Mutual of Enumclaw v. Harvey

• Decision Date: 07 April 1989
• Docket Number: No. 17449,17449
• Citation: 772 P.2d 216,115 Idaho 1009
• Parties: MUTUAL OF ENUMCLAW, a Washington corporation, Plaintiff-Counterdefendant-Appellant, v. Floyd W. HARVEY, individually, and Hells Canyon Excursions, Inc., an Idaho corporation, Defendants-Counterclaimants-Respondents, and Bruce Oakes, Defendant-Respondent.
• Court: Idaho Supreme Court

Page 216

772 P.2d 216

115 Idaho 1009

MUTUAL OF ENUMCLAW, a Washington corporation, Plaintiff-Counterdefendant-Appellant, v. Floyd W. HARVEY, individually, and Hells Canyon Excursions, Inc., an Idaho corporation, Defendants-Counterclaimants-Respondents and Bruce Oakes, Defendant-Respondent.

No. 17449.

Supreme Court of Idaho.

April 7, 1989.

Cantrill, Skinner, Sullivan & King, Boise, for appellant. Frank P. Kotyk argued.

Hawley, Troxell, Ennis & Hawley, Boise, for respondents Harvey and Hells Canyon Excursions, Inc. Merlyn W. Clark argued.

BISTLINE, Justice.

Having considered the briefs and record, and having heard oral argument we are persuaded that the able district judge explained the facts and the law in this case extremely well. Judge Schroeder's opinion addressed all of the issues raised on appeal. We adopt his opinion, in substantial part, as our own. In addition, we will address the issue of attorney fees on appeal following reproduction of the district court's opinion below:

"In 1977 Floyd Harvey, doing business as Hell's Canyon Excursions, filed a complaint alleging that on or about January 31 or February 1, 1974, Bruce Oakes, among others, damaged property belonging to Hell's Canyon Excursions. Mutual of Enumclaw defended Oakes, their insured, in that action under the terms of Homeowner's policy in effect at the time of the occurrence. On March 26, 1984, a judgment was entered in favor of Hells' Canyon and jointly and severally against Oakes and his co-defendant in the amount of $219,200 plus $45,444 costs, including $35,000 attorney fees. Since then Hell's Canyon has demanded that Mutual of Enumclaw pay Hell's Canyon those costs which Hell's Canyon argues are due them under Mutual of Enumclaw's policy insuring Oakes. Mutual of Enumclaw filed its complaint in this action on April 15, 1986, amended May 28, 1986, asking for a declaratory judgment seeking determinations that 1) Mutual of Enumclaw has no duty to indemnify or "1. Mutual of Enumclaw has the duty to pay Hell's Canyon for all costs, including attorney fees, taxed against Bruce Oakes, plus interest on those items; 2) Attorney fees and costs incurred in the declaratory judgment action be awarded to Floyd Harvey/Hell's Canyon.

[115 Idaho 1011] provide coverage for Bruce Oakes; 2) Mutual of Enumclaw has no duty to further defend Oakes; 3) Mutual of Enumclaw has no duty to pay that portion of the costs consisting of attorney's fees; 4) Mutual of Enumclaw be awarded attorney fees and costs incurred in the declaratory judgment action. On June 5, 1986, Hell's Canyon answered and counterclaimed for declaratory judgment that:

"On May 7, 1986, Floyd Harvey/Hell's Canyon filed an application for writ of execution on the March 1984 judgment, followed on April 3, 1987 by this summary judgment motion for $45,440.01 plus interest, costs and fees in the instant action. On July 10, 1987, Floyd Harvey/Hell's Canyon filed an amended counterclaim alleging an additional entitlement under the policy to interest on the entire $264,644.01 judgment which consisted of $219,200 damages plus $45,444.01 costs; the defendant's amended motion for summary judgment on August 7, 1987, reflected the new demand.

"The following issues are presented by the motion for summary judgment:

"1. Whether Hell's Canyon has standing to recover portions of the judgment directly from Mutual of Enumclaw instead of from Mutual of Enumclaw's insured, Bruce Oakes.

"2. Whether Mutual of Enumclaw is liable under policy Section II, Supplementary Coverages 2.a to pay the costs taxed against Oakes even though there may not be coverage under the policy for the conduct of Oakes which gave rise to the underlying action;

"3. Whether attorney fees should be considered an element of the costs taxed against Oakes which are payable under the policy.

"4. Whether Mutual of Enumclaw's failure to tender that portion of the judgment consisting of costs taxed against Oakes is enough to trigger Section II, Supplementary Coverages 2(c) which obligates the insurer to pay 'all interest on the entire amount of any judgment which accrues after entry of the judgment and before the insurer has paid or tendered or deposited in court that part of the judgment which does not exceed the limit of (the insurer's) liability thereon.'

"Issue I: Standing

"The insurance policy itself, Section II, Conditions Applicable Only to Section II, 8.b. confers standing. That provision states, 'Any person or organization or the legal representative thereof who has secured such judgment (a judgment against the Insured after actual trial) ... shall thereafter be entitled to recover under this policy to the extent of the insurance afforded under this policy.' The judgment in favor of Hell's Canyon dated March 26, 1984, states that the judgment was entered following a full jury trial. Therefore, under the terms of the policy, Hell's Canyon, having secured such judgment, is entitled to recover under the policy to the extent insurance afforded by the policy encompasses that judgment.

"Issue 2: Are Costs Taxed Against Oakes Payable even Though Oakes Conduct is not Covered under the Policy?

"Supplementary Coverages 2. of the policy provides, that the Insurer will pay, as an element of personal liability claims expenses, 'a. all expenses incurred by (the) Company and all costs taxed against the insured in any suit defended by (the) Company;'

"Mutual of Enumclaw maintains that the application of this provision turns on whether coverage existed for the underlying claim giving rise to the lawsuit. Mutual of Enumclaw argues that the jury determined Oakes' conduct to have been intentional. That being the case, the policy excludes coverage under Section II, Exclusion 1.f. which states that the policy does not apply to '... property damage which is either expected or intended from the standpoint of the Insured.' Since the policy excludes coverage, Mutual of Enumclaw maintains that Supplementary Coverages "Policy Section II, Supplementary Coverages 2. (Personal Liability Claims Expenses) provides that the company will pay 'a. all expenses incurred by Company and all costs taxed against the insured in any suit defended by Company.' A further sentence appearing at the end of Coverage 2. provides that 'any expenses (costs are treated by the policy as an element of expenses) incurred by this Company under this provision (supplementary Coverage 2.) shall not reduce the applicable limit of liability.' That language, as well as the placement of Coverage 2. under a heading named, 'Supplementary Coverages' implies that the provisions contained therein are separate from and in addition to the basic policy coverage, and, therefore, that Mutual of Enumclaw's obligation to pay such costs is unaffected by the fact that the policy does not cover Oakes' intentionally tortious conduct.

[115 Idaho 1012] 2.a., the provision allowing the payment of costs, is not operative in this case. Additionally it argues the non-applicability of the cost provision on the grounds that it undertook the defense with a full reservation of rights. Hell's Canyon maintains that the provision obligating the insurer to pay costs is independent of the obligation to pay for the conduct of Oakes, and that the reservation of rights operated to reserve only those rights which existed under the policy of insurance, not to absolve Mutual of Enumclaw of contractual duties nor deprive the insured of Hell's Canyon of contractual entitlements.

* * *

"In Liberty National Ins. Co. v. Eberhart, 398 P.2d 997 (Alaska 1965) the court dealt with the issue of proration of costs. In that case a decedent's estate administrator obtained a $20,000 judgment against the driver of one of the vehicles responsible for the decedent's death. The driver/defendant's policy limits for bodily injury liability were $10,000 on which amount the estate executed. In addition, through garnishment proceedings, the estate obtained $3,401.35 in costs, including attorney's fees computed as a percentage of the entire $20,000 judgment. The Court refused to prorate the costs/attorney fees in relation to the $10,000 policy limits on the basis of the policy language obligating the Company to pay costs. The court saw 'nothing in the ... language of the insurance agreement which supports appellant's view that it is responsible for payment only of a proportionate share of the total costs assessed against its insured ...' Id. at 999. The court observed that 'if (the Company) had wished to contract to pay only a proportionate share of the costs based upon the applicable limit of liability in the policy, it easily could have used appropriate language to achieve that result.' Id. at 1000. Similarly, even when the standard interest clause of a particular policy promises to pay 'post judgment interest' and does not include the phrase 'on the entire judgment' the courts generally have held that the insurer must nonetheless pay interest on the entire judgment, not merely on that portion covered by the applicable limits of liability. Courts dealing with this issue have noted that such interest is expressly treated by the policy as one of a number of supplemental coverages that are not intended to reduce the applicable limit of liability and is thus independent of those limits. See e.g. United Services Auto. Asso. v. Russom, 241 F.2d 296 (5th Circuit 1957); Knippen v. Glenn Calls [Glens Falls] Ins. Co., 564 F.2d 525, 529 (D.C.Cir.1977).

"The results in the cases depend 'upon the language employed by the parties in their contract.' 76 ALR2D 985. Language in the policy of this case does not indicate that payment of costs is conditioned upon a final determination that the policy covers the insured's conduct. The language of the policy says that the Company will pay all costs taxed against the insured in any suit defended by the Company. Beyond what appears to be the clear term of the policy, it is arguable that since the Company...