Title: RELIANCE INS CO v FISHER POEPP
Citation: N/A
Docket Number: 12605
State: Montana
Issuer: Montana Supreme Court
Date: April 23, 1974

No. 12605 I N T H E S U P R E M E C O U R T OF T H E STATE O F M O N T A N A 19 74 RELIANCE INSURANCE C O M P A N Y , P l a i n t i f f and Appellant, -vs - VIRGIL FISHER, RICHARD 0. POEPPEL, Defendants and Respondents, and HORACE MANN INSURANCE C O M P A N Y , Defendant and Appellant. Appeal from: D i s t r i c t Court of the Eleventh J u d i c i a l D i s t r i c t , 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 & P h i l l i p s , Kalispell, Montana Robert L. Fletcher argued, Kalispell, Montana McGarvey, Morrison, Hedman & m o r e , Whitefish, Montana Submitted: March 21, 1974 Decided: APR 2 3 1974 Filed : APR 2 3 1974 M r . ~ u s t i c e Fr8nk I. H a s w e l l delivered t h e Opinion of t h e Court. This is a declaratory judgment a c t i o n involving a t e a c h e r ' s professional l i a b i l i t y insurance policy and a second insurance policy issued t o t h e same defendant, V i r g i l Fisher, denominated "a Farmer's Comprehensive Personal L i a b i l i t y Hazard Policy". This d i s t r i c t c o u r t , s i t t i n g without a jury, refused t o e n t e r a declaratory judgment r e l e a s i n g t h e two insurance companies from t h e duty t o defend t h e insured i n a s u i t f o r personal damages i n Flathead County cause No. 23116. From t h i s order, both i n s u r e r s appeal. An a c t i o n w a s f i l e d i n t h e d i s t r i c t court of Flathead County by Richard 0. Poeppel a g a i n s t V i r g i l Fisher, seeking damages a l - legedly r e s u l t i n g from an a l t e r c a t i o n between t h e p a r t i e s on April 2 0 , 1972, i n t h e Central School i n Whitefish, Montana. Poeppel, a school teacher, alleged t h a t he had been attacked by Fisher, a l s o a teacher, and struck by him. The incident arose during regular school hours. Poeppel had physically e j e c t e d one of h i s students from h i s classroom i n t o t h e hallway. Fisher ob- served t h e a c t i o n s of Poeppel and t h e student, and reported them t o t h e a s s i s t a n t p r i n c i p a l . Fisher then returned t o t h e v i c i n i t y of Poeppel and t h e d i s c i p l i n e d student a t which t i m e t h e a l t e r - c a t i o n occurred during which Fisher s t r u c k Poeppel. Fisher tendered t h e defense of t h a t a c t i o n t o appellant Reliance Insurance Company which had issued a policy denominated "a Farmer's Comprehensive Personal L i a b i l i t y Hazard Policy" t o Fisher, which policy was i n e f f e c t a t t h e t i m e of t h e a l t e r c a t i o n . Although Reliance caused an i n i t i a l appearance t o be made on be- half of Fisher i n t h a t a c t i o n i n order t o prevent a d e f a u l t , it declined t o accept e i t h e r t h e duty t o defend o r r e s p o n s i b i l i t y f o r any judgment which might be obtained a g a i n s t Fisher i n t h a t action. A s t i p u l a t i o n w a s entered i n t o staying f u r t h e r proceedings i n t h a t a c t i o n u n t i l t h e matter of such insurance coverage could be resolved. O n August 28, 1972, Reliance CQmenced t h i s a c t i o n f o r a declaratory judgment i n t h e d i s t r i c t c o u r t of Flathead County, naming a s defendants its insured, V i r g i l Fisher; Richard 0 . Poeppel; and Horace Mann Insurance Company, a company t h a t had issued a policy providing professional l i a b i l i t y insurance cover- age f o r teachers of t h e Whitefish school system. The action sought a judgment declaring, among o t h e r things, t h a t Reliance had no obligation under i t s policy t o defend t h e Poeppel a c t i o n o r t o pay any damages t h a t might be awarded t h e r e i n . Through answers f i l e d by Horace Mann it was admitted t h a t on April 20, 1972, t h e r e was i n e f f e c t between s a i d insurance company and t h e Montana Education Association (MEA) a policy of l i a b i l i t y insurance denominated a s an "Educator's Professional L i a b i l i t y Policy." A s members of t h e MEA, both Fisher and Poeppel were insured p a r t i e s under t h e Horace Mann policy. A s a defense t o its alleged duty t o defend, Horace Mann contends t h a t i t s insurance contract is expressly inapplicable by reason of s p e c i a l exclusions contained i n s a i d policy. The case w a s argued o r a l l y before t h e d i s t r i c t c o u r t on May 22, 1973. Subsequently w r i t t e n b r i e f s were f i l e d and t h e d i s - t r i c t c o u r t issued i t s order refusing " t o render o r e n t e r a Declaratory Judgment o r Decree f o r t h e reason t h a t such a Judgment o r Decree would n o t terminate the uncertainty o r controversy giving rise t o t h e proceedings." From t h i s order and d e n i a l of a motion f o r new t r i a l o r order t o amend judgment, both i n s u r e r s appeal. The s i n g l e c o n t r o l l i n g i s s u e upon appeal is whether t h e i n s u r e r s , Reliance and Horace Mann, a r e under an obligation t o defend Fisher i n t h e lawsuit f i l e d a g a i n s t him by Poeppel o r required t o indemnify Fisher f o r any l o s s e s sustained as a r e s u l t of t h e Poeppel lawsuit. The g i s t of respondent F i s h e r ' s argument i s t h a t h i s a c t i o n s giving r i s e t o t h e a l t e r c a t i o n and subsequent lawsuit come within t h e Reliance policy coverage a s " a c t i v i t i e s t h e r e i n which are o r d i n a r i l y incident t o non-business p u r s u i t s . " Fisher a l s o argues t h a t h i s a c t i o n s t e m s from an apparent need t o defend himself. The d i s t r i c t c o u r t ' s reasons f o r refusing t o determine t h e o b l i g a t i o n s of Horace Mann with regard t o s a i d Cause No. 23116 a r e set f o r t h i n a memo following t h a t c o u r t ' s order deny- i n g a motion f o r new t r i a l , t h e a l t e r n a t i v e , f o r t h e c o u r t t o amend i t s order of J u l y 5 , 1973. Said memo reads i n p a r t : "Defendant Horace Mann puts t h e most r e l i a n c e upon exclusion j, ' t o l i a b i l i t y and respective claims brought by teachers o r o t h e r employees of a school system a g a i n s t t h e insured, * * * I . Defendant Horace Mann intends ( s i c ) t h a t i f t h e claimant were a teacher a t t h e t i m e of t h e occurrence giving rise t o t h e claim, irrespec- t i v e of t h e conduct of t h e teacher a t t h a t time, t h i s policy does not apply. This exclusionary clause, given l i t e r a l i n t e r p r e t a t i o n , would ex- clude any claimants who were teachers o r school employees of any school system a t any time, and t h a t simply cannot be t h e i n t e n t of t h e policy. Thus i n determining what t h e i n t e n t of t h i s policy is, it is incomprehensible t h a t t h e m e r e l a b l e ( s i c ) of ' t e a c h e r 1 is s u f f i c i e n t t o cause t h i s policy not t o apply. Thus, i f t h e conduct of t h e claimant 'teacher' so f a r exceeds t h e scope of h i s professional employment so a s t o be t o t a l l y unrelated t o h i s occupation, how can it be contemplated t h a t t h i s type of conduct would be excluded from t h e policy?" The t h r u s t of both i n s u r e r s ' p o s i t i o n s i n t h e i n s t a n t case is t h a t t h e i r duty t o defend is limited t o claims a g a i n s t t h e insured within t h e coverage of t h e policy. Reliance argues t h a t i t s policy issued t o Fisher i s denominated a "Farm Owner's Policy" on its face and cover sheet and s a i d 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 cer- tain 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 be- come legally obligated to pay as damages because of bodily injury or property damage and the Com- pany 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 alle- gations of the suit are groundless, false or fraudulent; but the Company may make such investi- gation 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 ser- vices, 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 resi- dence 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 pur- suits, (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 resi- dence 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 defini- tions 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 in- cluding: "Trade, profession, or occupation other than farming, and roadside stands maintained prin- cipally 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 follow- ing 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 t e a c h e r s working a t t h e Whitefish School within school hours a t t h e time of t h e i n c i d e n t while t h e claimant was d i s c i p l i n i n g a student from h i s c l a s s . The d i s t r i c t c o u r t ignored t h e s t i p u l a t i o n t h a t both were t e a c h e r s , and hypothesized t h a t t h e f a c t s might show t h a t t h e a c t i o n s of Poeppel "so f a r exceed(ed) t h e scope of h i s profes- s i o n a l employment" a s t o make him n e i t h e r a teacher nor an employee of t h e school system f o r purposes of coverage under t h e policy. W e disagree. The a l t e r c a t i o n was c l e a r l y connected with and r e l a t e d t o school a c t i v i t i e s . Section 13-704, R.C.M. 1947, provides t h a t t h e c l e a r and e x p l i c i t language of a c o n t r a c t must govern its i n t e r p r e t a - t i o n . Section 13-707, R.C.M. 1947, s t a t e s t h a t every p a r t of a c o n t r a c t is t o be given e f f e c t , using each c l a u s e t o h e l p i n t e r - p r e t t h e o t h e r s . F i n a l l y , s e c t i o n 13-710, R.C.M. 1947, provides: "The words of a c o n t r a c t a r e t o be understood i n t h e i r ordinary and popular sense, r a t h e r than according t o t h e i r s t r i c t l e g a l meaning, u n l e s s used by t h e p a r t i e s i n a t e c h n i c a l sense, o r u n l e s s a s p e c i a l meaning is given t o them by usage, i n which case t h e l a t t e r must be followed." The c l e a r e x p l i c i t language of exclusion " j " excludes " * * * claims brought by t e a c h e r s o r o t h e r employees of a school system a g a i n s t t h e assured * * *". Applying s e c t i o n s 13-704, 13-707 and 13-710, R.C.M. 1947, t h e , s u i t of Poeppel is c l e a r l y not covered. A s previously discussed i n reference t o t h e Reliance policy, it i s t h e l a w of t h i s s t a t e t h a t t h e duty of a l i a b i l i t y i n s u r e r t o defend t h e insured is governed by t h e a l l e g a t i o n s of t h e t h i r d p a r t y ' s complaint a g a i n s t t h e insured. McAlear v. S t . Paul I n s . Cos., 158 Mont. 452, 493 P.2d 331. I n t h i s c a s e , para- graph I of Poeppells complaint a g a i n s t F i s h e r a l l e g e s t h a t a t t h e time of t h e incident both Poeppel and Fisher were employed by School D i s t r i c t No. 4 4 i n Whitefish. Exclusion "j" of t h e Horace Mann policy excludes coverage f o r claims brought by "teachers o r o t h e r employees of a school system" and t h e r e f o r e t h e M c A l e a r r u l e r e q u i r e s a finding t h a t Horace Mann has no obligation t o defend i n t h i s matter. For these reasons t h e cause is remanded t o t h e d i s t r i c t c o u r t f o r e n t r y of judgment r e l e a s i n g both insurance companies from any duty t o defend o r t o pay any damages t h a t might be awarded i n Cause No. 23116. J u s t i c e - -.- /. w\a concur : - . - . J Chief J u s t i c e , - - ,- . I