U.S. Fidelity and Guar. Co. v. Powercraft Homes, Inc., 2
| Decision Date | 12 March 1984 |
| Docket Number | CA-CIV,No. 2,2 |
| Citation | 685 P.2d 136,141 Ariz. 71 |
| Parties | UNITED STATES FIDELITY AND GUARANTY COMPANY, a Maryland corporation, Plaintiff/Appellee, v. POWERCRAFT HOMES, INC., an Arizona corporation, Millie Wulff Richards, Samuel G. Farina and Gloria Farina, his wife, Lee Woodward, Brenda Woodward McGraugh, Sarah Vaughan White, Richard Fillion and Nancy Fillion, his wife, Arthur M. Schaar and Darenda Schaar, his wife, and Robert L. Grant, Defendants/Appellants. 4919. |
| Court | Arizona Court of Appeals |
This appeal is from a summary judgment declaring, in effect, that the plaintiff/appellee, United States Fidelity and Guaranty Company (USF & G), was not obligated to pay a judgment against appellant, Powercraft Homes, Inc. That judgment was entered March 15, 1982, in Pinal County, cause number 31933, in favor of the individual appellants in the instant case. It was originally in the cumulative amount of $210,000 but was reduced on appeal to this court. See Richards v. Powercraft Homes, 140 Ariz. ---, 678 P.2d 449 (App.1983), approved in part, vacated in part No. 16656-PR, Arizona Supreme Court, filed January 3, 1984. The judgment resulted from findings that Powercraft failed to properly construct habitable homes for the individual appellants.
USF & G insured Powercraft's liability under policies covering the time period of September 1, 1975 to September 1, 1977. The original policy was issued on or about September 1, 1975. That policy was renewed on or about September 1, 1976, for one year. No other coverage was provided Powercraft by USF & G after September 1, 1977. The original policy and the renewal were purchased from the Don Mahoney Agency in Casa Grande, Arizona. They were countersigned by an insurance agent with that agency, H.B. Claunts, as authorized representative of USF & G. These policies would have provided Powercraft with coverage for the liability arising from defective construction.
The complaint in cause number 31933 was filed on August 17, 1979. The summons and complaint were served August 22 on Powercraft. On that date the president of the company telephoned Claunts. The only affidavit supplied by the appellants in opposition to the motion for summary judgment relates that conversation, together with other facts:
"I, H.B. "BOOTS" CLAUNTS, being duly sworn upon my oath, depose and say:
1. That I have been an insurance agent for the Mahoney Insurance Agency in Casa Grande, Arizona, since July of 1959.
2. That I have been an authorized agent for U.S.F. & G. Insurance Company since July of 1959.
3. That I sold a number of different insurance policies to Powercraft Homes, Inc. through its President, Michael D Franks, two of which policies were U.S.F. & G. policies number ICC-714826 and ICC-994168.
4. That on or about the date of August 22, 1979, when Powercraft Homes, Inc. was served with the Complaint in the lawsuit of Woodward, et al., v. Powercraft Homes, Inc., for claims arising out of the Indian Hills Subdivision, Michael D. Franks called me and notified me of the lawsuit and inquired as to whether I was aware of any insurance coverage for Powercraft Homes, Inc. that would cover these claims and this lawsuit.
5. That I indicated at that time that I no longer had any coverage for Powercraft Homes, Inc. and that he should contact Bob Lamaar of the Lamaar-Baker Insurance Agency in Casa Grande who had started selling Insurance to Powercraft Homes, Inc. in 1977 or 1978, because I was no longer doing business with Powercraft Homes, Inc.
6. That Powercraft Homes, Inc. had insurance coverage with U.S.F. & G. from September 1, 1974 to September 1, 1977 as follows:
1. The reference to a policy covering the period September 1, 1974 to September 1, 1975, in this affidavit is the only mention of that earlier policy in the entire record.
Policy No. ICC-683266: September 1, 1974 to
September 1, 1975
Policy No. ICC-714826: September 1, 1975 to
September 1, 1976
Policy No. ICC-994168: September 1, 1976 to
September 1, 1977." 1
106 1. The reference to a policy covering the period September 1, 1974 to September 1, 1975, in this affidavit is the only mention of that earlier policy in the entire record.
USF & G was given no notice of the lawsuit other than this call to Claunts. Powercraft made no other inquiries of Claunts. The company first learned of the judgment on April 22, 1982, when it received a copy of the following letter to Claunts from the attorney for Powercraft:
Term 9-1-76-9-1-77
Term 9-1-75 9-1-76
Property Coverage
Dear Mr. Claunts:
As you know, I represent Powercraft Homes, Inc, for whom the referenced insurance policies were issued in 1975 and 1976. The policies each provided coverage for products liability. I was not aware of the existence of this coverage until a recent date.
During the term of these policies, the insured constructed homes in the Indian Hills subdivision, North of Casa Grande. The insured was made a defendant in an action filed by several purchasers and owners of homes in the Indian Hills subdivision. The action was delayed for about two and one-half years before trial for a number of reasons. The action was based on an implied warranty of workmanship and compliance with plans, specifications, codes and regulations. The case was tried in April, and resulted in a substantial judgment against the insured.
I am sure you are aware of the case, and the trial. Mike Franks indicated he had probably discussed this matter with you on occasion. I was not aware of the products coverage, and no tender of the defense of the case was made to the insurance carrier. This letter is to advise you and the insurance carrier of the possible claims.
All of the homes involved in the legal action were built, and sold, during the term of the two referenced policies. From my review of the coverage, it would appear the houses were covered as the insured's product. I have reviewed the exclusions, and they do not appear to exclude coverage. We may have a problem with notice of claim, which will have to be resolved. A copy of the judgment is enclosed.
We have the issued policies in file. If you have destroyed your dailies, I'll be glad to furnish you with photocopies of the policies.
Please give this your prompt consideration, and advise.
As might be expected the declaratory judgment action was based on the failure of Powercraft to comply with the notice requirements contained in the insurance policies. These provisions were:
"4. Insured's Duty in the Event of Occurrence, Claim or Suit.
(a) In the event of an occurrence, written notice containing particulars sufficient to identify the Insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the Insured to the Company or any of its authorized agents as soon as practicable.
(b) If claim is made or suit is brought against the Insured, the Insured shall immediately forward to the Company every demand, notice, summons or other process received by him or his representative.
* * *
* * *
5. Action Against Company
No action shall lie against the Company unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, nor until the amount of the Insured's obligation to pay shall have been finally determined either by judgment against the Insured after actual trial or by written agreement of the Insured, the claimant and the Company."
[Emphasis added]
The appellants resisted the motion for summary judgment on the theory that Claunts had denied coverage for USF & G and for that reason they did not have to comply with the policy provisions. This is the issue they now raise on appeal, arguing either that USF & G is liable as a matter of law, or, at least, that there are material, disputed questions of fact precluding summary judgment. We reverse.
There is authority for the proposition that an insured need give no further notice, or comply with policy requirements, when the insurance company has denied coverage.
"If the insurer denies liability to the insured on grounds other than the sufficiency, lateness, or absence of notice or proof of loss, compliance with the requirements as to notice and proof of loss are waived, for the insurer having raised one objection or certain objections is deemed to have raised all that exist, and good faith prohibits it from thereafter raising any others.
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* * *
Compliance with the policy provisions relating to notice and proof of loss is also waived where--the agent states that ... the loss is not covered by the policy, ... [emphasis added]" 4 Couch on Insurance 2d § 26:305 (1960)
Arlotte v. National Liberty Insurance Company, 312 Pa. 442, 167 A. 295 (1933), 108 A.L.R. 896, Annot. 108 A.L.R. 901.
In other words, having once denied coverage on the basis that a claim is not covered by the policy, the insurer cannot thereafter raise the new defense of the insured's failure to comply subsequently with the policy's notice provisions. See also Rock Transport Properties Corporation v. Hartford Fire Insurance Company, 433 F.2d 152 (2nd Cir.1970); Travelers Insurance Company v. Peerless Insurance Company, 287...
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