November 10 2009
DA 09-0219
IN THE SUPREME COURT OF THE STATE OF MONTANA
2009 MT 380N
ESSEX INSURANCE COMPANY,
Plaintiff and Appellee,
v.
ACCEPTANCE INDEMNITY INSURANCE
COMPANY,
Defendant and Appellant.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and For the County of Yellowstone, Cause No. DV 2007-0830
Honorable G. Todd Baugh, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Steven W. Reida, Landoe, Brown, Planalp & Reida, Bozeman, Montana
For Appellee:
Brian J. Smith, Kristina K. McMullin, Garlington, Lohn & Robinson,
PLLP, Missoula, Montana
Submitted on Briefs: October 21, 2009
Decided: November 10, 2009
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Pursuant to Section I, Paragraph 3(d)(v), Montana Supreme Court 1996 Internal
Operating Rules, as amended in 2006, the following memorandum decision shall not be
cited as precedent. It shall be filed as a public document with the Clerk of the Supreme
Court and its case title, Supreme Court cause number, and disposition shall be included in
this Court’s quarterly list of noncitable cases published in the Pacific Reporter and
Montana Reports.
¶2 Acceptance Indemnity Insurance Company appeals from the order of the
Thirteenth Judicial District Court, Yellowstone County, granting summary judgment in
favor of Essex Insurance Company. We affirm.
¶3 In February 2006, Treston Vermandel filed a complaint against the Red Door
Lounge (the Lounge). Vermandel alleged that a visibly intoxicated patron was served
alcohol at the Lounge and that the patron was known to be violent and aggressive. The
patron subsequently attacked Vermandel, and, as a result, Vermandel suffered serious
injuries. The complaint alleged a dram shop violation arising out of the service of
alcohol to the intoxicated patron, and also a separate claim for premises liability, given
that the plaintiff’s injuries occurred on the grounds of the insured premises.
¶4 The Lounge had two insurance policies at the time of the incident alleged in the
complaint. Essex insured the Lounge under a commercial general liability policy.
Acceptance insured the Lounge under a liquor liability policy. Both policies contained
exclusions for coverage for damages arising out of assault and battery.
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¶5 The Lounge submitted the defense of Vermandel’s claims to Essex. Essex
believed that the commercial general liability policy contained an exclusion of policy
coverage for Vermandel’s claims; accordingly, Essex agreed to defend under a
reservation of rights. The Lounge similarly made a written demand upon Acceptance to
defend and indemnify the Lounge against the dram shop claim made by Vermandel, but
Acceptance denied coverage because of the assault and battery exclusion in the policy.
¶6 In May 2006, Essex filed a declaratory judgment action and asked the court to
determine the extent of Essex’s responsibility under the commercial general liability
policy. The Lounge subsequently filed an answer, counterclaim, and third-party
complaint against Acceptance, seeking a declaration that Acceptance had a duty to
defend and indemnify. Acceptance failed to answer the complaint and a default judgment
was entered against it. The court determined that Acceptance had a duty to defend and
indemnify under its policy. Acceptance does not challenge the default judgment on
appeal.
¶7 Vermandel’s suit against the Lounge was eventually settled on the eve of trial.
Essex contributed five percent and Acceptance contributed ninety-five percent of the total
settlement. The issue before the District Court in this case was the proper allocation of
the cost of the defense of the Lounge between Essex and Acceptance. Essex filed a
summary judgment motion and maintained that defense costs should be allocated
according to the settlement. Because Essex contributed five percent of the settlement,
Essex argued that it should be responsible for five percent of the defense costs. For its
part, Acceptance maintained that Essex was required to bear the full cost of the defense
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because Essex had failed to notify Acceptance of the declaratory judgment action and the
default judgment. In the alternative, Acceptance argued that the defense costs should be
split fifty-fifty.
¶8 The court granted summary judgment in favor of Essex. “Based on the facts and
equitable considerations,” the court concluded that Essex was required to pay five percent
of the defense costs and that Acceptance was required to pay ninety-five percent of the
defense costs. In particular, the court noted that “Acceptance should have been providing
or at least participating in providing a defense to the Red Door Lounge” from the time
that Vermandel filed suit. The District Court concluded that “[i]f Acceptance had been
doing what it should have been doing on behalf of its insured, . . . it is possible that Essex
and Acceptance would have long ago resolved for themselves the appropriate split of
defense costs.”
¶9 The main thrust of Acceptance’s argument on appeal is that the division of the
defense costs was not equitable in light of the facts and circumstances in this case.
Acceptance maintains that the District Court ignored the doctrine of equitable
contribution and “the general equities of the situation.” Acceptance argues that Essex
should not be able to benefit from its failure to notify Acceptance of the default judgment
against Acceptance. Acceptance reiterates its contention that Essex should be liable for
the full cost of the defense, or, in the alternative, fifty percent of the cost.
¶10 Essex responds by arguing that the District Court was not required to apply the
doctrine of equitable contribution in this case. Because the Essex and Acceptance
insurance policies do not insure the same risk, the principles of equitable contribution do
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not apply. Essex also notes that it had no duty to inform Acceptance of the default-
judgment proceedings. Lastly, Essex maintains that fairness and equity favor Essex, not
Acceptance, because Essex provided a defense and Acceptance failed to do so.
¶11 We review a district court’s decision to grant summary judgment de novo. Libby
Placer Min. Co. v. Noranda Min. Corp., 2008 MT 367, ¶ 25, 346 Mont. 436, 197 P.3d
924. The moving party must establish the absence of any genuine issues of material fact
and entitlement to judgment as a matter of law. Libby Placer Min. Co., ¶ 25.
¶12 We have determined to decide this case pursuant to Section 1, Paragraph 3(d)(v)
of our 1996 Internal Operating Rules, as amended in 2006, which provides for
memorandum opinions. It is manifest on the face of the briefs and the record before us
that this appeal is without merit because the District Court correctly concluded that the
division of the defense costs between Essex and Acceptance was appropriate. Further,
the District Court correctly determined that Essex was entitled to judgment as a matter of
law.
¶13 Affirmed.
/S/ PATRICIA O. COTTER
We concur:
/S/ MIKE McGRATH
/S/ JAMES C. NELSON
/S/ W. WILLIAM LEAPHART
/S/ BRIAN MORRIS
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