Opinion ID: 896050
Heading Depth: 2
Heading Rank: 2

Heading: Insurer's Payment of Expenses

Text: [¶ 46] Kurry cites State Farm Fire and Cas. Co. v. Sigman, 508 N.W.2d 323 (N.D.1993), as requiring an insurer to pay attorneys fees and expenses in this declaratory judgment action. In Sigman, a majority of this Court concluded the policy language allowed for payment of attorneys fees in a declaratory judgment action brought by State Farm to determine coverage. Id. There is a difference, however, between an insurer's duty to defend and this Court's holding in Sigman. The Sigman majority concluded the language that State Farm will pay its insured's `reasonable expenses' incurred at the company's `request' is broad in scope and is without express conditions. Id. at 325. See also Johnson v. Center Mut. Ins. Co., 529 N.W.2d 568 (N.D.1995). While the Continental policy contains similar language, [2] this case is governed by the duty to defend clause, not the payment-of-expenses clause. [¶ 47] In part II of this opinion we concluded Kurry is not an insured under the Continental policy. This Court has declined to apply Sigman to instances where the court determines there is no coverage absent contractual or statutory authority. State Farm Mut. Auto. Ins. Co. v. Estate of Gabel, 539 N.W.2d 290, 294 (N.D.1995) (noting Sigman expressed no opinion about an insurer's obligation to pay its insured's attorneys fees and expenses when the court determines there is no coverage). In this case, the payment-of-expenses language in the Continental policy is expressly reserved to `insured[s].' We will not apply Sigman to cases where the court determines there is no coverage. Estate of Gabel, 539 N.W.2d at 294. See Sigman, 508 N.W.2d at 328 (VandeWalle, C.J., dissenting) (stating the clear legislative intent of section 32-23-06, N.D.C.C., was to prevent the insurer from being required to expend its resources to defend when it believed no duty to do so was present....); 1983 N.D. Laws Ch. 377, § 1 (amending N.D.C.C. § 32-23-06). [¶ 48] In addition, unlike Sigman and Johnson, this action was not brought by the insurer or insured, but by a third party. Compare Sigman, 508 N.W.2d at 323 (noting insurer brought declaratory action); Johnson, 529 N.W.2d at 569 (recognizing insureds brought declaratory action). Kurry was brought into this declaratory action by the Hannemans, not his insurer. The declaratory action was not brought at the insurer's request. There is no contractual relationship between the Hannemans and Continental, and no contractual language requires the payment of expenses because Kurry is not an insured under the Continental policy. [¶ 49] Finally, we observe that when the Hannemans' declaratory action was filed on May 21, 1996, Kurry's attorneys fees were still being paid by Ohio Casualty. Less than two months later, on July 8, 1996, the Hannemans settled with Kurry and Ohio Casualty with the July release agreement. Instead of moving to dismiss Kurry, Ohio Casualty paid its settlement and ended its defense of him. Kurry did not bother to extricate himself from the lawsuit. [¶ 50] We conclude Continental was not required to pay Kurry's attorneys fees and expenses.