Peterson v. Ohio Cas. Group

Page 765

724 N.W.2d 765

272 Neb. 700

John C. PETERSON and Kathy M. Peterson, husband and wife, appellants, v. The OHIO CASUALTY GROUP, a foreign insurance company, also known as West American Insurance Company, appellee.

No. S-05-691.

Supreme Court of Nebraska.

December 8, 2006.

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Michael F. Coyle and Timothy J. Thalken, of Fraser, Stryker, Meusey, Olson, Boyer & Bloch, P.C., for appellants.

Richard C. Gordon, Betty L. Egan, and Kylie A. Wolf, of Walentine, O'Toole, McQuillan & Gordon, for appellee.

WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

STEPHAN, J.

Appellants, John C. Peterson (Peterson) and Kathy M. Peterson, filed a declaratory judgment action in the district court for Douglas County against appellee The Ohio Casualty Group, also known as West American Insurance Company (Ohio Casualty). The Petersons sought a declaration that Ohio Casualty had an obligation under two insurance policies to defend and indemnify Peterson in a lawsuit filed against him by Richard J. Holcomb. In 2003, the district court entered summary judgment in favor of Ohio Casualty, and the Petersons appealed. In a memorandum opinion, we determined that deficiencies in the record precluded meaningful appellate review, and we therefore reversed, and remanded for further proceedings. Following remand, the parties filed cross-motions for summary judgment and supplemented the record. The district court concluded that Ohio Casualty had no obligation to indemnify or defend the Petersons in the Holcomb lawsuit, and entered judgment in its favor. We affirm.

I. BACKGROUND

On May 10, 1999, Holcomb filed a lawsuit against Peterson, individually, and Anesthesia West, P.C. Thereafter, Holcomb filed several amended petitions which added parties, facts, and claims, culminating in his sixth amended petition filed on November 29, 2001. The Holcomb petition and amended petitions are included in the bill of exceptions and allege the following facts which are not disputed for purposes of this case:

Holcomb and Peterson are anesthesiologists. Both were at one time employees, directors, and shareholders of Anesthesia West, a professional corporation conducting business in Douglas County. On November 30, 1998, Holcomb's employment agreement with Anesthesia West was terminated.

In each petition and amended petition, Holcomb asserted various causes of action against one or more named parties. Included is a defamation claim against Peterson in which Holcomb alleged that Peterson had "made false and defamatory" statements and allegations pertaining to Holcomb's professional competence and his conduct with an employee. In this claim, Holcomb further alleged that Peterson had "made unprivileged publication of . . . false and defamatory communications to third parties, including to Methodist [Hospital] and to third-party physicians and others." The Petersons' coverage claims asserted in this action are based solely on the allegations of Holcomb's defamation claim against Peterson.

At the time the Holcomb lawsuit was filed, the Petersons were insured under a homeowner's insurance policy and a personal umbrella liability endorsement (umbrella policy), both issued by Ohio Casualty. The homeowner's policy defines "[b]usiness" as including "trade, profession or occupation." The section of the homeowner's policy describing liability coverage includes the following:

COVERAGE E — Personal Liability

If a claim is made or a suit is brought against an "insured" for damages because of "bodily injury" . . . caused by an "occurrence" to which this coverage applies, we will:

1. Pay up to our limit of liability for the damages for which the "insured" is legally liable. . . .

2. Provide a defense at our expense . . . even if the suit is groundless, false or fraudulent.

The homeowner's policy also includes the following exclusion:

1. Coverage E — Personal Liability . . . do[es] not apply to "bodily injury" . . .

a. Which is expected or intended by the "insured";

b. Arising out of or in connection with a "business" engaged in by an "insured."

However, the homeowner's policy contains a "HOMEOWNERS ADDITIONAL COVERAGES ENDORSEMENT" which states:

2. Under Section II, Coverage E — Personal Liability, the definition "Bodily Injury" is amended to include personal injury. "Personal Injury" means injury arising out of one or more of the following offenses:

. . . .

b. libel, slander or defamation of character . . . .

. . . .

Section II Exclusions do not apply to this coverage. This coverage does not apply to:

. . . .

c. injury sustained by any person as a result of an offense directly or indirectly related to the employment of this person by the Insured;

d. injury arising out of the business pursuits of an Insured . . . .

The umbrella policy includes the following defined terms:

4. "Business" includes trade, profession or occupation (but not farming).

5. "Damages" mean the total of:

a. The amount the insured must pay . . . because of "personal injury" . . . covered by this endorsement; and

b. Reasonable expenses the insured incurs in the . . . defense . . . of a claim or suit because of "personal injury" . . . covered by this endorsement.

. . . .

8. "Personal injury" means:

. . . .

b. Injury arising out of:

. . . .

(2) Libel, slander, defamation, humiliation, or a publication or utterance in violation of a person's right of privacy; or

. . . .

12. "Underlying insurance" . . . includes any other insurance available to the insured.

The umbrella policy includes the following coverage and exclusions:

A. INSURING AGREEMENTS

1. Excess Liability Insurance

We will pay on behalf of the insured all sums for "damages" due to "personal injury" . . . in excess of the limits of "underlying insurance" and for expenses caused by an occurrence . . . . The "personal injury" . . . must be covered by "underlying insurance."

. . . .

We have the right to defend any claim or suit against the insured seeking "damages" for "personal injury" . . . to which this insurance applies; but:

. . . .

d. We have a duty to defend all claims or suits not covered by the "underlying insurance" shown in the underlying insurance endorsement;

. . . .

B. EXCLUSIONS

We do not cover:

. . . .

6. "Personal injury" . . . due to acts committed by or at an insured's direction with intent to cause "personal injury". . . .

7. "Personal injury" . . . due to "business" pursuits . . . . Our coverage is no broader than the "underlying insurance". . . .

. . . .

12. Liability due to activities as a member of a board of directors of, or as an officer of, an organization other than a charitable, religious or civic non-profit organization.

Through counsel, the Petersons sent a letter dated May 19, 1999, to Ohio Casualty, enclosing a copy of the original petition filed by Holcomb and requesting that Ohio Casualty indemnify and defend Peterson. In response, Ohio Casualty denied coverage under both the homeowner's policy and the umbrella policy. Referring to the Holcomb petition and citing language from the insurance policies, Ohio Casualty stated that Holcomb's defamation claim against Peterson fell within the business pursuits exclusions of the policies and that therefore, no coverage was provided. Ohio Casualty made no references to an investigation in these letters.

Thereafter, the Petersons commenced this action in which they claimed that coverage was provided under both policies and that Ohio Casualty had a duty to defend Peterson in the pending Holcomb lawsuit. In an amended petition filed March 21, 2003, the Petersons alleged that the Holcomb lawsuit had been settled and that Ohio Casualty was bound by the unspecified terms of the settlement and obligated to pay Peterson's defense costs.

As noted above, this matter is before us now for the second time. In our memorandum opinion and judgment on appeal filed January 12, 2005, we reversed an order of the district court granting summary judgment in favor of Ohio Casualty. We stated that because of deficiencies in the record, we could not determine the correctness of the order of the district court. We therefore reversed, and remanded for further proceedings. We did not reach the substantive issue of whether coverage was provided under the policies in question. See Peterson v. Ohio Casualty Group, 269 Neb. ___ (No. S-03-957, Jan. 12, 2005).

Following remand, the parties again filed cross-motions for summary judgment. At a hearing on the motions, the parties reoffered evidence received on the previous motions and also offered additional evidence, which was received by the district court. Subsequently, the district court entered judgment in favor of Ohio Casualty. After a detailed review and analysis of the evidence pertaining to the Holcomb lawsuit, other evidence received, and applicable legal principles, the court concluded: "The `business pursuits' exclusion is unambiguous. The facts are not in dispute. The Holcomb lawsuit is a business dispute. The defamation claim falls with[in] the `business pursuits' exclusion."

The Petersons perfected this timely appeal, which we removed to our docket pursuant to our statutory authority to regulate the caseloads of the appellate courts of this state. See Neb.Rev.Stat. § 24-1106(3) (Reissue 1995).

II. ASSIGNMENTS OF ERROR

The Petersons assign, restated and consolidated, that the district court erred in (1) finding the business pursuits exclusions in the Ohio Casualty policies were unambiguous; (2) finding, as a matter of law, that the allegations in Holcomb's petitions arose out of Peterson's business pursuits; (3) finding, as a matter of law, that Ohio Casualty did not have a duty to defend or indemnify the Petersons; and (4) granting summary judgment for Ohio Casualty and against the Petersons.

III. STANDARD OF REVIEW

When adverse parties have each moved for summary judgment and the...