No. 14411
IN THE SUPREME COURT OF THE STATE OF MONTANA
1979
NORTHWESTERN NATIONAL CASUALTY
COMPANY, a corporation,
Plaintiff and Respondent,
BERNHARDT W. PHALEN, WILLIAM PHALEN
and THU DUC VO,
Defendants and Appellants.
Appeal from: District Court of the Fifth Judicial District,
Honorable Frank E. Blair, Judge presiding.
Counsel of Record:
For Appellants:
Torger S. Oaas argued, Lewistown, Montana
John Jardine, Whitehall, Montana
For Respondent:
Keller, Reynolds and Drake, Helena, Montana
Glen L. Drake argued, Helena, Montana
Thomas Johnson argued, Helena, Montana
Submitted: February 9, 1979
Decided: JUN 18 1979
Filed: jliN 1 8
Mr. Justice John C. Sheehy delivered the Opinion of the Court.
This appeal is from a summary judgment entered in favor
of Northwestern National Casualty Company in the District
Court, Fifth Judicial District, Jefferson County, determining
that no insurance coverage existed under a policy issued by
the insurance company in an incident involving the defendant.
Northwestern had issued for a consideration a homeowner's
policy to Bernhardt W. and Josephine Phalen for a one year term
beginning November 3, 1976. The policy provided public liability
insurance to the limit of $50,000 for each "occurrence" during
its term. Defendant William Phalen is the son of Bernhardt and
Josephine Phalen, a resident of their household, under the age
of twenty-one years and as such an "insured" under the policy.
An "occurrence" is defined in the policy as an accident
which results in bodily injury or property damage. The policy
excludes from public liability coverage bosily injury which "is
either expected or intended from the standpoint of the insured".
On January 29, 1977, William Phalen was involved in an
altercation with Thu Duc Vo near the Windsor Bar near Boulder,
Montana. Two weeks before, the same two persons had been involved
in another altercation in which Thu Duc Vo hit William Phalen
over the head with a beer bottle. On January 29, a Sunday, at
1:30 a.m., William Phalen walked into the Windsor Bar and saw
Thu Duc Vo in the company of a young woman. At closing time,
when everyone was leaving the bar, William Phalen went out with
Vo and his woman companion. In a deposition, William Phalen
described what happened then:
"Q. What happened after you left the bar?
A. He was walking on the street. I walked
down the street, and I started talking to
him, and I had my arm around [the young woman] ,
and Thu was there. I kind of had my arm around
him, too, just talking to him. We were having
a verbal disagreement. He grabbed my arm, twisted
i t , wanted me t o r e l e a s e , and I h i t him once.
Then, I w a s g o i n g t o h i t him a g a i n , and I
grabbed h i s c o a t , and he s l i p p e d o u t from me.
He r a n around h i s c a r , and he r a n back towards
t h e b a r , and Harry Johnson t r i p p e d him up, and
he f e l l o f f t h e c u r b and h i t t h e pavement.
"Q. O.K., and you t e s t i f y you h i t him o n l y
once. A. Yes.
"Q. Then would you p i c k up your s t o r y from
t h e r e p l e a s e ? A. Yeah, w e l l , I was g o i n g t o h i t
him t w i c e , b u t when I went t o swing, he
jumped away and I grabbed h i s c o a t , and
he r u n away from m e . I had a h o l d of
h i s c o a t , and h e r a n away from me and r a n
around h i s c a r , and t h e n he r a n r i g h t p a s t me
a g a i n and t h a t i s when Harry Johnson t r i p p e d
him up.
"Q. Now, w e r e you c h a s i n g him o r was someone
r e s t r a i n i n g you o r what? A. [The young
woman] was r e s t r a i n i n g me, b u t I s t a r t e d a f t e r
him; I made a few s t e p s toward him, I g u e s s .
"Q. So, he was a t l e a s t r u n n i n g b e c a u s e
he was a n t i c i p a t i n g you c h a s i n g him; i s t h a t
c o r r e c t ? A. Y e s , sir.
"Q. And w h i l e h e was r u n n i n g , Harry Johnson
a p p a r e n t l y t r i p p e d him? A. Yes.
"Q. What happened a f t e r he was t r i p p e d , t h e n ?
A. Well, h e h i t t h e pavement p r e t t y h a r d .
I was--I looked a t him, you know, and p r e t t y
soon a l l t h e s e women j u s t came h o l l e r i n g and
r u n n i n g s o we d e c i d e d w e b e t t e r g e t o u t of
t h e r e , and s o w e went down t o m house. y
"Q. I b e l i e v e you t e s t i f i e d b e f o r e t h a t
t h e way--you f e l t i t was s o r t o f an a c c i d e n t ,
t h e e x t e n t of h i s i n j u r i e s was--
" ( O b j e c t e d t o as a l e a d i n g q u e s t i o n ; t r y i n g t o
lead the witness.)
"Q. Go ahead and answer. A. W i l l you
ask m e again?
"Q. I b e l i e v e you t e s t i f i e d b e f o r e t h a t
t h i s - - t h e way he g o t h u r t and t h e e x t e n t
of h i s i n j u r i e s was a c c i d e n t a l ? A. Accidental
t o m e because I d o n ' t f e e l l i k e I h u r t him."
S u b s e q u e n t l y , William P h a l e n was charged i n t h e D i s t r i c t
C o u r t , J e f f e r s o n County, w i t h f e l o n y a g g r a v a t e d a s s a u l t . In the
a f f i d a v i t of t h e c o u n t y a t t o r n e y f o r l e a v e t o f i l e t h e i n f o r m a t i o n
it i s r e c i t e d t h a t Thu Duc Vo a t t e m p t e d t o r u n away b u t t h a t
Harry Johnson tripped him, who then fell to the pavement and
lost consciousness. The witnesses further stated to the
county attorney that Thu Duc Vo was bleeding from the head and
mouth and appeared to be choking on his own blood and having
difficulty breathing.
The injuries suffered by Thu Duc Vo were substantial.
The main fractures he sustained are to the zygoma and its
attachment to the maxillary bone along the lower rim of the
left orbit under his eye. He lost his left central incisor
tooth and had swelling along the lower left side of his jaw
and a laceration two millimeters long over the left corner of
his mouth. He underwent surgery to realign the displaced
fractured bones. He was treated by Dr. William Simic, of
Helena, whose testimony showed:
"Q. Let me go back for a minute, Doctor.
I want to clear up something. When I
asked you about the amount of trauma
to the face, is it possible that one
blow to the face from a fist could cause
that type of break? A. It would be
possible, if I might qualify this--
"Q. Yes. A. It could be possible
to have a fracture like this result
from one blow. I would not think that
the overall injury pattern to the face
was the result of one blow. By that,
I mean the injury to the eye, the cheek,
the teeth, and of course, the fracture
itself.
"Q. Let me phrase it this way, Doctor.
It isn't likely that one blow to the
cheek would cause this type of injury?
Is that a fair statement? A. No, that's
highly unlikely."
When Vo was tripped by Johnson, he fell flat on his face
in the street. Later, it was found that the lower orbital rim
of Vo's left eye was displaced internally fifteen millimeters.
In discussing this Dr. Simic testified:
"Q. Could this type of displacement be
caused by falling down and hitting your
face on a hard object like a pavement or
cement or something like that? Is it possible?
A. This particular fracture could. We will
sometimes see this. The injury picture as a
whole, I would think not.
"Q. But was there some peculiar thing about
this type of fracture that would indicate that
it could have been caused by falling down? A.
No. No, what I meant was that the other injuries
to the eyelid, the laceration of the cheek, along
with this, would indicate that it was more than a
simple fall of the cheek area."
William Phalen was represented in the criminal proceedings
against him by attorney John H. Jardine. In what appears to
be the result of a plea bargain, Phalen entered a plea of guilty
to the charge of aggravated assault, and was given a three year
sentence deferred subject (1) to the usual parole rules;
(2) that he pay Jefferson County the sum of $500 for the cost
of the proceedings; and, (3) that he make restitution to Vo
of one-half of Vo's medical and dental expenses to the limit
of $900, and to the extent that such expenses were not covered
by insurance. Judgment on Phalen's guilty plea was entered
July 21, 1977.
In the meantime, Vo had commenced a civil action against
William Phalen and Harold Johnson for the injuries which he
sustained in the incident. On May 6, 1977, he amended his
complaint to provide two counts. In count I, he charged the
willful, malicious and wrongful assault upon him by the defendants;
and in count 11, he charged the defendants as follows:
"On or about January 29, 1977 upon and
about property known as the Windsor Bar in
the city of Boulder, county of Jefferson,
state of Montana defendant did then and
there negligently, carelessly, and wrongfully
assault, strike, beat and bruise plaintiff, and
d i d n e g l i g e n t l y and c a r e l e s s l y c a u s e p l a i n t i f f
personal injuries hereinafter more particularly
described, all without cause or provocation
on the part of the plaintiff."
Attorney Jardine also represented William Phalen in
connection with the civil action brought by Vo. On or about
June 14, 1977, the attorney called Jalmer 0. Carlson, claims
manager for Northwestern, and advised him of the Vo suit
against Phalen, and indicated the policy coverage might
attach. Carlson asked about the status of the civil litigation.
Attorney Jardine testified that it was his impression that
"he [Carlson] told me to go ahead with the defense and that
Northwestern would take care of that", although nobody said
that specifically. Carlson, in his testimony, denies hiring
the attorney to look after Northwestern's interest. How-
ever, Carlson did on June 27, 1977, send by certified mail a
letter to all of the insureds as follows:
"Dear Mr. Phelan [sic]:
"This letter is to inform you that the
Northwestern National Casualty Company
is reserving the rights afforded both
you and the company under policy no.
NHO 44 80 42 in regard to an incident
which took place on February 18, 1977
involving injuries to Thu Duc Vo. We
are making this reservation so that the
investigation may continue, that possible
compromise settlements might be made and
that any eventual litigation can be accomodated
without prejudice to the rights of either
party to the policy.
"This reservation of rights is being served
because the above mentioned incident does
not appear to meet the policy definition of
occurance [sic] and for other reasons.
"The service of this notice does not deprive
you of any rights you may have against this
company.
This action for declaratory judgment was not filed
until September 16, 1977 because attorney Jardine wanted
some time to see if he could "work something out".
In this action, cross-motions for summary judgment were
made by the parties and on May 3, 1978, the District Court
entered its declaratory judgment that there is no coverage
for William Phalen under the Northwestern policy of insurance,
arising out of the incident,and that Northwestern had no
duty to defend the action brought by Thu Duc Vo against
Phalen.
Phalen, the insured under Northwestern's policy, took
no active part in the proceedings before the District Court
nor in this appeal. Thu Duc Vo, as appellant, contends that
the grant of summary judgment to Northwestern was improper.
We agree with appellant Vo, as we determine that there is a
fact question upon which coverage under Northwestern's
policy may depend.
THE POLICY COVERAGE
We note that in no provision of Northwestern's policy,
does the word "assault" appear, nor "intentionally inflicted",
nor "committed by or at the direction of the insured".
Accordingly, cases construing policies with those types of
provisions do not reflect what the state of the law is or
should be under the coverage extended in Northwestern's
policy.
The policy in this case extends personal liability
coverage to the insureds for damages caused by an "occurrence".
The policy defines an occurrence as an accident resulting in
bodily injury or property damage, excluding only bodily
injury or property damage, which is either expected -
or
intended -- standpoint - - insured.
from the of the
In Grand River Lime Company v. Ohio Casualty Company,
(19721, 32 Ohio App. 2d 178, 289 N.E.2d 360, it was held
that the term "occurrence" is a broader term than "accident"
where occurrence is defined in a policy as meaning an incident
in which property damage is neither expected nor intended
from the viewpoint of the insured. There is no reason why
the same meaning should not be applied where personal
injury damages are involved instead of property damages.
The word "occurrence" instead of the word "accident" in the
insuring clause means that the word "occurrence" is in fact
broader than the word "accident" and is so intended by the
insurer. In such case, the intent of the policy is to
insure the acts or omissions of the insured, including his
intentional acts, excluding only those in which the resulting
injury is either expected or intended from the insured's
standpoint.
It is clear therefore, that the insured here would be
debarred from coverage in those cases where his deliberate
acts or assaults resulted in injuries which would be expect-
- or intended by - to result from his deliberate acts.
ed - - him
But what about coverage where the results of his acts (even
though deliberate) are unexpected or not intended by the
insured? The answer under such a policy provision is that
(1) the event is an occurrence; (2) since it results in
bodily injury it is an accident under the definition of the
policy, and (3) since it is unintended or unexpected, it is
within the coverage of the policy.
Such a construction of the insurance policy is not
strained or forced, but rather is an interpretation of the
plain, ordinary and popular meaning of the words used by the
insurer in defining the coverage extended. It should be
interpreted in that sense. Conlon v. Northern Life Insurance
Company (1939), 108 Mont. 473, 92 P.2d 284. Exclusions and
words of limitations must be strictly construed against the
insurer. Kansas City Fire and Marine Insurance Company v.
Clark (D.C. Mont. 1963), 217 F.Supp. 231. We do not consider
this provision to be ambiguous; the possibility of unintended
bodily injury brings that result within the policy coverage,
even though Phalen's actions may have been intentional.
- 8-
In interpreting the policy thusly, we have given
consideration to the cases cited by Northwestern in support
of its position that no coverage exists here. Most of the
cases cited by Northwestern relate to a policy provision
which excluded acts or injuries caused "intentionally by or
at the direction of the insured". On that basis, and on the
factual basis on which those cases were decided, they can be
distinguished from the case at bar. Some of those cases
include the following:
In Transamerica Insurance Company v. Cannon-Lowden
Company (D.C. Mont. 1975), 400 F.Supp. 817, the jury found
by special verdict that the insured had committed suicide
when she drove her automobile at a speed in excess of 60
miles per hour out of her lane of traffic and directly into
the path of a tractor-trailer unit driven by another. The
court felt that the risk of damages from the insured's acts
were so certain that it could be said as a matter of law
that the damage was intentional and expected. The exclusion
in the policy related to bodily injury and property damage
caused "intentionally by or at the direction of the insured."
In Home Insurance Company v. Neilsen (Ind. 1975), 332
N.E.2d 240, again the exclusionary clause excluded bodily
injury caused "intentionally by or at the direction of the
insured". In that case, the insured claimed he did not
intend to inflict the injuries of which plaintiff complained,
and that his actions were performed in self-defense. The
decision of the court that coverage did not apply, turned on
the court's construction of the word "intentionally" as used
in the policy. 332 N.E.2d 242.
In Caspersen v. Webber (Minn. 1973), 213 N.W.2d 327,
the policy excluded "bodily injury ... caused intentionally
- 9-
by or at the direction of the insured." The insured pushed
a hatcheck girl, who struck her back against a metal message
rack attached to the wall. The insured stated he had no
intention to harm her. The jury found that the insured had
assaulted the hatcheck girl, and that he was negligent, and
awarded general and punitive damages. The trial court
refused judgment against the insurance company, saying the
injuries were the direct result of the assault so that no
coverage applied. The appellate court reversed, saying that
the insurer is liable when the act is intended but the
resulting injury is not. 213 N.W.2d at 230.
More to the point are cases which have construed policies
which contained language excluding coverage for bodily
injuries "either expected or intended from the standpoint of
the insured." In determining the effect of this exclusionary
clause, we note that it is a relatively recent provision
used by insurers in this type of coverage. 79 A.L.R.3d 1125.
On its face, the clause requires a two-fold test to determine
coverage: (1) was the injury intended, or (2) was the
injury to be expected by the insured? In Farmers Automobile
Insurance Association v. Medina (Ill. 1975), 329 N.E.2d 430,
it appears a minor boy intentionally flipped matches upon a
gasoline spot directly below a parked automobile. The gasoline
ignited and burned the automobile. In considering the
clause identical to the one at bar, the Illinois court said:
"In examining the various court decisions
both in this state and from other jurisdictions,
we find that the courts have considered this
exclusionary clause, and a most comparable
one, which reads as follows:
"'To injury . . . caused intentionally
by or at the direction of the insured.'
"It is to be noted that the exclusionary
clause in the case before us contains the
expression or word 'expected'. --
The term
--
'expected' has been judicially construed
- mean - -
to a high degree of certainty. (Citing
~ a s In several cases which have considered
s
exclusionary clauses containing the term
'expected' in addition to the term 'intended'
the court's have failed to find that the
addition of the term 'expected' affected the
outcome of the case. (Citing cases.) It is
possible to envision situations in which the
inclusion of the term 'expected' in an insurance
exclusionary clause could alter the outcome
of a suit which required interpretation of the
clause, however, in view of the result we reach
herein, we find that further discussion of the
distinctions between the terms 'intended' and
'expected' is unnecessary." 329 N.E.2d at 432.
(Emphasis added. )
The Illinois court, in Medina, relying on the New Jersey
case of Lyons v. Hartford Insurance Group (N.J. 1973), 310 A.2d
485, decided that the general rule is that coverage exists under
an exclusion clause identical or similar to this one for the
unintended results of an intentional act but not for damages
assessed because of an injury which was intended to be inflicted.
No clear rule has yet emerged from those cases which have
specifically considered and turned on this particular exclusionary
clause. In State Farm Fire and Casualty Company v. Muth (Neb.
1973), 207 N.W.2d 364, in an action for declaratory judgment
between the insurer, insured and judgment creditor of the insured,
it appeared that the insured, a minor, had fired a b.b. gun from
an automobile toward the judgment creditor and the pellet struck
the judgment creditor in the eye, causing loss of sight.
The trial judge in the declaratory judgment action found that
when the minor caused the gun to discharge in the direction of
the judgment creditor, the minor did not intend or expect to
do bodily injury to him; therefore, it found the minor was
negligent and the exclusion did not apply. In interpreting
the exclusionary language, the Nebraska court said that bodily
injury is excluded "if the insured acted with a specific
intent to cause harm to a third party". 207 N.W.2d 366.
Other cases involving the same exclusionary clause
include Armstrong v. Security Insurance Group (Ala. 1973),
288 So.2d 134, where the husband and wife were the named
insureds as the operators of a sandwich shop, and it was
held that the clause excluded coverage for the husband who
shot a patron but did not exclude coverage for the wife who
was standing nearby.
In Terito v. McAndrew (Louis. 1971), 246 So.2d 235, it
was held that the owner of a hotel bar, who knocked the
patron from a barstool "to shut his mouth" and who had
fallen on the patron after he fell off a barstool so that
the patron's knee was injured, did not have coverage under
this clause. In Commercial Union Insurance Company v. City
of Montpelier (Vt. 1976), 353 A.2d 344, it was held that the
insurer owed the City a defense where police officers were
charged with assaults upon the plaintiff, again with the
same clause.
After examination of the cases, and the exclusion
itself, we would interpret the clause to mean that it precludes
coverage for bodily injuries or damages, though not specifically
intended by the insured, if the resulting harm was within
the expectation or intention of the insured from his standpoint.
That statement more precisely fits the language of the
coverage provided by the insurer. Out of that interpretation
a question of fact exists in this case as to whether coverage
should apply in view of the alleged accompanying and concurrently
negligent acts of Harry Johnson which may have exacerbated
the injuries Vo received.
THE FACT ISSUE
---
From the medical testimony, it appears that the massive
injuries to Vo's face could have resulted from the fall to the
pavement, or from the single blow that Phalen admits
-12-
he struck, or from a combination of both. Dr. Simic did not
believe that a single blow would cause the injuries which
extended from the lower orbital rim of the left eye where a
fifteen millimeter displacement occurred, to the left corner
of Vo's cheek, where his lip was lacerated. The part of
Vo's injuries, if any, which resulted from the fall to the
street, were proximately caused, apparently, by the fact
that Phalen was chasing Vo when Vo was tripped by Johnson
and the fall to the street ensued. Even if Phalen's act of
chasing is deemed to be intentional, the intervening act of
Johnson in tripping Vo and the resulting injuries may not
-
have been expected or intended by Phalen. At least a fact
issue as to that element of the claim exists. A situation
is presented where Phalen's act of chasing could be considered
by a jury to be concurrently negligent with the negligence
of Johnson in tripping Vo. Where one defendant's negligence
is a contributing proximate cause of injury, and neither
defendant is responsible for the other, each defendant is
liable, provided the injury would not have been sustained
but for his negligence. Marinkovich v. Tierney (1932), 93
Mont. 72, 17 P.2d 93; Bensley v. Miles City (1932), 91 Mont.
561, 9 P.2d 168. Where several causes producing injury are
concurrent and each is an efficient cause without which the
injury would not have occurred, the injury may be attributed
to all or any of the causes, and recovery may be had against
either or all of the responsible persons, though one of them
was more culpable and the duty owed by them to the injured
person was not the same. See Daly v. Swift and Company
(1931), 90 Mont. 52, 300 P. 265.
A fact question exists as to whether Phalen in chasing
or offering to chase Vo, would have expected - intended
or
that Johnson would trip him and crash him on his face to the
pavement. If the trier found that Vo's injuries were unexpected
by Phalen, certainly Northwestern's policy extended coverage
for the incident. -13-
If Phalen's chasing were a proximate cause of the eventual
injuries, it would be the accompanying act of the concurrently
negligent Johnson that brought about the unexpected and unintended
result, a result which Phalen himself testified he did not
intend.
The proper place for the determination of this fact issue
is in the original action brought by Vo against Phalen and Johnson.
Whether Vo's injuries were expected or intended by Phalen can
be determined in that case through the use of special interrogatories
to the jury, or if the case is tried by a judge without a jury,
through findings made by the court.
WAIVER BY NORTHWESTERN
-
Thu Duc Vo also contends that Northwestern waived any right
to dispute coverage by assuming the defense of the action on
behalf of Phalen. Vo also contends that Northwestern's letter
of June 27, 1977, is an inadequate reservation of rights under
the case of Henry v Johnson (Kan. 1963), 381 P.2d 538.
.
In view of our determination that a fact issue exists
which requires reversal, we do not need to determine at this time
the question of such waiver, or whether Thu Duc Vo, as a claimant,
can take advantage of a waiver by Northwestern to its insured
Phalen.
NORTHWESTERN'S DUTY TO DEFEND
--
In its brief, Northwestern contends this Court should
address the issue of the duty of Northwestern to defend Phalen
in the action brought by Vo. Northwestern claims that because
of its position that no coverage applies, there is no duty
to defend Phalen under the policy under Reliance Insurance Company
v. Fischer (1974), 164 Mont. 278, 531 P.2d 193.
In Reliance, we stated that there was no obligation on the
part of the insurance company to undertake the defense of the
insured, if under the policy, the insurance company had no duty
-14-
to pay any judgment secured against the insured. In this
case, the duty of Northwestern to pay a judgment on behalf
of Phalen may not be determined until the original action
has been completed. In the meantime, the pleadings themselves,
particularly count 11, stated a cause which fits within the
policy coverage and in that situation, Northwestern has a
duty to extend a defense of Vo's action to Phalen. St. Paul
Fire and Marine Insurance Company v. Thompson (1967), 150
Mont. 182, 433 P.2d 795.
Phalen's plea of guilty to felony assault is not conclusive
either as to his policy coverage or the duty of Northwestern
to defend him in a tort action. Teitelbaum Furs, Inc. v.
Dominion Insurance Company (1962), 25 Cal. Rptr. 559, 375
P.2d 439, 441; Brohawn v. Transamerica Insurance Company
(Md. 1975), 347 A.2d 842, 848. The proper case for determining
whether Phalen intended or expected the injuries Vo received
is in the tort action, and not in the declaratory judgment
action. (Brohawn, 347 A.2d at 848, 849.)
Moreover, the duty to provide a defense is not affected
by Phalen's showing little interest in either the tort
action or the declaratory judgment suit. This court held in
McLane v. Farmers Insurance Exchange (1967), 150 Mont. 116,
432 P.2d 98, that the injured party's rights as a claimant
vested at the time of the accident and could not be affected
by nondefense of an action brought by the insurer to rescind
the insurance policy. Here, Vo's rights can not be affected
by the action or nonaction of persons over whom Vo has no
control. See Peterson v. Western Casualty and Surety Company
(Utah 1967), 425 P.2d 769.
DISPOSITION
The applicability of Northwestern's coverage cannot be
determined until the factual issues concerning the intention
and expectation of Phalen as to Vo's injuries is decided in
the tort action. Therefore, summary judgment in favor of
Northwestern in the declaratory judgment case at bar was
-15-
improper. Kemmer v. City of Bozeman (1971), 158 Mont. 354,
492 P.2d 211; Duchesneau v. Silver Bow County (1971), 158
Mont. 369, 492 P.2d 926.
Reversed and remanded to the District Court with
instructions to dismiss the declarator
'J
We Concur: