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American Reliable Ins. Co. v. Vlieland

United States District Court, D. Montana, Missoula Division

March 30, 2018




         Before the Court is Plaintiff American Reliable Insurance Company's (“American Reliable”) motion for summary judgment. American Reliable seeks declaratory relief that the allegations made against Defendants Christina and Jeff Vlieland (“Vlielands”) in Montana Eleventh Judicial District Court, Flathead County, Montana (“Underlying Complaint” or “Underlying Litigation”) fail to trigger coverage under a Comprehensive Manufactured Home Policy (“Policy”), and therefore, American Reliable is not required to indemnify the Vlielands. American Reliable argues there is no duty to indemnify because: (1) the allegations in the Underlying Complaint are all intentional acts which do not constitute an “occurrence” under the Policy; and (2) that Policy exclusions preclude coverage. American Reliable also moves the Court to dismiss the Vlielands' affirmative defenses. For the reasons explained below, the Court denies the motion for summary judgment and dismisses one of the Vlielands' affirmative defenses.


         The Vlielands are neighbors of Randy Self and Tina Roberts (“Underlying Plaintiffs”) on 4th Street West in Hungry Horse, Montana. On November 1, 2016, Underlying Plaintiffs filed the Underlying Complaint against the Vlielands, who are American Reliable's insureds, in Montana Eleventh Judicial District Court, Flathead County, Montana.

         Underlying Plaintiffs allege that since the Vlielands moved into their Hungry Horse home in June 2011, the Vlielands have intentionally harassed, disrupted, and interfered with their enjoyment of life. The Underlying Complaint alleges that: (1) the Vlielands played loud music and directed noise at Underlying Plaintiffs' residence; (2) the Vlielands poisoned Underlying Plaintiffs' dog; (3) Jeff Vlieland pointed a pistol at Randy Self; (4) Jeff Vlieland tried to run Tina Roberts off the road; (5) the Vlielands threw rocks at Underlying Plaintiffs' residence; and (6) the Vlielands increased the height of their fence to block Underlying Plaintiffs' view. These factual allegations form the basis for the claims of nuisance, intentional infliction of emotional distress, and assault in the Underlying Complaint.

         The Vlielands tendered the Underlying Complaint to American Reliable and requested a defense and indemnification. During the relevant periods of the Vlielands' alleged conduct, the Vlielands had a Comprehensive Manufactured Home Policy issued by American Reliable (the “Policy”). The Policy is a standard “occurrence” based homeowner's policy, providing coverage for bodily injury and property damage. American Reliable provided a defense under a reservation of rights, and filed this declaratory action.

         American Reliable seeks summary judgment arguing that the policy precludes coverage because the conduct alleged does not qualify as an “occurrence” under the Policy. American Reliable additionally argues that even if the conduct qualifies as an “occurrence” under the Policy, five Policy exclusions further preclude coverage:

1. “Intentional Acts Exclusion”;
2. “Illegal Activities Exclusion”;
3. “Expected or Intended Acts Exclusion”;
4. “Assault and Emotional Abuse Exclusion”;
5. “Punitive Damages Exclusion.”

         The Vlielands counter that the issue of American Reliable's duty to indemnify is not ripe for this Court's determination, but should the Court decide the issue, the Vlielands argue that the Underlying Complaint alleges an “occurrence” and that the Policy's exclusions are inapplicable. Further, in the Vlielands' Answer, the Vlielands asserted affirmative defenses that American Reliable breached its obligation to defend and indemnify the Vlielands by seeking a declaration from the Court regarding their obligation to indemnify under the Policy.

         Trial in the Underlying Complaint is currently set for the term beginning June 18, 2018, in Montana Eleventh Judicial District Court, Flathead County, Montana.


         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. Babcock v. Farmers Ins. Exch., 999 P.2d 347, 348 (Mont. 2000). The Court will construe terms according to their usual, commonsense meaning. Natl. Farmers Union Prop. & Cas. Co. v. George, 963 P.2d 1259, 1261 (Mont. 1998). The interpretation should honor the objectively reasonable expectations of the insured. Hanson v. Emp'rs Mut. Cas. Co., 336 F.Supp.2d 1070, 1075 (D. Mont. 2004). Any ambiguities regarding coverage are construed against the insurer. Id. 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). “[A]n insurer must defend all counts so long as one count potentially triggers coverage, even if the remaining counts would not be covered.” J&C Moodie Prop. LLC v. Deck, 384 P.3d 466, 472 (Mont. 2016) (citing State Farm Fire & Cas. Co. v. Schwan, 308 P.3d 48, 51 (Mont. 2013)).

         I. Ripeness and Duty to Indemnify

         An insurer's duty to defend arises “when a complaint against an insured alleges facts, which if proven, would result in coverage” however “an insurer's duty to indemnify arises only if coverage under the policy is actually established.” State Farm Mut. Auto. Ins. Co. v. Freyer, 312 P.3d 403, 410-11 (Mont. 2013) (internal quotations and citations omitted) (emphasis added). While the allegations in a complaint may trigger an insurer's duty to defend its insured, “an insurer's duty to indemnify hinges not on the facts the claimant alleges and hopes to prove, but instead on the facts, proven, stipulated or otherwise established that actually create the insured's liability.” Id. at 411 (internal quotations and citations omitted) (emphasis added). “When facts necessary to determine the existence of coverage are contested in an underlying action, the insurer cannot be said to have yet breached the duty to indemnify.” Id.

         The duty to indemnify “does not arise unless the policy actually covers the alleged harm.” Skinner v. Allstate Ins. Co., 127 P.3d 359, 364 (Mont. 2005) (citation omitted). “[W]here there remain unresolved relevant issues in the underlying case, inseparable from the issues presented in the declaratory judgment action, the duty to indemnify is not ripe for resolution.” Id. at 363. Ruling on a duty to indemnify before allowing the facts to be determined in an underlying action fails to be “a final adjudication on the indemnification issue, ” and instead results in “speculative advice, subject to possible amendment or nullification upon final resolution of the underlying case.” Id. at 364-65 (quoting Northfield Ins. Co. v. Mont. Ass'n of Ctys., 10 P.3d 813, 819 (Mont. 2000)). Therefore, courts must caution against determining questions of indemnity until liability is established in the underlying proceeding. Id.; see also Natl. Sur. Corp. v. Mack, 2016 WL 590453, at *2 (D. Mont. Feb. 11, 2016); Penn Star Ins. Co. v. Real Estate Consulting Specialists, Inc., 1 F.Supp.3d 1168, 1175 (D. Mont. 2014).

         American Reliable's motion is not ripe and justiciable regarding its duty to indemnify the Vlielands under the Policy. The allegations in the Underlying Complaint are currently unresolved in a pending state court matter where no facts have been established that actually create liability for the Vlielands. Further, though the alleged intentional acts trigger a duty to defend the insureds, the duty to ...

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