Washington Supreme Court Unanimously Finds No Duty to Defend
It is encouraging, after the incredible Woo case (duty to defend dentist who inserted fake boars tusks into his employee’s mouth for photographs while the employee was under anesthesia), to have the Washington Supreme Court unanimously find, albeit in the title insurance context, that there are cases in Washington where an insurance company can properly deny a duty to defend.
In Campbell v. Ticor Title Ins. Co., 2009 Wash. Lexis 624 (Supreme Court of Washington, June 18, 2009), a parcel of land was divided into three lots, designated lots A, B, and C. In 1996, a pedestrian easement was granted, benefiting Lot C and burdening Lot B, for access to a lake. In 2001, the Campbells purchased Lot A. A 2002 survey revealed that the easement for lot C actually ran through a house on Lot B. When Edwards purchased Lot C in 2004 or 2005, the problem was discovered, and Edwards initiated a suit against the Campbells seeking a reformation re-drawing the easement so as to burden Lot A and be usable. The Campbells tendered defense of the Edwards suit to Ticor Title Insurance Company (“Ticor”), and Ticor denied coverage. The Court ruled that two exclusions, one for easements not disclosed by the public records, and another for “[d]efects, liens, encumbrances, adverse claims or other matters . . . attaching or created subsequent to Date of Policy,” clearly excluded coverage and there was no duty to defend.
What we find interesting about this case is not so much the unanimous decision on no duty to defend, as unusual as that might be, but the Court’s analysis and use of evidence apparently outside the complaint in reaching its conclusion. It is further interesting that the Court would accept review of an obscure title insurance case to reinforce or restate its duty to defend analysis, including the seemingly more stringent standard established in Woo v. Fireman’s Fund Ins. Co., 161 Wn.2d 43, 164 P.3d 454 (2007): “’[T]he duty to defend is triggered if the insurance policy conceivably covers the allegations in the complaint, whereas the duty to indemnify exists only if the policy actually covers the insured’s liability.’ Id. at 53. An insurer must defend unless it is clear from the face of the complaint that the claim is not covered by the applicable policy. Id. ‘[I]f it is not clear from the face of the complaint that the policy provides coverage, but coverage could exist, the insurer must investigate and give the insured the benefit of the doubt that the insurer has a duty to defend.’ Id.” (Emphasis in original.)
Curiously, the Court does not reference much of the language of the complaint itself, and it seems to rely on matters determined by further investigation to deny the duty to defend. Regarding the first exclusion at issue, the Court states: “Reading the plain language of the title policy’s exclusions, the fact that no record here showed any easement affecting Lot A undermines the Campbells’s duty to defend claim.” The Court then states that the second exclusion is “relevant because the easement dispute arose after the date of the policy, once a survey revealed that the property line between lots A and B ran through the Gromo house and the easement was intended to run along that property line.”
The rule in Washington is essentially that if the complaint is ambiguous, the insurer is required to investigate further to determine whether there is a duty to defend. It also appears clear, however, e.g., Truck Ins. Exch. v. VanPort Homes, Inc. 147 Wn.2d 751, 58 P.3d 276 (2002), that an insurer is not allowed to use further investigation to deny the duty to defend. It appears when a complaint is ambiguous, and further investigation establishes no coverage, under this case analysis, an insurer should be able to deny the duty to defend. That is not, however, explicitly stated.
