August 14 2009
DA 07-0684
IN THE SUPREME COURT OF THE STATE OF MONTANA
2009 MT 269
UNITED NATIONAL INSURANCE COMPANY,
a Pennsylvania Corporation,
Defendant and Appellant,
v.
ST. PAUL FIRE & MARINE INSURANCE COMPANY,
a Minnesota Corporation,
Plaintiff and Appellee.
APPEAL FROM: District Court of the Fourth Judicial District,
In and For the County of Missoula, Cause No. DV 04-866
Honorable Edward P. McLean, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Elizabeth O’Halloran; Milodragovich, Dale, Steinbrenner & Nygren, P.C.;
Missoula, Montana
For Appellee:
Paul C. Meismer; Meismer & Associates, PLLC; Missoula, Montana
Submitted on Briefs: October 16, 2008
Decided: August 14, 2009
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 United National Insurance Company (United National) appeals from the opinion
and order of the District Court for the Fourth Judicial District, Missoula County, granting
St. Paul Fire & Marine Insurance Company’s (St. Paul) motion for summary judgment
and denying United National’s motion for summary judgment and awarding St. Paul
damages and attorney fees. We affirm in part, reverse in part.
¶2 We consider the following issues on appeal:
¶3 1. Did the District Court err in granting St. Paul’s motion for summary
judgment and denying United National’s motion for summary judgment, holding United
National breached its duty to defend its insured, Swank Enterprises?
¶4 2. Did the District Court err in awarding St. Paul attorney fees for defense of
the initial personal injury action and for the declaratory judgment action?
FACTUAL AND PROCEDURAL BACKGROUND
¶5 In August 2001, general contractor Swank Enterprises (Swank) entered into a
contract with subcontractor Advanced Fireproofing & Insulation (Advanced
Fireproofing) to have Advanced Fireproofing perform fireproofing work as part of a
construction project at the Kalispell Regional Medical Center (KRMC). Michael Booth
(Booth) was an employee of subcontractor Advanced Fireproofing. In January 2002,
while performing fireproofing work at the KRMC project, Booth fell from a hydraulic lift
called a “scissor lift” and sustained injuries. Swank owned the scissor lift Booth was
using at the time of the accident and had provided the lift for Advanced Fireproofing’s
employees to use while working on the KRMC project.
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¶6 Booth stepped backwards off the lift and fell approximately seven feet after a
portion of the platform guardrail system on the scissor lift had been removed and was
replaced with a latching chain rather than an actual guardrail, in violation of safety
statutes and regulations. Because scissor lifts fall under the definitions of “scaffold”
contained in the United States Department of Labor and Occupational Safety and Health
Administration (OSHA) and the Montana Scaffolding Act (Scaffolding Act), a scissor lift
must comply with the regulatory and statutory requirements applicable to scaffolds.
Experts for both parties agree the lift was unsafe, it violated industry standards and
government regulations, and the removal of the guardrail, and its replacement with a
latching chain, was a cause of Booth’s accident.
¶7 The prime contract between Swank and KRMC contained the following provisions
pertaining to safety: “[t]he contractor shall enforce safety procedures . . .” “[t]he
contractor shall have overall responsibility for safety precautions and programs in the
performance of the Work,” and “[t]he Contractor shall seek to avoid injury, loss or
damage to persons or property by taking reasonable steps to protect: .1 its employees and
other persons at the Worksite; .2 materials and equipment stored at on-site or off-site
locations for use in the Work; and .3 property located at the site and adjacent to Work
areas . . . .” Furthermore, regarding “materials brought to the worksite” the contract
stated “[t]he Contractor shall be responsible for the proper delivery, handling,
application, storage . . . of all materials and substances brought to the worksite by the
Contractor in accordance with the Contract Documents and used or consumed in the
performance of the Work.” The subcontract between Swank and Advanced Fireproofing
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also contained an indemnity provision stating that the subcontractor will “indemnify and
hold harmless” the contractor for all “claims, damages, loss and expenses” resulting from
“performance of the Subcontractor’s Work.”
¶8 In the underlying personal injury action (Booth v. Swank Enterprises, et al.),
Booth sued Swank, along with Skyjack, Inc., the manufacturer of the lift, and Hytopz,
Inc., the company that sold the lift to Swank. Swank’s liability insurance carrier, St.
Paul, tendered the defense to Advanced Fireproofing under the indemnity clause in the
subcontract and to United National under the commercial general liability policy, under
which Swank qualified as an additional insured. United National rejected the tender of
defense, arguing the general contractor could not shift responsibility to the subcontractor
for the general contractor’s own statutory duties to maintain and supervise the scissor lift
at the job site, and thus United National had no duty to defend or cover the loss. Because
United National refused the tender of defense, St. Paul continued to defend the claims
asserted by Booth and, in August 2004, St. Paul settled the claim with Booth.
¶9 The subcontract between Swank and Advanced Fireproofing required Advanced
Fireproofing to purchase and maintain commercial general liability insurance listing
Swank as an additional insured. According to the requirements of the subcontract,
Advanced Fireproofing purchased liability insurance from United National. The policy
contained an endorsement extending insurance coverage to “certain additional insureds”
and United issued a certificate of insurance showing Swank as an additional insured. The
certificate of insurance states specifically that “Swank Enterprises and all related entities,
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the owner, and all other parties as required by contract, are named as Additional Insured
on a Primary Non-Contributing Basis.”
¶10 The current action began in September 2004 when St. Paul brought a declaratory
judgment action against United National, seeking payment of the amount it paid to settle
the claim with Booth as well as the attorney fees and costs it incurred in defending the
original action and the declaratory judgment action. Both parties then filed cross-motions
for summary judgment. In a June 2007 opinion and order regarding the declaratory
judgment, the District Court granted St. Paul’s motion for summary judgment and denied
United National’s and awarded St. Paul a judgment of $140,000, which equaled the
amount St. Paul paid to settle the claim in Booth v. Swank Enterprises, et al.. In an
October 2007 order and judgment, the District Court ordered United National to pay St.
Paul the $140,000 awarded in the June 2007 judgment as well as $24,695.54 in attorney
fees for its defense of Swank in Booth v. Swank Enterprises, et al., and $7,095.66 in
attorney fees for the declaratory judgment action. United National now appeals the
District Court’s judgment and order awarding St. Paul damages and attorney fees.
STANDARD OF REVIEW
¶11 Our standard of review of an appeal from a summary judgment order is de novo.
National Cas. Co. v. American Bankers Ins. Co. of Florida, 2001 MT 28, ¶ 13, 304 Mont.
163, 19 P.3d 223. We review a district court’s summary judgment to determine whether
it was correctly decided pursuant to Rule 56, M. R. Civ. P., which provides that summary
judgment is only appropriate where there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. National Cas. Co., ¶ 13. In the
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current case, both parties moved for summary judgment, agreeing there were no genuine
issues of material fact.
¶12 The interpretation of an insurance contract is a question of law, which we review
de novo to determine whether it is correct. Cusenbary v. United States Fid. & Guar. Co.,
2001 MT 261, ¶ 9, 307 Mont. 238, 37 P.3d 67. We are guided in our interpretation of
insurance policies by the well-established principle that when the language of a policy is
clear and explicit, the policy should be enforced as written. National Cas. Co., ¶ 13.
¶13 We review a district court’s decision to award attorney fees for an abuse of
discretion. Renville v. Farmers Ins. Exch., 2004 MT 366, ¶ 20, 324 Mont. 509, 105 P.3d
280. A district court abuses its discretion when it acts arbitrarily, without employment of
conscientious judgment, or in excess of the bounds of reason resulting in substantial
injustice. Kuhr v. City of Billings, 2007 MT 201, ¶ 14, 338 Mont. 402, 168 P.3d 615.
DISCUSSION
¶14 Did the District err in granting St. Paul’s motion for summary judgment and
denying United National’s motion for summary judgment, holding United
National breached its duty to defend its insured, Swank Enterprises?
¶15 United National argues that “[n]either principles of contractual indemnity, nor the
additional-insured endorsement to the United National policy, permit St. Paul to shift
Swank’s liability to Advanced Fireproofing or United National.” United National claims
that doing so would undermine the Montana Scaffolding Act’s goal of making
scaffolding operations safe. United National further argues that, even if the additional
insured endorsement applied, “the St. Paul policy [should] be deemed primary, and the
United National policy excess, with respect to Booth’s claim.” United National
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concludes the District Court erred in determining the additional insured endorsement
contained in Advanced Fireproofing’s policy provided coverage for Swank’s own
negligence, and Advanced Fireproofing owed no duty to indemnify or provide insurance
to Swank for Swank’s liability to Booth.
¶16 St. Paul argues that at issue is not liability under the Scaffolding Act because
“[t]here was never any determination that [Swank] violated any duties it owed to
[Booth]” and the alleged violations were never proved and the matter was “resolved in a
compromise settlement without disposition of the liability on the merits.” Rather, St.
Paul argues, at issue is the language in the United National policy and the scope of that
policy’s coverage of Swank. St. Paul states that Swank was not only intended to be an
additional insured under the United National policy but Swank “was [actually] added as
an additional insured on a primary, non-contributory basis through a Certificate of
Insurance issued by Advanced Fireproofing and/or its insurer.” St. Paul states “[t]he
subcontract between Advanced Fireproofing and Swank Enterprises required that Swank
Enterprises be added as an additional insured precisely for the type of claim that resulted
from the injuries to [Booth].” St. Paul further argues United National “breached its duty
to defend by failing to accept the tender of defense” and United National “confuses
contractual responsibilities between Advanced Fireproofing and Swank Enterprises with
the contractual responsibilities United National had to its additional insured . . . .”
A. Montana Scaffolding Act
¶17 The Montana Scaffolding Act, set forth in Title 50, Chapter 77, MCA, defines
“scaffold” or “scaffolding” as “a temporarily elevated platform and its supporting
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structure that is used on a construction site to support a person, material, or both.” The
Scaffolding Act provides that “[s]ubject to the comparative negligence principles
provided in Title 27, chapter 1, part 7, a contractor, subcontractor, or builder who uses or
constructs a scaffold on a construction site is liable for damages sustained by any person
who uses the scaffold . . . when the damages are caused by negligence of the contractor,
subcontractor, or builder in the use or construction of the scaffold.” Section 50-77-101,
MCA.
¶18 A violation of the duties imposed by the Scaffolding Act imposes absolute
liability. Slater v. Central Plumbing and Heating Co., 275 Mont. 266, 269, 912 P.2d 780,
782 (1996). This Court has held that the statutory duty of an employer to provide its
employees with a safe workplace is extended to a general contractor when that general
contractor controls job safety or has a nondelegable duty of safety, arising out of contract.
Stepanek v. Kober Const., 191 Mont. 430, 434, 625 P.2d 51, 53 (1981). Furthermore,
where a contract imposes a nondelegable duty to ensure a safe place to work, a general
contractor “cannot avoid liability by attempting to shift the responsibility to someone
else.” Nave v. Harlan Jones Drilling, 252 Mont. 199, 203, 827 P.2d 1239, 1241 (1992).
¶19 United National argues that the indemnity clause in the contract does not apply
because the Scaffolding Act prohibits Swank from shifting its liability to Booth for
breach of nondelegable duties. United National further argues that “[t]he prime contract
imposed on Swank the duty to control, manage, and supervise safety on the construction
project . . . [a]nd Swank was responsible for the proper handling of all materials – like the
scissor lift – it brought to the work-site.” St. Paul counters stating “the entity controlling
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the use of the scissor lift at the time of the loss was Advanced Fireproofing, not Swank
Enterprises.” Furthermore, “it is Advanced Fireproofing and [Booth] who were in
complete control of the cleanliness and operation of the scaffold in question.” St. Paul
concludes stating “[t]here was never any determination that Swank Enterprises violated
any duties it owed to [Booth]. Many violations were alleged, but none [was] proved and
the matter was resolved in a compromise settlement without disposition of the liability
issues on the merits.”
¶20 This Court has held that contractual provisions similar to those in the prime
contract between Swank and KRMC have created a nondelegable duty to control
workplace safety and to comply with the requirements of the Scaffolding Act. See
Steiner v. Dept. of Highways, 269 Mont. 270, 276-77, 887 P.2d 1228, 1232-33; Slater,
275 Mont. at 272, 912 P.2d at 783; Stepanek, 191 Mont. at 439, 625 P.2d at 56. As in
Stepanek, the prime contract between Swank and KRMC indicates Swank maintained the
responsibility to control safety on the project. The prime contract gave Swank the overall
responsibility for safety precautions and programs, the responsibility for protecting
employees at the worksite, and the responsibility for the safety of materials brought to the
worksite. According to our jurisprudence interpreting the Scaffolding Act, Swank cannot
delegate its contractual duty to maintain safety, arising from the prime contract with
KRMC. Thus, Swank had a nondelegable duty under the Scaffolding Act to ensure the
safety of the scissor lift.
¶21 While the Scaffolding Act and the case law interpreting that act create a
nondelegable duty to ensure workplace safety, the party with that duty can still insure
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itself from liability arising out of violations (alleged or proven) of that duty as long as the
duty itself is not being delegated to another. In other words, carrying insurance for
liability under the Scaffolding Act is not the same as delegating one’s duty to comply
with the Scaffolding Act. If Swank’s insurance coverage is not sufficient to satisfy a
judgment, then Swank remains liable for the excess. Swank is not attempting to delegate
its duty under the Scaffolding Act. Rather, Swank seeks a determination that United
National’s policy, listing Swank as an additional insured, covers Swank for its liability to
Booth.
¶22 The Dissent asserts this conclusion is a “sea change” in our nondelegable duty law
and that our holding in fact allows a general contractor to delegate its nondelegable duty
for workplace safety to a third party. The Dissent claims “Advanced Fireproofing now
bears the liability for Swank’s breach of its nondelegable duty to provide workplace
safety” and “Advanced Fireproofing must either provide workplace safety or,
alternatively, incur the financial burden (through its insurer) of Swank’s breach of its
duty to provide a safe place to work.” Dissent, ¶ 43. Swank was insured under United
National’s policy through an “additional insured” endorsement. This endorsement had
the effect of making Swank an insured of United National. Following the Dissent’s
reasoning to its logical conclusion, if a general contractor carries insurance (either on its
own or through a provision in a subcontract) to cover liability for failure to provide
workplace safety, that insurance contract would constitute a delegation of the general
contractor’s nondelegable duty; it would, in the words of the Dissent, be “foisting its own
misconduct and neglect” onto a third party—the insurance company. Despite the
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protestations of the Dissent, we have never held that a contractor cannot insure itself for
the “absolute liability” that arises from a violation of the duty to provide workplace
safety. Indeed, such a holding would be counterproductive in that insurance coverage
provides a further resource to satisfy an injured worker’s claim.
¶23 Swank has fulfilled its duty under the Scaffolding Act. Swank’s liability was
reflected by and accounted for in its settlement of Booth’s claim. Swank’s subcontract
with Advanced Fireproofing required Advanced Fireproofing to obtain insurance
covering Swank as an additional insured, on a primary non-contributing basis, in
contemplation of the type of incident at issue here. Although our holding is not premised
upon the assumption, we note as an aside that if Advanced Fireproofing accounted for the
cost of the insurance in its bid for the work, Swank indirectly paid for that insurance.
Thus, by requesting that Advanced Fireproofing indemnify Swank for Swank’s own
negligence, Swank is not delegating a nondelegable duty under the Montana Scaffolding
Act. Rather, that duty has been satisfied. The issue is, thus, a question of insurance
contract law.
B. Indemnity Provision in the Subcontract
¶24 We now turn to the indemnity provision in the subcontract between Swank and
Advanced Fireproofing to determine whether Swank can be indemnified for its liability
arising from an alleged violation of its duty under the Scaffolding Act. This Court has
adopted a standard under which “contractual provisions that indemnify a party for its own
negligence must be ‘clear and unequivocal’ to be enforceable.” Slater, 275 Mont. at 270,
912 P.2d at 782 (citing Sweet v. Colborn Sch. Supply, 196 Mont. 367, 369-70, 639 P.2d
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521, 523 (1982)). In Slater, this Court determined the contractual provisions were not
sufficiently clear and unequivocal to indemnify a general contractor for its own
negligence. Slater, 275 Mont. at 271, 912 P.2d at 782. In Slater, we determined that
while the indemnity provision clearly required the subcontractor to indemnify the general
contractor for damages arising out of the subcontractor’s negligence, it did not require
the subcontractor to indemnify the general contractor for damages arising out of the
general contractor’s own negligence. The Court in Slater held the indemnity provision
was not sufficiently clear and unequivocal in its intent to indemnify the general
contractor for its own negligence. Slater, 275 Mont. at 271, 912 P.2d at 782.
¶25 Similar to Slater, the contract provisions at issue in the instant case do not show
clear and unequivocal intent to indemnify Swank for its own negligence. Section 9.1.1 of
the subcontract agreement between Swank and Advanced Fireproofing states in relevant
part:
INDEMNITY To the fullest extent permitted by law, the Subcontractor
shall defend, indemnify and hold harmless the Contractor, the Contractor’s
other subcontractors . . . from and against all claims, damages, loss and
expenses, including but not limited to attorneys’ fees, costs and expenses
arising out of or resulting from the performance of the Subcontractor’s
Work.
The contract provision above is even less specific than the indemnity provision at issue in
Slater. Thus, as in Slater, we find the indemnity provision above is not specific in its
intent to indemnify Swank for Swank’s liability to Booth for its own negligence.
Therefore, we must now turn to the language in United National’s insurance policy to
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determine whether the policy covers Swank in its own right and whether liability for
Swank’s own negligence falls within the scope of the policy.
C. Additional Insured Endorsement
¶26 St. Paul asserts that Swank was an additional insured on a primary non-
contributing basis under the terms of the United National policy and United National
cannot now “pick and choose language that supports its view of limiting coverage . . .
[t]he policy must be looked at in its entirety.” United National counters stating that we
must look to the intent of the contract language and that the contract language did not
intend to cover Swank for Swank’s own negligence.
¶27 We have held that “[a]n insurance policy, like any other contract, must be given
that interpretation which is reasonable and which is consonant with the manifest object
and intent of the parties.” Anaconda Co. v. General Acc. Fire & Life Assur. Corp., Ltd.,
189 Mont. 447, 455, 616 P.2d 363, 367 (1980). The subcontract agreement specified that
Advanced Fireproofing must obtain a policy covering Swank. More specifically, Article
9, § 9.2.1 of the subcontract agreement states:
[b]efore commencing the Subcontractor’s Work, and as a condition of
payment, the Subcontractor [Advanced Fireproofing] shall purchase and
maintain insurance that will protect it from the claims arising out of its
operations under this Agreement, whether the operations are by the
Subcontractor, or any of its consultants or subcontractors or anyone directly
or indirectly employed by any of them, or by anyone for whose acts any of
them may be liable.
Exhibit B to the subcontract agreement states that “Swank Enterprises must be listed as
additional insured, and a copy of the additional insured endorsement must be attached to
the certificate.”
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¶28 Endorsement #5 to United National’s policy covering Advanced Fireproofing
states the policy affords insurance coverage to “additional insureds,” pursuant to the
following language:
[s]ubject to all its terms, conditions and endorsements, such insurance as is
afforded by the policy shall also apply to the following entity(ies) as an
additional insured, but only as respects liability arising from (1) premises
owned by or occupied by the Named Insured, or (2) the contract entered
into by the Named Insured.
The policy names additional insured entities as “[a]ll entities for which a Certificate of
Insurance has been issued naming them as an Additional Insured with a copy of the
Certificate of Insurance on file with the Company, and required by a written contract.”
United National then issued a “Certificate of Liability Insurance” stating that “Swank
Enterprises and all other related entities, the owner, and all other parties as required by
contract, are named as Additional Insured on a Primary Non-Contributing Basis.”
Furthermore, the “Primary Insurance Endorsement” of the policy states:
Subject to the terms and conditions of this policy, it is understood and
agreed that with respect to claims arising out of work performed by the
Named Insured, the coverage afforded herein shall be primary in relation
to any policies carried by any person or organization to whom or to which
the Named Insured is obligated by virtue of a written contract, and then
only as required by said written contract. (Emphasis added.)
¶29 Montana law is well-settled that an insurer’s duty to defend its insured arises when
an insured sets forth facts that represent a risk covered by the terms of an insurance
policy. Farmers Union Mut. Ins. Co. v. Staples, 2004 MT 108, ¶ 20, 321 Mont. 99, 90
P.3d 381. And the duty to defend is independent from and broader than the duty to
indemnify created by the same insurance contract. Staples, ¶ 21. Unless there exists an
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unequivocal demonstration that the claim against the insured does not fall within the
policy coverage, the insurer has a duty to defend. Insured Titles, Inc. v. McDonald, 275
Mont. 111, 115-16, 911 P.2d 209, 211-12 (1996). And any doubt as to the existence of a
duty to defend must be resolved in the insured’s favor. Allan D. Windt, Insurance
Claims and Disputes, § 4:2 (4th ed., West 2001).
¶30 It is clear from the plain language of the policy that United National intended to
cover Swank for the type of incident that occurred here. The policy covers Swank as an
additional insured on a primary non-contributing basis. The policy plainly states that it
affords additional coverage to additional insured for “liability arising from (1) premises
owned by or occupied by the Named Insured, or, (2) the contract entered into by the
Named Insured.” United National’s suggested interpretation of its policy would render
the policy meaningless. United National argues that even if United National’s policy
covering Advanced Fireproofing extended coverage to Swank, that coverage would be
excess coverage, secondary to St. Paul’s coverage. In interpreting insurance contracts,
we “accord the usual meaning to the terms and the words . . . and we construe them using
common sense.” Modroo v. Nationwide Mut. Fire Ins. Co., 2008 MT 275, ¶ 23, 345
Mont. 262, 191 P.3d 389. The language in the “Certificate of Liability Insurance” issued
to Swank under the United National policy plainly states that Swank is “named as
Additional Insured on a Primary Non-contributing basis.” It is clear from the plain
language of the insurance contract that the United National policy was intended to be
primary.
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¶31 Thus, the District Court was correct in determining that United National had a
duty to defend Swank and that United National’s policy is primary, pursuant to the
language in the additional insured endorsement in United National’s policy. The District
Court did not err in granting St. Paul’s motion for summary judgment and denying
United National’s motion for summary judgment and holding United National breached
its duty to defend Swank.
¶32 Did the District Court err in awarding St. Paul attorney fees for defense of the
initial personal injury action and for the declaratory judgment action?
¶33 In its October 2007 order and judgment, the District Court awarded St. Paul
$24,695.54 in attorney fees for the underlying personal injury case Booth v. Swank
Enterprises, et al. and $7,095.66 in attorney fees for the declaratory judgment action.
United National argues the attorney fees “were neither necessarily nor properly awarded
under the Uniform Declaratory Judgment Act or . . . Trustees of Indiana University v.
Buxbaum, 2003 MT 97, 315 Mont. 210, 69 P.3d 663 . . . [and] consequently, the District
Court’s determination that fees . . . were attributable to United National was in error.”
United National further argues “St. Paul should have sought the monetary relief it sought
through a properly asserted subrogation claim . . . without the invocation of the UDJA.
St. Paul’s decision to seek summary judgment in the declaratory judgment context was a
tactical decision and the proper claim was for subrogation of St. Paul’s insured’s
contractual rights.”
¶34 St. Paul argues it is “entitled to attorney fees and indemnity amounts paid on
behalf of Swank Enterprises due to United National’s failure to fulfill its duty to defend
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and indemnify Swank.” St. Paul further argues “[t]his is not a subrogation action, as
characterized by United National . . . [i]t is rather a direct action against United National
by St. Paul as the assignor of the rights of [Swank] for a determination that United
National had an obligation to provide a defense and indemnify [Swank] under the terms
of its insurance contract.”
¶35 The Uniform Declaratory Judgment Act allows for claims to be brought by “[a]ny
person interested under a deed, will, written contract, or other writings constituting a
contract or whose rights, status, or other legal relations are affected by a statute,
municipal ordinance, contract, or franchise may have determined any question of
construction or validity arising under the instrument, statute, ordinance, contract, or
franchise and obtain a declaration of rights, status or other legal relations thereunder.”
Section 27-8-202, MCA. The stated purpose of the Act is “to settle and to afford relief
from uncertainty and insecurity with respect to rights, status, and other legal relations;
and it is to be liberally construed and administered.” Section 27-8-102, MCA; Tarlton v.
Kaufman, 2008 MT 462, ¶ 33, 348 Mont. 178, 199 P.3d 263. Furthermore, this Court has
stated that “[a] declaratory proceeding is primarily intended to determine the meaning of
a law or a contract and to adjudicate the rights of the parties therein . . . .” Tarlton, ¶ 33
(citing Raynes v. City of Great Falls, 215 Mont. 114, 120-21, 696 P.2d 423, 427 (1985)).
¶36 United National argues St. Paul improperly brought its action under the UDJA.
However, Swank’s claim was not simply a subrogation action, but rather an action to
determine the scope of coverage under United National’s insurance policy covering
Swank. Such an action squarely fits within the intent of the UDJA’s liberally constructed
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purpose “to settle and to afford relief from uncertainty and insecurity with respect to
rights, status, and other legal relations . . . .” Thus, Swank properly brought the claim
under the UDJA, and we now turn to the question of whether the District Court abused its
discretion to award attorney fees under § 27-8-313, MCA.
¶37 Montana follows the general American Rule that a party in a civil action is not
entitled to attorney fees absent a specific contractual or statutory provision. Martin v.
SAIF Corp., 2007 MT 234, ¶ 22, 339 Mont. 167, 167 P.3d 916 (citing Trustees of Indiana
University v. Buxbaum, 2003 MT 97, ¶ 19, 315 Mont. 210, 69 P.3d 663). Because the
contracts at issue do not contain language regarding attorney fees, we must turn to the
statutory exception. Section 27-8-313, MCA does not contain a specific attorney fee
provision; however, it gives a court the ability to grant “supplemental relief” when the
court deems such relief is “necessary and proper.” Section 27-8-313, MCA. This Court
held in Buxbaum that § 27-8-313, MCA provides a statutory basis for awarding
supplemental relief in the form of attorney fees in declaratory judgment actions if the
award is “necessary and proper.” Buxbaum, ¶ 42. The Court in Buxbaum did not define
what constitutes “necessary and proper.” However, this Court has adopted the “tangible
parameters” test to determin e whether attorney fees granted under § 27-8-313 are
necessary and proper. Martin, ¶ 23 (citing Renville, ¶ 27). The tangible parameters test
provides that fees are “necessary and proper” when (1) an insurance company possesses
what the plaintiffs sought in the declaratory relief action; (2) it is necessary to seek a
declaration showing that the plaintiffs are entitled to the relief sought; and (3) the
declaratory relief sought was necessary in order to change the status quo. Martin, ¶ 23.
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And this Court has recognized a party’s “tactical decision” to file a declaratory judgment
action does not automatically presume attorney fees are “necessary or proper.” Buxbaum,
¶ 45.
¶38 While § 27-8-313, MCA gives district courts the discretion to award “further
relief” in the form of attorney fees if a court determines such an award is “necessary and
proper,” implicit in that determination is a threshold question of whether the equities
support a grant of attorney fees. In the only case since Buxbaum where we have upheld a
district court’s discretionary grant of attorney fees under § 27-8-313, the fees were
granted in order to prevent an anomalous result where one party would have been better
off had it never brought the claim in the first place. (See Renville, ¶ 28, affirming the
district court’s grant of attorney fees to an injured party seeking declaratory judgment as
to payment of medical costs owed by an insurance company). In Renville, we determined
fees were necessary and proper in order to afford meaningful relief to the injured party.
Thus, while a district court has the discretion to award attorney fees under § 27-8-313,
MCA, such fees are only appropriate if equitable considerations support the award. This
determination must be made before a court applies the criteria of the tangible parameters
test.
¶39 In applying the equitable consideration described above to the facts before us, we
find the equities do not support an award of attorney fees. The instant case is distinct
from the facts of Renville where an injured party expended more on the cost of litigation
than it received as a result of the litigation, thus potentially rendering the declaratory
relief meaningless. Rather, here we have two similarly situated parties disputing the
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interpretation of a contract. Under these circumstances, the equities do not support an
award of attorney fees to St. Paul. Because this threshold requirement is not met, we do
not even reach an analysis of the tangible parameters test. Therefore, the District Court
abused its discretion by acting arbitrarily in its award of attorney fees to St. Paul.
¶40 We reverse the award of attorney fees.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ JOHN WARNER
/S/ BRIAN MORRIS
/S/ JIM RICE
Justice James C. Nelson concurs and dissents.
¶41 I concur in the analysis of Issue 2, but otherwise dissent from the Court’s decision.
¶42 As to Issue 1, I agree that under our well-established precedent cited by the Court,
Swank had a nondelegable duty under the Scaffolding Act to ensure the safety of the
scissor lift. Opinion, ¶ 20. I disagree with the Court’s conclusion, however, that liability
for the breach of a nondelegable duty can be so conveniently shifted to a third party, or its
insurer, by way of (1) an indemnity/hold-harmless clause running from the party which
does not bear the nondelegable duty for workplace safety to the party who has
contractually assumed that duty, Opinion, ¶ 7, coupled with (2) an insurance policy
purchased by the former party naming the latter as an additional insured, Opinion, ¶ 22.
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¶43 This approach is flawed for two reasons. First, the Court’s holding completely
circumvents what we decreed in Nave v. Harlan Jones Drilling—i.e., “[b]ecause the duty
imposed on [the general contractor] by its contract was nondelegable, [the general
contractor] cannot avoid liability by attempting to shift the responsibility to someone
else.” Nave v. Harlan Jones Drilling, 252 Mont. 199, 203, 827 P.2d 1239, 1241 (1992)
(emphasis added). Here, the Court authorizes precisely what Nave prohibits. Advanced
Fireproofing now bears the liability for Swank’s breach of its nondelegable duty to
provide workplace safety. Advanced Fireproofing must either provide workplace safety
or, alternatively, incur the financial burden (through its insurer) of Swank’s breach of its
duty to provide a safe place to work. See Opinion, ¶ 21 (Swank remains liable for excess
damages).
¶44 Through smoke and mirrors Swank has clearly accomplished what we held in
Nave it could not. The Court’s pronouncement to the contrary, notwithstanding, Opinion,
¶ 25, Swank has not fulfilled its duty under the Scaffolding Act by shifting the liability
for noncompliance with the Act to Advanced Fireproofing. It was Swank’s nondelegable
duty to insure that the scissor lift was safe; there was an accident because the scissor lift
was not safe; Swank, thus, breached its duty to provide a safe place to work; and Swank
was absolutely liable for this breach. Opinion, ¶ 18. Yet, Advanced Fireproofing (and,
ultimately, its insurer) is held liable and financially responsible for Swank’s breach.
Swank is not absolutely liable at all; Advanced Fireproofing is. We have effectively
overruled the underpinnings for our seminal nondelegable duty decision in Ulmen v.
Schwieger, 92 Mont. 331, 12 P.2d 856 (1932) (general contractor, which has assumed a
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nondelegable duty of workplace safety, remained in direct control and the provisions of
the Scaffolding Act apply).
¶45 Second, the Court’s approach totally abrogates the important public policy reasons
underlying the nondelegable duty doctrine. In Nave, we reaffirmed these important
public policy concerns as “including preventing accidents in the workplace and
protecting against the economic costs of injuries.” Nave, 252 Mont. at 202, 827 P.2d at
1240. As a result of the Court’s decision here, the general contractor has no incentive
whatsoever to discharge its nondelegable duty to provide workplace safety. If an
employee of a subcontractor is injured, so what? The subcontractor is contractually
obligated to “indemnify and hold-harmless” the general contractor from its breach of
duty; the subcontractor’s insurer is obligated to pay the injured subcontractor’s
employee’s damages; and the subcontractor is obligated to bear the liability and financial
responsibility for any excess damages. See Opinion, ¶ 21. What could be more
convenient and financially foolproof for the general contractor? The general contractor
can breach its nondelegable duty with impunity, and require a third party to pick up the
tab for the economic costs. As a result of our decision here, there is no reason for the
general contractor with a nondelegable duty of workplace safety to actually perform its
duty. As long as the general contractor can require a subcontractor to indemnify and hold
the general contractor harmless and insure the general contractor against the general
contractor’s own negligence, the general contractor is home free. The Court’s decision
effectively overrules the underpinnings of Nave; Beckman v. Butte-Silver Bow County,
2000 MT 112, 299 Mont. 389, 1 P.3d 348; Slater v. Central Plumbing and Heating Co.,
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275 Mont. 266, 912 P.2d 780 (1996); Gibby v. Noranda Minerals Corp., 273 Mont. 420,
905 P.2d 126 (1995); Stepanek v. Kober Const., 191 Mont. 430, 625 P.2d 51 (1981), and
Shannon v. Howard S. Wright Const. Co., 181 Mont. 269, 593 P.2d 438 (1979).
¶46 Sadly, this is the second decision in as many years in which this Court has made a
sea-change in the law of nondelegable duty. The Court has ignored our settled
nondelegable duty jurisprudence and has permitted a general contractor which has
blatantly breached its nondelegable duty for workplace safety to effectively delegate that
duty to a third party. In Olson v. Shumaker Truck. and Excav. Contr., 2008 MT 378, 347
Mont. 1, 196 P.3d 1265, this Court held that the nondelegable duty of workplace safety
can, in fact, be delegated through comparative negligence to the injured subcontractor’s
employee—i.e., the very individual whom the nondelegable duty of job-site safety was
adopted to protect. In Olson, this Court made the injured subcontractor’s employee
responsible and financially liable for providing his own safe place to work. For the first
time, this Court made the nondelegable duty of workplace safety delegable by providing
the negligent general contractor with a convenient scapegoat on which to foist its own
misconduct and neglect. Olson, ¶¶ 73-87 (Nelson, J., concurring and dissenting).
¶47 In the case sub judice, the Court weakens the nondelegable duty doctrine even
further. Now, a general contractor which has breached its nondelegable duty of
workplace safety has two scapegoats on which to foist its own negligence and
misconduct—(1) on the injured subcontractor’s employee by way of comparative
negligence, Olson, and (2) on the subcontractor itself by way of an indemnity/hold-
harmless agreement coupled with a required insurance clause. It is difficult to discern
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what is left of the nondelegable duty doctrine. Indeed, between Olson and our decision
today, we have effectively drained our well-established nondelegable duty doctrine
jurisprudence of any vitality. I cannot agree.
¶48 I would reverse. I dissent from our failure to do so.
/S/ JAMES C. NELSON
Justice Patricia O. Cotter joins in the Concurrence and Dissent of Justice James C.
Nelson.
/S/ PATRICIA O. COTTER
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