Opinion ID: 751714
Heading Depth: 2
Heading Rank: 2

Heading: Massachusetts Bay's Duty to Defend Under Tennessee Law

Text: 33 We begin our analysis with the general rule that an insurer's duty to defend a suit against its insured is determined according to the factual allegations of the complaint. I. Appel Corp. v. St. Paul Fire & Marine Ins. Co., Inc., 930 S.W.2d 550, 552 (Tenn.App.1991) (citations omitted) (emphasis added). Where the complaint does not state facts sufficient to clearly bring the case within or without the coverage, ... the insurer is obligated to defend if there is, potentially, a case under the complaint within the coverage of the policy. Dempster Bros., Inc. v. United States Fidelity & Guar. Co., 54 Tenn.App. 65, 388 S.W.2d 153, 156 (Tenn.App.1964). This is but an adaptation of the principle that contracts of insurance which are ambiguous and susceptible to two reasonable meanings should be construed in the insured's favor. See Boyd v. Peoples Protective Life Ins. Co., 208 Tenn. 280, 345 S.W.2d 869, 872 (1961). Moreover, [i]f even one of the allegations is covered by the policy, the insurer has a duty to defend, irrespective of the number of allegations that may be excluded by the policy. Drexel Chemical Co. v. Bituminous Ins., 933 S.W.2d 471, 480 (Tenn.Ct.App.1996) (citing U.S. Fidelity & Guar. Co. v. Murray Ohio Manuf. Co., 693 F.Supp. 617 (M.D.Tenn.1988)). 34
35 Initially, we address Massachusetts Bay's argument that, because the insurance policy at issue limits coverage to property damage caused by an accident, it could not have been obligated with a duty to defend in the Film House action since Koenig's repossession of the BMW automobile cannot be characterized as an accident. The applicable section of Koenig's policy reads, in pertinent part: A. COVERAGE 36 We [Massachusetts Bay] will pay all sums an insured legally must pay as damages because of bodily injury or property damage to which this insurance applies caused by an accident and resulting from garage operations.(R. 1, Ex. A, Garage Coverage Form, at 2). Although the policy fails to define accident, we note that the district court turned to and applied Illinois law to interpret this term, to wit: 37 Several Illinois cases define accident as an unforeseen occurrence, usually of an untoward or disastrous character, or an undesigned sudden or unexpected event of an inflictive or unfortunate character. Farmers Elevator Mut. Ins. Co. v. Burch, 38 Ill.App.2d 249, 187 N.E.2d 12, 14 (Ill.App. 4th Dist.1962); see also Diamond State Ins. Co. v. Chester-Jensen Co., 243 Ill.App.3d 471, 183 Ill.Dec. 435, 443, 611 N.E.2d 1083, 1091 (Ill.App. 1st Dist.1993) (An accident, by its very nature contemplates an event that is unforeseen and neither intended or expected.); Travelers Ins. Cos. v. P.C. Quote, Inc., 211 Ill.App.3d 719, 156 Ill.Dec. 138, 143, 570 N.E.2d 614, 619 (Ill.App. 1st Dist.1991) (An accident is defined as 'an unforeseen occurrence of untoward or disastrous character' or 'an undesigned or sudden or unexpected event.' ); Aetna Casualty & Sur. Co. v. Freyer, 89 Ill.App.3d 617, 44 Ill.Dec. 791, 793, 411 N.E.2d 1157, 1159 (Ill.App. 1st Dist.1980) (same). As a result, these cases have held that the natural and ordinary consequences of an act do not constitute an accident. P.C. Quote, 156 Ill.Dec. at 144, 570 N.E.2d at 619; Freyer, 44 Ill.Dec. at 793, 411 N.E.2d at 1159; Burch, 187 N.E.2d at 14. 38 (R. 30, Mem. and Order of Jan. 19, 1996, at 6). Tennessee's definition of the term accident seems to be cut from the same cloth. That is, in Kroger Co. v. Johnson, 221 Tenn. 649, 651, 430 S.W.2d 130, 131 (1967), the Supreme Court of Tennessee explained that the words 'accident' and 'accidental' ... imply that the injury must partake of the unusual, casual or fortuitous. Id.; see also American Employers Ins. Co. v. Knox-Tenn Equip. Co., 52 Tenn.App. 643, 377 S.W.2d 573, 576 (1963) (citations and quotations omitted) (An accident as defined ... in our decisions defining accidental means as those words are used in insurance policies is an event not reasonably to be foreseen, unexpected, and fortuitous.). [T]here is an element of sudden, unforeseen and unexpected casualty and misfortune in the result. Kroger Co., 221 Tenn. at 652, 430 S.W.2d at 132. Thus, Tennessee courts, like those of Illinois, recognize that the the natural results of what [one] intend[s] to do, id. at 654-55, 430 S.W.2d at 132-33, do not flow from accidents. 39 It is beyond dispute that Koenig's conversion of the car was an intentional act not falling within the meaning ascribed the term accident; namely, an event that is unforeseen and neither intended nor expected. Indeed, [t]o be liable [for conversion], the defendant need only have an intent to exercise dominion and control over the property that is in fact inconsistent with the plaintiff's rights. Mammoth Cave Prod. Credit Ass'n v. L.H. Oldham, 569 S.W.2d 833, 836 (Tenn.Ct.App.1977) (emphasis added); see also General Electric Credit Corp. of Tennessee v. Kelly & Dearing Aviation, 765 S.W.2d 750, 754 (Tenn.Ct.App.1988) (emphasis added) (This intentional act by [defendant] constituted conversion.). Clearly, then, the intentional tort of conversion is at odds with a definition of accident which requires that the act at issue not be deliberate. Of course, as stated earlier, we focus our efforts on analyzing the facts, in contradistinction to the particular legal theories (i.e., conversion), contained within Film House's complaint to determine whether they could potentially bear evidence of an accident. See St. Paul Fire & Marine Ins. Co., Inc., 930 S.W.2d at 552. Upon doing so, we are unable to find a single factual allegation leading us to believe that Koenig's actions in repossessing the BMW were anything but intentional. In fact, the complaint itself states as much when it claims that [t]hese actions by the defendants [Koenig and the repossession company] were willful and wanton. See BLACK'S LAW DICTIONARY 1599 (6th Ed.1990) (emphasis added) (defining a willful action as one done intentionally, knowingly, and purposely, ... as distinguished from an act done ... inadvertently.). 40 This Court's decision in Red Ball Leasing, Inc. v. Hartford Accident & Indem. Co., 915 F.2d 306 (7th Cir.1990), a case cited approvingly by the district court and one bearing facts similar to those at bar, wholly supports the foregoing conclusion. In Red Ball, a seller and lessor of trucks, Red Ball, carried casualty insurance with Hartford Accident and Insurance (Hartford) that obligated Hartford to indemnify and defend Red Ball in any action caused by an accident ... which results in ... property damage neither expected nor intended from the standpoint of the insured. Id. at 307-08. After Red Ball wrongfully repossessed four trucks it had sold to an individual whom it erroneously believed to be in default on his payments, Hartford refused to defend it in the conversion action resulting therefrom. Red Ball subsequently brought suit against Hartford, seeking reimbursement for its settlement of the case, as well as attorney's fees. Id. at 308. The district court entered an order granting summary judgment in Hartford's favor, and we affirmed, stating that [t]here is no doubt that Red Ball intended to repossess the trucks; that action clearly was not an accident. Id. at 309. We went on to conclude: 41 A volitional act does not become an accident simply because the insured's negligence prompted the act. Injury that is caused directly by negligence must be distinguished from injury that is caused by a deliberate and contemplated act initiated at least in part by the actor's negligence at some earlier point. The former injury may be an accident. However, the latter injury, because it is intended and the negligence is attenuated from the volitional act, is not an accident. In this case, it is clear that Red Ball intended to repossess the [ ] trucks. A plain reading of the policy discloses that what must be neither expected nor intended is the damage; knowledge of the legal consequences is not material. Even if the mistake in Red Ball's accounting procedures triggered the chain of events that ultimately led to the repossession, the decision to take the trucks--an intentional act of Red Ball--is not an 'accident' under the terms of the insurance policy. 42 Id. at 311-12 (citations and footnotes omitted, and emphasis in original). 43 As Koenig's repossession of the automobile, like that in Red Ball, certainly was an intentional and affirmative act calculated to deprive Film House of the use and possession of the car, it cannot be construed an accident under the terms of the policy. Accordingly, Massachusetts Bay had no duty to defend Koenig in the Film House suit under the policy's accident coverage provision. 44
45 In addition to arguing that it was not obligated to defend in the Film House action because Koenig's repossession of the BMW automobile was not an accident, Massachusetts Bay further contends that the exclusionary provision in Koenig's policy, which reads as follows, brings about the same result: B. EXCLUSIONS 46 This insurance does not apply to any of the following: 1. EXPECTED OR INTENDED INJURY 47 Bodily injury or property damage expected or intended from the standpoint of the insured. But for garage operations other than covered autos this exclusion does not apply to bodily injury resulting from the use of reasonable force to protect persons or property. 48 (R. 1, Ex. A, Garage Coverage Form, at 3 (emphasis added)). Koenig consciously acted to repossess the BMW automobile with both the intention and expectation that Film House would not be able to use it. Thus, Film House's loss of use of the vehicle was both expected and intended from Koenig's standpoint, and as such, it would be disingenuous to suggest that the above-quoted exclusionary language was inapplicable. Tennessee courts have enforced similar exclusionary provisions when an insurer refused to defend its insured. See, e.g., Graves v. Liberty Mut. Fire Ins. Co., 745 S.W.2d 282, 284 (Tenn.Ct.App.1987) (We believe the exclusion is applicable if bodily injury is 'intended or expected' by the insured where the insured acts with the intent or expectation that bodily injury will result.). Without elaborating any further, we conclude that the expected or intended injury exclusion also justified Massachusetts Bay's refusal to defend Koenig in the Film House suit. 49
50 Having concluded that Massachusetts Bay did not have a duty to defend with respect to the intentional conversion claim, we now turn to consider whether, as Koenig asserts, the Film House complaint alleged facts that could potentially bring the case within the policy's coverage for breach of an insured contract, slander, wrongful entry, invasion of privacy, safekeeping coverage, and/or theft coverage. 8 We find each of Koenig's arguments for these potentially covered causes of action, although creative, to be scant at best. 51 As an initial matter, while we recognize that Tennessee is a notice pleading jurisdiction, see Walden v. Wylie, 645 S.W.2d 247, 250 (Tenn.Ct.App.1982), one wherein Film House was not necessarily required to articulate its theories of recovery by name, see Redfield v. Continental Cas. Corp., 818 F.2d 596, 605 (7th Cir.1987) (distinguishing between fact pleading and notice pleading), it is noteworthy that the Film House complaint explicitly states that [the defendants'] actions amounted to conversion, whereas none of the causes of action which Koenig purports the complaint alleges are expressly identified. Why would Film House have specifically alluded to a claim for conversion and excluded any reference whatsoever to Koenig's breach of an insured contract, slander, wrongful entry, invasion of privacy, safekeeping coverage, and/or theft coverage, unless it chose not to seek relief for them? We need not limit ourselves to speculating on what legal theories Film House intended to allege in its complaint. Once again, it is the facts set forth therein that one must consider in determining whether the disputed insurance policy's coverage is implicated. 52 Our review of the Film House complaint reveals that it alleges facts which solely and entirely relate to a claim for conversion. Koenig's attempt to use single words and phrases contained within the complaint out of context and contrive six additional causes of action is unavailing. The frailty of Koenig's position was evident when, at oral argument, its counsel asserted that Massachusetts Bay had a duty to defend ... because it wasn't clear that there wasn't at least one word in [the Film House] complaint that had the potential for coverage. In our view, this overstates the extent to which we are to review the complaint. See English v. Virginia Surety Co., 196 Tenn. 426, 268 S.W.2d 338, 340 (1954) (emphasis added) (explaining that [a]n insurance policy and its endorsements are to be read as a whole....). It would be inappropriate for us to conduct a word-by-word analysis of the complaint, patching one word from one paragraph to another word from another paragraph, because such a review might very well cause us to find meaning where none otherwise existed. The proper extent of our review simply requires us to focus attention on the facts alleged as they appear in the complaint to determine if they could even potentially be covered by the Massachusetts Bay policy. See Dempster Brothers, Inc., 388 S.W.2d at 156. That said, we turn to discuss Koenig's contention that the Film House complaint sets forth facts which could give rise to a cause of action for: (1) breach of an insured contract; (2) slander; (3) wrongful entry; (4) invasion of privacy; (5) safekeeping coverage; and/or (6) theft coverage. 53
54 Koenig argues that although its policy with Massachusetts Bay expressly excludes coverage for liability assumed under any contract or agreement, the insurer nevertheless had a duty to defend it in the Film House suit because the lease between Koenig and Film House is an insured contract, and its policy makes clear that this exclusion does not apply to liability for damages ... [a]ssumed in a contract or agreement that is an 'insured contract;'.... (R. 1, Ex. A, Garage Coverage Form, at 3). Whether the facts alleged state a claim for breach of an insured contract obviously depends on the policy's definition of that term, which reads, [t]hat part of any contract or agreement entered into, as part of [Koenig's] garage business, by [Koenig] or any of [its] employees pertaining to the rental or lease of any 'auto.'  (Id. at 12.) Koenig contends that the Film House complaint's allegation stating, it [Film House] properly and fully performed its obligations pursuant to a vehicle lease and purchase agreement so as to own said vehicle and its title but defendant Koenig failed and refused to transfer documentary title to the vehicle in question after demand, articulated a claim within the aforementioned definition of an insured contract. We disagree. Reading this sentence in isolation, as Koenig would advise us to do, is deceptive, for the remainder of the paragraph in the complaint from which this sentence is excerpted leaves no doubt that such facts refer solely to a claim for wrongful conversion: 55 This is a case involving the tortious conduct of the defendants in seizing the plaintiff's automobile. [Film House] alleges that it properly and fully performed its obligations pursuant to a vehicle lease and purchase agreement so as to own said vehicle and its title but defendant Koenig failed and refused to transfer documentary title to the vehicle in question after demand. The defendant unconscionably and without cause seized such vehicle in Nashville, Tennessee. These actions amounted to a conversion by the defendants. 56 (R. 1, Ex. B, Film House Complaint, at 1. (emphasis added)). Once again, the omitted text makes clear that the Film House suit was a case involving ... tortious conduct, as opposed to breach of contract, arising out of Koenig's conversion of the BMW automobile. 57 Even if we were to assume, arguendo, that the Film House complaint somehow stated a claim for breach of contract, Massachusetts Bay still would not have had a duty to defend Koenig under the plain language of the parties' agreement. The insured contracts clause covers only liability for damages ... assumed in ... [such] contracts.... Tennessee courts recognize that assumed liability requires an express provision assuming liability; that is, one set forth in and agreed upon as part of a lease agreement. See Coble Systems, Inc. v. Gifford Co., 627 S.W.2d 359, 363 (Tenn.Ct.App.1981) (holding lessee liable for total cost of vehicle where it executed lease agreement which contained an absolute assumption of liability provision). An insurer's exclusion of, or limitation of liability to, an insurer's assumed liabilities is by no means a prohibited practice. In fact, to the extent that only those risks are covered by the policy which were contemplated by the parties when the contract was made, Industrial Sugars, Inc. v. Standard Accident Ins. Co., 338 F.2d 673, 675 (7th Cir.1964), it makes sound business sense. The seven-page lease executed by and between Koenig and Film House in the instant case included no provision under which Koenig even remotely assumed liability for its refusal to transfer documentary title to the BMW automobile. Koenig's insurance policy, therefore, did not cover such liability and, in turn, Massachusetts Bay had no duty to defend against claims therefor. Moreover, as already stated, the policy's exclusion of losses expected or intended from the standpoint of the 'insured'  precludes coverage for Koenig's intentional conduct. 58
59 Koenig further contends that Massachusetts Bay was obligated to defend it against claims for personal injuries, which the parties' Broadened Coverage--Garages endorsement 9 defines as: 60 injury, other than bodily injury, arising out of one or more of the following offenses: 61 a. False arrest, detention or imprisonment; 62 b. Malicious prosecution; 63 c. Wrongful entry into, or eviction of a person from, a room, dwelling or premises that the person occupies; 64 d. Oral or written publication of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services; or 65 e. Oral or written publication of material that violates a person's right of privacy. 66 (Appellee's Br., Supp.App., Broadened Coverage-Garages, at 16 (emphasis added)). In so doing, it asserts that the Film House complaint alleges facts which could potentially constitute an action for wrongful entry, slander, and/or invasion of privacy, thereby invoking the policy's coverage. We, however, are of the opinion that Koenig is not entitled to a defense under this provision. 1. Slander 67 Under Tennessee law, [t]o establish a claim for [slander] the plaintiff must prove that the defendant communicated a false and defamatory statement to the person of another, and that as a result thereof the plaintiffs suffered actual damages. 10 Shipley v. Tennessee Farmers Mut. Ins. Co., 1991 WL 77540, at  5 (Tenn.Ct.App.1991) (citing Emerson v. Garner, 732 S.W.2d 613, 617 (Tenn.Ct.App.1987)). Koenig urges that Film House potentially pleaded these three requisite elements by alleging that Koenig: (1) falsely claimed Film House owed $6,000 on the BMW; (2) communicated false statements that it was going to take the car one way or another ... in the parking lot of insurer's office; and (3) caused significant damage as a result thereof. We find Koenig's argument to be unpersuasive. Giving Koenig the benefit of the doubt and assuming the fact that Film House owed $6,000 on the leased vehicle was false, Koenig nevertheless does not suggest that this particular statement was communicated to other individuals. Rather, it tells us that another declaration--[we are] going to take the car one way or another--was made in the parking lot of insurer's office, and no falsity inheres this statement. Moreover, Koenig relies on statements excerpted from a document entitled, Memorandum of Law and Facts on Behalf of Plaintiff Film House, which explains that Film House should receive compensatory damage because of the humiliation it suffered during and following the repossession, to demonstrate that Film House suffered damages as a result of Koenig's purported slanderous conduct. This proposition is thus extracted not from the complaint, but from an extrinsic document beyond the scope of our inquiry. See Drexel Chemical Co., 933 S.W.2d at 480 (explaining that the obligation of a liability insurance company to defend an action brought against the insured by a third party is determined solely by the allegations contained in the complaint in that action). For these reasons, Koenig's claim that Film House's complaint made out a cause of action for slander is without merit. 2. Invasion of Privacy 68 Koenig's assertion that the facts in the complaint potentially alleged an invasion of privacy is likewise unpersuasive. While there exists more than one branch of liability under the invasion of privacy cause of action, see Stein v. Davidson Hotel Company, 1996 WL 230196, at  7 (Tenn.Ct.App.1996), Koenig fails to identify the specific theory pursuant to which relief was allegedly sought in Film House's complaint (i.e., intrusion into seclusion, disclosing private information, etc.). 11 More significant, however, is the fact that Koenig once again mistakenly references documents other than the Film House complaint in its attempt to craft a claim which would otherwise fall under the Massachusetts Bay insurance policy's coverage. We hasten to point out that this information is not within the purview of our inquiry. See Drexel Chemical Co., 933 S.W.2d at 480 (the duty to defend is determined solely by the factual allegations of the complaint in relation to the language of the insurance policy). Hence, we need not waste valuable judicial resources and devote effort to addressing the substantive merits of its invasion of privacy argument. 3. Wrongful Entry 69 Koenig also claims that the Film House complaint's allegation which reads, [the] conversion was committed through a breach of the peace whereby defendants entered onto plaintiff's property, evidences a wrongful entry, a cause of action for which the Broadened Coverage--Garages endorsement provides coverage. Towards this end, Koenig cites McCall v. Owens, 820 S.W.2d 748, 752 (Tenn.Ct.App.1991), for the proposition that when a repossession breaches the peace as Film House alleged in its complaint, the repossessor may be liable for trespass. (Appellant's Br. at 10 (emphasis added)). We believe that this argument effectively extends us an invitation to create Tennessee law, a course of action that we are in no position to follow. That is, as Koenig points out, McCall explicitly addressed the tort of trespass in a vehicle repossession context, whereas the Massachusetts Bay policy insures against Koenig's wrongful entry into the premises of another. Koenig does not refer us to a single Tennessee case that sets forth the elements of a wrongful entry action, and for good reason, as none exist to our knowledge. We could, of course, equate wrongful entry with trespass, and proceed to consider Koenig's argument vis-a-vis Tennessee trespass principles. Such an analysis certainly would not prove novel to this Court, for we have previously drawn upon Missouri's and Illinois' trespass laws to interpret an insurance policy's definition of wrongful entry. See Pipefitters Welfare Educ. Fund v. Westchester Fire, 976 F.2d 1037 (7th Cir.1992). But the predominant reason for having done so-because Missouri and Illinois courts recognize that wrongful entry is substantially similar to trespass, id. at 1041, is inapplicable to the case at bar. Tennessee courts simply have not been called upon to compare and contrast the two causes of action, and it would be imprudent for us to do so in their stead. It is not our province as a reviewing federal appellate body to make federal law, much less state law.
70 Koenig, again relying on documents other than the Film House complaint, 12 also contends that Massachusetts Bay had a duty to defend arising from the disputed policy's coverage for any customer's 'auto' ... left with [Koenig's] 'garage operations' for ... safekeeping. (R.1, Ex. A, Garage Coverage Form, at 1 (emphasis added).) Limiting our review to the complaint only, we find that its only even remotely relevant allegation reads, in pertinent part, Film House surrendered the vehicle under protest in order to avoid damage to the vehicle. To suggest, however, that this factual averment invokes the safekeeping coverage is simply preposterous. To leave property for safekeeping implies the voluntary delivery of a chattel by one individual to another. See Marshall v. United States, 352 F.2d 1013, 1014 (9th Cir.1965) ([T]he appellant voluntarily delivered possession and control of his briefcase to his landlady for safekeeping ....) (cited in United States v. Garrett, 371 F.2d 296, 299 (7th Cir.1966)). And as the complaint makes plain, Film House's relinquishment of the BMW automobile in the face of repossessory action was anything but voluntary. Even if we assumed that Film House did in fact leave the vehicle with Koenig, the question thus arises as to for whom it was to be kept safe--certainly not Film House. In short, the complaint does not create a duty to defend in Massachusetts Bay under the safekeeping coverage provision.
71 Finally, Koenig attempts to bring its wrongful conversion within the policy's language by asserting that its actions constituted a theft, conduct for which Massachusetts Bay will pay for 'loss' to a covered 'auto'. Koenig only very briefly describes how the conversion amounted to a theft, and in doing so, fails to recognize that the applicable coverage provision applies only to 'autos' left with you [Koenig] for service, repair, storage, or safekeeping. Koenig does not suggest that it repossessed the BMW for service, repair or storage, and we have concluded above that Film House did not leave it for safekeeping. As if that were not enough, the policy also contains an exclusion specifically stating that any loss due to theft or conversion caused in any way by [the insured] is not covered.