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RQR Development, LLC v. Atlantic Casualty Insurance Co.

United States District Court, D. Montana, Missoula Division

December 10, 2014

RQR DEVELOPMENT, LLC, a Montana Limited Liability Company, Plaintiff,
ATLANTIC CASUALTY INSURANCE COMPANY, a North Carolina Corporation, Defendant. ATLANTIC CASUALTY INSURANCE COMPANY, a North Carolina Corporation, Counter Claimant,
RQR DEVELOPMENT, LLC, a Montana Limited Liability Company, Counter Defendant.


DONALD W. MOLLOY, District Judge.


Presently pending are cross motions for summary judgment. (Docs. 14, 20.) Plaintiff RQR Development, LLC ("RQR Development") requests partial summary judgment on the issue of whether Defendant Atlantic Casualty Insurance Company ("Atlantic") breached its duty to defend its insured, Mike Henning d/b/a Granite Mountain Excavating ("Granite Mountain"), in the underlying action. (Doc. 14 at 2.) RQR Development also seeks an entry of judgment awarding it the full amount of the judgment entered in the underlying action, post-judgment interest, costs, and attorneys' fees. ( Id. ) Atlantic filed a cross motion for summary judgment, admitting there are no factual disputes and seeking a judgment determination that the policy at issue does not provide coverage for the claims alleged by RQR Development in the underlying action. (Doc. 20 at 2.) Because there are no genuine disputes of material fact, these motions are appropriately resolved on summary judgment. For the reasons set forth below, judgment is granted in favor of Defendant and against Plaintiff.


RQR Development is a Montana limited liability company formed in 2006 for the purpose of developing a residential subdivision in Florence, Montana known as Sapphire Ridge. (SUF, Doc. 16 at ¶ 1.) On November 23, 2009, RQR Development signed a contract with Blanchard and Weaver Development, LLC ("Blanchard & Weaver") for general contracting services. ( Id. at ¶ 4.) Blanchard & Weaver, acting on behalf of RQR Development, then hired Mike Henning of Granite Mountain to provide excavating services for roadway improvements within Sapphire Ridge. ( Id. at ¶ 5.) According to the underlying complaint, Henning represented that he had the requisite knowledge, training, and experience to perform this job. (Doc. 16-3 at ¶ 15.) However, Granite Mountain's work resulted in delays and construction and engineering deficiencies, and RQR Development eventually hired another excavator to rectify Granite Mountain's work. ( Id. at ¶ 17.) RQR Development incurred significant expenses in repairing Granite Mountain's deficient work. ( Id. at ¶ 18.) On March 2, 2011, RQR Development sued Granite Mountain, Blanchard & Weaver, and another engineering firm, in the Fourth Judicial District Court, Missoula County, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, negligent misrepresentation, negligence, deceit, and constructive fraud ("the underlying action"). ( Id. at ¶¶ 19-111.)

Granite Mountain had a commercial general liability insurance policy (Policy No. L110003279) with Atlantic in effect from November 23, 2009, to November 23, 2010 ("the Policy"). (Doc. 16 at ¶ 6; Policy, Doc. 16-2.) When Granite Mountain was served with RQR Development's complaint in the spring of 2011, it tendered the complaint to Atlantic for defense and indemnity. (Doc. 16 at ¶ 18; Tender Letter, Doc. 16-4.) On April 14, 2011, Atlantic determined there was no coverage for the allegations in the complaint and declined to defend Granite Mountain. (Doc. 16 at ¶ 21; Declination Letter, Doc. 16-8.) On December 5, 2013, Granite Mountain executed a confession of judgment in favor of RQR Development, and on December 24, 2013, the district court entered a judgment against Granite Mountain in the amount of $326, 114.00 with 10% interest running from December 5, 2013. (Doc. 16 at ¶ 24.) Granite Mountain then assigned its rights in the Policy to RQR Development, and this lawsuit followed. ( Id. at ¶ 23.) RQR Development now alleges that Atlantic breached the terms of the Policy by failing to defend Granite Mountain in the underlying action and by failing to pay for the damages RQR Development sustained as a result of Granite Mountain's deficient work. (Compl., Doc. 1 at 7.)


A party is entitled to summary judgment if it can demonstrate that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). Summary judgment is warranted where the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986).


I. Duty to Defend

RQR Development alleges that Atlantic had a duty to defend Granite Mountain in the underlying action because its complaint alleged facts, which if proven, would result in coverage. (Br. in Support of Mot. for P.S.J., Doc. 15 at 12.) RQR Development contends that "[i]f [Atlantic] believed that policy exclusions... appl[ied], it was required to defend under a reservation of rights and seek a determination of coverage through a separate declaratory judgment action." ( Id. at 19.) Atlantic responds that courts may not "ignore the clear exclusionary language of insurance policies." (Atlantic's Response, Doc. 19 at 15.) Atlantic asserts it "reviewed the allegations in the complaint, ma[de] the assumption that all facts alleged in the complaint were true, and denied coverage based on the exclusions of the policy." ( Id. at 16.) Atlantic appropriately analyzed the exclusions and correctly concluded there is no coverage under the Policy.

An insurer's "duty to defend arises when a complaint against an insured alleges facts, which if proven, would result in coverage." Farmers Union Mut. Ins. Co. v. Staples, 90 P.3d 381, 385 (Mont. 2004). "[I]f there is any dispute as to the facts relevant to coverage, those factual disputes must be resolved in favor of coverage, " and "[u]nless there exists an unequivocal demonstration that the claim against the insured does not fall within the policy coverage, the insurer has a duty to defend." Id. at 386. The Montana Supreme Court has "repeatedly held that it is the acts giving rise to the complaint which form the basis for coverage, not the complaint's legal theories or conclusory language." Town of Geraldine v. Mont. Mun. Ins. Auth., 198 P.3d 796, 800 (Mont. 2008).

"An insurer's duty to defend its insured is determined by the language of the insurance policy. If there is no coverage under the terms of the policy based on the facts contained in the complaint, there is no duty to defend." Grimsrud v. Hagel, 119 P.3d 47, 53 (Mont. 2005) (internal citations omitted). The Montana Supreme Court "has consistently held that where the language employed in an insurance contract is clear, the language controls, and the court must enforce it as written." Id. (internal quotation marks omitted). However, "the insurer has the burden of proving the applicability of an exclusionary clause, " Travelers Cas. & Sur. Co. v. Ribi Immunochem Research, Inc., 108 P.3d 469, 476 (Mont. 2005), and "coverage exclusions [must] be narrowly construed, " Staples, 90 P.3d at 385. In this case, Atlantic has shown that RQR Development's claims do not constitute "occurrences" as defined by the Policy, and the unambiguous exclusions in the Policy are applicable. There is no coverage for any of RQR Development's claims, and, consequently, Atlantic had no duty to defend.

A. Negligence Claim

RQR Development alleged in its underlying complaint that Granite Mountain "failed to comply with the standard of care reasonably to be anticipated from the average excavator rendering such services under the same or similar circumstances" and caused damage to its property as a result. (Doc. 16-3 at 21-22.) Atlantic asserts that the negligence claim does not constitute an "occurrence" as defined by the Policy, (Doc. 19 at 4), and that the "your work" exclusions "preclude coverage for damage to property as a result of the insured's work, " ( id. at 21). Atlantic's argument is correct.

1. Occurrence

The Policy provides:

We [Atlantic] will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend the insured against any "suit" seeking those damages. However, we will have no duty to defend the insured against any "suit" seeking damages for "bodily injury" or "property damage" to which this insurance does not apply.

(Doc. 16-2 at 15.) The insurance applies to "property damage" only if the "property damage" is caused by an "occurrence." ( Id. ) The Policy defines "occurrence" as "an accident." ( Id. at 27.) The Policy does not define "accident, " but the Montana Supreme Court has held that "where a policy defines an occurrence' as an accident, ' [g]enerally, the term accident' from the standpoint of the insured reasonably refers to any unexpected happening that occurs without intention or design on the part of the insured.'" Landa v. Assurance Co. of Am., 307 P.3d 284, 288 (Mont. 2013) (quoting Safeco Ins. Co. of Am. v. Liss, 16 P.3d 399, 405 (Mont. 2000)). In determining whether something is an accident, the proper ...

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