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City of Everett v. American Empire Surplus Lines Insurance Co.12/23/1991
The City of Everett sought a declaratory judgment that the claims asserted in a wrongful death suit filed against the City were covered under a policy issued by
American Empire Surplus Lines Insurance Company. The trial court granted summary judgment in favor of American, determining that two exclusionary clauses in the policy applied. We affirm.
I
On October 26, 1988, the wife of Everett fire fighter Gary L. Parks filed a claim with the City for damages stemming from Parks' death while fighting a fire at Everett Community College. The claim alleged that the City was negligent "in the manner in which Parks and other firefighters were directed and allowed to fight the fire, the manner in which they were equipped and the manner in which they were trained."
On January 25, 1989, the City notified American of the Parks claim pursuant to a Municipality and Governmental Authorities Errors and Omissions Insurance Policy issued by American. The policy provided coverage for "all loss" from any claim or suit for wrongful acts made against the City during the policy period. "Loss" is defined as "any amount" that the insured is obligated to pay a claimant and includes but is not limited to "damages, judgments, settlements and costs, cost of investigation and defense of legal actions . . . claims and proceedings, and appeals therefrom".
In a letter dated February 20, 1989, American denied coverage for the Parks claim asserting that two separate exclusionary clauses in the policy applied. The relevant policy provisions state:
This insurance does not apply to and the Company shall not be liable to make any payment in connection with any claim made or suit brought against the insured based upon or arising out of the following:
6. Any damages, whether direct, indirect or consequential, arising from, or caused by, bodily injury , personal injury , sickness, disease or death, or loss or criminal abstraction of, or from damage to or destruction of any tangible property including the loss of use thereof;
14. Relating to employment practices and procedures including but not limited to employment hiring, advancement,
remuneration, termination of employment or labor negotiations.
(Italics ours.) American also denied coverage on the basis that the City had prior knowledge of the Parks claim which it failed to disclose in violation of a provision in the insurance application form that " o fact, circumstance or situation indicating the probability of a claim or action is now known to any Public Official or Employee".
On September 25, 1989, Ms. Parks filed a wrongful death action against Everett in superior court asserting allegations identical to those in her claim. When American again denied coverage, the City brought a declaratory judgment action against American, seeking an order establishing American's duty to indemnify the City for all expenses incurred in its defense against the Parks action, including settlements, judgments, costs, and legal fees.
Both the City and American moved for summary judgment. American reiterated its position that exclusions 6 and 14 precluded coverage for the Parks claim and that the City had prior knowledge of the Parks claim. In support of its motion, American submitted the declaration of Robert Nelson, a senior vice-president and underwriter with American. Nelson explained that, unlike a general liability policy, an errors and omissions (E&O; policy is not designed to cover claims for negligent acts of city employees that result in bodily injury or death. Instead, an E&O;policy is intended to insure municipal bodies against thi
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