Reisen v. Aetna Life and Cas. Co.

• Decision Date: 29 April 1983
• Docket Number: No. 801367,801367
• Citation: 302 S.E.2d 529,225 Va. 327
• Parties: Philip O. REISEN v. AETNA LIFE AND CASUALTY COMPANY. Record
• Court: Virginia Supreme Court

Page 529

302 S.E.2d 529

225 Va. 327

Philip O. REISEN v. AETNA LIFE AND CASUALTY COMPANY.

Record No. 801367.

Supreme Court of Virginia.

April 29, 1983.

Dennis E. Ahearn, Alexandria (Hart, Nugent & Ahearn, P.C., Alexandria, on brief), for appellant.

Robert J. Arthur, Arlington (Arthur and Speed, Ltd., Arlington, on brief), for appellee.

Before CARRICO, C.J., COCHRAN, POFF, COMPTON, STEPHENSON and RUSSELL, JJ., and HARRISON, Retired Justice.

COMPTON, Justice.

In this automobile insurance case, the question is whether declaratory judgment lies to decide a coverage question when the ultimate issue of fact determining coverage is set for adjudication in a related, pending tort action.

During April of 1979, appellant Philip O. Reisen approached Jack W. Goins on a city street in Alexandria, claiming Goins owed him $33. Following an argument, Goins drove his truck into Reisen, who was then on the sidewalk. As a result, Reisen suffered serious personal injuries.

In June of 1979, Reisen filed a tort action against Goins seeking compensatory damages of $900,000 and punitive damages in a like amount. The motion for judgment charged Goins with negligent and intentional conduct.

At the time of the incident, Goins' truck was covered by an automobile liability insurance policy issued by appellee Aetna Life and Casualty Company. State Farm Mutual Automobile Insurance Company, Reisen's uninsured motorist carrier, was served with a copy of the suit papers. Aetna notified Reisen and Goins that the loss was not covered by the terms of its policy because Goins' act was intentional; it refused to provide Goins a defense at that time. Subsequently, State Farm filed a responsive pleading in the case.

In December of 1979, Goins pled guilty to hit and run and reckless driving charges arising out of the incident; an indictment for felonious assault was not prosecuted. In January of 1980, Reisen made an offer to Aetna to settle the personal injury case within the policy limit of $100,000. Subsequently, Aetna, through counsel, filed responsive pleadings for Goins under a full reservation of its rights to later deny coverage. Trial of the case was set for May 19, 1980.

Then, in March of 1980, Aetna filed the present declaratory judgment proceeding at law naming as defendants Goins, Reisen, and State Farm. Aetna asserted its policy covered an "occurrence," defined in the insurance contract as "an accident ... which results in bodily injury [that is] neither expected nor intended from the standpoint of the insured." Alleging such provision expressly excluded coverage for bodily injury caused by Goins' intentionally tortious conduct, Aetna asserted "that the facts of the incident do not fall within the coverage afforded by the policy of insurance." Aetna stated that an actual controversy existed between the plaintiff and defendants as to the obligations, if any, of the plaintiff under the policy. It asked the trial court to declare Aetna was "not obligated to pay any judgment" that may be rendered against Goins in the personal injury case. In a demurrer, overruled by the trial court, Reisen sought dismissal of the motion for declaratory judgment.

At the trial of the declaratory judgment proceeding, held about two weeks before trial of the tort action, a jury found that Goins "did expect or intend to cause bodily injury to Philip Reisen." Subsequently, the trial court entered the order from which this appeal flows, confirming the verdict and declaring Aetna "owes no duty or obligation to afford coverage under its policy of insurance to the defendant Jack W. Goins due to his actions on April 27, 1979."

The personal injury case was tried as scheduled, new counsel having been substituted to represent Goins upon withdrawal of Aetna's attorney. Judgment was entered in favor of Reisen on a jury verdict in the amount of $372,686. According to representations in Aetna's brief, the case was tried solely on the issues of negligence and contributory negligence, not on the theory of an intentional tort. Reisen, on brief, informs us that the judgment remains unsatisfied except for $25,000 paid by State Farm in settlement of a suit on the uninsured motorists endorsement.

Before addressing the appellate arguments, established declaratory judgment principles should be reviewed. Circuit courts have power to make "binding adjudications of right" in cases of "actual controversy" where there is "antagonistic assertion and denial of right." Code § 8.01-184. The declaratory judgment statutes are remedial, their purpose being "to afford relief from the uncertainty and insecurity attendant upon controversies over legal rights...." § 8.01-191. The statutes are to be "liberally interpreted and administered with a view to making the courts more serviceable to the people." Id. But the controversy must be "justiciable," that is, one in which there are "specific adverse claims," based on present facts, that are "ripe for judicial adjustment." City of Fairfax v. Shanklin, 205 Va. 227, 229, 135 S.E.2d 773, 775 (1964). Enactment of the declaratory judgment statutes did not vest the courts with authority to render advisory opinions, decide moot questions, or answer merely speculative inquiries. Id. at 230-31, 135 S.E.2d at 776.

On appeal, Reisen correctly argues that because the motion for judgment in the tort action alleged facts and circumstances of negligence which, if proved, would fall within a risk covered by Aetna's policy, Aetna had a duty to defend its insured, Goins, even though the pleading also contained allegations of an intentional act. See Parker v. Hartford Fire Ins. Co., 222 Va. 33, 35, 278 S.E.2d 803, 804 (1981). The insurer is relieved of a duty to defend only when it clearly appears from the initial pleading the insurer would not be liable under the policy contract for any judgment based upon the allegations. Travelers Indemnity Co. v. Obenshain, 219 Va. 44, 46, 245 S.E.2d 247, 249 (1978). Asserting that Aetna's potential liability was contractual and arose only after Goins' liability had been established, Reisen contends that until Goins' liability had been determined "there could be no actual controversy between Aetna and Goins concerning the payment of a non-existent judgment which might be rendered in the future." Reisen argues that at the time the declaratory judgment was tried, "Goins could not have demanded that Aetna indemnify him because at that time there existed no judgment against him." He says the "only actual duty of Aetna and corollary right of Goins were the duty to provide and the right to receive a good faith defense." Reisen contends that Aetna merely sought an advisory opinion on the question: If a judgment is entered against Goins, will the insurer be obligated to pay?

Moreover, Reisen argues, in order to answer the foregoing question, the ultimate factual issue upon which tort liability would rest, i.e., was Goins' conduct intentional or negligent, had to be decided first. Relying on Prashker v. United States Guarantee Co., 1 N.Y.2d 584, 136 N.E.2d 871, 154 N.Y.S.2d 910 (1956), Reisen notes that the coverage question here is not the typical issue, such as absence of permissive use, failure of cooperation, or lack of timely notice, which are separable from the issue awaiting determination in the tort action. Instead, the factual issue that will decide the coverage question is the very same issue to be decided in the personal injury suit. Under these circumstances, Reisen urges, declaratory judgment is improper because, while such a procedure would certainly clear up the insurer's obligation under the contract, it would nevertheless be tantamount to permitting insurers to assume unfairly control and command of tort litigation.

In Prashker, the Court of Appeals of New York held that declaratory judgment was improper when the grounds of liability, if proved, in pending negligence actions would partly fall within and without exclusionary clauses of aircraft liability policies. There, the tort suits were brought against the owner of an airplane and the pilot's estate by the personal representatives of a deceased passenger killed in a crash. The court held no justiciable issue was presented because the tort claim was based in part upon negligence of the pilot and in part upon violation of Civil Aeronautics Administration regulations; the latter violation, if proven, would exempt the insurer from liability. The court said:

"Manifestly it cannot be ascertained in advance of the trial of these negligence actions which of these grounds of liability, if any of them, will be adjudicated against these assureds. Consequently it cannot be known in advance of the determination of those actions whether the estate of the pilot and the owner of the plane are indemnified by this policy against whatever judgments for damages which may be entered against them. If the existence or absence of liability on the part of this insurance carrier is to be declared under any and all contingencies in advance of the trial of the primary negligence actions, it may well be that the insurance company will be held or exonerated in this declaratory judgment action on a different factual basis from that which will later be established in the negligence actions.

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"This policy is one of indemnification; it is clear that the liability of the insurance company depends upon the basis for liability which is adjudicated against the assureds in the main actions. Unless the insurance company would be liable under the policy on the facts underlying each theory of liability pleaded against the...