RELIANCE INS CO v FISHER POEPP

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No. 12605 I N T E SUPREME C U T OF T E STATE O M N A A H OR H F OTN 1974 RELIANCE INSURANCE COMPANY, P l a i n t i f f and A p p e l l a n t , - -vs VIRGIL FISHER, RICHARD 0. POEPPEL, Defendants and Respondents, and HORACE MANN INSURANCE COMPANY, Defendant and A p p e l l a n t . Appeal from: D i s t r i c t Court of t h e Eleventh J u d i c i a l D i s t r i c t , Honorable Robert K e l l e r , Judge p r e s i d i n g . Counsel of Record : For A p p e l l a n t s : Warden, W a l t e r s k i r c h e n & C h r i s t i a n s e n , K a l i s p e l l , Montana M e r r i t t N. Warden argued, K a l i s p e l l , Montana G a r l i n g t o n , Lohn and Robinson, Missoula, Montana Lawrence F Daly argued, Missoula , Montana . For Respondents: Murphy, Robinson, Heckathorn & P h i l l i p s , K a l i s p e l l , Montana Robert L. F l e t c h e r argued, K a l i s p e l l , Montana McGarvey, Morrison, Hedman & m o r e , W h i t e f i s h , Montana Submitted: March 21, 1974 Decided: APR 2 3 F i l e d : APR 2 3 1974 1974 M r . ~ u s t i c eFr8nk I . H a s w e l l d e l i v e r e d t h e Opinion of t h e C o u r t . T h i s i s a d e c l a r a t o r y judgment a c t i o n i n v o l v i n g a t e a c h e r ' s p r o f e s s i o n a l l i a b i l i t y i n s u r a n c e p o l i c y and a second i n s u r a n c e p o l i c y i s s u e d t o t h e same d e f e n d a n t , V i r g i l F i s h e r , denominated " a F a r m e r ' s Comprehensive P e r s o n a l L i a b i l i t y Hazard P o l i c y " . 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 d e c l a r a t o r y judgment r e l e a s i n g t h e two i n s u r a n c e companies from t h e d u t y t o defend t h e i n s u r e d i n a s u i t f o r p e r s o n a l damages i n F l a t h e a d County c a u s e No. 23116. From t h i s o r d e r , b o t h 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 c o u r t o f F l a t h e a d County by R i c h a r d 0. Poeppel a g a i n s t V i r g i l F i s h e r , s e e k i n g damages a l l e g e d l y 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 A p r i l 2 0 , 1972, i n t h e C e n t r a l School i n W h i t e f i s h , Montana. P o e p p e l , a s c h o o l t e a c h e r , a l l e g e d t h a t he had been a t t a c k e d by F i s h e r , a l s o a t e a c h e r , and s t r u c k by him. during r e g u l a r school hours. The i n c i d e n t a r o s e Poeppel had p h y s i c a l l y e j e c t e d o n e o f h i s s t u d e n t s from h i s c l a s s r o o m i n t o t h e h a l l w a y . F i s h e r ob- s e r v e d t h e a c t i o n s of Poeppel and t h e s t u d e n t , and r e p o r t e d them t o the assistant principal. Fisher then returned t o t h e v i c i n i t y o f Poeppel and t h e d i s c i p l i n e d s t u d e n t a t which t i m e t h e a l t e r c a t i o n o c c u r r e d d u r i n g which F i s h e r s t r u c k Poeppel. F i s h e r t e n d e r e d t h e d e f e n s e of t h a t a c t i o n t o a p p e l l a n t R e l i a n c e I n s u r a n c e Company which had i s s u e d a p o l i c y denominated "a F a r m e r ' s Comprehensive P e r s o n a l L i a b i l i t y Hazard P o l i c y " t o F i s h e r , which p o l i c y 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 R e l i a n c e c a u s e d a n i n i t i a l a p p e a r a n c e t o be made on beh a l f o f F i s h e r i n t h a t a c t i o n i n o r d e r t o p r e v e n t a d e f a u l t , it d e c l i n e d t o a c c e p t 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 o b t a i n e d a g a i n s t F i s h e r 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 s t a y i n g 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 m a t t e r of s u c h i n s u r a n c e c o v e r a g e c o u l d be r e s o l v e d . O August 28, 1972, R e l i a n c e CQmenced t h i s a c t i o n f o r a n d e c l a r a t o r y judgment i n t h e d i s t r i c t c o u r t of F l a t h e a d County, naming a s d e f e n d a n t s i t s i n s u r e d , V i r g i l F i s h e r ; R i c h a r d 0 . Poeppel; and Horace Mann I n s u r a n c e Company, a company t h a t had issued a p o l i c y providing p r o f e s s i o n a l l i a b i l i t y insurance covera g e f o r t e a c h e r s of t h e W h i t e f i s h s c h o o l system. The a c t i o n s o u g h t a judgment d e c l a r i n g , among o t h e r t h i n g s , t h a t R e l i a n c e had no o b l i g a t i o n under i t s p o l i c y t o d e f e n d 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 i t was a d m i t t e d t h a t on A p r i l 20, 1972, t h e r e was i n e f f e c t between s a i d i n s u r a n c e company and t h e Montana E d u c a t i o n A s s o c i a t i o n (MEA) a p o l i c y o f l i a b i l i t y i n s u r a n c e denominated a s an " E d u c a t o r ' s P r o f e s s i o n a l Liability Policy." A s members of t h e MEA, b o t h F i s h e r and Poeppel were i n s u r e d p a r t i e s under t h e Horace Mann p o l i c y . A s a defense t o i t s a l l e g e d d u t y t o d e f e n d , Horace Mann c o n t e n d s t h a t i t s i n s u r a n c e c o n t r a c t i s e x p r e s s l y i n a p p l i c a b l e by r e a s o n of s p e c i a l exclusions contained i n s a i d policy. The c a s e w a s a r g u e d o r a l l y b e f o r e t h e d i s t r i c t c o u r t on May 22, 1973. S u b s e q u e n t l y 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 court issued i t s order refusing " t o render o r e n t e r a D e c l a r a t o r y Judgment o r Decree f o r t h e r e a s o n t h a t such a Judgment o r Decree would n o t t e r m i n a t e t h e u n c e r t a i n t y o r c o n t r o v e r s y g i v i n g rise t o t h e p r o c e e d i n g s . " From t h i s o r d e r and d e n i a l o f a motion f o r new t r i a l o r o r d e r t o amend judgment, b o t h i n s u r e r s a p p e a l . The s i n g l e c o n t r o l l i n g i s s u e upon a p p e a l i s whether t h e i n s u r e r s , R e l i a n c e and Horace Mann, a r e under an o b l i g a t i o n t o d e f e n d F i s h e r i n t h e l a w s u i t f i l e d a g a i n s t him by Poeppel o r r e q u i r e d t o indemnify F i s h e r f o r any l o s s e s s u s t a i n e d as a r e s u l t of t h e Poeppel l a w s u i t . The g i s t of r e s p o n d e n t F i s h e r ' s argument i s t h a t h i s a c t i o n s g i v i n g r i s e t o t h e a l t e r c a t i o n and s u b s e q u e n t l a w s u i t come w i t h i n t h e R e l i a n c e p o l i c y c o v e r a g e 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 i n c i d e n t t o n o n - b u s i n e s s p u r s u i t s . " Fisher a l s o a r g u e s t h a t h i s a c t i o n s t e m s from an a p p a r e n t need t o d e f e n d himself. The d i s t r i c t c o u r t ' s r e a s o n s f o r r e f u s i n g t o d e t e r m i n e t h e o b l i g a t i o n s of Horace Mann w i t h r e g a r d t o s a i d Cause No. 23116 a r e s e t f o r t h i n a memo f o l l o w i n g t h a t c o u r t ' s o r d e r denyi n g a motion f o r new t r i a l , the alternative, for the court t o amend i t s o r d e r of J u l y 5 , 1973. S a i d memo r e a d s i n p a r t : "Defendant Horace Mann p u t s t h e most r e l i a n c e upon e x c l u s i o n j, ' t o l i a b i l i t y and r e s p e c t i v e claims b r o u g h t by t e a c h e r s o r o t h e r employees o f a s c h o o l system a g a i n s t t h e i n s u r e d , * * * I . Defendant Horace Mann i n t e n d s ( s i c ) t h a t i f t h e c l a i m a n t were a t e a c h e r a t t h e t i m e of t h e occurrence giving rise t o t h e claim, irrespect i v e of t h e conduct of t h e t e a c h e r a t t h a t time, t h i s policy does not apply. This exclusionary c l a u s e , g i v e n l i t e r a l i n t e r p r e t a t i o n , would exc l u d e any c l a i m a n t s who were t e a c h e r s o r s c h o o l employees o f any s c h o o l s y s t e m a t any t i m e , and t h a t s i m p l y c a n n o t be t h e i n t e n t of t h e p o l i c y . Thus i n d e t e r m i n i n g what t h e i n t e n t of t h i s p o l i c y is, it i s 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 i s s u f f i c i e n t t o cause t h i s p o l i c y n o t t o a p p l y . Thus, i f t h e c o n d u c t of t h e claimant ' t e a c h e r ' so f a r exceeds t h e s c o p e of h i s p r o f e s s i o n a l employment s o a s t o be t o t a l l y u n r e l a t e d t o h i s o c c u p a t i o n , how c a n it be c o n t e m p l a t e d t h a t t h i s t y p e o f c o n d u c t would be excluded from t h e p o l i c y ? " The t h r u s t of b o t h 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 c a s e i s t h a t t h e i r duty t o defend i s l i m i t e d t o claims a g a i n s t t h e i n s u r e d w i t h i n t h e c o v e r a g e of t h e p o l i c y . Reliance argues t h a t i t s p o l i c y i s s u e d t o F i s h e r i s denominated a "Farm Owner's P o l i c y " on i t s f a c e and c o v e r s h e e t and s a i d p o l i c y p r i m a r i l y covers farming o p e r a t i o n s . 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 become legally obligated to pay as damages because of bodily injury or property damage and the Company 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 allegations of the suit are groundless, false or fraudulent; but the Company may make such investigation 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 services, 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.-acondition in the ways immediately adioininq, (2) is caused by the activities of an Insured or of any farm or residence 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 pursuits, (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 residence 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 definitions 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 including: "Trade, profession, or occupation other than farming, and roadside stands maintained principally 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 following 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 F i s h e r were t e a c h e r s working a t t h e W h i t e f i s h School w i t h i n s c h o o l h o u r s a t t h e t i m e o f t h e i n c i d e n t w h i l e t h e c l a i m a n t was d i s c i p l i n i n g a s t u d e n t from h i s c l a s s . The d i s t r i c t c o u r t i g n o r e d t h e s t i p u l a t i o n t h a t b o t h were t e a c h e r s , and h y p o t h e s i z e d t h a t t h e f a c t s m i g h t show t h a t t h e a c t i o n s of Poeppel " s o f a r e x c e e d ( e d ) t h e s c o p e of h i s p r o f e s s i o n a l employment" a s t o make him n e i t h e r a t e a c h e r n o r an employee of t h e s c h o o l s y s t e m f o r p u r p o s e s o f c o v e r a g e under the policy. W e disagree. The a l t e r c a t i o n was c l e a r l y c o n n e c t e d w i t h and r e l a t e d t o s c h o o l a c t i v i t i e s . S e c t i o n 13-704, R.C.M. 1947, p r o v i d e s 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 i t s i n t e r p r e t a tion. S e c t i o n 13-707, R.C.M. 1947, s t a t e s t h a t e v e r y p a r t o f a c o n t r a c t i s t o be g i v e n e f f e c t , u s i n g e a c h c l a u s e t o h e l p i n t e r pret the others. F i n a l l y , s e c t i o n 13-710, R.C.M. 1947, p r o v i d e s : "The words of a c o n t r a c t a r e t o be u n d e r s t o o d i n t h e i r o r d i n a r y and p o p u l a r s e n s e , r a t h e r t h a n a c c o r d i n g 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 s e n s e , o r u n l e s s a s p e c i a l meaning i s g i v e n t o them by u s a g e , i n which c a s e t h e l a t t e r must be f o l l o w e d . " The c l e a r e x p l i c i t language of e x c l u s i o n " j " e x c l u d e s " * * * c l a i m s b r o u g h t by t e a c h e r s o r o t h e r employees of a s c h o o l system a g a i n s t t h e assured 13-707 and 13-710, R.C.M. * * *". Applying s e c t i o n s 13-704, 1947, t h e , s u i t of Poeppel i s c l e a r l y n o t covered. A s previously discussed i n reference t o t h e Reliance p o l i c y , 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 d u t y of a l i a b i l i t y i n s u r e r t o d e f e n d t h e i n s u r e d i s 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. P a u l I n s . Cos., 158 Mont. 452, 493 P.2d 331. McAlear v . S t . I n t h i s case, para- g r a p h I of P o e p p e l l s c o m p l a i n t 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 o f t h e i n c i d e n t b o t h Poeppel and F i s h e r were employed by School D i s t r i c t No. 4 4 i n W h i t e f i s h . E x c l u s i o n "j" o f t h e Horace Mann p o l i c y e x c l u d e s c o v e r a g e f o r c l a i m s b r o u g h t by " t e a c h e r s o r o t h e r employees of a s c h o o l 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 f i n d i n g t h a t Horace Mann h a s no o b l i g a t i o n t o defend i n t h i s m a t t e r . F o r t h e s e r e a s o n s t h e c a u s e i s 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 b o t h i n s u r a n c e companies from any d u t y t o d e f e n d o r t o pay any damages t h a t might be awarded i n Cause No. 23116. Justice - -.w\a c o n c u r :-.-. /. J Chief J u s t i c e ,, -I .

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