Shelter Mut. Ins. Co. v. Ballew

• Decision Date: 24 October 2006
• Docket Number: No. WD 65618, No. WD 65650.
• Citation: 203 S.W.3d 789
• Parties: SHELTER MUTUAL INSURANCE COMPANY, Respondent, v. Glen Eugene BALLEW, Diana Rose Ballew, Christopher Robles and Georgetta Robles, Appellants.
• Court: Missouri Court of Appeals

203 S.W.3d 789

SHELTER MUTUAL INSURANCE COMPANY, Respondent, v. Glen Eugene BALLEW, Diana Rose Ballew, Christopher Robles and Georgetta Robles, Appellants.

Nos. WD 65618, WD 65650.

Missouri Court of Appeals, Western District.

October 24, 2006.

Nikki Cannezzaro, John L. Mullen, Kansas City, MO, for respondent.

Margaret E. Dean, Kansas City, MO, for appellants Ballew.

William G. Cownie, Lee's Summit, MO, for appellants Robles.

Before HOWARD, P.J., and ELLIS and HARDWICK, JJ.

VICTOR C. HOWARD, Presiding Judge.

Glenn and Diana Ballew ("Ballews") and Christopher and Georgetta Robles ("Robleses") appeal the Circuit Court of Cass County's grant of summary judgment in favor of Shelter Mutual Insurance Company ("Shelter"). The sole issue on appeal is whether the trial court erred in granting Shelter's Motion for Summary Judgment based on its finding that the "property owned by an insured" exclusion applied. We hold that Shelter did not have a duty to defend or indemnify the Ballews.

Factual and Procedural Background

On December 5, 2000, the Ballews entered into a contract to sell their home to the Robleses. After purchasing the residence, the Robleses discovered a number of deficiencies with the home and on July 8, 2002, filed suit in the Circuit Court of Cass County against the Ballews ("underlying action"), alleging five separate counts, including a claim for negligent misrepresentation.¹ The Ballews tendered the defense of the underlying action to Shelter based on their Homeowner's Policy and their Personal Umbrella Policy (collectively referred to as "policies").² Subsequently, Shelter filed a Petition for Declaratory Judgment, asserting that based on the allegations contained in the underlying action, it did not have a duty to defend or indemnify the Ballews under the terms of either of the policies. Shelter moved for Summary Judgment on the issue of coverage. Based on the Ballews' response to Shelter's Motion for Summary Judgment,³ the only remaining issue for the trial court to determine was whether the Homeowner's Policy and/or the Personal Umbrella Policy issued by Shelter to the Ballews provided coverage for the negligent misrepresentation claim in the underlying action.

The trial court granted Shelter's Motion for Summary Judgment, finding that the coverage was expressly excluded by the "property owned by an insured" exclusion in both policies. The trial court found that the negligent misrepresentation claim asserted by the Robleses in the underlying action was one for property damage to property owned by an insured, and, thus, based on the express language of the policies, Shelter had no duty to defend or indemnify the Ballews.

Standard of Review

Appellate review of summary judgment is de novo, with no deference given to the trial court's ruling. ITT Commercial Fin. Corp. v. Mid-Am. Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). Pursuant to Rule 74.04(c)(6), "[s]ummary judgment is appropriate when there are no genuine issues of material fact, and the movant is entitled to judgment as a matter of law." Johnson v. Mo. Dep't of Corr., 166 S.W.3d 110, 111 (Mo.App. W.D.2005). A court-tried declaratory judgment action involving the "interpretation of an insurance policy is a question of law, and the trial court receives no deference." Auto. Club Inter-Ins. Exch. v. Medrano, 83 S.W.3d 632, 637 (Mo.App. E.D.2002).

Discussion

The sole issue on appeal is whether the trial court erred in granting Shelter's Motion for Summary Judgment based on its finding that the "property owned by an insured" exclusion applied and, therefore, Shelter did not have a duty to defend or indemnify the Ballews.

An insurer's duty to defend is based on the allegations of an underlying action and the terms of the insurance policy. Citizens Ins. Co. of Am. v. Leiendecker, 962 S.W.2d 446, 450 (Mo.App. E.D. 1998). Whether an underlying petition has alleged a claim that is covered by the terms of the insurance policy is a legal question, which is not dependent on a factual determination of the underlying claims. Id.⁴

Even though it is an insurer that brings a declaratory judgment action, the insured has the burden of proving that the underlying action is covered by the insurance policy. Auto. Club Inter-Ins. Exch. v. Medrano, 83 S.W.3d 632, 638 (Mo.App. E.D.2002). The insurer bears the burden of establishing that an exclusion to coverage applies. Id.

In the underlying action, the Robleses allege negligent misrepresentation. In their petition, they pray for judgment in their favor in the form of property damages, specifically the cost of repairs. The Ballews argue that a duty to defend arises under the Homeowner's Policy based on the "Comprehensive Personal Liability Protection" section⁵ and under the Personal Umbrella Policy based on the "Personal Liability" coverage,⁶ which defines a personal injury to include "misrepresentation."⁷ They claim both of these provisions obligate Shelter to defend the Ballews in claims for "property damage," such as the Robleses have alleged in their petition in the underlying action.

Shelter responds to these arguments by pointing to the "property owned" exclusions found in both policies.⁸ In both of the policies, the express language excludes coverage of "property damage" to "property owned by an insured." In the underlying action, the Robleses have prayed for such property damage, the cost of repairs. The question then becomes whether the property damage is "to property owned by an insured," the Ballews. To answer this question, what the Robleses are alleging must be considered.

In the underlying action, the Robleses allege that during the sale of the home: the Ballews represented to them that the residence was free of defects; that these representations were false; that the Robleses relied on the representations of the Ballews; and as a result, suffered damages "in the form of necessary repairs to their home."⁹ Implicit in these allegations is the fact that these defects existed prior to the sale of the home to the Robleses. The type of negligence that is claimed in the underlying action is that which would have had to occur while the Ballews owned the property. See generally Wickner v. Am. Reliance Ins. Co., 141 N.J. 392, 661 A.2d 1256 (1995). Otherwise, there would have been no false representations. Thus, it was property damage to property owned by the Ballews that gave rise to this cause of action.

As previously mentioned, whether an underlying petition has alleged a claim that is covered by the terms of the insurance policy is not dependent on a factual determination of the underlying claims, it is a legal question to be determined based on the allegations contained in the petition. See Leiendecker, 962 S.W.2d at 450. The Ballews argue that the specific damage the Robleses complain of did not occur until after the sale had been completed. This is irrelevant. Whether, in fact, damage occurred to the property before or after the sale is a question to be determined in the underlying action and is not the subject of this declaratory judgment action.¹⁰

The Ballews contend that the "property owned" exclusion should not apply in this case. They first argue that because the exclusion is in regard to "property damage" and not "personal injury," it does not apply to the negligent misrepresentation claim. In support of this argument, they cite the California Court of Appeals case General Accident Insurance Company v. West American Insurance Company, for the holding that "[u]nlike liability coverage for property damage or bodily injury, personal injury coverage is not based on an accidental occurrence. Rather, it is triggered by one of the offenses listed in the policy." 42 Cal.App.4th 95, 49 Cal.Rptr.2d 603, 606 (1996).

In this case, the Ballews are attempting to use the way the Robleses labeled their allegations in the underlying action to avoid the exclusion. In doing this, they are relying on the distinction in the Personal Umbrella Policy between "property damage" and "personal injury," which by definition in the policy includes "misrepresentation." However, what they fail to recognize is, regardless of what the Robleses title their cause of action, what they are praying for is ultimately property damages, i.e., the cost of repairs. The Personal Umbrella Policy explicitly states that it will pay "damages," which "result from personal injury or property damage." (Emphasis added.) However, as discussed more fully above, there is an exclusion to "property damage to property owned by an insured." The Ballews are confusing what can cause the damage — a personal injury, such as misrepresentation — with the damage itself, in this case, the cost of repairs, which is property damage. This property damage is excluded from coverage under the Personal Umbrella Policy because it was damage to "property owned by an insured" as discussed above. Therefore, regardless of what type of claim the Robleses bring, ultimately it is for "property damage to property owned by an insured" and is excluded from coverage. This point is denied.

In their second point, the Ballews argue that the "property owned" exclusion should not apply because it is ambiguous. "An ambiguity arises when there is duplicity, indistinctness, or uncertainty in the meaning of words used in the contract." Krombach v. Mayflower Ins. Co., 827 S.W.2d 208, 210 (Mo. banc 1992). The language "will be viewed in the meaning that would ordinarily be understood by the layman who bought and paid for the policy." Id. A phrase is not read in isolation; instead, the policy is read as a whole. Leiendecker, 962 S.W.2d at 451.

When a policy is found to be ambiguous, it will be construed against the insurer. Krombach, 827 S.W.2d at 210. If a policy is found unambiguous, the rules of construction will not be applied and absent public policy to the contrary, the policy is enforced as written. Id. We "will not create an ambiguity in order to...