Tackett v. American Motorists Ins. Co.

• Decision Date: 28 February 2003
• Docket Number: No. 30633.,30633.
• Citation: 584 S.E.2d 158,213 W.Va. 524
• Court: West Virginia Supreme Court
• Parties: Steven TACKETT, Plaintiff Below, Appellant, v. AMERICAN MOTORISTS INSURANCE COMPANY, a Foreign Corporation, Defendant Below, Appellee.

584 S.E.2d 158

213 W.Va. 524

Steven TACKETT, Plaintiff Below, Appellant, v. AMERICAN MOTORISTS INSURANCE COMPANY, a Foreign Corporation, Defendant Below, Appellee.

No. 30633.

Supreme Court of Appeals of West Virginia.

Submitted January 15, 2003.

Decided February 28, 2003.

Concurring and Dissenting Opinion of Chief Justice Starcher July 11, 2003.

John J. Polak, Esq., Rose & Atkinson, Charleston, West Virginia, Attorney for the Appellant.

Robert A. Lockhart, Esq., David R. Schuda, Esq., Schuda & Associates, PLLC, Charleston, West Virginia, Attorneys for the Appellee. DAVIS, Justice:

The appellant herein and plaintiff below, Steven Tackett [hereinafter referred to as "Mr. Tackett"], appeals from an October 30, 2001, order entered by the Circuit Court of Cabell County. In that order, the circuit court, ruling in favor of the appellee herein and defendant below, American Motorists Insurance Company [hereinafter referred to as "American Motorists"], granted summary judgment to American Motorists and denied Mr. Tackett's claim for such relief. The court concluded that, although American Motorists had defended its insured, Mr. Tackett's former employer, in a related lawsuit arising from Mr. Tackett's alleged intentional sexual misconduct in his capacity as an employee, it was not similarly required to provide a defense for Mr. Tackett in said proceeding. On appeal to this Court, Mr. Tackett claims that the circuit court erred and that American Motorists was obligated to provide him legal representation in the related proceeding. Upon a review of the parties' arguments, the record submitted on appeal, and the pertinent authorities, we conclude that American Motorists had a duty to defend Mr. Tackett in the aforementioned lawsuit. Accordingly, we reverse the circuit court's October 30, 2001, order finding no such duty existed and remand this case for further proceedings consistent with this Opinion.

I.

FACTUAL AND PROCEDURAL HISTORY

The facts upon which the circuit court based its decision are as follows. In April, 1997, Mr. Tackett was employed as an assistant manager by Gadzooks, Inc., a nationwide clothing retailer with a store in the Huntington Mall. On or about April 19, 1997, K.M.L.¹ [hereinafter referred to as "Miss L."], a fifteen-year-old female, was a customer at said Gadzooks store and was assisted by Mr. Tackett. In a complaint filed September 30, 1997, by Miss L. and her parents in the Circuit Court of Cabell County against Gadzooks and Mr. Tackett, Miss L. alleged that, while she was shopping at Gadzooks, Mr. Tackett subjected her to various acts of sexual misconduct:

On or about April 19, 1997, the Plaintiff [K.M.L.], while shopping in the Defendant's [Gadzooks'] Store, was attended to by the Defendant, Tackett. At said time and place, the Plaintiff, [K.M.L.], was fifteen (15) years of age. At said time and place, and while the Plaintiff was within the said retail Store, the Defendant, Tackett, while in the course and scope of his employment, sexually harassed, molested, and violated the infant Plaintiff, by, among other things, making sexual innuendos to the Plaintiff; touching the Plaintiff on various parts of her body, including her breasts; entering the sanctity of her dressing room, when the said infant Plaintiff was disrobed while trying on clothes; reaching his hands under the blouse that the Plaintiff was trying on; and by doing all of the above in front of another individual.

K.M.L. v. Gadzooks, Inc., No. 97-C-0772, Complaint at ¶ 6 (Cir. Ct. Cabell County, W. Va. filed Sept. 30, 1997). As a result of this complaint, American Motorists, from whom the corporate offices of Gadzooks had obtained a commercial general liability insurance policy, provided counsel to represent the Huntington Gadzooks store in its defense of this lawsuit.² American Motorists refused, however, to represent Mr. Tackett in this matter. Consequently, Mr. Tackett was required to obtain his own defense counsel. Ultimately, the L. family reached and entered into a settlement agreement with the defendants, Gadzooks and Mr. Tackett.³

Following this settlement, Mr. Tackett filed a declaratory judgment action against American Motorists in the Circuit Court of Cabell County, on June 16, 2000, seeking to recoup the legal expenses he incurred in his defense of the L. family's lawsuit.⁴ Following the parties' motions for summary judgment, the circuit court, by order entered October 30, 2001, rejected Mr. Tackett's motion and granted summary judgment to American Motorists finding that the insurance company was not obligated to defend Mr. Tackett in the L. family's lawsuit. In short, the circuit court determined that American Motorists did not have a duty to defend Mr. Tackett as to Miss L.'s sexual harassment claim because the policy contained an "intentional injury" exclusion. Similarly, the court concluded that the conduct allegedly attributed to Mr. Tackett was "entirely foreign to the risk that was insured against" and therefore not covered by the subject insurance policy or American Motorists' duty to defend thereunder. Lastly, the court found that American Motorists' failure to issue a reservation of rights in connection with its defense of Gadzooks was not dispositive of the existence of a duty to defend Mr. Tackett in the same matter. From these rulings of the circuit court, Mr. Tackett appeals to this Court.

II.

STANDARD OF REVIEW

Procedurally, the instant appeal is before this Court as a result of the circuit court's grant of summary judgment to American Motorists and its denial of summary relief to Mr. Tackett. Typically, we apply a plenary review to a circuit court's entry of summary judgment. "A circuit court's entry of summary judgment is reviewed de novo." Syl. pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994). Similarly, when review of a circuit court's denial of summary judgment is properly before this Court, we examine anew the circuit court's ruling. "This Court reviews de novo the denial of a motion for summary judgment, where such a ruling is properly reviewable by this Court." Syl. pt. 1, Findley v. State Farm Mut. Auto. Ins. Co., 213 W.Va. 80, 576 S.E.2d 807 (2002).⁵ Furthermore, the instant appeal requires this Court to review the terms of the insurance policy at issue herein. Generally, "[d]etermination of the proper coverage of an insurance contract when the facts are not in dispute is a question of law." Syl. pt. 1, Tennant v. Smallwood, 211 W.Va. 703, 568 S.E.2d 10 (2002). As such, we will also apply a de novo standard of review to these rulings of the circuit court. "The interpretation of an insurance contract, including the question of whether the contract is ambiguous, is a legal determination that, like a lower court's grant of summary judgement, shall be reviewed de novo on appeal." Syl. pt. 2, Riffe v. Home Finders Assocs., Inc., 205 W.Va. 216, 517 S.E.2d 313 (1999). See also Syl. pt. 1, Chrystal R.M. v. Charlie A.L., 194 W.Va. 138, 459 S.E.2d 415 (1995) ("Where the issue on an appeal from the circuit court is clearly a question of law or involving an interpretation of a statute, we apply a de novo standard of review."). With these standards in mind, we proceed to consider the parties' arguments.

III.

DISCUSSION

The assignments of error raised by Mr. Tackett in the instant proceeding may be succinctly summarized as follows: does an insurer have a duty to defend its insured's employee in a cause of action alleging that the employee, in his/her capacity as such, intentionally caused personal injury to a third party? Before reaching the specific issues pertinent to the case sub judice, it is instructive to first re-examine the jurisprudence of this State addressing an insurer's duty to defend its insured.

A contract for indemnification from loss typically also includes a provision whereby the insuring entity agrees to provide legal representation to said insured with respect to any claims filed against him/her for which the subject policy provides coverage. This type of arrangement has come to be known as the insurer's duty to defend. See, e.g., Black's Law Dictionary 523 (7th ed.1999) (defining "duty-to-defend clause" as "[a] liability-insurance provision obligating the insurer to take over the defense of any lawsuit brought by a third party against the insured on a claim that falls within the policy's coverage"). Unquestionably, the terms of the pertinent insurance contract govern the parties' relationship and define the scope of coverage as well as the existence of the insurer's duty to defend its insured.

Less certain, however, is the extent of such a duty. In this regard, we have held that "included in the consideration of whether [an] insurer has a duty to defend is whether the allegations in the complaint ... are reasonably susceptible of an interpretation that the claim may be covered by the terms of the insurance polic[y]." Syl. pt. 3, in part, Bruceton Bank v. United States Fid. & Guar. Ins. Co., 199 W.Va. 548, 486 S.E.2d 19 (1997).⁶ However, "`[t]here is no requirement that the facts alleged in the complaint specifically and unequivocally make out a claim within the coverage.'" Aetna Cas. & Sur. Co. v. Pitrolo, 176 W.Va. 190, 194, 342 S.E.2d 156, 160 (1986) (quoting Union Mut. Fire Ins. Co. v. Inhabitants of Town of Topsham, 441 A.2d 1012, 1015 (Me.1982)).⁷ Thus, "the duty to defend an insured may be broader than the obligation to pay under a particular policy. This ordinarily arises by virtue of language in the ordinary liability policy that obligates the insurer to defend even though the suit is groundless, false, or fraudulent." Pitrolo, 176 W.Va. at 194,342 S.E.2d at 160 (citations omitted). In other words, "if part of the claims against an insured fall within the coverage of a liability insurance policy and part do not, the insurer must defend all of the claims, although it might eventually be required to pay only some of the claims." Horace Mann...