For reversal and remandment -- Chief Justice Weintraub and Justices Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- Justice Jacobs. The opinion of the court was delivered by Weintraub, C.J. Jacobs, J. (dissenting).
The defendant carrier issued a Home Owner's policy to plaintiff, Burd, providing him with "Comprehensive Personal Liability Coverage." The ultimate issue is whether the policy covers the liability incurred by Burd when he inflicted shotgun wounds upon August D'Agostino.
The shooting incident led to the conviction of Burd for atrocious assault and battery. Thereafter D'Agostino sued Burd for damages. His complaint contained two counts. The first count charged that Burd "did maliciously and intentionally
fire a loaded gun at the plaintiff" and as a proximate result "of said negligence," D'Agostino was injured. The second count charged that Burd "did negligently fire a loaded gun at the plaintiff." Burd called upon the carrier to defend the suit but the carrier refused on the ground that the policy expressly excluded coverage of "bodily injury or property damage caused intentionally by or at the direction of the Insured." Burd defended through his own counsel. There was a general verdict for D'Agostino in the sum of $8,500.
Burd then brought the present action against the carrier to recover the amount of D'Agostino's judgment and also the costs incurred in defending that action. D'Agostino was named a party defendant but no relief was sought against him, and he is not a party to the present appeal. Burd and the carrier both moved for summary judgment. Burd prevailed. We certified the carrier's appeal before argument in the Appellate Division.
Burd and the carrier each contended the other was bound by the judgment in a prior proceeding. The carrier urged that Burd was bound by the finding in the criminal case that he intentionally wounded D'Agostino, while Burd contended the carrier had to defend the civil action, and having refused to do so, may not challenge the allegation therein that the injuries were "negligently" inflicted. The trial court held the carrier was thus precluded, and hence did not reach the question whether, if the carrier were free to dispute coverage, Burd would be foreclosed by the criminal conviction from questioning the carrier's position that D'Agostino was intentionally injured within the meaning of the policy exclusion from coverage.
The judgment against the carrier rests upon the premise that the carrier was obligated to defend the suit D'Agostino brought against the insured because the second count of the complaint alleged only "negligence" and thus on its face
was beyond the clause excluding coverage for intentional injury. Hence, the insured argues, the carrier, having foregone the opportunity to defend, is estopped to assert the injuries were intentionally caused.
LIABILITY: To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage, and the company shall defend any suit against the Insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the company may make such investigation and settlement of any claim or suit as it deems expedient.
As already stated, the policy provided, under "Special Exclusions," that this coverage did not apply "to bodily injury or property damage caused intentionally by or at the direction of the insured."
The insured says the carrier is obligated to defend an action whenever the complaint alleges a basis of liability within the covenant to pay. That is the general approach. Ohio Casualty Ins. Co. v. Flanagin, 44 N.J. 504, 514 (1965); Danek v. Hommer, 28 N.J. Super. 68, 77 (App. Div. 1953), aff'd o.b., 15 N.J. 573 (1954). But when coverage, i.e., the duty to pay, depends upon a factual issue which will not be resolved by the trial of the third party's suit against the insured, the duty to defend may depend upon the actual facts and not upon the allegations in the complaint. So, for example, if a policy covered a Ford but not a Chevrolet also owned by the insured, the carrier would not be obligated to defend a third party's complaint against the insured which alleged the automobile involved was the Ford when in fact the car involved was the Chevrolet. The identity of the car, upon which coverage depends, would be irrelevant to the trial of the negligence action.
The sense of the covenant is to defend suits involving claims which the carrier would have to pay if the claimant prevailed in the action. The covenant to defend
is thus identified with the covenant to pay. That is the basis of the rule that ordinarily a carrier who defends unsuccessfully may not later deny coverage, absent an express agreement with the insured reserving a right to deny coverage. Merchants Indemnity Corp v. Eggleston, 37 N.J. 114, 127 (1962). The obligation to defend "groundless, false or fraudulent" claims does not mean that the carrier will defend claims which would be beyond the covenant to pay if the claimant prevailed. It means only that a carrier may not refuse to defend a suit on the ground that the claim asserted against the insured cannot possibly succeed because either in law or in fact there is no basis for a plaintiff's judgment. So in Danek v. Hommer, supra, 28 N.J. Super. 68, it was held that where a per quod action brought by the husband of an injured employee against the employer would be covered by the policy if the husband prevailed, the carrier could not refuse to defend merely because it believed, and correctly, that the husband's claim had no foundation in law. In short, the carrier's promise is to defeat or to pay a claim within the policy coverage. As the court said in Danek, 28 N.J. Super. at 80, "The stipulation for defense of actions, even if groundless, would be of little value if that obligation did not arise when a claim is stated in the pleadings, which, if sustained, would be within the protection afforded by the policy."
Here the obligation to pay a judgment obtained by the injured party depended upon whether the injuries were intentionally inflicted within the meaning of the exclusionary clause. There may be cases in which the interests of the carrier and the insured coincide so that the carrier can defend such an action with complete devotion to the insured's interest. But if the trial will leave the question of coverage unresolved so that the insured may later be called upon to pay, or if the case may be so defended by a carrier as to prejudice the insured thereafter ...