Court Opinion

ID: 626360
Source: CourtListenerOpinion
Date Created: 2012-03-29 20:26:47+00
Date Added: 2024-06-11T17:51:15.389578
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                         FILED
                            FOR THE NINTH CIRCUIT                           MAR 29 2012

                                                                        MOLLY C. DWYER, CLERK
                                                                         U .S. C O U R T OF APPE ALS

ROBERT G. WENDEL, DMD,                           No. 11-35340

              Plaintiff - Appellant,             D.C. No. 2:10-cv-00028-LRS

  v.
                                                 MEMORANDUM *
TRAVELERS CASUALTY AND
SURETY COMPANY OF AMERICA,

              Defendant - Appellee.

                    Appeal from the United States District Court
                      for the Eastern District of Washington
                     Lonny R. Suko, District Judge, Presiding

                       Argued and Submitted March 9, 2012
                               Seattle, Washington

Before: PAEZ and MURGUIA, Circuit Judges, and TUCKER, District Judge.**

       Appellant Robert G. Wendel, DMD, appeals the district court’s grant of

summary judgment in favor Appellee Travelers Casualty and Surety Company of

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable Josephine Staton Tucker, District Judge for the U.S.
District Court for Central California, sitting by designation.
America (“Travelers”) on Dr. Wendel’s claim for breach of contract. Dr. Wendel

also appeals the district court’s denial of his cross-motion for partial summary

judgment on his breach-of-contract claim and motion for summary judgment on his

bad-faith claim, and asks us to enter judgment in his favor. We review de novo

motions for summary judgment. Family Inc. v. U.S. Citizenship & Immigration

Servs., 469 F.3d 1313, 1315 (9th Cir. 2006). Because the history and facts of this

case are familiar to the parties, we recount them only to the extent necessary to

explain our decision. Applying Washington law, we reverse.

I.    Discussion

      In November 2009, Dr. Wendel filed the instant lawsuit, alleging that

Travelers breached their contract and acted in bad faith by refusing to defend him

in a 2007 lawsuit brought by the estate of his former employee, Christa Yount.

The Yount lawsuit accused Dr. Wendel of using his position of authority as Ms.

Yount’s boss to carry on a three-year sexual relationship with her, and alleged that

Ms. Yount committed suicide after Dr. Wendel fired her. Prior to the Yount

lawsuit, in 2005, another of Dr. Wendel’s former employees, Dorinda Wiseman,

sued Dr. Wendel. Ms. Wiseman alleged that Dr. Wendel fired her because she had

learned of his affair with Ms. Yount.

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      The parties agree and the record shows that the Yount lawsuit made no

mention of the prior Wiseman lawsuit. Accordingly, in order to deny Dr. Wendel’s

claim pursuant to the prior-litigation exclusion, Travelers had to rely on extrinsic

evidence. The district court endorsed this practice, but we reverse, as Washington

law can reasonably be interpreted as prohibiting Travelers from so doing.

      Under Washington law, the duty to defend is broader than the duty to

indemnify. Am. Best Food, Inc. v. Alea London, Ltd., 229 P.3d 693, 696 (Wash.

2010). Whereas the “duty to indemnify exists only if the policy actually covers the

insured's liability,” the “duty to defend is triggered if the insurance policy

conceivably covers allegations in the complaint.” Id. Therefore, while “[t]he

insurer is entitled to investigate the facts and dispute the insured’s interpretation of

the law,” it must defend the claim “if there is any reasonable interpretation of the

facts or the law that could result in coverage . . . .” Id. at 696 (emphasis added).

      Travelers argues that it properly relied on the Wiseman lawsuit because the

Wiseman lawsuit did not bear upon the truth of the allegations in the Yount lawsuit

and it used the Wiseman lawsuit only to determine whether the duty to defend was

triggered. Travelers admits, however, that no Washington court has ever expressly

stated that extrinsic evidence may be used in this manner. The district court sided

                                            3
with Travelers, citing to out-of-circuit precedent and non-binding secondary

sources. This was error.

      Travelers was bound to provide a defense unless the complaint made it

absolutely “clear” that the policy did not cover the claim alleged in the complaint

under Washington law. See Woo v. Fireman’s Fund Ins. Co., 164 P.3d 454, 459

(Wash. 2007). In making this determination, Travelers was not permitted to decide

unilaterally, as it has attempted to do here, that its interpretation of the law was

likely to be adopted by the Washington Supreme Court and deny coverage on that

basis. See id. at 463 (faulting an insurer for using its own “equivocal interpretation

of case law to give itself the benefit of the doubt rather than its insured”). To the

contrary, the lack of on-point Washington authority suggests a legal ambiguity that

Travelers was bound to resolve in Dr. Wendel’s favor. See Am. Best Food, Inc.,

229 P.3d at 699 (explaining that any ambiguity as to coverage must be resolved in

favor of the claimant); Woo, 164 P.3d at 463 (“[T]he duty to defend requires an

insurer to give the insured the benefit of the doubt when determining whether the

insurance policy covers the allegations in the complaint.”). Had Travelers wished

to seek an extension of Washington case law, it could have elected to defend Dr.

Wendel under a reservation of rights and sought declaratory relief. See Am. Best

                                            4
Food, Inc., 229 P.3d at 696, 700–01. Travelers, however, elected not to pursue this

course of action.

      We conclude that there is a reasonable interpretation of Washington law that

could have resulted in a duty to defend. In Woo, the Washington Supreme Court

recently had occasion to summarize Washington duty-to-defend law. 164 P.3d at

459–60. As part of this discussion, the court noted that there are only “two

exceptions to the rule that the duty to defend must be determined only from the

complaint . . . .” Id. at 459 (quoting Truck Ins. Exch. v. VanPort Homes, Inc., 58

P.3d 276 (Wash. 2002)). It further explained that these exceptions benefit the

insured, not the insurer. Id. Accordingly, in Washington an “insurer may not rely

on facts extrinsic to the complaint to deny the duty to defend—it may do so only to

trigger the duty.” Id. (emphasis added).

      The extrinsic evidence exception espoused by Travelers is not one of the two

exceptions listed by the Woo court. Even more importantly, Travelers proposes

that it be allowed to use extrinsic evidence to deny coverage, an action which

directly conflicts with Woo. Accordingly, we cannot accept Travelers’ argument

that no reasonable interpretation of case law supports the notion that Travelers

improperly relied on the Wiseman lawsuit. To the contrary, Woo suggests just the

opposite.

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      Therefore, we reverse the district court’s grant of Travelers’ motion for

partial summary judgment.1 We also reverse the district court’s denial of Dr.

Wendel’s motions for partial summary judgment, which were denied summarily,

and remand so that the district court may give substantive consideration to those

motions in light of this disposition.

      REVERSED AND REMANDED.

      1
        We decline to consider Travelers’ suggestion that we affirm based on the
prior-knowledge exclusion, as Travelers did not rely on the prior-knowledge
exclusion in its partial motion for summary judgment. Cf. Joseph Rosenbaum,
M.D., Inc. v. Hartford Fire Ins. Co., 104 F.3d 258, 261 (9th Cir. 1996).

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