No. 12113 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1972 

ALLEN L. McALEAR, 

Plaintiff and Respondent, 

SAINT PAUL INSURANCE COMPANIES, 

a Corporation, 

Defendant and Appellant. 

Appeal from: District Court of the Fourteenth Judicial District, 

Honorable Na t Allen, Judge presiding . Counsel of Record : 

For Appellant : 

Patrick Fw Hooks argued, Townsend, Montana. 

Glenn Fw Kenney appeared, Helena, Montana. 

For Respondent: 

Allen L. McAlear argued, Bozeman, Montana. 

Submitted: January 12, 1972 

Decided: JPN 3 11972 

Filed : 1]fi~q 3 7 *. 1972 
Mr. Justice Frank I. Haswell delivered the Opinion of the Court. 

In a declaratory judgment action involving an attorney's 

professional liability insurance policy, the district court 

held the insurer liable for the cost of its insured's defense 

against a third-party property damage action based upon a collision caused by the insured's runaway airplane. From this final 

judgment, the insurer appeals. 

The single controlling issue upon appeal is whether the 

insurer is liable for the costs of such defense incurred by its 

insured. The district court held the insurer liable. We reverse. 

The facts in this case are uncontradicted as the case 

was submitted on the basis of an agreed statement of fact which 

included the pleadings, stipulated exhibits, and discovery proceedings. On November 14, 1969, plaintiff Allen F. McAlear, a 

Bozeman attorney, purchased a professional liability policy from 

defendant, Saint Paul Insurance Companies, containing the following insuring agreement and exclusions: 

"Insuring Agreements 

"Coverage A - Professional Liability 

"To pay on behalf of the Insured all sums which 

the Insured shall become legally obligated to 

pay as damages arising out of the performance 

of professional services for others in the Insured's capacity as a lawyer and caused by the 

Insured or any other person for whose acts the 

Insured is legally liable (the performance of 

professional services shall be deemed to include the Insured's acts as an administrator, 

conservator, executor, guardian, trustee or 

in any similar fiduciary capacity, but only to 

the extent for which in the usual attorneyclient relationship the Insured would be 

legally responsible as attorney for a fiduciary) 
and the Company shall have the right and duty 

to defend in his name and behalf any suit 

against the Insured alleging damages, even if 

such suit is groundless, false or fraudulent; 

but the Company shall have the right to make 

such investigation and negotiation of any claim 

or suit as may be deemed expedient by the Company. The Company, however, shall not make 

settlement or compromise any claim or suit 

without the written consent of the Insured." 

The "Exclusions" section of the policy specifically 

provides : 

"Coverage A does not apply: 

"(3) to bodily injury to, or sickness, disease 

or death of any person, or to injury to or 

destruction of any tangible property, including the loss of use thereof." 

During the policy period McAlear flew to Salt Lake City 

with a client, Robert S. Beck. Beck had contacted McAlear regarding the purchase of a trailer and it was necessary for them 

to go to Salt Lake City to obtain financing from a private individual. As the sellers were insolvent it was necessary to complete the transaction and get the title recorded before liens 

could be recorded against the seller's equity in the trailer. 

Beck and McAlear had flown to Salt Lake City on March 20, 

1969, in McAlear's plane for this purpose. They transacted their 

business on March 21 and 22. At about 6:00 a.m. on March 23, 

while preparing to return to Bozeman, McALear was engaged in a 

preflight inspection of his plane. He manually turned over the 

propellor while the ignition was in the "on" position. This 

caused the pilotless airplane to accelerate down the ramp and 

crash into three other airplanes. 
On May 21, 1970, an action was filed in the United States 

District Court in Utah by Gordon S. Burchett, the owner of one 

of the damaged planes. The Burchett action sought damages against McAlear for his alleged negligence and sought recovery 

of repair costs, depreciation and loss of use of Burchett's airplane. 

McAlear's professional liability policy with his insurer, 

Saint Paul Insurance Companies, is the sole basis for his claim 

in the instant declaratory judgment action. He demanded of Saint 

Paul that it defend him in the Burchett action. Saint Paul 

denied this demand on the basis that his policy afforded no coverage and accordingly it owed him no duty to defend. McAlear then 

hired his own attorney to defend in the Burchett action. 

Thereafter McAlear brought the instant declaratory judgment action against Saint Paul seeking a judgment holding it* 

liable for the reasonable costs of his defense. The case was 

filed in the district court of Meagher County and submitted to 

the district court, sitting without a jury, for decision on the 

basis of an agreed statement of facts. The district court on 

July 2, 1971 entered an "Order", in effect the judgment, providin material part: 

"IT IS HEREBY ORDERED, ADJUDGED AND DECREED, 

that the Plaintiff recover for his cost of 

defense in the suit brought against him. 

"It appears to the Court that the policy was 

carelessly written, and since this is the 

fault of the insurance company, they should 

pay for their own carelessness, because certainly the duty to defend is not limited to 

the liability of the policy." 
Following denial of insurer's motion that the court 

enter written findings of fact and conclusions sf law, the 

insurer appeals, 

The thrust of insurer's position in the instant case 

is that its duty to defend is limited to claims against the 

insured within the coverage of the policy. The insurer contends that where, as here, there is no primary indemnity coverage for the Burchett accident, it has no duty to defend. Insurer 

points out that the basic insuring agreement in the policy (Coverage A), properly construed, so limits the duty to defend and 

that the policy contains an express exclusion of property damage claims (Exclusion 3). 

On the other hand, the gist of the insured's position 

is that the duty to defend is contractual and where, as here, the 

duty to defend is unrestricted by the terms of the policy, the 

duty to defend is not limited to the primary indemnity coverage 

of the policy. According to the insured, the duty to defend 

in the instant case is entirely independent of the primary indemnity coverage of the policy. Thus, the insured argues, where 

the Burchett complaint falls within the scope of the "duty to 

defend" provision in the policy, the insurer is obligated to 

defend without regard to the primary indemnity coverage afforded by the policy. As a corollary to this argument, the insured 

insists that the exclusion of property damage claims from the 

primary indemnity coverage afforded by the policy in no way 

limits the duty of the insurer to defend. 
Ordinarily a liability insurer has no duty to defend 

an action 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 contractural obligation to afford a defense. This general rule is succinctly stated 

in 50 ALR2d at page 472, as follows: 

" * * * a liability insurance company has 

no duty to defend a suit brought by a third 

party against the insured where the petition 

or complaint in such suit upon its face alleges a state of facts which fails to bring the 

case within the coverage of the policy. Consequently the company is not required to defend if it would not be bound to indemnify 

the insured even though the claim against him 

should prevail in that action." 

To like effect see 49 ALR2d 703; 114 U. of Pa. Law Review.734, 

"The Insurer's Duty to Defend Under a Liability Insurance Policy" 

pp. 747-749, 757; 7A Appleman Ins. L. & P., S 4685, pp. 462, 471. 

The allegations in the complaint against the insured 

determine whether there is coverage under the policy. This general rule is well stated in 44 AmJur 23, Insurance, s 1539; 

"Upon the basis of the allegations of the 

complaint or petition, the courts have adopted 

the following tests for determining whether 

particular allegations require the insurer to 

defend the action brought against the insured: 

if the complaint in the action brought against 

the insured upon its face alleges facts which 

come within the coverage of the liability policy, 

the insurer is obligated to assume the defense 

of the action; but if the alleged facts fail 

to bring the case within the policy coverage, 

the insurer is free of such obligation, at 

least initially. Stated differently, the 

insurer is under an obligation to defend only 

if it could be held bound to indemnify the 

insured, assuming that the injured person proved 
the allegations of the complaint, regardless 

of the actual outcome of the case. * * *" 

Measuring the Burchett claim against the policy provisions here, it is clear that Burchett's action is a property 

damage claim seeking money damages for McAlear's alleged negligence in damaging Burchett's plane, depreciation in its value, 

and loss of its use. The policy expressly excludes from coverage "injury to or destruction of any tangible property, including the loss of use thereof". Under such circumstances there is 

no duty to defend, as has been well expressed by the Michigan 

Supreme Court in Duval v. Aetna Casualty & Surety Co., 304 Mich. 

"The insurer is not required to defend the 

insured against claims expressly excluded 

from coverage in the policy, The exception 

in the policy is a part of the contract between the parties. The duty of the insurance 

company to defend was not independent of the 

duty to pay damages, if any, The two provisions 

are not separable." 

However, McAlear contends that the "duty to defend" provision of his policy is unique, thereby taking his case outside 

the scope of the general rule. He points out that the basic insuring agreement, Coverage A, provides in material part "the 

company shall have the * * * duty to defend * * * any suit against 

the Insured alleging damages, even if such suit is groundless, 

false or fraudulent", He further contends this provision constitutes an unrestricted contractual obligation on the part of 

the insurer to defend without regard to the primary indemnity 

coverage afforded by the policy. McAlear contends that because 

such language neither refers to nor restricts the duty to defend 

to damage actions within the coverage of the policy, any suit for 
damages within the scope of the "duty to defend" provisions of 

the policy imposes such duty on the insurer. For emphasis, he 

points out that under coverage B in the policy (not purchased 

by the insured in the instant case) the duty to defend is restricted by the following language: 

" * * * the Company shall have the right and 

duty to defend any suit against the Insured 

seeking damages on account of such bodily injury or property damage, even if any of 

the allegations of the suit are groundless * * *". 

Regarding interpretation of the terms of the policy here, 

the insured insists that an insurance policy differs from an 

ordinary contract between two persons in that there is no true 

negotiation and bargaining between the insurer and the insured 

in arriving at the terms of an insurance policy; that the terms 

of the policy are standardized by the insurer and offered to the 

insured on a "take-it-or-leave-it" basis; and that the insured 

really has nothing to say about the policy terms because of his 

lack of any real bargaining power with the insurer. The insured 

here reminds us that because of such circumstances existing in 

non-negotiated "adhesion" contracts such as insurance policies, 

a11 doubts as to the meaning of the terms in the policy must 

be resolved in favor of the insured and against the insurer. 

We recognize this principle of interpretation of "adhesion" 

contracts as expressed by the California Supreme Court in Gray 

v, Zurich Insurance Company, 65 C.2d 263, 419 P.2d 168, 171: 

"Although courts have long followed the 

basic precept that they would look to the 

words of the contract to find the meaning 
which the parties expected from them, they 

have also applied the doctrine of the adhesion 

contract to knsurance policies, holding that 

in view of the disparate bargaining status of 

the parties we must ascertain that meaning of 

the contract which the insured would reasonably expect. " (EmpHasis added. ) 

The Montana Supreme Court has previously recognized this same 

test in the following language from St. Paul Fire & Marine Ins. 

Co. v. Thompson, 150 Mont. 182, 187, 433 P.2d 795: 

"Again looking to the Kansas rule which we 

have adopted, we find that, 'the test is not 

what the insurer intended the words of the 

policy to mean but what a reasonable person 

in the position of an insured would understand 

them to mean. ' " 

Applying this test to the instant case, would a reasonable lawyer expect that his professional liability policy obligated his insurer to defend him against damage suits expressly 

excluded from the primary indemnity coverage of the policy? Or 

put another way, would a reasonable lawyer understand that his 

professional liability policy obligated his insurer to defend 

him against all damage suits of whatever nature? We hold that a 

reasonable lawyer would no more understand that his professional 

malpractice policy obligated his insurer to defend him against 

damage claims arising out of an airplane accident than against 

damages arising out of an assault, an automobile accident, or a 

fall on the steps of his residence. 

Both McAlear and the district court rely heavily upon 

the holding of this Court in Thompson for the proposition that 

the duty to defend is broader than the primary indemnity coverage 

under an insurance policy. There we said at p. 188, 
"'"The principle that 'the duty to defend is 

broader than the duty to pay' is now beyond 

cavil." The agreement to defend is not a 

covenant subordinate to or dependent on the 

agreement to indemnify; it is distinct from, 

different from, independent of, and broader 

than the insurer's promise to pay on behalf 

of the insured all sums which the insured 

shall become obligated to pay by reason of 

the liability imposed upon him by law for 

damages because of bodily injury. There is 

no language in the policy making the defense 

covenant dependent on the amount of liability 

for bodily injury. The defense covenant is 

clear, positive and unambiguous, and should 

be accorded its plain and ordinary meaning.' 

Comunale v. Traders & Gen. Ins. Co., 321 P.2d 

768, 773, (Cal .App.) " 

Thompson is clearly distinguishable and must be construed 

in the light of the facts of that case. There the insured carried 

an automobile liability policy with State Farm Mutual Insurance 

Company. In prior litigation State Farm had paid the limits of 

the policy on a judgment against Thompson and argued that it had 

no further duty to defend Thompson. We held otherwise. 

The distinction is that in Thompson the claim against 

the insured was clearly within the primary indemnity coverage of 

his policy, while here Burchett's claim is clearly outside the 

primary indemnity coverage. In Thompson the insurer urged that 

it was relieved of its duty to defend because of payment of the 

liability limits, whereas in the instant case there can never 

be any obligation on the part of the insurer to pay any judgment 

in the Burchett action. Additionally, in Thompson, the duty to 

defend was contained in one portion of the policy, while the duty 

to pay was contained in another; here the duty to defend and the 

duty to pay are all included in one sentence. Thus, Thompson is 
no authority for the proposition that an insurer's duty to 

defend extends to cases outside the primary indemnity coverage 

of the policy. 

For the foregoing reasons the judgment of the district 

court is reversed and the cause dismissed. 

Associate Justice