Spruill Motors, Inc. v. Universal Underwriters Ins. Co.

• Decision Date: 14 July 1973
• Docket Number: No. 46930,46930
• Citation: 512 P.2d 403,212 Kan. 681
• Parties: SPRUILL MOTORS, INC., Appellant, v. UNIVERSAL UNDERWRITERS INSURANCE CO., Appellee.
• Court: Kansas Supreme Court

Page 403

512 P.2d 403

212 Kan. 681

SPRUILL MOTORS, INC., Appellant, v. UNIVERSAL UNDERWRITERS INSURANCE CO., Appellee.

No. 46930.

Supreme Court of Kansas.

July 14, 1973.

Syllabus by the Court

1. An insurer is not bound to defend its insured in an action brought wholly outside any coverate obligations assumed in the policy.

2. An insurer's duty to defend attaches where facts, extraneous to the allegations of the pleadings, known or reasonably ascertainable by insurer, make out a case against the insured covered by the policy. (Overruling Leonard v. Maryland Casualty Co., 158 Kan. 263, 146 P.2d 378, and Brown v. Green, 204 Kan. 802, 466 P.2d 299.)

3. If the facts known or reasonably ascertainable by insured give rise to the potentiality of liability under the policy, insurer bears the duty to defend.

4. Public policy prohibits insurance coverage for intentional and malicious acts.

5. The provisions of a liability insurance policy which include liability for an accident which results in bodily injury or property damage 'neither expected nor intended from the standpoint of the insured' is construed to provide coverage for an unintended injury resulting from an intentional act.

6. A liability insurance contract, by the use of language independent and unrelated to the provisions defining coverage, may extend the duty to defend beyond the coverage of the policy.

7. The issue of whether an insurance company failed to defend its insured or pay a claim without just cause or excuse under K.S.A. 40-256 (now K.S.A.1972 Supp. 40-256) must be determined under the facts, circumstances, and law existing at the time the action against its insured was filed.

8. The record is examined and it is held: the trial court erred in sustaining defendant's motion for summary judgment, in failing to sustain plaintiff's motion for summary judgment on the issue of coverage, and in failing to allow a reasonable attorney fee in the Rounkles action.

Kenneth C. Havner, of Larry L. Kopke Law Offices, Great Bend, argued the cause, and Larry L. Kopke, Great Bend, was with him on the brief for appellant.

Glenn E. Opie, Great Bend, argued the cause, and Fred L. Conner, Great Bend, was with him on the brief for appellee.

L. M. Cornish, Jr., and Edward B. Soule, of Glenn, Cornish & Leuenberger, Topeka, were on the brief for the Kansas Association of Property and Casualty insurance Companies, Inc., amicus curiae.

OWSLEY, Justice:

This is an action by Spruill Motors, Inc., to recover from its insurer, Universal Underwriters Insurance Company, the judgment entered and attorneys' fees incurred in defending a suit brought by a third party. Defendant insurance company refused to defend plaintiff insured because the petition alleged acts outside the coverage of plaintiff's liability insurance policy.

On November 15, 1968, Spruill was sued by Vernon Rounkles of Great Bend, Kansas, alleging personal injuries and property damage deliberately inflicted by Spruill's employees. The incident giving rise to Rounkles' allegations of intentional tort occurred at Spruill's garage on October 31, 1968. For some months prior to the incident, Rounkles and Spruill motors had disagreed over a bill for work done on Rounkles' 1962 Mercury automobile. Rounkles claimed the work was not proerly done and refused to pay. Spruill insisted upon payment and sued Rounkles for $651.16, the amount owed for repairs. After bringing the same automobile in for repairs following a subsequent accident, the automobile was sitting at Spruill's garage and Rounkles, thinking it was repaired and ready for him to pick up, drove it away. Spruill employees immediately retrieved the car from the driveway of Rounkles' home and took it back to Spruill's garage. Rounkles drove back to Spruill's garage in his pickup truck, parked it, and again drove his automobile to his home. While returning to get his truck, he saw Spruill employees towing it to their other business location one block away. Accounts of Rounkles and Spruill employees differ as to events which occurred thereafter. In his petition against Spruill, rounkles alleged that '. . . on seeing his truck being towed by the defendant's pickup, (plaintiff) went to the pickup and started to open the door on the right hand side, and the employee of the defendant, upon seeing the plaintiff, intentionally, maliciously and with intent to do great bodily harm to the plaintiff, ran over plaintiff's right foot. . . .' Rounkles' petition does not make clear which truck ran over his foot.

One of Spruill's employees testified by deposition he was driving the Spruill truck and was towing Rounkles' truck, and Rounkles did not come near enough to either truck to be hit or urn over. The employee guiding Rounkles' truck testified by deposition Rounkles jumped onto the running board of his own truck and tried to get him to stop, but he could not stop since Rounkles' truck was being towed. Rounkles jumped down immediately, according to the testimony of the drvier of Rounkles' truck, and he further testified he felt no bump or saw no reaction from Rounkles to indicate he had been run over or was hurt in any way. These same employees testified Rounkles gave no indication of being injured throughout the argument which continued for several hours at Spruill's garage. Rounkles insisted Spruill could not keep his truck and threatened to back it out through the closed garage doors. Police were called into the melee.

Rounkles' petition alleged intentional torts by Spruill and sought $25,000 damages for personal injury, pain and suffering, humiliation, loss of use of his automobile and truck, mental anguish, loss of profit, and punitive damages. Defendant Spruill denied the allegations of intentional tort, and its cross-appeal incorporated its pending suit against Rounkles for the $651.16 repair bill.

Universal Underwriters Insurance Company sent letters dated December 17 and 18, 1968, to Spruill Motors, Inc., and its attorney, reserving rights to deny coverage even though continuing to investigate the incident and defend Spruill. Insurer's attorneys officially withdrew from the defense of Spruill on September 4, 1969.

The Rounkles v. Spruill Motors Corporation case was tried without a jury on January 9, 1970, and resulted in judgment against Spruill for $2,500.00 and costs from which was deducted the cost of repairs to Rounkles' car. The judgment paid by Spruill amounted to $2,345.95.

Plaintiff filed the present action against Universal Underwriters Insurance Company on April 3, 1970, seeking $3,448.04 as reimbursement for the judgment and attorney fees in the Rounkles case and seeking costs and attorney fees incurred in the case at bar against its insurer.

Defendant herein, Universal Underwriters, answered denying it had any duty to pay attorney fees or judgment against its insured because Rounkles' petition alleged injuries due to insured's intentional torts. Universal Underwriters contends such intentional acts are outside the coverage of Spruill's liability insurance contract with the company for two reasons: (1) it is against public policy to insure anyone against the results of his intentional torts, and (2) they are specifically excluded from the definition of 'occurrences' against which Spruill is insured. The policy provides:

'The company will pay on behalf of insured all sums which the insured shall become legally obigated to pay as damages because of bodily injury or property damage to which this insurance applies caused by an occurrence and arising out of garage operations, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damages, even if any of the allegations of the suit are groundless, false or fraudulent . . .'

"Occurrence' means an accident, including injurious exposure to conditions, which results, during the policy period, in bodily injury or property damage neither expected nor intended from the standpoint of the insured.'

Defendant's motion for summary judgment was sustained. In its memorandum decision the court found there was no ambiguity in the clauses of the insurance policy setting forth the liability coverage and insurer's duty to defend, nor was there any issue as to the material facts of the case. The trial court based its decision on Gowing v. Great Plains Mutual Ins. Co., 207 Kan. 78, 483 P.2d 1072, which holds an ambiguous exclusionary clause in an insurance contract should be construed to favor the interpretation of the insured. The trial court, finding no ambiguity in Spruill's contract, construed the coverage and exclusionary clauses in the insurer's favor, denying recovery to plaintiff. Plaintiff appeals the court's order on both procedural and substantive grounds.

An insurer's duty to defend has been considered by this court on several occasions. In EL Dorado Refining Co. v. United States Fidelity & G. Co., 157 Kan. 198, 139 P.2d 369, we stated the insurer is not bound to defend the insured in actions brought wholly outside any coverage obligations assumed in the policy or when the insurer would have no liability if plaintiff secured a judgment against the insured. We adhere to this rule and hold that where there is no coverage there is no duty to defend.

In Leonard v. Maryland Casualty Co., 158 Kan. 263, 146 P.2d 378, the insured brought an action against his carrier for attorney fees expended in successfully defending an action for wrongful death. The insured had refused to defend on the ground the petition alleged the deceased was acting in the scope of his employment with the insured at the time of his death, and the policy excluded any obligation for which the insured could he held liable under the Workmen's Compensation Law. The following rules emerged:

'The obligation of an insurer, under an automobile liability policy, to defend an action for damages against the insured, is to be determined when...