Chapter 50



Chapter 49

Insurance

Case 49.1

397 F.3d 158

United States Court of Appeals,

Second Circuit.

ZURICH AMERICAN INSURANCE CO., Plaintiff-Counter-Defendant-Appellee,

v.

ABM INDUSTRIES, INC., Defendant-Counterclaimant-Appellant.

Docket No. 04-0445-CV.

Argued Sept. 24, 2004.

Decided Feb. 9, 2005.

CARDAMONE, Circuit Judge:

The terrorist attack on the World Trade Center complex in lower Manhattan on September 11, 2001 brought about a harvest of bitter distress and loss. Of the complex, one stone was not left on another, it was all thrown down, bringing about, in addition to human casualties, the loss and destruction of businesses. It is the loss of one business that is the focus of this appeal.

Appellant ABM Industries Incorporated (ABM, appellant, or insured), an engineering and janitorial service contractor, provided extensive services at the World Trade Center complex (WTC or complex). ABM was insured against business interruption by appellee Zurich American Insurance Company (Zurich, appellee, or insurer). Zurich, as plaintiff, initiated the instant litigation by bringing a declaratory judgment action in the United States District Court for the Southern District of New York (Rakoff, J.) against ABM, asking the court to determine the extent of its liability to ABM resulting from the loss of the WTC. ABM had sought from Zurich business interruption (BI) insurance coverage for its losses.

ABM appeals from an order dated May 28, 2003 and final judgment entered on January 6, 2004 in the district court, denying its motion for partial summary judgment and granting such a motion in favor of Zurich. ABM contends the district court erred when it determined that, as a matter of law, ABM was not entitled to coverage under the Business Interruption provision, the Leader Property provision, the Civil Authority provision, and the Extra Expense provision of its insurance policy with Zurich. ABM also asserts that the district court abused its discretion when it granted Zurich's motion to exclude evidence supporting a two-occurrence claim.

BACKGROUND

A. ABM Industries

ABM provided extensive janitorial, lighting, and engineering services at the World Trade Center. It operated the heating, ventilating, and air-conditioning (HVAC) systems for the entire WTC, essentially running the physical plant. ABM serviced the common areas of the complex pursuant to contracts with the owners Silverstein Properties and the Port Authority of New York and New Jersey.

Under these contracts ABM had office and storage space in the complex and had access to janitorial closets and slop sinks located on every floor of the WTC buildings. ABM also had effective control over the freight elevators. At the time of the attacks, it employed more than 800 people at the WTC, and its exclusive and significant presence at the complex allowed it to secure service contracts with nearly all of the WTC's tenants. ABM also had service contracts with various building owners and tenants at 34 other locations in lower Manhattan.

In order to handle these enormous responsibilities at the WTC, ABM created and manned a call center to which tenants reported problems. ABM's engineering department took complaints at the call center and dispatched its employees to remedy problems as they arose. Additionally, ABM developed complex preventative maintenance schedules through state-of-the-art software that tracked the equipment in the WTC. These procedures allowed ABM to repair equipment before it malfunctioned.

B. The Insurance Policy

ABM procured insurance coverage from Zurich for properties serviced by ABM throughout North America under an insurance policy numbered MLP 8339383-05 (policy). The policy provides a blanket limit of $127,396,375, subject to various sublimits. Section 7.A(1) of the policy covers loss or damage to "real and personal property, including but not limited to property owned, controlled, used, leased, or intended for use by the Insured" (Insurable Interest provision). In addition to covering property damage, the policy also provides business interruption coverage under § 7.B(1) by insuring against "loss resulting directly from the necessary interruption of business caused by direct physical loss or damage, not otherwise excluded, to insured property at an insured location" (Business Interruption or BI provision). The blanket limit of $127,396,375 is the only applicable limit to the BI provision.

Relatedly, § 7.C(1) of the policy provides insurance coverage for extra expenses "incurred resulting from loss, damage, or destruction covered herein ... to real or personal property as described in [the Insurable Interest provision]" (Extra Expense provision). Section 7.C(2) defines "[e]xtra [e]xpense" as the "total cost chargeable to the operation of the Insured's business over and above the total cost that would normally have been incurred to conduct the business had no loss or damage occurred." This provision is subject to a $50,000,000 per-occurrence sublimit.

The policy also contains three relevant time element extensions. First, § 7.F(2) of the policy provides extended coverage to actual losses sustained

due to the necessary interruption of business as the result of direct physical loss or damage of the type insured against to properties not operated by the Insured which wholly or partially prevents any direct supplier of goods and/or services to the Insured from rendering their goods and/or services, or property that wholly or partially prevents any direct receiver of goods and/or services from the Insured from accepting the Insured's goods and/or services

(Contingent Business Interruption or CBI provision).

Second, § 7.F(4) of the policy "insures against loss resulting from damage to or destruction by causes of loss insured against, to property not owned or operated by the Insured, located in the same vicinity as the Insured, which attracts business to the Insured" (Leader Property provision). Finally, § 7.F(5) of the policy covers losses sustained "during the period of time when access to real or personal property is impaired by order or action of civil or military authority issued in connection with or following a peril insured against" (Civil Authority provision).

ABM's claims under the policy arise out of the complete destruction of the WTC by the terrorist attacks of September 11, 2001. ABM declares it has lost, as a result of these events, all income that it derived from its operations at the WTC. Specifically, it asserts that it should be compensated for its lost income resulting from the destruction of: (1) equipment it owned and used to perform its janitorial and maintenance services; (2) its offices and warehouses in which ABM operated and stored its supplies; (3) the on-site call center; (4) the freight elevators, janitorial closets and slop sinks to which it had exclusive access; (5) the common areas in the WTC; and (6) the spaces occupied by the tenants with whom ABM had contracts to provide services.

Moreover, ABM contends that the loss of the WTC resulted in a series of union negotiations and an increase in unemployment compensation claims and that it incurred additional expenses as a result. ABM also seeks coverage for losses stemming from police orders that prevented it from conducting operations at 34 locations in lower Manhattan after September 11.

C. Proceedings Below

In its complaint Zurich requested a declaration that ABM's business interruption losses were subject to a $10 million per-occurrence limit of liability. Zurich argued that this sublimit applied because ABM's claim arose from damage and destruction of the premises of ABM's customers and hence was encompassed by the policy's Contingent Business Interruption clause--a provision triggered by damage to properties "not operated by the Insured."

ABM contested the applicability of the CBI provision and insisted instead that the relevant provision, to which no sublimit applies, is the Business Interruption provision, invoked by ABM's extensive relationship with the World Trade Center complex. ABM also claimed coverage under the Extra Expense, Leader Property, and Civil Authority provisions of the policy.

In the proceedings below, ABM initially moved for partial summary judgment. The district court denied that motion on the ground that the policy was "ambiguous in several pertinent respects." The trial court ordered discovery to resolve the ambiguities in the contract. At the close of discovery, ABM and Zurich both moved for partial summary judgment. ABM sought a declaration that its loss of income was covered by the BI provision or, alternatively, by the Leader Property provision. As before, Zurich's position was that the majority of ABM's lost business income was covered by the Contingent Business Interruption provision, and that coverage was unavailable under the BI, Extra Expense, Leader Property, and Civil Authority provisions.

On May 28, 2003 the district court granted Zurich's motion for partial summary judgment, finding the BI provision, as well as the other sources of coverage invoked by ABM, inapplicable to the majority of ABM's claims. The district court held that ABM could obtain BI coverage only for the income it lost resulting from "the destruction of the World Trade Center space that ABM itself occupied or caused by the destruction of ABM's own supplies and equipment located in the World Trade Center." Zurich Am. Ins. Co. v. ABM Indus., Inc., 265 F.Supp.2d 302, 305 (S.D.N.Y.2003). The court reasoned that the policy restricts BI coverage to "insured property at an insured location," and that the common areas and the tenants' premises in the WTC did not constitute insured property as that term is defined in the policy. Id. Specifically, the court held that ABM neither "used" nor "controlled" these areas in a manner that sufficed for the creation of a "legally cognizable 'interest' in the property." Id. at 305-06. For the same reasons, the district court held that ABM could not recover under the related Extra Expense provision. Id. at 306-07. The court further held that ABM could not recover under any of the time element extensions, including the Civil Authority and Leader Property provisions. Id. at 307-09.

In a subsequent order dated August 4, 2003, the trial court effectively overruled its earlier decision that ABM was entitled to some BI coverage. The district court granted Zurich's motion to strike portions of the report of ABM's expert witness, Jerome Trupin, that "opine[d] on the extent of the business interruption loss suffered by [ABM] as a result of the 'destruction of the World Trade Center space that ABM itself occupied' or as a result of 'the destruction of ABM's own supplies and equipment located in the World Trade Center.' " Zurich Am. Ins. Co. v. ABM Indus., Inc., No. 01 Civ. 11200, slip op. at 1 (S.D.N.Y. Aug. 4, 2003). The district court reasoned that BI coverage under the policy "only insures against loss resulting directly from the necessary interruption of business caused by the destruction of insured property," and "the incidental destruction of the aforementioned items was not a material cause of the business interruption." Id. at 2.

Finally, on August 22, 2003, the district court granted Zurich's motion in limine seeking to bar ABM from presenting evidence in support of the theory that the WTC's destruction constituted two occurrences. The court was of the opinion that Zurich had proceeded on a one-occurrence theory and that ABM did not meet its burden to raise their alternative theory "in a way that would give fair notice to Zurich." The parties agreed to settle the remaining elements of the case, and the district court entered final judgment on January 20, 2004. This appeal followed.

We affirm the district court's evidentiary ruling, reverse its order granting summary judgment insofar as it held that ABM was not entitled to coverage under the Business Interruption clause of its insurance contract with Zurich, and vacate and remand to the district court the issues of Extra Expense and Civil Authority coverage. We believe that ABM's activities at the World Trade Center created an insurable interest cognizable under New York law, and that this insurable interest falls within the scope of the policy's coverage. We thus grant summary judgment in favor of ABM on the issue of Business Interruption coverage, and remand that issue for determination of ABM's damages to the district court. Because factual disputes surround the issues of Extra Expense and Civil Authority coverage, we remand those issues to the district court for further proceedings.

DISCUSSION

I Standard of Review

We review de novo the grant of Zurich's cross-motion for summary judgment and the denial of ABM's similar motion, and apply the same principles as required of the district court. Bishop v. Nat'l Health Ins. Co., 344 F.3d 305, 307 (2d Cir.2003). "[C]onstruing the evidence in the light most favorable to the non-moving party," we must determine whether any genuine issues of material fact would bar summary judgment. Scholastic, Inc. v. Harris, 259 F.3d 73, 81 (2d Cir.2001).

[1] The legal principles applicable to this dispute are well-settled. With respect to a contract claim, a court may construe the contract and grant summary judgment when the contractual language is "plain and unambiguous." Brass v. Am. Film Techs., Inc., 987 F.2d 142, 148-49 (2d Cir.1993). Whether contractual language is ambiguous is a question of law that we review de novo. See State Farm Fire & Cas. Ins. Co. v. Sayles, 289 F.3d 181, 185-86 (2d Cir.2002). Ambiguity exists when a contract is "capable of more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business." Sayers v. Rochester Tel. Corp. Supplemental Mgmt. Pension Plan, 7 F.3d 1091, 1095 (2d Cir.1993).

II Business Interruption Coverage

[2] We think the district court failed to elucidate the natural and ordinary meanings of pertinent terms in the BI provision of the policy as they applied to all of the categories of property under which ABM is seeking BI coverage and thus erred in barring such coverage. We consider first the scope of BI coverage set out in § 7.B of the policy, which covers loss resulting from the interruption of business caused by damage "to insured property at an insured location." The scope of the BI provision is effectively delineated by § 7.A(1) of the policy, the Insurable Interest provision, which defines the scope of coverage as "[t]he interest of the Insured in all real and personal property including but not limited to property owned, controlled, used, leased or intended for use by the Insured."

In construing § 7.A(1), Zurich argues for application of the doctrine of ejusdem generis, a rule of statutory construction under which "general words are construed to embrace only objects similar in nature to those objects enumerated by the preceding specific words." Circuit City Stores, Inc. v. Adams, 532 U.S. 105, 114-15, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001). Under this principle Zurich maintains that a property interest such as ownership or tenancy is necessary for coverage regardless of the level of "use" or "control." Such a reading would require us to ignore the phrase "but not limited to" as well as the disjunctive "or" in the provision. Moreover, if a property interest were required under the contract, the terms "controlled," "used," and "intended for use" would be superfluous. In interpreting an insurance contract under New York law, a court must strive to "give meaning to every sentence, clause, and word." Travelers Cas. & Sur. Co. v. Certain Underwriters at Lloyd's of London, 96 N.Y.2d 583, 594, 734 N.Y.S.2d 531, 760 N.E.2d 319 (2001). Thus, we construe § 7.A(1) to require only an "insurable interest," the outer boundaries of which we delineate below, rather than finding that a "property interest" is a predicate to coverage.

A. Common Areas, Tenants' Premises, and HVAC System

[3] Because ABM did not "own" or "lease" the common areas and the premises of the other tenants, whether they "controlled," "used," or "intended to use" these areas is the relevant inquiry. We believe ABM "used" the common areas and the premises of the other tenants in the WTC within the meaning of the Insurable Interest provision. Hence, summary judgment for ABM is appropriate on this issue.

The district court defined "use" as "to carry out a purpose or action by means of." Zurich, 265 F.Supp.2d at 305 (quoting Webster's Third New Int'l Dictionary of the English Language (Unabridged) 2524 (2002)). The trial court concluded that ABM did not "use" the common areas and other tenants' premises in the WTC complex because it could accomplish its purpose of cleaning and earning income with "mop[s]" and "broom[s]." Id. Thus, according to the district court, the premises in question were "the locations of ABM's acts, not the means through which the acts were accomplished." Id.

We disagree with the district court's application of this definition. We think instead that the "plain meaning [of these words] unambiguously includes the actual situation for which coverage is sought." Coregis Ins. Co. v. Am. Health Found., 241 F.3d 123, 129 (2d Cir.2001). The existence and configuration of the common areas and tenants' premises were vital to the execution of ABM's business purpose. These areas and premises were the means by which ABM derived its income and were as essential to that function as ABM's cleaning tools. Following the definition cited by the trial court, ABM therefore "used" this property. Contrary to the district court's view, ABM's use of other items in accomplishing its purpose makes these areas of the complex no less important to ABM's tasks.

The conclusion reached by the court below that the common areas and leased premises in the WTC were merely the "locations" rather than the "means" of ABM's work not only overlooks the instrumentality of the property in ABM's processes, but categorically disfavors providers of physical labor. The furnishing of physical services usually entails entering the space of another. To deny ABM's loss-of-income coverage simply because its income is derived from labor that occurs outside of its own cubicles and offices artificially excludes service providers when the contract itself does not limit coverage in such a manner. The nature of ABM's business requires movement from its own leased spaces onto another's property.

To give an example, a reasonable person would not contest that a hypothetical accounting firm "uses" the offices it occupies. Such a person should also conclude a janitorial and electrical service provider "uses" the spaces it services because, in both situations, it is the space or property that engenders productivity. The district court erroneously held that ABM's usage was confined to the offices that ABM itself occupied. ABM, unlike the accounting firm, does not engage in predominantly mental labor and is thus prevented from working solely within the confines of its own offices. Its "usage" necessarily extends beyond those boundaries. It would be wrong to privilege the hypothetical accounting firm's, over ABM's, relationship with the property such that the former entity could be said to "use" the property while the latter would not. In other words, it makes no sense to deny that ABM "uses" these premises simply because they are also used by another when the nature of ABM's work compels this duality.

Further, even if ABM did not "carry out" their purpose of running a successful business through the common areas and leased offices in the complex, it can still be said that ABM "used" these areas following other common dictionary definitions of the term. Clearly, ABM "had recourse to" and "enjoyment of" these areas and indeed could avail itself of all areas of the World Trade Center where it performed operations. Webster's Third New Int'l Dictionary of the English Language (Unabridged) 2523 (2002). Additionally, ABM applied all areas of the WTC to its advantage, thus "put[ting]" the characteristics of the property "into action" and into its "service." Id. (defining the intransitive verb "use" as "to put into action or service: have recourse to or enjoyment of").

B. Property Occupied by ABM

[4] ABM also seeks BI coverage for income derived from property that it occupied, such as the "offices" and "warehouses" on site in which it stored equipment and conducted operations; its call center; and the freight elevators, janitorial closets, and slop sinks to which it had nearly exclusive access. Because ABM "used" and "controlled" the areas that it occupied as contemplated under the policy, we hold it is entitled to summary judgment on this issue of BI coverage.

ABM clearly availed itself of the property that it occupied to facilitate its income-producing activities and thus "used" this property. And while exclusive access to an area is not necessary to "control" that area, exclusivity strongly supports the conclusion that "control" exists. ABM's privileged relationship with, and management of, its offices, storage spaces, freight elevators, closets, and sinks indicates that it exerted power and directed influence over these premises. Therefore, ABM "controlled" its occupied properties. See Webster's Third New Int'l Dictionary of the English Language (Unabridged) 496 (2002) (defining the verb "control" as "to exercise restraining or directing influence over: ... have power over").

Although ABM "used" and "controlled" this category of property, the district court held that it could not recover under the BI provision because "[t]he undisputed cause of the interruption here was the destruction of the World Trade Center, which would have totally interrupted the ABM business here in issue regardless of what happened to the freight elevators, loading docks, etc." Zurich, No. 01 Civ. 11200, slip op. at 2. We cannot agree with the district court's approach to the causation issue because it artificially severs the chain of events occurring on September 11. Since the destruction of the WTC and the properties owned by ABM were obviously simultaneous, the destruction of ABM's occupied property was not "incidental to" the destruction of the WTC, as concluded by the district court, because this property was part of the complex. Accordingly, the ruination of the WTC, including the property at issue, was the cause of ABM's business interruption. Contrary to the district court's view, ABM's failure to have an interest in the entire WTC does not bar its claim for lost income due to the destruction of a portion of the WTC.

C. Supplies and Equipment

ABM also avers that the district court's August 4, 2003 decision foreclosed it from claiming BI coverage for damage to any property, including its supplies and movable equipment. This portion of the BI claim, however, was never at issue in the declaratory judgment action and thus is not a subject of this appeal.

D. Insurable Interest

Given that, in our view, ABM "used" and "controlled" property in the WTC and thereby acquired a BI claim, we next examine the district court's conclusion that even if ABM "used" or "controlled" the common areas and the premises of other tenants, its activities did not rise to the level necessary to create a "legally cognizable 'interest' " in the property. Zurich, 265 F.Supp.2d at 306. In light of ABM's substantial influence over, and availment of, the WTC infrastructure to develop its business, it is difficult to imagine what would constitute a "legally cognizable 'interest' in the property," apart from ownership or tenancy. The terms of the insurance policy, however, do not limit coverage to property owned or leased by the insured. To the contrary, the policy's scope expressly includes real or personal property that the insured "used," "controlled," or "intended for use."

The district court's imposition of the "legally cognizable 'interest' in the property" requirement is an impermissible hurdle to insurance coverage, contemplated by neither the parties nor the New York legislature. The only prerequisite to coverage mandated by New York law is that an entity have an "insurable interest" in the property it insures. New York law embraces the sui generis nature of an "insurable interest" and statutorily defines this term to include "any lawful and substantial economic interest in the safety or preservation of property from loss, destruction or pecuniary damage." N.Y. Ins. Law § 3401 (2002). ABM's income stream is dependent upon the common areas and leased premises in the WTC complex, and thus ABM meets New York's requirement of having an "insurable interest" in that property.

The prophylactic function of the "insurable interest" requirement is not destroyed by its breadth. Zurich asserts that extending ABM's insurable interest to include the common areas and leased premises would mean that ABM has direct damage coverage for these areas--"an absurd result." To the contrary, ABM does not have and does not claim to have an insurable interest in these properties for the purpose of direct damage coverage because it suffered no direct pecuniary loss of asset value. The insurable interest requirement thus avoids absurd results by protecting only that in which ABM has a financial stake--its future stream of income.

Zurich further contends that ABM's interest is only derivative from the property, and that it does not constitute a direct interest in the property itself. In so arguing, Zurich unsuccessfully seeks to amend the text of N.Y. Ins. Law § 3401 by narrowing the definition of an insurable interest. The outer reaches of an interest that can be insured clearly encompass an indirect economic interest in the property. Such an interest can be insured if, as is the case here, it falls within the definitional boundaries set by the insurance policy.

E. Contingent Business Interruption Coverage

[5] In ascertaining the extent of an insured's coverage under an insurance policy, we look to the entire contract to determine "its purpose and effect" and the "apparent intent of the parties." Maryland Cas. Co. v. Cont'l Cas. Co., 332 F.3d 145, 161 (2d Cir.2003). While the meaning of a term or provision may be clear when read in isolation, its interaction with other parts of the policy may infuse it with ambiguity. Accordingly, it is necessary to address whether the operation of other provisions in the policy cast doubt upon ABM's BI coverage. Zurich's position is that the Contingent Business Interruption provision at § 7.F(2) of the policy, rather than the BI provision, covers ABM's lost income up to its $10 million sublimit. The insurer urges that because the CBI provision extends the scope of coverage beyond that provided by the BI provision, property covered by the former falls outside the scope of the latter. While we agree that the CBI provision is an extension of the BI coverage, we disagree that it applies to the circumstances here.

CBI coverage is a relatively recent development in insurance law and its scope has not yet been fully delineated by the courts. Entities that rely on "third parties" sometimes purchase CBI coverage as a policy extension in case their income is disrupted by damage to third party property. Gavin Souter, Risks From Supply Chain Also Demand Attention, Bus. Ins. 26 (May 15, 2000). These provisions typically provide coverage to enumerated dependent properties such as "those who supply materials for the insured, purchase the insured's goods, or attract customers to the insured's business." Paula B. Tarr, Where Have All The Customers Gone? Business Interruption Coverage For Off-Premises Events, 30 The Brief 20, 29 (Winter 2001); see Archer Daniels Midland Co. v. Hartford Fire Ins. Co., 243 F.3d 369, 371 (7th Cir.2001) ("Regular business-interruption insurance replaces profits lost as a result of physical damage to the insured's plant or other equipment; contingent business-interruption coverage goes further, protecting the insured against the consequences of suppliers' problems.").

By its express terms, the CBI provision of the policy covers business interruption due to loss or damage to properties "not operated by the Insured," that is to say, it insures against events that prevent entities from supplying goods to, or receiving goods from, the insured. The relevant inquiry, then, is whether ABM "operated" the properties at issue in this action. We hold that through its operation of the infrastructure of the WTC, appellant also operated the physical spaces occupied by itself and other tenants as well as those shared with the public.

The transitive verb "to operate" has the following meanings: "1: to cause to occur, ... 2 a: to cause to function usu[ally] by direct personal effort, ... b: to manage and put or keep in operation whether with personal effort or not." Webster's Third New Int'l Dictionary of the English Language (Unabridged) 1581 (2002). Among its many activities at the WTC, ABM directed and maintained the HVAC system and freight elevators. It effectively ran the entire physical plant. Appellant handled the upkeep and maintenance of the infrastructure itself, including the leased premises of other tenants and the common areas. Any work done in or on the tenants' premises had to be cleared through ABM. Moreover, ABM developed and executed new technologies that ensured that the complex ran smoothly. Using these direct efforts, appellant "caused" the properties at issue in the WTC "to function." In this respect, the insured effectively served as a management company for the WTC, partnered with other entities responsible for the complex's finances. It is true that ABM did not operate the businesses that leased space at the WTC, nor did it dictate the usage of the common areas. But the policy requires only that ABM operated the physical structures themselves, a hurdle it clearly meets through its extensive involvement with the property.

Further, ABM's operation of the WTC need not be exclusive. "The word 'operate' has varying meanings according to the context.... One may operate singly with [one's] own hands, or jointly with another, or through one or more agents." State Farm Mut. Auto. Ins. Co. v. Coughran, 303 U.S. 485, 491, 58 S.Ct. 670, 82 L.Ed. 970 (1938). In Coughran, the Court held that the term "operated" could refer not only to the actions of a motor vehicle owner's wife, who was riding in and responsible for the vehicle, but also to those of a 13- year-old girl, who was driving under the wife's direction and guidance. Id. at 491-92, 58 S.Ct. 670. Here, ABM ran the physical aspects of the complex, including the upkeep and maintenance of the common areas and tenanted spaces. Although it did so through contracts with the Port Authority, Silverstein Properties, and other tenants, under Coughran, the presence of these other entities and the joint decision-making involved did not detract from ABM's "operation" of the property. See Potts v. Cont'l Cas. Co., 453 F.2d 276, 278 (9th Cir.1971) (holding that an insurance policy provision, which excluded coverage when the insured was flying on an airplane "operated by" his employer, applied even though the airplane was owned by another entity and on a short-term lease to the employer).

We cannot adopt Zurich's contention that if ABM is said to operate its customers' premises and the common areas, then "there would never be an instance in which ABM would need CBI coverage." Outside of the present situation, there exists a host of scenarios where CBI coverage would benefit ABM, including damage to the property of ABM's suppliers, its intermediaries, or its customers outside of the complex. We recognize that CBI coverage usually encompasses destroyed property of the insured's customers, and the tenants here were "direct receiver[s] of .... services from the Insured" as contemplated under the CBI provision in § 7.F(2). Yet the case before us involves a unique set of circumstances where the insured's customers occupied a building that the insured itself operated, thus rendering the CBI provision inapplicable.

III Other Relevant Policy Provisions

We turn now to analyze other relevant provisions of the policy.

A. Extra Expense Coverage

[6] Section 7.C insures against certain costs incurred from the loss, damage, or destruction of property as described in the "Insurable Interest" provision. ABM sought reimbursement under this provision for extra expenses that it contends resulted from the destruction of the WTC, such as increased employee costs related to seniority displacements of employees in other buildings, state unemployment obligations, and employee termination costs.

The scope of the Extra Expense provision is limited to that of the Insurable Interest provision, and § 7.C(1) states that extra expenses must result from damage or destruction to "real or personal property as described in Clause 7.A." The district court held that ABM could not claim coverage under the Extra Expense provision because the "extra expenses incurred by ABM resulted from the destruction of property that was not 'owned, controlled, used, leased or intended for use' by ABM." Zurich, 265 F.Supp.2d at 307. We disagree with the district court's interpretation and application of the Insurable Interest provision in regard to the BI issue for the reasons stated above, and accordingly disagree with its Extra Expense holding. We concluded a moment ago that ABM "used" and "controlled" the damaged property to the extent required by the policy and New York law. Thus, we cannot uphold the district court's award of summary judgment to Zurich on these grounds.

Nonetheless, Zurich insists that even if ABM has suffered a loss as described in § 7.A, the expenses claimed by it are still not covered under the Extra Expense provision. Zurich argues that the provision limits coverage to expenses from "continuing operations that were made more costly as a result of damage to the insured's property" rather than "loss of income resulting from the suspension of business operations." The language of the provision in the policy has no such limitation. Its terms require only that the extra expense relate to the "operation of the Insured's business" over and above the costs normally incurred by the business, not that the insured resume operations identical to those prior to the loss. Nor does the contract provision limit coverage to losses stemming directly from the location that sustained damage. Inasmuch as the provision is not otherwise limited, we think it applies when continuation of the business occurs at a substitute location.

It is not clear at this point, however, that summary judgment in ABM's favor is appropriate on the Extra Expense issue because there is no finding as to the causation requirement. The policy language requires that extra expenses "result[ ] from" a covered incident. A causation requirement is a fundamental aspect of an insurance policy because it allows an insurer to "have a reasonably defined universe of possibilities to which it can apply its risk analysis methods ... and determine a premium." Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 101:40 (3d ed.1998). Hence, on remand, we direct the district court to make findings as to whether the extra expenses claimed by ABM were proximately caused by the peril insured against.

B. Civil Authority Coverage

[7] Appellant has also made claims for its losses of business income resulting from the issuance of civil authority orders that, it argues, prevented it from operating at its numerous downtown locations. The "Civil Authority" section of the policy, § 7.F(5), "cover[s] the loss sustained during the period of time when access to real or personal property is impaired by order or action of civil or military authority issued in connection with or following a peril insured against."

The district court denied Civil Authority coverage on the ground that the insured's loss of business income was caused by the destruction of the WTC, and thus would have occurred even if no orders of civil authorities prohibited access to the WTC. Zurich, 265 F.Supp.2d at 309. We are unable to agree with this reasoning because the loss of income that appellant seeks under this provision is from its interruption of business at its 34 non-WTC locations. As a consequence, the destruction of the WTC, unaccompanied by the orders, would not have resulted in the loss of income for which ABM seeks reimbursement under the Civil Authority provision.

Nonetheless, a factual dispute remains with respect to whether the civil orders or ABM's own company policies impaired its access to the properties it serviced. The issue of Civil Authority coverage must therefore be remanded to the district court for further consideration.

C. Leader Property Coverage

[8] Lastly, ABM asserts that if BI coverage is unavailable, then alternatively its losses of business income from the destruction of the WTC are covered by the Leader Property provision which applies to losses "to property not owned or operated by the Insured, located in the same vicinity as the Insured, which attracts business to the Insured." We affirm the district court's grant of summary judgment to Zurich on the issue of Leader Property coverage, although on different grounds than it relied upon. The trial court ruled the WTC was not a " 'leader property' in the 'vicinity' of ABM which 'attracts business' to ABM, but rather is itself the site and source of the ABM business here at issue." Zurich, 265 F.Supp.2d at 308. We reject the notion that a property cannot "attract" business to another entity at the same site, or adjacent to it. The district court's refutation of this possibility rests on an overly literal interpretation of the word "attracts." Economic forces need not act in the same physical fashion as does a magnet attracting metal. Indeed, it was the interconnectedness of the WTC complex that "attracted" its tenants to ABM's services by providing an opportunity for ABM to exploit economies of scale.

Nonetheless, we conclude that Leader Property coverage is inappropriate in this case. As discussed above, ABM "operated" the infrastructure of the complex, including the common areas and tenanted premises. As such, the situation here does not fall within the language of § 7.F(4) of the policy which covers "properties not owned or operated by the insured." Accordingly, the award of summary judgment to Zurich on this issue must be affirmed.

IV Zurich's Motion to Exclude Evidence

[9] Finally, in addition to challenging the award of summary judgment to Zurich, ABM also contends that the district court erred in excluding evidence that supported a two-occurrence claim. Evidentiary rulings ordinarily will not be overturned absent an abuse of discretion. See Am. Fed. Group, Ltd. v. Rothenberg, 136 F.3d 897, 904 (2d Cir.1998); In re Martin-Trigona, 760 F.2d 1334, 1344 (2d Cir.1985) (evidentiary rulings generally not to be disturbed unless " 'manifestly erroneous' ") (quoting Salem v. United States Lines Co., 370 U.S. 31, 35, 82 S.Ct. 1119, 8 L.Ed.2d 313 (1962)). Even an erroneous ruling will not lead to reversal unless affirmance appears to the Court to be "inconsistent with substantial justice," Fed.R.Civ.P. 61, or the exclusion affects a substantial right of the party. Fed.R.Evid. 103(a).

[10] We affirm the district court's grant of Zurich's motion in limine to bar ABM from asserting a two-occurrence theory and agree with the reasons the district court gave during the evidentiary hearing. Because Zurich proceeded on a theory of one occurrence in its original and amended complaints, the trial court reasoned that the burden to contest this theory shifted to ABM.

ABM relies on Gaetan v. Firemen's Ins. Co., 264 A.D.2d 806, 808, 695 N.Y.S.2d 608 (2d Dep't 1999), for the proposition that the insurance company bears the burden of proving exclusionary language. However, per-occurrence limitations define the scope of coverage and are not policy exclusions. See Worcester Ins. Co. v. Bettenhauser, 95 N.Y.2d 185, 189, 712 N.Y.S.2d 433, 734 N.E.2d 745 (2000) (noting the line drawn by New York courts "between a lack of coverage in the first instance and a lack of coverage based on an exclusion"). Further, Gaetan is inapplicable to the case at hand because it only addresses the question of who has the burden of proof rather than the burden of raising the issue. Even if Zurich has the burden of raising the issue, it has met this burden by invoking the per-occurrence limits. Zurich's complaint presumed one occurrence by explicitly stating that it was seeking a declaration that liability was limited to $10 million. The burden then shifted to ABM to contest the number of occurrences.

Moreover, it was not an abuse of the trial court's discretion for it to rule that ABM failed to contest the one-occurrence exclusion in a way that would give fair and timely notice to Zurich. Appellant did not raise the issue in its responsive pleadings even though its counterclaim refers to the $10 million per-occurrence sublimit. In fact, a witness for ABM stated that ABM had not yet taken a position on the issue because it thought its limits were adequate. Additionally, in its damage computations, ABM did not assert that its damages were premised on a two-occurrence claim. ABM now argues that it raised the issue in its motion papers for partial summary judgment, but these motions only included a footnote stating that ABM would be entitled to $10 million "for each occurrence." This footnoted mention of the sublimit does not sufficiently raise the issue. See United States v. Restrepo, 986 F.2d 1462, 1463 (2d Cir.1993) (holding that an argument noted only in a footnote is not preserved for appellate review).

The district court was unpersuaded by ABM's argument that the claim should be permitted, even if untimely, because no prejudice would result from allowing the claim. Rule 403 of the Federal Rules of Evidence states in part that "evidence may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice." Fed.R.Evid. 403. The trial court has broad discretion in determining whether proffered evidence should be admitted. See United States v. Robinson, 560 F.2d 507, 514-15 (2d Cir.1977) (en banc). Even if the occurrence issue is a matter of law, the determination of the harm flowing from each occurrence would require considerable discovery. Because discovery was closed and trial was approaching, the district court could reasonably conclude that Zurich would be substantially prejudiced by the introduction of the new claim and did not abuse its discretion in refusing to consider it.

CONCLUSION

Accordingly, for the foregoing reasons, we affirm the district court's grant of Zurich's motion in limine excluding evidence on ABM's two-occurrence theory as well as the district court's denial of Leader Property coverage. We reverse the district court's May 28, 2003 order granting summary judgment in favor of Zurich and award summary judgment in favor of ABM on its claims for Business Interruption coverage. Further, we vacate and remand the remaining issues of Extra Expense coverage, Civil Authority coverage, and damages to the district court for further proceedings not inconsistent with this opinion.

Affirmed in part, reversed in part, vacated and remanded, in part.

Case 49.2

108 P.3d 288

Supreme Court of Colorado,

En Banc.

Thomas A. CARY and Beth Hanna, individually and on behalf of their minor daughter, Dena Cary, Petitioners,

v.

UNITED OF OMAHA LIFE INSURANCE COMPANY, Respondent.

No. 04SC13.

Feb. 28, 2005.

RICE, Justice.

Petitioner, Thomas Cary, individually and on behalf of his minor daughter, Dena Cary, appeals a judgment of the court of appeals holding that the Arvada Medical and Disability Health Care Plan unambiguously excludes Dena's injuries from coverage.

We hold that the Plan is ambiguous because it is susceptible to more than one reasonable interpretation. Therefore, we reverse the court of appeals' holding and remand with instructions to return the case to the trial court for proceedings consistent with this opinion.

I. Facts and Procedural History

Petitioner was an employee of the City of Arvada, which provided him and his fourteen-year-old daughter, Dena, with health coverage under the Arvada Medical and Disability Health Care Plan (Plan), a partially self-funded municipal health plan overseen by the Arvada Medical and Disability Trust Fund (Trust). Like all Arvada employees, Petitioner did not receive a copy of the Plan itself. Rather, in February 1994, Arvada distributed a summary plan description (1994 SPD), which highlighted relevant aspects of the Plan.

In 1996, the Trust retained Respondent, United of Omaha Life Insurance Company (United), to administer the Plan. United was responsible for handling and processing all claims, and for determining the extent of coverage. United's determinations were appealable to the Trust. Mutual of Omaha of Colorado, Inc. (Antero) sub-contracted with United to fulfill some of United's claims investigations and appeals responsibilities.

In November 1996, Arvada distributed a flier entitled "Mutual [of] Omaha Companies Point-of-Service Plan Summary" (1996 Flier) that summarized benefits and listed general exclusions from the Plan. In or around July 1997, Arvada distributed a new summary plan description to its employees (1997 SPD) which stated that it was effective January 1, 1997. Both the 1996 Flier and the 1997 SPD contained markedly different exclusions than the 1994 SPD.

In June 1997, Dena shot herself under the chin in an unsuccessful suicide attempt. At the time, she was suffering from a major depressive episode associated with diagnosed bipolar disorder, a biologically based mental illness covered by the Plan. Dena's gunshot injuries required extensive treatment, hospitalization, and multiple surgeries.

Petitioner and Dena (Insureds) applied for benefits under the Plan, but United denied the claim. After an unsuccessful appeal to the Trust, Insureds brought suit in Denver District Court (trial court) against Arvada, the Trust, United, and Antero [FN1] seeking a declaration that the Plan covered Dena's injuries, as well as damages for breach of insurance contract and bad faith failure to provide insurance benefits.

FN1. Arvada and the Trust settled immediately after the trial court decision. Antero settled after we issued our opinion in Cary v. United of Omaha Life Insurance Co., 68 P.3d 462 (Colo.2003) (Cary II ), but before the court of appeals' decision in Cary v. United of Omaha Life Insurance Co., 91 P.3d 425 (Colo.App.2003) (Cary III ). Thus, United is the sole party remaining in this case. The issue of coverage is central to Insureds' claim of bad faith failure to provide insurance benefits.

On cross motions for summary judgment, the trial court held that the Plan's definitions and exclusionary provisions were ambiguous, and resolved the ambiguity in favor of coverage. Additionally, the trial court dismissed Insured's bad faith claim with prejudice, holding that claims of insurance bad faith against third-party administrators are limited to the workers' compensation arena.

Insureds appealed summary judgment on their claim of insurance bad faith, and United cross-appealed summary judgment on the issue of coverage. In Cary v. United of Omaha Life Insurance Co., 43 P.3d 655, 659 (Colo.App.2001) (Cary I ), the court of appeals affirmed the trial court's grant of summary judgment on Insureds' bad faith claim. Having determined that judgment for United was proper, the court of appeals did not address United's cross-appeal. Id. at 660.

In Cary v. United of Omaha Life Insurance Co., 68 P.3d 462, 464 (Colo.2003) (Cary II ), we reversed the trial court's determination that United owed no duty of good faith when investigating and servicing insurance claims under the Plan. We concluded that United "had primary control over benefit determinations, assumed some of the insurance risk of loss, undertook many of the obligations and risks of an insurer, and had the power, motive, and opportunity to act unscrupulously in the investigation and servicing of the insurance claims." Id. at 463. Accordingly, we held that a special relationship existed between United and Insureds that was sufficient to establish United's duty to act in good faith. Id. Consequently, we reinstated Insureds' bad faith claim against United and remanded the issue of coverage to the court of appeals. Id.

On remand, the court of appeals reversed the trial court's grant of summary judgment on the issue of coverage, holding that the Plan unambiguously excluded coverage for Dena's injuries. Cary v. United of Omaha Life Ins. Co., 91 P.3d 425, 428, 430 (Colo.App.2003) (Cary III ). This appeal followed.

We accepted certiorari to determine (1) whether the court of appeals correctly held that the Plan unambiguously excluded coverage for Dena's injuries, and (2) if so, whether the 1994 SPD created an ambiguity that the 1996 Flier and 1997 SPD later cured. [FN2]

FN2. We granted certiorari on the following issues:

1) Whether the court of appeals correctly interpreted Tom Cary's health insurance plan as excluding coverage for injuries sustained by his fourteen year old daughter when she shot herself because she was suffering from a biologically based major depressive episode.

2) Whether a brochure or the draft of a new Summary Plan Description which purports to exclude coverage can trump a previously published and distributed Summary Plan Description which contains no such exclusion even though the draft Summary Plan Description had not been distributed to insureds.

Because the Plan is susceptible on its face to more than one reasonable interpretation, we hold that the Plan is ambiguous and resolve the ambiguity in favor of coverage. We therefore reverse and remand to the court of appeals with instructions to return it to the trial court for proceedings consistent with this opinion.

II. Analysis

[1][2] An insurance policy is a contract, the interpretation of which is a matter of law that we review de novo. State Farm Mut. Auto. Ins. Co. v. Stein, 940 P.2d 384, 387 (Colo.1997); Union Ins. Co. v. Houtz, 883 P.2d 1057, 1061 (Colo.1994). As with any contract, we construe the terms of an insurance policy to promote the intent of the parties. Houtz, 883 P.2d at 1061.

[3][4][5] We must enforce an insurance policy as written unless the policy language contains an ambiguity. Stein, 940 P.2d at 387. An insurance policy is ambiguous if it is susceptible on its face to more than one reasonable interpretation. Houtz, 883 P.2d at 1061. Any ambiguity in an insurance policy is construed in favor of providing coverage to the insured. Am. Fam. Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo.1991). A mere disagreement between the parties concerning interpretation of the policy does not create an ambiguity. Houtz, 883 P.2d at 1061. To determine whether a policy contains an ambiguity, we must evaluate the policy as a whole. Id.; Stein, 940 P.2d at 387.

In this case, the Plan provides that it pays a specified percentage of "covered expenses" per year. To qualify as a "covered expense," a medical expense must be "Medically Necessary for the treatment of an Injury or an Illness not specifically excluded or otherwise limited under [the] Plan." [FN3]

FN3. Capitalization of words and phrases in quoted Plan material indicates that such words and phrases are expressly defined in the Definitions section of the Plan. Only Plan definitions that are relevant to the analysis in this case are included in this opinion.

The Plan defines "injury" and "illness" as follows:

Injury. Injury means accidental bodily Injury which occurs independently of Illness. Injury does not include self-inflicted bodily Injury, either while sane or insane, [FN4] or disease or infection (except pyogenic infection occurring through an accidental cut or wound).

FN4. Citing Bigelow v. Berkshire Life Insurance Co., 93 U.S. 284, 287, 23 L.Ed. 918 (1876), United argues that the "sane or insane" language contained in the Plan is meant to exclude benefits for self-destructive behavior regardless of the degree or nature of the mental disorder from which the individual is suffering. However, Bigelow is distinguishable on its facts because it involved a life insurance policy whose exclusion prohibited coverage where the decedent "shall die by suicide (sane or insane)." Id. at 285-86. Here, there is no mention of the term "suicide" in the Plan and it is not apparent that the Plan's exclusion for self-inflicted injuries means attempted suicide.

Illness. Illness means a physical or mental disorder, including pregnancy.

These definitions are controlling throughout the Plan.

[6] The Plan also contains an exclusionary provision which provides that "[c]harges in connection with a self-inflicted injury, whether sane or insane" are not covered. However, because the Plan definitions are controlling throughout the Plan, this provision cannot be read in isolation, but must be read in context with the specific definitions set forth in the Plan. Accordingly, this exclusionary provision only applies to "injury" as the Plan defines that term.

United argues that the Plan language clearly and unambiguously excludes self-inflicted injuries from coverage. Insureds agree with United that this is one reasonable interpretation of the Plan. However, Insureds argue that an equally reasonable interpretation of the Plan is that if a self-inflicted injury results from an illness, treatment for that injury is covered. We agree that each interpretation is reasonable.

One reasonable interpretation of these definitions is that the first sentence in the "injury" definition ("Injury means accidental bodily Injury which occurs independently of Illness") is a definitional sentence that narrows the effect of the limitation contained in the second sentence ("Injury does not include self-inflicted bodily Injury, either while sane or insane"). Thus, the self-inflicted injury limitation in the second sentence of the "injury" definition modifies only the phrase "accidental bodily Injury which occurs independently of Illness." As a result, injuries that occur as a result of illness, even if self-inflicted, are defined out of the "injury" definition and are covered by the Plan's promise to provide coverage for treatment of an illness.

The trial court illustrated this interpretation of the language by comparing a self-inflicted injury resulting from a drunken dare with a self-inflicted injury resulting from narcolepsy. Because a drunken person does not suffer from a covered illness, the Plan does not cover self-inflicted injuries resulting from drunken behavior. Conversely, because narcolepsy is a covered illness, self-inflicted injuries resulting from a narcoleptic fall down the stairs would be covered as "Medically Necessary for the treatment of an Illness." Similarly, because Dena's bipolar disorder is a covered illness, self-inflicted injuries resulting from her bipolar disorder would be covered as well. [FN5]

FN5. United argues that although the Plan provides coverage for treatment of the mental illness itself, it does not cover all the consequences that might flow from the mental illness. Thus, United argues that although depression may be a symptom of Dena's bipolar disorder, her injuries are not themselves a symptom of bipolar disorder and are not covered in the treatment of her mental illness. In other words, United argues that the sequela of a symptom can be isolated from the symptom itself, and that the symptom is covered, but the sequela is not. This argument is without merit.

Bipolar disorder is a biologically based mental illness that is a disease or illness in the same sense as cancer, diabetes, or heart disease. See, e.g. § 10-16-104(5.5), C.R.S. (2004) ("Every group policy, plan certificate, and contract of a carrier subject to the provisions of ... this article ... shall provide coverage for the treatment of biologically based mental illness that is no less extensive than the coverage provided for any other physical illness."). It is well established that physically self-destructive behavior, including attempted suicide, is a symptom of bipolar disorder. American Psychiatric Association, Diagnostic and Statistic Manual of Mental Disorders 320, 322 (4th ed.1994). Thus, Dena's injuries are physical manifestations of a symptom of her mental illness. Arguing that Dena's injuries are not covered is tantamount to arguing that coverage is available for treatment of diabetes, but not the consequences of high blood sugar, which is a symptom of diabetes. Not only is this argument contrary to the concept of health care, it is inconsistent with Insureds' reasonable interpretation of the Plan, namely that the "injury" definition defines injuries occurring as a result of illness out of the definition of "injury" and into the definition of "illness."

However, an equally reasonable interpretation is that both sentences in the "injury" definition are of like definitional value, that is to say that one does not modify the other. Thus, to be covered, an injury must be "accidental bodily Injury which occurs independently of Illness" and must not be "self-inflicted bodily Injury, either while sane or insane." Accordingly, if an injury is accidental or is the result of an illness, it nonetheless would be excluded from coverage if it is self-inflicted. Likewise, though the result of her bipolar disorder, Dena's injuries would be excluded because they were self-inflicted.

Both interpretations are equally reasonable, but problematic. The first interpretation is problematic because it presumes that injuries occurring as a result of an illness, though expressly excluded from coverage under the "injury" definition, are covered by default under the "illness" definition. The second interpretation is problematic because it completely reads "which occurs independently of Illness" out of the "injury" definition. Most importantly for our purposes, however, the Plan is ambiguous because it is susceptible to each equally reasonable interpretation.

The Plan is also ambiguous because the second sentence in the "injury" definition references "self-inflicted bodily injury" without more. The term "injury" is defined generally as "accidental bodily injury." Many injuries are accidentally self-inflicted, such as cutting one's finger while chopping vegetables or falling while skiing. It is unclear from the Plan language whether these injuries are covered or excluded under the Plan. Rather, the Plan is susceptible to two equally reasonable interpretations because accidental self-inflicted injuries are within the definition of injury and also within the self-inflicted injury exclusion. [FN6] Because we resolve ambiguities in favor of coverage, Dena's injuries are covered.

FN6. In a related argument, Insureds argue that the Plan is also ambiguous because it does not state whether the self-inflicted injury exclusions require the injury to have been intentionally self-inflicted. If the self-inflicted injury exclusions require the injury to have been intentional, Insureds argue that this only aggravates the ambiguity in the Plan because the word "intentionally" has more than one meaning. Insureds further argue that the phrase "whether sane or insane" fails to clarify this ambiguity. Because we conclude that the ambiguity in the Plan arises solely as a result of the effect of the first two sentences in the definition of "injury," and because an analysis of the intentional/accidental and sane/insane dualities has no effect upon our finding of ambiguity, we do not address either of these arguments.

Based on our conclusion that the Plan is ambiguous, we need not address whether or not the 1994 SPD created an ambiguity that the 1996 Flier and 1997 SPD later cured. [FN7]

FN7. Each of these documents ultimately defers to the Plan if there is a conflict. The 1994 SPD provides that "[i]n any cases of conflict, the official Plan document will determine your eligibility or benefit." Similarly, the 1997 SPD expressly provides that "[i]n the event of any inconsistencies between the [P]lan documents and the summary plan description, the [P]lan documents will govern." For full details on coverage, the 1996 Flier instructs Insureds to "refer to the plan document [they] will receive after enrollment."

We therefore reverse and remand to the court of appeals with instructions to return this case to the trial court for proceedings consistent with this opinion.

Case 49.3

164 P.3d 454

Wash.,2007.

Supreme Court of Washington,En Banc.

Robert C. WOO, D.D.S., and Anne M. Woo, husband and wife; and the marital community composed thereof, Petitioners,

v.

FIREMAN'S FUND INSURANCE COMPANY, a California corporation; and National Surety Corporation, an Illinois corporation, Respondents,

Depositors Insurance Company, an Iowa corporation; and the Pacific Underwriters Corporation, a Washington corporation, Defendants.

No. 77684-9.

Argued Sept. 12, 2006.

Decided July 26, 2007.

FAIRHURST, J.

*48 ¶ 1 This case arises from a practical joke that an oral surgeon, Dr. Robert C. Woo, played on an employee, Tina Alberts, while **457 he was performing a dental procedure on her. Alberts brought suit against Woo as a result of the practical joke, and Woo asked his insurer, Fireman's Fund Insurance Company FN1 (Fireman's), to defend him, claiming coverage under the professional liability, employment practices liability, and general liability provisions of his insurance policy. Fireman's refused Woo's request to defend.

FN1. Woo originally sued Fireman's, National Surety Corporation (a corporate affiliate of Fireman's and provider of Woo's professional, employment practices, and general liability coverage), Depositors Insurance Company (Woo's homeowner's and personal excess liability insurer), and the Pacific Underwriters Corporation (Woo's insurance broker). Fireman's stipulated that it would take responsibility for the acts and omissions of its corporate affiliate, National Surety. Depositors defended Woo on a reservation of rights, obtained a partial summary judgment, and assigned its rights to Woo. Woo voluntarily dismissed Pacific Underwriters from the suit.

¶ 2 Woo brought suit against Fireman's, claiming breach of duty to defend, bad faith, and violation of the Consumer Protection Act (CPA), chapter 19.86 RCW. The trial court granted Woo's motion for partial summary judgment, holding that Fireman's had a duty to defend under all three provisions. After trial on the bad faith and CPA claims, a *49 jury found by special verdict that Fireman's failed to act in good faith and violated the CPA. Division One of the Court of Appeals reversed, holding that Fireman's had no duty to defend. Woo seeks review of the Court of Appeals ruling and attorney fees and costs on appeal.

¶ 3 We partially reverse the Court of Appeals and reinstate the trial court's judgment based on the jury's verdict. We hold that Fireman's had a duty to defend under the professional liability and general liability provisions but not under the employment practices liability provision. We grant Woo's request for attorney fees and costs on appeal.

I. STATEMENT OF THE CASE

¶ 4 Alberts worked for Woo as a dental surgical assistant for about five years. Her family raised potbellied pigs, and she often talked about them at work. She claims that over the course of her employment, Woo made several offensive comments about her pigs. Woo claims his comments about Alberts' pigs were part of a “friendly working environment” he encouraged in the office. Br. of Resp'ts at 4-5.

¶ 5 The event that precipitated this case occurred during a procedure Woo agreed to perform for Alberts to replace two of her teeth with implants. The procedure required Woo to install temporary partial bridges called “flippers” as spacers until permanent implants could be installed. Pet. for Review at 3. When he ordered the flippers for Alberts' procedure, Woo also ordered a second set of flippers shaped like boar tusks to play a practical joke on Alberts.FN2 While Alberts was under anesthesia, Woo and his staff removed Alberts' oxygen mask, inserted the boar tusk flippers in her mouth and took photographs of her, some with her eyes *50 pried open. After taking the photographs, Woo completed the planned procedure and inserted the normal flippers.

FN2. Woo claims he was originally planning to show the boar tusk flippers to Alberts at the time of the procedure while she was under local anesthetic. He claims, however, that because Alberts asked for a general anesthetic the morning of the procedure, he decided instead to put them in her mouth while she was under general anesthesia, take photographs, and show the photographs to her afterward.

¶ 6 Woo subsequently had the photographs developed but claims that when he saw them he concluded they were ugly and should not be shown to Alberts. He also claims he told another surgical assistant he thought the photographs were ugly. He claims that he did not expect his staff to give them to Alberts before talking with him. However, about a month later, Woo's staff gave Alberts the photographs at a gathering to celebrate her birthday. Stunned, Alberts proceeded to assist in a dental surgery procedure after receiving the photographs but after that procedure, she went home and never returned to her job. Woo called Alberts several times and wrote to apologize, but Alberts did not respond.

¶ 7 Shortly thereafter, Alberts filed suit against Woo alleging outrage, battery, invasion of privacy, false light, public disclosure **458 of private acts, nonpayment of overtime wages, retaliation for requesting payment of overtime wages, medical negligence, lack of informed consent, and negligent infliction of emotional distress. At the time of Alberts' suit, Woo's policy contained provisions for professional liability, employment practices liability, and general liability.FN3 About five months after Alberts filed suit, Fireman's notified Woo that his policy did not cover the claims asserted in Alberts' suit and declined to fund his defense.

FN3. A complete copy of the insurance policy is included in the record. See Def. Ex. 40. Pages of defendant exhibit 40 are designated as “NSW” and are numbered from 000001 to 000112. All references to the insurance policy in this opinion will use that designation. In addition, all boldface emphasis contained in the exhibit has been omitted.

¶ 8 Fireman's refused to defend under the professional liability provision on the grounds that the acts alleged in Alberts' complaint did not arise out of the provision of dental services. It refused to defend under the employment practices liability provision on the grounds that the complaint did not allege sexual harassment, discrimination, or wrongful discharge as those terms were defined by the policy. It refused to defend under the general liability *51 provision on the grounds that the alleged practical joke was intentional and was not considered a “business activity.” Pl.Ex. 25, at 7.

¶ 9 Because Fireman's refused to defend him, Woo paid attorney John Versnel to defend him against Alberts' suit and settled with Alberts just prior to trial for $250,000. Woo then brought suit against Fireman's alleging breach of duty to defend under the professional, employment practices, and general liability provisions of Woo's insurance policy, bad faith, and violation of the CPA. He further alleged that Fireman's was estopped from denying coverage under the policy as a result of its breach of the duty to defend.

¶ 10 The parties submitted cross motions for summary judgment.FN4 The trial court granted Woo's motion for partial summary judgment holding that Fireman's breached its duty to defend.

FN4. Woo moved for partial summary judgment arguing that Fireman's breached its duty to defend him in the tort action against Alberts. Fireman's sought summary dismissal of Woo's claims.

¶ 11 Following trial on the bad faith and CPA issues, a jury found that Fireman's failed to act in good faith, violated the CPA, and awarded Woo damages in the amount of $750,000. The trial court entered judgment against Fireman's and awarded damages under the jury verdict, attorney fees and costs pursuant to Olympic Steamship Co. v. Centennial Insurance Co., 117 Wash.2d 37, 811 P.2d 673 (1991), and recovery of the $250,000 settlement Woo negotiated with Alberts.

¶ 12 Fireman's appealed to the Court of Appeals, Division One. Woo v. Fireman's Fund Ins. Co., 128 Wash.App. 95, 114 P.3d 681 (2005). The Court of Appeals reversed the trial court's summary judgment order regarding duty to defend and instructed the trial court to vacate the jury's verdict and dismiss the case. The Court of Appeals did not reach Fireman's remaining issues on appeal. Id. at 118, 114 P.3d 681. Woo petitioned this court for review, which we accepted. *52Woo v. Fireman's Fund Ins. Co., 156 Wash.2d 1035, 134 P.3d 1171 (2006). Woo also requests attorney fees and costs on appeal.

II. ISSUES

A. Did Fireman's have a duty to defend Woo under the professional liability, employment practices liability, and general liability provisions of his insurance policy?

B. Do other issues raised by Fireman's at the Court of Appeals have merit?

C. Is Woo entitled to attorney fees and costs on appeal?

III. ANALYSIS

[1][2][3] ¶ 13 An appellate court reviews a partial summary judgment order de novo and engages in the same inquiry as the trial court. **459Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wash.2d 654, 692 n. 17, 15 P.3d 115 (2000). Interpretation of an insurance contract is a question of law reviewed de novo. Roller v. Stonewall Ins. Co., 115 Wash.2d 679, 682, 801 P.2d 207 (1990), overruled on other grounds by Butzberger v. Foster, 151 Wash.2d 396, 89 P.3d 689 (2004). When we construe the language of an insurance policy, we give it the same construction that an “average person purchasing insurance” would give the contract. Id.

A. The duty to defend

[4][5][6][7][8][9][10] ¶ 14 The rule regarding the duty to defend is well settled in Washington and is broader than the duty to indemnify. Hayden v. Mut. of Enumclaw Ins. Co., 141 Wash.2d 55, 64, 1 P.3d 1167 (2000). The duty to defend “arises at the time an action is first brought, and is based on the potential for liability.” Truck Ins. Exch. v. VanPort Homes, Inc., 147 Wash.2d 751, 760, 58 P.3d 276 (2002) (emphasis added). An insurer has a duty to defend “ ‘when a complaint against the insured, construed liberally, alleges facts which could, if proven, impose liability upon the insured within *53 the policy's coverage.’ ” Id. (quoting Unigard Ins. Co. v. Leven, 97 Wash.App. 417, 425, 983 P.2d 1155 (1999)). An insurer is not relieved of its duty to defend unless the claim alleged in the complaint is “clearly not covered by the policy.” Id. (citing Kirk v. Mt. Airy Ins. Co., 134 Wash.2d 558, 561, 951 P.2d 1124 (1998)). Moreover, if a complaint is ambiguous, a court will construe it liberally in favor of “triggering the insurer's duty to defend.” Id. (citing R.A. Hanson Co. v. Aetna Ins. Co., 26 Wash.App. 290, 295, 612 P.2d 456 (1980)).FN5 In contrast, the duty to indemnify “hinges on the insured's actual liability to the claimant and actual coverage under the policy.” Hayden, 141 Wash.2d at 64, 1 P.3d 1167 (emphasis added). In sum, the 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.

FN5. Fireman's argues that we should adopt a “reasonable expectations” standard in determining whether an insurer has a duty to defend an insured. Suppl. Br. of Resp'ts at 3 (citing E-Z Loader Boat Trailers, Inc. v. Travelers Indem. Co., 106 Wash.2d 901, 907, 726 P.2d 439 (1986)). It argues “an insurer has no duty to defend when the insured can have no reasonable expectation of coverage.” Id. It also suggests the Court of Appeals adopted such a test when it concluded, “[n]o reasonable person could believe that a dentist would diagnose or treat a dental problem by placing boar tusks in the mouth while the patient was under anesthesia in order to take pictures with which to ridicule the patient.” Id.;Woo, 128 Wash.App. at 103, 114 P.3d 681. Fireman's misreads the Court of Appeals' statement. The court was referring to whether a reasonable patient would believe that the dentist would put boar tusks in her mouth whereas Fireman's refers to whether a reasonable insured would expect his policy to provide coverage. In any case, neither comports with our established rule regarding the duty to defend, and we decline to adopt Fireman's reasoning.

[11][12][13] ¶ 15“There are two exceptions to the rule that the duty to defend must be determined only from the complaint, and both the exceptions favor the insured.” Truck Ins., 147 Wash.2d at 761, 58 P.3d 276. First, if 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. Notice pleading rules, which require only a short and plain statement of the claim showing that the pleader is entitled to relief, impose a significant burden on the insurer to determine if there are any facts in the *54 pleadings that could conceivably give rise to a duty to defend. Hanson, 26 Wash.App. at 294, 612 P.2d 456. Second, if the allegations in the complaint “ ‘ “conflict with facts known to or readily ascertainable by the insurer,” ’ ” or if “ ‘ “the allegations ... are ambiguous or inadequate,” ’ ” facts outside the complaint may be considered. Truck Ins., 147 Wash.2d at 761, 58 P.3d 276 (quoting Atl. Mut. Ins. Co. v. Roffe, Inc., 73 Wash.App. 858, 862, 872 P.2d 536 (1994) (quoting E-Z Loader Boat Trailers, Inc. v. Travelers Indem. Co., 106 Wash.2d 901, 908, 726 P.2d 439 (1986))). The insurer may not rely on facts extrinsic to the complaint to deny the duty to defend-it may do so only to trigger the duty. Id.

[14] ¶ 16 The duty to defend is a valuable service paid for by the insured and one of the **460 principal benefits of the liability insurance policy. Grifin v. Allstate Ins. Co., 108 Wash.App. 133, 138, 29 P.3d 777, 36 P.3d 552 (2001); Safeco Ins. Co. v. Butler, 118 Wash.2d 383, 392, 823 P.2d 499 (1992); Tank v. State Farm Fire & Cas. Co., 105 Wash.2d 381, 390, 715 P.2d 1133 (1986); THOMAS V. HARRIS, WASHINGTON INSURANCE LAW § 11.1, at 11-1, 11-2 (2d ed.2006). If the insurer is uncertain of its duty to defend, it may defend under a reservation of rights and seek a declaratory judgment that it has no duty to defend. Truck Ins., 147 Wash.2d at 761, 58 P.3d 276 (citing Grange Ins. Co. v. Brosseau, 113 Wash.2d 91, 93-94, 776 P.2d 123 (1989)). Although the insurer must bear the expense of defending the insured, by doing so under a reservation of rights and seeking a declaratory judgment, the insurer avoids breaching its duty to defend and incurring the potentially greater expense of defending itself from a claim of breach. Id.

1. Professional liability provision

¶ 17 Woo makes three basic arguments with regard to Fireman's duty to defend under the professional liability provision. First, he argues that the insertion of boar tusk flippers in Alberts' mouth constituted the practice of dentistry as defined in his policy and RCW 18.32.020. Second, he argues that the Court of Appeals improperly extended *55 the “sexual misconduct” rule from Standard Fire Insurance Co. v. Blakeslee, 54 Wash.App. 1, 771 P.2d 1172 (1989) in concluding that Woo's actions did not constitute the practice of dentistry. Lastly, he argues that application of Blakeslee to the facts of this case was uncertain and Fireman's had a duty to defend until the rule was clarified by the court.

a. Conduct falling within the definition of the practice of dentistry

[15] ¶ 18 The professional liability provision states that Fireman's will defend any claim brought against the insured “even if the allegations of the claim are groundless, false or fraudulent.” NSW at 000080. It defines “dental services” as “all services which are performed in the practice of the dentistry profession as defined in the business and professional codes of the state where you are licensed.” NSW at 000102. RCW 18.32.020 defines the practice of dentistry and states:

A person practices dentistry, within the meaning of this chapter, who (1) represents himself as being able to diagnose, treat, remove stains and concretions from teeth, operate or prescribe for any disease, pain, injury, deficiency, deformity, or physical condition of the human teeth, alveolar process, gums, or jaw, or (2) offers or undertakes by any means or methods to diagnose, treat, remove stains or concretions from teeth, operate or prescribe for any disease, pain, injury, deficiency, deformity, or physical condition of the same, or take impressions of the teeth or jaw, or (3) owns, maintains or operates an office for the practice of dentistry, or (4) engages in any of the practices included in the curricula of recognized and approved dental schools or colleges, or (5) professes to the public by any method to furnish, supply, construct, reproduce, or repair any prosthetic denture, bridge, appliance, or other structure to be worn in the human mouth.

¶ 19 Woo argues that the Court of Appeals erred in concluding the insertion of boar tusk flippers in Alberts' mouth did not constitute the practice of dentistry as defined in RCW 18.32.020. He claims the joke was “intertwined *56 with employee and patient relationships, areas of Woo's ownership and operation of the dental office.” Suppl. Br. of Pet'r Woo at 5. Fireman's responds that the allegations in Alberts' complaint unambiguously establish that Woo's practical joke was not connected to treating Alberts' condition. It asserts the boar tusk flippers were not intended to replace Alberts' teeth-they were intended only as a practical joke. Fireman's also asserts that insertion of the boar tusk flippers was not covered under the professional liability provision because Woo “interrupted his rendering of dental services.” Resp'ts' Answer to Br. of Amicus Curiae Washington State Trial Lawyers Association Foundation (WSTLA Foundation) at 5.

[16] ¶ 20 The Court of Appeals based its conclusion that Fireman's had no duty to **461 defend Woo under the professional liability provision on two flawed premises. First, it concluded, “[n]o reasonable person could believe that a dentist would diagnose or treat a dental problem by placing boar tusks in the mouth while the patient was under anesthesia in order to take pictures with which to ridicule the patient.” Woo, 128 Wash.App. at 103, 114 P.3d 681. As we note in footnote 5, supra, what a reasonable patient would believe a dentist would do is irrelevant to our determination of whether Fireman's had a duty to defend under the professional liability provision. Rather, the rule requires us to determine whether the complaint alleged facts that were conceivably covered under the insurance policy.

¶ 21 Second, the Court of Appeals erred in concluding Fireman's had no duty to defend Woo under the professional liability provision because Woo's actions “could not conceivably be considered a means or method ‘to diagnose, treat, remove stains and concretions from teeth, operate or prescribe for any disease, pain, injury, deficiency, deformity, or physical condition.’ ” Woo, 128 Wash.App. at 103, 114 P.3d 681 (quoting RCW 18.32.020). The court's definition of what Woo's policy conceivably covers was overly constrained. In addition to covering the rendering of dental services, the professional liability provision covers ownership, maintenance, or operation*57 of an office for the practice of dentistry and Alberts' complaint alleged Woo's practical joke took place while Woo was conducting his dental practice. The insertion of the boar tusk flippers was also intertwined with Woo's dental practice because it involved an interaction with an employee. In fact, that employee interaction was as much a part of his dental practice as the rendering of dental services to his patients.

¶ 22 Moreover, Woo's practical joke did not interrupt the dental surgery procedure, as Fireman's argues. After administering anesthesia and preparing Alberts for surgery, Woo inserted the boar tusk flippers, took photographs, removed the boar tusk flippers, and inserted another set of flippers. The acts that comprised the practical joke were integrated into and inseparable from the overall procedure.

¶ 23 In sum, Alberts' complaint alleges that Woo inserted a flipper, albeit oddly shaped, during a dental surgery procedure while he was operating an office for the practice of dentistry. The rule for determining whether an insurer has a duty to defend only requires the complaint to allege facts that could impose liability on the insurer. Truck Ins., 147 Wash.2d at 760, 58 P.3d 276. Because RCW 18.32.020 defines the practice of dentistry so broadly, the fact that his acts occurred during the operation of a dental practice conceivably brought his actions within the professional liability provision of his insurance policy.

¶ 24 We conclude that Fireman's had a duty to defend under Woo's professional liability provision because the insertion of boar tusk flippers in Alberts' mouth conceivably fell within the policy's broad definition of the practice of dentistry.

b. Extension of Blakeslee

¶ 25 Woo next argues that in concluding that his practical joke did not constitute the practice of dentistry, the Court of Appeals improperly extended Blakeslee to include more than just sexual assault. He argues that Blakeslee should apply only in a sexual assault context because *58 sexual contact during dental treatment presumes intent to injure whereas the same does not hold true for “an innocently conceived group joke.” Suppl. Br. of Pet'r Woo at 8. Fireman's counters that Blakeslee merely stands for the general proposition that an insured should not expect insurance coverage to apply to problems that fall outside the policy coverage. It also claims the court did not apply the “intent to injure” rule of sexual assault cases with regard to the professional liability provision-it only applied settled law to a unique set of facts. Resp'ts' Answer to Amicus Curiae WSTLA's [Foundation] Memo. in Support of Pet. for Review at 3.

¶ 26Blakeslee involved a dentist accused of sexually assaulting a patient during a dental procedure while the patient was under the influence of nitrous oxide. 54 Wash.App. at 2, 771 P.2d 1172.The court noted that medical malpractice insurance policies do not cover a physician's sexual contact with a patient. **462Id. at 8-9, 771 P.2d 1172 (citing Wash. Ins. Guar. Ass'n v. Hicks, 49 Wash.App. 623, 627, 744 P.2d 625 (1987) (a gynecologist's sexual assault of a patient)). It concluded, therefore, that because there could be no legitimate course of treatment involving sexual contact between a dentist and a patient, the dentist's insurance policy did not cover his actions. Id. at 9, 771 P.2d 1172.

¶ 27 The Court of Appeals analogized the facts of this case to Blakeslee by noting that, like Blakeslee, Woo took advantage of Alberts' anesthetized state for his own purposes. Woo, 128 Wash.App. at 104, 114 P.3d 681. It also analogized this case to Blakeslee on the grounds that the professional services that Woo rendered were not the proximate cause of Alberts' injuries. Id.

¶ 28 We conclude the Court of Appeals improperly analyzed the significance of the act at issue by focusing only on the facts that Woo inserted the boar tusk flippers for his own purposes and the injuries did not arise from the treatment Alberts requested. It ignored the fact that application of Blakeslee to other contexts could inappropriately narrow the duty to defend. It also failed to consider that *59 sexual contact is never an appropriate component of dental treatment whereas other actions could conceivably fall within the broad definition set out in the insurance policy and RCW 18.32.020.FN6

FN6.Blakeslee expressly recognized a distinction between factual situations in which sexual contact is necessitated by the treatment being provided and those in which it is not, citing a case involving improper sexual contact by a gynecologist. Blakeslee, 54 Wash.App. at 9, 771 P.2d 1172 (citing St. Paul Fire & Marine Ins. Co. v. Asbury, 149 Ariz. 565, 720 P.2d 540 (Ct.App.1986)). The Asbury court concluded that because the improper sexual contact was “intertwined with and inseparable from” a gynecologist's services, it fell within the gynecologist's professional liability policy. Id. Although the Blakeslee court rejected Asbury, we note that the facts here are more analogous to those in Asbury than they are to Blakeslee. Woo's insertion of the boar tusk flippers was intertwined with and inseparable from the real treatment he performed on Alberts whereas the sexual contact by the dentist in Blakeslee was not.

¶ 29 Additionally, the Court of Appeals failed to recognize that the Blakeslee analysis was based on the duty to indemnify, not the duty to defend. Woo, 128 Wash.App. at 103, 114 P.3d 681. The insurer in Blakeslee properly defended under a reservation of rights and sought a declaratory judgment. Blakeslee, 54 Wash.App. at 3, 771 P.2d 1172.Blakeslee's analysis, therefore, focused on whether the insurance policy actually provided coverage. In contrast, our focus in this case is whether the facts alleged in the complaint conceivably triggered a duty on the part of Fireman's to defend. Thus, Blakeslee does not even provide the proper framework for our analysis.

¶ 30 We conclude that the Court of Appeals improperly extended Blakeslee to a nonsexual assault context.

c. Refusal to defend when there was an undetermined rule of law

[17] ¶ 31 Finally, Woo argues that application of Blakeslee to the facts of this case was uncertain at best and Fireman's had a duty to defend until and unless application of the rule in this particular context was clarified by the court. Amicus WSTLA Foundation agrees, arguing that under the “complaint allegation rule,” an insurer is obligated to err in favor of defending the insured if the law is uncertain “at the time [the insurer] was required to decide whether to provide [the *60 insured] a defense.” Br. of Amicus Curiae WSTLA Foundation at 21 (emphasis omitted). WSTLA Foundation also challenges Fireman's argument to the Court of Appeals that if a legal issue is “fairly debatable” at the time an insured requests defense, the insurer may refuse. Id. at 22, 771 P.2d 1172; Appellants Opening Br. at 24-26 & n. 12, 49-53.

¶ 32 Fireman's obtained a formal written legal opinion from attorney Stephen G. Skinner, who advised that Fireman's did not have a duty to defend under the professional liability provision based on Blakeslee and Hicks. Skinner's opinion acknowledged, however, that neither Blakeslee nor Hicks were entirely on point and that a court reviewing them might conclude they relate only to cases involving sexual assault.

[18] ¶ 33 Fireman's reliance on Skinner's equivocal advice regarding the application of **463Blakeslee or Hicks to this case flatly contradicts one of the most basic tenets of the duty to defend. The duty to defend arises based on the insured's potential for liability and whether allegations in the complaint could conceivably impose liability on the insured. Truck Ins., 147 Wash.2d at 760, 58 P.3d 276. An insurer is relieved of its duty to defend only if the claim alleged in the complaint is “clearly not covered by the policy.” Id. Moreover, an ambiguous complaint must be construed liberally in favor of triggering the duty to defend. Id.

[19] ¶ 34 Fireman's is essentially arguing that an insurer may rely on its own interpretation of case law to determine that its policy does not cover the allegations in the complaint and, as a result, it has no duty to defend the insured. However, the duty to defend requires an insurer to give the insured the benefit of the doubt when determining whether the insurance policy covers the allegations in the complaint. Here, Fireman's did the opposite-it relied on an equivocal interpretation of case law to give itself the benefit of the doubt rather than its insured.

¶ 35 We conclude that Fireman's inappropriately relied on Blakeslee to deny Woo a defense.

*61 2. Employment practices liability provision

[20] ¶ 36 The employment practices liability provision states that Fireman's will defend any claim brought against the insured “even if the allegations of the claim are groundless, false or fraudulent.” NSW at 000094. It further states, in pertinent part, that Fireman's will “pay all sums which you ... are legally required to pay as damages as a result of sexual harassment, discrimination, or wrongful discharge that arise out of a wrongful employment practice.” Id. Woo and Fireman's do not argue that anything other than wrongful discharge applies here. “Wrongful discharge” is defined, in pertinent part, as “the unfair or unjust termination of an employment relationship which ... inflicts emotional distress upon the employee, defames the employee, [or] invades the employee's privacy.” NSW at 000106. “Wrongful employment practice” is defined, in pertinent part, as “any negligent act, error, omission, or breach of duty committed in the course of ... relations with employees.” Id.

¶ 37 Woo argues Fireman's had a duty to defend him under the employment practices liability provision because Alberts' complaint can reasonably be read to include allegations of negligent acts that led to an involuntary or constructive discharge.FN7 Fireman's counters that even if the joke qualified as a wrongful employment practice, it did not trigger the duty to defend because the complaint did not allege that the wrongful discharge arose out of the wrongful *62 employment practice and that the emotional distress resulted from the wrongful discharge. Instead, Fireman's argues Alberts alleged that the wrongful employment practice caused her emotional distress and the emotional distress caused her to leave her job. The Court of Appeals agreed, basing its conclusion that Alberts did not allege constructive discharge on the fact that the complaint did not allege violation of an employment contract-only violation of the insurance policy to which she was not a party. Woo, 128 Wash.App. at 105, 114 P.3d 681.

FN7. Woo also takes issue with the Court of Appeals' statement that Fireman's had no duty to defend him under the employment practices liability provision if it determined the complaint alleged no “cognizable cause of action.” Pet. for Review at 15-17 (citing Woo, 128 Wash.App. at 105, 114 P.3d 681). He notes that the duty to defend focuses on “the allegations of the complaint and the policy, not on whether a claim happens to be ‘cognizable.’ ” Pet. for Review at 17. The insurance policy states that Fireman's will “defend any claim brought against you ... seeking damages that are covered under this section of this policy ...even if the allegations of the claim are groundless, false or fraudulent.” NSW at 000094 (emphasis added). Woo seems to be suggesting that insurers should not be involved in determining whether claims are legally cognizable, but that concern does not change the fact that Alberts' complaint did not allege a claim for wrongful discharge as defined by Woo's insurance policy. Therefore, we need not reach this argument.

¶ 38 Alberts' complaint alleged that Woo frequently taunted her about her potbellied pigs. It also alleged that after the office **464 staff showed her the photographs she assisted with a surgical procedure and during that procedure Woo told her she could take the boar tusk flippers home as a trophy. After the procedure, Alberts collapsed in tears and then told the office manager not to have anyone contact her, went home, and never returned. These facts indicate that Alberts' emotional distress resulted from the taunting and the practical joke, not from a wrongful discharge. Thus, they do not meet the definition of wrongful discharge under Woo's policy.

¶ 39 We conclude Fireman's had no duty to defend under Woo's employment practices liability provision because Alberts' complaint clearly did not allege actions that met the definition of wrongful discharge under the policy.

3. General liability provision

¶ 40 The general liability provision covers bodily injury, personal injury, advertising injury, and property damage. Only the bodily injury and personal injury portions apply in this case.

a. Bodily injury

[21] ¶ 41 “Bodily injury” is defined as “bodily harm, sickness or disease,” NSW at 000102, and is covered under the general liability coverage if “caused by an occurrence.” NSW at 000032. “Occurrence” is defined as “[a]n accident, *63 including continuous or repeated exposure to substantially the same general harmful conditions.” NSW at 000045. “Accident” is defined as a “fortuitous circumstance, event or happening that takes place and is neither expected nor intended from the standpoint of the insured.” NSW at 000043.

¶ 42 Woo argues that Alberts' complaint should be construed liberally in his favor as triggering a duty to defend because the complaint alleged both intentional and negligent conduct resulting in bodily injury.FN8 Fireman's counters that the inclusion of negligence causes of action in Alberts' complaint did not render the complaint ambiguous regarding whether Woo's conduct was intentional. Fireman's suggests that any ambiguity must be found in the complaint's factual allegations, arguing that none of the conduct alleged in the complaint was accidental or fortuitous.

FN8. Woo also argues that Fireman's denial of coverage under the general liability provision contradicts its denial of coverage under the professional liability provision, calling Fireman's denial of coverage a “flip flop.” Pet. for Review at 12. He claims Fireman's denied coverage under the professional liability provision because Woo was not providing dental services and simultaneously denied coverage under the general liability provision because Woo was providing professional services. Id.; Pl.Ex. 25, at 9. Fireman's does appear to have denied coverage under the two provisions for contradictory reasons but because this case does not involve Fireman's duty to indemnify, we need not reach this issue.

¶ 43 The Court of Appeals agreed with Fireman's and concluded that any bodily injury alleged in Alberts' complaint FN9 did not result from an accident as defined in the policy because the complaint alleged exclusively intentional conduct. Woo, 128 Wash.App. at 106, 114 P.3d 681. It also concluded that even if Woo had second thoughts about giving Alberts the photographs, that fact would not render the allegations in Alberts' complaint ambiguous because the conduct related to taking the photographs was intentional. Id.

FN9. In her complaint, Alberts alleged facts that arguably constitute bodily harm, such as acute and chronic depression, anxiety, panic attacks, nightmares, and suicidal ideation.

¶ 44 Alberts' complaint alleged that Woo repeatedly taunted her about her pigs and that Woo or an assistant working under his supervision ordered boar tusk flippers, *64 placed the flippers in her mouth, pried her eyes open, took photographs of her with the flippers in her mouth, had the photographs developed, and gave the photographs to her. However, three of the claims listed in Alberts' complaint alleged negligent causes of action-medical negligence, lack of informed consent, and negligent infliction of emotional distress.

[22] ¶ 45 The insurer's duty to defend is triggered if a complaint is ambiguous. Truck Ins., 147 Wash.2d at 760, 58 P.3d 276. The insured must be given the benefit of the **465 doubt if it is not clear from the face of the complaint that the policy does not provide coverage. Id. at 761, 58 P.3d 276. In short, if it is not clear that the complaint does not contain allegations that are not covered by the policy, the insurer has a duty to defend.

¶ 46 Woo's policy covers bodily injury that is caused by an “accident,” which is defined as a “fortuitous circumstance, event or happening that takes place and is neither expected nor intended from the standpoint of the insured.” NSW at 000043 (emphasis added). The Court of Appeals limited its analysis of the bodily injury coverage to whether Alberts' complaint alleged exclusively intentional conduct. However, based on the language of Woo's policy, he had to have “expected or intended” the specific “event or happening” alleged in the complaint. Thus, he would have to have intended not only the “event or happening” of photographing her with the boar tusk flippers in her mouth but also the “event or happening” that Alberts would sustain the specific injuries she alleged in her complaint. Although Woo's conduct was likely intentional, it is conceivable that Woo did not intend that conduct to result in Alberts' injuries.

¶ 47 Moreover, Woo's policy covers “continuous or repeated exposure to substantially the same general harmful conditions.” NSW at 000045. Woo's “taunts” and the practical joke could have been part of Woo's “continuous or repeated” efforts to cultivate a “friendly working environment” in the office. NSW at 000045; Br. of Resp'ts at 4-5.

¶ 48 We conclude it is not clear that Alberts' complaint does not contain allegations that are not covered by Woo's *65 policy and Fireman's had a duty to defend him under the bodily injury portion of the general liability provision.

b. Personal injury

[23] ¶ 49 “Personal injury” is defined, in pertinent part, as “harm that arises out of one or more of the following offenses: assault, battery, mental anguish, mental shock or humiliation; ... [or] invasion of an individual's right of privacy.” NSW at 000105. Personal injury is covered under the general liability coverage if it is “caused by an offense arising out of your business.” NSW at 000032 (emphasis added). “Offense” is defined as “a fortuitous, inadvertent or mistaken business activity giving rise to ... personal injury neither expected nor intended from the standpoint of the insured.” NSW at 000045. “Your business” is defined as “the trade, profession or occupation in which you are engaged and which is shown on the declarations page.” NSW at 000047.

¶ 50 Our analysis of Woo's intent to cause personal injury is comparable to our analysis of his intent to cause bodily injury. Alberts' complaint alleged that Woo taunted her about her pigs and that he played an arguably offensive practical joke on her but Woo claims he did so only in an effort to create a “friendly working environment” in his business office. Br. of Resp'ts at 4-5. As with bodily injury, Woo's policy covers personal injury if caused by a “fortuitous, inadvertent or mistaken business activity giving rise to ... personal injury neither expected nor intended from the standpoint of the insured.” NSW at 000045 (emphasis added). Because, as we concluded above, Alberts' complaint did not clearly allege that Woo expected or intended that his taunts or the practical joke would cause personal injury to Alberts, Fireman's had a duty to defend him.

¶ 51 Woo also argues the Court of Appeals erroneously applied a Louisiana case when it concluded that any personal injury alleged in Alberts' complaint was not caused by an “offense arising out of your business,” NSW at 000032, because “the particular activities engaged in at the time of *66 the injury were ordinarily incident to business pursuits.” Woo, 128 Wash.App. at 107, 114 P.3d 681 (citing Jackson v. Frisard, 96-0547 (La.App. 1 Cir.1996 12/20/96), 685 So.2d 622, 629). Woo disputes the court's interpretation of Jackson and argues that because there was no exception to the policy for practical jokes, it covered anything that occurred in the context of running a dental office. He claims the court's focus ignored all conduct unrelated to the core functions of the business. Fireman's counters that the mere fact that an employer plays a joke on an employee at **466 the office does not convert it into a business activity.FN10

FN10. Amicus WSTLA Foundation also urges us to address the broader issue of whether practical jokes generally fall outside an insurer's duty to defend. It argues that the Court of Appeals ruling inappropriately implied that practical jokes are outside insurance coverage as a matter of law. It also argues that such a holding disregards the principle of fortuity-in other words, practical joking cannot be considered outside insurance coverage if no injury is intended. We decline to reach the broad issue urged by WSTLA Foundation because we have limited briefing on it and need not reach it to resolve the specific case before us. Moreover, because the issue was raised only by amicus curiae, we need not consider it. Seeley v. State, 132 Wash.2d 776, 808 n. 20, 940 P.2d 604 (1997).

¶ 52Jackson involved an injury incurred when state troopers engaged in horseplay during a defensive training session. 685 So.2d at 624. The insurance provision at issue excluded coverage for bodily injury arising out of business pursuits of the insured, but the exclusion did not apply to “ ‘activities which are ordinarily incident to non-business activities.’ ” Id. at 629 (quoting policy). Jackson held that the trooper's actions were the type of activity that were “ordinarily incident to non-business pursuits,” and were not subject to the policy exclusion. Id. at 631.Thus, contrary to Woo's assertion, the Court of Appeals properly interpreted the insurance policy in Jackson as providing coverage for personal injury arising from acts that were not ordinarily incident to business pursuits. It also properly concluded that the policy in this case provided coverage for personal injury arising from the business. Woo, 128 Wash.App. at 107, 114 P.3d 681.

¶ 53 We conclude the Court of Appeals erred in determining that Woo's conduct did not arise from his business. We hold Fireman's had a duty to defend him under the personal *67 injury portion of the general liability provision. Alberts' complaint alleged that Woo's staff participated in playing a practical joke on a colleague during the course of a dental procedure that was undoubtedly part of Woo's business. Woo's policy language provides broad coverage for personal injuries “arising from” his business, and the definition of “your business” is equally broadly defined.

¶ 54 We partially reverse the Court of Appeals and reinstate the trial court's judgment based on the jury's verdict. We hold that the court erred in concluding that Fireman's had no duty to defend Woo under the professional liability and general liability provisions but it did not err in concluding that Fireman's had no duty to defend under the employment practices liability provision. We also hold that the court improperly extended Blakeslee to a nonsexual assault context and Fireman's improperly relied on Blakeslee as a basis for refusing to defend Woo.

B. Other issues Fireman's raised at the Court of Appeals

¶ 55 The Court of Appeals did not resolve certain issues because it determined that Fireman's had no duty to defend Woo. RAP 13.7 requires us to either consider and decide those issues or remand the case to the Court of Appeals to decide them. We elect to decide them rather than remand to the Court of Appeals.

¶ 56 Fireman's raised four additional arguments at the Court of Appeals: (1) that the jury's bad faith and CPA violation verdict could not be upheld on appeal if the Court of Appeals found that Fireman's correctly declined to defend Woo on only some of the policy provisions, (2) that the jury verdict could not be upheld because the trial court erred in instructing the jury that Fireman's had breached its duty to defend, (3) that the trial court erred in resolving its claim of collusion in the settlement between Woo and Alberts, and (4) that the trial court erred in denying relief from emotional distress damages the jury awarded to Woo based on Fireman's refusal to defend him.

*68 1. A new trial is not warranted if the Court of Appeals is reversed on only some provisions of the insurance policy

[24] ¶ 57 Fireman's argues that if the Court of Appeals is reversed on only some of the duty to defend claims, it should remand for new trial because there was insufficient proof of bad faith if Fireman's correctly refused**467 to defend with regard to some of the claims. Fireman's admits, however, that the bulk of Woo's case revolved around the professional liability provision. Woo argues that Fireman's waived this issue because it failed to propose a special verdict identifying the coverages under which the jury found bad faith.

¶ 58 Because Fireman's acknowledges that the bulk of Woo's case related to the professional liability provision and we reverse the Court of Appeals with respect to that provision, we conclude the jury's verdict that Fireman's acted in bad faith is not compromised and a new trial is not warranted.

2. The trial court did not err in instructing the jury that Fireman's breached its duty to defend

[25] ¶ 59 Fireman's claims that the trial court erred in instructing the jury that Fireman's breached its duty to defend. The trial court's instruction stated:

The issues for you to decide are whether defendant Fireman's Fund failed to act in good faith in handling and investigating Dr. Woo's claim, and whether defendant Fireman's Fund violated the Washington Consumer Protection Act. The Court has already determined that defendant Fireman's Fund erred in not defending Dr. Woo. However, an insurance company can be in error in its determination on the duty to defend and not be in bad faith so long as its determination was not unreasonable, frivolous or unfounded. The Court's earlier decision on the duty to defend does not control your decisions in this case.

Clerk's Papers (CP) at 3559.

¶ 60 Fireman's seems to think the instruction was erroneous because it left the jury to wonder about coverage. *69 However, the jury was not asked to determine if the policy provided coverage. Woo sought a declaration that Fireman's was estopped from denying coverage based on the duty to defend determination. The jury was asked only to determine if Fireman's acted in bad faith and in violation of the CPA by refusing to defend.

¶ 61 We conclude the trial court did not err in instructing the jury that Fireman's breached its duty to defend.

3. The trial court did not err in resolving Fireman's claim of collusion in the settlement between Woo and Alberts

[26] ¶ 62 Fireman's claims the trial court erroneously resolved its claim of collusion in the settlement between Woo and Alberts. It argues that the court conflated the purpose of the reasonableness hearing with the question of whether the agreement was the result of fraud or collusion, thereby failing to conduct the appropriate analysis.

[27] ¶ 63 Woo responds that the court analyzes collusion twice, (1) in evaluating the reasonableness of the settlement and (2) in determining whether the settlement was the result of fraud or collusion. Once the court determines the settlement is reasonable, Fireman's has the burden of proving collusion and it failed to provide such evidence at trial. Truck Ins., 147 Wash.2d at 765, 58 P.3d 276. In contrast, Woo cited testimony of attorney John Versnel, who stated unequivocally that the settlement was “devoid of any bad faith, collusion or fraud.” Br. of Resp'ts at 48-49. Woo challenged the list of cases cited by Fireman's in which the insured escaped liability, noting that he did not, and noted that Fireman's never provided any suggestions regarding what a reasonable settlement would have been. Finally, Woo pointed to extensive evidence that he mounted a vigorous defense prior to settling with Alberts.

¶ 64 We conclude the trial court did not err in resolving Fireman's collusion claim regarding the settlement between Woo and Alberts.

*70 4. The trial court did not err in denying relief from emotional distress damages the jury awarded to Woo based on Fireman's refusal to defend him

¶ 65 Fireman's argues that the trial court erred in denying relief from the jury's award of damages for emotional distress based on Fireman's refusal to defend him. Appellants' Opening Br. at 66-67. It claims that Woo failed to present evidence about his emotional**468 distress, other than his own testimony. Id. The court acknowledged that the damages could be viewed as “extraordinarily high given the absence of any medical, psychiatric or expert testimony,” but noted that Fireman's provided “virtually no authority or support for [its] argument” and the court could not substitute its judgment for that of the jury. CP at 3969.

¶ 66 We conclude the trial court did not err in denying Fireman's relief from the jury's damages award.

C. Attorney fees and costs on appeal

[28] ¶ 67 The trial court awarded Woo fees under Olympic Steamship for Fireman's breach of the common law duty of good faith and under the CPA. Woo requested fees on appeal in his brief to the Court of Appeals and in his supplemental brief to this court under Svendsen v. Stock, 143 Wash.2d 546, 560, 23 P.3d 455 (2001) and Amazon. com International, Inc. v. American Dynasty Surplus Lines Insurance Co., 120 Wash.App. 610, 619-20, 85 P.3d 974,review denied152 Wash.2d 1030, 103 P.3d 200 (2004).FN11

FN11. It is unclear why Woo cites Amazon. com as the basis for his claim of attorney fees and costs rather than Olympic Steamship.In Amazon. com, American Dynasty sued Atlantic claiming that Atlantic should have defended . 120 Wash.App. at 614, 85 P.3d 974. American Dynasty prevailed on appeal and requested attorney fees under Olympic Steamship.Id. at 619, 85 P.3d 974. The court held that as an excess insurer, American Dynasty had the same rights as the insured and was entitled to fees. Id. In this case, Woo is the insured, not an excess insurer. Woo, 128 Wash.App. at 97, 114 P.3d 681.

¶ 68 Attorney fees are recoverable at trial, and if the plaintiff prevails on appeal, under the CPA. Svendsen, 143 Wash.2d at 560, 23 P.3d 455. In a duty to defend action, an insured is *71 entitled to fees on appeal, pursuant to RAP 18.1, because the insurer “compels the insured to assume the burden of legal action, to obtain the full benefit of his insurance contract.” Olympic Steamship, 117 Wash.2d at 53, 811 P.2d 673. Under RAP 18.1, a party has a right to recover reasonable attorney fees or expenses on review before the Supreme Court if granted by applicable law. The party must request fees and costs in its opening brief, but a request made at the Court of Appeals is considered a continuing request at the Supreme Court. RAP 18.1(b). Because Woo prevails on appeal and we hold that Fireman's improperly refused to defend him, we grant Woo attorney fees and costs on appeal.

IV. CONCLUSION

¶ 69 We partially reverse the Court of Appeals and reinstate the trial court's judgment based on the jury's verdict. We hold that Fireman's had a duty to defend under the professional liability and general liability provisions but not under the employment practices liability provision. We further hold that the Court of Appeals improperly extended Blakeslee to a nonsexual assault context and Fireman's improperly relied on Blakeslee as a basis for refusing to defend Woo. Fireman's additional issues are without merit. We grant Woo attorney fees and costs on appeal.

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