Penn Star Ins. Co. v. Real Estate Consulting Specialists, Inc.

• Decision Date: 19 February 2014
• Docket Number: No. CV 13–223–M–DLC.,CV 13–223–M–DLC.
• Citation: 1 F.Supp.3d 1168
• Parties: PENN STAR INSURANCE COMPANY, Plaintiff, v. REAL ESTATE CONSULTING SPECIALISTS, INC., Defendant. and Corrine Degolier, Trust Protector of the Leanne Hart Trust, on behalf of her natural sister, Leanne Hart, Defendant–Intervenor.
• Court: U.S. District Court — District of Montana

1 F.Supp.3d 1168

PENN STAR INSURANCE COMPANY, Plaintiff,

v. REAL ESTATE CONSULTING SPECIALISTS, INC., Defendant.andCorrine Degolier, Trust Protector of the Leanne Hart Trust, on behalf of her natural sister, Leanne Hart, Defendant–Intervenor.

No. CV 13–223–M–DLC.

United States District Court,

D. Montana,

Missoula Division.

Feb. 19, 2014.

Jared S. Dahle, Randall G. Nelson, Ryan J. Gustafson, Nelson & Dahle, Billings, MT, for Plaintiff.

Marcel A. Quinn, Hammer Hewitt Jacobs & Quinn PLLC, Kalispell, MT, for Defendant.

Lee C. Henning, Rebecca J. Henning–Rutz, Henning Keedy & Lee, Kalispell, MT, for Defendant–Intervenor.

ORDER

DANA L. CHRISTENSEN, Chief Judge.

Before the Court are the parties cross-motions for summary judgment. Jurisdiction is based on diversity. For the reasons explained, the Court grants Defendant's motion and denies Plaintiff's motion.

Factual and Procedural Background

I. Introduction

This declaratory action stems from a complaint filed by Defendant–Intervenor Corrine Degolier, trust protector of the Leanne Hart Trust, (“Hart”) in Montana state district court against Defendant Real Estate Consulting Specialists, Inc. (“RECSI”). The state court complaint alleges that Hart, a resident of an apartment managed by RECSI, suffered injuries as a result of RECSI's “negligence in failing to perform routine maintenance duties at the apartments.” (Doc. 7–2 at 3.) Plaintiff Penn Star Insurance Company (“Penn”) insured RECSI under a commercial general liability policy. Penn filed the instant action seeking a judicial declaration that it has no duty to defend or indemnify RECSI for the claims alleged by Hart.

II. The Underlying Complaint

Hart's complaint in state court alleges that Leanne Hart, a resident of an apartment managed by RECSI, was injured when, while taking a shower at the apartment, she suffered a seizure, struck the temperature control lever, and was scalded by the hot water that sprayed from the showerhead. Hart's complaint alleges that RECSI was responsible for “all day-to-day details associated with the apartment complex” and that RECSI was “responsible for all day-to-day maintenance and other duties concerning the property.” (Doc. 7–2 at 1–2.) Hart's complaint alleges that “had [RECSI] been properly performing its routine maintenance duties regarding the apartment, it would have ensured that the temperature of the water was 120° F or less.” Id. Ultimately, the complaint alleges that Hart's injuries resulted from RECSI's “negligence in failing to perform routine maintenance duties at the apartment.” Id., at 3.

III. The Commercial General Liability Insurance Policy

At the time of Hart's injuries, RECSI was a Named Insured under a Commercial General Liability Policy issued by Penn (“the Policy”). The Policy's “Insuring Agreement” provided:

We will pay those sums that the Insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages.

(Doc. 7–1 at 26.) The Insuring Agreement further provided that insurance is applicable if “[t]he ‘bodily injury’ or ‘property damage’ is caused by an ‘occurrence’ that takes place in the ‘coverage territory’.” The Policy defined the “coverage territory” as “the United States of America (including its territories and possessions), Puerto Rico and Canada.” (Doc. 7–1 at 38.) The Declarations page and the Supplemental Location Schedule, under the remark “Locations of all premises you Own, Rent, or Occupy”, lists several addresses in Kalispell, none of which is the address where Hart's injuries are alleged to have occurred.¹

The Policy contains an endorsement that limits coverage to designated operations. This endorsement states that “[t]his insurance applies only to ‘bodily injury’ ... arising out of only those operations designated, listed and described in the Declarations ...” (Doc. 7–1 at 59.) The operations designated in the Declarations are described as “Real Estate Property managed.” (Doc. 7–1 at 4.) The Policy also contains an endorsement entitled “Real Estate Property Managed”, which provides that “[w]ith respect to your liability arising out of your management of property for which you are acting as real estate manager this insurance is excess over any other valid and collectible insurance available to you.” (Doc. 7–1 at 52.)

The Policy also contains a “Designated Professional Services” endorsement. This endorsement provides that “[t]his insurance does not apply to ‘bodily injury’ ... due to the rendering of or failure to render any professional service.” (Doc. 7–1 at 46.) This exclusion applies “[w]ith respect to any professional services shown in the Schedule ...” Id. The Schedule, under the remark “Description of Professional Services”, lists “Real Estate Property Manage & Consulting.” Id.

In its reservation of rights letter to RECSI and here, Penn asserts that there is no coverage for Hart's claim against RECSI for two reasons. First, Penn asserts that, pursuant to the Declarations page and Supplemental Location Schedule, the Policy only insured against losses that occurred at the limited, specific locations listed on the Declarations page and Supplemental Location Schedule.² Second, Penn asserts that there is no coverage because the Policy's “Designated Professional Services” endorsement unambiguously excludes coverage for the claims alleged by Hart.

Summary Judgment Standard

Summary judgment is appropriate “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 movant bears the initial burden of informing the Court of the basis for its motion and identifying those portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (internal quotation marks omitted). The movant's burden is satisfied when the documentary evidence produced by the parties permits only one conclusion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Where the moving party has met its initial burden, the party opposing the motion “may not rest upon the mere allegations or denials of his pleading, but ... must set forth specific facts showing that there is a genuine issue for trial.” Id. at 248, 106 S.Ct. 2505 (internal quotation marks omitted).

Applicable Law

A federal court sitting in diversity applies the substantive law of the forum state. Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). In this case, the Court applies Montana law.

I. Interpretation of Insurance Contracts

In Montana, the interpretation of an insurance contract is a question of law. Marie Deonier & Assoc. v. Paul Revere Life Ins. Co., 301 Mont. 347, 9 P.3d 622, 630 (2000). In interpreting an insurance contract, the court “will read the insurance policy as a whole, and will if possible, reconcile its various parts to give each meaning and effect.” Farmers Alliance Mut. Ins. Co. v. Holeman, 289 Mont. 312, 961 P.2d 114, 119 (1998). The language of an insurance policy governs if it is clear and explicit. Marie Deonier & Assoc., 9 P.3d at 630.

“Any ambiguity in an insurance policy must be construed in favor of the insured and in favor of extending coverage.” Hardy v. Progressive Specialty Ins. Co., 315 Mont. 107, 67 P.3d 892, 896 (2003). “An ambiguity exists where the contract, when taken as a whole, is reasonably subject to two different interpretations.” Id. “Whether an ambiguity exists is determined through the eyes of ‘a consumer with average intelligence but not trained in the law or insurance business.’ ” Id. (quoting Holeman, 961 P.2d at 119).

“[E]xclusions and words of limitation in a policy must be strictly construed against the insurer regardless of whether or not they are ambiguous.” Leibrand v. National Farmers Union Property and Cas. Co., 272 Mont. 1, 898 P.2d 1220, 1224 (1995) (citing Aetna Ins. Co. v. Cameron, 194 Mont. 219, 633 P.2d 1212, 1214 (1981)). “[E]xclusions from coverage will be narrowly and strictly construed because they are contrary to the fundamental protective purpose of an insurance policy.” Revelation Industries, Inc. v. St. Paul Fire & Marine Ins. Co. 350 Mont. 184, 206 P.3d 919, 929 (2009) (quoting Wellcome v. Home Ins. Co., 257 Mont. 354, 849 P.2d 190, 192 (1993)).

II. The duty to defend

“The duty to defend is independent from and broader than the duty to indemnify created by the same contract.” Farmers Union Mut. Ins. v. Staples, 321 Mont. 99, 90 P.3d 381, 385 (2004) (citing St. Paul Fire & Marine Ins. Co. v. Thompson, 150 Mont. 182, 433 P.2d 795, 799 (1967)); Grindheim v. Safeco Ins. Co., 908 F.Supp. 794, 800 (D.Mont.1995). “The duty to defend arises when a complaint against an insured alleges facts, which if proven, would result in coverage.” Id.

“When a court compares allegations of liability advanced in a complaint with policy language to determine whether the insurer's obligation to defend was ‘triggered,’ a court must liberally construe allegations in a complaint so that all doubts about the meaning of the allegations are resolved in favor of finding that the obligation to defend was activated.” Id. (citing Portal Pipe v. Stonewall, 256 Mont. 211, 845 P.2d 746, 749 (1993); Grindheim, 908 F.Supp. at 805). “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.” Id. (citing Insured Titles, Inc. v. McDonald, 275 Mont. 111, 911 P.2d 209, 212 (1996)).

Analysis

As noted above, Penn's motion for summary judgment is premised on two grounds. First, Penn contends that there is no coverage and no...