Reisig v. Union Ins. Co.

• Decision Date: 18 March 1994
• Docket Number: No. 93-57,93-57
• Citation: 870 P.2d 1066
• Parties: Russell C. REISIG, d/b/a Russell's Excavation and Construction, Appellant (Plaintiff), v. UNION INSURANCE COMPANY, a Nebraska corporation, and Manville Claims Service, a Wyoming corporation, Appellees (Defendants).
• Court: Wyoming Supreme Court

Page 1066

870 P.2d 1066

Russell C. REISIG, d/b/a Russell's Excavation and Construction, Appellant (Plaintiff), v. UNION INSURANCE COMPANY, a Nebraska corporation, and Manville Claims Service, a Wyoming corporation, Appellees (Defendants).

No. 93-57.

Supreme Court of Wyoming.

March 18, 1994.

Glenn E. Smith, Glenn E. Smith & Associates, Cheyenne, for appellant.

Richard Rideout, Herschler, Freudenthal, Salzburg, Bonds & Rideout, P.C., Cheyenne, for appellees.

Before MACY, C.J., and THOMAS, CARDINE, GOLDEN and TAYLOR, JJ.

THOMAS, Justice.

The issue in this case is whether Union Insurance Company (Union) committed a breach of its duty to defend Russell C. Reisig, d/b/a Russell's Excavation and Construction, (Reisig) in accordance with the terms of an insurance policy. The district court ruled the claims asserted against Reisig by third parties were not covered by the insurance policy, and Union had not committed a breach of its duty to defend Reisig. We are satisfied the issue is controlled by our holding in First Wyoming Bank, N.A., Jackson Hole v. Continental Ins. Co., 860 P.2d 1094 (Wyo.1993), and the Order Granting Defendant's Motion for Summary Judgment entered in the trial court should be affirmed.

In his Brief of the Appellant, Reisig defines the issues as follows:

I. In holding that Union had no duty to defend, did the district court improperly utilize extrinsic evidence, base Union's duty to defend on whether it had a duty to pay, or determine facts which have yet to be adjudicated in the underlying action?

II. Does the third party complaint filed by Rocky Mountain against Reisig allege a potential "occurrence" under the policy of insurance issued to Union by Reisig?

III. Does the third party complaint filed by Rocky Mountain against Reisig allege sufficient facts to warrant a refusal by Union to defend on the basis of Union's "care, custody or control" exclusion?

IV. If a duty to defend is not created by the allegations of the Rocky Mountain complaint, did Union know or should Union have known of facts outside of the complaint which would establish a potential for coverage and, if so, does such extrinsic evidence create a duty to defend which would not exist based solely on the allegations of the complaint?

V. Did Reisig have a duty to search the public records for the lien filed by Rocky Mountain and, if so, was the damage complained of by Rocky Mountain intended or expected by Reisig because it was the natural, ordinary and logical result of his failure to do so?

VI. Are there genuine issues of material fact which preclude the district court from entering summary judgment in favor of Union? ¹

Union compiles the issues in this way:

I. Whether the district court erred in granting summary judgment to the Appellant.

A. Whether the district court erred in holding the Appellee did not breach the contract of insurance with the Appellant.

1. Whether the district court erred in determining that there was no "occurrence" triggering coverage.

2. Whether the district court erred in determining that there was no coverage as the care, custody and control exclusion applied.

II. Whether there are genuine or material issues of fact precluding summary judgment.

The underlying events resulting in this appeal go back to September 22, 1980 when the District Court of the First Judicial District in and for Laramie County entered an order directing Sidney and Florence Kornegay (Kornegays) to remove or destroy certain accumulated junk and structures in order to abate a nuisance which was identified as the Kornegay's junkyard. Subsequently, the district court entered two orders finding the Kornegays in contempt for their refusal to abide by the order entered in 1980. The second of those orders, issued on April 6, 1987, also required Laramie County to develop a plan to bring property into compliance with the order entered in 1980, and it gave the Kornegays sixty days to remove any property they wanted to protect from the County's plan for restoring Tracts 10 and 23 of Artesian Tracts in Laramie County.

After that order was entered, the Kornegays applied for, and obtained, a loan from Rocky Mountain Federal Savings & Loan (Rocky Mountain) in the amount of $8,012. The loan was secured by two pieces of heavy equipment, a Fiat Alias [Allis] Tractor Loader (Fiat loader) and a Michigan Rubber Tire Loader (Michigan loader). Rocky Mountain filed a financing statement covering both loaders in the office of the Laramie County Clerk; once on April 22, 1987 and again, on November 23, 1987. Both pieces of equipment were located on the property that was the subject of the 1980 and 1987 orders entered in the district court.

As a response to the plan of Laramie County, Reisig submitted a proposal to clean up the Kornegays' property and to bring it into compliance with the terms and conditions of the orders of the court. The court approved Reisig's plan in an Order Approving Schedule and Plan entered on March 9, 1988. Laramie County then made a Contract for Services with Reisig for the removal of the junk and debris from the Kornegays' property, including all salvage rights. Reisig began performance of the contract in March of 1988, and it was completed in September of 1989.

Pursuant to a requirement of the Contract for Services, Reisig obtained a Commercial General Liability (CGL) policy from Union with the period of insurance coverage running from December 30, 1988 to December 30, 1989. In August of 1988, Reisig, without any actual knowledge of the security agreement, removed the Michigan loader, which the Kornegays had pledged as security to Rocky Mountain, from the Kornegays' junkyard. Reisig certainly had constructive knowledge of the security interest at that time because the financing statement had been appropriately filed.

On September 2, 1988, the Kornegays sent Reisig a letter, through their attorney, demanding the return of the personal property listed on an attachment to the letter which included the Michigan and Fiat loaders. Subsequently, Reisig sold the Michigan loader to a third party in either August or September of 1989. In the summer of 1989, Reisig repaired the Fiat loader, used it in the cleanup of the Kornegays' property, and then removed it to his place of business in Morrill Nebraska. Reisig never did conduct a lien or title search with respect to the loaders or any other property in dispute.

On May 5, 1989, the Kornegays were in default on their promissory note and, on March 13, 1990, Rocky Mountain filed an action against the Kornegays to recover on the promissory note and against Reisig for converting to his own use collateral covered by the financing statement. Reisig notified Union of the action brought by Rocky Mountain, and Union advised Reisig, on March 13, 1991, that the Rocky Mountain claim was not covered by its policy, and it had no duty to defend the action. Specifically, Union told Reisig (1) there was no occurrence, (2) there was no property damage, and (3) there was a care, custody, and control exclusion, all of which resulted in there being no coverage under its CGL policy. On November 18, 1991, Reisig brought this action against Union, alleging breach of the insurance contract, bad faith, and negligence on the part of Union and seeking recovery of attorney fees. The district court granted a motion for summary judgment filed by Union, ruling there was no duty to defend Reisig in the third-party lawsuit and, therefore, there had been no breach of the contract by Union. This appeal is taken from that order.

In First Wyoming Bank, we set forth the pertinent criteria in arriving at a determination of a duty to defend on the part of an insurance company. We said:

Regarding the duty to defend, we have held that the duty of an insurer to defend a claim is broader than the duty of the insurer to indemnify. Aetna Ins. Co. v. Lythgoe, 618 P.2d 1057, 1061 (Wyo.1980) (citing Lanoue v. Fireman's Fund American Ins. Cos., 278 N.W.2d 49 (Minn.1979); Boston Ins. Co. v. Maddux Well Serv., 459 P.2d 777 (Wyo.1967)). Analysis of the duty to defend is not made based on the ultimate liability of the insurer to indemnify the insured or on the basis of whether the underlying action is groundless or unsuccessful. Lythgoe, 618 P.2d at 1061 (citing Employers' Fire Ins. Co. v. Beals, 103 R.I. 623, 240 A.2d 397 (1968); Burger v. Continental Nat'l American Group, 441 F.2d 1293 (6th Cir.1971)). Instead, we analyze the duty to defend by examining the facts alleged in the complaint that the claim is based upon. Lythgoe, 618 P.2d at 1061 n. 2. See also Garvis v. Employers Mut. Casualty Co., 497 N.W.2d 254, 258 (Minn.1993); County of Columbia v. Continental Ins. Co., 189 A.D.2d 391, 595 N.Y.S.2d 988, 990 (1993).

First Wyoming Bank, 860 P.2d at 1097.

The analysis of the facts alleged in the complaint upon which the claim is based is undertaken in the light of the language of the insurance policy. In order to determine whether Union owed a duty to defend Reisig in the litigation instituted by Rocky Mountain, we must compare the terms of the insurance policy with the allegations set forth in the complaint filed by Rocky Mountain.

The CGL policy issued by Union to Reisig states, in pertinent part (emphasis added):

COMMERCIAL GENERAL LIABILITY COVERAGE FORM

SECTION I--COVERAGES

COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. Insuring Agreement.

a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS--COVERAGES A AND B. This insurance applies only to "bodily injury" and "property damage" which occurs during the policy period. The "bodily injury" or "property damage" must be caused by an "occurrence." The "occurrence" must take place in the "coverage...