McAndrews v. Farm Bureau Mut. Ins. Co.

• Decision Date: 13 June 1984
• Docket Number: No. 83-121,83-121
• Parties: Paul McANDREWS, Appellee, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant.
• Court: Iowa Supreme Court

Page 117

349 N.W.2d 117

Paul McANDREWS, Appellee, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant.

No. 83-121.

Supreme Court of Iowa.

June 13, 1984.

James A. Pugh of Morain, Burlingame & Catterall, West Des Moines, for appellant.

Michael J. Green of Carney, Hudson, Williams & Green, Des Moines, for appellee.

Considered en banc.

LARSON, Justice.

The issue in this case is whether Farm Bureau Mutual Insurance Company was required by its policy to defend its insured, Paul McAndrews, in a civil action for assault and battery brought by a third party, William Clemons. The district court concluded that, while the policy excluded coverage for intentional acts, there was a "potential for coverage" under the policy, and that was sufficient to require Farm Bureau to furnish a defense. The court of appeals affirmed, on the ground that, if there is a "possibility" that the intentional-act exclusion of the policy would not apply, the defense must be provided. We vacate the court of appeals opinion and reverse the district court.

Farm Bureau insured McAndrews under its "Country Squire IV," a general farm liability policy. It provided personal liability protection under Coverage "L" as follows:

This Company agrees to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage, to which this insurance applies, caused by an occurrence. This Company shall have the right and duty, at its own expense, to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, but may make such investigations and settlement of any claim or suit as it deems expedient.

(Emphasis added.) An "occurrence" as referred to in Coverage "L" is defined in the policy as "an accident, including injurious exposure to conditions, which results, during the policy term, in bodily injury or property damage."

The policy also provided an exclusion for any "bodily injury or property damage which is either expected or intended from the standpoint of the insured." The fighting issue here is whether that exclusion applies. Farm Bureau argues that because of the exclusion it could not be required to indemnify McAndrews for any judgment rendered against him in the assault and battery case; hence, it was not obliged to furnish a defense. McAndrews argues that there was at least a possibility the "intentional act" exclusion would not apply based on his claim of self-defense and, therefore, Farm Bureau was required to defend him.

The factual background began with a dispute at a county fair involving cattle being shown by the sons of McAndrews and Clemons. Words erupted into action resulting in the assault and battery suit against McAndrews who tendered the defense to Farm Bureau. McAndrews briefly outlined the event in his notice of loss submitted to Farm Bureau:

At Fairtime I exchanged words with William Clemons and a scuffle followed and I injured him. Wm. Clemons took wild swing at insured and insured acted in self defense and injured Wm. Clemons.

(McAndrews' claim that Clemons had swung first is apparently not challenged.)

Upon Farm Bureau's refusal to defend, McAndrews conducted his defense through private counsel. Despite his self-defense claim, a verdict for $2000.00 was returned by the jury, and judgment was entered against him. McAndrews then filed this suit alleging breach of the contractual duty to defend and obtained a judgment for $3032.45 for the cost of his defense in the assault and battery action. (Originally, he also sought indemnity from Farm Bureau for the $2000.00 judgment, but he dismissed that claim.) The court of appeals affirmed.

[An insurer's] duty to defend arises whenever there is a potential or possible liability to pay based on the facts at the outset of the case and is not dependent on the probable liability to pay based on the facts ascertained through trial.

(Footnote omitted.) 7C J. Appleman, Insurance Law and Practice § 4684, at 83 (Berdal ed. 1979).

The "facts at the outset of the case" under this test have traditionally been those alleged in the petition in the suit against the insured. Id. § 4683, at 42. See also Chipokas v. Travelers Indemnity Co., 267 N.W.2d 393, 395 (Iowa 1978) ("In deciding whether an insurer has a duty to defend, the first query is into plaintiff's pleadings to see if the pleadings state facts which bring the claim within the liability covered by the policy.")

The scope of inquiry, however, must sometimes be expanded beyond the petition, especially under "notice pleading" petitions which often give few facts upon which to assess an insurer's duty to defend. In Central Bearings Co. v. Wolverine Insurance Co., 179 N.W.2d 443 (Iowa 1970), we recognized the need to supplement the facts in the pleadings saying that the insurer has no duty to defend "if after construing both the policy in question, the pleadings of the injured party and any other admissible and relevant facts in the record, it appears the claim made is not covered by the indemnity insurance contract...." Id. at 445. (Emphasis added.) A court may also take judicial notice of facts bearing on policy coverage. Appleman, supra § 4684.01, at 90.

An insurer cannot, of course, await the outcome of the trial to furnish the defense if potential liability appears at an earlier stage. Appleman, supra § 4684, at 83, 85.

On the other hand, an insurer is not required to provide a defense when no facts presently available to it indicate coverage of the claim merely because such facts might later be added by amendment or introduced as evidence at the trial. If the totality of facts fail to disclose potential coverage, an insurer might proceed in two ways: it could initiate a declaratory judgment action against its insured, see, e.g., Farm Bureau Mutual Insurance Co. v. Sandbulte, 302 N.W.2d 104 (Iowa 1981), or it might elect to do nothing, running the risk, of course, that its insured will seek indemnity if coverage is established at trial. See Grenga v. National Surety Corp., 113 R.I. 45, 49, 317 A.2d 433, 436 (1974); Appleman, supra §§ 4683, 4685.01, at 53, 133.

In the present case, we look to the pleadings and all other "admissible and relevant facts," Central Bearings, 179 N.W.2d at 445, to resolve the question of Farm Bureau's duty to defend. If it appears from those facts that there was potential for coverage under the policy, McAndrews must prevail.

The petition against him alleged, and McAndrews did not dispute, that he had struck Clemons with his fist and knocked him down. McAndrews merely claims there was at least a possibility a fact-finder would not find the act to be "intended," because it was done in self-defense.

In this case, the jury must have concluded McAndrews did not act in self-defense, because it rendered a verdict against him. In assessing the duty to defend, however, we look to the facts as they appeared prior to trial, not as they later developed. We assume, for that purpose, that McAndrews in fact did act in self-defense. This being assumed, was there a potential for coverage under the policy? A considerable number of cases have addressed this issue.

One authority notes that, in some cases,

it has been indicated that the insurer cannot refuse to defend a charge of assault and battery since there will always be the possibility of claims or defenses falling within the purview of the policy. Further, whether the insured can or cannot avoid liability on grounds of self-defense has been held to be of no concern to the insurer with respect to its duty to defend; if the insurer failed to investigate, and the insured acted in self-defense, the incident is covered by the policy and insurer is obligated to defend.

(Footnotes omitted.) Appleman, supra § 4685.01, at 128.

Other cases, which we believe state the preferable view, go the other way. In Home Insurance Co. v. Neilsen, 165 Ind.App. 445, 332 N.E.2d 240 (1975), the insured also argued that his striking of the victim was done in...