Appeal from the Superior Court of the District of Columbia (CA-7369-99) (Hon. Susan R. Winfield, Trial Judge)
Before Terry, Schwelb and Reid, Associate Judges.
The opinion of the court was delivered by: Reid, Associate Judge
Argued September 20, 2001
Dissenting opinion by Associate Judge Schwelb
The issue presented by this case is whether appellee, United General Title Insurance Company ("United General"), had a duty to defend appellant John Stevens in a lawsuit brought against him by the 1438 E Street, S.E. L.L.C. ("1438 E Street"). The trial court granted summary judgment in favor of United General. Mr. Stevens filed a timely appeal, contending that under his title insurance policy, United General was required to defend him. We affirm the judgment of the trial court, and hold that because the allegations of the underlying complaint against Mr. Stevens fell within a policy exclusion, United General had no duty to defend him. We also reaffirm our adherence to the traditional "eight corners" rule which requires a comparison of the allegations of the underlying complaint with the provisions of the insurance policy to determine the existence of a duty to defend. Furthermore, we decline, at this point, to adopt the factual exception to the traditional rule.
The record on appeal shows that in August 1999, an entity known as 1438 E Street filed suit against Poy Hong Moy and Mr. Stevens, alleging in part that: (1) 1438 E Street "is the purchaser [of premises located at 538 3rd Street, N.E., in the District of Columbia] under a Regional Sales Contract dated May 6, 1998," with Mr. Moy for the sales price of $185,000; (2) 1438 E Street made a $1,000.00 down payment on the property; (3) Mr. Moy failed to take the steps necessary to "convey title in conformity with the Sales Contract"; (4) Mr. Stevens made an offer to buy the property from 1438 E Street for $240,000; (5) Mr. Stevens knew that 1438 E Street "was the contract purchaser for the Property under the Sales Contract"; (6) Mr. Stevens knew that he would have to obtain a release from 1438 E Street before purchasing the property; (7) Mr. Moy and Mr. Stevens "intentional[ly] and . . . in conscious and flagrant disregard for the rights of [1438 E Street]" entered into an agreement for the purchase of the property by Mr. Stevens for the price of $203,000. The complaint included a count for fraudulent conveyance and one for an intentional tort.
After being served with the lawsuit filed by 1438 E Street, Mr. Stevens notified United General and requested that the company defend him in the lawsuit. In a letter dated August 26, 1999, United General invoked one of the "exclusion" clauses of Mr. Stevens' title insurance policy, and declined to defend him, indicating, in part, that "the lawsuit alleges that you had actual knowledge of the alleged sales contract by and between Poy Hong Moy and 1438 E Street " but failed to inform United General prior to issuance of the title insurance policy. Thus, United General's letter stated, "your alleged actions led to the adverse claim you are now being sued for which would also lead to denial of coverage under the title policy."
Following the refusal of United General to defend him against the legal action brought by 1438 E Street, Mr. Stevens obtained private counsel. Eventually, 1438 E Street dismissed its lawsuit against Mr. Stevens when it learned that he did not acquire the property from Mr. Moy. Mr. Stevens filed a declaratory judgment action against the title insurance company in October 1999, seeking to compel United General to pay the costs of his defense, and to indemnify him for his losses. Both United General and Mr. Stevens filed summary judgment motions. *fn1 After considering both motions, the oppositions, and the entire record, the trial court summarily granted the motion of United General on the ground that: "[United General] is clearly entitled to judgment as a matter of law notwithstanding [Mr. Stevens'] arguments to the contrary."
Mr. Stevens contends that "whenever there is `any possibility' of a claim or recovery within coverage under the insurance policy," as in this case, the insurance company has a duty to defend; and that any "ambiguity, doubt and/or uncertainty as to coverage must be resolved in favor of providing a defense." He further argues that: "[United General's] knowledge of the public records within the four corners of the insurance policy creates a conflict with the 1438 E Street complaint. The existence of this conflict triggers United General's duty to defend Mr. Stevens." *fn2 As an alternative argument, in the event that the court should disagree with his reading of the policy and the complaint, Mr. Stevens maintains that this court "should recognize a factual test exception to the general rule applicable to those cases where false facts alleged in a third party complaint fall within policy exclusions but true facts, known or reasonably ascertainable, would trigger coverage under the policy."
United General maintains that the proper approach to determining whether a duty to defend exists is to "compar[e] the allegations in a complaint to the coverage afforded by the insurance policy." Thus, because the 1438 E Street complaint against Mr. Stevens "alleged fraud and other intentional misconduct on the part of [Mr.] Stevens," and since Mr. Stevens' policy excluded coverage for "defects . . . created . . . by the insured claimant," United General had no duty to defend Mr. Stevens against the 1438 E Street complaint. If the court departs from the "four corners" rule (focusing on the allegations of the complaint), "the insurer will be required to retain counsel and incur investigative costs to ascertain its coverage obligations." With respect to Mr. Stevens' alternative argument, advocating a "factual test exception" to the traditional "four corners" or "eight corners" rule, United General asserts:
The fact that United General may have been able to discover facts from examination of the Land records of the District of Columbia which, when proven, may have provided [Mr.] Stevens with an ultimate meritorious defense to the claims asserted by 1438 E St. does not expand United General's duty to defend. None of the factual allegations contained in the 1438 E St. Complaint were contained in the public records and would have required United General to conduct a substantial factual investigation to evaluate the merits of the case. Simply stated, United General did not have an[y] actual factual knowledge which would have brought the claims asserted by 1438 E St. within the coverage afforded by the policy.
Standard of Review and Applicable Legal Principles
Our review of this matter is de novo. Travelers Indem. Co. of Ill. v. United Food & Commercial Workers Int'l Union, 770 A.2d 978, 985 (D.C. 2001) (citation omitted). "In reviewing a grant of summary judgment [under Super. Ct. Civ. R. 56 (c)], this court `must independently review the record to determine whether genuine issues of material fact exist and whether the movant is entitled to judgment as a matter of law.'" American Cont'l Ins. Co. v. Pooya, 666 A.2d 1193, 1197 (D.C. 1995) (quoting Beckman v. Farmer, 579 A.2d 618, 626-27 (D.C. 1990)). "In doing so, this court reviews the record in the light most favorable to the non-movant, and any doubt regarding the existence of a factual dispute is to be resolved against the movant." Id. (citing Beckman, supra, 579 A.2d at 627).
Because an insurance policy constitutes a contract, we construe it according to contract principles. *fn3 See Travelers Indem. Co. of Ill., supra, 770 A.2d at 986. "`[W]here [insurance] contract language is not ambiguous, summary judgment is appropriate because a written contract duly signed and executed speaks for itself and binds the parties without the necessity of extrinsic evidence.'" Id. at 985 (quoting Byrd v. Allstate Ins. Co., 622 A.2d 691, 693 (D.C. 1993) (quoting Holland v. Hannan, 456 A.2d 807, 815 (D.C. 1983) (internal quotation marks omitted))). Generally, we interpret the terms of the contract in a manner consistent with ordinary speech. Id. at 986.
Our task is to determine whether United General had a duty to defend Mr. Stevens in the lawsuit brought by 1438 E Street. To make this determination, our long standing case law requires us to examine both the complaint and the insurance policy. *fn4 As we said in Pooya, supra: "Whether [the insurance company] was obligated to defend [the insured] turns on interpretation of ...