R. A. Hanson Co., Inc. v. Aetna Ins. Co., 3372-III-4

• Decision Date: 29 May 1980
• Docket Number: No. 3372-III-4,3372-III-4
• Citation: 26 Wn.App. 290,612 P.2d 456
• Parties: R. A. HANSON COMPANY, INC., a Washington Corporation, Appellant, v. AETNA INSURANCE COMPANY, a Foreign Corporation, Respondent.
• Court: Washington Court of Appeals

Page 290

26 Wn.App. 290

612 P.2d 456

R. A. HANSON COMPANY, INC., a Washington Corporation, Appellant, v. AETNA INSURANCE COMPANY, a Foreign Corporation, Respondent.

No. 3372-III-4.

Court of Appeals of Washington, Division III, Panel Four.

May 29, 1980.

Patrick A. Sullivan, L. H. Vance, Jr., Winston & Cashatt, Spokane, for appellant.

Curtis Shoemaker, Paine, Lowe, Coffin, Herman & O'Kelly, Spokane, for respondent.

ROE, Judge.

In 1972, Hanson Co., in the district court in California, sued one of its former employees and Constructora Daroel, S. A., for various claims relating to the alleged misuse of Hanson's trade secrets, and patent infringement. That employee, Robert James, counterclaimed, alleging interference with prospective advantage, inducing breach of contract, and abuse of process. Hanson tendered defense of the counterclaim to its insurer, Aetna, based on an insurance policy covering, inter alia,

(A)-False arrest, detention or imprisonment, or malicious prosecution (B)-. . . libel or slander . . . in violation of an individual's right of privacy;

(Italics ours.) Coverage for these events extended only to their occurrence in the United States or Canada. Aetna considered all the information it had and rejected the tender based on its counsel's opinion that there was no coverage.

The counterclaim was later amended to include allegations of antitrust law violations. On Hanson's motion, the federal court in 1976 dismissed without prejudice the interference with prospective advantage and abuse of process counterclaims. Hanson's brief in federal court demonstrated that the statute of limitations for abuse of process was one year, and distinguished that type of action from malicious prosecution. Aetna was not notified of the dismissal. In August 1976, James filed a second amended counterclaim, this time alleging abuse of process within the statutory period, and alleging libel or slander. Aetna was not notified of the existence of this counterclaim, though Hanson continued to insist that Aetna defend the action. Aetna requested additional information from Hanson so that it could decide if and when a duty to defend arose. In November 1976, Hanson replied to Aetna's request and stated:

(T)he policy in question expressly provides coverage for malicious prosecution which is a generic label covering both abuse of process and wrongful use of civil procedure as well as the criminal tort malicious prosecution.

Hanson and James settled. When Aetna refused to pay the settlement, Hanson commenced this suit alleging breach of contract because of wrongful refusal of tender. Hanson moved for summary judgment on the issue of liability; Aetna moved for a summary judgment of dismissal.

The trial court found a difference existed between the actions of abuse of process and malicious prosecution, that Aetna relied on that distinction, and that the refusal to defend was proper. The court determined that the counterclaim here was sufficiently definite that Aetna had no obligation to go beyond the face of the pleadings to determine if there were any covered events giving rise to its duty to defend.

Hanson argues that Aetna's duty to defend is to be determined not by merely looking at the pleadings on their face, but by the insurer conducting its own investigation to find facts which would bring the counterclaim within Aetna's policy coverage.

Holland America Ins. Co. v. National Indemn. Co., 75 Wash.2d 909, 911, 454 P.2d 383 (1969), states that as a general rule, an insurer's duty to defend "arises when the complaint is filed and is to be determined from the allegations of the complaint." See Tieton v. General Ins. Co. of America, 61 Wash.2d 716, 380 P.2d 127 (1963). The insurer need look only at the face of the petition or complaint. 7C F. Berdal, Appleman's Insurance Law and Practice § 4683 (1979). James' counterclaim allegations do not appear on their face to include any insurable events.

Neither party has asserted that the law of another state should apply to this case, so we shall use Washington law. A party alleging civil malicious prosecution must prove five elements:

(1) That the prosecution claimed to have been malicious was instituted or continued by the defendant; (2) that there was want of probable cause for the institution or continuation of the prosecution; (3) that the proceedings were instituted or continued through malice; (4) that the proceedings terminated on the merits in favor of the plaintiff, or were abandoned; and (5) that the plaintiff suffered injury or damage as a result of the prosecution.

(Italics ours.) Peasley v. Puget Sound Tug & Barge Co., 13 Wash.2d 485, 497, 125 P.2d 681 (1942). See Gem Trading Co. v. Cudahy Corp., 92 Wash.2d 956, 962-63, 603 P.2d 828 (1979). In an abuse of process claim, the "plaintiff need not show that the suit was groundless or terminated in his favor or that the process complained of was obtained without probable cause." Gem Trading Co. v. Cudahy Corp., supra at 963, n. 2, 603 P.2d at 833.

Under the terms of the policy, Aetna had no duty to defend an abuse of process claim, and from the face of the pleadings the elements of malicious prosecution were not alleged.

However, there are exceptions to the general rule that an insurer need look only to the pleadings to determine the existence of coverage. One exception is where the allegations are in conflict with the facts known to or ascertainable by the insurer. See Annot., Allegations in third person's action against insured as determining liability insurer's duty to defend, 50 A.L.R.2d 458, 497 (1956); 14 R. Anderson, Couch Cyclopedia of Insurance Law 2d § 51:47 (1965 & Supp. 1979).

Appleman states that a duty to defend arises from facts known or reasonably ascertainable by the insurer, and the insurer may not rely on the pleadings alone. An insurer must defend if the claim is potentially within the policy. 7C F. Berdal, Appleman's Insurance Law and Practice §§ 4683, 4684.01 (1979). See Babcock & Wilcox Co. v. Parsons Corp., 430 F.2d 531, 538-39 (8th Cir. 1970); Gray v. Zurich Ins. Co., 65 Cal.2d 263, 419 P.2d 168, 54 Cal.Rptr. 104 (1966); Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 212 Kan. 681, 512 P.2d 403 (1973). Thus, modern rules of notice pleading, which do not require the definiteness of former rules, may change the general rule. There is a greater duty placed on the insurer to determine if there are any facts which could fall within the pleadings, thus giving rise to an obligation to defend. See Ross Island Sand & Gravel Co. v. General Ins. Co. of America, 472 F.2d 750 (9th Cir. 1973); National Steel Constr. Co. v. National Union Fire Ins. Co. of Pittsburgh, 14 Wash.App. 573, 543 P.2d 642 (1975) (dicta). Washington adopted notice pleading effective 1967.

A second exception to the general rule arises when the allegations of the complaint are ambiguous or inadequate. Then facts which might give rise to potential liability must be investigated. Insurance Co. of N. America v. Insurance Co. of the State of Pa.,...