source: Caselaw Access Project

author: H. FRANKLIN WATERS, Chief Judge.

license: Public Domain

text:
    William Joseph SMITH, Plaintiff, v. ST. PAUL GUARDIAN INSURANCE COMPANY, Defendant.
    Civ. No. 85-3025.
    United States District Court, W.D. Arkansas, Harrison Division.
    Nov. 25, 1985.
    Walter R. Niblock, Fayetteville, Ark., and Terry M. Poynter, Mountain Home, Ark., for plaintiff.
    Wm. Robert Still, Jr., Fayetteville, Ark., for defendant.
   MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

I. Introduction

This is a declaratory judgment action arising under 28 U.S.C. § 2201 to determine the duty, if any, on the part of the defendant insurer to defend the plaintiff in an alienation of affections action currently pending in Baxter County Circuit Court. Jurisdiction and venue are properly in this court.

Defendant issued policies numbered 9LA6A2286 and 503XB3898 to the plaintiff, covering him for a blanket liability of $300,-000.00 and $1,000,000.00, respectively. It is admitted that the actions and conduct on the part of the plaintiff which allegedly constitute the tort of alienation of affections occurred during the policy period. A demand was made on the defendant to defend the plaintiff in the pending Baxter County tort action and the defendant has denied the existence of any duty to defend and has refused plaintiffs demand.

Both parties admit that there are no disputed questions of material fact and that the sole issue presented is one of law, i.e., the construction and interpretation of the policy provisions with reference to defendant’s contractual duty to defend. Accordingly, the action is before the court pursuant to the parties’ cross-motions for summary judgment.

II. The Policies

The underlying insurance policy is a Pak II “plain language” policy. The policy provides, inter alia:

Pak II means broad personal protection. Your Pak II Personal Protection Policy covers you for claims others make against you. The common. And the uncommon. Up to $100,000.
... Pak II covers you and your family 24-hours a day anywhere in the world for accidents or incidents that happen during the policy term.
All the personal insurance you may need____

(Policy, p. 1)

... Under the liability section of this policy you’re covered when somebody makes a claim against you. We’ll cover your legal liability up to $100,000 if you’re involved in a covered accident or incident where there is property damage, personal injury or death____ What’s legal liability? Any injury, damage or loss that you’re responsible for under the law.
What do we mean by accident or incident? Anything that causes property damage, personal injury or death without you expecting or intending it. If you could’ve expected the result, you’re not covered. The only exception is assault and battery committed to save a life or property (emphasis added).
What is personal injury? Bodily injury of course, but also injuries to a person’s feeling or reputation. Like mental injury. Mental anguish. Shock. Wrongful eviction. Libel. Slander. Defamation of character. Invasion of privacy. False arrest (emphasis added).

(Policy, p. 2)

We’ll pay for the cost of your defense, including investigation, lawyer’s fees and court costs when someone makes a claim against anyone insured under this policy (emphasis added).

(Policy, p. 3)

The umbrella policy provides, inter alia: The Company will indemnify the Insured for all sums which the Insured shall become legally obligated to pay as damages, all as more fully defined by the term “ultimate net loss” on account of:
1. Personal Injuries,
2. Property Damage,
3. Advertising Offense,
to which this Policy applies, caused by an occurrence (emphasis added).
A. When underlying insurance does not apply to an occurrence:
With respect to any occurrence not covered by the underlying policy(ies) of insurance ... but covered by terms and conditions of this Policy ... the Company will in addition to the amount of the ultimate net loss payable;
(1) defend any suit against the insurer seeking damages on account of personal injury, property damage or advertising offense even if such suit is groundless, false or fraudulent;

(Umbrella Policy, §§ I — II).

The term “Occurrence” means
(1) with respect to subsection (a) of the definition of personal injuries ... an event, .. which results in such personal injury, ... neither expected nor intended from the standpoint of the Insured; (emphasis added).
(2) with respect to subsections (b) and (c) of the definition of personal injuries, an act or series of acts of the same or similar nature, committed during this policy period which causes such personal injury____(emphasis added).
The term “Personal Injuries,” ... means (a) bodily injury, mental injury, mental anguish, shock, sickness, disability; (b) false arrest, false imprisonment, wrongful eviction, detention, malicious prosecution, humiliation, assault and battery committed for the purpose of preventing or eliminating danger to persons or property; (c) also libel, slander or defamation of character or invasion of rights of privacy, except that which arises out of any Advertising activities (emphasis added).

(Umbrella Policy, Definitions 9, 10)

III. Discussion

Defendant argues that alienation of affections is not included within the definition of “personal injury” in the coverage sections of the policies. Defendant further contends that even if alienation of affections is included in the term “personal injury,” it is nonetheless excluded from coverage under the definition of “accident” and “occurrence.” Defendant additionally asserts that to allow coverage for the tort of alienation of affections would violate the public policy of the state of Arkansas.

The primary policy, the Pak II, defines “personal injury” as including “injuries to a person’s feeling or reputation. Like mental injury. Mental anguish. Shock. Wrongful eviction. Libel. Slander. Defamation of character. Invasion of privacy. False arrest” (emphasis added). In the umbrella policy the term “personal injuries” includes the above as well as “sickness,” “disability,” “false imprisonment,” “detention,” “malicious prosecution,” “humiliation,” and “assault and battery” to protect persons or property.

Thus, if the injury sustained by the complainant in the alienation of affections action includes any injury to his feeling similar to mental anguish, shock, or humiliation, then the complainant has alleged a “personal injury” as defined by the policies. This does not necessarily resolve the issues of coverage or the duty to defend, but it does initially disclose whether the injuries sustained by the complainant fall within those against which plaintiff is insured.

The complainant seeks damages for loss of “consortium, comfort, companionship, love, affection and society of his wife.”

The court notes that the term “comfort” includes things which bring ease, contentment, and enjoyment, Strite v. McGinnes, 330 F.2d 234 (3rd Cir.1964), and denotes whatever is necessary for physical, mental and spiritual fulfillment. Emmert v. Old Nat. Bank, 246 S.E.2d 236. In essence, then, the complainant seeks compensation for the loss of contentment, enjoyment and physical, mental and spiritual fulfillment he received from his wife’s companionship, love and affection during the marriage. The court believes that this is merely another way of stating that the complainant has allegedly suffered a mental injury “like” mental anguish, shock and humiliation because of the plaintiff’s conduct. The injury alleged is not a bodily injury, as that term is normally understood, nor a financial one, but rather is an emotional deprivation occasioned by the loss of the complainant’s wife’s affections. Where adultery is involved it is clear that the primary remedy is damages for emotional distress. See Restatement (Second) of Torts § 685 comment g at 485. As Professor Prosser notes in his treatise: “There has been a gradual shift of emphasis away from ‘services’ and toward a recognition of more intangible elements in the domestic relations, such as companionship and affection.” Prosser, Law of Torts § 118 at 895. To maintain the alienation of affections action, “it is not necessary that the wife commit adultery, or that the husband be deprived of any household services, or suffer any pecuniary loss; nor is it necessary that the wife abandon his home, or that there be more than a partial loss of her affections and attentions. The gist of the tort is thus an interference with the wife’s mental attitude toward the husband, and the conjugal kindness of the marital relation____” Prosser, supra, at 897-98. The alienation tort is, thus, based upon an interference with the consortium of the spouse. Orlando v. Alamo, 646 F.2d 1288 (8th Cir.1981) (applying Arkansas law).

Damages caused by a loss of the consortium of a spouse are routinely “passed along” to insurers in accidental personal injury actions. The injuries suffered by the complainant are clearly injuries to his “feeling” “like” mental injury, anguish, shock and humiliation. Had the plaintiff accidently mortally wounded the complainant’s wife, rather than merely “alienated” her affections, the court believes that the injuries sustained by the complainant, including loss of consortium, sex and comfort, would clearly constitute “personal injuries” within the meaning of the policies and would be compensable thereunder, assuming all other criteria are satisfied. This being the case, there is no reason why the same elements of damage standing alone would not qualify as “personal injuries” under the policies.

The “plain-language” Pak II policy lacks precision and clarity in defining the term “personal injuries,” as defined by the nonexclusive list of examples included therein, and in the court’s view is ambiguous. The term, as defined, is fairly capable of construction as including the injuries suffered by the complainant. The terms of this policy are to be construed against the defendant, and any doubt as to the meaning of any provision is to be construed in favor of the plaintiff. Schulte v. Benton Savings and Loan Ass’n, 279 Ark. 275 (1983).

The court concludes that the terms “personal injuries” in the Pak II policy and “personal injury” in the umbrella policy include those elements of damage involved in complainant’s tort action against the plaintiff.

Nonetheless, as noted, this does not, of itself, resolve the ultimate issues. Although the complainant’s injuries are “personal injuries” within the meaning of the Pak II policy, before these injuries are covered it must appear that the injuries arose from a “covered accident or incident.” “Covered accident or incident” is defined as “anything that causes property- damage, personal injury or death without (the insured) expecting or intending it.” In the umbrella policy, “occurrence” means, with regard to mental injury, anguish or shock, “an event ... which results ... in such personal injury ... neither expected nor intended from the standpoint of the insured.” “Occurrence” means, with respect to “humiliation,” “an act or series of acts of the same or similar nature, committed during this policy period which causes such personal injury____”

If the Pak II policy does not apply to a covered “occurrence” as defined by the umbrella policy, the defendant must “defend any suit against the insured seeking damages on account of personal injury____” (See Umbrella Policy § II.A(1)). If the Pak II policy does apply to an “occurrence” as defined, by the umbrella policy, the insurer “shall be obligated to assume charge of the settlement or defense of any claim or proceeding against the Insured resulting from the same occurrence” if the umbrella policy otherwise applies, where the limits of liability of the Pak II policy are exhausted and where the umbrella policy is immediately in excess of the Pak II policy without intervening excess insurance. (See Umbrella Policy, § II.B). Therefore, the court will first examine whether the personal injuries suffered by the complainant may have arisen from a “covered accident or incident” as defined by the Pak II policy.

As Prosser points out, the gist of the tort is an interference with the wife’s mental attitude toward the husband. Prosser, supra, at 898. The vast majority of cases historically have been brought against “the meddling mother-in-law” rather than the “wicked lover.” At common law there were two primary rights involved in such actions: one is the “right” of the plaintiff to the body of the wife “and the other to her mind, unpolluted.” Prosser, supra, at 898 n. 6, quoting Sullivan v. Valiquette, 666 Colo. 170, 180 P. 91 (1919).

In order to be held liable, the tortfeasor must have acted affirmatively and successfully, affecting the marital relation and this must be the cause of the diminished affection of the wife for the husband. Hvasta v. McGough, 276 Ark. 168, 633 S.W.2d 31 (1982). It is not necessary that the tortfeasor act with ill will toward the plaintiff. Hodge v. Brooks, 153 Ark. 222, 240 S.W. 2 (1922); Boland v. Stanley, 88 Ark. 562, 115 S.W. 163 (1909); Alexander v. Johnson, 182 Ark. 270, 31 S.W.2d 304 (1930). Arkansas courts have held that after a complete and permanent breach of the relation by desertion, there can be no liability for alienation of the affections of the deserting spouse. Adams v. Carrier, 214 Ark. 55, 214 S.W.2d 781 (1948). It has also been held, however, that the action will not be defeated by separation, because a third person has no right to meddle with the affections of a married person until the marriage is terminated by death or divorce. Gibson v. Gibson, 244 Ark. 327, 424 S.W.2d 871 (1968) (citing no Arkansas cases for this proposition). Parents are privileged to interfere unless they act from “bad or unworthy motives,” Boland v. Stanley, supra, although in case of a stranger the causes must be extreme to warrant interference.

It is alleged in the alienation of affections action that the present plaintiff “unlawfully and maliciously, by means of devious wiles, manifestations of affections and misrepresentation, did lessen and wean the affections of” complainant’s wife from him. The tort of alienation of affections, as historically defined and as apparently alleged by the complainant, clearly involves “intentional” conduct on the part of the tortfeasor. Because alienation of affections involves intentional conduct, defendant argues that coverage under the policy is necessarily excluded.

The Pak II policy thus purports to exclude coverage for conduct of the insured in those cases where the insured intended or expected the result. Nonetheless, two paragraphs later the policy portends to extend coverage to injuries sustained “like” mental injury, mental anguish, shock, wrongful eviction, libel, slander, defamation of character, invasion of privacy and false arrest.

In Arkansas, recovery for mental anguish requires a showing of intentional conduct unless there is an independent tort involved or some manifestation of physical injury. The tort is itself termed “the intentional infliction of emotional distress.” M.B.M. v. Counce, 268 Ark. 269, 596 S.W.2d 681 (1980); See also 4 Ark.L.J. 343 (1981). Without intentional conduct recovery is limited to situations where a physical injury is involved or an independent tort is committed. If coverage for all intentional conduct is excluded from coverage, mental anguish is compensable under the policy only where an independent tort or physical injury is involved. Yet, unless one were learned in the law one would not be aware of this restriction.

Similarly, false arrests are explicitly included within the policy coverage. Yet, there is no false imprisonment unless the defendant intends to cause the resulting confinement, whether of the plaintiff or another. Prosser, supra, § 12 at 60. Recovery may be had without proof of actual damage. Prosser, supra, at 55. “Since the injury is in large part a mental one, (the plaintiff) is entitled to damages for his mental suffering, humiliation and the like.” Prosser, supra, at 56.

Therefore, although the language of the policy seemingly excludes coverage for intentional acts, it expressly includes coverage for “false arrest,” which requires no proof of actual injury and can only be committed by one who intentionally causes the result, it being presumed that “mental suffering, humiliation, and the like” will result. Coverage for false arrest is either illusory or the intentional result exclusion is fraught with numerous unseen holes.

Additionally, the policy specifically covers “invasions of privacy.” Yet, most forms of invasion of privacy require intentional conduct on the part of the defendant. “Intrusion” is the intentional invasion or intrusion upon plaintiff’s physical solitude, seclusion or private matters. See generally Prosser, supra, § 112 at 833-34. Similarly, intentional public disclosure of private facts is historically actionable as an invasion of privacy, even if the facts disclosed are true. See generally Prosser, supra, at 834-37. The invasion of privacy “sub-tort” of “appropriation” requires intentional appropriation for the defendant’s benefit or advantage, of the plaintiff’s name or likeness. See generally Prosser, supra, at 839-42. It is generally agreed that, apart from potential constitutional considerations that may be applicable to some forms of invasion of privacy, plaintiff need not plead or prove special damages. Prosser, supra, at 844. Thus, these forms of invasion of privacy require no proof of actual injury and require intentional conduct on the part of the defendant. Nonetheless, actions of this nature are seemingly expressly covered by the policy. Here, too, then, coverage for invasion of privacy is either wholly illusory or there is a very obvious and evident gap in the intentional act exclusion.

It is apparent that the policy cannot factually or legally do what it purports to do, i.e., extend coverage for injuries “like” mental anguish, shock, false arrest and invasion of privacy, and at the same time exclude all intentional acts from coverage. It seems that defendant “giveth” and defendant “taketh” away on the same page of the policy. The policy is clearly ambiguous with respect to whether intentional infliction of mental distress, false arrest, invasion of privacy, and actions “like” them are covered. In such a case, the presence of the ambiguities indicates that there may be coverage. Schulte, supra.

Alienation of affections is not expressly mentioned either in the coverage provisions nor in the exclusion provisions of the policy. Because the court believes that the “injuries” and conduct involved in an alienation of affections action are “like” those involved in the torts of intentional infliction of mental distress, false arrest, and invasion of privacy, which reasonably can be construed as being covered by the policy, the court concludes that the Pak II policy imposes a duty to defend an alienation of affections action on behalf of the plaintiff. The court notes that coverage for “assault and battery” is specifically excluded unless committed to save a life or property. Had the defendant so chosen it could have easily excluded coverage for alienation of affections in this “plain language” policy in so many words without leaving a layman to guess as to whether alienation of affections is covered because it is “like” those specifically listed covered injuries. Defendant must suffer the risk of any imprecision employed in the policy. “The courts strictly interpret exclusions from insurance coverage and resolve all reasonable doubts in favor of the insured____” Commercial Union Ins. Co. of America v. Henshall, 262 Ark. 117, 553 S.W.2d 274 (1977).

The court concludes that liability for the alleged injury is not clearly excluded from coverage under the Pak II policy. Because the defendant’s indemnity liability for the alleged alienation of affections action is ambiguous to say the least, the court concludes that the defendant has the obligation to defend the plaintiff in the pending tort suit under the provisions of the Pak II policy.

Numerous cases have held that several of the “intentional or expected act” exclusions commonly employed are either inherently ambiguous or may be ambiguous depending on the particular facts of the case. See Baldinger v. Consolidated Mut. Ins. Co., 11 N.Y.2d 1026, 280 N.Y.S.2d 25, 183 N.E.2d 908 (1961); Gray v. Zurich Ins. Co., 65 Cal.2d 263, 54 Cal.Rtpr. 104, 419 P.2d 168 (1966); Dochod v. Central Mut. Ins. Co., 81 Mich.App. 63, 264 N.W.2d 122 (1978); Patrons-Oxford Mut. Ins. Co. v. Dodge, 426 A.2d 888 (Me.1981); Farmers Ins. Group v. Sessions, 100 Idaho 914, 607 P.2d 422 (1980); Grinnell Mutual v. Frierdich, 79 Ill.App.3d 1146, 35 Ill.Dec. 418, 399 N.E.2d 252 (1979).

In the instant case, not only is there whatever ambiguity may be inherent in the terms themselves and under the particular situation presented, the ambiguity is further exacerbated in the Pak II policy by the specific inclusion of several intentional torts and the use of the word “like” in the clause which extends coverage to those listed injuries and those “like” them. Whether one injury or action is “like” another in many cases is open to a reasonable dispute.

Ambiguity in the umbrella policy is heightened by the explicit inclusion of several injuries and actions of an intentional nature in Definitions number 10(b) and (c), which, unlike those listed in number 10(a), have no exclusion at all for “intended or expected” results.

The court notes that defendant includes in its brief the umbrella policy definition of “occurrence” as it pertains to subsection (a) of the definition of personal injuries, which specifically excludes expected or intended injuries. The silence of defendant in its failure to include the policy definition as it pertains to subsections (b) and (c) of the definition of personal injuries, which has no exclusionary clause, is deafening.

If the underlying insurance, the Pak II policy, applies to an “occurrence” as defined by the umbrella policy, the umbrella policy also requires the defendant “to assume charge of the settlement or defense” where the limits of the underlying policy are exhausted. (Umbrella Policy § II.B.) Where bodily injury, mental injury, mental anguish, shock, sickness or disability are involved, the term “occurrence” means “an event ... which results in such personal injury ... neither expected nor intended from the standpoint of the Insured.” However, where false arrest, false imprisonment, wrongful eviction, detention, malicious prosecution, humiliation, assault and battery committed to prevent danger to persons or property, libel, slander, defamation of character or invasion of privacy are involved, then “occurrence” means “an act or series of acts of the same or similar nature, committed during this policy period which causes such personal injury.” As noted, there is no intentional act exclusion with respect to the latter injuries.

Although the injuries sustained by the alienation of affections plaintiff can be classified as “mental anguish” or “shock” within Definition number 10(a) of the umbrella policy, they are equally capable of reasonable categorization as “humiliation” within the definition of “personal injuries” in Definition number 10(b), and the conduct complained of is more akin to the injuries listed in Definitions number 10(b) and (c) than those listed in Definition number 10(a). Resolving all reasonable doubts in favor of the plaintiff who had no part in the preparation of the contract, Henshall, supra, the court believes that the alleged conduct of the insured may well constitute an “occurrence” as defined by the umbrella policy. Because the court concludes that the underlying policy, the Pak II, also applies to the occurrence, the defendant is obligated by the umbrella policy to assume charge of the defense in the event the limits of liability of the Pak II policy are exhausted. This conclusion is of diminished importance because defendant is the insurer under both policies, however, the court believes the foregoing analysis provides a more comprehensive picture of the insurer’s duty to defend in this case.

Even if the Pak II policy was inapplicable to the events at issue, the court nonetheless concludes that the umbrella policy would require the defendant to defend the plaintiff in the pending tort suit.

Section II.A. of the umbrella policy states:

When underlying insurance does not apply to an occurrence:
With respect to an occurrence not covered by the underlying ... insurance, but covered by terms and conditions of this Policy ... the Company will ...; (1) defend any suit against the Insured seeking damages on account of personal injury ... even if such suit is groundless, false or fraudulent____

As noted, the court believes that the “occurrence” alleged in complainant’s action may be “covered by terms and conditions of (the umbrella policy).” If such is the case, then it makes little difference whether the duty to defend arises from a covered “accident or incident” within the meaning of the Pak II policy, or from a covered “occurrence” as defined in the umbrella policy. If the Pak II policy applies, then the duty to defend arises from that policy. If the Pak II policy does not apply, then the duty to defend arises under the terms and conditions of the umbrella policy. Either way, the court concludes that the policies impose an obligation to defend the plaintiff against the complainant’s alienation of affections action.

Defendant finally argues that to find a duty to defend the alienation of affections suit under the policies would violate the public policy of the state of Arkansas, because “if a single insured is allowed through intentional acts to consciously control risk covered by the policy, the central concept of insurance is violated.” However, as noted, the Pak II policy expressly provides coverage for three sub-torts of invasion of privacy and false arrest or imprisonment which require intentional conduct. It is difficult, if not impossible, to even envision an actionable non-intentional invasion of privacy for example. The policy also explicitly provides coverage for assault and battery committed to save a life or property. Presumably, under this language, there would be coverage if plaintiff used a baseball bat on a ten-year-old to protect his garden hose. If the only intentional conduct which is covered is that which is legally justifiable in nature, then the defendant’s promises of indemnity for assault and battery, invasion of privacy or false imprisonment are mere wisps of smoke, for in those cases there would be no liability in the first place.

The umbrella policy expressly covers false arrest, false imprisonment, wrongful eviction, detention, malicious prosecution, humiliation, assault and battery to prevent danger to persons or property, libel, slander, defamation of character and invasion of privacy. As noted, there is no intentional conduct exclusion with regard to these injuries, as there is with regard to bodily injury, mental injury, mental anguish, shock, sickness and disability. It is unimaginable how one could commit the tort of malicious prosecution without “intending” or being able to “expect” the result. The defendant is not in any position to forcefully argue that insurance coverage for intentional conduct violates public policy when it has expressly included many examples of such conduct within the coverage.

There is nothing in the state’s public policy that prevents an insurer from indemnifying its insured against punitive damages arising from an “accident.” Southern Farm Bureau Cas. Ins. Co. v. Daniel, 246 Ark. 849, 440 S.W.2d 582 (1969). Under Arkansas law, before punitive damages arising from an “accident” may be imposed, it must appear that the defendant “knew or ought to have known, in the light of the surrounding circumstances, that his conduct would naturally or probably result in injury and that he continued such conduct in reckless disregard of the consequences from which malice may be inferred.” Arkansas Model Jury Instructions (Civil) 2217. If there is no public policy against such punitive damages being “passed along” through insurance, the court can see no public policy barrier to the indemnification against compensatory damages arising from similar conduct. Punitive damages, after all, are designed to “punish a wrongdoer and to deter others from similar behavior.” AMI 2217. Yet, though punitive in nature, the Arkansas Supreme Court allows them to be “passed through” to the insurer, in cases of “accident.”

Further, compensatory damages are designed to compensate the plaintiff, not punish the defendant. Should a defendant be a judgment-proof “turnip,” then a deserving plaintiff will be deprived of a remedy if there is a “public policy” that prohibits liability indemnification for compensatory damages simply because the injury “could” have been “expected.” Given a choice, this court should interpret the public policy of this state in such a manner as to further the availability of compensation for those who have been wronged rather than force a construction that will inure to the detriment of judgment-proof tortfeasors only marginally and in principle, while providing nothing to their victims.

If the public policy of this state allows indemnification for punitive damages based upon the wrongdoer’s conduct in acting with reckless disregard of the consequences while knowing that his conduct would naturally result in injury, Daniel, supra; AMI 2217, the court foresees no bar to indemnification for liability for compensatory damages based upon the allegedly tortious conduct of the plaintiff.

It is factually possible in the alienation of affections action that the plaintiff in this action acted intentionally, but that the results were unintentional. In such a case there would be coverage and a duty to defend under this policy. Talley v. MFA Mut. Ins. Co., 273 Ark. 269, 620 S.W.2d 260 (1981). In Talley the Arkansas Supreme Court rejected the classic tort doctrine that a tortfeasor necessarily “intends” the natural and probable consequences of his actions for purposes of contract construction. Whether the plaintiff in this action did in fact intend the actual result which obtained is, of course, a fact question that cannot be resolved by mere reference to the complaint.

The duty to defend cannot be determined solely from the tort complaint in this case. “The duty to defend is broader than the duty to pay damages and the duty to defend arises where there is a possibility that the injury or damage may fall within the policy coverage.” Henshall, supra, 262 Ark. at 123, 553 S.W.2d 274 (emphasis added). If the duty to defend could be delineated solely by the allegations of the tort complaint, there would never be any duty to defend the insured in an action for assault and battery, for example, although there is coverage for such if committed to save a life or property, because few tort plaintiffs will allege in the complaint that they were assaulted by the insured while the insured was protecting a life or property. There would clearly be a duty to defend in such a case, however, as there is here, because there is a “possibility that the injury or damage may fall within the policy coverage.” Henshall, supra.

Even if coverage and the duty to defend are co-extensive, as defendant urges, then if the plaintiff did not intend the results of his actions, in which case there would apparently be coverage, there would be a duty to defend. That there may be no tort liability if plaintiff did not intend the results, and therefore no liability for indemnification on the part of defendant, does not mean there is no duty to defend. The lack of indemnification liability in such a case would spring from the fact that the complainant failed to prove a cause of action, not because the policy excludes such a case from coverage, which it does not. There is a possibility of “coverage” regardless of whether the conduct constitutes a cause of action. By the very terms of the Pak II policy, there is coverage if a personal injury arises from “anything that causes ... personal injury ... without (the insured) expecting or intending it.” Further: “We’ll pay for the cost of your defense, including investigation, lawyer’s fees and court costs when someone makes a claim against anyone insured under this policy.” Under the umbrella policy, there is coverage if the conduct results in “humiliation,” regardless whether it is intended or expected. No requirement is stated that the conduct constitute a cause of action. The umbrella policy clearly states that there is a duty to defend “even if such suit is groundless, false or fraudulent.” Plaintiff doubtlessly contends that the tort suit is groundless, false or fraudulent.

Defendant cites Eberdt v. St. Paul Fire & Marine Ins. Co., 36 Or.App. 679, 585 P.2d 711 (1978), in support of its position. In that case the Oregon Court of Appeals ruled that alienation of affections constitutes an intentional infliction of injury and that public policy prevents an insurer from providing coverage for intentional wrongful acts. However, in the present case, defendant has expressly covenanted to provide coverage for several intentional acts, and it has been held that coverage for intentional acts is not necessarily precluded by Arkansas’ public policy: “Furthermore, we see no violation of public policy in allowing recovery in circumstances in which it is shown the results were accidental or unintended,” Talley 273 Ark. at 274, 620 S.W.2d 260, or in cases arising from an “accident” where the defendant knew or should have known that his conduct would naturally result in injury. AMI 2217. In such cases as the latter group, it can hardly be said that the results could not be “expected.” It is precisely because they could be expected that punitive damages are allowed. Yet Daniel, supra, allows coverage in those situations. See also Lyons v. Hartford Insurance Group, 125 N.J.Super. 239, 310 A.2d 485 (1973); Smith v. Moran, 61 Ill.App.2d 157, 209 N.E.2d 18 (1965).

Although it is alleged in the tort action that the present plaintiff “unlawfully and maliciously, by means of devious wiles, manifestations of affections and misrepresentation, did lessen and wean the affections of Mrs. Asta” from Mr. Asta, “malice” is not a necessary element of alienation of affections. See Alexander v. Johnson, 182 Ark. 270, 31 S.W.2d 304 (1930); Porter v. Lincoln, 282 Ark. 258, 668 S.W.2d 11 (1984), nor are “devious wiles, manifestations of affections and misrepresentation.” Therefore, insofar as the essential elements are concerned, the complaint alleges simply that the present plaintiff “lessened and weaned” Mrs. Asia’s affections from Mr. Asta. It remains possible that the plaintiff did not intend to do so, although he may have taken whatever course of action he took intentionally.

The defendant erroneously cites C.N.A. Ins. Co. v. McGinnis 10 Ark.App. 234, 663 S.W.2d 182 (1984), a case involving the sexual abuse of a minor. Defendant undoubtedly intended to cite 282 Ark. 90, 666 S.W.2d 689 (1984) which reversed the decision of the Court of Appeals which had affirmed the trial court. The Supreme Court held that as a matter of fact the insured in that case expected or intended to cause injury to the stepdaughter and that the opinion to the contrary of the experts, the insured, the trial court, and the Court of Appeals, was clearly erroneous. The Supreme Court did not hold, however, that such intent could be presumed, and because of Talley, the question remains a factual issue. See McGinnis, 282 Ark. 90, 93, 663 S.W.2d 689 (Hollingsworth, J., dissenting).

Regardless of the consistency of the Supreme Court’s decision in McGinnis with Talley, this court believes that a “mature man’s deliberately debauching his six-year-old stepdaughter and continuing to do so for years” is a far, far different case from the instant case presented wherein it is alleged merely that because of certain conduct of the plaintiff, Mrs. Asia’s affection for Mr. Asta has diminished.

The court concludes, in light of the above, that defendant has a duty to defend the plaintiff in the pending alienation of affections action, and that the actions of the plaintiff in this case may constitute an “accident or injury” within the meaning of the Pak II policy and an “occurrence” within the meaning of the umbrella policy.

In summary, there is a duty to defend under the Pak II policy because the injury involved constitutes a personal injury within the meaning of the policy, and it is possible that the plaintiff may not have intended the results. There is a duty to defend under the umbrella policy because the injury is a personal injury within the meaning of that policy which does not exclude coverage or numerous injuries including humiliation, even if intentionally caused. Further, there may be a duty to defend as well as liability under the ambiguous language of both policies. However, it is unnecessary to decide this issue and the interplay of public policy definitively at this time inasmuch as there are material issues of fact with respect to the mens rea of the plaintiff in the underlying tort action which may have significant bearing on the resolution of the issue of liability. The court cannot and should not resolve the factual issues on a motion for summary judgment, particularly where the court’s file consists only of the complaint, answer, cross-motions and copies of the policies. The court has not been provided with any of the pleadings in the tort action and does not know the exact contentions or defenses involved.

Plaintiff’s motion for summary judgment will be granted with respect to the defendant’s duty to defend him in the tort action. Plaintiff’s and defendant’s cross-motions for summary judgment with respect to liability, attorney’s fees and penalty will be denied at this time and “must be postponed until after the facts are developed at trial of the personal injury action.” Henshall, supra, 262 Ark. at 124, 553 S.W.2d 274.

A separate order in accordance herewith will be concurrently entered.


author: JUNE L. GREEN, District Judge.

text:
    Joseph P. CONNORS, Sr., et al., Plaintiffs, v. CALVERT DEVELOPMENT COMPANY, et al., Defendants.
    Civ. A. No. 84-986.
    United States District Court, District of Columbia.
    Nov. 25, 1985.

      Rodney F. Page, David T. Dekker, Washington, D.C., for plaintiffs.
    William H. Howe, Richard A. Steyer, Richard B. Fellows, Jr., Washington, D.C., for defendants.
   OPINION

JUNE L. GREEN, District Judge.

This is an action to collect withdrawal liability under the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended by the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”), 29 U.S.C. § 1001 et seq. (1982). Presently before the Court is a motion by plaintiffs to compel interim payment of withdrawal liability. For the reasons stated herein, the Court grants plaintiffs’ motion.

I. Statement of Facts

Plaintiffs are the Trustees of the United Mine Workers of America (“UMWA”) 1950 Pension Plan and the UMWA 1974 Pension Plan (“Plans”). The plaintiffs allege that the defendants, two West Virginia corporations, a partnership, and the former individual members in the partnership, are liable to the Plans for withdrawal liability assessed against one of the corporations.

The defendant corporations are Calvert Development Company (“Calvert”) and C.C. & L. Coal Company (“C.C. & L.”), both of which were engaged in the contract mining business. Calvert contributed to the Plans as a signatory to the National Bituminous Coal Wage Agreement of 1978 and 1981 (“Agreements”). Defendant C.A.M. Associates (“C.A.M.”) was a West Virginia partnership of Retha Calvert, Vincent M. Calvert, Jr., Daniel K. Calvert, John Morgan, Thomas Canterbury, and Kermit Alley (“individual defendants”). Defendant Pauline Alley is the Executrix of the Estate of Kermit Alley. Neither C.C. & L. nor C.A.M. was signatory to the National Bituminous Coal Wage Agreements.

The individual defendants were the officers and controlling shareholders of Calvert and C.C. & L. Affidavit of Daniel K. Calvert ¶¶ 15(a), 16(a). “The individual defendants are all former partners in C.A.M., ... which was part of a commonly controlled group of businesses which included Calvert Development.” Defendants’ Opposition to Plaintiffs’ Motion to Compel Interim Payment of Withdrawal Liability (“Defendants’ Opposition”) at 4-5.

Pursuant to its obligations under the terms of the Agreements, Calvert was a participating employer in the Plans and was obligated to and did make contributions to the Plans on behalf of its employees covered under the Agreements. Calvert ceased to be a participating employer in the Plans on or about December 23, 1981. As a result, Calvert withdrew from the Plans in a complete withdrawal as that term is defined in section 4208(a) of ERISA, 29 U.S.C. § 1383(a).

Pursuant to Sections 1382(2) and 1399(b)(1), the Trustees notified Calvert of the amount of its withdrawal liability. By letter dated June 16, 1983, the Trustees determined that Calvert incurred withdrawal liability to the 1950 Plan in the amount of $101,647.16. Similarly, on June 20,1983, the Trustees wrote to Calvert notifying it of withdrawal liability to the 1974 Plan in the amount of $52,096.80. Both letters included schedules determined by the Trustees according to which Calvert was to discharge its liability payments.

Calvert has failed to make any withdrawal payments to the 1950 Plan or the 1974 Plan. In addition, Calvert never requested review of the Trustees’ withdrawal liability assessments within the time period required by Section 1399(b)(2)(A), and failed to initiate arbitration within the time period required by Section 1401(a)(1). The Trustees then made a second demand for payment on September 19, 1983, to which Calvert did not respond.

On March 29, 1984, the Trustees filed suit against Calvert and other defendants, seeking enforcement of their assessment of withdrawal liability against Calvert, alleging that Calvert is in default under Section 1399(c)(5). On July 9, 1985, the Trustees were granted leave by the Court to file an amended complaint which named as a defendant Pauline Alley as the Executrix of the Estate of Kermit Alley. The Trustees now move to compel defendants to make interim payments under Sections 1399(c)(2), (c)(3), (c)(5), and 1401(b)(1). The Trustees seek to have the defendants pay $153,-743.96 in withdrawal liability, plus $36,-126.29 in accrued interest as of September 24, 1985, continuing at $42.13 per day until payment is made.

It appears that Calvert and C.C. & L. are without assets and unable to pay any withdrawal liability. Affidavits of Vince and Daniel K. Calvert at ¶¶ 13,14(f). The issue in this case, then, is whether the individual partners in C.A.M., which was part of a common control group that included a withdrawing employer, may be held responsible in default for the withdrawal liability of the withdrawing employer.

II. Conclusions of Law

Section 1399(c)(2) provides:

Withdrawal liability shall be payable in accordance with the schedule set forth by the plan sponsor under subsection (b)(1) beginning no later than 60 days after the date of the demand notwithstanding any request for review or appeal of determinations of the amount of such liability or of the schedule.

Where an employer initiates arbitration of the decision on review, Section 1401(d) provides that:

Payments shall be made by an employer in accordance with the determinations made under this part until the arbitrator issues a final decision with respect to the determination submitted for arbitration, with any necessary adjustments in subsequent payments or overpayments or underpayments arising out of the decision of the arbitrator with respect to the determination.

The law is clear that withdrawal liability payments must be made by an employer according to the plan’s schedule even if the employer disputes the liability. The importance of providing plan trustees with an efficient procedure to insure continued funding upon an employer’s withdrawal is noted clearly at Section 1399(c)(2). A dispute over withdrawal liability does not suspend the obligation to pay, but, rather, such payment is due “notwithstanding any request for review or appeal of determinations of such liability or of the schedule.” The courts have supported unequivocally this interpretation of the employer’s obligation to make withdrawal liability payments. Combs v. Miss-Ala Electrical Contractors, Inc., No. 85-604, slip op. (D.D.C. Apr. 18, 1985); Thomas v. Southland Corp., 603 F.Supp. 1088 (N.D.Ill.1985); Trustees of the Retirement Fund of the Fur Mfg. Industry v. Lazar-Wisotsky, 550 F.Supp. 35 (S.D.N.Y.1982), aff'd 738 F.2d 419 (2d Cir.1984).

In order to collect withdrawal liability, a plan must notify an employer of the amount of withdrawal liability, supply the employer with a schedule of payments, and demand payment. Section 1399(b)(1). Once the demand is made, the employer is to begin paying withdrawal liability. Although any dispute concerning the amount of withdrawal liability does not obviate the obligation to make interim payments, the language of Section 1399 is clear that no such obligation exists until sixty days after demand for payment. Section 1399(c)(2).

A plan may demand full payment of all withdrawal liability if the employer is in “default.” Section 1399(c)(5). A “default” occurs when the employer does not make withdrawal liability payments to the plan and does not respond to “written notification” from the plan that the payments are due. Section 1399(c)(5)(A).

Defendants argue that under these provisions, the only defendant that could be in default is Calvert because only Calvert had an obligation to make interim payments, and only Calvert received notice of default from the Trustees. Defendants’ Opposition at 8-9. Since separate notice and demand for payment of withdrawal liability was not made on all the members of the control group (i.e., defendants C.C. & L., C.A.M., and individual defendants), defendants maintain that C.C. & L., C.A.M., and the individual defendants cannot be in default nor under any obligation to make interim payments.

Defendants contend that Section 1399 should be read to require that each entity, or company, of a group of businesses in common control with the employer must be afforded the statutory rights concerning notice, collection, and resolution of disputes. In other words, one entity of a commonly controlled group should not be held liable for the withdrawal payments owed by a sister entity unless the procedural rights of Section 1399 are afforded both entities.

Specifically, defendants argue that the term “employer,” as it is used in Section 1399, should be read to require notice to all entities which a plan intends to hold responsible for payment of withdrawal liability. This interpretation, so defendants contend, would be “[i]n keeping with the intended purpose of the review procedures to assure all parties a fair interpretation____” Defendants’ Opposition at 10.

The Court is well aware of Congress’s concern that all parties be afforded a fair determination in withdrawal liability cases. See 1980 U.S.Code Cong. & Ad.News 2952-53. Yet, Congress also endeavored to define carefully the term “employer” as that term appears throughout ERISA and MPPAA. For purposes of ERISA, an “employer” means “any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity.” Section 1002(5). That definition is supplemented by Section 1301(b)(1), which provides:

For purposes of this subchapter [sub-chapter III], under regulations prescribed by the corporation [Pension Benefit Guarantee Corporation (PBGC)], all employees of the trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer and all such trades and businesses as a single employer. The regulations prescribed under the preceding sentence shall be consistent and co-extensive with regulations prescribed for similar purposes by the Secretary of the Treasury under § 414(c) of Title 26.

The PBGC regulation promulgated pursuant to this section, 29 C.F.R. § 2612, incorporates by reference the provisions of section 414(c) of the Internal Revenue Code of 1954 and the regulations issued thereunder. Section 414(c) states, in relevant part, “[A]ll employees of trades or businesses (whether or not incorporated) which are under common control shall be treated as employed by a single employer.”

The Treasury Regulation issued under 26 U.S.C. § 414(c) provides a detailed characterization of the “control group” concept:

The term “brother-sister group of trades or businesses under common control” means two or more organizations [the term “organization” means, inter alia, a partnership or a corporation] conducting trades or businesses, if (i) the same five or fewer persons who are individuals ... own ... singly or in combination, a controlling interest of each organization, and (ii) taking into account the ownership of each such person only to the extent such ownership is identical with respect to each such organization, such persons are in effective control of each organization.

Temp.Treas.Reg. § 11.414(c)-2(c). “Controlling interest” for purposes of the regulation is defined to mean ownership of at least 80 percent of the stock of a corporation or profits or capital interest of a partnership. Temp.Treas.Reg. § 11.414(c)-2(b)(2). Persons are in “effective control” of an organization if

(i) In the case of ... a corporation, such persons own stock possessing more than 50 percent of the total combined voting power of all classes of stock entitled to vote ... or more than 50 percent of the total value of shares of all classes of stock____
(iii) In the case of ... a partnership, such persons own an aggregate of more than 50 percent of the profits interest or capital interest____

Temp.Treas.Reg. § 11-414(c)-2(c)(2).

Calvert, C.C. & L., and C.A.M. were owned as set forth below:

Affidavits of Retha Calvert, Vince Calvert, Jr., Daniel Calvert, John Morgan, and Tom Canterbury, Esq. Thus it is clear that C.C. & L., Calvert, and C.A.M. were under common control for purposes of ERISA. All members of a commonly controlled group are treated as one employer and, accordingly, each member is jointly and severally liable for payment of withdrawal liability. Section 1301(b)(1); Pension Benefit Guaranty Corporation v. Ouimet Corporation, 630 F.2d 4, 11 (1st Cir.1980).

The requirement that members of a controlled group, such as defendants, be treated as a single employer means that plan trustees can operate as if defendants were one entity. In this respect, the preamble to the regulation, entitled “Notice and Collection of Withdrawal Liability,” 49 Fed.Reg. 22,642, 22,644 (May 31,1984) (codified at 29 C.F.R. § 2644), states:

[U]nder ERISA there is a unity of interest in the case of a controlled group of corporations, since the entire group is considered to be a single employer for withdrawal liability and other purposes. Therefore, PBGC believes that a notice of default sent to the contributing entity which is a member of a controlled group of corporations, within the meaning of Section 4001(b)(1) [29 U.S.C. § 1301(b)(1)], constitutes constructive notice to the other members of the same controlled group. Thus, PBGC finds that Section 4219(c)(5)(A) [29 U.S.C. 1399(c)(5)(A) ] does not require notice to the other members of a controlled group.

The Court finds this reasoning consistent with the legislative history of the MPPAA. Senator Williams, one of the principal sponsors of both ERISA and MPPAA stated:

Under current law, a group of trades or businesses under common control, whether or not incorporated, is treated as a single employer for purposes of employer liability under Title IV. Thus, if a terminating single employer plan is maintained by one or more members of a controlled group, the entire group is the “employer” and is responsible for any employer liability.

126 Cong.Rec. S11672 (daily ed. Aug. 26, 1980).

It is clear that notice and demand to one is notice and demand to all. Defendants’ position that Section 1301(b)(1) should read to mean that all entities of the common control group be afforded the same procedural rights as the withdrawn employer must fail. Indeed, such an interpretation would void that section of any significance. The notice and demand of withdrawal liability served upon Calvert by the Trustees also was sufficient as to C.A.M., C.C. & L., and the individual defendants. It is immaterial that at the time notice and demand was made, Calvert was without assets and unable to pay withdrawal liability. Affidavit of Vincent M. Calvert, Jr. ¶ 14(f). In enacting Section 1301(b)(1), Congress intended to prevent such evasion of ERISA through the abuse of the structural formalities of overlapping business organizations. See, e.g., Pension Benefit Guaranty Corporation v. Anthony Co., 537 F.Supp. 1048, 1052 n. 6 (N.D.Ill.1982) (Sections 1301(b)(1) and 1362 reflect “congressional concern that the realities of business organizations should prevail over the formalities of corporate structure in imposing liability____”)

The defendants are in default pursuant to Section 1399(c)(5)(A), and, therefore, must make “immediate payment of the outstanding amount of [the] employer’s liability____” Section 1399(c)(5).

      . Pursuant to United States District Court Rules — District of Columbia, Rule 1-9(g) (1984), an oral hearing in this matter was not granted.

      . This opinion will cite to Title 29 (in the form "Section_”), rather than to ERISA’s internal numbering.


author: WEXLER, District Judge.

text:
    UNITED STATES of America, Plaintiff, v. SEABOARD SURETY COMPANY and the Home Insurance Company, Defendant and Third-Party Plaintiffs, v. JOSEPH MORTON CO., INC., Joseph J. Battaglia and the Perkins & Will Partnership, Third-Party Defendants.
    No. CV 82-0518.
    United States District Court, E.D. New York.
    Nov. 25, 1985.

      Raymond J. Dearie, U.S. Atty. by Thomas Roberts, Asst. U.S. Atty., Brooklyn, N.Y., for plaintiff.
    Hart & Hume, New York City, for defendants/third party plaintiffs.
    Bernstein, Weiss, Copland, Weinstein & Lake by Norman Copland, New York City, for third party defendants Perkins & Will.
   MEMORANDUM AND ORDER

WEXLER, District Judge.

I.

In September 1976 Joseph Morton Company (Morton), then headed by Joseph Battaglia, was awarded a building contract by the United States government to construct additions to the Plum Island Animal Disease Center on Long Island, New York. Seaboard Surety Company and The Home Insurance Company (the Sureties) issued the performance bond. During the ensuing three years hundreds of modifications were ordered. In March 1979 Morton by letter declared the United States in breach of contract. The United States immediately notified Morton that it was terminated for default, specifically for non-performance. The United States then looked to the Sureties for completion of the project. The Sureties refused to either complete the project or pay the performance bond.

In March' 1980 Morton filed for Chapter 11 Reorganization under the Bankruptcy Code. Pursuant to 11 U.S.C. § 302(c)(2)(B), all persons were stayed from filing any action against Morton without the leave of the Bankruptcy Court during pendency of the bankruptcy action. In March 1982 Morton filed suit in the United States Claim Court seeking to have the termination for default converted into a termination for convenience. Termination for convenience would allow Morton to recover costs plus some profit on the work performed before termination. Unfortunately, in 1980 the United States charged Morton with fraud and conspiracy to commit fraud in connection with Change Order No. 2 of the Plum Island contract. The company was convicted of submitting false and fraudulent cost statements in violation of 18 U.S.C. §§ 2, 371,1001, and 3237 in April 1981.

In response to Morton’s 1982 suit in the Claims Court for a ruling of termination for convenience, the United States asked for summary judgment sustaining the default termination. In July 1983 the Claims Court issued a decision. Neatly avoiding the issue of non-performance, the Claims Court upheld the termination for default based on the post-termination charge and conviction of fraud. The Claims Court declared that even though the United States did not know of the fraudulent cost statements in March 1979 and did not terminate the contract for that reason, the fraud had been committed before termination and could have been, had it been discovered, a basis for default termination. Accordingly, since fraud could have been the ground for default termination, the Claims Court sustained the default termination of the entire contract without deciding the non-performance issue. Joseph Morton Co. v. United States, 3 Cl.Ct. 120, 122 (1983). On appeal the United States Court of Appeals for the Federal Circuit affirmed the Claims Court, holding that newly-discovered grounds can support a prior termination for default. Joseph Morton Co. v. United States, 757 F.2d 1273, 1277-79 (Fed.Cir.1985).

In 1982, at the same time Morton commenced its suit in the Claims Court, the United States commenced the instant action against the Sureties under the Miller Act. 40 U.S.C. §§ 270a.-d. The simultaneous suits were filed by agreement. Moreover, it appears that the Sureties were acting for Morton in the Claims Court, that is, they paid the lawyer and generally directed the litigation. In any event, in April 1983 the United States Bankruptcy Court dismissed Morton’s Chapter 11 proceeding. Morton was not discharged and the automatic stay was lifted. At this point, the United States sought to enter counterclaims for breach of contract against Morton in the Claims Court action.

Morton opposed adding the counterclaims on the basis of the recently enacted § 6(a) of the Contract Disputes Act of 1978 (CDA), 41 U.S.C. § 605(a). Under the CDA “[a]ll claims by the government against a contractor relating to a contract shall be the subject of a decision by the contracting officer.” There was some question as to whether § 6(a) of the CDA applied to Morton, as its contract pre-dated the Act, and might or might not be grandfathered in under the footnote to § 16, 41 U.S.C. § 601. Despite a First Circuit Court of Appeals opinion holding that a decision by a contracting officer was not necessary in a similar case, Woods Hole Oceanographic Institution v. United States, 677 F.2d 149 (1st Cir.1982), the Claims Court held that under §§ 6(a) and 16 of the CDA, Morton could choose to invoke the requirements of the Act. If Morton so chose there must be a decision from a contracting officer before the government could file and pursue its counterclaims in the Claims Court action. Morton opted to proceed under the CDA. The government appealed and the Federal Circuit affirmed the Claims Court, holding that the CDA does apply and the contracting officer’s decision is a jurisdictional prerequisite to the government’s claims against Morton. Joseph Morton Co. v. United States, 757 F.2d 1273 (Fed.Cir.1985).

Plaintiff United States now moves for partial summary judgment in its favor, Rule 56(b), Fed.R.Civ.P., holding that the Claims Court decision sustaining termination for default works collateral estoppel on the issue of the Sureties’ liability. The government argues that as it is now settled that Morton defaulted on the contract, the Sureties’ liability on the bond is established and only damage issues remain for trial. The Sureties oppose partial summary judgment, maintaining that they are not collaterally estopped by the Claims Court judgment from contesting liability. The Sureties also move for dismissal of this action on the ground that under the CDA a decision by a contracting officer is a jurisdictional prerequisite to commencing and maintaining this suit, and that the Court of Claims then has exclusive jurisdiction. 41 U.S.C. §§ 605, 609. The government counters that the CDA is applicable to contractors but not their Sureties. In addition, the Sureties move for summary judgment in their favor holding that under the circumstances it was impossible for Morton to perform the construction contract or that changes in the contract during the course of construction amounted to breach or recession releasing Morton from performance. The various motions were submitted in two sets of motions some months apart. In the interest of efficiency the Court chooses to address and decide them in one opinion.

II.

The Court first addresses the issue of collateral estoppel. Collateral estoppel is a more limited and narrow application of its sister doctrine, res judicata. Both serve the goals of judicial finality, legal certitude, and judicial economy. E.g., Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 597, 68 S.Ct. 715, 719, 92 L.Ed. 898 (1948). The doctrine of res judicata holds that once a case has been litigated to judgment it should not be the subject of repeated suits. Rather, the first judgment disposes of any subsequent suits involving the same factual events and legal issues among the same parties or their privities. Of course, application of res judicata frequently raises questions of identity, privity, and what issues and claims were the subject of final judgment.

Collateral estoppel is a narrower application of res judicata. Where a second lawsuit between the same parties, or those who stand in their place, involves a different cause of action, the judgment in the first action estops relitigation of only those matters that were litigated and the subject of a final determination or verdict. Id. at 598, 68 S.Ct. at 719. In other words, the effect of the prior judgment is limited to specific issues in the second action and does not dispose of the entire suit.

In the instant case, the government asks that this Court apply the judgment of the Claims Court upholding contract termination for default to dispose of the liability issue between the government and the Sureties. More accurately, the government asks that Morton’s criminal conviction for fraud operate as an estoppel on the issue of the Sureties’ liability on the performance bond.

It is not disputed that there is sufficient identity of interest between the parties on each side of the two cases. Neither party here seriously disputes that there was sufficient opportunity to litigate the questions of fraud and termination in the earlier action. What is in question is what the earlier judgment decided and the effect it should have here.

The Court will not indulge in long discussion. The application the government advocates is overly broad. Collateral estoppel requires a narrow application. The judgment in the criminal case was that Morton had committed fraud in certain cost and payment statements submitted to the government. The judgment in the Claims Court case was that Morton defaulted on the contract by committing that fraud. Neither judgment addresses the issues of contract performance. Whether Morton performed construction of the Plum Island addition as it should have, whether the architect’s construction plans were faulty, and other performance issues have not yet been litigated or decided by any court. These contract performance issues are the essence of the government’s claims and the Sureties’ defenses. As the Sureties point out, they issued a performance bond, not a fidelity bond. They were liable for failure to properly build the facility addition, not for fraudulent Change Orders.

Accordingly, the judgment of the district court that tried the criminal case and the judgment of the Claims Court, which was affirmed by the Federal Circuit, operates as collateral estoppel on the issues of the specific fraudulent acts committed by Morton, and its agents, and the default termination for those fraudulent acts. The Court concludes that as neither judgment had any bearing on the contract performance issues, they cannot be the basis for holding the Sureties liable on the performance bond. Plaintiff’s motion for partial summary judgment, therefore, is denied.

III.

The Court next addresses the more difficult issue of application of the CDA to the case at bar. 41 U.S.C. §§ 601 to 613. Specifically, the Sureties contend that as this suit involves the question of performance of a contract with the government, at the non-government party’s option it must first be the subject of a contracting officer’s decision, and in any event, can only be heard by the Claims Court. Defendant Sureties ask for dismissal on this ground. The government maintains that only a contractor can assert these defenses, not its surety. Moreover, plaintiff contends the CDA is not applicable to this action.

The issue appears to be one of first impression. While the parties contest at some length the law regarding when a surety can assert defenses or claims of a contractor, the Court is convinced that this is not the correct analysis. Rather, the dispositive question is whether the CDA applies to actions between the government and sureties.

The CDA is silent as to its application to sureties and the Miller Act, 40 U.S.C. § 2709a.-d. The Miller Act requires that a contractor for a public building secure a payment and a performance bond in conformance with the statute. The government here sues the Sureties on the performance bond pursuant to the Miller Act. The CDA goes no further than declaring that its provisions apply to disputes involving contracts to which the United States is a party and where the contract is for, among other things, “the procurement of construction ... [on] real property.” 41 U.S.C. § 602(a)(3). Throughout its provisions the statute speaks of disputes between contractors and the government. A “contractor” is defined as “a party to a Government contract other than the Government.” 41 U.S.C. § 601(4). The question is, then, does the CDA by its intent or definition apply to actions involving sureties.

The Court is unwilling to construe the terms of the CDA beyond the plain meaning of its words. A contractor is a party to a government contract, and this a surety is not. Obviously, a surety has an interest in the contract, but unless the contractor defaults, the surety is not directly involved. This construction is supported by a reading of the legislative history. Among the declared purposes of the CDA is the equalization of the bargaining power of the parties and the assurance of fair and equitable treatment of contractors. S.Rep. No. 95-1118, 95th Cong., 2d Sess. 1, reprinted in 1978 U.S.Code Cong. & Ad.News 5235. The legislation addressed particular concern not only that the resolution of contract disputes should be uniform throughout the government with greater opportunity for negotiated settlement, but that small contractors should not be at an economic disadvantage and their right to due process should be safeguarded. Id. at 4, reprinted in 1978 U.S.Code Cong. & Ad.News at 5238.

The legislative history, however, does not speak directly to the Miller Act or the CDA’s application to sureties. Rather, its primary concern is clearly contractors’ claims. Nevertheless, the legislative history and the statute do directly address the CDA’s affect on a number of other statutes. 41 U.S.C. §§ 602(b-c), 603, and 609(a); S.Rep. No. 95-1118 at 33-35, reprinted in 1978 U.S.Code Cong. & Ad. News at 5267-69. Faced with this silence on the subject of the Miller Act and sureties amid discussion and provision for effects on other areas of the law, the Court concludes that Congress did not contemplate or intend application of the CDA to include the Miller Act and suits between sureties and the government. Where Congress has set out to create a coherent system, the Court will infer that what Congress did not include it meant to exclude. In other words, the Court refuses to construe the CDA so broadly as to include what Congress gives not the slightest suggestion it intended to include. Accordingly, the Court holds that the CDA is not applicable to the government’s action against the Sureties under the Miller Act.

Nor is the Court particularly enlightened by the parties’ discussion of subrogation. While discussing an earlier motion by the third-party defendant Perkins & Will Partnership for dismissal of the action against them, the Court noted that it doubted that the Sureties are subrogated to the rights of the contractor, but more likely are subrogated to the rights of the government. Slip op. at 8 (E.D.N.Y. September 10, 1985). A brief perusal of the issue of surety subrogation under the Miller Act has not convinced the Court that the result under that statute is any different.

Furthermore, the Court is not convinced that a contracting officer’s decision would make any difference in the course of this litigation, save to delay it. The government undertook detailed review of the Plum Island construction immediately after the default and Sureties’ refusal to complete the project. Based on the parties’ litigation preparation, the Court sees no likelihood that a decision by a contracting officer will finally resolve the case or that proceedings before the officer will result in a negotiated settlement. Proceedings in this action have already extended over a three-year period without any indication that the matter can be ended short of trial. Nor does the Court find any indication that Congress intended to remove actions under the Miller Act from the jurisdiction of the district courts.

IV.

Lastly, it appears that the Sureties are asking for summary judgment in their favor holding that performance of the construction contract was impossible and that the numerous change orders included or amounted to a “cardinal change” in the contract. These are clearly disputed issues of material fact requiring trial, and summary judgment must be denied.

y.

The Court determines that the earlier decisions by the district court and the Claims Court on the issues of Morton’s fraudulent Change Orders and termination for default based on fraud operate to collaterally estop litigation of those limited issues before this Court. All other motions by the plaintiff and defendant Sureties are denied.

SO ORDERED.

      . United. States v. Joseph Morton Co., No. CR 80-00413 (E.D.N.Y. April 24, 1981), aff’d Nos. 81-1174/1233 (2d Cir. Jan. 11, 1982).