Klamath Pacific Corporation v. Reliance Insurance Company ( 1998 )

955 P.2d 340 (1998) 152 Or. App. 738

KLAMATH PACIFIC CORPORATION, an Oregon corporation, and Robert Stewart, Respondents,
v.
RELIANCE INSURANCE COMPANY, Appellant, and
Insurance Company of the State of Pennsylvania, a Pennsylvania corporation, Defendant.

9302944CV; CA A91172.

Court of Appeals of Oregon, In Banc.

Petition for Reconsideration December 11, 1997. Decided February 25, 1998.

Gregory B. Snook, Portland, and Kilmer, Voorhees & Laurick, P.C., for petition.

On Respondents' Petition for Reconsideration December 11, 1997.

LANDAU, Judge.

Klamath Pacific Corporation and Robert Stewart petition for reconsideration of our opinion, 151 Or.App. 405, 950 P.2d 909 (1997). They argue that we neglected to resolve one of the issues that the parties argued, namely, whether Reliance Insurance Company (Reliance) was excused from the duty to defend Stewart in the state court actions against him by virtue of the employers liability or the intentional acts exclusion of the Reliance policy. We agree that we did not resolve that issue in our original opinion. We therefore allow the petition for reconsideration, adhere to our opinion as modified and modify the award of costs.

In our original opinion, we held that the allegations of the state court complaints sufficiently alleged bodily injury such that Reliance had a duty to defend Klamath and Stewart, unless any of the policy exclusions applied. 151 Or.App. at 413-14, 950 P.2d 909. We first address the employers liability exclusion. The complaints alleged that Klamath Pacific was plaintiffs' employer and that Stewart was the principal shareholder of Klamath Pacific. The complaints did not allege that Stewart was plaintiffs' employer. We analyze the employers liability exclusion separately as to each insured. See Cimarron Ins. Co. v. Travelers Ins. Co., 224 Or. 57, 60-62, 355 P.2d 742 (1960). Because Stewart was not alleged to be plaintiffs' employer, the employers liability exclusion does not apply.

Having decided that the employers liability exclusion does not apply, we then must determine whether the intentional acts exclusion of the policy relieves Reliance of the duty to defend Stewart in the state court actions. That exclusion applies if the injury at issue was "expected or intended from the standpoint of the insured." The exclusion from coverage for intentional acts depends on the subjective intent of the insured. Allstate Ins. Co. v. Stone, 319 Or. 275, 278, 876 P.2d 313 (1994). The acts of the insured must have been committed for the purpose of inflicting the injury and harm before a policy provision excluding intentional harm applies. Nielsen v. St. Paul Companies, 283 Or. 277, 281, 583 P.2d 545 (1978).

The state court complaints clearly alleged intentional conduct on the part of Pearce and Mahoney, plaintiffs' supervisors. But the only allegation in the complaints concerning Stewart's conduct was that he "knew" the acts of Pearce and Mahoney "would cause" injury to the plaintiffs. Without more, we cannot say that those allegations trigger the intentional acts exclusion. Ledford v. Gutoski, 319 Or. 397, 400, 877 P.2d 80 (1994). We hold that Reliance owed Stewart a duty to defend the state court actions.

Because we hold that the complaints alleged a duty to defend Stewart in the action on the basis of the allegations of intentional infliction of emotional distress, we need not address the sufficiency of the allegations with regard to coverage of the battery claim. If the complaints provide any basis for which the insurer might provide coverage, even if some, but not all, conduct would be not be covered, the insurer has a duty to defend. Timberline Equip. v. St. Paul Fire and Mar. Ins., 281 Or. 639, 645, 576 P.2d 1244 (1978).

Petition for reconsideration allowed; opinion modified and adhered to as modified.