Transamerica Ins. Group v. Hinkle-Keeran Group, Inc.

• Decision Date: 29 November 1993
• Citation: 1995 WL 251504,53 F.3d 343
• Parties: NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of
• Court: U.S. Court of Appeals — Tenth Circuit

Page 343

53 F.3d 343

NOTICE: Although citation of unpublished opinions remains unfavored, unpublished opinions may now be cited if the opinion has persuasive value on a material issue, and a copy is attached to the citing document or, if cited in oral argument, copies are furnished to the Court and all parties. See General Order of November 29, 1993, suspending 10th Cir. Rule 36.3 until December 31, 1995, or further order.

TRANSAMERICA INSURANCE GROUP, Plaintiff-Counter-Defendant-Appellee, v. HINKLE-KEERAN GROUP, INC., Gene Hinkle,

Defendants-Counter-Claimants-Appellants,

and

Robert Keeran, Defendant.

Nos. 93-2330, 94-2001.

United States Court of Appeals, Tenth Circuit.

April 21, 1995.

Before MOORE and BARRETT, Circuit Judges; and DOWNES, District Judge. ^*

ORDER AND JUDGMENT ^**

DOWNES, District Judge.

Gene Hinkle and Hinkle-Keeran Group, Inc. ("HKGI") appeal from the district court's order granting Transamerica Insurance Group's ("Transamerica") oral motion for summary judgment wherein the district court concluded as a matter of law that Transamerica had no duty to defend or indemnify in an underlying lawsuit against HKGI. We will affirm the district court's decision.

The issues raised in this appeal arise out of a civil action filed in New Mexico State Court styled Hinkle v. FDIC as receiver for Southwest National Bank, and Hinkle-Keeran Group, Inc., No. CV 90-05205 (hereinafter "state court action") (Aplt.App. at 9, 12, 13.) The underlying facts of that state court action merit a brief discussion.

Gene Hinkle and his son-in-law, Keeran, formed a corporation, HKGI to manage various commercial properties owned by Hinkle. (Aplt.App. at 23.) Subsequently Hinkle transferred his entire interest in HKGI to Keeran. (Aplt.App. at 116.) As set forth in the second amended complaint filed in the state court action, in December of 1987 Southwest National Bank, without Gene Hinkle's consent or approval, allowed Robert Keeran to change the designation and signature cards on two accounts held by Gene Hinkle. ¹

Mr. Hinkle, understandably unhappy with his son-in-law's actions, initiated the underlying state court action against Southwest National Bank. (Aplt.App. at 9.) Subsequently, after Southwest National Bank was taken over by the FDIC, Gene Hinkle filed a second amended complaint in the state court action. (Aplt.App. at 9.) This second amended complaint contained counts for breach of contract, negligence and unfair trade practices against the FDIC as receiver for Southwest National Bank and one count for liability under the doctrine of respondeat superior against HKGI. (Apple.Supp.App. at 1-7.)

On July 1, 1991, counsel for Gene Hinkle wrote Transamerica informing it of the lawsuit and advising Transamerica of his intent to amend the complaint, in the state court action, asserting a claim against HKGI. ² (Aplt.App. at 9.) On September 13, 1991, Transamerica responded requesting additional policy information so that a coverage determination could be made. (Aplt.App. at 11.) Transamerica also asked whether a claim was still being presented against HKGI. (Aplt.App. at 11.) Mr. Hinkle's counsel responded on September 20, 1991, sending Transamerica a copy of the declaration sheet for their policy number 3021 63 61 and a copy of the proposed second amended complaint. (Aplt.App. at 12.) Counsel for Mr. Hinkle also advised Transamerica that a hearing was scheduled on his Motion to join HKGI as a defendant. (Aplt.App. at 12.) On October 21, 1991, Mr. Hinkle's counsel informed Transamerica that he was in the process of having Mr. Keeran served with the second amended complaint and suggested that Transamerica may want to retain counsel and enter an appearance in the matter. (Aplt.App. at 13.)

On March 13, 1992, Transamerica wrote Mr. Hinkle's counsel asking to be advised of the status of the litigation and advising him that when Transamerica's insured, HKGI, was brought into the action, Transamerica would review the allegations of the complaint to make a coverage determination. (Aplt.App. at 15.) Counsel for Mr. Hinkle responded on March 17th informing Transamerica that HKGI had entered an appearance and was represented by Mr. Duncan. (Aplt.App. at 16.) Apparently unknown to Transamerica, Mr. Hinkle filed an application for default judgment which was set for hearing on April 22, 1992. (Aplt.App. at 99.) On April 21st HKGI's counsel, Mr. Duncan, informed the state court and Mr. Hinkle's counsel that he would not be filing an answer or appearing at the hearing on application for default. (Aplt.App. at 99.) Mr. Hinkle's counsel wrote Transamerica on April 23, 1992 informing them that a default judgment had been entered against HKGI and that he intended to move for a determination of damages. (Aplt.App. at 17.) On June 15, 1992, a judgment was entered in the state court action against HKGI in an amount of $77,750.00 for compensatory and $250,000 in punitive damages. (Aplt.App. at 54-55.) By order dated August 31, 1992, Gene Hinkle was assigned any rights that HKGI held under Transamerica policy number 3021 63 61. ³ This policy was a commercial general liability policy providing coverage for bodily injury and property damage liability with a term from April 5, 1987, to April 5, 1988. (Aplt.App. at 2, 42.) However, the policy excluded coverage for " 'bodily injury' or 'property damage' expected or intended from the standpoint of the insured." (Aplt.App. at 42.)

After reviewing the second amended complaint filed in the state court action, Transamerica determined and informed Mr. Hinkle, based upon their review, there was neither coverage nor a duty to defend under its policy. (Aplt.App. at 18.) Shortly after that, Transamerica filed its complaint for a declaratory judgment in Federal District Court. (Aplt.App. at 1-5.) In response, HKGI filed a counterclaim which raised for the first time the existence of a management agreement between Gene Hinkle and HKGI. Specifically, this counterclaim alleged negligence by HKGI in not obtaining a fidelity bond as required under the Management Agreement. (Aplt.App. at 22-26.) Hinkle and HKGI moved for summary judgment on their counterclaims. At the summary judgment hearing, counsel for Transamerica orally moved for summary judgment which was subsequently granted. (Aplt.App. at 118.)

In a letter setting forth its decision granting Transamerica's motion for summary judgment, the district court found that the second amended complaint, in the state court action, only alleged facts relating to losses resulting from intentional acts which were expressly and unambiguously excluded from coverage under the policy and for which the insurance company had no duty to defend or to indemnify. (Aplt.App. at 119-20.) The district court observed that despite the numerous and detailed factual allegations set forth in the state court complaint, there was a complete absence of any allegation relating to the duty to secure a bond and a negligent failure (against HKGI) to do so. Furthermore, the court noted that such a duty could only be implicated by reference to a document entirely outside the state court pleadings (the management agreement). The district court concluded as a matter of law that no reasonable fact finder could find that the underlying complaint in the state court action set forth a claim falling outside the excluded intentional acts provision. As a result, the district court concluded that Transamerica did not have a duty to defend. (Aplt.App. at 119-20.)

On appeal, Hinkle essentially raises two issues: (1) whether Defendant-Appellant Hinkle's second amended complaint made sufficient allegations of negligence to invoke a duty to defend under Transamerica's insurance policy; and (2) whether Transamerica, upon the receipt of notice of a complaint alleging negligence against HKGI, can fail to appear or defend and subsequently assert that it had no duty to defend. Transamerica asserts the sole issue is whether an insurer's duty to defend under an insurance policy which excludes intentional acts is triggered by a complaint which contains a reference to negligence, but factually alleges only intentional conduct by the insured.

Standard of Review

The standard of review of a district court's ruling on summary judgment is de novo, Housing Auth. Of Fort Collins v. United States, 980 F.2d 624, 627 (10th Cir.1992), and we employ the same standard applied by the district court. International Bhd. Of Elec. Workers v. Public Serv. Co., 980 F.2d 616, 618 (10th Cir.1992). Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see Anderson v. Liberty Lobby, Ins., 477 U.S. s242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). The ruling of the district court on summary judgment will be affirmed if "there is no genuine dispute over a material fact and the moving party is entitled to judgment as a matter of law. Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir.1991).

Discussion

Appellant's appeal presents essentially two issues: (1) what effect does Transamerica's failure to appear in the state court action have on this action; and (2) did Transamerica have a duty to defend in the state court action. Beyond responding to Appellant's issues, Appellee asserts that Appellant's claims are barred because of HKGI's failure to demand a defense. See State Farm Fire and Cas. Co. v. Price, 101 N.M. 438, 684 P.2d 524, 529 (Ct.App.), cert. denied, 101 N.M. 362, 683 P.2d 44 (1984).

This court will not address the issue of whether a demand to defend was made by HKGI. As set forth in Price, two things must occur before a breach of the duty to defend arises; (1) a duty to defend must exist; and (2) a demand to defend must be made. Id. at 529. Regardless of...