Wood v. Safeco Ins. Co. of America

• Decision Date: 08 September 1998
• Docket Number: No. 73693,73693
• Citation: 980 S.W.2d 43
• Parties: Lowell K. WOOD, Plaintiff-Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Respondent.
• Court: Missouri Court of Appeals

Page 43

980 S.W.2d 43

Lowell K. WOOD, Plaintiff-Appellant, v. SAFECO INSURANCE COMPANY OF AMERICA, Defendant-Respondent.

No. 73693.

Missouri Court of Appeals,

Eastern District,

Division Four.

Sept. 8, 1998.

Motion for Rehearing and/or Transfer to

Supreme Court Denied Nov. 6, 1998.

Application for Transfer Denied Dec. 22, 1998.

Gregory F. Hoffman, Millar, Schaefer, Hoffmann & Robertson, St. Louis, for plaintiff-appellant.

William F. James, Lindsay A. Dibler, Wuestling & James, St. Louis, for defendant-respondent.

HOFF, Judge.

Lowell K. Wood (Insured) appeals from the judgment entered in favor of Safeco Insurance Company of America (Insurer) upon the granting of Insurer's motion for summary judgment in this damages action arising out of Insurer's duty to defend under a personal umbrella policy. We reverse and remand with directions, upon finding the policy covers the negligent misrepresentation claims in the underlying lawsuits and Insurer waived its right to assert a policy exclusion applied to those claims.

1. Introduction

Insured owned real estate along the Big River in Missouri (the property). He sold the property to another (Buyer). Subsequent to the sale, the property flooded twice. Buyer sued Insured for alleged misrepresentations Insured made to Buyer, prior to the sale, regarding flooding of the property.

In the first lawsuit, filed in March 1994, Buyer alleged Insured was liable for intentional misrepresentations (Count II of the petition) and negligent misrepresentations (Count III of the petition). Buyer dismissed that lawsuit without prejudice. Buyer then filed another lawsuit based upon the same claims of fraud due to intentional misrepresentations (Count I of the petition) and negligent misrepresentations (Count II of the petition) against Insured. That lawsuit was dismissed with prejudice.

Insurer refused to defend Insured against either lawsuit based upon the terms of a personal umbrella policy (policy) Insurer issued to Insured.

After the dismissal of Buyer's second lawsuit, Insured filed this damages action seeking indemnification from Insurer for its failure to defend Insured under the terms of the policy. ¹ Insured alleged the policy covered the misrepresentation claims pursued by Buyer and, in its letter advising Insured it refused to assume the defense of Buyer's litigation, Insurer had failed to address Buyer's negligent misrepresentation claim(s). Insured sought an award of the $46,102.64 in attorney's fees and costs he incurred defending himself in Buyer's litigation. Insured also contended Insurer was liable for the amount provided in Section 375.420 RSMo 1986 ² because Insurer's refusal to defend was vexatious and without reasonable cause. Finally, Insured requested an award of reasonable attorney's fees and costs.

In its response to Insured's petition, Insurer stated in relevant part: "there is no coverage provided to [Insured], under the policy in question, because of the definitions contained in the policy concerning bodily injury, personal injury, property damage, occurrence and intentional acts."

The parties filed cross-motions for summary judgment. In its successful motion, Insurer argued the policy did not require it to defend Insured against Buyer's negligent and intentional misrepresentation claims for two reasons. First, those claims were not "occurrences" required for coverage by the policy. Second, those claims were excluded from policy coverage by the policy's "expected or intended" acts exclusion. Insurer further urged the policy expressly excluded coverage for any punitive damages claim in the underlying litigation; and an award under The trial court granted judgment in favor of Insurer and denied Insured's motion for summary judgment. With respect to the fraud claims, the trial court found the language of the "expected or intended" act exclusion controlling. With respect to the negligent misrepresentation claims, the trial court found: Buyer had pleaded the elements of the claim as set forth in Chubb Group of Ins. Cos. v. C.F. Murphy & Assocs., Inc., 656 S.W.2d 766 (Mo.App. W.D.1983); a cause of action for negligent misrepresentation exists in Missouri; this cause of action includes a "requirement of 'intent' to provide information on which reliance is sought [and] such 'intent' is not an 'accident' or 'occurr[e]nce' for which there was coverage under the ... policy." Thus, the trial court concluded, Insurer did not have a duty to defend under the policy issued to Insured and Insurer was entitled to judgment as a matter of law. This appeal followed.

Section 375.420 was not warranted because Insurer's refusal to defend was reasonable.

In his first point, Insured contends the trial court erred in concluding a fraudulent misrepresentation claim is an intentional tort and therefore falls within the policy's "expected or intended" act exclusion. Insured argues in his second point that the trial court erred in concluding a negligent misrepresentation claim contains the same element of intent as the fraudulent misrepresentation claim and is, therefore, not an "occurrence" or "accident" for purposes of the policy's coverage. Insured also urges, in his third point, that the trial court erred in determining Insurer had not waived its right to assert the "expected or intended" act exclusion applied to a negligent misrepresentation claim. Finally, in point four, Insured argues the trial court erred in finding Insured was not entitled to recover statutory damages under Section 375.420 for Insurer's allegedly vexatious refusal to defend.

2. Standard of Review

Appellate review of a grant of summary judgment is essentially de novo. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). A summary judgment movant has the burden "to show a right to judgment flowing from [material] facts about which there is no genuine dispute." Id. at 378. Whether or not summary judgment was proper is a question of law, and we need not defer to the trial court's order granting summary judgment. Id. at 376. We view the record in the light most favorable to the party against whom judgment was entered, and take facts set forth in affidavits and otherwise in support of the motion as true unless they are contradicted by the non-moving party's response. Id. Importantly, "[t]he key to summary judgment is the undisputed right to judgment as a matter of law; not simply the absence of a fact question." Id. at 380; Combined Communications Corp. v. City of Bridgeton, 939 S.W.2d 460, 463 (Mo.App. E.D.1996); Liberty Mut. Ins. Co. v. IGF Ins. Co., 888 S.W.2d 757, 758 (Mo.App. E.D.1994); United States Fidelity & Guar. v. Drazic, 877 S.W.2d 140, 142 (Mo.App. E.D.1994).

Here there are no disputed material facts. Thus, we must decide whether Insurer has shown as a matter of law its entitlement to judgment on Insured's damages claim for Insurer's failure to defend.

3. Insurer's Duty to Defend

An insurer's duty to defend exists when the petition in the underlying action states some grounds of liability covered by its insurance policy. Butters v. City of Independence, 513 S.W.2d 418, 424 (Mo.1974). Therefore, we must compare "the language of the insurance contract and the allegations of the petition in the action brought by the person injured or damaged. If the complaint alleges facts which state a claim potentially within the policy's coverage, there is a duty to defend." Standard Artificial Limb, Inc. v. Allianz Ins. Co., 895 S.W.2d 205, 210 (Mo.App.E.D.1995) (citation omitted); see also Bonner v. Automobile Club Inter-Ins. Exch., 899 S.W.2d 925, 929 (Mo.App. E.D.1995). There is no duty to defend, however, where the underlying claim is outside the coverage of the insurance policy. McDonough v. Liberty Mut. Ins. Co., 921 S.W.2d 90, 94 (Mo.App. E.D.1996) (finding insurer had no duty to defend upon determining, in relevant part, that (1) the homeowners policy did Because we find the negligent misrepresentation claims are potentially covered by the policy, we will not address the policy's coverage of the fraudulent misrepresentation claims. "The presence of some insured claims in the [underlying] petition gives rise to a duty to defend, even though uninsured claims or claims beyond the coverage may also be present." Scottsdale Ins. Co. v. Ratliff, 927 S.W.2d 531, 534 (Mo.App. E.D.1996).

not provide coverage either for the equitable relief sought in the underlying lawsuit, or for acts of governing bodies which were the basis for the underlying action; and (2) the terms of the umbrella policy provided no coverage for loss of use of property, ³ which was the alleged property damage in the underlying action), abrogated in part, ⁴ Farmland Indus., Inc. v. Republic Ins. Co., 941 S.W.2d 505, 509 (Mo. banc 1997).

With respect to the negligent misrepresentation claims against Insured in the underlying lawsuits, ⁵ Buyer alleged Insured "failed to exercise ordinary and reasonable care" in making representations that "the residence was not located in a flood plain, had never flooded, and would not flood." In setting forth the representations in more detail, Buyer specifically alleged Insured stated:

(a) That the residence was not located in the flood plain;

(b) That the residence: (i) had never had water in it; (ii) was definitely out of any danger of flooding; and (iii) had never flooded;

(c) That only a small portion of the land purchased (i.e., approximately five (5) acres located immediately adjacent to the Big River) was actually located in a flood plain;

(d) That, at most, the Big River would rise only high enough to cover the approximate five (5) acres of ground located immediately adjacent to the river;

(e) That the provision in the Sale Contract which states that the property is located in a flood plain was a formality and necessary only because the above-described five (5) acres were located in the flood plain;

(f) That a creek bed which ran near the...