Grange Ins. Ass'n v. Mielke Bros., Inc. and Douglas Mielke

FILED
SEPTEMBER 19, 2019
In the Office of the Clerk of Court
WA State Court of Appeals, Division III
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION THREE
GRANGE INSURANCE ) No. 36195-1-III
ASSOCIATION, a Washington )
corporation, )
)
Respondent, )
)
v. ) UNPUBLISHED OPINION
)
MIELKE BROTHERS, INC., a )
Washington corporation, and DOUGLAS )
MIELKE, an individual, )
)
Appellants. )
PENNELL, J. — Mielke Brothers, Inc. and Douglas Mielke appeal a summary
judgment order declaring Grange Insurance Association has no duty to defend or
indemnify against a minority shareholder lawsuit. Because the lawsuit in question does
not seek damages for which bodily injury, property damage, or personal and advertising
injury coverages apply, we affirm.
No. 36195-1-III
Grange Ins. Ass’n v. Mielke Bros., Inc.
FACTS
Mielke Brothers, Inc. is a Washington corporation located in Lincoln County.
Douglas Mielke is the corporation’s president and chairman of its board of directors.
Mielke Brothers owns crop and pasture land, farming equipment, farming buildings, and
residential homes. The primary purpose of the corporation is to acquire, improve and
develop properties, and conduct agricultural operations. The shareholders of Mielke
Brothers include numerous members of the Mielke family. All current shareholders serve
on the corporation’s board of directors.
A minority of Mielke Brothers’ shareholders filed suit in 2017, alleging oppressive
actions by the corporation through Douglas Mielke and a majority of the shareholders.
For example, the suit alleged that minority shareholder-employees were barred from
accessing land necessary for employment. In addition, the minority shareholders claimed
the corporation changed its rules regarding shareholder tenants; some tenants were going
to be charged rent for residential property while other tenants could reside rent-free. Other
alleged mismanagement included refusal to make payments on debt owed to one of the
minority shareholders, failure to pay wages, cancelling crop leases related to minority
shareholder income, and refusal to allow minority participation at board meetings.
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No. 36195-1-III
Grange Ins. Ass’n v. Mielke Bros., Inc.
Grange has provided farm insurance to Mielke Brothers since 2013. The Grange
policy includes a provision for farming and personal liability insurance. Of relevance
here, the policy includes liability coverage for “bodily injury and property damage,”
(Coverage H), Clerk’s Papers (CP) at 109, and “personal and advertising injury”
(Coverage I). Id. at 115.
Coverage for bodily injury and property damage (Coverage H) is limited to
damage caused by an “occurrence” that takes place during the policy’s coverage period.
Id. at 109. An “occurrence” is defined as “an accident, including continuous or repeated
exposure to substantially the same general harmful conditions.” Id. at 125.
Coverage for personal and advertising injury (Coverage I) includes damage for an
injury, including consequential bodily injury, arising out of “[t]he wrongful eviction from,
wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or
premises that a person occupies, committed by or on behalf of its owner, landlord or
lessor.” Id.
The aforementioned coverage provisions oblige Grange to defend against a lawsuit
seeking damages for “bodily injury,” “property damage,” or “personal and advertising
injury” to which coverage applies. Id. at 109, 115-16.
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No. 36195-1-III
Grange Ins. Ass’n v. Mielke Bros., Inc.
Grange initially defended Mielke Brothers and Douglas Mielke in the minority
shareholders’ lawsuit under a reservation of rights. Grange then filed a declaratory
judgment action in Spokane County Superior Court. The superior court granted Grange
declaratory relief from further responsibility to defend or indemnity under the terms of the
policy. Mielke Brothers and Douglas Mielke appeal.
ANALYSIS
Liability insurance generally obliges an insurer to defend an insured against claims
for covered damages. See St. Paul Fire & Marine Ins. Co. v. Onvia, Inc., 165 Wash. 2d 122,
129, 196 P.3d 664 (2008). This duty to defend is broad, applying not only to covered
losses, but also to ones that are potentially covered. Am. Best Food, Inc. v. Alea London,
Ltd., 168 Wash. 2d 398, 404, 229 P.3d 693 (2010). Doubts about coverage are to be resolved
in favor of the duty to defend. Woo v. Fireman’s Fund Ins. Co., 161 Wash. 2d 43, 52-53, 64,
164 P.3d 454 (2007). De novo review applies to a trial court’s summary judgment
determination regarding an insurance company’s duty to defend. Id. at 52.
Mielke Brothers claims that its liability coverage for bodily injury and property
damage (Coverage H) and personal and advertising injury (Coverage I) apply to the
claims in the minority shareholder complaint and, as a result, Grange has a duty to defend.
We disagree.
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No. 36195-1-III
Grange Ins. Ass’n v. Mielke Bros., Inc.
The coverage for bodily injury and property damage (Coverage H) is limited in
scope to an “occurrence” that happens during the policy period. CP at 109. An occurrence
is defined as an “accident.” Id. at 125. The shareholder complaint does not allege
damages attributable to an accident. It alleges Mielke Brothers engaged in purposefully
oppressive conduct. Such an intentional act with foreseeable consequences does not
quality for coverage under the bodily injury and property damage provision (Coverage H).
See Safeco Ins. Co. of Am. v. Butler, 118 Wash. 2d 383, 401, 823 P.2d 499 (1992); State
Farm Fire & Cas. Co. v. Parrella, 134 Wash. App. 536, 541, 141 P.3d 643 (2006).
Mielke Brothers argues that coverage for personal and advertising injury
(Coverage I) applies because the complaint includes claims for wrongful eviction. We
disagree with this characterization of the complaint. A unilateral change of lease terms
(i.e., requiring rent where none was demanded before) is not an eviction. Kitsap County v.
Allstate Ins. Co., 136 Wash. 2d 567, 593, 964 P.2d 1173 (1998) (eviction requires physical
ouster). In addition, although there is an allegation that a minority shareholder has been
wrongfully excluded from farming areas, Grange’s policy only applies to evictions from a
place of private occupancy, not an exclusion from the workplace. See id. at 590 (Private
occupancy contemplates one that is secluded from the sight, presence or intrusion of
others.).
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No. 36195-1-III
Grange Ins. Ass 'n v. Mielke Bros., Inc.
CONCLUSION
Because the insurance agreement clearly does not afford coverage for the damage
claims asserted against Mielke Brothers and Douglas Mielke, the trial court properly
granted Grange's request for declaratory relief. This matter is affirmed.
A majority of the panel has determined this opinion will not be printed in the
Washington Appellate Reports, but it will be filed for public record pursuant to
RCW 2.06.040.
Pennell, J.
WE CONCUR:
Lawrence-Berrey, C.J." Fearing, J.
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