No. 89-505 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

SCOTT L. GRABER, individually, 

and doing business as 

NORTHWEST PUBLISHING COMPANY, 

Plaintiff and Appellant, 

STATE FARM FIRE AND CASUALTY 

COMPANY, COLIN C. ANDREWS, and 

DUANE PASEMAN, 

Defendants and Respondents. 

APPEAL FROM: District Court of the Eleventh Judicial District, 

In and for the County of Flathead, 

The Honorable Michael H. Keedy, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Dana L. Christensen, Debra D. Parker; Murphy, 

Robinson, Heckathorn & Phillips, Kalispell, Montana 

For Respondents: 

Stephen C. Berg; Warden, Christiansen, Johnson & 

Berg, Kalispell, Montana 

Filed: 

Submitted on Briefs: May 17, 1990 

L4 Decided: September 4, 1990 
Justice Diane G. Barz delivered the Opinion of the Court. 

In the fall of 1983, Scott L. Graber purchased a business 

insurance policy from State Farm Fire and Casualty Company. On May 

29, 1987, Scott L. Graber, individually and d/b/a Northwest 

Publishing Company, filed a complaint in the District Court of the 

Eleventh Judicial District, Flathead County, alleging damages as 

a result of the refusal by State Farm, Colin C. Andrews and Duane 

Paseman to offer a defense or coverage for a claim made against 

Graber. On March 10, 1989, State Farm and Duane Paseman moved for 

summary judgment pursuant to Rule 56, M.R.Civ.P., requesting that 

the District Court determine as a matter of law that no coverage 

existed under the business policy for the claim submitted by 

Graber. The court granted State Farm's and Pasemants motion for 

summary judgment, finding that no coverage existed because there 

was no damage to "tangiblew property. Graber appeals this 

decision. We affirm. 

The following issues were raised on appeal: 

1. Did the District Court err in granting summary judgment 

in favor of State Farm and Paseman? 

2. Did an 'loccurrencell exist as defined in the State Farm 

Policy? 

In 1976 Graber established a publishing and advertising 

business in Kalispell, Montana, under the assumed name of Northwest 

Publishing Company. Among other things, Graber published an 

annual, magazine-style, tourist information periodical known as 
Travel Guide. ClaraEllen Anderson had been employed by Graber at 

Northwest Publishing Co. since August of 1986. She had previously 

worked approximately one and one-half years with the company as a 

part-time employee. Her duties consisted of typesetting, lay-out, 

camera work and copyrighting. Anderson also assisted in the 

production of Travel Guide. Her involvement with the production 

of this publication consisted primarily of obtaining and/or writing 

copy relating to each geographical region. Graber was the owner 

of Northwest Publishing Co. at all times during Anderson's 

employment. 

Since 1969, Graber had purchased several insurance policies 

from Kalispell State Farm agent, Colin Andrews, for personal and 

business purposes. In the fall of 1983, Graber contacted Andrews 

for the purpose of purchasing a new business policy. Graber was 

purchasing a building on North Main Street in Kalispell to use as 

a new business location for his publishing company. Andrews 

inspected the premises and thereafter issued Graber a business 

policy, effective on approximately November 1, 1983. The policy 

provided coverage for the building and personal property to the 

extent of $60,000 and $19,000, respectively. The policy also 

provided liability coverage in the aggregate amount of one million 

dollars per occurrence together with $25,000 per accident on 

medical coverage. Graber also contends that at the time he 

purchased this business policy, that State Farm's agent, Andrews, 

assured him that the policy would afford Graber protection from 

copyright and editorial infringement claims. However, this issue 
is not presently before this Court. 

On November 6, 1985, Graber was served with a complaint filed 

by Alaska Northwest Publishing Co. in the United States District 

Court for the Western District of Washington. In its complaint, 

Alaska Northwest alleged that a portion of its publication, The 

Milepost, was copied by Graber in his publication, Travel Guide. 

Graber gave notice of the lawsuit to State Farm by filling out a 

"Fire and Casualty Claim Report1! form in agent Andrewsl office in 

Kalispell. Graber kept State Farm apprised of the subsequent 

developments in the litigation. 

Graber agreed on May 2, 1986 to settle with Alaska Northwest 

by paying them $40,000 plus costs and interests on that sum to be 

paid over a period of five years. Prior to settling with Alaska 

Northwest, Graber informed State Farm that settlement appeared 

imminent. He asked State Farm whether it would provide a defense 

or coverage. State Farm did not respond. 

After the settlement agreement between Alaska Northwest and 

Graber was signed, Graber again asked State Farm to respond to his 

request for a defense or coverage. On May 21, 1986, State Farm, 

in writing, denied coverage due to the llintentionalll nature of the 

alleged actions, and the definition of lloccurrencell in the policy. 

On October 21, 1986, State Farm, in writing, cancelled Graberls 

llBusiness Policy. l1 

On May 29, 1987, Graber, individually and d/b/a Northwest 

Publishing Co., filed a complaint in the District Court of the 

Eleventh Judicial District alleging damages as a result of the 
refusal by State Farm, Andrews and Paseman to offer a defense or 

coverage for a claim made against Graber. On March 10, 1989, State 

Farm and Paseman moved for summary judgment, requesting that the 

District Court determine as a matter of law that no coverage 

existed under the "Business Policy1' for the claim submitted by 

Graber. The court granted State Farm's and Paseman's motion for 

summary judgment after finding that no coverage existed because 

there was no damage to property. Graber appeals the 

court's decision in regard to these two defendants. 

The first issue raised on appeal is whether the District Court 

erred in granting summary judgment in favor of State Farm and 

Paseman. 

The business insurance policy which Graber bought provided 

that: 

[Tlhe Company will pay on behalf of the 

insured all sums which the insured shall 

become legally obligated to pay as damages 

because of bodily injury, property damage or 

personal injury caused by an occurrence to 

which this insurance applies. 

The essential question therefore is whether Alaska Northwest 

suffered ''property damagef1 as a result of the plagiarism by 

Graber1s employee from Alaska Northwest's publication, The 

Milepost. Graber first argues that Alaska Northwest's publication 

is tangible property. Graber notes that the Alaska Northwest's 

complaint stated that Graberls employee's plagiarism made its 

publication, The Mile~ost,,less useful and therefore Graber argues 

that as a consequence ''property damage" occurred to the 

publication. 
The insurance policy that Graber purchased contained two 

definitions for ffproperty damages,11 one stating that property 

damage occurs if Ifphysical injury to or destruction of tangible 

propertyft is found and the other stating that property damage 

occurs if there is "loss of use of tangible property which has not 

been injured. Graber argues that the damage to Alaska Northwest Is 

publication, as a result of Graberls plagiarism, fits within the 

second definition. 

The publication, The Milepost, is indisputably tangible 

property. The dispute, however, lies in whether plagiarism of the 

publication constitutes property damage to the publication. While 

Graber argues that it does constitute property damage, respondents 

State Farm and Paseman argue that this case only involves copyright 

and trademark infringement which they argue is intangible property. 

The publication The Milepost is clearly a piece of tangible 

property. The publication was not physically injured or destroyed 

and therefore it does not fit under the first definition. However, 

we must also examine whether Graber may recover under the second 

definition which states that property damage occurs if there is 

ffloss of use of tangible property which has not been injured.If 

Because the trial court granted summary judgment in State 

Farm's favor, we view the facts in the light most favorable to 

Graber. See Nitschke v. Blue Cross of Montana (1988) , 231 Mont. 

113, 751 P.2d 175. Only if an issue of material fact remains in 

dispute will we reverse the trial courtfs grant of summary 

judgment. Graham v. Montana State University (1988) , 235 Mont. 
Tangible property is property that is capable of being 

handled, touched or physically possessed. Lamar Truck Plaza, Inc. 

v. Sentry Ins. (Colo.App. 1988), 757 P.2d 1143, 1144. See also 

Sturges Manufacturing Co. v. Utica Mutual Ins. Co. (1973), 347 

N.Y.S.2d 388, 75 Misc.2d 416 and Lay v. Aetna Ins. Co. 

(Tex.Civ.App. 1980), 599 S.W.2d 684. Alaska Northwest's complaint 

against Graber alleged "lost advertising business, . 

substantial loss of revenues, . . . irreparable injury to its 

reputation and good will . . . 'I none of which qualifies as 

tangible property. As the trial court correctly noted, the 

complaint alleges economic losses. Montana courts have 

consistently held that in order for economic loss to be covered by 

insurance a direct physical injury to tangible property must occur. 

Safeco Ins. Co. v. Munroe (1974), 165 Mont. 185, 527 P.2d 64; 

Lindsay Drilling v. U.S. Fidelity & Guar. (1984), 208 Mont. 91, 676 

P.2d 203; Aetna Casualty & Surety Co. v. First Security Bank (D. 

Mont. 1987), 662 F.Supp. 1126. Alaska Northwest did not allege 

direct physical injury to its tangible property, The Milepost, but 

alleged only economic loss. The trial court correctly concluded 

Alaska Northwest's claims did not constitute property damage, or 

loss of use of tangible property. 

The general rule is that the insurer has a duty to defend when 

a complaint filed against its insured sets forth facts which bring 

the event within the policy provisions. Atcheson v. Safeco (1974), 

165 Mont. 239, 245, 527 P.2d 549, 552. The insurance company must 
look to the allegations of the complaint to determine if there is 

liability coverage. McAlear v. St. Paul Ins. Companies (1972) , 158 

Mont. 452, 456, 493 P.2d 331, 334. However, where the complaint 

alleges events not within the coverage of the policy, and the 

insurer would not be obligated to indemnify the insured if the 

complaining party recovered, then the insurer has no duty to 

defend. a. 

State Farm denied coverage and defense to Graber on the 

grounds that events alleged in Alaska Northwest's complaint failed 

to meet the policy definition of lloccurrence.ll Part of the policy 

definition of lloccurrencell requires resulting property damage. The 

economic loss alleged to have resulted from events is not, as a 

matter of law, property damage. Therefore, having determined that 

events failed to trigger indemnity, State Farm had no duty to 

defend. 

The second issue raised on appeal is whether an lloccurrencell 

existed as defined in the State Farm policy. 

We do not have jurisdiction to address this issue. This issue 

has not yet been addressed by the District Court, and therefore is 

not properly before this Court. 

We hold the trial court's grant of summary judgment to be 

proper and, therefore, affirm. 
We concur: