No. 12505
I N THE SUPREME COURT O THE STATE O M N A A
F F OTN
SAFECO INSURANCE COMPANY,
a corporation,
P l a i n t i - f f and A p p e l l a n t ,
Defendants and Respondents.
.................... -----------------------------
SAFECO INSURANCE COMPANY,
a corporation,
Third P a r t P l a i n t i f f ,
COGSWELL AGENCY, I N C . , a Corporation,
Third P a r t y Defendant and Respondent.
Appeal from: D i s t r i c t Court of t h e E i g h t h J u d i c i a l D i s t r i c t ,
Honorable Truma~r Bradford, Judge p r e s i d i n g .
Counsel o f Record :
For Appellant :
Loble, P i c o t t e , Loble, Pauly and Sternhagen, Helena,
Montana
Gene A , P i c o t t e a r g u e d , Helena, Montana
For Respondent :
D z i v i , Conklin, Johnson & Nybo, G r e a t F a l l s , Montana
Louis D. Nybo a r g u e d , G r e a t F a l l s , Montana
Church, H a r r i s , Johnson & Williams, Great F a l l s , Montana
C h a r l e s C. Love11 a r g u e d , G r e a t F a l l s , Montana
Smith, Emmons & B a i l l i e , Great F a l l s , Montana
J a r d i n e , Stephenson, Blewett & Weaver, Great F a l l s ,
.- Montana
J a c k L. Lewis a r g u e d , G r e a t F a l l s , Montana
Submitted: September 11, 1974
Decided: # C f 16 1974
F i l e d :DCT I € 1974
Mr. J u s t i c e Wesley C a s t l e s d e l i v e r e d t h e Opinion o f t h e C o u r t .
T h i s i s an a p p e a l from a judgment of t h e d i s t r i c t c o u r t
of t h e e i g h t h j u d i c i a l d i s t r i c t , i n and f o r t h e County of Cascade,
which r e n d e r e d p a r t i a l summary judgment i n f a v o r o f d e f e n d a n t ,
D. E. Munroe, and a g a i n s t p l a i n t i f f , S a f e c o I n s u r a n c e Company.
O November 5 , 1971, John D . Buchanan f i l e d s u i t i n d i s -
n
t r i c t c o u r t i n Cascade County a g a i n s t David E . Munroe. The amend-
ed c o m p l a i n t i n s a i d c a u s e s t a t e s g e n e r a l l y t h a t Harold S c h i l l i n g
was f a r m i n g Buchananls l a n d n o r t h of Cascade and t h a t S c h i l l i n g
o r d e r e d s e e d wheat from Munroe who r e p r e s e n t e d t h a t it was s p r i n g
wheat, b u t i t was i n f a c t w i n t e r wheat. The c o m p l a i n t f u r t h e r
a l l e g e s t h a t Munroe t o l d S c h i l l i n g t o r e p l a n t w i t h s p r i n g wheat
a n d , a l t h o u g h t h i s was done, Buchanan s u s t a i n e d l o s s e s e q u i v a l e n t
t o t h e c o s t s of r e p l a n t i n g and t h i r t y b u s h e l s p e r a c r e f o r o n e
hundred f o r t y - n i n e a c r e s f o r which Munroe i s l i a b l e .
On J a n u a r y 4 , 1972, Viggo 0 . Andersen and E i n e r G. Hovland,
co-partners, doing business a s Andersm & Hovland, f i l e d s u i t i n
d i s t r i c t c o u r t i n Cascade County a g a i n s t Munroe Ranch Co., Inc.
The c o m p l a i n t i n s a i d c a u s e s t a t e s g e n e r a l l y t h a t Munroe a g r e e d t o
s e l l and d e l i v e r s p r i n g wheat s e e d t o AndersRn & Hovland and t h e
same was p l a n t e d by them b u t i t was a c t u a l l y w i n t e r wheat which
d i d n o t come up r e s u l t i n g i n a c r o p l o s s , expense of d e s t r o y i n g a
c r o p t o p r o t e c t t h e n e x t c r o p from d i s e a s e , f u t u r e a d d i t i o n a l
f a r m i n g e x p e n s e , and f u t u r e c r o p l o s s , o r , i n t h e a l t e r n a t i v e ,
t h e a l l e g e d damages a r e s a i d t o be measured by c o s t o f s e e d , c o s t
o f t r e a t i n g s e e d , c o s t of t r a n s p o r t i n g s e e d , c o s t o f p r e p a r i n g
s o i l t o r e c e i v e s e e d , c o s t o f s e e d i n g and f e r t i l i z i n g , c o s t of
s p r a y i n g and t o p - d r e s s i n g , l o s s of use of lands f o r one c r o p season,
e x p e n s e of d e s t r o y i n g c r o p t o p r o t e c t n e x t c r o p from d i s e a s e ,
f u t u r e a d d i t i o n a l f a r m i n g e x p e n s e , and f u t u r e l o s s of p r o d u c t i v i t y .
Munroe, t h e d e f e n d a n t i n t h e two b a s i c c a s e s d e s c r i b e d
above, purchased a "Growers & Ranchers" policy of insurance from
Safeco Insurance Company, the plaintiff in the instant action.
Listed on the policy as the "insured" is "D. E, Munroe, Donald G.
Munroe and David M. Munroe, DBA Munroe Ranch Company" The policy
had a three year term from August 20, 1970 to August 20 1973. The
portions of the policy pertinent to this appeal are as follows:
LIABILITY COVERAGE
"The company will pay all damages the insured is
obligated to pay for liability imposed by law:
(1) upon him; or ( 2 ) upon another, but assumed by
him under a contract, because of bodily injury or
property damage to which this insurance applies,
caused by an occurrence. The company shall have
the right and duty to defend any suit against the
insured seeking damages on account of such bodily
injury or property damage, even if any of the
allegations of the suit are groundless, false or
fraudulent, and may make such investigation and
settlement of any claim or suit as it deems ex-
pedient. The company shall not be obligated to
pay any claim or judgment or defend any suit after
the applicable limits of the company's liability
has been exhausted by payment of judgments or
settlements.
"Exclusions
"This insurance does not apply:
" (d) to property damage * * * (6) to the named
insured's products arising out of such products
or any part of such products * * *
"DEFINITIONS
"'damages' includes damages for death and for care
and loss of services resulting from bodily injury
and damages for loss of use of property resulting
from property damage;
"'named insured's products1 means goods or products
manufactured, sold, handled or distributed by
the named insured or by others trading under his
name, including any container thereof (other than
a vehicle), but !named insured's products' shall
not include a vending machine or any property
o t h e r than such container, rented t o o r located
f o r use of others but not sold * * * .
" ' p r o p e r t y damage1 means i n j u r y t o o r d e s t r u c t i o n
of t a n g i b l e p r o p e r t y * * *."
Safecocontends h e r e a d a l l e g e d i n i t s complaint t h a t t h e
p o l i c y c o v e r a g e was n e v e r i n t e n d e d t o i n s u r e a g a i n s t l o s s e s re-
s u l t i n g from r e s a l e of p r o d u c t s s u c h a s t h e s e l l i n g o f s e e d wheat
t h e i n s u r e d happened t o have on hand; and t h a t , f o r s u c h c o v e r a g e ,
s u c h p e r s o n s w i s h i n g t o be s o i n s u r e d must p u r c h a s e t h e " m i s d e l i v -
e r y of s e e d " endorsement a v a i l a b l e a t a d d i t i o n a l premium. However,
i t i s u n c o n t r a d i c t e d by S a f e c o t h a t Munroe was n e v e r o f f e r e d such
a n endorsement nor t h a t Munroe was even aware of t h e e x i s t e n c e of
s u c h a n endorsement.
Munroe t e n d e r e d b o t h c o v e r a g e and d u t y t o d e f e n d t h e two
aforestated actions. Both c o v e r a g e and t h e d u t y t o d e f e n d were
d e n i e d by S a f e c o . Safeco then brought t h e i n s t a n t d e c l a r a t o r y
judgment a c t i o n a s k i n g t h e c o u r t t o c o n s t r u e t h e p o l i c y p r o v i s i o n s
and t o d e c l a r e t h a t S a f e c o h a s n o t c o n t r a c t e d t o c o v e r t h e r i s k s
o r t h e damages w i t h i n t h e c o n t e m p l a t i o n o f t h e two b a s i c a c t i o n s
and h a s no d u t y t o d e f e n d them.
S a f e c o b r o u g h t Harold J . S c h i l l i n g and J i m S c h i l l i n g i n t o
t h e c a s e as defendants because a t t h a t t i m e Safeco b e l i e v e d t h a t
t h e S c h i l l i n g s c l a i m e d t o have s u f f e r e d a l o s s a r i s i n g o u t o f t h e
same o r s i m i l a r o c c u r r e n c e and were c l a i m i n g t h a t t h e y a l s o w e r e
e n t i t l e d t o r e c o v e r a g a i n s t Munroe. O A p r i l 1 8 , 1973, t h e
n
S c h i l l i n g s b r o u g h t a n a c t i o n which i s s i m i l a r t o t h e f i r s t two
basic actions. I t would a p p e a r t h a t t h e outcome of t h i s a p p e a l
w i l l d e t e r m i n e a l s o whether o r n o t t h e r e i s c o v e r a g e and d u t y t o
d e f e n d under t h i s new a c t i o n b r o u g h t by t h e S c h i l l i n g s .
I n t h e i n s t a n t c a s e , defendants f i l e d motions t o dismiss
and t o s t r i k e which were r u l e d upon by t h e d i s t r i c t c o u r t . The
d i s t r i c t court ordered Safecols a l l e g a t i o n s r e f e r r i n g t o t h e
" m i s d e l i v e r y of s e e d " endorsement s t r i c k e n from i t s c o m p l a i n t .
The d e f e n d a n t s t h e n answered and c o u n t e r c l a i m e d a g a i n s t S a f e c o
--
s e e k i n g t o a v o i d t h e p o l i c y l i m i t s on t h e grounds, i n t e r a l i a ,
of n e g l i g e n c e and e s t o p p e l .
Safeco then brought a t h i r d p a r t y complaint a g a i n s t t h e
Cogswell Agency, I n c . , o f G r e a t F a l l s , who had s o l d t h e p o l i c y
of S a f e c o , a l l e g i n g , i n t e r a l i a , t h a t Cogswell had r e p r e s e n t e d t o
d e f e n d a n t Munroe t h a t i t was a u t h o r i z e d t o a c t f o r S a f e c o i n ways
i n which it was n o t a u t h o r i z e d t o a c t , i n d i c a t i n g t h e r e was c o v e r -
a g e f o r t h e r e s u l t s o f t h e s e e d wheat mix up when t h e r e was n o t .
Cogswell d e n i e s t h i s a l l e g a t i o n .
T h e r e a f t e r Cogswell moved f o r summary judgment and Munroe
moved f o r a p a r t i a l summary judgment. The d i s t r i c t c o u r t i s s u e d
i t s summary judgment which i n c l u d e d f i n d i n g s of f a c t and c o n c l u -
s i o n s of law h o l d i n g t h a t t h e r e was c o v e r a g e and t h e r e was a c o r r e s -
ponding d u t y t o d e f e n d . I t i s from t h i s d e c i s i o n of t h e d i s t r i c t
c o u r t t h a t Safeco appeals. The d i s t r i c t c o u r t d e n i e d C o g s w e l l ' s
motion f o r summary judgment on t h e t h i r d - p a r t y c o m p l a i n t and made
no r u l i n g on t h e c o u n t e r c l a i m s of d e f e n d a n t s . Those i s s u e s a r e
n o t now b e f o r e t h i s C o u r t .
To s t o p t h e c o n t i n u a n c e of t h e two b a s i c a c t i o n s pending
t h e a p p e a l of t h e i n s t a n t a c t i o n , S a f e c o a c q u i r e d from t h e d i s -
t r i c t c o u r t an order s t a y i n g proceedings i n those a c t i o n s . The
defendants i n t h e i n s t a n t a c t i o n t h e r e a f t e r received a modifica-
t i o n o f t h e s t a y of p r o c e e d i n g s t o t h e e f f e c t t h a t d i s c o v e r y i n
t h e two b a s i c a c t i o n s c o u l d c o n t i n u e . Safeco then appealed t h e
o r d e r modifying t h e s t a y o f p r o c e e d i n g s a l l o w i n g d i s c o v e r y . This
Court t h e n e n t e r e d i t s o r d e r s t a y i n g d i s c o v e r y i n t h e two b a s i c
a c t i o n s pending t h i s a p p e a l .
Safeco presents f i v e i s s u e s f o r our consideration:
(1) Whether, b e c a u s e t h e c o v e r a g e i s o n l y f o r i n j u r y
t o o r d e s t r u c t i o n of " t a n g i b l e " p r o p e r t y , t h e d i s t r i c t c o u r t
e r r e d i n h o l d i n g t h a t t h e a l l e g e d l o s s was c o v e r e d by t h e p o l i c y ?
(2) Whether l i a b i l i t y c o v e r a g e f o r p r o p e r t y damages
a r i s i n g o u t of i n s u r e d ' s p r o d u c t s was e x c l u d e d by t h e p o l i c y ?
(3) Whether t h e d i s t r i c t c o u r t e r r e d i n s t r i k i n g t h e
a l l e g a t i o n s i n S a f e c o ' s c o m p l a i n t c o n c e r n i n g t h e " m i s d e l i v e r y of
s e e d " endorsement?
(4) Whether t h e r e i s a d u t y t o d e f e n d t h e u n d e r l y i n g
cases i n d i s t r i c t court?
(5) Whether t h e a p p e a l from t h e d i s t r i c t c o u r t ' s o r d e r
modifying t h e s t a y of p r o c e e d i n g s was n e c e s s a r y t o p r o t e c t S a f e c o ?
W e answer t h e f i r s t t h r e e q u e s t i o n s i n t h e n e g a t i v e , t h e
f o u r t h i n t h e a f f i r m a t i v e and t h e f i f t h we h o l d t o be moot. We
a f f i r m t h e d e c i s i o n of t h e d i s t r i c t c o u r t .
F o r p u r p o s e s of d i s c u s s i o n o f t h e f i r s t i s s u e w e would
l i k e t o s e t o u t t h e f i r s t s e n t e n c e of t h e c o v e r a g e p r o v i s i o n a s
i t would a p p e a r i f t h e i r r e l e v a n t p o r t i o n s w e r e d e l e t e d and t h e
d e f i n i t i o n s incorporated therein:
The company w i l l pay a l l damages, i n c l u d i n g damages
f o r l o s s of u s e of p r o p e r t y r e s u l t i n g from i n j u r y t o
o r destruction of tangible property, t h e insured
i s o b l i g a t e d t o pay f o r l i a b i l i t y imposed by law
upon him b e c a u s e of i n j u r y t o o r d e s t r u c t i o n o f
t a n g i b l e p r o p e r t y t o which t h i s i n s u r a n c e a p p l i e s ,
c a u s e d by a n o c c u r r e n c e .
The i n s u r a n c e a p p l i e d t o p r o d u c t l i a b i l i t y c o v e r a g e a l t h o u g h ,
a s l a t e r d i s c u s s e d , S a f e c o c o n t e n d s t h a t s u c h c o v e r a g e was l i m i t e d
t o b o d i l y damages, p r o p e r t y damage b e i n g e x c l u d e d . Safeco contends
t h a t whatever i n j u r e s s u f f e r e d by Buchanan and Andersen & Hovland,
a s a l l e g e d i n t h e i r c o m p l a i n t s , were i n j u r i e s t o " i n t a n g i b l e " pro-
p e r t y and n o t i n j u r i e s t o " t a n g i b l e " p r o p e r t y . W find t h i s contention
e
t o be w i t h o u t m e r i t . W e f i n d no e r r o r i n and a d o p t t h e f i n d i n g
o f f a c t No. 8 of t h e d i s t r i c t c o u r t ;
"8. That i f t h e c l a i m a n t s a g a i n s t Munroe a s
a f o r e d e s c r i b e d s u f f e r e d any l o s s by v i r t u e o f
h a v i n g r e c e i v e d and p l a n t e d t h e wrong t y p e of
s e e d wheat, it f o l l o w s , a s a m a t t e r of common
knowledge, t h a t t h e l a n d i n which t h e s e e d wheat
was p l a n t e d would have been damaged i n t h a t s a i d
l a n d would have l o s t a p o r t i o n o f i t s r e t a i n e d
m o i s t u r e , would have l o s t a p o r t i o n of i t s re-
t a i n e d f e r t i l i z e r , weeds would have grown t h e r e o n
where no c r o p had grown, e r o s i o n would have
o c c u r r e d , s a i d l a n d would have t o have been re-
c u l t i v a t e d i n o r d e r t o render it s u i t a b l e f o r
t h e p l a n t i n g of a n o t h e r c r o p o f t h e same o r
s i m i l a r n a t u r e , and t h a t i f l i t t l e o r no c r o p
grew, t h e c l a i m a n t s would have r e c e i v e d l i t t l e o r
no compensation by v i r t u e o f h a v i n g l o s t a c r o p ,
and would have s u f f e r e d l o s s of u s e o f t h e i r
.
l a n d s I'
Although S a f e c o t a k e s f i v e and one-half pages o f i t s
b r i e f t o d e f i n e t h e word " t a n g i b l e 1 ' , w e f i n d i t t o be beyond
d i s p u t e t h a t a Montana wheat f i e l d a n d t h e c r o p t h e r e i n , i s
tangible property. The d i s t r i c t c o u r t c l e a r l y found i n j u r y t o
t h e wheat f i e l d s and t h u s i n j u r y t o t a n g i b l e p r o p e r t y . The
a l l e g a t i o n s of c o s t s of r e p l a n t i n g , t h i r t y b u s h e l s p e r a c r e f o r
one hundred f o r t y - n i n e a c r e s , expense o f d e s t r o y i n g a c r o p t o
p r o t e c t t h e n e x t c r o p , c o s t of p r e p a r i n g s o i l , e t c . , is not
damage t o " i n t a n g i b l e 1 1p r o p e r t y , a s S a f e c o c o n t e n d s , b u t i s merely
t h e measure of t h e damage t o t h e " t a n g i b l e " wheat f i e l d s . Once
i n j u r y t o t a n g i b l e p r o p e r t y i s found, t h e p o l i c y c l e a r l y s t a t e s
t h a t i t a l s o c o v e r s damages f o r l o s s of u s e of p r o p e r t y r e s u l t i n g
from i n j u r y t o t a n g i b l e p r o p e r t y .
The p l a i n , c l e a r , unambiguous meaning o f t h e l a n g u a g e i n
t h e p o l i c y i s t h a t once i t h a s been found t h a t t a n g i b l e p r o p e r t y
h a s been damaged, t h e r e i s i n s u r a n c e c o v e r a g e f o r a l l damages be-
c a u s e t h e t e r m damages i s used w i t h o u t l i m i t a t i o n and, i n f a c t ,
i s expanded t o i n c l u d e damages f o r l o s s o f u s e , The i s s u e t h e n
becomes whether o r n o t S a f e c o t s p o l i c y language i s s u f f i c i e n t l y
s t r o n g enough t o e x c l u d e i n s u r a n c e c o v e r a g e f o r c o n s e q u e n t i a l
damages--loss of p r o f i t s . I t might b e t h a t l o s s o f p r o f i t s i s
a n i t e m o f i n t a n g i b l e damage, However, i t i s of u t m o s t i m p o r t a n c e
t o n o t e t h a t t h e p o l i c y d o e s n o t , by a n y s t r e t c h o f t h e imagin-
a t i o n , r e q u i r e t h a t t h e r e be t a n g i b l e damage t o t a n g i b l e prop-
erty. C l e a r l y , it was n o t S a f e c o ' s i n t e n t i o n t o e x c l u d e conse-
q u e n t i a l damages o r t h e y would have s a i d s o i n t h e p o l i c y .
S a f e c o , i n a t t e m p t i n g t o d i s t i n g u i s h , among o t h e r s , Wells
Labberton v . G e n e r a l C a s u a l t y Co.'of America, 53 Wash.2d 1 8 0 , 332
P.2d 250, and St. P a u l F i r e & Marine I n s u r a n c e Co. v . N o r t h e r n
G r a i n Co., 365 F.2d 361, 368, (8th C i r . ) , argues t h a t t h e courts
t h e r e were n o t f a c e d w i t h p o l i c y l a n g u a g e l i m i t i n g c o v e r a g e t o
i n j u r y t o "tangible" property. W deem it u n n e c e s s a r y t o go i n t o
e
t h e f a c t u a l bases o r i s s u e s of t h o s e c a s e s , noting merely t h a t
t h e y were s i m i l a r t o t h e i n s t a n t a p p e a l and t h e l o s s e s were h e l d
c o v e r e d by t h e p o l i c i e s . Because t h e p o l i c i e s i n t h o s e c a s e s
covered i n j u r i e s t o "property" r a t h e r than i n j u r i e s t o " t a n g i b l e
property", Safeco reasons t h a t those c a s e s are not a p p l i c a b l e .
However, S a f e c o ' s argument f a l l s one s t e p s h o r t of t h e mark. To
d e t e r m i n e whether e a c h p a r t i c u l a r c a s e i s a p p l i c a b l e o r n o t , t h e
c a s e must be examined t o d e t e r m i n e whether t h e i n j u r y i n v o l v e d
was t o t a n g i b l e o r i n t a n g i b l e p r o p e r t y . If that injury is t o
t a n g i b l e p r o p e r t y , t h e n t h e a d d i t i o n o f t h e word " t a n g i b l e " t o
t h e d e f i n i t i o n of p r o p e r t y would have no e f f e c t on t h e r u l e of t h e
case. I n e a c h of t h e above c a s e s , and i n t h e i n s t a n t a p p e a l , t h e
i n j u r y w a s t o a wheat f i e l d and a wheat f i e l d i s t a n g i b l e p r o p e r t y .
And, d e s p i t e S a f e c o ' s d e n i a l s t h a t t h e i n j u r i e s i n Wells Labberton
and N o r t h e r n Grain were i n j u r i e s t o " t a n g i b l e " p r o p e r t y , t h e Court
i n N o r t h e r n Grain s a i d , a t p. 366.
" J u s t a s t h e diminution i n value of t h e build-
i n g s i n H a u e n s t e i n I H a u e n s t e i n v . S t . Paul-
Mercury Indem. Co,, 2 4 2 Minn, 354, 65 N.W.2d
1221 and Dakota Block IDakota Block v. Western
Cas. & S u r e t y Co., 8 1 S.D. 213, 132 N.W.2d 8261
c o n s t i t u t e d p r o p e r t y damage w i t h i n t h e a m b i t o f
t h e i n s u r i n g agreement, s o a l s o d o e s t h e dimin-
u t i o n i n t h e p r o d u c t i v i t y o f t h e wheat c r o p , a s
t h e r e s u l t o f an i n f e r i o r and d e f i c i e n t q u a l i t y
of s e e d wheat, c o n s t i t u t e p r o p e r t y damage w i t h i n
t h e c o v e r a g e of t h i s p o l i c y . The c r o p s r a i s e d by
N o r t h e r n ' s c u s t o m e r s were no less p h y s i c a l prop-
e r t i e s t h a n t h e b u i l d i n g s i n H a u e n s t e i n and
Dakota Block. " (Emphasis s u p p l i e d . )
W h o l d t h a t t h e i n j u r i e s a l l e g e d i n t h e c o m p l a i n t s of
e
Buchanan and Andersen & Hovland a r e i n j u r i e s t o t a n g i b l e p r o p e r t y
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 of i n s u r a n c e s o l d by S a f e c o t o
Munroe .
The second i s s u e r a i s e d c o n c e r n s t h e f o l l o w i n g e x c l u s i o n :
"This insurance does n o t apply:
' I * * *
" ( d ) t o p r o p e r t y damage * * * ( 6 ) t o t h e named
i n s u r e d ' s products a r i s i n g o u t of such products
o r any p a r t of s u c h p r o d u c t s * * *."
S a f e c o a s k s t h i s C o u r t t o c o n s t r u e t h e language of t h e
e x c l u s i o n by r e a d i n g it i n t h e a l t e r n a t i v e :
T h i s i n s u r a n c e d o e s n o t a p p l y t o (a) p r o p e r t y
damage of t h e named i n s u r e d ' s p r o d u c t s - ( b )
or
p r o p e r t y damage a r i s i n g o u t o f s u c h p r o d u c t s o r
any p a r t of s u c h p r o d u c t s .
A s s o c o n s t r u e d , t h e i n j u r y t o t h e wheat f i e l d s o b v i o u s l y a r o s e
o u t o f Munroe's p r o d u c t , t h e s e e d , t h e e x c l u s i o n i s a p p l i c a b l e ,
and t h e r e i s no c o v e r a g e under t h e p o l i c y . P e r h a p s i f t h e ex-
c l u s i o n w e r e p u n c t u a t e d o r p h r a s e d i n a n o t h e r manner it would
have t h a t e f f e c t . But, a s w r i t t e n , t h e e x c l u s i o n h a s r e f e r e n c e
s o l e l y t o p r o p e r t y damage t o t h e named i n s u r e d ' s p r o d u c t s .
By s u b s t i t u t i n g t h e p o l i c y d e f i n i t i o n s f o r " p r o p e r t y
damage" and "named i n s u r e d ' s p r o d u c t s " , t h e e x c l u s i o n r e a d s :
This insurance does n o t apply t o i n j u r y t o o r
d e s t r u c t i o n of t a n g i b l e p r o p e r t y t o t h e goods
- 9 -
products manufactured, sold, handled
distributed by the named insured or by others
trading under his name including any container
thereof arising out of such products or any
part of such products.
The court in Northern Grain said, at page 3 6 8 :
"Finally, St. Paul contends that irrespective
of any 'injury to * * * property' which may con-
ceivably exist, coverage is nevertheless precluded
under the exclusion of 'injury to or destruction
of * * * ( 3 ) any goods, products or containers
thereof manufactured, sold, handled or distributed
by the Insured * * *.I Thus St. Paul equates the
wheat crop of Northern's customers with the seed
wheat sold by Northern, and refuses to recognize
a distinct and separate identity between the two.'
"We refuse to accede to the argument that the
wheat crop was merely the seed in changed form
and therefore encompassed within the exclusionary
clause. By virtue of the germination process in-
volved in the production of wheat a transformation
did, in fact, occur so as to constitute the wheat
crop a separate and distinct entity from the
original seed wheat.
"Considered in its proper perspective, the func-
tion of the exclusionary clause denying coverage
of damages for 'injury to or destruction of * * *
any goods, products or containers thereof manu-
factured, sold, handled or distributed by the
Insured * * * ' is clear. Such a provision denies
coveraqe to an insured for damaqes occasioned to
his own qoods or work product by reason of its
internal defectiveness. The exclusionary clause,
however, has no reference to damage to property
other than the insured's qoods or products or
other accidental loss resulting from the defec-
tive condition of the insured's work product."
(Emphasis supplied.)
Although we have no knowledge of why exclusion ( d ) ( 6 ) was
inserted in the instant policy, it appears likely that it was for
the reason stated by the court in Northern Grain.
Safeco's third contention is that the district court erred
in granting defendants' motion to strike from the amended complaint
the allegations regarding the existence of a so-called "Misdelivery
of Seed" endorsement.
The allegation which was stricken by the district court
reads as follows:
- 10 -
"Plaintiff had available for inclusion in such
a policy upon payment of an additional premium
therefor its 'Misdelivery of Seed' endorsement,
a copy of which is attached marked 'Exhibit B'.
Defendant ID. E. Munroe,] did not pay for and
did not receive such a 'Misdelivery of Seed'
endorsement and the same is not a part of the
contract of insurance entered between the parties."
There is no contention advanced by Safeco that Munroe
was offered such an endorsement or was even aware of the existence
of such an endorsement. Yet it is advocated by Safeco that this
endorsement, or its absence, is evidence of the intention of the
parties to the insurance contract.
Section 13-705, R.C.M. 1947, provides:
"When a contract is reduced to writing, the in-
tention of the parties is to be ascertained
from the writing alone, if possible; subject,
however, to the other provisions of this chapter."
This statute makes it clear that, in Montana, a contract is to be
interpreted within its four corners and not by reference to ex-
traneous matters, as Safeco would have this Court do. In Home
Ins. Co. v. Pinski Bros., Inc., 156 Mont. 246, 258, 479 P.2d 274,
we stated:
" * * * Where the policy is unambiguous, the
terms and coverage of the policy must be deter-
mined by its language alone and extrinsic
evidence is inadmissible to establish its meaning.
Section 13-704, R.C.M. 1947; James v. Prudential
Ins. Co., 131 Mont. 473, 312 P.2d 125, Kansas City
Fire & Marine Ins. Co. v. Clark (D.C. Mont.) , 217
F.Supp. 231 (1963) affirmed 9 Cir., 329 F.2d 647;
Glacier Gen. Assur. Co. v. State Farm Insurance
Co., 150 Mont. 452, 436 P.2d 533. * * * "
We hold that the policy provisions in issue were not
ambiguous and that the district court properly struck the allega-
tions in Safeco's amended complaint regarding the "Misdelivery
of Seed" endorsement.
Finding coverage under the policy, Safeco's duty to de-
fend the actions brought by Buchanan and Andersen & Hovland
against Munroe follows from the language of the policy:
" * * * The company shall have the right and
duty to defend any suit against the insured
seeking damages on account of such bodily injury
or property damage * * *,"
Safeco's fifth argument goes to the question of whether
or not the district court erred in making its order allowing
discovery proceedings to continue in the two basic actions pend-
ing the appeal of this action. However, since no discovery pro-
ceedings have taken place since this Court's order staying the
same, this question is moot.
Because of the view we have taken of the foregoing issues,
we deem it unnecessary to discuss any of the other issues raised
by the parties.
The summary judgment of the district court is affirmed.
i
,"i"
We concur:
'thief Justice