Strojnik v. General Ins. Co. of America

• Decision Date: 18 December 2001
• Docket Number: No. 1-CA-CV-00-0209.,1-CA-CV-00-0209.
• Citation: 201 Ariz. 430,36 P.3d 1200
• Parties: Peter STROJNIK and Tanya C. Strojnik, husband and wife, Plaintiffs-Appellants, v. GENERAL INSURANCE COMPANY OF AMERICA, a foreign insurer; and Safeco Corporation, Defendants-Appellees.
• Court: Arizona Court of Appeals

36 P.3d 1200

201 Ariz. 430

Peter STROJNIK and Tanya C. Strojnik, husband and wife, Plaintiffs-Appellants, v. GENERAL INSURANCE COMPANY OF AMERICA, a foreign insurer; and Safeco Corporation, Defendants-Appellees.

No. 1-CA-CV-00-0209.

Court of Appeals of Arizona, Division 1, Department A.

December 18, 2001.

William J. Downey, P.C., by William J. Downey, Phoenix, Attorneys for Plaintiffs-Appellants.

Browder & Kenney, P.C., by Robert W. Browder, Phoenix, Attorneys for Defendants-Appellees.

OPINION

TIMMER, Judge.

¶ 1 In a prior lawsuit, Peter and Tanya Strojnik sued the law firm of Diouguardi, Poli and Ball (the "Poli Firm") for malicious prosecution. The Poli Firm's insurer, General Insurance Company of America ("GICA"), contested coverage and therefore defended the firm under a reservation of rights. After the Strojniks and the Poli Firm negotiated the terms of a Morris agreement,¹ GICA and the firm resolved the coverage dispute, and, as a result, the Poli Firm refused to enter the Morris agreement.

¶ 2 The Strojniks then sued GICA for intentional interference with their prospective contract with the Poli Firm. The trial court denied the Strojniks' motion for partial summary judgment, entered summary judgment in favor of GICA, and the Strojniks appealed. We must decide whether the court correctly ruled that, as a matter of law, GICA did not improperly interfere with the Strojniks' prospective contract with the Poli Firm by inducing the firm to forego execution of the Morris agreement. For the reasons that follow, we decide that GICA did not improperly interfere with the Strojniks' prospective agreement with the Poli Firm and therefore affirm.

FACTUAL AND PROCEDURAL HISTORY

¶ 3 In 1990, the Poli Firm, on behalf of a client, sued the Strojniks for fraud, racketeering, and other charges. The trial court ultimately dismissed that complaint, and the Strojniks then filed a malicious prosecution action against the Poli Firm, seeking $2.5 million in damages.

¶ 4 The Poli Firm informed GICA, its legal malpractice carrier, of the Strojniks' claim. After evaluating the Strojniks' complaint, GICA notified the Poli Firm that although GICA would defend the firm against the claim, GICA reserved its rights to contest coverage in a later proceeding. GICA based its reservation of rights on the fact that the alleged tortious acts might constitute either a "knowingly wrongful act" or a reasonably foreseeable pre-existing claim, as defined in (and excluded from coverage by) the firm's insurance policy.

¶ 5 After learning of GICA's position on coverage, the Poli Firm commenced negotiations with the Strojniks to enter a Morris agreement. Under such an agreement, an insured being defended under a reservation of rights can properly enter a settlement agreement with the aggrieved party and stipulate to a judgment without breaching the cooperation clause contained in the insurance contract. Morris, 154 Ariz. at 119, 741 P.2d at 252. Such agreements are proper only if created fairly, with notice to the insurer, and without fraud or collusion on the insurer. Id. Assuming the insurer eventually loses the coverage contest, the plaintiff can collect its judgment against the insurer if the plaintiff proves that the judgment was not fraudulent or collusive and was fair and reasonable under the circumstances. Id. at 121, 741 P.2d at 254.

¶ 6 The Poli Firm and the Strojniks ultimately negotiated a Morris agreement, under which the firm would (1) stipulate to the entry of a judgment against it in the amount of $2.5 million, and (2) assign to the Strojniks its right to pursue any claims against GICA for failing to discharge its duties under the insurance contract. In return, the Strojniks would agree to refrain from executing its judgment against the Poli Firm.

¶ 7 As required by Morris, the Poli Firm notified GICA of the impending agreement and stated that unless GICA unconditionally withdrew its reservation of rights, the firm would enter the Morris agreement. The firm conveyed that it preferred not to enter the agreement but would be compelled to do so if GICA did not change its position. After receiving the Poli Firm's notification, GICA sent a representative to meet with the firm in an attempt to dissuade it from entering the Morris agreement. GICA was successful. After meeting with its insured, GICA and the Poli Firm entered a "Defense and Indemnification Agreement" (the "D & I"), consisting of the following, pertinent terms: (1) the Poli Firm agreed that no coverage existed under the GICA policy for the Strojniks' claim, (2) GICA agreed to continue defending the firm from the Strojniks' claim and to provide a limited amount of indemnity, with a maximum payment of $450,000.00, if the Strojniks prevailed or the parties settled the claim, and (3) the Poli Firm agreed not to enter any settlement agreement with the Strojniks without GICA's consent. As a result of the D & I, the Poli Firm did not enter the Morris agreement with the Strojniks.

¶ 8 The Strojniks then sued GICA for intentionally interfering with their prospective contractual relationship with the Poli Firm. In order to have prevailed on its intentional interference claim against GICA, the Strojniks needed to establish the following elements: (1) the existence of the prospective Morris agreement, (2) GICA's knowledge of the prospective agreement, (3) intentional acts by GICA that caused the Poli Firm to refrain from entering the Morris agreement, (4) the impropriety of GICA's interference, and (5) resulting damage to the Strojniks. Pasco Indus., Inc. v. Talco Recycling, Inc., 195 Ariz. 50, 62, ¶ 54, 985 P.2d 535, 547 (App.1998); Edwards v. Anaconda Co., 115 Ariz. 313, 315, 565 P.2d 190, 192 (App.1977).

¶ 9 The Strojniks unsuccessfully moved for partial summary judgment on whether GICA's alleged interference was "improper" as a matter of law. GICA then moved for summary judgment based on its contention that any interference was not legally "improper." The trial court granted this motion, ruling that GICA's actions were a good faith attempt to safeguard a legally protected interest, did not violate the law, and were therefore not improper. This appeal followed.²

STANDARD OF REVIEW

¶ 10 We review de novo the trial court's grant of summary judgment, viewing the evidence in the light most favorable to the Strojniks as the non-prevailing parties. L. Harvey Concrete, Inc. v. Agro Constr. & Supply Co., 189 Ariz. 178, 180, 939 P.2d 811, 813 (App.1997). The court properly entered summary judgment for GICA if no genuine issues of material fact existed and it was entitled to judgment as a matter of law. Ariz. R. Civ. P. 56(c); Orme School v. Reeves, 166 Ariz. 301, 305, 802 P.2d 1000, 1004 (1990).

¶ 11 The Strojniks also appeal from the court's denial of their motion for partial summary judgment. As GICA correctly notes, such orders are not ordinarily reviewed on appeal, even after entry of a final judgment. Bothell v. Two Point Acres, Inc., 192 Ariz. 313, 316, ¶ 7, 965 P.2d 47, 50 (App.1998). However, we may review the ruling when, as in this case, the court denied the motion on a point of law. Hauskins v. McGillicuddy, 175 Ariz. 42, 49, 852 P.2d 1226, 1233 (App.1992). We are additionally persuaded to review the denial of the Strojniks' motion because the issue presented in that motion was identical to the one tendered in GICA's successful motion. Because the court denied the Strojniks' motion based on its interpretation of statutory and common law, we review the ruling de novo. San Carlos Apache Tribe v. Superior Court, 193 Ariz. 195, 203,

¶ 9, 972 P.2d 179, 187 (1999).

DISCUSSION

I. Restatement (Second) of Torts § 773: Did GICA assert a "legally protected interest"?

¶ 12 The Strojniks first argue that the trial court erred by relying on Restatement (Second) of Torts ("Restatement") § 773 (1979) in concluding that GICA did not improperly interfere³ with the proposed Morris agreement. Section 773, followed by Arizona courts, provides as follows:

One who, by asserting in good faith a legally protected interest of his own or threatening in good faith to protect the interest by appropriate means, intentionally causes a third person not to perform an existing contract or enter into a prospective contractual relation with another does not interfere improperly with the other's relation if the actor believes that his interest may otherwise be impaired or destroyed by the performance of the contract or transaction.

Snow v. W. Sav. & Loan Ass'n, 152 Ariz. 27, 35, 730 P.2d 204, 212 (1986) (quoting Restatement § 773). The trial court, relying on § 773, ruled that the Strojniks had failed to demonstrate that GICA's intervention "to protect [its] own business interests" was improper as to means or objective, and GICA was therefore entitled to summary judgment.

¶ 13 The Strojniks argue that the trial court misapplied Restatement § 773 because GICA did not, in fact, possess a "legally protected interest" at the time it entered the D & I that would have been impaired by execution of the Morris agreement. Rather, the Strojniks contend, GICA merely possessed an economic interest in preventing the Poli Firm from entering the agreement. GICA counters that its "economic/business interests" emanating from the insurance policy issued to the Poli Firm were "legally protected" within the meaning of § 773, and GICA was thus entitled to interfere with execution of the Morris agreement pursuant to this provision.

¶ 14 An interest is "legally protected" within the meaning of Restatement § 773 if society recognizes the interest as so legitimate that everyone is under a duty not to invade it by interfering with its realization, and those who do so would be civilly liable to the possessor. Restatement § 1, cmt. d. An interest created by a valid, existing contract indisputably falls within this definition. Wyatt v. Ruck Const., Inc., 117 Ariz. 186, 190, 571 P.2d 683, 687 (App.1977) ("If a defendant...