Transamerica Ins. Co. v. Preston

• Decision Date: 04 August 1981
• Docket Number: No. 3894-III-7,3894-III-7
• Citation: 30 Wn.App. 101,632 P.2d 900
• Court: Washington Court of Appeals
• Parties: TRANSAMERICA INSURANCE COMPANY, Respondent, v. David L. PRESTON and Ruth Mary Preston, husband and wife, Appellants, and Chicago, Milwaukee, St. Paul and Pacific R.R., Respondent.

Page 101

30 Wn.App. 101

632 P.2d 900

TRANSAMERICA INSURANCE COMPANY, Respondent, v. David L. PRESTON and Ruth Mary Preston, husband and wife, Appellants, and Chicago, Milwaukee, St. Paul and Pacific R.R., Respondent.

No. 3894-III-7.

Court of Appeals of Washington, Division 3, Panel Four.

Aug. 4, 1981.

William Wimberley, Richter, Wimberley & Ericson, Spokane, for appellants.

Patrick Shine, Robert J. Crotty, Lukins & Annis, Spokane, for Transamerica Ins. Co.

James E. Nelson, Seattle, for Chicago, Milwaukee, St. Paul and Pac. R.R.

GREEN, Judge.

David L. and Ruth M. Preston appeal the granting of a summary judgment in favor of Transamerica Insurance Co. The issue presented is whether Transamerica, who issued a farm owner's/ranch owner's liability policy to the Prestons, must defend a third party complaint brought against them by the Chicago, Milwaukee, St. Paul and Pacific Railroad. ¹

The facts were stipulated by the parties on cross-motions for summary judgment. Mr. Preston was a locomotive engineer for the Milwaukee Railroad. On February 19, 1977, the freight train he was operating collided with another train near Pandora, Washington. The injured parties brought suit against the Milwaukee Railroad who, in turn, filed a third party complaint against the Prestons for indemnity alleging the collision

was solely caused by the negligent, reckless, deliberate and wanton and willful misconduct of David L. Preston ... in violating, ignoring and purposely acting contrary to instructions, rules and orders of (his) employer, the Milwaukee Road. That all acts of (Mr. Preston) ... were beyond the scope of (his) employment by Milwaukee Road, and contrary to and in breach of (his) respective employment contract with Milwaukee Road.

The third party complaint further alleges the Prestons are liable for damages to railroad property.

The Prestons tendered the defense to Transamerica, their insurer. Transamerica rejected the tender, claiming the occurrence was not covered by the policy because of certain exclusions, and commenced this declaratory judgment action. It then moved for summary judgment claiming it had no duty to defend the action. This motion was granted and the Prestons appeal.

The Prestons contend the court erred in granting summary judgment because it failed to find a duty to defend exists based solely on the allegations in the complaint. They point out the policy requires Transamerica to defend any suit against the insured "even if ... the allegations of the suit are groundless, false or fraudulent, ..." We find no error.

It is true an insurer's duty to defend, unlike its duty to pay, arises when the complaint is filed and is to be determined from the allegations in that complaint. Holland America Ins. Co. v. National Indemnity Co., 75 Wash.2d 909, 911, 454 P.2d 383 (1969); Hering v. St. Paul-Mercury Indemnity Co., 50 Wash.2d 321, 324, 311 P.2d 673 (1957); National Steel Constr. Co. v. National Union Fire Ins. Co., 14 Wash.App. 573, 575, 543 P.2d 642 (1975); Yakima Cement Products Co. v. Great American Ins. Co., 14 Wash.App. 557, 544 P.2d 763 (1975). However, in determining whether the insurer has a duty to defend, the test to be applied is whether the facts alleged in the complaint, if proved, would render the insurer liable under the policy. Seaboard Surety Co. v. Ralph Williams' Northwest Chrysler Plymouth, Inc., 81 Wash.2d 740, 741, 504 P.2d 1139 (1973); National Steel Constr. Co., supra, 14 Wash.App. at 574, 543 P.2d 642. Thus, the insurer has a duty to defend only if, from the facts alleged in the complaint, it would have a duty to pay. Consequently, we must look to other provisions of the policy to determine if there is coverage for the alleged facts.

The policy covers bodily injury or property damage caused by an accident "to which this insurance applies" and Transamerica will defend a suit "seeking damages on account of such bodily injury or property damage." (Italics ours.) The policy excludes coverage for

bodily injury or property damage arising out of business pursuits of any Insured except activities therein which are ordinarily incident to nonbusiness pursuits or farming.

If the facts alleged by the Prestons fall within this business pursuits exclusion, Transamerica has no duty to defend and summary judgment was properly granted.

The Prestons contend the "business pursuits" exclusion does not apply because the complaint alleges negligence beyond the scope of employment. They argue the term "business pursuits" is ambiguous and should be construed against Transamerica to allow coverage. We disagree.

In construing the policy, basic rules of contract construction are to be applied:

(1) The intention of the parties must control, (2) the intent must be ascertained from reading the contract as a whole, and (3) where the language used is unambiguous, and ambiguity will not be read into the contract.

Hering v. St. Paul-Mercury Indemnity Co., supra, 50 Wash. at 323, 311 P.2d 673. Also,

(T)he court will give the language its popular and ordinary meaning, unless it is apparent from a reading of the whole instrument that a different or special meaning was intended or is necessary to avoid an absurd or unreasonable result.

Lawrence v. Northwest Casualty Co., 50 Wash.2d 282, 285, 311 P.2d 670 (1957). The exclusion here is unambiguous it applies to business activities of the insured except those activities which would ordinarily be incident to a nonbusiness pursuit.

Generally, where the insured is engaged in an occupation when the accident occurs and the activity which causes the accident relates to performance of the insured's duties, the occurrence falls within the "business pursuits" exclusion. Pitre v. Pennsylvania Millers Mut. Ins. Co., 236 So.2d 920 (La.App. 1970); Wint v. Fidelity & Casualty Co., 9 Cal.3d 257, 507 P.2d 1383, 107 Cal.Rptr. 175 (1973); Berkshire Mut. Ins. Co. v. LaChance, 115 N.H. 487, 343 A.2d 642 (N.H. 1975); Martinelli v. Security Ins. Co., 490 S.W.2d 427 (Mo.App. 1972); 48 A.L.R.3d 1096 (1973). This principle applies even though the act may have been intentional. Reliance Ins. Co. v. Fisher, 164 Mont. 278, 521 P.2d 193 (1974); Bruns v. Foremost Ins. Co., 27 Ill.App.3d 50, 325 N.E.2d 815 (1975); Kermans v. Pendleton, 62 Mich.App. 576, 233 N.W.2d 658 (1975). ² In Milwaukee Mut. Ins. Co. v. Minneapolis, 307 Minn. 301, 239 N.W.2d 472 (1976), the court in explaining the exclusion cited with approval The "Business Pursuits" Exclusion in Personal Liability Insurance Policies. What The Courts Have Done With It, 1970 Ins.L.J. 519, 534:

In order for an act to be considered part of a business pursuit it must be an act that contributes to, or furthers the interests of, the business and one that is peculiar to it. It must be an act that the insured would not normally perform but for the business, and must be solely referable to the conduct of the business.

Here, the third party complaint alleges that Preston...