No. 83-524
IN THE SUPREME COURT OF THE STATE OF JIONTATJA
1984
TRUCK INSURANCE EXCHANGE,
a reciprocal or interinsurance
exchange,
Plaintiff and Appellant,
MARIE WOLDSTAD, Individually,
and as Administratrix of the Fstate
of RICHARD C. WOLDSTAD, HYDRO-FLAME,
a Utah corporation, and ACTION SALES,
INC. ,
Defendants and Respondents.
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 Appellant:
Morrow, Sedivy & Bennett; Lyman 11. Bennett, 111,
argued and Terry Schaplow argued, Bozeman,
Montana
For Respondents:
Goetz, Madden & Dunn; William Madden argued for
Woldstad, Bozeman, Montana
Landoe, Brown, Law Firm; Randy Dix argued for
Hydro-Flame, Bozeman, Montana
Leaphart Law Firm; William Leaphart argued for
Action Sales, Helena, Montana
- -
Submitted: June 19, 1984
Decided: September 12, 1984
Filed: SEP r ,? t984
Clerk
Mr. Chief Justice Frank I. Ha-swell delivered the Opinion of
the Court.
This is an appeal from a summary judgment of the
Gallatin County District Court. Truck Insurance Exchange,
plaintiff in a declaratory judgment action below and appel-
lant here, challenges the District Court's interpretatj-onof
an insurance contract issued by appellant to Action Sales,
Inc. The court found coverage effective for post-expiration
injury where the defective product was sold while the policy
was still in force. The court ordered payment of judgment
and attorney fees. We affirm.
In June 1976 Richard Woldstad. purchased a pickup-
mounted camper from Action Sales, Inc. (Action) . The camper
was equipped with a propane furnace designed, manufactured
and sold by Hydro-Flame Corp.
On March 3, 1980, Richard Woldstad was using the camper
in the vicinity of Manhattan, Montana.. The camper exploded
and Wol-dstad sustained injuries which caused his death on
March 9, 1980.
At the time Woldstad purchased the camper from Action,
Action was insured by Truck Insurance Exchange (Truck) for
damages arising out of an occurrence such as that which
caused Woldstad's death. After the purchase but prior to the
accident, the coverage was canceled.
Marie Woldstad (Woldstad), individually and as personal
representative of the estate of Richard C. Woldstad, filed a
wrongful death suit against Action and Hydro-Flame. Action
attempted to tender defense of the suit to Truck. Truck
declined coverage and refused to defend. Action defended the
suit and later informed Truck of a settlement offer mzde by
Woldstad. At that time, Action demanded Truck either settle
within the policy limits or unconditionally assume Action's
defense. Truck informed Action that Truck would neither
respond to the settlement offer nor assume Action's defense.
Later, Action informed Truck that Action intended to enter
into a consent judgment with Woldstad in the amount of
$225,000 with a covenant not to execute and asked Truck if it
had changed its position. Truck did not respond. Action
then entered into an agreement for entry of consent judgment
with Woldstad for $225,000.
Nearly nine months later the District Court ruled on
Woldstad's and Truck's cross-motions for summary judgment,
holding the policy issued by Truck to Action covered the
claims brought against Action by Woldstad. Woldstad then
moved for summary judgment against Truck to compel payment of
the consent judgment. Action joined in Woldstad's motion and
further sought attorney fees and costs.
On November 10, 1983, the District Court ordered Truck
to pay the consent judgment. Six days later Truck appealed,
and this Court remanded the matter to the District Court for
a hearing on the issue of fees. On December 21, 1.983, the
District Court ordered Truck to pay Action $2,446.65 in
attorney fees and costs. Truck now appeals, and the follow-
ing issues are raised:
1. Does the policy issued by Truck to Action provide
coverage for a product sold during the term of coverage when
the product causes injury after the policy has expired?
2. If there is coverage, is Truck legally obliqated to
pay Action's attorney fees and costs with regard to this
matter?
The first issue to be addressed is whether the policy
issued by Truck provided coverage for damages for a yroduct
sold during the term of the coverage when the product caused
injury after the policy had expired. Under the circumstances
of this case, we affirm the ruling of the District Court that
the policy issued by Truck provided coverage for such damage.
It is undisputed that at the date of the sale of the
camper there was coverage in effect which applied to the type
of claims asserted by Woldstad. Truck maintains, however,
that the policy clearly limits their liability to d-amages
which occur during the policy term. Respondents argue that
there is no clear limiting language and that the terms of the
policy are at best amhiguous and, therefore, must be con-
strued in their favor. The District Court found the policy
ambiguous, held for respondents, and we affirm both the
hol-ding and the reasons for that holding.
The critical portions of coverage at issue here are
those relating to completed operations haza.rd and products
hazard.
"Completed Operations Hazard" is, in part, defined. as
follows:
" (d) 'Completed Operations Hazard' in-
cludes bodily injury and property damage
arising out of operations or reliance
upon a representation or warranty made at
any time with respect thereto, but only
if the bodily injury or property damage
occurs after such operations have been
completed or abandoned and occurs away
from premises owned by or rented to the
named insured. 'Operations1 include
materials, parts or equipment furnished
in connection therewith.
"Products Hazard" is defined. as:
"'Products hazard1 includes bodily injury
and property damage arising out of the
named insured's products or reliance upon
a representation or warranty made at any
time with respect thereto, but only if
the bodily injury or property damage
occurs away from premises owned by or
rented to the named insured and after
physical possession of such products has
been relinquished to others."
"Bodily Injury" is defin-ed in the policy as foll.ows:
"'Bodily Injury' means bodily injury,
sickness or disease, includ.ing death at
anytime resulting therefrom, sustained by
any person." (Emphasis added.)
There is no language in the above definitions which
provides that the damage must occur while the pol-icy is in
force.
Truck argues that the section of the policy entitled
"General. Conditions; Applicable to Enti-re Policy" states that
the policy applies only to bodily injury or property damage
occurring during the policy period. We find, however, as did
the District Court, that this section does not apply to the
portions of the policy dealing with products haza.rd and
completed operations hazard coverage because the general
limiting language states ". . . except as otherwise provided.
herein." The policy provides otherwise in the sections
dealing with products hazard and completed operations hazard
by not specifically limiting the coverage therein.
Truck also maintains that a clause in the policy limits
"liability for all damages arising out of the products hazard
and completed operations hazard during the twelve-month
period beginning with the effective date of such coverage
provided the bodily injury or property damage occurs while
the policy is in force. . . ." This limiting language specif-
ically applies onl-y to coverage "C, D, E" of the policy, and
neither products hazard nor completed operations hazard are
contained in parts C, D or E of the policy.
The hazard clauses specifically provide coverage tor
future injury arising from product sales. The act giving
rise to liability occurred when the camper was sold and while
the policy was admittedly still in force. While ap insurer
may limit its liability in this area, the limiting language
must be clear and unambiguous. The provisions of this policy
with regard to products hazard or completed operations hazard
coverage and the sections dealing with policy limitations,
taken as a whole, are ambiguous. It is the rule of construc-
tion in Montana that language of limitation or exclusion must
be clear and unequivocal; otherwise, the policy will be
strictl-y construed in favor of the insured. Terry v. Nation-
al Farmers Union Life Insurance Co. (1960), 138 Mont. 333,
356 P.2d 975; Atcheson v. Safeco Insurance Co. (1974), 165
Mont. 239, 527 P.2d 549; Fassio v. Montana Physicians' Ser-
vice (1976), 170 Mont. 320, 553 P.2d 998; Lindell v. Ruthford
(1979), 183 Mont. 135, 598 P.2d 616; Northwestern Nat. Cas.
Co. v. Phalen (1979), 182 Mont. 448, 597 P.2d 720.
I1
The second issue is whether Truck is obligated to pay
Action's attorney fees and costs with regard to this matter.
We have held that an insurer's breach of contract, in this
case refusal to defend, renders the insurer liable for the
defense costs resulting from the breach. Home Insurance
Company v. Pinski Brothers, Inc. (1972), 160 Mont. 219, 500
P.2d 945.
In this matter Action made repeated requests of Truck
to assume the defense and Truck refused or failed to respond.
Action was forced to retain counsel for the wrongful death
action as well as the declaratory judgment action. In light
of Truck's breach, we find Truck liable for Action's attorney
fees and costs in defense of this matter.
Affirmed and remanded to the District Court for deter-
mination of attorney fees and costs.
? d&
i4 q
!
Justice
Chief
We concur:
Justices
Mr. Justice Fred J. Weber dissents:
I respectfully dissent from the majority opinion in its
interpretation of the insurance contract issued by Truck
Tnsurance Exchange. The majority has failed to give effect
to a clear and unambiguous provision of the policy which
limits coverage to bodily injury or damage which occurs
during the policy period. The majority opinion creates
coverage where the parties agreed in the insurance contract
there would be none.
The general condition limiting liability, which
expressly applies to the entire policy, states:
"Except . . .as otherwise provided herein, the
insurance afforded under section I1 of this policy
[the coverage involved in this case] applies only
to bodily injury or property dama e which occurs
-
during the policy period ..
.d m p h a s i s added)
This is a clear and unambiguous provision stating that the
insurance applies only to bodily injury or damage which
occurs within the policy period. It is contained in the
general conditions expressly applicable to the entire policy.
There is no language in the policy providing otherwise with
respect to the coverage involved here.
The majority suggests that because there is no language
in section I1 which specifically limits coverage und.er that
section, there is no limit whatsoever in the policy which
provides that, to be covered, bodily injury or property
damage must occur while the policy is in force. The majority
supports this conclusion by referring to the phrase "except
as otherwise provided herein." The majority finds that the
complete absence of any mention of a policy period limitation
in section I1 constitutes an exception "otherwise provided"
in the policy. Obviously, if there is no exception stated in
section 11, there is no exception "otherwise provided" and
the general condition limiting liability clearly applies.
The only policy provision arguably related to this
question is the definition of bodily injury:
"'Bodily Injury' means bodily injury, sickness or
disease, including death at any time resulting
therefrom, sustained by any person."
Because the phrase "including death at any time" is
underscored in the majority opinion, I assume the majority
construes this language as creating coverage of bodily injury
which occurs outside the policy period. However, the
majority ignores the last two words of the phrase appearing
in the policy, "resulting therefrom." When the entire phrase
is read in light of the general condition statement regarding
the policy period limit, the phrase "including death at any
time resulting therefrom" is clearly intended to assure
coverage for a death occurring outside the policy period
which results from a bodily injury occurring within the
policy period. Obviously, this phrase was not intended to
provide coverage of any death at any time which resulted from
injury occurring outside the policy period. Despite the
clear intent of this phrase to the contrary, the majority has
concluded that it extends coverage to death resulting from an
injury occurring outside the policy period.
I respectfully disagree with the majority's conclusion
that the quoted definitions of completed operations hazard,
products hazard and bodily injury provide coverage for injury
occurring outside the policy period. Those provisions are
definition paragraphs which describe the particular types of
hazard or injury which are covered. Nothing in these
definitions provides that bodily injury or property damage
occurring outside the policy period is covered under the
policy.
I would agree with the general statement that the policy
provisions are complex and technical. At first reading the
provisions may even be confusing. However, the majority's
confusion is unrelated to the policy period limitation.
Complexity or difficulty in reading the policy is alone an
insufficient basis to find ambiguity. The provision of the
policy which limits coverage to bodily injury or property
damage occurring within the policy period, or death resulting
therefrom, is clear and unambiguous. I would reverse the
Xr. Justice L. C. Gulbrandson:
I join in the foregoing dissent of Mr. Justice 'deber.
Mr. Justice Daniel J. Shea, dissenting:
I join in the dissent of Justice Weber and I would
reverse the judgment of the District Court. The majority
opinion creates insurance coverage where there clearly is
none--by the terms of the pol-icy.
Insurance policies are a maze, and this appears to be a
generally-accepted fact of 1-ife, and a fact that courts also
must live with. However, once the maze is figured out, the
question should be whether the essential policy provisions
are ambiguous. If they are, 1 have no problem in construing
the provisions against the insurer. This is the law and
properly so. But if the language is clear and it happens to
benefit the insurer, the insurer is just as clearly entitled
to the benefit of that language when the courts are called on
to decide the question. Here the language is clear and the
language benefits the insurer.
When read in its entirety, conditioned upon the general
condition limiting liability, it is clear that the damage or
an injury leading to death, had to occur during the policy
period. It did not and therefore there is no coverage.