file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm
No. 01-066
IN THE SUPREME COURT OF THE STATE OF MONTANA
2001 MT 261
JONATHAN CUSENBARY,
Plaintiff and Appellant,
v.
UNITED STATES FIDELITY AND GUARANTY
COMPANY; ST. PAUL COMPANIES, INC.;
ST. PAUL FIRE AND MARINE INSURANCE
COMPANY; JOHN DOE CORPORATION I;
and JOHN DOE CORPORATION II,
Defendants and Respondents.
APPEAL FROM: District Court of the Eight Judicial District,
In and for the County of Cascade,
Honorable Thomas M. McKittrick, Judge Presiding
COUNSEL OF RECORD:
For Appellant:
Norman L. Newhall, Linnell, Newhall, Martin & Schulke,
Great Falls, Montana
For Respondents:
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm (1 of 7)3/23/2007 4:01:11 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm
Guy W. Rogers and Don M. Hayes, Brown Law Firm,
Billings, Montana
Submitted on Briefs: June 14, 2001
Decided: December 13, 2001
Filed:
__________________________________________
Clerk
Justice Jim Rice delivered the Opinion of the Court.
¶1 Appellant Jonathan Cusenbary (Cusenbary) appeals from the order of the Eighth
Judicial District Court, Cascade County, granting summary judgment in favor of
Respondent United States Fidelity & Guaranty (USF&G). We affirm.
¶2 The following issue is presented on appeal:
¶3 Whether there is coverage under the insurance policy issued to Glen Mortensen for the
$750,000.00 judgment entered against him in Cusenbary v. Mortensen, Eighth Judicial
District Court Cause No. ADV-96-759.
FACTUAL AND PROCEDURAL BACKGROUND
¶4 Glen A. Mortensen (Mortensen) is the owner of the Town Tavern, a business which
sells, serves and furnishes alcoholic beverages. On July 28, 1993, Cusenbary suffered
serious personal injuries at the Town Tavern when a car driven by James Wells (Wells)
crashed through the wall of the bar.
¶5 On that evening, prior to the incident giving rise to this action, Wells was a patron of
the Town Tavern. Wells arrived at the bar having already consumed a significant amount
of alcohol. Wells was in an intoxicated state, and he continued to drink alcoholic
beverages that Mortensen's establishment continued to serve him. Wells left the bar
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm (2 of 7)3/23/2007 4:01:11 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm
around 10:00 p.m. and drove his vehicle through the Town Tavern's outer wall. Cusenbary
was pinned between Wells' vehicle and the water cooler.
¶6 At the time of the incident, Mortensen was insured under a commercial general liability
policy issued by USF&G, which contained a liquor liability exclusion. Mortensen
tendered the Complaint to USF&G for defense, but USF&G denied coverage and refused
to defend, based on the exclusion.
¶7 Cusenbary's claim was tried to a jury, which entered a special verdict finding that
Mortensen was negligent; that Mortensen's negligence was the cause of Cusenbary's
injuries; that Cusenbary's damages were in the amount of $750,000.00; and that
Cusenbary was not entitled to punitive damages. Mortensen appealed, and the verdict and
the judgment entered by the District Court were affirmed in Cusenbary v. Mortensen,
1999 MT 221, 296 Mont. 25, 987 P.2d 351.
¶8 Mortensen then assigned all of his rights to coverage under his USF&G commercial
general liability policy to Cusenbary. Cusenbary filed a Complaint in the present action,
alleging two counts of breach of contract, a count alleging tortious breach of the implied
covenant of good faith and fair dealing, a count alleging violation of the Unfair Trade
Practices Act, and also claiming punitive damages. Cusenbary filed a motion for summary
judgment for indemnity up to the amount of policy limits, under Count I, on the single
issue of whether USF&G had a duty to indemnify Mortensen based on the judgment.
Cusenbary argued that negligent behavior by Mortensen in the management of the tavern,
separate from that involved in providing alcohol to Wells, but proved at trial, was also a
cause of Cusenbary's injuries for which USF&G had a duty to indemnify Mortensen, as it
was not excluded from coverage by the liquor liability exclusion. USF&G filed a cross-
motion for summary judgment on all counts of the Complaint. The District Court denied
Cusenbary's motion for summary judgment on Count I and granted USF&G's motion for
summary judgment on all five Counts. Cusenbary appeals from the District Court's denial
of his motion for summary judgment on Count I, and from the grant of USF&G's motion
for summary judgment on Count I only.
STANDARD OF REVIEW
¶9 The interpretation of an insurance contract is a question of law. Babcock v. Farmers
Insurance Exchange, 2000 MT 114, ¶ 5, 299 Mont. 407, ¶ 5, 999 P.2d 347, ¶ 5. We review
a district court's conclusions of law de novo to determine whether they are correct.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm (3 of 7)3/23/2007 4:01:11 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm
Babcock, ¶ 5. In an appeal from a grant of summary judgment, this Court's standard of
review is also de novo. Babcock, ¶ 5. To be granted summary judgment, the moving party
must demonstrate that no genuine issues of material fact exist. Once this has been
accomplished, the burden then shifts to the non-moving party to prove, by more than mere
denial and speculation, that a genuine issue does exist. Having determined that genuine
issues of fact do not exist, the court must then determine whether the moving party is
entitled to judgment as a matter of law.
Ensey v. Colorado Casualty, 2001 MT 152, ¶ 7, 306 Mont. 68, ¶ 7, 30 P.3d 350, ¶ 7, quoting
Bruner v. Yellowstone County (1995), 272 Mont. 261, 264-65, 900 P.2d 901, 903.
DISCUSSION
¶10 Did the jury verdict for $750,000.00 in Cusenbary v. Mortensen include liability
which is not excluded from coverage by the liquor liability exclusion of Mortensen's
USF&G commercial general liability policy?
¶11 In Sheffield Insurance Company v. Lighthouse Properties (1998), 234 Mont. 395, 763
P.2d 669, the insurer filed a declaratory judgment action seeking a determination that its
policy did not cover liability for injuries caused by a driver who was served intoxicating
beverages by the insured bar. The Complaint alleged the bar owner and employees
knowingly sold alcohol to the plaintiff who was intoxicated, and that the plaintiff's injuries
were the direct result of the negligence of the bar in selling alcohol to the plaintiff. The
plaintiff also alleged negligence on the part of the bar in the management and supervision
of the bar employees. This Court found that the language of the policy was unambiguous,
and the policy explicitly excluded coverage for liability imposed by violation of a statute
or by reason of the sale or service of alcoholic beverages:
While Mr. Tibbetts attempts to argue that there is a basis to consider his allegations
of negligence separately from the sale or service of alcohol, our analysis of the
pleadings and affidavits considered in connection with the granting of summary
judgment leads us to conclude that Mr. Tibbetts has failed to set forth a theory of
negligence separate and apart from the sale or service of alcohol. As a result, we
hold that coverage is specifically excluded by the language of the policy.
Sheffield, 234 Mont. at 398, 763 P.2d at 671.
¶12 In this case, USF&G contends that Mortensen's negligence in serving, selling or
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm (4 of 7)3/23/2007 4:01:11 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm
furnishing alcohol to Wells, while Wells was visibly intoxicated, is specifically excluded
from coverage by the unambiguous language of the policy and that all of Cusenbary's
claims were based on the sale or service of alcohol. The exclusion upon which USF&G
denied coverage is similar to the exclusion in Sheffield, and states in pertinent part:
2. Exclusions.
This insurance does not apply to:
...
c. "Bodily injury" or "property damage" for which any insured may be held liable by
reason of:
(1) Causing or contributing to the intoxication of any person;
(2) The furnishing of alcoholic beverages to a person under the legal drinking
age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift, distribution
or use of alcoholic beverages.
This exclusion applies only if you are in the business of manufacturing,
distributing, selling, serving or furnishing alcoholic beverages.
Thus, USF&G denied coverage and refused to defend or indemnify Mortensen for any part
of the $750,000.00 judgment that Cusenbary was awarded against Mortensen.
¶13 Cusenbary argues that other negligent behavior by Mortensen, completely
independent of that involved in the serving, selling or furnishing of alcohol to Wells, also
caused the injuries to Cusenbary that night, and, therefore, coverage is implicated under
the USF&G policy. Cusenbary points to evidence which was introduced at trial showing
Mortensen was negligent in the manner in which he ran his business, specifically, that
Mortensen had little or no experience in running a bar; had no written operating rules or
policies; was the sole person responsible for interviewing, hiring and training personnel;
had no training materials; had no training program; hired employees with little or no
experience; failed to adequately staff the premises; and routinely tolerated disorderly
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm (5 of 7)3/23/2007 4:01:11 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm
conditions. Cusenbary argues that since the jury heard evidence of this "other" negligence,
the jury's finding that Mortensen was negligent included both the negligence in serving,
selling or furnishing alcohol to Wells and the inadequate manner in which he operated the
tavern. Further, Cusenbary asserts the "other" negligence by Mortensen would be covered
under USF&G's commercial general liability policy, and USF&G has a duty to indemnify
Cusenbary up to the limits of the policy for Mortensen's negligent operation of the tavern.
¶14 Cusenbary's argument is unsupported by the record in the underlying case.
Throughout the pre-trial process and the trial, Cusenbary's only theory of negligence was
Mortensen's act of serving, selling or furnishing alcohol to Wells. Cusenbary's assertions
regarding other negligence on the part of Mortensen causing Cusenbary's injuries are
directly contrary to any of the pleadings, the Pretrial Order, the statements made by
Cusenbary's counsel at trial, the District Court's rulings, and this Court's decision in
Cusenbary v. Mortensen. When evidentiary matters arose in the trial of the underlying
action regarding Mortensen's management of the tavern, Cusenbary's counsel consistently
told the trial judge that the evidence was relevant to bolster the liquor liability claim. No
assertion was ever made that the proposed evidence was relevant to any other theory of
negligence or any other purpose.
¶15 On numerous occasions during the trial, Cusenbary's counsel stated that the only issue
was whether Mortensen was negligent in serving, selling or furnishing alcohol to Wells. In
pre-trial motions, causation was only argued in terms of Mortensen's breach of his
statutory duty not to serve alcohol to visibly intoxicated patrons. The record does not show
any evidence was introduced to link Mortensen's "other" negligence to the injuries
sustained by Cusenbary. Based on the record and the transcript of the underlying trial, the
exclusive cause established for Cusenbary's injuries, and the only basis for the jury's
verdict, was the serving of alcohol to Wells. As in Sheffield, Mortensen failed to set forth a
theory of negligence separate and apart from the sale or service of alcohol.
¶16 After analyzing the facts presented in support of Mortensen's claim in this action, the
District Court concluded that the evidence of improper employee supervision and training,
and the mismanagement of the tavern, directly related to the service or sale of alcohol to
Wells. The District Court further determined that Mortensen failed to set forth evidence
that supported an alternative negligence theory. As a matter of law, the District Court
found Mortensen's judgment was excluded from coverage by the express language of
USF&G's insurance policy.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm (6 of 7)3/23/2007 4:01:11 PM
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm
¶17 We agree with the District Court's finding that all of Mortensen's claims arise from
serving, selling or furnishing alcohol to Wells and are thus excluded from coverage. The
District Court properly granted summary judgment in favor of USF&G. Its judgment is
affirmed.
/S/ JIM RICE
We concur:
/S/ JAMES C. NELSON
/S/ JIM REGNIER
/S/ TERRY N. TRIEWEILER
/S/ W. WILLIAM LEAPHART
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/01-066%20Opinion.htm (7 of 7)3/23/2007 4:01:11 PM