Reliance Insurance Company v. Fisher

No. 12605

I N T E SUPREME C U T OF T E STATE O M N A A
H OR H F OTN

1974

RELIANCE INSURANCE COMPANY,

P l a i n t i f f and A p p e l l a n t ,
-vs -
VIRGIL FISHER, RICHARD 0. POEPPEL,

Defendants and Respondents,
and

HORACE MANN INSURANCE COMPANY,

Defendant and A p p e l l a n t .

Appeal from: D i s t r i c t Court of t h e Eleventh J u d i c i a l D i s t r i c t ,
Honorable Robert K e l l e r , Judge p r e s i d i n g .

Counsel of Record :

For A p p e l l a n t s :

Warden, W a l t e r s k i r c h e n & C h r i s t i a n s e n , K a l i s p e l l ,
Montana
M e r r i t t N. Warden argued, K a l i s p e l l , Montana
G a r l i n g t o n , Lohn and Robinson, Missoula, Montana
.
Lawrence F Daly argued, Missoula , Montana

For Respondents:

Murphy, Robinson, Heckathorn & P h i l l i p s , K a l i s p e l l ,
Montana
Robert L. F l e t c h e r argued, K a l i s p e l l , Montana
McGarvey, Morrison, Hedman & m o r e , W h i t e f i s h , Montana

Submitted: March 21, 1974

Decided: APR 2 3 1974
F i l e d : APR 2 3 1974
M r . ~ u s t i c eFr8nk I . H a s w e l l d e l i v e r e d t h e Opinion of t h e C o u r t .

T h i s i s a d e c l a r a t o r y judgment a c t i o n i n v o l v i n g a t e a c h e r ' s

p r o f e s s i o n a l l i a b i l i t y i n s u r a n c e p o l i c y and a second i n s u r a n c e

p o l i c y i s s u e d t o t h e same d e f e n d a n t , V i r g i l F i s h e r , denominated
" a F a r m e r ' s Comprehensive P e r s o n a l L i a b i l i t y Hazard P o l i c y " .

This d i s t r i c t c o u r t , s i t t i n g without a jury, refused t o
e n t e r a d e c l a r a t o r y judgment r e l e a s i n g t h e two i n s u r a n c e companies

from t h e d u t y t o defend t h e i n s u r e d i n a s u i t f o r p e r s o n a l damages

i n F l a t h e a d County c a u s e No. 23116. From t h i s o r d e r , b o t h i n s u r e r s

appeal.

An a c t i o n w a s f i l e d i n t h e d i s t r i c t c o u r t o f F l a t h e a d County
by R i c h a r d 0. Poeppel a g a i n s t V i r g i l F i s h e r , s e e k i n g damages a l -

l e g e d l y r e s u l t i n g from an a l t e r c a t i o n between t h e p a r t i e s on A p r i l

2 0 , 1972, i n t h e C e n t r a l School i n W h i t e f i s h , Montana.

P o e p p e l , a s c h o o l t e a c h e r , a l l e g e d t h a t he had been a t t a c k e d
by F i s h e r , a l s o a t e a c h e r , and s t r u c k by him. The i n c i d e n t a r o s e

during r e g u l a r school hours. Poeppel had p h y s i c a l l y e j e c t e d o n e

o f h i s s t u d e n t s from h i s c l a s s r o o m i n t o t h e h a l l w a y . F i s h e r ob-

s e r v e d t h e a c t i o n s of Poeppel and t h e s t u d e n t , and r e p o r t e d them

t o the assistant principal. Fisher then returned t o t h e v i c i n i t y

o f Poeppel and t h e d i s c i p l i n e d s t u d e n t a t which t i m e t h e a l t e r -
c a t i o n o c c u r r e d d u r i n g which F i s h e r s t r u c k Poeppel.

F i s h e r t e n d e r e d t h e d e f e n s e of t h a t a c t i o n t o a p p e l l a n t

R e l i a n c e I n s u r a n c e Company which had i s s u e d a p o l i c y denominated
"a F a r m e r ' s Comprehensive P e r s o n a l L i a b i l i t y Hazard P o l i c y " t o

F i s h e r , which p o l i c y was i n e f f e c t a t t h e t i m e of t h e a l t e r c a t i o n .
Although R e l i a n c e c a u s e d a n i n i t i a l a p p e a r a n c e t o be made on be-

h a l f o f F i s h e r i n t h a t a c t i o n i n o r d e r t o p r e v e n t a d e f a u l t , it
d e c l i n e d t o a c c e p t e i t h e r t h e duty t o defend o r r e s p o n s i b i l i t y
f o r any judgment which might be o b t a i n e d a g a i n s t F i s h e r i n t h a t

action. A s t i p u l a t i o n w a s entered i n t o s t a y i n g f u r t h e r proceedings
i n t h a t a c t i o n u n t i l t h e m a t t e r of s u c h i n s u r a n c e c o v e r a g e

c o u l d be r e s o l v e d .

O August 28, 1972, R e l i a n c e CQmenced t h i s a c t i o n f o r a
n
d e c l a r a t o r y judgment i n t h e d i s t r i c t c o u r t of F l a t h e a d County,

naming a s d e f e n d a n t s i t s i n s u r e d , V i r g i l F i s h e r ; R i c h a r d 0 .

Poeppel; and Horace Mann I n s u r a n c e Company, a company t h a t had

issued a p o l i c y providing p r o f e s s i o n a l l i a b i l i t y insurance cover-

a g e f o r t e a c h e r s of t h e W h i t e f i s h s c h o o l system.

The a c t i o n s o u g h t a judgment d e c l a r i n g , among o t h e r t h i n g s ,

t h a t R e l i a n c e had no o b l i g a t i o n under i t s p o l i c y t o d e f e n d t h e

Poeppel a c t i o n o r t o pay any damages t h a t might be awarded t h e r e i n .

Through answers f i l e d by Horace Mann i t was a d m i t t e d t h a t

on A p r i l 20, 1972, t h e r e was i n e f f e c t between s a i d i n s u r a n c e

company and t h e Montana E d u c a t i o n A s s o c i a t i o n (MEA) a p o l i c y o f

l i a b i l i t y i n s u r a n c e denominated a s an " E d u c a t o r ' s P r o f e s s i o n a l

Liability Policy." A s members of t h e MEA, b o t h F i s h e r and Poeppel

were i n s u r e d p a r t i e s under t h e Horace Mann p o l i c y . A s a defense

t o i t s a l l e g e d d u t y t o d e f e n d , Horace Mann c o n t e n d s t h a t i t s

i n s u r a n c e c o n t r a c t i s e x p r e s s l y i n a p p l i c a b l e by r e a s o n of s p e c i a l

exclusions contained i n s a i d policy.

The c a s e w a s a r g u e d o r a l l y b e f o r e t h e d i s t r i c t c o u r t on

May 22, 1973. S u b s e q u e n t l y w r i t t e n b r i e f s were f i l e d and t h e d i s -

t r i c t court issued i t s order refusing " t o render o r e n t e r a

D e c l a r a t o r y Judgment o r Decree f o r t h e r e a s o n t h a t such a Judgment

o r Decree would n o t t e r m i n a t e t h e u n c e r t a i n t y o r c o n t r o v e r s y

g i v i n g rise t o t h e p r o c e e d i n g s . "
From t h i s o r d e r and d e n i a l o f a motion f o r new t r i a l o r

o r d e r t o amend judgment, b o t h i n s u r e r s a p p e a l .
The s i n g l e c o n t r o l l i n g i s s u e upon a p p e a l i s whether t h e
i n s u r e r s , R e l i a n c e and Horace Mann, a r e under an o b l i g a t i o n t o
d e f e n d F i s h e r i n t h e l a w s u i t f i l e d a g a i n s t him by Poeppel o r

r e q u i r e d t o indemnify F i s h e r f o r any l o s s e s s u s t a i n e d as a
r e s u l t of t h e Poeppel l a w s u i t .

The g i s t of r e s p o n d e n t F i s h e r ' s argument i s t h a t h i s

a c t i o n s g i v i n g r i s e t o t h e a l t e r c a t i o n and s u b s e q u e n t l a w s u i t

come w i t h i n t h e R e l i a n c e p o l i c y c o v e r a g e a s " a c t i v i t i e s t h e r e i n

which are o r d i n a r i l y i n c i d e n t t o n o n - b u s i n e s s p u r s u i t s . " Fisher

a l s o a r g u e s t h a t h i s a c t i o n s t e m s from an a p p a r e n t need t o d e f e n d
himself.

The d i s t r i c t c o u r t ' s r e a s o n s f o r r e f u s i n g t o d e t e r m i n e

t h e o b l i g a t i o n s of Horace Mann w i t h r e g a r d t o s a i d Cause No.

23116 a r e s e t f o r t h i n a memo f o l l o w i n g t h a t c o u r t ' s o r d e r deny-

i n g a motion f o r new t r i a l , the alternative, for the court

t o amend i t s o r d e r of J u l y 5 , 1973. S a i d memo r e a d s i n p a r t :

"Defendant Horace Mann p u t s t h e most r e l i a n c e
upon e x c l u s i o n j, ' t o l i a b i l i t y and r e s p e c t i v e
claims b r o u g h t by t e a c h e r s o r o t h e r employees
o f a s c h o o l system a g a i n s t t h e i n s u r e d , * * * I .
Defendant Horace Mann i n t e n d s ( s i c ) t h a t i f t h e
c l a i m a n t were a t e a c h e r a t t h e t i m e of t h e
occurrence giving rise t o t h e claim, irrespec-
t i v e of t h e conduct of t h e t e a c h e r a t t h a t time,
t h i s policy does not apply. This exclusionary
c l a u s e , g i v e n l i t e r a l i n t e r p r e t a t i o n , would ex-
c l u d e any c l a i m a n t s who were t e a c h e r s o r s c h o o l
employees o f any s c h o o l s y s t e m a t any t i m e , and
t h a t s i m p l y c a n n o t be t h e i n t e n t of t h e p o l i c y .
Thus i n d e t e r m i n i n g what t h e i n t e n t of t h i s
p o l i c y is, it i s incomprehensible t h a t t h e m e r e
l a b l e ( s i c ) of ' t e a c h e r 1 i s s u f f i c i e n t t o cause
t h i s p o l i c y n o t t o a p p l y . Thus, i f t h e c o n d u c t
of t h e claimant ' t e a c h e r ' so f a r exceeds t h e
s c o p e of h i s p r o f e s s i o n a l employment s o a s t o be
t o t a l l y u n r e l a t e d t o h i s o c c u p a t i o n , how c a n it
be c o n t e m p l a t e d t h a t t h i s t y p e o f c o n d u c t would
be excluded from t h e p o l i c y ? "
The t h r u s t of b o t h i n s u r e r s ' p o s i t i o n s i n t h e i n s t a n t
c a s e i s t h a t t h e i r duty t o defend i s l i m i t e d t o claims a g a i n s t

t h e i n s u r e d w i t h i n t h e c o v e r a g e of t h e p o l i c y . Reliance argues
t h a t i t s p o l i c y i s s u e d t o F i s h e r i s denominated a "Farm Owner's

P o l i c y " on i t s f a c e and c o v e r s h e e t and s a i d p o l i c y p r i m a r i l y

covers farming o p e r a t i o n s .
 Fisher owned and operated a farm, but also was a school
teacher in Whitefish. Reliance contends that by reason of cer-
tain exclusions enumerated in the policy it is not liable for
Fisher's actions while engaged in business pursuit outside of
farming--namely, that of teaching.
The Reliance insuring agreement, section 11, contains the
following pertinent provisions:
"1. Coverage G--Farmers Comprehensive Personal
Liability: (a) Liability: To pay on behalf of
the insured all sums which the Insured shall be-
come legally obligated to pay as damages because
of bodily injury or property damage and the Com-
pany shall defend any suit against the Insured
alleging such bodily injury or property damage
and seeking damages which are payable under the
terms of this policy, even if any of the alle-
gations of the suit are groundless, false or
fraudulent; but the Company may make such investi-
gation and settlement of any claim or suit as it
deems expedient. * * *
"2. Coverage H--Personal Medical Payments: To pay
all reasonable expenses incurred within one year
from the date of accident for necessary medical,
surgical, X-ray and dental services, including
prosthetic devices, and necessary ambulance,
hospital, professional nursing and funeral ser-
vices, to or for each person who sustains bodily
injury caused by accident,
"(a) while on the premises with the permission of
an Insured, or
"(b) while elsewhere if such bodily injury, (1)
arises out of the premises or.-acondition in the
ways immediately adioininq, (2) is caused by the
activities of an Insured or of any farm or resi-
dence employee in the course of his employment
bv an Insured. ( 3 ) is sustained bv an insured
farm employee or by a residence employee and arises
out of and in the course of his employment by an
Insured, or (4) is caused by an animal owned by
or in the care of an Insured." (Emphasis added.)
The "Special Exclusions" section of the policy specifically
provides :
"Section I1 of this Policy does not apply:
"(a) (1) to any business pursuits of an Insured,
except under Coverages G and H, activities therein
which are ordinarily incident to non-business pur-
suits, (2) to the rendering of any professional
service or the omission thereof, or (3) to any act
 or omission in connection with premises, other
than as defined, which are owned, rented or
controlled by an Insured; but this subdivision
(3) does not apply with respect to bodily injury
to a residence employee or an insured farm employee
if such bodily injury arises out of and in the
course of employment by the Insured of such resi-
dence employee or insured farm employee;

"(c) under Coverages G and H, to bodily injury or
roperty damage caused intentionally by or at the
girection of the Insured * * *.I1 (Emphasis added

Throughout the policy repeated references are made to
"farm dwellings," "farm premises," farming operations and other
activities in connection with the insured's operation of a farm.
Under the heading of "General Conditions" are certain defini-
tions including a definition of the word "premises" which
clearly limits that term to the farm grounds and buildings of
the insured, and the term "business" which is defined as in-
cluding:
"Trade, profession, or occupation other than
farming, and roadside stands maintained prin-
cipally for the sale of insured's produce."
The actions of Fisher referred to in the action brought
against him by Poeppel were admittedly performed by him while he
was engaged in his profession as a school teacher, and were
directly related to the performance of his duties as a school
teacher.
The actions which constitute the basis of the Poeppel
suit as set forth in the complaint come within section I1 (a)(l)
of that part of the policy dealing with special exclusions.
Fisher's actions come under this specific exclusion since follow-
ing his profession as a school teacher was a "business pursuit"
completely separated from any farming activities.
This Court in a similar case, McAlear v. St. Paul Ins.
Gas., 158 Mont. 452, 493 P.2d 331, held that ordinarily a liability
insurance company has no duty to defend an action brought by
a third party against the insured when the claim or complaint
does not fall within the coverage of the liability policy. If
the insurer would have no obligation to indemnify the insured
should the complainant recover, then there is no contractual
obligation to afford a defense. See also Couch on Insurance 2d,
S 51:38 et seq.; 7A Appleman Insurance Law and Practice, S 4682

et seq.; 49 ALR 2d 703. (For a discussion of an insurer's duty
to defend a wilful injury see 2 ALR 3d 1238 and 7A Appleman '74
Bd. Supp. 8 4683.)
We hold that under the provisions of the policy there
was no coverage for the acts complained of in the Poeppel action
and that Reliance is entitled to the relief prayed for in the
declaratory judgment action.
With respect to the "Educator's Professional Liability
Policy", Horace Mann contends that the policy does not provide
coverage for the damages claimed by Poeppel unless it can be
established that those damages were (1) unintentionally caused
by Fisher (2) acting as a teacher, (3) within his professional
capacity, (4) to Poeppel, not acting as a teacher. If any one
of these items cannot be established, it argues, coverage fails.
Horace Mann contends that not one but several of these requisites
are absent from the instant case, and that therefore it is not
obligated to defend Fisher or to pay any claims against him by
Poeppel .
The Horace Mann policy contains exclusion "j" which
provides :
"This policy does not apply:
"j. To liability in respect of claims brought
by teachers or other employees of a school system
against the assured, as defined by the policy * * *."
As previously mentioned, all parties stipulated that both
Poeppel and F i s h e r were t e a c h e r s working a t t h e W h i t e f i s h

School w i t h i n s c h o o l h o u r s a t t h e t i m e o f t h e i n c i d e n t w h i l e

t h e c l a i m a n t was d i s c i p l i n i n g a s t u d e n t from h i s c l a s s .

The d i s t r i c t c o u r t i g n o r e d t h e s t i p u l a t i o n t h a t b o t h were

t e a c h e r s , and h y p o t h e s i z e d t h a t t h e f a c t s m i g h t show t h a t t h e

a c t i o n s of Poeppel " s o f a r e x c e e d ( e d ) t h e s c o p e of h i s p r o f e s -

s i o n a l employment" a s t o make him n e i t h e r a t e a c h e r n o r an

employee of t h e s c h o o l s y s t e m f o r p u r p o s e s o f c o v e r a g e under

the policy.

W e disagree. The a l t e r c a t i o n was c l e a r l y c o n n e c t e d w i t h

and r e l a t e d t o s c h o o l a c t i v i t i e s .

S e c t i o n 13-704, R.C.M. 1947, p r o v i d e s t h a t t h e c l e a r

and e x p l i c i t language of a c o n t r a c t must govern i t s i n t e r p r e t a -

tion. S e c t i o n 13-707, R.C.M. 1947, s t a t e s t h a t e v e r y p a r t o f a

c o n t r a c t i s t o be g i v e n e f f e c t , u s i n g e a c h c l a u s e t o h e l p i n t e r -

pret the others. F i n a l l y , s e c t i o n 13-710, R.C.M. 1947, p r o v i d e s :

"The words of a c o n t r a c t a r e t o be u n d e r s t o o d
i n t h e i r o r d i n a r y and p o p u l a r s e n s e , r a t h e r t h a n
a c c o r d i n g t o t h e i r s t r i c t l e g a l meaning, u n l e s s
used by t h e p a r t i e s i n a t e c h n i c a l s e n s e , o r
u n l e s s a s p e c i a l meaning i s g i v e n t o them by
u s a g e , i n which c a s e t h e l a t t e r must be f o l l o w e d . "

The c l e a r e x p l i c i t language of e x c l u s i o n " j " e x c l u d e s

" * * * c l a i m s b r o u g h t by t e a c h e r s o r o t h e r employees of a s c h o o l

system a g a i n s t t h e assured * * *". Applying s e c t i o n s 13-704,

13-707 and 13-710, R.C.M. 1947, t h e , s u i t of Poeppel i s c l e a r l y

n o t covered.

A s previously discussed i n reference t o t h e Reliance

p o l i c y , it i s t h e l a w of t h i s s t a t e t h a t t h e d u t y of a l i a b i l i t y

i n s u r e r t o d e f e n d t h e i n s u r e d i s governed by t h e a l l e g a t i o n s of

t h e t h i r d p a r t y ' s complaint a g a i n s t t h e insured. McAlear v . S t .

P a u l I n s . Cos., 158 Mont. 452, 493 P.2d 331. I n t h i s case, para-

g r a p h I of P o e p p e l l s c o m p l a i n t a g a i n s t F i s h e r a l l e g e s t h a t a t
 t h e time o f t h e i n c i d e n t b o t h Poeppel and F i s h e r were employed

by School D i s t r i c t No. 4 4 i n W h i t e f i s h . E x c l u s i o n "j" o f t h e

Horace Mann p o l i c y e x c l u d e s c o v e r a g e f o r c l a i m s b r o u g h t by

" t e a c h e r s o r o t h e r employees of a s c h o o l system" and t h e r e f o r e

t h e M c A l e a r r u l e r e q u i r e s a f i n d i n g t h a t Horace Mann h a s no

o b l i g a t i o n t o defend i n t h i s m a t t e r .

F o r t h e s e r e a s o n s t h e c a u s e i s remanded t o t h e d i s t r i c t

c o u r t f o r e n t r y of judgment r e l e a s i n g b o t h i n s u r a n c e companies

from any d u t y t o d e f e n d o r t o pay any damages t h a t might be
awarded i n Cause No. 23116.

Justice
- -.- /.
w\a c o n c u r :-.-.
J

Chief J u s t i c e , --
,-
I
.