim within the coverage of the policy," Indiana Lumbermen's Mutual Ins. Co. v. Champion, 80 N.C.App. 370, 376, 343 S.E.2d 15, 19 (1986). This is true, even if the facts alleged are only arguably covered by the policy. See Wilkins v. American Motorists Ins. Co., 97 N.C.App. 266, 269, 388 S.E.2d 191, 193 (1990)

("[I]f the pleadings allege any facts which disclose a possibility that the insured's potential liability is covered under the policy, then the insurer has a duty to defend.") Furthermore, "where a complaint contains multiple theories of recovery, some covered by the policy and others excluded by it, the insurer still has a duty to defend." Waste Management of Carolinas, Inc. v. Peerless Ins. Co., 72 N.C.App. 80, 85, 323 S.E.2d 726, 730 (1984),

rev'd on other grounds,

315 N.C. 688, 340 S.E.2d 374 (1986).

It is axiomatic that an insurance policy is a contract, the provisions of which govern the rights and responsibilities of the contracting parties. Deason v. J. King Harrison Co., 127 N.C.App. 514, 517, 491 S.E.2d 666, 668 (1997),aff'd in part and disc. review improvidently allowed in part, 349 N.C. 220, 504 S.E.2d 784 (1998). "`As with all contracts, the goal of construction is to arrive at the intent of the parties when the policy was issued.'" Brown, 326 N.C. at 392,390 S.E.2d at 153 (quoting Woods v. Insurance Co., 295 N.C. 500, 505, 246 S.E.2d 773, 777 (1978)). In reviewing an insurance policy, exclusions from coverage are strictly construed, Stanback v. Westchester Fire Ins. Co., 68 N.C.App. 107, 114, ...