Case Title: Reisig v. Union Ins. Co.

Citation: 

Docket Number: 93-57

State: wyoming

Court: Wyoming Supreme Court

Date: 1994-03-18T00:00:00Z

Document:
Reisig v. Union Ins. Co.1994 WY 33870 P.2d 1066Case Number: 93-57Decided: 03/18/1994Supreme Court of Wyoming
Russell 
C. REISIG, d/b/a Russell's Excavation and Construction, 

Appellant 
(Plaintiff),

v.

UNION 
INSURANCE COMPANY, a Nebraska corporation, 

and 
Manville Claims Service, a Wyoming corporation, 

Appellees 
(Defendants).

 

Appeal 
from the District Court, Laramie County,

Edward 
L. Grant, J.

 

Representing 
Appellant:

Glenn 
E. Smith, Glenn E. Smith & Associates, Cheyenne.

Representing 
Appellee:

Richard 
Rideout, Herschler, Freudenthal, Salzburg, Bonds & Rideout, P.C., 
Cheyenne.

Before 
MACY, C.J., and THOMAS, CARDINE, GOLDEN and TAYLOR, JJ.

THOMAS, 
Justice.

[¶1]      The issue in this 
case is whether Union Insurance Company (Union) committed a breach of its duty 
to defend Russell C. Reisig, d/b/a Russell's Excavation and Construction, 
(Reisig) in accordance with the terms of an insurance policy. The district court 
ruled the claims asserted against Reisig by third parties were not covered by 
the insurance policy, and Union had not committed a breach of its duty to defend 
Reisig. We are satisfied the issue is controlled by our holding in First Wyoming 
Bank, N.A., Jackson Hole v. Continental Ins. Co., 860 P.2d 1094 (Wyo. 1993), and 
the Order Granting Defendant's Motion for Summary Judgment entered in the trial 
court should be affirmed.

[¶2]      In his Brief of 
the Appellant, Reisig defines the issues as follows:

I. 
In holding that Union had no duty to defend, did the district court improperly 
utilize extrinsic evidence, base Union's duty to defend on whether it had a duty 
to pay, or determine facts which have yet to be adjudicated in the underlying 
action?

II. 
Does the third party complaint filed by Rocky Mountain against Reisig allege a 
potential "occurrence" under the policy of insurance issued to Union by 
Reisig?

III. 
Does the third party complaint filed by Rocky Mountain against Reisig allege 
sufficient facts to warrant a refusal by Union to defend on the basis of Union's 
"care, custody or control" exclusion?

IV. 
If a duty to defend is not created by the allegations of the Rocky Mountain 
complaint, did Union know or should Union have known of facts outside of the 
complaint which would establish a potential for coverage and, if so, does such 
extrinsic evidence create a duty to defend which would not exist based solely on 
the allegations of the complaint?

V. 
Did Reisig have a duty to search the public records for the lien filed by Rocky 
Mountain and, if so, was the damage complained of by Rocky Mountain intended or 
expected by Reisig because it was the natural, ordinary and logical result of 
his failure to do so? 

VI. 
Are there genuine issues of material fact which preclude the district court from 
entering summary judgment in favor of Union?1

Union 
compiles the issues in this way:

I. 
Whether the district court erred in granting summary judgment to the 
Appellant.

A. 
Whether the district court erred in holding the Appellee did not breach the 
contract of insurance with the Appellant.

1. 
Whether the district court erred in determining that there was no "occurrence" 
triggering coverage.

2. 
Whether the district court erred in determining that there was no coverage as 
the care, custody and control exclusion applied.

II. 
Whether there are genuine or material issues of fact precluding summary 
judgment.

[¶3]      The underlying 
events resulting in this appeal go back to September 22, 1980 when the District 
Court of the First Judicial District in and for Laramie County entered an order 
directing Sidney and Florence Kornegay (Kornegays) to remove or destroy certain 
accumulated junk and structures in order to abate a nuisance which was 
identified as the Kornegay's junkyard. Subsequently, the district court entered 
two orders finding the Kornegays in contempt for their refusal to abide by the 
order entered in 1980. The second of those orders, issued on April 6, 1987, also 
required Laramie County to develop a plan to bring property into compliance with 
the order entered in 1980, and it gave the Kornegays sixty days to remove any 
property they wanted to protect from the County's plan for restoring Tracts 10 
and 23 of Artesian Tracts in Laramie County.

[¶4]      After that order 
was entered, the Kornegays applied for, and obtained, a loan from Rocky Mountain 
Federal Savings & Loan (Rocky Mountain) in the amount of $8,012. The loan 
was secured by two pieces of heavy equipment, a Fiat Alias [Allis] Tractor 
Loader (Fiat loader) and a Michigan Rubber Tire Loader (Michigan loader). Rocky 
Mountain filed a financing statement covering both loaders in the office of the 
Laramie County Clerk; once on April 22, 1987 and again, on November 23, 1987. 
Both pieces of equipment were located on the property that was the subject of 
the 1980 and 1987 orders entered in the district court.

[¶5]      As a response to 
the plan of Laramie County, Reisig submitted a proposal to clean up the 
Kornegays' property and to bring it into compliance with the terms and 
conditions of the orders of the court. The court approved Reisig's plan in an 
Order Approving Schedule and Plan entered on March 9, 1988. Laramie County then 
made a Contract for Services with Reisig for the removal of the junk and debris 
from the Kornegays' property, including all salvage rights. Reisig began 
performance of the contract in March of 1988, and it was completed in September 
of 1989.

[¶6]      Pursuant to a 
requirement of the Contract for Services, Reisig obtained a Commercial General 
Liability (CGL) policy from Union with the period of insurance coverage running 
from December 30, 1988 to December 30, 1989. In August of 1988, Reisig, without 
any actual knowledge of the security agreement, removed the Michigan loader, 
which the Kornegays had pledged as security to Rocky Mountain, from the 
Kornegays' junkyard. Reisig certainly had constructive knowledge of the security 
interest at that time because the financing statement had been appropriately 
filed.

[¶7]      On September 2, 
1988, the Kornegays sent Reisig a letter, through their attorney, demanding the 
return of the personal property listed on an attachment to the letter which 
included the Michigan and Fiat loaders. Subsequently, Reisig sold the Michigan 
loader to a third party in either August or September of 1989. In the summer of 
1989, Reisig repaired the Fiat loader, used it in the cleanup of the Kornegays' 
property, and then removed it to his place of business in Morrill, Nebraska. 
Reisig never did conduct a lien or title search with respect to the loaders or 
any other property in dispute.

[¶8]      On May 5, 1989, 
the Kornegays were in default on their promissory note and, on March 13, 1990, 
Rocky Mountain filed an action against the Kornegays to recover on the 
promissory note and against Reisig for converting to his own use collateral 
covered by the financing statement. Reisig notified Union of the action brought 
by Rocky Mountain, and Union advised Reisig, on March 13, 1991, that the Rocky 
Mountain claim was not covered by its policy, and it had no duty to defend the 
action. Specifically, Union told Reisig (1) there was no occurrence, (2) there 
was no property damage, and (3) there was a care, custody, and control 
exclusion, all of which resulted in there being no coverage under its CGL 
policy. On November 18, 1991, Reisig brought this action against Union, alleging 
breach of the insurance contract, bad faith, and negligence on the part of Union 
and seeking recovery of attorney fees. The district court granted a motion for 
summary judgment filed by Union, ruling there was no duty to defend Reisig in 
the third-party lawsuit and, therefore, there had been no breach of the contract 
by Union. This appeal is taken from that order.

[¶9]      In First 
Wyoming Bank, we set forth the pertinent criteria in arriving at a 
determination of a duty to defend on the part of an insurance company. We 
said:

Regarding 
the duty to defend, we have held that the duty of an insurer to defend a claim 
is broader than the duty of the insurer to indemnify. Aetna Ins. Co. v. 
Lythgoe, 618 P.2d 1057, 1061 (Wyo. 1980) (citing Lanoue v. Fireman's Fund 
American Ins. Cos., 278 N.W.2d 49 (Minn. 1979); Boston Ins. Co. v. Maddux 
Well Serv., 459 P.2d 777 (Wyo. 1967)). Analysis of the duty to defend is not 
made based on the ultimate liability of the insurer to indemnify the insured or 
on the basis of whether the underlying action is groundless or unsuccessful. 
Lythgoe, 618 P.2d  at 1061 (citing Employers' Fire Ins. Co. v. 
Beals, 103 R.I. 623, 240 A.2d 397 (1968); Burger v. Continental Nat'l 
American Group, 441 F.2d 1293 (6th Cir. 1971)). Instead, we analyze the duty 
to defend by examining the facts alleged in the complaint that the claim is 
based upon. Lythgoe, 618 P.2d  at 1061 n. 2. See also Garvis v. 
Employers Mut. Casualty Co., 497 N.W.2d 254, 258 (Minn. 1993); County of 
Columbia v. Continental Ins. Co., 189 A.D.2d 391, 595 N.Y.S.2d 988, 990 
(1993).

First 
Wyoming Bank, 
860 P.2d  at 1097.

The 
analysis of the facts alleged in the complaint upon which the claim is based is 
undertaken in the light of the language of the insurance policy. In order to 
determine whether Union owed a duty to defend Reisig in the litigation 
instituted by Rocky Mountain, we must compare the terms of the insurance policy 
with the allegations set forth in the complaint filed by Rocky 
Mountain.

[¶10]   The CGL policy issued by Union to 
Reisig states, in pertinent part (emphasis added):

COMMERCIAL 
GENERAL LIABILITY

COVERAGE 
FORM

SECTION 
I - COVERAGES

COVERAGE 
A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY

1. 
Insuring Agreement.

a. 
We will pay those sums that the insured becomes legally obligated to pay as 
damages because of "bodily injury" or "property damage" to which this insurance 
applies. No other obligation or liability to pay sums or perform acts or 
services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS 
- COVERAGES A AND B. This insurance applies only to "bodily injury" and 
"property damage" which occurs during the policy period. The "bodily injury" or 
"property damage" must be caused by an "occurrence." The "occurrence" must take 
place in the "coverage territory." We will have the right and duty to defend any 
"suit" seeking those damages. But:

* 
* * * * *

c. 
"Property damage" that is loss of use of tangible property that is not 
physically injured shall be deemed to occur at the time of the "occurrence" that 
caused it.

* 
* * * * *

SECTION 
V - DEFINITIONS

* 
* * * * *

9. 
"Occurrence" means an accident, including continuous or repeated exposure to 
substantially the same general harmful conditions.

* 
* * * * *

12. 
"Property damage" means:

a. 
Physical injury to tangible property, including all resulting loss of use of 
that property; or

b. 
Loss of use of tangible property that is not physically injured.

[¶11]   The language of the CGL policy is 
clear and unambiguous in defining an occurrence and the nature of the losses 
that are to be covered.

[¶12]   With this language of the insurance 
policy before us, we examine the pertinent allegations in the Complaint filed by 
Rocky Mountain in which it alleges conversion. These are:

COUNT 
II

8. 
At the time Rocky Mountain made its loan to the Kornegays it took a security 
interest in the following described collateral:

One 
M12-G Fiat Alias Tractor Loader # 96Y02308

One 
Michigan M175 Rubber Tire Loader # 25328

* 
* * * * *

9. 
Russell Reisig was hired by the County of Laramie to remove all salvage and junk 
material from property owned by the Kornegays South of Cheyenne.

10. 
In the course of performing the cleaning up of the Kornegay property, Russell 
Reisig took possession of the heavy equipment described in paragraph 8 
above.

11. 
Russell Reisig took possession of the above described heavy equipment subject to 
the outstanding security interest of Rocky Mountain.

12. 
Upon information and belief Rocky Mountain alleges that Russell Reisig has sold 
one of the pieces of heavy equipment and has retained possession of the 
other.

13. 
Russell Reisig has converted Rocky Mountain's collateral for the Kornegay loan 
and Rocky Mountain has been damaged by this conversion to the extent of the 
collateral's value. Rocky Mountain has been further damaged to the extent of the 
attorney's fees and collection costs incurred in attempting to recover the 
collateral.

WHEREFORE, 
Plaintiff prays for judgment as follows:

* 
* * * * *

2. 
A Judgment against Russell Reisig in the amount of $8,940.59 together with 
interest thereon at the rate specified in the Note or in the alternative a 
Judgment in an amount equal to the fair market value of the collateral converted 
by Russell Reisig together with all attorney fees and collection costs incurred 
by Plaintiff.

[¶13]   The only claim asserted by Rocky 
Mountain against Reisig is for conversion of the loaders in which it held a 
security interest. Reisig's claim against Union is premised upon the breach of 
its contract imposing upon it a duty to defend Reisig. The contractual language 
that provides coverage to Reisig under Union's CGL policy is quoted above. 
Reisig asserts many issues in presenting his argument, but we are satisfied the 
case is resolved by addressing only whether conversion, which is an intentional 
tort, is to be considered an "accident" as defined by the policy and, therefore, 
a covered "occurrence."

[¶14]   In determining the question of 
whether the intentional tort of conversion can be considered an "accident," we 
look only to the allegations of the Complaint filed by Rocky Mountain to see if 
there is alleged a loss "caused by an `occurrence'" as required by the CGL 
policy, which incorporates the term "accident" in defining "occurrence." We 
previously have defined "accident" in this way:

The 
word may be defined as meaning a fortuitous circumstance, event, or happening, 
an event happening without any human agency, or if happening wholly or partly 
through human agency, an event which under the circumstances is unusual and 
unexpected by the person to whom it happens; an unusual, fortuitous, unexpected, 
unforeseen or unlooked for event, happening or occurrence; * * * chance or 
contingency; fortune; mishap; some sudden and unexpected event taking place 
without expectation, upon the instant, rather than something which continues, 
progresses or develops * * *.

Wright 
v. Wyoming State Training Sch., 
71 Wyo. 173, 255 P.2d 211, 218 (1953).

[¶15]   We also have said that 
"[c]onversion is defined as any distinct act of dominion wrongfully executed 
over one's property in denial of his right or inconsistent therewith." 
Satterfield v. Sunny Day Resources, Inc., 581 P.2d 1386, 1388 (Wyo. 
1978), cert. denied, 441 U.S. 938, 99 S. Ct. 2153, 60 L. Ed. 2d 1040 (1979) 
(quoting Western Nat'l Bank of Casper v. Harrison, 577 P.2d 635, 640 
(Wyo. 1978)). In another case, addressing whether a conversion had occurred, we 
said that "[w]hile an intent to convert is necessary, that intent need not be 
wrongful." Seay v. Vialpando, 567 P.2d 285, 289 (Wyo. 1977). "Although 
some notice of ownership may be necessary, good faith on the part of a defendant 
or ignorance of the owner's rights does not avoid the consequences of an 
unauthorized act constituting conversion." Seay, 567 P.2d  at 289. In a 
sister state, this pertinent language has been invoked: "The act constituting 
`conversion' must be an intentional act, but it does not require wrongful intent 
and is not excused by care, good faith, or lack of knowledge." Bader v. 
Cerri, 96 Nev. 352, 609 P.2d 314, 317 n. 1 (1980). In First Wyoming 
Bank, 860 P.2d 1094, 1100, we also said, relying upon Dykstra v. Foremost 
Ins. Co., 14 Cal. App. 4th 361, 17 Cal. Rptr. 2d 543, 545 (1993) (quoting 
Chatton v. Nat'l Union Fire Ins. Co., 10 Cal. App. 4th 846, 13 Cal. Rptr. 2d 318, 328 (1992)), "`it is well settled that intentional or fraudulent acts are 
deemed purposeful rather than accidental and therefore, are not covered under a 
CGL policy [citations].'" We are satisfied one who accomplishes a conversion is 
answerable to the owner without regard to his intention, his care, or his 
well-founded belief that his tortious act was right.

[¶16]   It is clear that nowhere in its 
Complaint does Rocky Mountain allege any loss "caused by an `occurrence'" as the 
CGL policy language requires. Any element of "accident" is completely missing 
from the claim. The record demonstrates Reisig did perform distinct acts of 
dominion and control that deprived the Kornegays of their property when he 
removed and sold the Michigan loader and used, and then removed, the Fiat 
loader. Rocky Mountain's interest under its security agreement was an intangible 
property right that became a tangible right to dominion and control when the 
Kornegays defaulted on their loan with Rocky Mountain. Reisig's conversion of 
the two loaders resulted in the loss by Rocky Mountain of its right to dominion 
and control.

[¶17]   There is no question that Reisig's 
acts were intentional, without regard to the wrongful nature of that intent. The 
intentional act makes it impossible to define the conduct as an "accident," and 
it, therefore, is not an "occurrence" covered by the policy. The Arkansas 
Supreme Court has held that an allegation of conversion of soy beans did not 
result in a claim of an "accident" as defined by the standard form policy of 
general liability insurance. Proctor Seed & Feed Co., Inc. v. Hartford 
Accident and Indem. Co., 253 Ark. 1105, 491 S.W.2d 62 (1973). We think the 
analysis by the Arkansas Supreme Court is not only correct, but is highly 
persuasive.

[¶18]   We deem it important to comment 
upon public policy concerns arising out of claims of insurance coverage in civil 
actions for conversion. If the insured could demand that his insurer defend a 
conversion action, casual conversion of another's property might be approached 
with less trepidation. The insured would not necessarily be risking much because 
the insurance company would have to pay the costs of defense and, ultimately, 
the property would simply have to be returned. It is possible an insured might 
even seek defense of a criminal action for conversion. Sound public policy 
demands insurance companies, and ultimately others who pay premiums to those 
companies, be free from any requirement to defend a claim of conversion of 
property by the insured.

[¶19]   We are satisfied there are no 
genuine issues of material fact in this case. As a matter of law, Union had no 
duty to defend Reisig against Rocky Mountain's claim for conversion because 
Rocky Mountain's complaint did not allege an "occurrence" as required by the 
clear language of the CGL policy Union had issued. The Order Granting 
Defendant's Motion for Summary Judgment entered in the district court is 
affirmed.

Footnotes

1 
The appellant's reply brief was not timely filed according to WYO.R.APP.P. 
7.06(c). Accordingly, the brief was stricken, and it was not considered in 
connection with this appeal. We deem it important that members of our bar 
understand the Rules of Appellate Procedure are significant and will be enforced 
whenever appropriate.