Nichols v. American Employers Ins. Co.
| Decision Date | 22 July 1987 |
| Docket Number | No. 86-1821,86-1821 |
| Citation | 140 Wis.2d 743,412 N.W.2d 547 |
| Parties | Charles E. NICHOLS, Plaintiff-Respondent, v. AMERICAN EMPLOYERS INSURANCE CO. and Commercial Union Insurance Co., Defendants-Appellants. |
| Court | Wisconsin Court of Appeals |
Alice M. Shuman of Albert, Jude & Van Remmen, S.C., Racine, for defendants-appellants.
Charles H. Constantine of Constantine, Christensen, Krohn & Kerscher, S.C., Racine, for plaintiff-respondent.
Before SCOTT, C.J., BROWN, P.J., and NETTESHEIM, J.
The issue is whether the insurer in this case had a duty to defend its insured in a sexual harassment action before the Equal Rights Division of the Department of Industry, Labor and Human Relations. The trial court agreed with the insured that since the insurance policy provided for coverage against defamation claims and since a defamatory statement was arguably subsumed within the sexual harassment action, there was a duty to defend. We hold that this insurer was not required to defend where it was not bound to indemnify should the injured party prevail upon her allegations. We therefore reverse the trial court.
The facts are uncontroverted. Constance Catterall filed two complaints with DILHR alleging that Nichols Motors had discriminated against her on the basis of sex in violation of sec. 111.31 through sec. 111.395, Stats. The Equal Rights Division of the Department found probable cause of sex discrimination. Nearly two years passed before hearings were held on the complaints. Shortly before the hearings, Nichols tendered the defense to its comprehensive general liability insurer, American Employers Insurance Company and its umbrella carrier, Commercial Union Insurance Company. Included with the tender was information from which it could be deduced that certain of Catterall's claims included arguably defamatory statements by fellow employees. Both insurers denied coverage. A hearing ensued on the sexual harassment claim without the insurers' participation. Prior to the rendering of a formal decision, the sexual harassment claim was settled and Nichols agreed to pay Catterall $25,000. Nichols then sued the insurers for breach of their duty to defend. After motions by both parties for summary judgment, the trial court held for the insured but did not decide the damages question. We accepted the insurer's petition to review a nonfinal order. Further facts will be stated when necessary.
Certain legal principles compel us to reverse. The first is stated in Sola Basic Industries, Inc. v. United States Fidelity & Guar. Co., 90 Wis.2d 641, 280 N.W.2d 211 (1979). The supreme court wrote:
To determine whether an insurer is obligated to assume the defense of a third-party suit, it is necessary to determine whether the complaint alleges facts which, if proven, would give rise to liability covered under the terms and conditions of the policy.
Id. at 646, 280 N.W.2d at 213. We have examined the allegations in Catterall's complaints filed with DILHR. Nowhere does she relate any statements alleging defamation. In fact, the complaints are devoid of any statements that could be considered an allegation of defamation. This is understandable because she was not seeking damages for defamation of her character. She was seeking reinstatement of her job, back wages and a halt to Nichols' discrimination practices. Sola Basic teaches that the obligation to defend is to be determined by the allegations in the complaint. Since the sexual harassment complaints made no defamatory allegations, a basic tenet of Sola Basic is missing.
A corollary principle also compels reversal. The supreme court in Grieb v. Citizens Casualty Co., 33 Wis.2d 552, 148 N.W.2d 103 (1967), stated:
[T]he insurer is under an obligation to defend only if it could be held bound to indemnify the insured, assuming that the injured person proved the allegations of the complaint, regardless of the actual outcome of the case.
Id. at 558, 148 N.W.2d at 106. No compensatory relief for defamation is available to an employee in a sexual harassment action. Remedies for violations of the Fair Employment Act are statutory and are exclusively available through DILHR proceedings. Bachand v. Connecticut General Life Ins. Co., 101 Wis.2d 617, 623-24, 305 N.W.2d 149, 152 (Ct.App.1981). The supreme court has held that damages for harm to reputation are not available from either a DILHR proceeding or through a private cause of action for violations of the Fair Employment Act. Yanta v. Montgomery Ward & Co., Inc., 66 Wis.2d 53, 62-63, 224 N.W.2d 389, 394 (1974); see also Bachand, 101 Wis.2d at 629, 305 N.W.2d at 154.
Therefore, even if the sexual harassment complaints had related some defamatory matter, there could be no damages awarded as a result of the defamation. Grieb explains that the duty to defend is equated with the duty to pay possible damages. Since there can be no damages for defamation, there can be no duty to defend.
Nichols attempts to circumvent the Sola Basic and Grieb maxims by directing our attention to the language of the policies in question. Acknowledging that Catterall's complaints did not contain any defamatory matter, Nichols points out that when it sent its tender of defense to the insurers, it also sent a copy of the hearing examiner's initial report quoting Nichols' employees' alleged challenges to Catterall's competence with a sexist, vulgar term. From this, Nichols concludes that although the complaint did not give the insurers notice, Nichols himself did give notice that part of the sexual harassment grievance contained an allegation of defamation. Nichols argues that the insurance policies do not require that notice only came from the four corners of a "complaint" by a third party against the insured. Rather, the underlying policies require that:
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