Kepner v. Western Fire Insurance Company
509 P.2d 222
Ariz.
1973
Check Treatment

*1 509 P.2d Kepner, Shirley hus-

James H. KEPNER wife, band and and Walter James Through ner, minor, By his next Appellants, Kepner, friend H. James

The WESTERN FIRE COM- INSURANCE Appellees. PANY, corporation, a Kansas

No. 10884 — PR.

Supreme Court of

In Banc.

April 27,

Rehearing May 22, 1973. Denied Schaper, M. Anderson S. Jack John

Phoenix, appellants. Renaud, Cook, Miller & Cordova Videan, Phoenix, appellees. James STRUCKMEYER, Justice. This is an H. James wife, Shirley Kepner, his in behalf four-year-old Kepner, their James son, recover for an suffered Walter garnishment proceedings, the Court entered garnishee-defendant, Ap- Company. The Court of peals, reversed, Ariz.App. (1972). Opinion P.2d Judgment of vacated. necessary law- to resolve this suit establish that property of real ner were the owners Phoenix, Arizona. 5733 North 7th Street as their home a busi- by Harry Kepner as an office for *2 Harry’s being ness as Pool A known Service. conducted and that oc- the policy car- homeowner’s of insurance was curred in an arising accident out of ried with Judgment garnishment business.” in the Company, providing comprehensive for proceeding was entered in of West- coverage. it, personal liability ern, In Western For the followed. Kepners agreed pay forth, to all sums which the reasons hereinafter set the damages legally obligated became to Court bodily injury because dam- of or principle It is of a well established any age. agreed Western “defend also to agreement parties law that the to an of suit alleging such bodi- any cov contract lawful ly injury property damage seeking or erage and insurance has that an damages payable which are the impose right the to limit its and to terms al- policy, any of of upon conditions restrictions its con legations groundless, the suit are false of obligations tractual not inconsistent apply or fraudulent.” The did not policy. See, public e.g., Gottula v. Stand any pursuits "to insured an of 8-9, Reliance ard 165 Neb. * * * emphasis added.) .” (All carport While a at the residence premium protec- is low Western’s being as an office for enclosed use designed insure tion to a homeowner pool service, Kepner, grandson op- against the hazards out of Harry Kepner; of sustained an Velma eration and maintenance of his home. injury through power the use of a saw type specif- policy, of certain risks operated Harry being employee ically em- excluded because are not An action was to recover braced within the course a homeowner’s personal to Wal- injuries normal activities. Business activities ter, but reference was com- made beyond present additional risks over and plaint power that saw was the fact ordinary found and usual hazards being accident in operation of a in the and maintenance Harry’s the business Pool Serv- home. Callahan v. American Motorists ground negligence asserted to ice. Misc.2d N.Y.S.2d although material others They (Sup.Ct.1968). are not within specified complaint, in Walter’s contemplation or intended to be within Kepner permitted Wal- ITence, whether the coverage. dangerous proximity ter in close to a personally negligent in their ners were instrumentality, power saw. a relevant non-business activities facts, denied these this case. the determination of the suit. The Globe refused irrespective proxi- For, Company, with whom accident, resulting mately causing the en- policy, thereafter ners had a business injuries carrying on a busi- arose out of and ulti- defense of the tered injuries pursuit, ness which the without mately during course settled occurred. could tak- judgment, the final trial for less than not to plaintiffs covenant ing from the lan Appellants do execute. excluding business guage of the they ques coverage, nor do activities from a writ judgment, After being power fact saw was tion the seeking on issued and served Western used in within judg- satisfy balance owed meaning policy. Their issue, On tender ment. ** * may not that an refuse found: “[T]he pleaded against a suit on facts which premises insured occurred * * * by the would covered pursuit which a business Accordingly, the facts, ap- covery complaint. policy when other defend should focus pear cov- allegations of the rather than erage. may not control is the concerning The decisions when it *3 liability. the ultimate determination of duty an insurer defend been col- See, Fidelity e.g., States & Guar. United A. lated in an annotation 50 extensive 583, Baugh, Ind.App. Co. v. 146 257 N.E.2d “Allegations in third L.R.2d 458 (1970). 699 person’s against insured as deter- mining liability duty insurer’s defend.” cases, Second, many there are Concededly, the determination of whether allegation of facts where frequently to defend is a difficult decision proved, be deci will not generality as a it but obligation of the insurer to sive as to the said, as the annotator states: resulting judgment. proof complaint “If the in the action causing proximately against alleges its face fa Kepner’s injuries justifies judgment coverage facts which come within the him, the fact that vorable to but liability policy, obligat- the insurer is irrele sureds’ excludes action, ed to assume the defense of the the trial. vant and could not be shown at alleged bring but if the facts fail to As the of Iowa said case policy coverage, within the the in- Hampshire recent of New Ins. Co. v. surer is obligation.” free of such 50 A. Christy, 834, : (1972) Iowa 200 838 N.W.2d omitted). L.R.2d at (footnotes 464 not, allegations pleading “The support The Arizona cases foregoing situations, in all circumstances general See, Cagle statement. v. Home determining whether decisive Co., 360, Ariz.App. 14 483 P.2d 592 duty the in- there exists a (1971); Tucson Public School Dist. No. is es- to defend. This Co., One v. Ariz.App. Home Insurance 9 pecially duty true when 233, 451 P.2d 46 (1969); Lawrence v. pends upon a factual issue Burke, Ariz.App. 228, 6 P.2d 302 431 resolved the trial of the third (1967); Paulin v. Fireman’s Fund Ins. insured, Co, Ariz.App. 408, 1 403 (1965). P.2d 555 may depend upon the actual Many drawn, distinctions have been allegations facts and dependent some language of the pleading.” policies’ provisions various and some particular facts of the case. The dis- case, the instant the trial of the tinction here facts os- gence action is- did resolve the factual tensibly bring the case within the sue whether fell within coverage but other facts which are not re- exclusionary policy; clause of the further flected in the plainly take the litigation responsi- required fix the outside the coverage. We hold bility payment judgment in this situation there no absolute would required have been if the in- even duty to defend for these reasons: surer had undertaken the defense.

First, Third, practices, recognized modern there are such as the Federal Rules of Civil Proce where, has, cases if on the facts the insurer dure, followed in reason to believe does not cover serves a insured, notice function and is framed be the interests of the insured discovery fore crystalize diverge. Several recent facts of the recognize case. trial focuses on the cases that the insurer should not exist rather than on facts then control the defense. Glens Falls Ins. might theory exist under the of re- 120, Co. American v. Oil 254 Md. 254

332 ; 654, Burd v. Sussex Mutual 2d (1969) (1958); 328 P.2d 198 Grieb v. A.2d Citi- 383, (1970). A.2d Casualty Co., 552, zens 33 Wis.2d N.J. Ins. Co. American Oil In Glens Falls court said: foregoing reasons, For the Court is affirmed. defend, require “To- the insurer to case, the- present circumstances of the HAYS, J., LOCKWOOD, J., C. put both the insurer and the in- JACOBSON, EINO M. sured at- in the untenable Judge, concur. tempting cooperate in the conduct of were, when their interests Note: Vice Chief DUKE Justice JAMES fact, in' adverse.” Md. at CAMERON A. WILLIAM *4 Justice A.2d at 666. HOLOHAN did participate in In Burd v. Mutual Ins. Sussex termination Judge of this matter. Chief court said: EINO and Vice Chief JACOBSON may “There in the inter- cases which .Judge HENRY S. STEVENS ests of the carrier and the insured coin- Appeals, Court of were cide so that the carrier can defend such called to sit in their stead. complete an action to the with devotion But if the trial insured’s interest. STEVENS, Appeals Judge Court of question leave the unre- (specially concurring). may so that the insured later solved point First let that while the me pay, called the case if Appeals opinion in rendered was by prejudice so a defended carrier as to assigned a of this to Division One insured thereafter the issue wholly Judges Court it was decided coverage, per- the carrier should not be hav- of this Court. Not Division Two mitted That was to' control defense. ing personally participated in the Court situation' hand.” hesitancy in Appeals opinion, no sit- I have 389,- NI at 267 A.2d at 10. J. re- ting Court on with view. there are facts which Where i. my question is the To mind the critical might, coverage, insurer cannot adequacy establish wheth- fidelity. of the record to complete with qlw£.ys def.end grandmother’s care the minor er the proceeding a at which the There must be activity a or a home ac- represent child was insurer and the insured are each mo- tivity. question I that at the fight ed choice to counsel own injury, ment of the the instrument which testing of out their- differences. a Such injury inflicted the was of the busi- the insurer’s take the form grandparents. In this ness activities of the declaratory judgment brought in advance aspect grandmoth- issue the party’s of the third action or participant. er not an -garnishment active following the trial of activity liability policy issued third as in the instant case. Indemnity supra. Mutual Globe Globe Burd v. Sussex Comment, fully performed obligations under its see, Duty its And “The Insurer’s policy. grandmother’s participation Liability Defend Insurance Poli under cy” child’s was her U.Pa.L.Rev. 734 If gence failing properly supervise defend and awaits the refuses to opinion obligation my pleadings in a subse child. of its determination quent proceeding, peril, if it acts at its tort action and the issues framed guesses wrong conse broad it must bear the here enough quences encompass question. This its breach of contract. Comun expressly was not cannot & 50 Cal. answered and we Traders General ale opinion negligence, than I would be for this trial court to the the case . return defend at its' refused to purpose. that Western its peril should be held to express finding that there been Had policy. homeowners her supervision of grandmother’s though activity, even was a home grandson In- Globe The business child inattention to her Fire to duty to demnity, owed relative telephone call answering a she Fire. to Western develop facts beneficial business, coupled and even family to the review, I concur. the record concurrence of business