Unpublished Disposition, 904 F.2d 41 (9th Cir. 1990)

MEMORANDUM^* 

Kenneth Maule ("Maule"), Michael Weber ("Weber"), and Fairview Bank of Montana ("the Bank") filed an action in the United States District Court, District of Montana, for declaratory relief. They contended that St. Paul Mercury Insurance Company ("St. Paul") had a duty to defend Maule, Weber, and the Bank against a wrongful termination suit filed in Montana state court by Leland Swanson ("Swanson"). The district court granted summary judgment for St. Paul on the ground that Swanson's wrongful termination action did not set forth allegations giving rise to potential coverage under the policies St. Paul issued to Maule, Weber, and the Bank. We have jurisdiction under 28 U.S.C. 1291. We affirm.

DISCUSSION

We review a grant of summary judgment de novo. Kruso v. Int'l Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989). Viewing the evidence in the light most favorable to the appellants, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Tzung v. State Farm Fire and Casualty Co., 872 F.2d 919, 920 (9th Cir. 1989). We also review de novo the district court's interpretation of state law. Matter of McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc).

Montana law controls in this diversity action. Eerie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938); St. Paul Fire & Marine Ins. Co. v. Weiner, 606 F.2d 864, 867 (9th Cir. 1979). The parties agree that the district court was required to look beyond the allegations in the complaint filed in the underlying state wrongful termination action to determine St. Paul's duty to defend. Under Montana law, "the duty to defend may be triggered by notification to the insured of facts asserted in the pleadings, discovery, or final issues declared ready for trial, giving rise to potential liability under the policy." Liberty Bank of Montana v. Travelers Indemnity Co., 870 F.2d 1504, 1507 (9th Cir. 1989). Despite our opinion in Liberty Bank of Montana, the district court limited the duty to defend to the allegations in the complaint. Although the district court erred in that holding, we may affirm on other grounds. Robins v. Harum, 773 F.2d 1004, 1008 (9th Cir. 1985).

Even looking outside the complaint, Maule, Weber, and the Bank have shown no duty to defend. The policies St. Paul issued in this case provide coverage for "bodily injury" caused by an "event." An "event" is "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." The policies also provide coverage for "personal injury" caused by an "offense," including "libel or slander." Maule, Weber, and the Bank argue that Swanson's deposition testimony establishes that Swanson's discharge was unintentional and that, therefore, Swanson's wrongful termination action sets forth a claim of negligent discharge covered as an "event" under the policies. The appellants also contend that Swanson's deposition testimony alleges "personal injury" caused by an "offense" covered under the policies: damage to Swanson's reputation caused by false public statements that Swanson was not fired from the Bank, but quit.

These contentions are without merit. First, Swanson's wrongful termination allegations, even if read to include a negligent termination claim, do not give rise to coverage under the policies. An intentional wrongful termination is not an "accident" under Montana law. See Daly Ditches Irrigation v. Nat'l Survey Corp., --- Mont. ----, 764 P.2d 1276, 1278 (1988) (wrongful termination not an "occurrence," defined in policy as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured"); see also St. Paul Mercury Ins. Co. v. Ralee Eng'g Co., 804 F.2d 520, 522 (9th Cir. 1986) (intentional wrongful termination not an "accidental event" under California law). Nor is the mental anguish Swanson allegedly suffered an unexpected consequence of an intentional wrongful termination. See Daly Ditches, 764 P.2d at 1278. Further, Montana law does not provide for a "negligent termination" action in these circumstances. See Mont.Code Ann. Secs. 39-2-904, -913 (1987).

Second, Swanson's deposition testimony cannot be read to set forth a "personal injury" claim triggering St. Paul's duty to defend. Swanson asserted that false statements were made in public that damaged his reputation, but attributed those statements to John Morrison, an officer of a Minnesota corporation who was not insured under the policies issued by St. Paul. It is not enough that Swanson arguably alleged that he was "injured" as defined in the policies. Swanson did not allege personal injury caused by an insured, and the policies clearly cover only liability of those insured under the policies.

The judgment of the district court is AFFIRMED.