No. 84-21
IN THE SUPREME COURT OF THE STATE OF MONTANA
1984
UNITED STATES FIDELITY AND GUARANTY
COMPANY, a Maryland corporation,
Plaintiff, Respondent and Cross-Appellant,
RAE VOLUNTEER FIRE COMPANY,
Defendant and Appellant,
and
F A M E R S UNION P.IUTUAL INSURANCE
COMPAXY, HARRY PETROFF and ROSSALIC
A. PETROFF, husband and wife,
Intervenors and Appellants.
APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Joseph B. Gary, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
William E. OILeary; OILeary & McCarthy, Helena,
Montana (Rae Volunteer Fire Co.)
Graybill, Ostrem, Warner & Crotty; Gregory Warner,
Great Falls, Montana (Farmers Union tlutual Ins.)
For Respondent :
Gough1 Shanahan, Johnson & Waterman; Daniel C.
Murphy, Helena, Montana
Submitted on Briefs: M.ay 17, 1984
Deci.ded: October 9, 1984
Clerk
Mr. Justice Fred J. Weber delivered the Opinion of the Court.
United States Fidelity and Guaranty Company (USF&G)
sought a declaratory judgment in the Gallatin County District
Court as to its obligations under a liability insurance
policy issued by USF&G to Rae Volunteer Fire Company (Rae), a
nonprofit corporation. Rae halted firefighting efforts upon
determining that Harry Petroff and Rosalie Petroff
(Petroffs), residential dwelling owners, were not members of
Rae, and the Petroff home burned to the ground. The District
Court held that the decision to cease firefiqhting was not an
occurrence or an accident within the meaning of the policy,
because the resulting property damage was expected, and that
there was no policy coverage. Farmers Union Mutual Insurance
Company, insurer of the Petroff home, has intervened. We
affirm the District Court.
The issues a.re:
1. Does the USF&G policy provide Rae with coverage as
to the damages claimed by Farmers Union and Petroffs?
2. Did the District Court err in finding the policy
exclusionary language unambiguous where the policy fails to
specify the individual or individuals in the corporation who
may activate the exclusion?
3. Does USF&G have a duty to defend Rae in the action
commenced against Rae by Farmers Union and Petroffs?
USF&G commenced this declaratory judgment action to
determine the extent of its obligations and liabilities under
the liability insurance policy issued to Rae. An extensive
agreed statement of facts was submitted by the parties.
USF&G and Rae then both moved for summary judgment. The
District Court entered summary judgment for USF&G, holding
that USF&G was neither obligated to provide liability
coverage nor to defend Rae.
The critical facts as summarized in this opinion are
undisputed. Rae is a nonprofit corporation established to
provide rural firefighting protection to its subscribers.
Subscribers are charged an initiation fee and annual
assessment dues. USF&G issued to Rae a standard form
manufacturers' and contractors' liability insurance policy.
On February 24, 1979 several Rae firefighters were
advised by the Gallatin County Sheriff's office that a fire
was burning at the Petroff home in Gallatin County. Four Rae
volunteer firemen responded. The fire could be seen from
approximately 1/2 mile away. Flames were shooting through
the roof around the chimney as high as 15 or 20 feet in the
air before arrival of the Rae firefighting equipment. All
four Rae firefighters considered the fire to be fully
involved, that is, it had sought its own source of oxygen,
which would have prevented Rae from saving the structure with
the supply of water available. The Rae firefighters
considered the fire out of control upon arrival and at all
times while they participated.
Upon arrival at the scene, firefighter Frank Trunk
activated the water pump on the fire truck, two others
commenced fighting the blaze with separate hoses, and the
fourth firefighter, Rick Jensen, questioned Harry Petroff
about the possibility of persons being endangered by the
fire. Petroff stated there was no one in the house. The
firefighter further inquired and was told that the Petroffs
were not subscribing members of Rae. Jensen double-checked
that information by radio with Rae's secretary. Upon being
advised that the Petroff's were not Rae members, Frank Trunk,
as fire company chairman, ordered the firefighters to cease
all. firefighting efforts. The entire firefighting effort by
Rae took an estimated 2 to 5 minutes after arrival at the
scene. The fire continued burning out of control and
destroyed the house.
Approximately one year before the Petroff fire, the
board of directors of R.ae a.dopted a policy which required
personnel to respond to all fire calls in the service area to
determine whether a life-endangering situation existed. If
no life was endangered by fire, and if the owners of the
structure were not members of the company, Rae would not
fight the fire.
Petroffs and Fa.rmers Union filed a com.plaint against Rae
in the Gallatin County District Court seeking damages for
destruction of the Petroff home and personal property, and
for punitive damages. Rae gave notice of the suit to USF&G,
which denied coverage on the basis that the allegations of
the complaint and the incidents on February 24, 1979 did not
constitute an "occurrence" as defined in the policy.
The District Court's findings of fact quoted the
applicable portions of the policy, about which there is no
disagreement:
"The company will pay on behalf of the insured all
sums which the insured shall become legally
obligated to pay as damages because of ...
property damage to which this insurance applies,
caused by an occurrence . . ."
The insurance policy defined. the word "occurrence" as
follows :
"'Occurrencer means an accident, including
continuous or repeated exposure to conditions,
which results in ...property damage neither
expected nor intended from the standpoint of the
Insured. "
In its conclusions of law, the District Court held that
the issue between Rae and USF&G is one of contract language;
that the language cannot be interpreted to cover a deliberate
act by Rae the results of which were expected by its officers
and agents; that the decision to cease firefighting was not
an "occurrence" or an "accident" because the resulting
property damage was expected from the standpoint of the
insured; that USF&G does not provide insurance coverage for
Rae under these circumstances; and that USF&G has no duty to
defend since there is no liability under the policy. The
District Court further held that the policy language is
unambiguous because the fire company can have an expectation
of property damage through its duly authorized officers and
agents.
I
Does the U S F & G policy provide Rae with coverage as to
the damages claimed by Farmers Union and Petroffs?
Rae contends that Montana case law was not properly
interpreted by the District Court. Rae contends that the
court erred in holding, in effect, that Rae was the cause of
the fire and that because Rae expected the damage to occur
when it stopped fighting the fire, Rae is barred from
liability coverage.
In contrast, USF&G argues that the decision of Rae to
cease firefighting efforts at the Petroff residence was
intentional and that the resulting destruction of the Petroff
home was expected from the standpoint of the insured. USF&G
argues there is no insurance coverage under these facts.
The deposition of Mr. Trunk, chairman of the board of
directors of Rae, establishes that he expected at the time
the firefighting efforts were terminated that the house would
burn to the ground. Mr. Gilbertson and Mr. Jensen, Rae's
fire chief and assistant fire chief, testified that at the
time the decision was made to stop the firefighting efforts,
each of them expected that the house would be destroyed.
This testimony is consistent with the findings of fact and
agreed statement of facts to the effect that the fire
continued burning out of control and destroyed the Petroff
residence.
Under these facts the policy definition of "occurrence"
was not met. Such an "occurrence" must have resulted in
property damage "neither expected nor intended from the
standpoint of the Insured.." While there may be some argument
as to intent in this case, there can be no argument as to
"expected." It is clear that the chairman of the board, fire
chief and assistant fire chief all expected that the house
would continue to burn and be destroyed. That affords a
clearly sufficient factual basis for the District Court's
conclusion of law that the decision to cease firefighting was
not an "occurrence" or an "accident" because the resulting
property damage was expected by Rae.
In Northwestern National Casualty Co. v. ~ h a l e n (1979),
182 Mont. 448, 459, 597 P.2d 720, 726, we construed a similar
policy provision as follows:
"After examination of the cases, and the exclusion
itself, we would interpret the clause to mean that
it precludes coverage for ...
damages, though not
specifically intended by the insured, if the
resulting harm was within the expectation or
intention of the insured from his sta-ndpoint. That
statement more precisely fits the language of the
coverage provided by the insurer."
That is directly applicable here where the destruction of the
dwelling was the resulting harm expected by the insured.
Rae cites Miller's Mutual Insurance Co. v. Strainer
(Mont. 1983), 663 P.2d 338, 40 St.Rep. 743, as authority for
its position. In that case we concluded that in removing a
filter from a gas mask, the defendant had committed an
intentional act, but that in doing so he had neither intended.
nor expected the act's consequences, serious injury to a
co-employee. Here Rae, through its employees, clearly
expected the destruction of the dwelling. This is a factual
distinction between Miller's Mutual Insurance - and this
Co.
case.
We affirm the holding of the District Court that the
USF&G policy did not provide coverage for the fire of
February 24, 1979 or the damages claimed by the Petroffs and
Farmers Union.
Did the District Court err in finding the policy
exclusionary language unambiguous where the policy fails to
specify the individua.1 or individuals in the corporation who
may activate the exclusion?
We agree with the numerous Montana cases cited by Rae
holding that where an ambiguity in an insurance contract
exists, every doubt should be resolved in favor of the
insured and strictly construed against the insurer. However,
those cases are not controlling because Rae fails to show how
the policy provisions are ambiguous in the present fact
situation.
In substance, Rae contends that because the policy
language fails to identify the individual in the Rae
corporation who may activate the provision with regard to the
expectations or intention of the corporation, there is an
ambiguity. That contention ignores the principle that a
corporation acts through its duly authorized officers and
agents. Fisk Tire Co. v. Lanstrum 61934), 96 Mont. 279, 282,
30 P.2d 84, 85. Further, the uncontradicted findings of fact
establish that Rae made a corporate decision through its
board of directors to terminate firefighting activities under
the fact situation which existed in the present case. The
on-the-scene decision to stop firefighting efforts was made
by the chairman of the board of directors after carefully
checking to determine that the facts came within the purview
of the decision previously made by the board of directors.
We affirm the conclusion by the District Court that the
chairman of the board of directors had authority under the
circumstances to act for the corporation. See Hauptman v.
Edwards, Inc. (1976), 170 Mont. 310, 553 P.2d 975; Bentall v.
Koenig Bros. Inc. (1962), 140 Mont. 339, 372 P.2d 91.
We affirm the conclusion by the District Court that the
language of the policy is not ambiguous because Rae can have
an "expectation" of property damage through its duly
authorized officers.
I11
Does USF&G have a duty to defend Rae in the action
commenced against Rae by Farmers Union and Petroffs?
In substance Rae argues that under the allegations of
the complaint by the Petroffs and Farmers Union, USF&G should
be required to defend the action regardless of whether the
actions of Rae actually caused the damage to the Petroff
residence. In making that argument, Rae relies particularly
upon our holding in Lindsay Drilling and Contracting v.
United States Fidelity and Guaranty Co. (Mont. 1984), 676
P.2d 203, 41 St.Rep. 193. It is true that in Lindsay this
Court concluded that USF&G was obligated to defend under its
policy, leaving for future determination by the jury whether
the operations being performed by or on behalf of the insured
at the time of injury were in fact negligent. In a similar
manner, Rae argues that regardless of the facts, the
allegations of the Petroff complaint are sufficient to
require defense by USF&G.
This argument disregards the undisputed facts contained
in the agreed statement of facts and restated in the District
Court's findings of fact. These facts establish that there
is no coverage under the USF&G policy because the fire damage
to the Petroff home was expected by Rae and, as a result, the
decision to cease firefighting was not an "occurrence" as
defined in the policy. This distinguishes Lindsay, in which
the facts had not yet been determined by a trier of fact.
We affirm the conclusion of the District Court that
U S F & G has no duty to defend where there is no liability under
zhe policy provisions.
We affirm the judgment of the District Court.
We concur:
'ab%JA.$
Chief Justice
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