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 FIRE AND CASUALTY
COMPANY, COLIN C. ANDREWS, and
Defendants and Respondents.
District Court of the Eleventh Judicial District,
In and for the County of Flathead,
The Honorable Michael H. Keedy, Judge presiding.
COUNSEL OF RECORD:
Dana L. Christensen, Debra D. Parker; Murphy,
Robinson, Heckathorn & Phillips, Kalispell, Montana
Stephen C. Berg; Warden, Christiansen, Johnson
Berg, Kalispell, Montana
Submitted on Briefs:
May 17, 1990
September 4, 1990
Justice Diane G. Barz delivered the Opinion of the Court.
In the fall of 1983, Scott L. Graber purchased a business
insurance policy from State Farm Fire and Casualty Company. On May
29, 1987, Scott L. Graber, individually and d/b/a
Publishing Company, 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
On March 10, 1989, State Farm and Duane Paseman moved for
summary judgment pursuant to Rule 56, M.R.Civ.P.,
the District Court determine as a matter of law that no coverage
existed under the business policy for the claim submitted by
The court granted State Farm's and Pasemants motion for
summary judgment, finding that no coverage existed because there
was no damage to
Graber appeals this
The following issues were raised on appeal:
Did the District Court err in granting summary judgment
in favor of State Farm and Paseman?
Did an 'loccurrencell
exist as defined in the State Farm
In 1976 Graber established a publishing and advertising
business in Kalispell, Montana, under the assumed name of Northwest
Among other things, Graber published an
annual, magazine-style, tourist information periodical known as
ClaraEllen Anderson had been employed by Graber at
Northwest Publishing Co. since August of 1986. She had previously
worked approximately one and one-half years with the company as a
part-time employee. Her duties consisted of typesetting, lay-out,
camera work and copyrighting.
production of Travel Guide.
Anderson also assisted in the
Her involvement with the production
of this publication consisted primarily of obtaining and/or writing
copy relating to each geographical region.
Northwest Publishing Co.
Graber was the owner
Since 1969, Graber had purchased several insurance policies
from Kalispell State Farm agent, Colin Andrews, for personal and
In the fall of 1983, Graber contacted Andrews
for the purpose of purchasing a new business policy.
purchasing a building on North Main Street in Kalispell to use as
a new business location for his publishing company.
inspected the premises and thereafter issued Graber a business
policy, effective on approximately November 1, 1983.
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 one million
dollars per occurrence together with $25,000 per accident on
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 issue
is not presently before this Court.
On November 6, 1985, Graber was served with 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 Andrewsl office in
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
He asked State Farm whether it would provide a defense
State Farm did not respond.
After the settlement agreement between Alaska Northwest and
Graber was signed, Graber again asked State Farm to respond to his
request for a defense or coverage.
On May 21, 1986, State Farm,
in writing, denied coverage due to the llintentionalll
nature of the
alleged actions, and the definition of lloccurrencell the policy.
On October 21, 1986, State Farm, in writing, cancelled Graberls
On May 29, 1987, Graber, individually and d/b/a
Publishing Co., filed a complaint in the District Court of the
Eleventh Judicial District alleging damages as a result of the
refusal by State Farm, Andrews and Paseman to offer a defense or
coverage for a claim made against Graber. On March 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
The court granted State Farm's and Paseman's motion for
summary judgment after finding that no coverage existed because
there was no damage to
Graber appeals the
court's decision in regard to these two defendants.
The first issue raised on appeal is whether the District Court
erred in granting summary judgment in favor of State Farm and
The business insurance policy which Graber bought provided
[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
Milepost. Graber first argues that Alaska Northwest's publication
is tangible property.
Graber notes that the Alaska Northwest's
complaint stated that Graberls employee's plagiarism made its
publication, The Mile~ost,,less
useful and therefore Graber argues
The insurance policy that Graber purchased contained two
definitions for ffpropertydamages,11 one stating that property
damage occurs if Ifphysical injury to or destruction of tangible
propertyft is found and the other stating that property damage
occurs if there is "loss of use of tangible property which has not
Graber argues that the damage to Alaska Northwest Is
publication, as a result of Graberls plagiarism, fits within the
The publication, The Milepost, is indisputably tangible
The dispute, however, lies in whether plagiarism of the
publication constitutes property damage to the publication. While
Graber argues that it does constitute property damage, respondents
State Farm and Paseman argue that this case only involves copyright
and trademark infringement which they argue is intangible property.
The publication The Milepost is clearly a piece of tangible
The publication was not physically injured or destroyed
and therefore it does not 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 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
See Nitschke v. Blue Cross of Montana (1988), 231 Mont.
113, 751 P.2d 175.
dispute will we
Only if an issue of material fact remains in
reverse the trial courtfs grant of summary
Graham v. Montana State University (1988), 235 Mont.
Tangible property is property that is capable of being
handled, touched or physically possessed.
Lamar Truck Plaza, Inc.
v. Sentry Ins. (Colo.App. 1988), 757 P.2d 1143, 1144.
Sturges Manufacturing Co. v. Utica Mutual Ins. Co. (1973), 347
(Tex.Civ.App. 1980), 599 S.W.2d 684. Alaska Northwest's complaint
. . . irreparable injury to its
. . . none of which qualifies as
substantial loss of revenues,
reputation and good will
As the trial court correctly noted, the
consistently held that in order for economic loss to be covered by
insurance a direct physical injury to tangible property must occur.
Safeco Ins. Co. v. Munroe (1974), 165 Mont. 185, 527 P.2d 64;
Lindsay Drilling v. U.S. Fidelity
P.2d 203; Aetna Casualty
Guar. (1984), 208 Mont. 91, 676
Surety Co. v. First Security Bank (D.
Mont. 1987), 662 F.Supp. 1126.
Alaska Northwest did not allege
direct physical injury to its tangible property, The Milepost, but
alleged only economic loss.
The trial court correctly concluded
Alaska Northwest's claims did not constitute property damage, or
loss of use of tangible property.
The general rule is that the insurer has a duty to defend when
a complaint filed against its insured sets forth facts which bring
the event within the policy provisions. Atcheson v. Safeco (1974),
165 Mont. 239, 245, 527 P.2d 549, 552. The insurance company must
look to the allegations of the complaint to determine if there is
liability coverage. McAlear v. 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
State Farm denied coverage and defense to Graber on the
grounds that events alleged in Alaska Northwest's complaint failed
Part of the policy
to meet the policy definition of lloccurrence.ll
definition of 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
The second issue raised on appeal is whether an lloccurrencell
existed as defined in the State Farm policy.
We do not have jurisdiction to address this issue. This issue
has not yet been addressed by 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.