### No. 12605 

### INTHE SUPREME COURT OF 

### THE STATE OF MONTANA 19 

### 74

RELIANCE INSURANCE COMPANY, Plaintiff and Appellant, -vs

# - VIRGIL FISHER, RICHARD 0. 

### POEPPEL, Defendants and Respondents, and HORACE 

### MANN INSURANCE COMPANY, Defendant and Appellant.

Appeal from: District Court of the Eleventh Judicial District, Honorable Robert Keller, Judge presiding. Counsel of Record: For Appellants: 

### Warden, Walterskirchen & 

### Christiansen, Kalispell,

Montana Merritt N. 

### Warden argued, Kalispell, Montana Garlington, Lohn and Robinson, Missoula, Montana Lawrence 

### F

# .Daly argued, Missoula

# ,Montana For Respondents: Murphy, Robinson, Heckathorn & 

### Phillips, Kalispell,

Montana Robert 

### L. Fletcher argued, Kalispell, Montana McGarvey, Morrison, Hedman & 

### more, Whitefish, Montana

Submitted: March 21, 1974 Decided: 

### APR

### 23

## 1974 Filed:

# APR23

### 1974

### Mr. ~ustice Fr8nk I. Haswell delivered the Opinion of the Court. This 

### is a declaratory judgment action involving a teacher's professional liability insurancepolicy and a second insurance policy issued tothe 

### same defendant, Virgil Fisher, denominated "a Farmer's Comprehensive Personal Liability Hazard Policy". This districtcourt, sittingwithout a jury, refused to enter a declaratory judgment releasing the two insurance companies from the duty todefend the insured ina suitfor personal damages inFlathead County cause No. 23116. From thisorder, both insurers appeal. An action

### was filed inthe districtcourt of Flathead County by Richard 0. Poeppel against Virgil Fisher, seeking damages allegedly resulting from an altercationbetween the parties on April 20, 1972, inthe Central School inWhitefish, Montana. Poeppel, a school teacher, alleged that he had been attacked by Fisher, also a teacher, and struck by him. The incident arose during regular school hours. Poeppel had physically ejected one of his students from his classroom intothe hallway. Fisher observed the actions of Poeppel and the student, and reported them tothe assistantprincipal. Fisher then returned tothevicinity of Poeppel and the disciplined student atwhich 

### timethe altercationoccurred during which Fisher struck Poeppel. Fisher tendered the defense of that action toappellant Reliance Insurance Company which had issued a policy denominated "a Farmer's Comprehensive Personal Liability Hazard Policy" to Fisher, which policy was in effect atthe timeof the altercation. Although Reliance caused an initialappearance tobe made on behalf of Fisher inthat action inorder toprevent a default, it declined toaccept eitherthe duty todefend or responsibility for any judgment which might be obtained against Fisher in that action. A stipulation

### was entered into staying further proceedingsinthat action until thematter of such insurance coverage could be resolved. On August 28, 1972, Reliance CQmencedthis action for a declaratoryjudgment inthe districtcourt of Flathead County, naming asdefendants its insured, Virgil Fisher; Richard 0. Poeppel; and Horace Mann Insurance Company, a company that had issued a policy providing professional liability insurance coverage for teachers of the Whitefish school system. The action sought a judgment declaring, among other things, that Reliance had no obligation under itspolicy todefend the Poeppel action or topay any damages thatmight be awarded therein. Through answers filedby Horace Mann it was admitted that

on April 20, 1972, there was ineffectbetween said insurance company and the Montana Education Association (MEA) a policy of liability insurance denominated as an "Educator's Professional Liability Policy." Asmembers of the MEA, both Fisher and Poeppel

were insured partiesunder the Horace Mann policy. As a defense toitsalleged duty todefend, Horace Mann contends that its insurance contract is expressly inapplicable by reason of special exclusions contained in said policy. The case

### was argued orally before the districtcourt on May 22, 1973. Subsequently written briefs were filed and the districtcourt issued its order refusing "torender or enter a Declaratory Judgment or Decree for the reason that such a Judgment

orDecree would not terminate the uncertainty or controversy giving 

### rise tothe proceedings." From this order and denial of a motion for new trial or order toamend judgment, both insurers appeal. The single controlling issue upon appeal is whether the insurers, Reliance and Horace Mann, areunder an obligation todefend Fisher in the lawsuit filed against him by Poeppel or required toindemnify Fisher for any losses sustained as a result of the Poeppel lawsuit. The gistof respondent Fisher's argument is that his actions giving rise tothe altercation and subsequent lawsuit

come within the Reliance policy coverage as "activities therein which 

### are ordinarily incident tonon-business pursuits." Fisher also argues that his action stems from an apparent need todefend himself.The districtcourt's reasons forrefusing todetermine the obligations of Horace Mann with regard to said Cause No. 23116 are set forth ina memo following that court's order denying a motion fornew trial, the alternative, for the court toamend its order of July 5, 1973. Said memo reads inpart: "Defendant Horace Mann puts the most reliance upon exclusion 

### j, 'to liability and respective 

### claims brought by teachers or other employees of a school system against the insured, 

## * * *I. Defendant Horace Mann intends (sic) that if the claimant were a teacher atthe 

### time of the occurrence giving 

### rise tothe claim, irrespectiveof the conduct of the teacher atthat time, thispolicy does not apply. This exclusionary clause, given literalinterpretation, would 

### exclude any claimants who 

### were teachers or school employees of any school system at any time, and that simply cannot be the intent of the policy. Thus indetermining what the intent of this policy is, it 

### is incomprehensible that the 

### mere lable (sic)of 'teacher1

### is sufficient tocause thispolicy not toapply. Thus, if the conduct of the claimant 'teacher' so farexceeds the scope of hisprofessional employment so astobe totally unrelated tohisoccupation, how can it be contemplated that this type of conduct would be excluded from the policy?" The thrust of both insurers' positions inthe instant

case isthat their duty todefend is limited toclaims against the insured within the coverage of the policy. Reliance argues that itspolicy issued toFisher isdenominated a "Farm Owner's Policy" on its face and cover sheet and said policy primarily

covers farming operations.

### Fisher owned and operated a farm,but also was a school teacher in Whitefish. Reliance contends that by reason of certain exclusions enumerated in the policy it is not liable for Fisher's actions while engaged in business pursuit outside of farming--namely, that of teaching. The Reliance insuring agreement, section 11, contains the following pertinent provisions: "1. Coverage G--Farmers Comprehensive Personal Liability: (a) 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. 

## * * * "2. Coverage H--Personal Medical Payments: To pay all reasonable expenses incurred within one year from the date of accident for necessary medical, surgical,X-ray and dental services, including prosthetic devices, and necessary ambulance, hospital, professional nursing and funeral services, to or for each person who sustains bodily injury caused by accident, "(a) while on the premises with the permission of an Insured,or "(b) while elsewhere if such bodily injury, (1) arises out of the premises or.-a condition in the ways immediately adioininq, (2) is caused by the activities of an Insured or of any farm or residence employee in the course of his employment bv an Insured. (3) 

### is sustained bv an insured farm employee or by a residence employee and arises out of and in the course of his employment by an Insured,or 

### (4) is caused by an animal owned by or in the care of an Insured." (Emphasisadded.) The "Special Exclusions" section of the policy specifically provides: 

### "Section I1 of this Policy does not apply: "(a) (1) to any business pursuits of an Insured, except under Coverages G and H, activities therein which are ordinarily incident to non-business pursuits, (2) to the rendering 

### of any professional service or the omission thereof, or (3) 

### to any act

### or omission in connection with premises, other than as defined, which are owned, rented or controlled by an Insured; but this subdivision

(3) does not apply with respect to bodily injury to a residence employee or an insured farm employee if such bodily injury arises out of and in the course of employment by the Insured of such residence employee or insured farm employee;

"(c) under Coverages G and H, 

### to bodily injury or

roperty damage caused intentionally by or at the girection of the Insured

## * 

## * *.I1 

### (Emphasis added

Throughout the policy repeated references are made to "farmdwellings," "farmpremises," farming operationsand other activities in connection with the insured'soperation of a farm. Under the heading of "General Conditions" are certain definitions including a definition of the word "premises"which clearly limits that term to the farm grounds and buildings of the insured, and the term "business" which is defined as including:"Trade,profession, or occupation other than farming,and roadside stands maintained principally for the sale of insured's produce." The actions of Fisher referred to in the action brought against him by Poeppel were admittedly performed by him while he

was engaged in his profession as a school teacher, and were directly related to the performance of his duties as a school teacher. The actionswhich constitute the basis of the Poeppel suit as set forth in the complaint come within section I1 (a)(l) of that part of the policy dealing with special exclusions. Fisher's actions come under this specific exclusion since following his profession as a school teacher was a "business pursuit" completely separated from any farming activities. This Court in a similar case,McAlear v. St. Paul Ins. Gas., 

### 158Mont. 452, 493 P.2d 331, held that ordinarily a liability

### insurance company has no duty to defend an action brought by

a third party against the insured when the claim or complaint does not fall within the coverage of the liability policy. If the insurer would have no obligation to indemnify the insured should the complainant recover, then there is no contractual obligation to afford a defense. See also Couch on Insurance 2d, S 

### 51:38 et seq.; 7AAppleman Insurance Law and Practice, S 

### 4682 et seq.; 49 ALR 2d 703. (For a discussion of an insurer'sduty to defend a wilful injury see 2 ALR 3d 1238 and 7AAppleman '74 Bd. Supp. 8 

### 4683.) We hold that under the provisions of the policy there

was no coverage for the acts complained of in the Poeppel action and that Reliance is entitled to the relief prayed for in the 

### declaratory judgment action. With respect to the "Educator's Professional Liability Policy",Horace Mann contends that the policy does not provide coverage for the damages claimed by Poeppel unless it can be established that thosedamages were (1)unintentionally caused by Fisher (2) 

### acting as a teacher, (3) within his professional capacity, (4) to Poeppel, not acting as a teacher. If any one of these items cannot be established, it argues,coverage fails. Horace Mann contends that not one but several of these requisites

are absent from the instant case, and that therefore it is not obligated to defend Fisher or to pay any claims against him by Poeppel

# . The Horace Mann policy contains exclusion "j"which provides: 

### "Thispolicy does not apply: "j. To liability in respect of claims brought by teachers or other employees of a school system against the assured, as defined by the policy 

## * * 

## *."

As previously mentioned, all parties stipulated that bothPoeppel and Fisher were teachers working attheWhitefish School within school hours atthe time of the incident while the claimant was disciplining a student from hisclass. The districtcourt ignored the stipulation that both were teachers, and hypothesized that the factsmight show that the actions of Poeppel "so far exceed(ed) the scope of his professional employment" astomake him neither a teacher nor an employee of the school system for purposes of coverage under the policy. We disagree. The altercationwas clearly connected with and related to school activities. Section 13-704, R.C.M. 1947, provides that the clear and explicit language of a contract must govern its interpretation. Section 13-707, R.C.M. 1947, states that every part of a contract 

### is tobe given effect, using each clause tohelp interpret the others. Finally, section 13-710, R.C.M. 1947, provides: "The words of a contract are tobe understood intheir ordinary and popular sense, rather than according totheir strictlegalmeaning, unless used by the parties ina technical sense, or unless a specialmeaning is given tothem by usage, inwhich case the lattermust be followed." The clear explicit language of exclusion "j"excludes 

### " 

## * * 

## * claims brought by teachers or other employees of a school system against the assured

## * 

## * *". Applying sections 13-704, 13-707 and 13-710, R.C.M. 1947, the,suitof Poeppel is clearly not covered. Aspreviously discussed inreference tothe Reliance policy, it is the lawof this state that the duty of a liability insurer todefend the insured is governed by the allegations of the third party's complaint against the insured. McAlear v. St. Paul Ins. Cos., 158 Mont. 452, 493 P.2d 331. In thiscase, paragraph I of Poeppellscomplaint against Fisher alleges that atthe

### time of the incident both Poeppel and Fisher 

### were employed by School District No. 44 inWhitefish. Exclusion 

### "j" of the Horace Mann policy excludes coverage for claims brought by "teachers or other employees of a school system" and therefore the McAlear rulerequires a finding that Horace Mann has no obligation todefend in thismatter. For these reasons the cause isremanded tothe district court for entryof judgment releasing both insurance companies from any duty todefend or topay any damages thatmight be awarded inCause No. 23116.

Justice

-

### -.- /. 

### w\a concur:-.-. J

Chief Justice 

### ,-- ,- . I