United States District Court, D. Montana, Missoula Division
OPINION AND ORDER
W. Molloy, District Judge.
Atlantic Casualty Insurance Company (“Atlantic”)
seeks a declaratory judgment that it has no duty to defend or
indemnify its insured Brunner Homes and Construction
(“Brunner”) in an underlying lawsuit brought by
homeowners Peggy and Kevin Quinn (“the Quinns”).
(Doc. 1.) Pending before the Court are Atlantic and
Brunner's cross-motions for partial summary judgment.
(Docs. 23, 30, 50.) A hearing was held in Missoula, Montana
on June 20, 2019. Ultimately, Atlantic has a duty to defend
Brunner against all claims in the underlying complaint.
However, Atlantic does not have a duty to indemnify Brunner
for the liquidated damages, breach of warranty, Montana
Consumer Protection Act, and emotional distress claims.
Factual issues preclude summary judgment on Atlantic's
duty to indemnify Brunner for the other claims. Consequently,
the issue of indemnity on those claims is held in abeyance
until the underlying state case is resolved.
Quinns entered into a contract with Brunner on June 29, 2015,
for the construction of a $745, 688.98 custom home in
Missoula. (Doc. 36-4 at 17-23.) The contract required Brunner
to complete the home no later than 300 days after work
commenced-by May 24, 2016 (“the Completion
Date”). (See Id. at 18.) However, the
Completion Date was permissibly subject to delays resulting
from any change orders the Quinns issued during the
construction period. (Id.) Barring any change
orders, Brunner agreed to finish the home no later than the
Completion Date or else be responsible for .5% of the
contract price for every day beyond that date that the home
remained unfinished. (Id.)
September 25, 2017, the Quinns sued Brunner in state court
for negligence, breach of contract, and construction default,
among other things. (Doc. 36-1.) The Quinns allege the home
was not satisfactory for habitation by the Completion Date.
(Doc. 36-4 at 4-5.) As part of their claim for damages, the
Quinns assert that Brunner must pay $3, 728.45 per day for
each day past the Completion Date that the home remains
substandard. (Id. at 8.) The Quinns thus allege that
as of April 27, 2018, Brunner owes $2, 624, 828.80 for the
delay on the home, accruing at a rate of $3, 728.45 each day.
was insured by Atlantic at all relevant times. (See
Doc. 35 at 3.) Brunner notified Atlantic of the Quinns'
lawsuit on October 6, 2017. (Doc. 36-5.) On November 14,
2017, Atlantic informed Brunner on at least one Atlantic
policy that it would defend under a complete reservation of
rights. (Doc. 36-2.)
April 20, 2018, Atlantic filed suit in this Court, seeking a
declaration that it has no duty to defend or indemnify
Brunner in the underlying lawsuit. (Doc. 1.) It moved for
partial summary judgment on its duties to defend and
indemnify against the underlying complaint's breach of
contract claims on November 21, 2018. (Doc. 23.) It moved for
summary judgment on its duty to defend and indemnify against
all twelve counts of the underlying complaint on January 4,
2019. (Doc. 30.) Brunner filed a cross-motion for summary
judgment on the duty to defend on April 1, 2019. (Doc. 50.)
judgment is proper “if the movant shows 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). The court must view all evidence and draw all
inferences in favor of the nonmoving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
substantive law of Montana applies to this diversity action.
Med. Lab. Mgmt. Consultants v. Am. Broad. Cos., 306
F.3d 806, 812 (9th Cir. 2002). Interpretation of a contract
or an insurance policy is a question of law. Wendell v.
State Farm Mut. Auto Ins. Co., 974 P.2d 623, 627 (Mont.
1999). Even so, “[e]ach case turns on its precise
individual facts, ” which play a significant role in
determining whether coverage under an insurance contract
exists. Id. at 637 (internal quotation marks
omitted). Contracts are interpreted “according to their
usual, common-sense meaning” viewed from the
perspective of the insured, who is treated as a consumer of
average intelligence with no training in the law or in
insurance. Id. at 628; Hanson v. Emp'rs Mut.
Ins. Co., 336 F.Supp.2d 1070, 1075 (D. Mont. 2004).
Exclusions from coverage are construed narrowly. Farmers
Union Mut. Ins. Co. v. Staples, 90 P.3d 381, 385 (Mont.
2004). Ambiguities are construed in favor of the
insured and against the insurer. Id.
Duties to Defend and Indemnify
duty to defend is independent from and broader than the duty
to indemnify created by the same insurance contract.”
Id. An insurer's duty to indemnify arises only
if there is coverage under the policy. State Farm Fire
& Cas. Ins. Co. v. Schwan, 308 P.3d 48, 51 (Mont.
2013). The duty to defend, however, “is triggered when
a complaint against an insured alleges facts, which if
proven, would result in coverage.” Id.
(internal quotation marks omitted). Allegations in the
complaint must be liberally construed so that any doubts
regarding coverage are resolved in favor of finding a duty to
defend. Farmers Union, 90 P.3d at 385. An insurer is
presumed to have a duty to defend, absent an
“unequivocal demonstration that the claim against an
insured does not fall within the insurance policy's
coverage.” Id. Further, Montana follows
“the ‘mixed action' rule, which requires an
insurer to defend against all counts in a complaint so long
as one count potentially triggers coverage, even if the
remaining counts would not be covered.” State
Farm, 308 P.3d at 51 (internal citation omitted).
prevail at summary judgment, Atlantic must show that none of
the Quinns' claims against Brunner are or could be
covered by the relevant insurance policy. Atlantic has
shown the Quinns' claims for liquidated damages, breach
of warranty, Montana Consumer Protection Act violations, and
emotional distress are not covered. Factual issues preclude
summary judgment on the remaining claims. However, because
the possibility of ...