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 FIREAND 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 HonorableMichael 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 Decided: September 4, 1990 L4Justice Diane G. Barz delivered the Opinion of the Court.

In the fall of 1983, Scott 

### L. Graber purchased a business insurancepolicy from StateFarm Fireand CasualtyCompany. OnMay 29, 1987, Scott L. Graber, individually and d/b/a Northwest PublishingCompany, 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 Pasemanmoved for summary judgmentpursuant 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 Pasemantsmotion for summary judgment, finding that no coverage existed because there

was no damage to "tangiblew property. Graber appeals this decision. We affirm. The following issueswere 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 inKalispell,Montana, under theassumedname of Northwest Publishing Company. Among other things, Graber published an annual, magazine-style, tourist information periodical known asTravel Guide. ClaraEllen Anderson had been employed by Graber at Northwest Publishing Co. sinceAugust of 1986. Shehad previously worked approximately one and one-half yearswith 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 thispublication consistedprimarily of obtainingand/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 onemillion 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 issueis not presently before this Court. On November 6, 1985, Graberwas servedwith 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 Andrewsloffice 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 itwould provide a defense

or coverage. State Farm did not respond. After the settlement agreement between Alaska Northwest and Graberwas signed,Graber again asked State Farm to respond tohis request for a defense or coverage. On May 21, 1986, State Farm, inwriting,denied coveragedue to the llintentionalll nature of the alleged actions,and thedefinition of lloccurrencell in thepolicy. 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 therefusal by State Farm, Andrews and Paseman to offer a defense or coverage fora claimmade againstGraber. OnMarch 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'smotion 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 onappeal is whether theDistrictCourt 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 thatAlaska Northwest's publication is tangible property. Graber notes that the Alaska Northwest's complaint stated that Graberls employee's plagiarism made its publication,TheMile~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 ffpropertydamages,11one stating that property damage occurs if Ifphysicalinjury to or destruction of tangible propertyftis found and the other stating that property damage

occurs if there is "loss of use of tangiblepropertywhich has not been injured. Graberargues that thedamagetoAlaskaNorthwestIs publication, as a result of Graberlsplagiarism, fits within the second definition. The publication, The Milepost, is indisputably tangible property. The dispute, however, lies inwhetherplagiarism of the publication constitutesproperty damage to thepublication. While Graber argues that it does constitute property damage,respondents StateFarmand Pasemanargue that this case only involvescopyright and trademark infringement which theyargue is intangible property. The publication The Milepost is clearly a piece of tangible property. Thepublicationwas not physically injured ordestroyed and therefore itdoesnot 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 orphysicallypossessed. 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 consistentlyheld that in order for economic loss tobe covered by insurance adirectphysical injurytotangibleproperty must occur. Safeco Ins. Co. v. Munroe (1974), 165 Mont. 185, 527 P.2d 64; Lindsay Drillingv. U.S. Fidelity & Guar. (1984),208Mont. 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 directphysical injury to its tangible property, TheMilepost,but alleged only economic loss. The trial court correctly concluded Alaska Northwest's claims did not constitute property damage, or loss of use of tangibleproperty. Thegeneral rule is that the insurerhas a duty todefend when

a complaint filed against its insured sets forth facts which bring theeventwithin thepolicyprovisions. Atchesonv. Safeco (1974), 165Mont. 239, 245, 527 P.2d 549, 552. The insurance companymustlook to the allegations of the complaint to determine if there is liability coverage. McAlearv. 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 eventsalleged inAlaska Northwest's complaint failed tomeet thepolicy definition of lloccurrence.ll Part of thepolicy definitionof 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 iswhether an lloccurrencell existed as defined in the State Farm policy. We do nothave jurisdictionto address this issue. This issue has not yetbeen addressedby 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: