Reliance Ins. Co. v. Fisher, 12605

• Decision Date: 23 April 1974
• Docket Number: No. 12605,12605
• Citation: 164 Mont. 278,521 P.2d 193
• Parties: RELIANCE INSURANCE COMPANY, Plaintiff and Appellant, v. Virgil FISHER, Richard O. Poeppel et al., Defendants and Respondents, and Horace Mann Insurance Company, Defendant and Appellant.
• Court: Montana Supreme Court

Page 193

521 P.2d 193

164 Mont. 278

RELIANCE INSURANCE COMPANY, Plaintiff and Appellant, v. Virgil FISHER, Richard O. Poeppel et al., Defendants and Respondents and Horace Mann Insurance Company, Defendant and Appellant.

No. 12605.

Supreme Court of Montana.

Submitted March 21, 1974.

Decided April 23, 1974.

Warden, Walterskirchen & Christiansen, Merrit N. Warden (argued), Kalispell, Garlington, Lohn & Robinson, Lawrence F. Daly (argued), Missoula, for appellant.

Murphy, Robinson, Heckathorn & Phillips, Robert L. Fletcher (argued), Kalispell, McGarvey, Morrison, Hedman & Moore, Whitefish, for respondent.

HASWELL, Justice.

This is a declaratory judgment action involving a teacher's professional liability insurance policy and a second insurance policy issued to the same defendant, Virgil Fisher, denominated 'a Farmer's Comprehensive Personal Liability Hazard Policy'.

The district court, sitting without a jury, refused to enter a declaratory judgment releasing the two insurance companies from the duty to defend the insured in a suit for personal damages in Flathead County Cause No. 23116. From this order, both insurers appeal.

An action was filed in the district court of Flathead County by Richard O. Poeppel against Virgil Fisher, seeking damages allegedly resulting from an altercation between the parties on April 20, 1972, in the Central School in Whitefish, Montana.

Poeppel, a school teacher, alleged that he had been attacked by Fisher, also a teacher, and struck by him. The incident arose during regular school hours. Poeppel had physically ejected one of his students from his classroom into the hallway. Fisher observed the actions of Poeppel and the student, and reported them to the assistant principal. Fisher then returned to the vicinity of poeppel and the disciplined student at which time the altercation occurred during which Fisher struck Poeppel.

Fisher tendered the defense of that action to appellant Reliance Insurance Company which had issued a policy denominated 'a Farmer's Comprehensive Personal Liability Hazard Policy' to Fisher, which policy was in effect at the time of the altercation. Although Reliance caused an initial appearance to be made on behalf of Fisher in that action in order to prevent a default, it declined to accept either the duty to defend or responsibility for any judgment which might be obtained against Fisher in that action. A stipulation was entered into staying further proceedings in that action until the matter of such insurance coverage could be resolved.

On August 28, 1972, Reliance commenced this action for a declaratory judgment in the district court of Flathead County, naming as defendants its insured, Virgil Fisher; Richard O. Poeppel; and Horace Mann Insurance Company, a company that had issued a policy providing professional liability insurance coverage for teachers of the Whitefish school system.

The action sought a judgment declaring, among other things, that Reliance had no obligation under its policy to defend the Poeppel action or to pay any damages that might be awarded therein.

Through answers filed by Horace Mann it was admitted that on April 20, 1972, there was in effect between said insurance company and the Montana Education Association (MEA) a policy of liability insurance denominated as an 'Educator's Professional Liability Policy.' As members of the MEA, both Fisher and Poeppel were insured parties under the Horace Mann policy. As a defense to its alleged duty to defend, Horace Mann contends that its insurance contract is expressly inapplicable by reason of special exclusions contained in said policy.

The case was argued orally before the district court on May 22, 1973. Subsequently written briefs were filed and the district court issued its order refusing 'to render or enter a Declaratory Judgment or Decree for the reason that such a Judgment or Decree would not terminate the uncertainty or controversy giving rise to the proceedings.'

From this order and denial of a motion for new trial or order to amend judgment, both insurers appeal.

The single controlling issue upon appeal is whether the insurers, Reliance and Horace Mann, are under an obligation to defend Fisher in the lawsuit filed against him by Poeppel or required to indemnity Fisher for any losses sustained as a result of the Poeppel lawsuit.

The gist of respondent Fisher's argument is that his actions giving rise to the altercation and subsequent lawsuit come within the Reliance policy coverage as 'activities therein which are ordinarily incident to non-business pursuits.' Fisher also argues that his action stems from an apparent need to defend himself.

The district court's reasons for refusing to determine the obligations of Horace Mann with regard to said Cause No. 23116 are set forth in a memo following that court's order denying a motion for new trial, or in the alternative, for the court to amend its order of July 5, 1973. Said memo reads in part:

'Defendant Horace Mann puts the most reliance upon exclusion j, 'to liability and respective claims brought by teachers or other employees of a school system against the insured, * * *'. Defendant Horace Mann intends (sic) that if the claimant were a teacher at the time of the occurrence giving rise to the claim, irrespective of the conduct of the teacher at that time, this policy does not apply. This exclusionary clause, given literal interpretation, would exclude any claimants who were teachers or school employees of any school system at any time, and that simply cannot be the intent of the policy. Thus in determining what the intent of this policy is, it is incomprehensible that the mere lable (sic) of 'teacher' is sufficient to cause this policy not to apply. Thus, if the conduct of the claimant 'teacher' far exceeds the scope of his professional employment so as to be totally unrelated to his occupation, how can it be contemplated that this type of conduct would be excluded from the policy?'

The thrust of both insurers' positions in the instant case is that their duty to defend is limited to claims against the insured within the coverage of the policy. Reliance argues that its policy issued to Fisher is denominated a 'Farm Owner's Policy' on its face and cover sheet and said policy primarily covers farming operation.

Fisher owned and operated a farm, but also was a school teacher in Whitefish. Reliance contends that by reason of certain exclusions enumerated in the policy it is not liable for Fisher's actions while engaged in business pursuit outside of farming-namely, that of teaching.

The Reliance insuring agreement, section II, contains the following pertinent provisions:

'1. Coverage G-Farmers Comprehensive Personal Liability: (a) Liability: To pay on behalf of the insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage and the Company shall defend any suit against the Insured alleging such bodily injury or property damage and seeking damages which are payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the Company may make such investigation and settlement of any claim or suit as it deems expedient. * * *

'2. Coverage H-Personal Medical Payments: To pay all reasonable expenses incurred within one year from the date of accident for necessary...