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American Reliable Insurance Co. v. Lockard

United States District Court, D. Montana, Missoula Division

January 2, 2018




         Before the Court is Plaintiff American Reliable Insurance Company's ("American Reliable") motion for summary judgment. For the reasons explained below, the Court denies the motion.

         Background and Procedural History

         Lawrence Lockard ("Lockard") was employed by the United States Fish and Wildlife Service ("USFWS") as a Regional Field Dive Officer. Karen Jane Nelson ("Nelson") also worked for the USFWS. On September 8, 2015, Nelson accompanied Lockard into Quartz Lake in Glacier National Park to collect information regarding lake trout. The trip entailed an overnight stay in a remote USFWS cabin, and Lockard and Nelson slept in the same room in separate but adjacent beds. Nelson alleged that Lockard knew she had taken sleep medication, waited for her to fall asleep, and then sexually assaulted her. Nelson claims that the assault caused her damages, including anxiety, embarrassment, humiliation, insomnia, nightmares, and emotional trauma.

         On September 9, 2015, Nelson filed a civil Complaint (hereafter "Underlying Complaint") against Lockard alleging that he negligently proceeded with a sexual advance without her permission. Lockard tendered the Underlying Complaint to American Reliable and requested a defense and indemnification. During the relevant period of his employment with USFWS, Lockard was insured by American Reliable, policy No. LOG000313-7 (the "Policy"). The Policy is a standard "occurrence" based homeowner's policy which provides coverage for bodily injury and property damage. American Reliable filed this declaratory action and now seeks summary judgment arguing that the policy precludes coverage because the conduct alleged does not qualify as an "occurrence" under the Policy, and that five Policy exclusions further preclude coverage:

1. "Expected or Intended Injury Exclusion";
2. "Business Exclusion" which excludes coverage for bodily injury;
3. "Sexual Molestation, Corporal Punishment or Mental Abuse Exclusion";
4. "Assault and Battery Exclusion"; and
5. "Punitive Damages Exclusion."

         The bench trial in this matter is currently set for May 21, 2018.

         Legal Standard

         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). Only disputes over facts that might affect the outcome of the lawsuit will preclude entry of summary judgment; factual disputes that are irrelevant or unnecessary to the outcome are not considered. Id. at 248. In ruling on a motion for summary judgment, a court must view the evidence "in the light most favorable to the opposing party." Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (quoting Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970)). "[T]he evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id. at 1863 (quoting Anderson, 477 U.S. at 255). "[A]t the summary judgment stage the judge's function is not himself to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson, 477 U.S. at 249.


         The interpretation of an insurance contract is a question of law for the Court. Babcockv. Farmers Ins. Exchange, 999 P.2d 347, 348 (Mont. 2000). The Court will construe terms according to their usual, commonsense meaning. Natl. Farmers Union Property & Casualty Co. v. George, 963 P.2d 1259, 1261 (Mont. 1998). The interpretation should honor the objectively reasonable expectations of the insured. Hanson v. Employers Mut. Cas. Co., 336 F.Supp.2d 1070, 1075 (D. Mont. 2004). Any ambiguities regarding coverage are construed against the insurer. Hanson, 336 F.Supp.2d at 1073. "An ambiguity exists when a contract taken as a whole is reasonably subject to two different interpretations." Id. (citation omitted); see also Modroo v. Nationwide Mut. Fire Ins. Co., 191 P.3d 389, 395 (Mont. 2008). However, a policy provision is not ambiguous just because the parties disagree as to its interpretation, and "courts will not distort contractual language to create an ambiguity where none exists." Giacomelli v. Scottsdale Ins. Co., 221 P.3d 666, 672 (Mont. 2009).

         I. An "Occurrence" under the policy

         American Reliable initially contends that there is no coverage under the Policy because the Underlying Complaint does not allege an "occurrence" which would trigger a duty to defend and indemnify. American Reliable relies on New Hampshire Ins. Group v. Strecker, 798 P.2d 130 (Mont. 1990), for the proposition that all acts of sexual assault and molestation are "not accidental." Nelson claims that because the Underlying Complaint alleges negligence, it is covered under the Policy. Further, Lockard contends that under the Montana Supreme Court's recent holding in Emplrs. Mut. Cas. Co. v. Fisher Building, Inc., 371 P.3d 375 (Mont. 2016), an "accident" may include intentional acts so long as the consequences of those acts are not objectively intended or expected from the standpoint of the insured.

According to the policy, an "Occurrence" is defined as:
... an accident, including continuous or repeated exposure to substantially the same harmful conditions, which results, ...

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