Standard Fire Ins. Co. v. Blakeslee

• Decision Date: 27 April 1989
• Docket Number: No. 11331-7-II,11331-7-II
• Citation: 771 P.2d 1172,54 Wn.App. 1
• Parties: The STANDARD FIRE INSURANCE COMPANY, Respondent, v. George G. BLAKESLEE, Jr., D.M.D., P.S., and Jeanne Blakeslee, individually and as husband and wife, including the marital community composed thereof; Sherry Boose, individually and as Guardian Ad Litem for Carolyn Boose, a minor, Appellants.
• Court: Washington Court of Appeals

Page 1

54 Wn.App. 1

771 P.2d 1172

The STANDARD FIRE INSURANCE COMPANY, Respondent, v. George G. BLAKESLEE, Jr., D.M.D., P.S., and Jeanne Blakeslee, individually and as husband and wife, including the marital community composed thereof; Sherry Boose individually and as Guardian Ad Litem for Carolyn Boose, a minor, Appellants.

No. 11331-7-II.

Court of Appeals of Washington Division 2.

April 27, 1989.

Ben Shafton, Morse & Bratt, Vancouver, for appellants.

George G. Blakeslee, Portland, Or., pro se.

Douglas F. Foley, Vancouver, R. Daniel Lindahl, Bullivant, Houser, Bailey, Pendergrass & Hoffman, Portland, Or., for Standard Fire.

ALEXANDER, Chief Judge.

Carolyn Boose, third-party plaintiff in a declaratory judgment action against defendant Blakeslee, appeals an order of summary judgment granted to Standard Fire Insurance Co. (Standard). She contends that the trial court erred in holding that Standard had no obligation as an insurer under its policy of insurance with the insureds, George Blakeslee, Jr., D.M.D., and George Blakeslee, Jr., D.M.D., P.S., a Professional Services Corporation, for damages arising out of a sexual assault upon Boose by George Blakeslee, while Blakeslee was in the course of rendering dental care to Boose. We affirm.

In June 1985, Carolyn Boose sought the dental services of Dr. George Blakeslee. Blakeslee proposed to fill two cavities in her teeth, and as part of the procedure he administered nitrous oxide to Boose. Boose was rendered semi-conscious by the drug and while she was in this state, Blakeslee lifted her shirt and fondled one of her breasts. Blakeslee was subsequently charged with, and pled guilty to, the crime of indecent liberties arising out of the incident.

Prior to the incident in question, Blakeslee had incorporated his dental practice as a professional services corporation. He was the corporation's sole shareholder, officer, and director. The corporation thereafter executed an employment agreement with Blakeslee. Blakeslee signed the agreement both as an employee of the corporation and as its president.

At the time of the incident in question, Blakeslee and the corporation were together covered by a policy of insurance with Standard which provided general and professional liability coverage. The general liability portion of the policy provided coverage for bodily injury or property damage caused by an "occurrence" arising out of the use of the insured premises. The insurance contract defined "occurrence" as:

... an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected or intended by the insured; ...

(Italics ours.)

The professional liability portion of the policy limited coverage to damages for:

injury ... arising out of the rendering of or failure to render, during the policy period, professional services by the individual insured, or by any person for whose acts or omissions such insured is legally responsible, ... ¹

In November 1985, Boose commenced an action against Blakeslee and the professional services corporation for the damages she allegedly sustained as a result of Blakeslee's conduct. Standard subsequently commenced this declaratory judgment action against Boose and Blakeslee in order to obtain a declaration of its rights and duties in connection with the lawsuit by Boose against Blakeslee and the corporation. All parties moved for summary judgment. The trial court granted judgment to Standard, concluding that Standard had no duty to defend or indemnify the insureds (i.e., Blakeslee and the corporation), against Boose's claim. Blakeslee and Boose each moved for reconsideration and the motions were denied. Boose appeals the order of summary judgment, contending the trial court erred in denying coverage to the corporation under the general liability portion of the policy; and in denying coverage to both Blakeslee and the corporation under the professional liability portion of the policy.

In reviewing a summary judgment, this court makes the same inquiry as did the trial court. Donald v. Vancouver, 43 Wash.App. 880, 883, 719 P.2d 966 (1986). In determining whether a summary judgment was properly granted, an appellate court must consider the evidence and reasonable inferences therefrom in the light most favorable to the nonmoving party. Johnson v. Schafer, 110 Wash.2d 546, 548, 756 P.2d 134 (1988). Summary judgment should be granted only if the pleadings, depositions, answers to interrogatories, admissions and affidavits show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. CR 56(c); Johnson, 110 Wash.2d at 548, 756 P.2d 134. Here, there is no real factual dispute about Blakeslee's conduct nor about his relationship to the corporation. Consequently, resolution of the issue of coverage under the general and professional liability portions of the policy present questions of law properly decided by summary judgment. See State Farm Gen. Ins. Co. v. Emerson, 102 Wash.2d 477, 687 P.2d 1139 (1984) (Insurance policies are to be construed as contracts, and interpretation is a matter of law).

I. Coverage Under the General Liability Provisions of the Policy

As noted above, the general liability portion of the policy in question precludes coverage for injuries which are "intended" by the insured. Generally, there must be a showing of a subjective intent to injure on the part of the insured in order for coverage to be excluded under such a clause. Rodriguez v. Williams, 107 Wash.2d 381, 729 P.2d 627 (1986). In sexual abuse cases, however, our Supreme Court has held that an intent to injure is presumed as a matter of law. Rodriguez, 107 Wash.2d at 387, 729 P.2d 627. Accordingly, Boose concedes that Blakeslee, as an individual, is not entitled to coverage under the general liability portion of the policy.

The exclusion of coverage for Blakeslee as an individual, however, does not necessarily preclude coverage for the corporation which is a separate insured under the policy in question. It is well-established that where coverage under a policy of insurance is defined in terms of the "insured," the contract between the insurer and several insureds is to be considered separable, rather than joint; the result being that an act which excludes one insured from coverage does not bar coverage for additional insureds who have not engaged in the same conduct. Unigard Mut. Ins. Co. v. Spokane School Dist. No. 81, 20 Wash.App. 261, 266, 579 P.2d 1015 (1978). Because a corporation exists as an entity distinct from its shareholders, State v. Northwest Magnesite Co., 28 Wash.2d 1, 41, 182 P.2d 643 (1947), Boose contends that Blakeslee's employer (i.e., George Blakeslee, Jr., D.M.D., P.S.), is entitled to coverage under the policy for Blakeslee's act, notwithstanding the fact that Blakeslee, individually, is excluded from coverage. A question on appeal, therefore, is whether the corporation can be said to have expected or intended the injuries inflicted upon Boose by Blakeslee individually so as to preclude coverage for the corporation. For reasons that follow, we conclude that Blakeslee's intent to injure is to be ascribed to the corporation, thus defeating coverage for the corporation under the general liability portion of the policy.

With regard to corporations, Washington long has recognized the "alter ego" doctrine, which provides:

Where a private person so dominates and controls a corporation that such corporation is his alter ego, a court is justified in piercing the veil of corporate entity and holding that the corporation and private person are one and the same.

(Italics original.)

Pohlman Inv. Co. v. Virginia City Gold Mining Co., 184 Wash. 273, 283, 51 P.2d 363 (1935). Although this doctrine most commonly has been invoked to impose personal liability upon corporate officers for fraud committed by a corporation, it also has been recognized as imposing liability on a corporation for individual acts of shareholders who owned all or substantially all of the corporation's stock. In Roberts v. Hilton Land Co., 45 Wash. 464, 88 P. 946 (1907), a shareholder who owned 98 percent of the corporation's stock contracted individually to sell land, title to which belonged in the corporation. The shareholder subsequently attempted to rescind the contract, claiming that the land was owned by the corporation. In denying rescission, the court invoked the alter ego doctrine and compelled the corporation to convey the land to the purchaser. It found that the corporation and the individual were one and the same, and hence the act of the individual was the act of the corporation. Roberts, 45 Wash. at 468, 88 P. 946. This doctrine was similarly applied in Pohlman Inv. Co. v. Virginia City Gold Mining Co., supra, to defeat a corporation's claim to enforce a contract which its president, while acting as a trustee of the defendant corporation, consented to cancel. Pohlman, 184 Wash. at 273, 283, 51 P.2d 363.

Here, the undisputed facts establish that Blakeslee is the corporation's sole officer, director and shareholder. Under these circumstances, Blakeslee clearly is the corporation's alter ego and we conclude, therefore, that his acts were those of the corporation, and vice-versa.

Boose contends, however, that to impute Blakeslee's conduct to the corporation is to disregard the corporate entity. She argues that such action is not justifiable unless it can be shown that the corporate form was intentionally used to violate or evade a duty owed to a third person. See Morgan v. Burks, 93 Wash.2d 580, 585, 611 P.2d 751 (1980). The cases cited by appellant, however, deal with the disregard of the corporate entity for the purpose of imposing personal liability upon the shareholders. Application of the alter ego doctrine to attribute to a corporation the acts of its officers and directors does not, contrary to appellant's assertion,...