No. 12605 

IN THE 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 2 3 1974 

Filed : APR 2 3 1974 
Mr. ~ustice Fr8nk I. Haswell delivered the Opinion of the Court. 

This is a declaratory judgment action involving a teacher's 

professional liability insurance policy and a second insurance 

policy issued to the same defendant, Virgil Fisher, denominated 

"a Farmer's Comprehensive Personal Liability Hazard Policy". 

This district court, sitting without a jury, refused to 

enter a declaratory judgment releasing the two insurance companies 

from the duty to defend the insured in a suit for personal damages 

in Flathead County cause No. 23116. From this order, both insurers 

appeal. 

An action was filed in the district court of Flathead County 

by Richard 0. Poeppel against Virgil Fisher, seeking damages allegedly resulting from an altercation between the parties on April 

20, 1972, in the Central School in Whitefish, 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 into the hallway. Fisher observed the actions of Poeppel and the student, and reported them 

to the assistant principal. Fisher then returned to the vicinity 

of Poeppel and the disciplined student at which time the altercation occurred during which Fisher struck Poeppel. 

Fisher tendered the defense of that action to appellant 

Reliance Insurance Company which had issued a policy denominated 

"a Farmer's Comprehensive Personal Liability Hazard Policy" to 

Fisher, which policy was in effect at the time of the altercation. 

Although Reliance caused an initial appearance to be made on behalf of Fisher in that action in order to prevent a default, it 

declined to accept either the duty to defend or responsibility 

for any judgment which might be obtained against Fisher in that 

action. A stipulation was entered into staying further proceedings 
in that action until the matter of such insurance coverage 

could be resolved. 

On August 28, 1972, Reliance CQmenced this action for a 

declaratory judgment in the district court of Flathead County, 

naming as defendants 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 its policy to defend the 

Poeppel action or to pay any damages that might be awarded therein. 

Through answers filed by Horace Mann it was admitted that 

on April 20, 1972, there was in effect between said insurance 

company and the Montana Education Association (MEA) a policy of 

liability insurance denominated as an "Educator's Professional 

Liability Policy." As members of the MEA, both Fisher and Poeppel 

were insured parties under the Horace Mann policy. As a defense 

to its alleged duty to defend, 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 district court on 

May 22, 1973. Subsequently written briefs were filed and the district court issued its order refusing "to render or enter a 

Declaratory Judgment or Decree for the reason that such a Judgment 

or Decree would not terminate the uncertainty or controversy 

giving rise to the proceedings." 

From this order and denial of a motion for new trial or 

order to amend judgment, both insurers appeal. 

The single controlling issue upon appeal is whether the 

insurers, Reliance and Horace Mann, are under an obligation to 
defend Fisher in the lawsuit filed against him by Poeppel or 

required to indemnify Fisher for any losses sustained as a 

result of the Poeppel lawsuit. 

The gist of respondent Fisher's argument is that his 

actions giving rise to the altercation and subsequent lawsuit 

come within the Reliance policy coverage as "activities therein 

which are ordinarily incident to non-business pursuits." Fisher 

also argues that his action stems from an apparent need to defend 

himself. 

The district court's reasons for refusing to determine 

the obligations of Horace Mann with regard to said Cause No. 

23116 are set forth in a memo following that court's order denying a motion for new trial, the alternative, for the court 

to amend its order of July 5, 1973. Said memo reads in part: 

"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 at the time of the 

occurrence giving rise to the claim, irrespective of the conduct of the teacher at that time, 

this policy does not apply. This exclusionary 

clause, given literal interpretation, 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 in determining what the intent of this 

policy is, it is incomprehensible that the mere 

lable (sic) of 'teacher1 is sufficient to cause 

this policy not to apply. Thus, if the conduct 

of the claimant 'teacher' so far exceeds the 

scope of his professional employment so as to be 

totally unrelated to his occupation, how can it 

be contemplated that this type of conduct would 

be excluded from the policy?" 

The thrust of both insurers' positions in the instant 

case is that their duty to defend is limited to claims against 

the insured within the coverage of the policy. Reliance argues 

that its policy issued to Fisher is denominated 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." (Emphasis added.) 

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 

"farm dwellings," "farm premises," farming operations and other 

activities in connection with the insured's operation 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 actions which 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., 158 Mont. 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.; 7A Appleman Insurance Law and Practice, S 4682 

et seq.; 49 ALR 2d 703. (For a discussion of an insurer's duty 

to defend a wilful injury see 2 ALR 3d 1238 and 7A Appleman '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 those damages 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 : 

"This policy 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 both 
Poeppel and Fisher were teachers working at the Whitefish 

School within school hours at the time of the incident while 

the claimant was disciplining a student from his class. 

The district court ignored the stipulation that both were 

teachers, and hypothesized that the facts might show that the 

actions of Poeppel "so far exceed(ed) the scope of his professional employment" as to make him neither a teacher nor an 

employee of the school system for purposes of coverage under 

the policy. 

We disagree. The altercation was 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 to be given effect, using each clause to help interpret the others. Finally, section 13-710, R.C.M. 1947, provides: 

"The words of a contract are to be understood 

in their ordinary and popular sense, rather than 

according to their strict legal meaning, unless 

used by the parties in a technical sense, or 

unless a special meaning is given to them by 

usage, in which case the latter must 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,suit of Poeppel is clearly 

not covered. 

As previously discussed in reference to the Reliance 

policy, it is the law of this state that the duty of a liability 

insurer to defend 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 this case, paragraph I of Poeppells complaint against Fisher alleges that at 
the time of the incident both Poeppel and Fisher were employed 

by School District No. 44 in Whitefish. 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 rule requires a finding that Horace Mann has no 

obligation to defend in this matter. 

For these reasons the cause is remanded to the district 

court for entry of judgment releasing both insurance companies 

from any duty to defend or to pay any damages that might be 

awarded in Cause No. 23116. 

Justice 

- -.- /. 

w\a concur : -.- . J 

Chief Justice , - - ,- . I