Court Opinion

ID: 4646123
Source: CourtListenerOpinion
Date Created: 2020-12-23 17:08:31.240777+00
Date Added: 2024-06-11T08:00:56.236795
License: Public Domain

12/22/2020

                                           DA 19-0727
                                                                                         Case Number: DA 19-0727

                  IN THE SUPREME COURT OF THE STATE OF MONTANA

                                           2020 MT 319

FARMERS INSURANCE EXCHANGE,

              Petitioner, Appellee, and Cross-Appellant,

         v.

KATE WESSEL, JOHN MEHAN,

              Respondents, Appellants, and Cross-Appellees,

MARC FLORA, GLORIA FLORA and CONNIE CRITES,
as Personal Representative of the Estate of
John Michael Crites,

              Respondents.

APPEAL FROM:           District Court of the First Judicial District,
                       In and For the County of Lewis And Clark, Cause No. BDV 19-333
                       Honorable Michael F. McMahon, Presiding Judge

COUNSEL OF RECORD:

                For Appellants:

                       David L. Vicevich, Lawrence E. Henke, Vicevich Law, Butte, Montana

                For Appellee:

                       Nicholas J. Pagnotta, Alexander Tsomaya, Williams Law Firm, P.C.,
                       Missoula, Montana

                                                     Submitted on Briefs: September 30, 2020

                                                               Decided: December 22, 2020

Filed:

                                  cir-641.—if
                       __________________________________________
                                         Clerk
Justice Laurie McKinnon delivered the Opinion of the Court.

¶1     This case has its origins in two lawsuits involving neighboring landowners in a rural

part of Lewis and Clark County. One claim was filed by Marc and Gloria Flora (the Floras)

and the other by the Estate of John Michael Crites (the Estate). Defendants in these

underlying lawsuits, Katy Wessel and John Mehan (together, the Insureds), tendered the

claims to Farmers Insurance Exchange (Farmers), with whom they have a homeowners

insurance policy (Policy). Farmers concluded coverage was not available because the

claims asserted intentional conduct by the Insureds. Farmers continued with its defense of

the Insureds and filed the instant declaratory judgment action to confirm it did not have a

duty to defend or indemnify the Insureds. The First Judicial District Court, Lewis and

Clark County, granted summary judgment to Farmers, concluding there was no coverage

under the Policy and Farmers, therefore, did not have a duty to defend the Insureds.

However, the District Court determined the issue of indemnification was not justiciable

and, on that basis, denied Farmers’ motion to dismiss. Also, citing M. R. Civ. P. 56(f), the

District Court denied the Insureds’ request to conduct further discovery, concluding no

affidavit had been filed showing “specific reasons” why the Insureds could not present

essential facts in opposition to Farmers’ summary judgment motion. Both parties appeal.

¶2     The Insureds present the following issues for review:

       1. Whether Farmers had a duty to defend when the claim against the Insureds
          alleges intentional conduct?

       2. Whether the District Court abused its discretion when it denied the Insureds’
          discovery requests?

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       Farmers presents the following issue on cross-appeal:

       3. Whether there can be a duty to indemnify in the absence of a duty to defend?

We affirm the District Court’s denial of the Insureds’ discovery requests. We affirm the

District Court’s holding that Farmers had no duty to defend the Insureds. However, when

there is no duty to defend there cannot be a duty to indemnify. Consequently, we reverse

the District Court’s holding that the duty to indemnify was not justiciable.

                 FACTUAL AND PROCEDURAL BACKGROUND

¶3     In 2008, the Insureds purchased property in Lewis and Clark County which is

accessed by Turk Road.         At the time, neighboring landowners, the Floras and

Michael Crites, used Turk Road to access their homes located further north. Turk Road,

which traverses the Insureds’ property, was the only means of access to the Floras’ and

Michael Crites’ properties. Both the Floras and the Estate maintain they have a right to

use Turk Road as it traverses the Insureds’ property and that Turk Road has historically

provided the only means of access to their properties.

¶4     In 2008, the Insureds asked for permission to snowmobile, and otherwise recreate,

on the Floras’ property. The Floras were unable to grant them permission because the

property is in a conservation easement which prohibits motorized use. The Insureds

became upset and retaliated by not allowing the Floras and Michael Crites to use

Turk Road. The Floras and the Estate allege that the Insureds began a concerted campaign

to intimidate and harass them and others who needed to use Turk Road to access their

properties. As a result, the Floras purchased, from another landowner, an easement on

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property adjoining the Insureds’ property and constructed a new driveway which did not

traverse the Insureds’ property, and which could also be used by Michael Crites.

¶5     This did not resolve the ongoing dispute. John Mehan allegedly told Mrs. Flora that

“if the Floras continued to use their new driveway, Marc Flora’s blood would run down

it.”1 Threats were also allegedly made by the Insureds that if Crites bypassed the Insureds’

parcel by using the new driveway, it would “be the end of him, too.” The Floras allege

that, in retaliation for not allowing the Insureds to recreate on their property, the Insureds

constructed snow berms and gates, felled trees, and created other obstacles to prevent them

and others from using the new driveway to access their properties. Additionally, the Floras

allege the Insureds physically threatened them; interfered with the enjoyment of their

property and home; and intimidated them, including discharging firearms at them. The

Floras allege they were compelled to leave their home, upon advice of law enforcement,

and because they feared for their lives. The Floras have been unable to find anyone to live

in their home, even for free; and their home continues to sit vacant, to decay, and cannot

be sold.

¶6     In the summer of 2011, Michael Crites disappeared. His dismembered remains were

found several months later near McDonald Pass. Michael Crites’ skull was subsequently

discovered in a different location from the rest of his body, on the other side of the

Continental Divide. Mehan was charged with felony assault with a weapon for pointing a

1
 The Insureds contend that Katy Wessel never made threats or intimidated and harassed the Floras,
the Estate or others. However, as will be discussed infra, the conduct which gave rise to the claim
was intentional and not accidental. Therefore, it is of little consequence whether Katy Wessel
participated in the alleged intentional conduct of assault and intimidation.
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gun at Crites, and for felony evidence tampering for removing cameras that were being

used by law enforcement to investigate Crites’ murder. Law enforcement has searched the

Insureds’ home on several occasions.

¶7     The Floras filed a lawsuit against the Insureds seeking declaratory and injunctive

relief alleging that they have an express and/or prescriptive easement to use Turk Road;

and sought relief for assault, trespass, and civil conspiracy. They allege the Insureds acted

intentionally, purposefully, and with malice. The second claim against the Insureds was

brought by the Estate and, like the Flora case, alleged that Crites had a right to use

Turk Road and that the Insureds had threatened Crites in retaliation for the Insureds’

inability to recreate on the Floras’ property. The Estate brought claims against the Insureds

for assault, trespass, intentional infliction of emotional distress, and civil conspiracy. The

Estate claims these acts were intentional and purposeful.

¶8     Farmers argues that the claims, made by the Estate and the Floras against the

Insureds, do not constitute an “occurrence” which would trigger coverage under the terms

of the Policy. Farmers maintains there was nothing “accidental” about the Insureds’

conduct which could be construed as an “occurrence” under the Policy. Contrarily, the

Insureds maintain that there are disputes of fact over whether they committed any wrongful

or intentional acts which would exclude them from coverage under the Policy. The

Insureds argue that a factual issue exists over whether an “occurrence” is involved in this

dispute, thus triggering coverage. Finally, the Insureds argue more discovery is needed to

know the basis of Farmers’ decision to deny coverage.

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¶9     Relevant portions of the Policy provide that “Farmers will defend an insured against

any suit seeking damages covered under Coverage E (Personal Liability).” Coverage E

provides that Farmers will pay “those damages which an insured becomes legally obligated

to pay because of: 1. Bodily injury resulting from an occurrence; or 2. Property damage

resulting from an occurrence.”             Under the Policy, “occurrence” is clearly

defined: “occurrence . . . means an accident[.]” (Emphasis added.) The Policy further

provides for a number of exclusions for intentional torts:2

       12. Intentional acts.
       We do not cover bodily injury, property damage or personal injury which is
       caused by, arises out of or is the result of an intentional act by or at the
       direction of any insured. By way of example this includes but is not limited
       to any intentional act or intentional failure to act by any insured, whether a
       criminal act or otherwise, where resulting injury or damage would be
       objectively expected to a high degree of likelihood, even if not subjectively
       intended or expected. This exclusion applies even if:

              a. any insured mistakenly believes he or she has the right to engage in
              certain conduct;
              b. the injury or damage is sustained by persons or property not
              intended or expected by any insured;
              c. the injury or damage is different or greater or of a different quality
              than that intended or expected;
              d. any insured did not understand that injury or damage may result; or
              e. any insured knew the intentional act or failure to act was a violation
              of any penal law, whether or not an insured is actually charged with
              or convicted of a crime.

       For purposes of application of this exclusion, a plea of guilty, no contest, or
       true in a criminal proceeding, which involves the same acts or activities
       which are the basis of a claim for damages against any insured, shall

2
  We note these exclusions only for purposes of completeness and because it discusses
“intentional torts,” which are at issue in the underlying proceedings. However, because we
conclude there was no “occurrence” and the claims do not trigger coverage, it is not necessary to
apply the Policy’s provision to exclude coverage.
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       conclusively bar any bodily injury, property damage or personal injury
       arising or resulting from or caused by such acts or activities from.

¶10    Farmers moved for summary judgment in September 2019 after receiving answers

from the Floras and the Estate admitting that their allegations against the Insureds were for

“strictly intentional conduct.” The District Court granted Farmers’ motion for summary

judgment on the duty to defend; however, it concluded Farmers’ duty to indemnify was not

yet justiciable.

                              STANDARDS OF REVIEW

¶11    This Court will review an order granting summary judgment de novo.

M. R. Civ. P. 56(c)(3), provides: “the judgment sought should be rendered if the pleadings,

the discovery and disclosure materials on file, and any affidavits shows that there is no

genuine issue as to any material fact and that the movant is entitled to judgment as a matter

of law.” The moving party has the initial burden of establishing both the absence of any

genuine issue as to any material fact and entitlement to judgment as a matter of law.

Tin Cup Cty. Water v. Garden City Plumbing, 2008 MT 434, ¶ 22, 347 Mont. 468,

200 P.3d 60. Once the moving party has met its burden, the opposing party must present

affidavits or other testimony containing material facts which raise a genuine issue as to one

or more elements of its case. Tin Cup Cty. Water, ¶ 54 (citing Klock v. Town of Cascade,

284 Mont. 167, 174, 943 P.2d 1262, 1266 (1997)).

¶12    Before this Court is an issue regarding the interpretation of an insurance policy. The

interpretation of an insurance policy presents a question of law, which this Court reviews

                                          7
for correctness.   Town of Geraldine v. Mont. Mun. Ins. Auth., 2008 MT 411, ¶ 8,

347 Mont. 267, 198 P.3d 796.

                                       DISCUSSION

¶13 1. Whether Farmers had a duty to defend when the claim against the Insureds
alleges intentional conduct?

¶14    An insurer has a duty to defend when a complaint against an insured alleges facts

which, if proved, would result in coverage. Fire Ins. Exch. v. Weitzel, 2016 MT 113, ¶ 12,

383 Mont. 364, 371 P.3d 457 (internal citations omitted). Whether a duty exists is

determined by looking to the allegations within the complaint; “the complaint and the

policy constitute the universe with regard to the insurers’ duty to defend.” Weitzel, ¶ 12.

If there is no coverage under the terms of the policy based on the facts contained in the

complaint, there is no duty to defend. Weitzel, ¶ 12 (internal citations omitted). The insured

bears the initial burden “to establish that the claim falls within the basic scope of coverage.”

Weitzel, ¶ 13 (citing Travelers Cas. & Sur. Co. v. Ribi Immunochem Research,

2005 MT 50, ¶ 29, 326 Mont. 174, 108 P.3d 469). If the insured shows that the claim falls

within the basic scope of coverage, then the burden shifts to the insurer to show that the

claim is unequivocally excluded under an exception within the coverage. Weitzel, ¶ 13.

¶15    Here, the Insureds must demonstrate that the claims against them fell within the

scope of coverage, showing either “bodily injury” or “property damage” resulting from an

“occurrence.” Under the Policy, “occurrence” means accident. To analyze whether the

conduct was accidental rather than intentional, the District Court utilized the

Fisher Builders two-prong objective standard, which first considers whether the act itself

                                           8
was intentional and, if so, then considers whether the consequence or resulting harm

stemming from the act was intended or expected from the actor’s standpoint. See Emplrs

Mut. Cas. Co. v. Fisher Builders, Inc., 2016 MT 91, ¶ 15, 383 Mont. 187, 371 P.3d 375.

The second prong requires an objective inquiry to determine what could reasonably be

expected to result from an intentional act. Fisher Builders, ¶ 19. The District Court found

both the Floras and the Estate alleged, in their underlying claims and respective admissions

in this action, intentional conduct of the Insureds that was not accidental. The District

Court found that the Insureds also intended the ensuing consequences of harm to the Floras

and the Estate.

¶16    This Court agrees. The Floras and the Estate allege that the Insureds’ conduct was

both intentional and purposeful; that is, the Insureds intended to cause the “very type of

damages” that the Floras and the Estate suffered. The intentional conduct alleged in the

claims by the Floras and the Estate include: threats of physical harm for using the Floras’

new driveway; installment of physical barriers preventing access to properties owned by

the Floras, the Estate, and other landowners; retaliation in the form of intimidation for

denying the Insureds access to recreate on their property; and threats of violence through

the use of firearms. As the conduct alleged was both intentional and done purposefully by

the Insureds to cause injury and damages to the Floras and the Estate, it does not come

under the terms of the Policy which requires that an “occurrence” or “accident” is needed

to trigger coverage. Although an insurer “[c]annot ignore knowledge of facts that may give

rise to coverage under the policy simply because the complaint . . . does not allege these

facts of which the insurer has knowledge . . . ,” this exception does not apply due to the

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very nature of the claims. See Revelation Indus. v. St. Paul Fire & Marine Ins. Co.,

2009 MT 123, ¶ 39, 350 Mont. 184, 206 P.3d 919. The Insureds suggest that their denials

to the allegations create factual disputes. However, our case law makes clear that the

threshold question is whether the claim against the insured alleges facts that would trigger

coverage. Weitzel, ¶ 21. The Insureds cannot create coverage where it does not exist

simply by denying the claims when the claims themselves do not trigger coverage.

¶17    The District Court did not err in granting summary judgment to Farmers on the issue

of Farmers’ duty to defend. The underlying cases against the Insureds allege the Insureds

intended both their actions and the ensuing consequences. Because the Insureds’ conduct

was not accidental, there was no “occurrence” under the Policy which would trigger

coverage.

¶18 2. Whether the District Court abused its discretion when it denied the Insureds’
discovery requests?

¶19    The Insureds assert that they were entitled to conduct reasonable discovery to

evaluate Farmers’ compliance with Montana law in its claims settlement process. Pursuant

to Montana law, Farmers only had to read the underlying complaint and counterclaim.

See Landa v. Assurance Co., 2013 MT 217, ¶ 34, 371 Mont. 202, 307 P.3d 284 (holding

that Montana law “expressly decline[s] to require that insurers seek out facts beyond the

complaint.”). M. R. Civ. P. 56(f) requires, “the party opposing the motion show by

affidavit that, for specified reasons, it cannot present facts essential to justify its

opposition[.]” If Rule 56(f) is not met, then the party opposing summary judgment is not

entitled to discovery.   Miller v. Goetz, 2014 MT 150, ¶¶ 14-16, 375 Mont. 281,

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327 P.3d 483. Additionally, “a district court does not abuse its discretion in denying a

M. R. Civ. P. 56(f) motion where the party opposing a motion for summary judgment does

not establish how the proposed discovery could preclude summary judgment.”

Miller, ¶ 15.

¶20    The Insureds have not provided an affidavit setting forth specific reasons why they

cannot present facts essential to justify their opposition to Farmers’ summary judgment

motion. Instead, the Insureds merely deny the allegations against them. As the Insureds

have not satisfied Rule 56(f), this Court agrees with the District Court’s decision to deny

discovery under a plain application of Rule 56(f)—and in doing so, the District Court did

not abuse its discretion.

¶21    Farmers asserts the following claim on cross-appeal.

¶22    3. Whether there can be a duty to indemnify in the absence of a duty to defend?

¶23    The duty to defend and the duty to indemnify are independent of each other,

however, “where there is no duty to defend, it follows that there can be no duty to

indemnify.”     See Skinner v. Allstate Ins. Co., 2005 MT 323, ¶ 18, 329 Mont. 511,

127 P.3d 359. The duty to indemnify is narrower than the duty to defend and arises “only if

coverage under the policy is actually established.” State Farm Mut. Auto. Ins. Co. v.

Freyer, 2013 MT 301, ¶ 26, 372 Mont. 191, 312 P.3d 403. “While an insurer’s duty to

defend is triggered by the allegations [of the claim], an insurer’s duty to indemnify hinges

not on the facts the claimant alleges and hopes to prove but instead on the facts, proven,

stipulated, or otherwise established that actually create the insured’s liability.”

Freyer, ¶ 26.

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¶24    The District Court held Farmers’ duty to indemnify was not ripe and therefore not

justiciable because liability had not yet been determined in the underlying claims made by

the Floras and the Estate. The District Court cited Northfield stating, “it simply is not

appropriate to determine whether the conduct of the insureds in the present case falls within

the exclusions of the Policy prior to a determination or stipulation as to the underlying

facts, because the duty to indemnify may, in fact, never arise.” Northfield Ins. Co. v.

Mont. Ass’n of Counties, 2000 MT 256, ¶ 23, 301 Mont. 472, 10 P.3d 813.                  The

District Court was correct that where there may potentially be a duty to defend, the duty to

indemnify is not ripe for judicial determination. However, here, there is no coverage under

the Policy which gives rise to a duty to defend. Where there is no coverage under the

Policy—and no corresponding duty to defend—there cannot be a duty to indemnify. A

conclusion that there is no duty to defend compels the conclusion that there is no duty to

indemnify.

                                     CONCLUSION

¶25    The District Court correctly concluded there was no coverage under the Policy

because the Insureds’ intentional acts committed with the purpose of producing the ensuing

consequences did not constitute an “accident” or “occurrence.” The District Court did not

abuse its discretion in denying the Insureds more time for discovery, particularly given that

the Insureds did not comply with M. R. Civ. P. 56(f). The District Court erred in

concluding the issue of whether Farmers had a duty to indemnify was not justiciable. A

conclusion that there is no duty to defend, as here, compels a conclusion that there is no

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duty to indemnify. The judgment of the District Court is affirmed in part and reversed in

part.

                                               /S/ LAURIE McKINNON

We concur:

/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ DIRK M. SANDEFUR
/S/ INGRID GUSTAFSON

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