McAlear v. Saint Paul Ins. Companies
Decision Date | 31 January 1972 |
Docket Number | No. 12113,12113 |
Citation | 493 P.2d 331,158 Mont. 452 |
Court | Montana Supreme Court |
Parties | Allen L. McALEAR, Plaintiff and Respondent, v. SAINT PAUL INSURANCE COMPANIES, a Corporation, Defendant and Appellant. |
Patrick F. Hooks, argued, Townsend, Glenn F. Kenney, appeared, Helena, for defendant-appellant.
Allen L. McAlear, argued, Bozeman, for plaintiff-respondent.
In a declaratory judgment action involving an attorney's professional liability insurance policy, the district court held the insurer liable for the cost of its insured's defense against a third-party property damage action based upon a collision caused by the insured's runaway airplane. From this final judgment, the insurer appeals.
The single controlling issue upon appeal is whether the insurer is liable for the costs of such defense incurred by its insured. The district court held the insurer liable. We reverse.
The facts in this case are uncontradicted as the case was submitted on the basis of an agreed statement of fact which included the pleadings, stipulated exhibits, and discovery proceedings. On November 14, 1969, plaintiff Allen M. McAlear, a Bozeman attorney, purchased a professional liability policy from defendant, Saint Paul Insurance Companies, containing the following insuring agreement and exclusions:
'Insuring Agreements
'Coverage A-Professional Liability
The 'Exclusions' section of the policy specifically provides:
'Coverage A does not apply:
'* * *
'(3) to bodily injury to, or sickness, disease or death of any person, or to injury to or destruction of any tangible property, including the loss of use thereof.'
During the policy period McAlear flew to Salt Lake City with a client, Robert S. Beck. Beck had contacted McAlear regarding the purchase of a trailer and it was necessary for them to go to Salt Lake City to obtain financing from a private individual. As the sellers were insolvent it was necessary to complete the transaction and get the title recorded before liens could be recorded against the seller's equity in the trailer.
Beck and McAlear had flown to Salt Lake City on March 20, 1969, in McAlear's plane for this purpose. They transacted their business on March 21 and 22. At about 6:00 a. m. on March 23, while rpeparing to return to Bozeman, McAlear was engaged in a preflight inspection of his plane. He manually turned over the propellor while the ignition was in the 'on' position. This caused the pilotless airplane to accelerate down the ramp and crash into three other airplanes.
On May 21, 1970, an action was filed in the United States District Court in Utah by Gordon S. Burchett, the owner of one of the damaged planes. The Burchett action sought damages against McAlear for his alleged negligence and sought recovery of repair costs, depreciation and loss of use of Burchett's airplane.
McAlear's professional liability policy with his insurer, Saint Paul Insurance Companies, is the sole basis for his claim in the instant declaratory judgment action. He demanded of Saint Paul that it defend him in the Burchett action. Saint Paul denied this demand on the basis that his policy afforded no coverage and accordingly it owned him no duty to defend. McAlear then hired his own attorney to defend in the Burchett action.
Thereafter McAlear brought the instant declaratory judgment action against Saint Paul seeking a judgment holding it liable for the reasonable costs of his defense. The case was filed in the district court of Meagher County and submitted to the district court, sitting without a jury, for decision on the basis of an agreed statement of facts. The district court on July 2, 1971 entered an 'Order', in effect the judgment, providing in material part:
'IT IS HEREBY ORDERED, ADJUDGED AND DECREED, that the Plaintiff recover for his cost of defense in the suit brought against him.
'It appears to the Court that the policy was carelessly written, and since this is the fault of the insurance company, they should pay for their own carelessness, because certainly the duty to defend is not limited to the liability of the policy.'
Following denial of insurer's motion that the court enter written findings of fact and conclusions of law, the insurer appeals.
The thrust of insurer's position in the instant case is that its duty to defend is limited to claims against the insured within the coverage of the policy. The insurer contends that where, as here, there is no primary indemnity coverage for the Burchett accident, it has no duty to defend. Insurer points out that the basic insuring agreement in the policy (Coverage A), properly construed, so limits the duty to defend and that the policy contains an express exclusion of property damage claims (Exclusion 3).
On the other hand, the gist of the insured's position is that the duty to defend is contractual and where, as here, the duty to defend is unrestricted by the terms of the policy, the duty to defend is not limited to the primary indemnity coverage of the policy. According to the insured, the duty to defend in the instant case is entirely independent of the primary indemnity coverage of the policy. Thus, the insured argues, where the Burchett complaint falls within the scope of the 'duty to defend' provision in the policy, the insurer is obligated to defend without regard to the primary indemnity coverage afforded by the policy. As a corollary to this argument the insured insists that the exclusion of property damage claims from the primary indemnity coverage afforded by the policy in no way limits the duty of the insurer to defend.
Ordinarily a liability insurer has no duty to defend an action against the insured when the claim or complaint does not fall within the coverage of the liability policy. If the insurer would have no obligation to indemnify the insured should the complainant recover, then there is no contractual obligation to afford a defense. This general rule is succinctly stated in 50 A.L.R.2d at page 472, as follows:
'* * * a liability insurance company has no duty to defend a suit brought by a third party against the insured where the petition or complaint in such suit upon its face alleges a state of facts which fails to bring the case within the coverage of the
To like effect see 49 A.L.R.2d 703; 114 U. required to defend if it would not be bound to indemnify the insured even though the claim against him should prevail in that action.'
To like effect see 49 A.L.R.2d 703; 144 U. of Pa. Law Review 734, 'The Insurer's Duty to Defend Under a Liability Insurance Policy' pp. 747-749, 757; 7A...
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