Huckins v. United Servs. Auto. Ass'n

• Decision Date: 13 June 2017
• Docket Number: DA 16-0561
• Citation: 396 P.3d 121,387 Mont. 514
• Parties: Jessica HUCKINS, Plaintiff and Appellant, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant and Appellee.
• Court: Montana Supreme Court

387 Mont. 514

396 P.3d 121

Jessica HUCKINS, Plaintiff and Appellant,

v.UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant and Appellee.

DA 16-0561

Supreme Court of Montana.

Submitted on Briefs: April 19, 2017

Decided: June 13, 2017

For Appellant: Jesse C. Kodadek, Worden Thane, P.C., Missoula, Montana

For Appellee: David M. McLean, Ryan C. Willmore, McLean & Associates, PLLC, Missoula, Montana

Justice Jim Rice delivered the Opinion of the Court.

¶1 Appellant Jessica Huckins (Huckins) appeals the order of the Twenty-First Judicial District Court, Ravalli County, granting summary judgment in favor of Appellee United Services Automobile Association (USAA), and holding that USAA did not breach its duty to defend under policies held by the insured. We reverse and address the following issue:

Did the District Court err by holding that USAA did not breach its duty to defend under the homeowner's policies or the renter's policy?

FACTUAL AND PROCEDURAL BACKGROUND

¶2 Barry Van Sickle (Van Sickle) purchased a home in Stevensville, Montana, in 2001. In 2010, Van Sickle placed the home for sale and, in the process, completed a Seller's Property Disclosure Statement Montana Association of Realtors® Standard Form (Disclosure). The Disclosure requested the seller to "Please describe any Adverse Material Facts concerning the items listed or other components, fixtures or matters," followed by a request for information about the "BASEMENT: (Leakage, Flooding, Moisture or evidence of Water, and Fuel Tanks)." In the blank next to this request, Van Sickle wrote "N\A."

¶3 On January 28, 2014, Huckins conveyed an offer on Van Sickle's home. Van Sickle accepted the offer on January 29, 2014, and, "[s]oon thereafter," the Disclosure completed by Van Sickle was provided to Huckins. Prior to closing, Huckins paid for a home inspection and inquired into home insurance costs. The inspection revealed that there was an "unconventional" sump pump in the basement, and the home insurance quotes indicated that a claim for flooding in the home had been made in 2011. Huckins closed on the transaction in March 2014, but upon entering the home after the closing, she found the basement flooded.

¶4 Huckins filed a complaint against Van Sickle and his real estate agent¹ (Underlying Complaint). The Underlying Complaint stated that the Disclosure's question about the basement was "left blank by Van Sickle" and provided a screenshot of that question with a blank answer. Huckins alleged that Van Sickle should have disclosed the previous basement flooding problems and set forth claims of negligent misrepresentation, negligence, fraud and fraudulent misrepresentation, constructive fraud, violations of the Montana Consumer Protection Act, deceit, breach of the covenant of good faith and fair dealing, and for punitive damages.

¶5 At times related to the events stated by the Underlying Complaint, Van Sickle held three insurance policies through USAA. From 2001 to January 3, 2014, Van Sickle was covered by an annually renewing homeowner's policy, with identical terms each year (Pre-2014 Policy). When the policy renewed for the January 4, 2014 to January 4, 2015 term, USAA added additional exclusions, including one that excluded coverage for damages "arising out of your failure, intentionally or unintentionally, to disclose information regarding the sale or transfer of real or personal property." (2014 Policy) (collectively "Homeowner's Policies"). The Homeowner's Policies both included personal liability protection that provided both indemnity and a defense "[i]f a claim is made or a suit is brought against an ‘insured’ for damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence’ to which this coverage applies." In addition to the Homeowner's Policies, Van Sickle, who at the time had moved to and rented a home in California, had a renter's policy that ran from March 15, 2014, to March 15, 2015 (Renter's Policy).

¶6 Van Sickle tendered the Underlying Complaint to USAA, who conducted a telephone interview with Van Sickle and his wife, Michelle Van Sickle (Michelle). Following the interview, USAA sent a letter to Van Sickle denying coverage for the claims stated in the Underlying Complaint, stating "[t]he allegations are concerning alleged misrepresentation and concealment of material facts concerning the sale of property," and that the policy required an "occurrence as defined" to provide coverage, noting that "[m]isrepresentation and concealment is not an accident and does not give rise to an occurrence."

USAA's letter also cited the exclusion for "property damage to property owned by an insured."

¶7 Van Sickle then settled the underlying litigation with Huckins by way of a consent judgment of $300,000 and Van Sickle's assignment of all claims under his insurance policies to Huckins in exchange for a covenant not to execute. The District Court entered the consent judgment on June 25, 2015, concluding it was "reasonable in light of the facts and circumstances of this case, and the risks and costs of litigation." Huckins then brought the instant case against USAA, stating claims for breach of duty to defend Van Sickle, breach of contract, violations of the Montana Unfair Trade Practices Act, breach of the covenant of good faith and fair dealing, and punitive damages. Huckins and USAA moved for summary judgment on the primary issue of whether USAA had breached its duty to defend Van Sickle. The District Court reasoned that the claim did not constitute an "occurrence" as defined by the policies held by Van Sickle, and that USAA had therefore not breached its duty to defend under either the Homeowner's Policies or the Renter's Policy.

¶8 Huckins appeals. Additional facts will be referenced herein.

STANDARDS OF REVIEW

¶9 A district court's grant of summary judgment is reviewed de novo, applying the same criteria as the district court. J & C Moodie Props., LLC v. Deck , 2016 MT 301, ¶ 15, 385 Mont. 382, 384 P.3d 466 ( [hereinafter J &C Moodie ] ) (citing State Farm Fire & Cas. Co. v. Schwan , 2013 MT 216, ¶ 12, 371 Mont. 192, 308 P.3d 48 ). Under M. R. Civ. P. 56(c), judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. J &C Moodie , ¶ 15 (citing Roe v. City of Missoula , 2009 MT 417, ¶ 14, 354 Mont. 1, 221 P.3d 1200 ).

¶10 If no material facts are in dispute, the question of whether or not an insurer breached its duty to defend is a question of law. J &C Moodie , ¶ 17 (citing Schwan , ¶ 12 ). Questions of law are reviewed for correctness. J &C Moodie , ¶ 17 (citing State Farm Mut. Auto. Ins. Co. v. Freyer , 2013 MT 301, ¶ 22, 372 Mont. 191, 312 P.3d 403 ).

DISCUSSION

¶11 Did the District Court err by holding that USAA did not breach its duty to defend under the homeowner's policies or the renter's policy?

¶12 Huckins argues that USAA breached its duty to defend because USAA deemed Van Sickle's acts to be intentional, and not an accidental "occurrence" covered by the policy, even though Van Sickle reported to USAA in the interview that he did not understand the scope of the information the Disclosure was asking him to supply about the property. Huckins also argues that the District Court erred by resolving any doubt about the allegations as stated in the Underlying Complaint in favor of USAA, instead of in favor of coverage.

¶13 USAA argues that the Underlying Complaint "failed to assert ‘bodily injury’ as defined in the policy" and that the District Court correctly concluded that there was no "occurrence," under either the Homeowner's Policies or the Renter's Policy. USAA also argues that, while the District Court reached the right result on these grounds, the "Failure to Disclose" exclusion in the 2014 Policy provided an unequivocal demonstration that the facts alleged in the underlying lawsuit did not fall within the 2014 Policy's coverage, and the Renter's Policy is not applicable to the home in Stevensville.

¶14 "The duty to defend arises when a complaint against an insured alleges facts, which if proven, would result in coverage." J &C Moodie , ¶ 20 (citing Farmers Union Mut. Ins.Co. v. Staples , 2004 MT 108, ¶ 21, 321 Mont. 99, 90 P.3d 381 ; Schwan , ¶ 15 ; Freyer , ¶ 26 ; Tidyman's Mgmt. Servs. v. Davis , 2014 MT 205, ¶ 22, 376 Mont. 80, 330 P.3d 1139 ). "Unless there exists an unequivocal demonstration that the claim against an insured does not fall within the insurance policy's coverage, an insurer has a duty to defend." Staples , ¶ 22;J &C Moodie , ¶ 20;accord Revelation Indus., Inc. v. St. Paul Fire & Marine Ins. Co. , 2009 MT 123, ¶ 32, 350 Mont. 184, 206 P.3d 919.

¶15 "[T]o determine whether [the insurer] had a duty to defend [the insured], we ... look first to the terms of the policy, and next to the facts alleged [in the] complaint." Landa v. Assurance Co. of Am. , 2013 MT 217, ¶ 19, 371 Mont. 202, 307 P.3d 284 (citing Lloyd A. Twite Family P'ship v. Unitrin Multi Line Ins. , 2008 MT 310, ¶ 7, 346 Mont. 42, 192 P.3d 1156 ). Further, an insurer's duty to defend may arise from an insurer's knowledge of "facts obtained from outside the complaint." Revelation Indus., Inc. , ¶ 39. "An insurer cannot ignore knowledge of facts that may give rise to coverage under the policy simply because the complaint ... does not allege these facts of which the insurer has knowledge." Revelation Indus., Inc. , ¶ 39.

¶16 Exclusions in policies "must be narrowly and strictly construed because they ‘are contrary to the fundamental protective purpose of an insurance policy.’ "

Newman v. Scottsdale Ins. Co. , 2013 MT 125, ¶ 35, 370 Mont. 133, 301 P.3d 348 (quoting Farmers Union Mut. Ins. Co. v. Oakland , 251 Mont. 352, 356, 825 P.2d 554, 554 (1992) ). "[A]ny ambiguity in an insurance policy must be construed against the insurer." Newman , ¶ 41...