Union Warehouse and Supply Co., Inc. v. Illinois R.B. Jones, Inc.
| Decision Date | 05 June 1996 |
| Docket Number | No. 21468,21468 |
| Citation | 128 Idaho 660,917 P.2d 1300 |
| Parties | UNION WAREHOUSE AND SUPPLY CO., INC., an incorporated association, Plaintiff-Respondent, v. ILLINOIS R.B. JONES, INC., a corporation; and Steven Bruce Booker, for himself and those other underwriters at Lloyd's, London, binding certain Seedsmen's Errors and Omissions Coverage, and Signatory to Certificate # AH404071, Defendants, Third-Party Plaintiffs-Appellants, and Mutual Service Casualty Insurance Company, Third-Party Defendant-Respondent. North Idaho, October 1995 Term |
| Court | Idaho Supreme Court |
Evans, Keane, Boise, for appellants. Bruce C. Jones, argued.
Dee, MacGregor & Fales, Grangeville, for respondent Union Warehouse and Supply Co., Inc. Wayne C. MacGregor, argued.
Keefe, King & Bowman, Spokane, Washington, for respondent Mutual Service Casualty Insurance Co. David A. Goicoechea, argued.
This is an insurance coverage dispute arising from the sale of contaminated winter wheat seed.
The respondent, Union Warehouse and Supply Co. (Union), is a cooperative marketing association that purchases, stores, and sells seed to farmers in the Grangeville area. Union was insured under three insurance policies: (1) a Comprehensive General Liability (CGL) policy issued by Mutual Service Casualty Insurance Co. (MSI); (2) an Umbrella policy also issued by MSI; and (3) a Seedsmen's Errors and Omissions policy underwritten by certain underwriters at Lloyd's of London (Underwriters) and brokered through Illinois R.B. Jones, Inc. (Jones). The Seedsmen's policy was purchased by Union to cover any economic losses resulting from its operation. As discussed more fully below, coverage under the MSI policies is not at issue in this appeal.
In 1991, Union purchased what it believed to be uncontaminated winter wheat seed. However, samples of this seed were sent away for testing and the test results indicated that the seed was contaminated with jointed goatgrass seed, which is classified as a noxious weed. Before the test results were received by Union, a portion of the seed was sold to local farmers. Furthermore, after they were received, the test results were filed by Union without noting the contamination problem and additional seed was then sold from the lot. In all, approximately twenty farmers purchased contaminated winter wheat seed from Union Warehouse.
Roughly one month after the last sale of seed from the contaminated lot, a farmer who had purchased some of the seed discovered goatgrass kernels in his grain drill and brought the problem to Union's attention. On October 11, 1991, Union informed Underwriters of potential claims arising from the sale of contaminated seed. However, at that point no lawsuit had been filed by any purchasers of seed. Underwriters indicated that there was probably only coverage for one year's crop loss and requested that Union notify them in the event it received any service of process or pleadings relating to contaminated seed. Union subsequently notified MSI of the potential claims.
Because jointed goatgrass is difficult to eradicate, Union and MSI immediately took steps to determine the scope of the problem. They obtained the assistance of Dr. Guenthner of the University of Idaho who developed a crop rotation plan which, if followed, would allegedly eradicate the goatgrass over a five-year period. Dr. Guenthner also surveyed the affected farmers' fields and estimated the damages these farmers would likely incur in following the plan (apparently, the plan involved the planting of crops less profitable than winter wheat). However, as the district court found, there is no evidence in the record that any of the farmers actually followed the eradication plan, and no evidence (other than projections) of any actual loss that exceeded the MSI CGL policy limits. Although it denied coverage under its Umbrella policy, MSI notified Union that it had one million dollars in coverage under the CGL policy.
On March 13, 1992, Union brought the present action joined against Underwriters seeking a court determination of coverage under the Seedsmen's policy. Subsequently, settlement agreements were entered into between Union, MSI, and the injured farmers, whereby (1) MSI tendered the limits of its
[128 Idaho 664] CGL policy; (2) the farmers released Union and MSI from all liability except liability that might be covered under the Seedsmen's policy; (3) Union assigned its rights under the Seedsmen's policy to the farmers; and (4) Union and MSI agreed to continue to maintain the present action. On October 16, 1992, Union filed an amended complaint which named Jones as a defendant.
On November 18, 1992, Underwriters moved for summary judgment on the grounds that Union breached a consent-to-settle/cooperation clause (Condition 3(b)) in the Seedsmen's policy, that a property damage exclusion in the policy applied, and that Union was not the real party in interest. At the same time, Jones moved to dismiss Union's amended complaint as against it on the ground that it was not a co-insurer under Idaho law. Union filed a cross-motion for summary judgment requesting a ruling that Underwriters were obligated to provide coverage, and that the exclusion in the Seedsmen's policy did not apply. On March 31, 1993, Underwriters moved to dismiss Union's amended complaint on the ground that with no lawsuits filed against Union, there was no justiciable controversy. The trial court denied the motion but certified the issue for interlocutory appeal. This Court declined to accept the appeal. In response to encouragement by Union, five farmers subsequently filed suit against it.
On June 9, 1993, Underwriters filed an amended third-party complaint against MSI. They then moved for summary judgment seeking a declaration that the Seedsmen's policy was excess to the MSI Umbrella policy. MSI filed a cross-motion for summary judgment on the ground that its Umbrella policy excluded coverage for property damage resulting from the presence of noxious weeds, and that its policy was excess to the Seedsmen's policy. On January 28, 1994, Union moved for summary judgment against Underwriters on Underwriters' counterclaims relating to coverage and Union's duty to cooperate. Underwriters then moved for summary judgment on the additional ground that because Union was released from liability, there was no obligation to indemnify under the Seedsmen's policy.
The district court concluded that the Seedsmen's policy provided coverage; that there was no "property damage" within the meaning of the exclusion in the Seedsmen's policy; that Underwriters had a duty to defend Union; that Union did not breach Condition 3(b) in the Seedsmen's policy; that the MSI Umbrella policy did not provide coverage, and that even if it did, that coverage was excess to coverage under the Seedsmen's policy. It also found that Jones was Underwriters' agent and dismissed that party from the action without prejudice.
With regard to requests for attorney fees made by Union and MSI, the trial court found that Union was a "prevailing party" and that notice pursuant to I.C. § 41-1839 was given to Underwriters. It also found that a "commercial transaction" within the meaning of I.C. § 12-120(3) was the gravamen of the action. Accordingly, an award of attorney fees was granted to Union under both I.C. §§ 41-1839 and 12-120(3). MSI's requests for attorney fees and costs were denied.
As a threshold matter we conclude that although it is named as a respondent, MSI is not properly a party to this appeal. There is no dispute relating to coverage under the MSI CGL policy, or priority of coverage between that policy and the Seedsmen's policy. Further, although MSI makes assertions regarding priority of coverage between its Umbrella policy and the Seedsmen's policy, Underwriters did not appeal from any determination relating to coverage under the Umbrella policy. Finally, MSI asserts a
[128 Idaho 665] right to an award of attorney fees below, but did not cross-appeal from the denial of its request for attorney fees by the district court. Since there are no issues presented on appeal that relate to MSI, that party is hereby dismissed.
On November 18, 1992, Underwriters filed a motion for summary judgment alleging that Union was not the real party in interest pursuant to I.R.C.P. 17(a) and therefore lacked standing to prosecute this action. The district court summarily denied this motion. On appeal, Underwriters contend that the district court erred.
I.R.C.P. 17(a) provides in relevant part:
Every action shall be prosecuted in the name of the real party in interest.... No action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest until a reasonable time has been allowed after objection for ratification of commencement of the action by, or joinder or substitution of, the real party in interest....
An assignor of a chose in action is not the real party in interest and has no standing to prosecute an action on the chose in action. McCluskey v. Galland, 95 Idaho 472, 511 P.2d 289 (1973). It follows that an assignor of all rights and causes of action under an insurance policy lacks standing to seek a declaration relating to a policy in which it no longer has an interest.
In the present case, Union assigned its rights under the Seedsmen's policy to the farmer-growers and thus is not the real party in interest. However, under the terms of Rule 17(a), an action may not be dismissed if the real parties in interest have ratified its commencement by a third party. The release agreements specifically refer to the declaratory judgment action and, in fact, require Union to continue to pursue and finance that action. Thus, the agreements which divest Union of its standing as the real party in interest also contain a ratification by the farmers of...
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