Western Commerce Bank v. Reliance Ins. Co.

• Decision Date: 10 February 1987
• Docket Number: No. 16337,16337
• Citation: Western Commerce Bank v. Reliance Ins. Co., 105 N.M. 346, 732 P.2d 873, 1987 NMSC 9 (N.M. 1987)
• Parties: WESTERN COMMERCE BANK, formerly Commerce Bank and Trust, Plaintiff-Appellant, v. RELIANCE INSURANCE CO., Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 873

732 P.2d 873

105 N.M. 346

WESTERN COMMERCE BANK, formerly Commerce Bank and Trust Plaintiff-Appellant, v. RELIANCE INSURANCE CO., Defendant-Appellee.

No. 16337.

Supreme Court of New Mexico.

Feb. 10, 1987.

[105 NM 347] McCormick, Forbes, Caraway & Tabor, Don G. McCormick, Michael Dargel, Carlsbad, for plaintiff-appellant.

Butt, Thornton & Baehr, Paul L. Butt, Albuquerque, for defendant-appellee.

OPINION

SOSA, Senior Justice.

This case involves a controversy between plaintiff Western Commerce Bank (Bank), an insured, and its insurer defendant Reliance Insurance Company (Reliance) concerning whether the insurance contract required Reliance to defend a counterclaim against the Bank. The Bank brought an action against Reliance for breach of contract and failure to defend. Reliance filed an answer and motion for judgment on the pleadings. After considering the pleadings and the respective arguments of counsel, the trial court found that the third party's allegations against the Bank did not fall within the policy coverage. The court entered judgment on the pleadings in favor of Reliance and dismissed the Bank's complaint with prejudice. The Bank appeals. We affirm.

The sole issue on appeal is whether judgment on the pleadings was proper in that the third party's allegations against the Bank failed to state a claim within the terms of the policy.

As a preliminary matter, we hold that under these circumstances, the court did not err in considering the motion for judgment on the pleadings. Reliance in its answer admitted the essential facts in this case, only disputing the legal conclusions to be drawn from the facts. Where the answer raises issues of law only, and the essential facts in the case are uncontroverted, a motion for judgment on the pleadings is properly considered. See Ollman v. Huddleston, 41 N.M. 75, 76, 64 P.2d 97, 98 (1937).

The instant dispute was predicated on the following events: In 1981, the Bank filed a suit against Spurlin Properties, Inc. (Spurlin) to recover judgment on a promissory note. On June 18, 1982, Spurlin filed a first amended counterclaim, alleging that: "[the Bank] has, on repeated occasions, exercised its influence as a lending institution to discourage and interfere with third party's business and contractual relations with one or more of the Defendants." At this point, the Bank furnished Reliance with a copy of this amended counterclaim and requested Reliance to defend the counterclaim. Reliance refused to defend, maintaining that the claim alleged against the Bank was not provided for in the insurance coverage and therefore the allegations did not give rise to a duty to defend.

On appeal, the Bank relies on Foundation Reserve Ins. Co. v. Mullenix, 97 N.M. 618, 642 P.2d 604 (1982) for its position that Reliance had a duty to defend the Bank throughout the primary action because there was a possibility that the claim was covered under the policy. The Bank argues that Reliance may refuse to defend only when the allegations are completely outside the insurance policy coverage. We have no dispute with the Bank's interpretation of New Mexico law regarding an insurer's duty to defend an insured. The Bank's reliance on Foundation Reserve, however, is not helpful. In Foundation Reserve, the facts alleged tended to show an occurrence within the coverage and the insurer's only refusal to defend was because an exclusionary provision limited the coverage. By contrast, here Reliance maintains that there was no occurrence or potential coverage because the allegations in the third party's complaint failed to state a claim within the terms of the policy. Whether an insurer has a duty to defend a suit filed by a third party against the insured depends on whether the allegations of the petition are sufficient to state a claim within the terms of the policy. American Employers' Ins. Co. v. Continental Casualty Co., 85 N.M. 346, 348, 512 P.2d 674, 676 (1973). Because the Bank contends that Reliance was obligated to conduct a defense on its behalf under the policy coverage for personal injury, we will compare the coverage afforded under that provision with the allegations in the third party's counterclaim.

The underlying Comprehensive Insurance Policy defined "personal injury" in pertinent part: "Group B--the publication or utterance of libel or slander or other defamatory or disparaging material." Reliance also issued to the Bank an "Excess Umbrella Policy." Under this policy, Reliance agreed, subject to the limitations in the agreement, to indemnify the insured for all sums which the insured would be obligated to pay for personal injury liability. The insurance agreement also provided that when the underlying insurance did not apply to an occurrence, but was covered by the Excess Umbrella Policy, Reliance would defend a suit against the insured by parties seeking damages on account of personal injury. The Excess Umbrella Policy defined "personal injury" in pertinent part: "(c) the publication or utterance of a libel or slander or of other defamatory material, including disparaging statements concerning the condition, value, quality or use of real or personal property. * * * " By contrast, Spurlin's counterclaim alleges that the Bank has exercised its influence as a lending institution to discourage and interfere with its third party business and contractual relations.

The Bank argues that in construing an insurance policy, the test is what a reasonable person would understand the words in the policy to mean, citing Cincinnati Ins. Co. v. Davis, 153 Ga.App. 291, 265 S.E.2d 102 (1980). The Bank further contends that the policy should be strictly construed against Reliance because the umbrella policy is ambiguous and misleading; its very title connoting "full coverage," "multiperil coverage," "hold harmless coverage," or "all risk insurance."

In New Mexico, unambiguous insurance contracts must be construed in their usual and...