No. 12080 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1972 

THE HOME INSURANCE COMPANY, a corporation, 

Plaintiff and Appellant, 

PINSKI BROTHERS, INC.,, a corporation, 

KENNETH K. KNIGHT and A. ANDREW VAN TEYLINGEM, 

co-partners, doing business as KNIGHT & VAN TEYLINGEN, 

,,,, ,,,,,,,,,,,,,,,-- Aefeadants and Respondents. 

KENNETH K. KNIGHT, 

Counterclaimant, 

HOME IIID~~ITY COMPANY, a corporation, 

Involuntary Plaint iff and Defendant to 

Counterclaims and Appellant. 

Appeal from: District Court of the Eighth Judicial District, 

Honorable Paul Ha Ff ield , Judge presiding. 

Counsel of Record : 

For Appellant : 

Smith, Emmons & Baillie (Home Indemnity), Great Falls, 

Montana. 

Alexander, Kuenning, Hall & Miller (Home Insurance Company), 

Great Falls, Montana. 

John Hall argued, Great Falls, Montana. 

For Respondents: 

Church, Harris, Johnson & Williams, Great Falls, Montana, 

(Pinski Brothers). 

Jack L. Lewis argued, Great Falls, Montana. 

Jardine, Stephenson, Blewett & Weaver, Great Falls, Montana. 

Scott & Linnell, Great Falls, Montana. 

Wayne E. Linnell argued, Great Falls, Montana. 

Loble, Picotte & Loble, Helena, Montana. 

Filed : 

Submitted: June 12, 1972 

Decided : nutiel dk 
Mr. Justice Frank I. Haswell delivered the Opinion of the Court. 

In an action between an insurer and its insured involving the 

insurer's subrogation rights and the insured's right to damages for breach 

of the insurance contract, the district court of Cascade County, the Hon. 

Paul G. Hatfield, district judge presiding, granted summary judgment to the 

insured. The insurer now appeals from such summary judgment. 

Plaintiff in the original action was The Home Insurance Company who 

paid off a property damage loss of approximately $135,000 resulting from a 

boiler explosion at the old Montana Deaconess Hospital in Great Fa1 1 s and 

claimed subrogation to the rights of the hospital against those allegedly 

responsible. After various dismissals by the district court, the remaining 

defendants were (1 ) Pinski Bros, Inc., the mechanical contractor on the 

hospital remodel ing project where the boi 1 er explosion occurred, and (2) 

the architects on the project, Kenneth K. Knight and A. Andrew Van Teylingen, 

copartners, doing business as Knight & Van Teyl ingen. 

The complaint of The Home Insurance Company alleged three counts of 

negligence against the architects which it claimed was the cause of the boiler 

explosion and the resulting property damage loss. The architects tendered 

defense of the action to The Home Indemnity Company, a wholly owned subsidiary 

of plaintiff Home Insurance Company, with whom the architects carried a 

comprehensive 1 iabi l i ty pol icy. The Home Indemni ty Company refused this 

tender, the architects hired their own defense counsel , and filed an answer 

containing, among other things, a "Twelfth Defense, Counterclaim and Setoff" 

by one of the architects, Kenneth K. Knight. Therein Knight alleged that 

insurance coverage was afforded under the architects ' comprehensive 1 iabil ity 

policy with The Home Indemnity Company; that such coverage constituted a 

defense against the claim of the parent company, The Home Insurance Company, 

and that The Home Indemnity Company was 1 iable for the costs and expenses, 

including attorney fees, incurred in defending the action and prosecuting 
the counterclaim and se%off. It was stipulated that The Home Insurance 

Company and The Home Indemnity Company are one and the same corporate entity. 

Subsequently the district court, in effect, granted summary judgment 

to The Home Indemnity Company against the architects on all issues of insurance 

coverage under their comprehensive 1 iabil i ty pol icy, dismissed the "Twelfth 

Defense, Counterclaim and Setoff" of architect Knight, and ordered the subrogation action of The Home Insurance Company against the architects to 

continue. 

Upon appeal, we held that the a1 leged negligent design, supervision 

and inspection of the hot water heating system by the architects (Count I 

of the complaint by The Home Insurance Company against the architects) was 

within the coverage of the architects ' comprehensive 1 iabil i ty pol icy; we 

further held that Counts I1 and I11 of the complaint were not within the 

coverage of the architects' pol icy. We vacated the district court's findings 

of fact, conclusions of law and judgment from which the appeal was taken and 

remanded the case to the district court for consideration of the further 

issues raised by The Home Insurance Company's motion for summary judgment 

against architect Knight on his "Twelfth Defense, Counterclaim and Setoff" 

and entry of appropriate findings, conclusions and judgment. See The Home 

Insurance Company v. Pinski Bros., Inc., 156 Mont. 246, 479 P.2d 275. 

Prior to hearing this former appeal, pretrial conferences were held 

by the district court at which time three developments pertinent to this 

appeal occurred: (1) The Home Insurance Company settled its claim against 

Pinski Bros., leaving the architects as the sole remaining defendants, (2) 

The Home Insurance Company offered to settle its claim against the architects 

within the limits of coverage claimed by them under their comprehensive liability pol icy with The Home Indemnity Company, leaving unsettled the then 

pending former appeal , (3) the architects were permitted to amend their 

answer by adding a "Thirteenth Defense and Counterclaim", in essence the same 
defense, counterclaim and setoff, for the architects named in the caption 

of the suit as was contained in architect Knight's "Twelfth Defense, 

Countercl aim and Setoff". 

Following this Court's decision on the former appeal, the architects 

moved (1) for summary judgment against The Home Insurance Company on its 

complaint against them, and (2) for partial summary judgment on the issue of 

liability against The Home Insurance Company and The Home Indemnity Company 

on the counterclaim aspects of the architects ' twelfth and thirteenth defenses, 

countercl aims and setoffs. 

Thereafter foll owing hearing, the district court entered its "Findings of Fact, Conclusions of Law, Order, Memorandum Opinion, and Summary 

Judgment". Therein the district court of Cascade County as directed by this 

Court's order of remand in the former appeal, made findings of fact and conclusions of law with respect to Home Indemnity's motion for summary judgment 

against the architects. The district court found and concluded that The Home 

Indemnity Company had not pointed out or suggested to the district court any 

facts which required entry of sumary judgment in favor of The Home Indemnity 

Company or which had not been ruled upon and decided by this Court in the 

earlier appeal, and that The Home Indemnity Company insured the architects 

for the liability claimed against them by Count I of the complaint of The 

Home Insurance Company. In addition, the district court (1) concluded that 

the controlling facts were undisputed and there was no genuine issue of 

material fact; (2) held that the architects could not be liable to The Home 

Insurance Company by reason of: (a) contributory negl igence, (b) assumption 

of risk, (c) intervening cause, and (d) insurance coverage under the Home 

Indemnity Company pol icy and its breach of duty to defendant under its pol icy; 

(3) entered summary judgment in favor of the architects on The Home Insurance 

Company's complaint against them; (4) entered partial summary judgment as to 

the issue of'liability in favor of architect Knight on his twelfth defense 
and counterclaim against The Home Indemnity Company for a11 costs, expenses, 

attorney fees, etc., incurred on behalf of Knight in defending against the 

claim of Home Insurance and in prosecuting his claim for insurance coverage 

against Home Insurance; and (5) withheld until after the summary judgment 

became final the setting of a trial date for determination of the amount of 

damages to be awarded architect Knight for defense costs. 

Home now appeals from this summary judgment. 

We will summarize the underlying issues upon appeal in this manner: 

1. Is there a genuine issue of material fact precluding summary 

judgment in favor of the architects on Home's complaint against them? 

2. Is there a genuine issue of material fact precluding partial 

summary judgment on the issue of liability in favor of architect Knight 

against The Home Indemnity Company for his costs of defense herein? 

3. Must Home pay all attorney fees and court costs incurred in this 

action? 

Directing our attention to the first issue, we first review the 

basic requirements for granting a summary judgment. Rule 56(c), M.R.Civ.P., 

requires that a summary judgment shall be granted forthwith if: 

" * * * the pleadings, depositions, answers to interrogatories, and admissions on file show that there is no 

genuine issue as to any material fact and that the moving 

party is entitled to a judgment as a matter of law.* * *" 

The burden of establishing the absence of any issue of material fact is on 

the party seeking summary judgment. Roope, v. The Anaconda Company Mont . 

- ,494 P.2d 922, 29 St.Rep. 170; Byrne v. Plante, 154 Mont. 6, 459 P.2d 

266. Where the record before the court discloses no genuine issue as to any 

material fact, the burden is upon the party opposing entry of summary judgment 

to present evidence of a material and substantial nature raising a genuine 

issue of material fact. Roope v. The Anaconda Company, supra; Flansberg v. 

Montana Power Company, 154 Mont. 53, 460 P.2d 263. 

Applying these basic rules to the problem at hand we note that all 
other questions aside, the record before the Court disc1 oses that subsequent 

acts of hospital employees precipitated and caused the boiler explosion 

irrespective of anything the architects allegedly did or failed to do 

previously. The deposition of William Even, the chief engineer at the 

hospital, establishes the fact that the employee engineers at the hospital 

knew the hot water heating system being installed was without safety devices, 

appreciated the danger of "firing up" the system before safety devices had 

been installed, but nevertheless proceeded to "fire up" the system which 

resulted in the boiler explosion. There are no facts to the contrary appearing in the voluminous record in this case. The foregoing facts establish, at 

the very least, the defenses of assumption of risk and an efficient intervening cause. Under such circumstances, it is incumbent upon Home to present 

evidence of a substantial and material nature which raise a genuine issue of 

material fact. Having failed to do so, Home cannot now complain that the 

architects are not entitled to a summary judgment as a matter of law. 

There is yet a further and perhaps more cogent reason why sumary 

judgment for the architects on Home's complaint against them is correct. Here, 

it is undisputed that the architects have insurance coverage to the extent of 

$25,000 under their Home Indemnity comprehensive liability policy; that Home 

Indemnity and Home Insurance are one and the same corporate entity; that Home 

as a subrogated insurer of one of its policyholders (the Deaconess Hospital ) 

has sued another of its policyholders (the architects) whom it has insured 

against the very liability for which it seeks recovery in Count I of its 

complaint in an amount in excess of the policy limits. 

Subrogation is an equitable right. Caledonia Ins. Co. v. Northern 

Pacific Ry. Co., 32 Mont. 46, 79 P. 544; Swingley v. Riechoff, 112 Mont. 59, 

112 P.2d 1075. Accordingly, certain equity principles apply in determining 

subrogation rights: One who seeks equity must do equity, Hall v. Lommasson, 

113 Mont. 272, 124 P.2d 694; Tomsheck v. Doran, 126 Mont. 598, 256 P.2d 538; 
Barbour v. Barbour, 134 Mont. 317, 330 P.2d 1093. One who seeks equity must 

come into court with clean hands, Perry v. Luding, 123 Mont. 570, 21 7 P.2d 

207;Giarratana v. Naddy, 129 Mont. 154, 284 P.2d 254; Weintz v. Bumgarner, 

150 Mont. 306, 434 P.2d 712. "No one can take advantage of his own wrong." 

Section 49-109, R.C.M. 1947. 

To permit the insurer to sue its own insured for a liability covered by the insurance policy would violate these basic equity principles, as 

well as violate sound public policy. Such action, if permitted, would (1) 

allow the insurer to expend premiums collected from its insured to secure a 

judgment against the same insured on a risk insured against; (2) give judicial sanction to the breach of the insurance policy by the insurer; (3) 

permit the insurer to secure information from its insured under the guise of 

pol icy provisions available for later use in the insurer's subrogation action 

against its own insured; (4) allow the insurer to take advantage of its conduct and conflict of interest with its insured; and (5) constitute judicial 

approval of a breach of the insurer's relationship with its own insured. 

No right of subrogation can arise in favor of an insurer against its 

own insured since, by definition, subrogation exists only with respect to 

rights of the insurer against third persons to whom the insurer owes no duty. 

16 Couch on Insurance 2d, 5 61 :133; see also 46 C.J .S. Insurance t3 1209(b); 16 

Couch on Insurance 2d, B 61 :136. This principle is succinctly stated in 

Chenoweth Motor Co. v. Cotton, 2 Ohio Misc. 123, 207 N.E.2d 412, 413: 

" * * * it is axiomatic that [an insurance company] has no 

subrogation rights against the negligence of its own 

insured. " (Bracketed material paraphrased). 

To allow subrogation under such circumstances would permit an insurer, in 

effect, to pass the incidence of the loss, either partially or totally, 

from itself to its own insured and thus avoid the coverage which its insured 

purchased. 2 Richards on Insurance, $ 185, states the same principle in this 

1 anguage : 
"An insurer clearly may be subrogated to its insured's 

claim against a third party who tortiously causes the 

loss, but no subrogation exists against the insured or 

co-i nsured whose negl i gence caused the 1 oss . " 

For the foregoing reasons, we hold summary judgment in favor of the 

architects on Home's subrogation complaint against them is correct and is 

hereby affirmed . 

Proceeding to the second issue for review, we note that the counterclaim of architect Knight for his costs of defense is bottomed on a breach 

by the insurer of Home Indemnity's comprehensive liability policy with 

Knight. Since The Home Insurance Company which sued Knight for his alleged 

negligence is one and the same corporate entity as The Home Indemnity Company, 

the actions of one are the actions of the other. Having refused to defend 

Knight against Home's complaint alleging negligence within Knight's policy 

coverage, Home's refusal to defend constituted a breach of contract even if 

based on an honest mistake, thereby rendering Home liable for defense costs 

resulting from such breach. 14 Couch on Insurance 2d, $$ 51 :50, 51 :52; 49 ALR2d 

694, 701 , 71 1 ; 7A Appl eman, Insurance Law and Practice, § 4689; Independent 

Milk & Cream Co. v. Aetna Life Ins. Co., 68 Mont. 152, 216 P. 1109; Mid-Century 

Ins. Co. v. American Casual ty Co. , 152 Mont. 328, 449 P .2d 679. Inasmuch as 

there is coverage for the first count in Home's complaint against the architects, denial of coverage and defense was unjustified even though there was 

no coverage for the second and third counts in Home's complaint. 41 ALR2d 434; 

14 Couch on Insurance 2d, ss 51:43, 51:50; 7A Appleman, Insurance Law & 

Practice, B 4683. 

As there is no conflict in the foregoing facts appearing in the records 

of this case, we hold that the partial summary judgment on the issue of 

liability for defense costs is correct and must be affirmed. 

The final issue for review is whether Home must pay all attorney fees 

and court costs herein. Home argues that while it may be liable for defense 

costs, it is not 1 iable for attorney fees, expenses and court costs involved 
in architect Knight's counterclaim against it or in defending against the 

second and third counts in Home's complaint which are not covered by Kfiight's 

pol icy. 

In our view it would not be possible to separate or segregate such 

defense costs from costs involved in prosecuting Knight's countercl aim in 

any event. Even if such were possible, Home has been the moving party throughout this litigation and the party whose wrongful acts made it necessary for 

the architects to defend themselves against both covered and noncovered claims, 

as well as the counterclaim of architect Knight for breach of contract in 

denying insurance coverage and refusal to defend. Under such circumstances 

the wrongful acts of the insurer (1) in suing its insured under its nonexistent subrogation rights on both covered and noncovered claims, and (2) its 

refusal to defend this action on behalf of architect Knight, constituted 

breaches of its obl igation and duty rendering the insurer 1 iable for damages 

by way of attorney fees, expenses, and court costs occasioned thereby. This 

Court has extensively discussed the insurer's duty to defend in St. Paul Fire 

& Marine Ins. Co. v. Thompson, 150 Mont. 182, 433 P.2d 795. The following 

cases so hold with respect to the counterclaim for insurance coverage: Runyan 

v. Continental Casualty Company, 233 F.Supp. 214; Util i ties Construction Corp. 

v. Peerless Ins. Co., 233 F.Supp. 64; Southwestern Bell Tel. Co. v. Western 

Casualty & Sur. Co., 269 F.Supp. 315. The following authorities so hold with 

respect to a complaint containing both covered and noncovered claims: St. Paul 

Fire & Marine Ins. Co. v. Hodor, ~la.'(1967), 200 S.2d 205; 50 ALR2d 458, 469, 

506. 

We note the district court did not fix the amount of damages by way 

of attorney fees, court costs, and expenses for which Home is liable to the 

architects in defending against Home's complaint or to architect Knight, 

architect Van Teylingen, or the architectural firm. Instead, the district 

court only prescribed the criteria on which such award would be based upon 
future trial to establish the amount of damages. Any determination of the 

dollar amount of damages or the criteria therefor at this time is premature. 

For the foregoing reasons, the judgment of the district court is 

affirmed. This cause is remanded to the district court for trial and determination of the amount of damages. 

Associate Justice 

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