Rochdale Ins. Co. v. Dlxon
| Decision Date | 09 June 2020 |
| Docket Number | CV 19-68-M-DWM |
| Parties | ROCHDALE INSURANCE COMPANY, Plaintiff, v. SKYLAR DLXON and FELDER & COMPANY, LLC, dba STILLWATER FISH HOUSE, Defendants. |
| Court | U.S. District Court — District of Montana |
This coverage dispute arises out of a car accident that occurred after an employee completed his shift at a restaurant and was on his way home. The parties have filed cross-motions for summary judgment on the question of whether the employee's injuries arose out of and in the course of his employment. (Docs. 22, 27.) Because they did not, summary judgment is granted in favor of the plaintiff.
BACKGROUND1
On August 20, 2014, 15-year-old Skylar Dixon was employed by Felder & Co. as a dishwasher and prep cook at Stillwater Fish House, its restaurant inWhitefish, Montana. (Doc. 21 at ¶ 3(h); Doc. 23-2 at 3; Doc. 28 at ¶ 5.) That day, he began his shift at 4:00 p.m. and clocked out around 12:50 a.m. (Doc. 21 at ¶ 3(i), (j).) He then accepted a ride home from his co-worker and friend, Noah Gillund. (Id. at ¶ 3(k), (l), (o); Doc. 28-1 at 41.) On the way, Gillund lost control of the vehicle, resulting in a single-car roll-over accident. (Doc. 21 at ¶ 3(o); Doc. 28-1 at 73, 75.) The accident took place around 1:15 a.m. approximately 4 miles north of the restaurant on Highway 93. (See Doc. 28-1 at 73; Doc. 28 at ¶¶ 18, 19; Doc. 23-4 at 3.) Dixon was injured, (Doc. 21 at ¶ 3(o)), and ultimately lost his left leg, (see Doc. 28-2 at 21). He unsuccessfully submitted a workers' compensation claim to Rochdale Insurance Company. (Doc. 21 at ¶ 3(p).) On August 24, 2015, the Montana Department of Labor and Industry Employment Rights Division ("the Department") held a mediation. (Id. at ¶ 3(q).) The Department agreed with Rochdale, (id.), and Dixon did not petition the Workers' Compensation Court for further review of the denial, (id. at ¶ 3(r)).
On August 30, 2017, Dixon filed suit against Felder & Co., alleging claims of negligence and negligence per se and requesting declaratory judgment (the "Underlying Lawsuit"). (Doc. 13-1; Doc. 21 at ¶ 3(d).) Felder & Co. tendered the Underlying Lawsuit to its general liability insurer, American Hallmark Insurance Company of Texas ("American Hallmark"). (See Doc. 28-2 at 1.) AmericanHallmark defended Felder & Co. subject to a reservation of rights.2 (See generally id.) Dixon filed his First Amended Complaint in the Underlying Lawsuit on June 21, 2019, alleging a single count of negligence. (Doc. 13-2; Doc. 23-1.) He alleges that his injuries were caused by his and Gillund's unreasonably long and late work hours. (See id.)
Rochdale issued Felder & Co. a Workers Compensation and Employers Liability Policy (No. RWC3318979) effective March 21, 2014 to March 21, 2015 (the "Policy"). (Doc 21 at ¶ 3(t); Doc. 13-3.) The Policy includes coverage for bodily injury that arises out of and in the course of an injured employee's employment, subject to certain exclusions. (Doc. 13-3 at 9-10.) On April 17, 2019, Rochdale filed this action, seeking a determination that Dixon was not in the course of his employment at the time of the accident (Count One) and that two exclusions bar coverage (Counts Two and Three). (Docs. 1, 13.) In its present motion, Rochdale seeks summary judgment on Count One and a declaration that itdoes not have a duty to defend or indemnify Felder & Co in the Underlying Lawsuit. (Doc. 22.) Dixon filed a cross-motion for summary judgment, (Doc. 27), and Felder & Co. filed a notice taking no position on the motions, (Doc. 30).
LEGAL STANDARD
Summary judgment is appropriate when "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). Facts are material if they have the potential to affect the outcome of the case and there is sufficient evidence for a jury to return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). On cross-motions for summary judgment, it is the court's "independent duty to review each cross-motion and its supporting evidence . . . to determine whether that evidence demonstrates a genuine issue of material fact." Fair Housing Council of Riverside Cty., Inc. v. Riverside Two, 249 F.3d 1132, 1137 (9th Cir. 2001). Each motion is therefore evaluated separately, "giving the nonmoving party in each instance the benefit of all reasonable inferences." Lenz v. Universal Music Corp., 815 F.3d 1145, 1150 (9th Cir. 2016).
ANALYSIS
As the forum state, Montana law applies in this diversity action. Med. Lab. Mgmt. Consult. v. Am. Broad. Cos., Inc., 306 F.3d 806, 812 (9th Cir. 2002). "Theduty to defend arises when a complaint against an insured alleges facts which, if proved, would result in coverage." Tidyman's Mgmt. Servs. Inc. v. Davis, 330 P.3d 1139, 1149 (Mont. 2014). "It is independent from and broader than the duty to indemnify created by the same insurance contract." Id. (internal quotation marks omitted). "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." Farmers Union Mut. Ins. Co. v. Staples, 90 P.3d 381, 385 (Mont. 2004). The duty to indemnify, on the other hand, "arises only if coverage under the policy is actually established." St. Farm Mut. Auto. Ins. Co. v. Freyer, 312 P.3d 403, 410-11 (Mont. 2013). Ordinarily, if there is "no duty to defend, it follows that there can be no duty to indemnify." Skinner v. Allstate Ins. Co., 127 P.3d 359, 364 (Mont. 2005) (); but see Troutt v. Colo. W. Ins. Co., 246 F.3d 1150 (9th Cir. 2001).
"The interpretation of an insurance contract is a question of law." United Nat'l Ins. Co. v. St. Paul Fire & Marine Ins. Co., 214 P.3d 1260, 1265 (Mont. 2009). "[W]hen the language of a policy is clear and explicit, the policy should be enforced as written." Id. Giving the words of a contract their ordinary meaning, insurance policies are strictly construed against the insurer in favor of the insured. Travelers Cas. & Sur. Co v. Ribi Immunochem Research, Inc., 108 P.3d 469, 474 (Mont. 2005). Ambiguity exists, when taken as a whole, an insurance contract isreasonably subject to two different interpretations. Id. Ambiguous contract language is interpreted to provide coverage. Id.
The Policy includes two interrelated types of insurance coverage for an employer when an employee is injured on the job: Part One - Workers Compensation Insurance and Part Two - Employers Liability Insurance. The Workers Compensation section only provides coverage for a work-related accident that falls under an employer's statutory obligation to pay workers' compensation benefits. (See Doc. 13-3 at 8.) Dixon did not petition for review of the Department's denial of his workers' compensation claim. (Doc. 21 at ¶ 3(r).) Thus, Dixon agrees that the Workers Compensation section of the Policy does not apply. (See Doc. 29 at 6, 15.) Consequently, for coverage to exist, Dixon's claim must fall within the Employers Liability section of the Policy. Pursuant to that section, there is coverage for "bodily injury by accident," but the injury "must arise out of and in the course of the injured employee's employment." (Doc. 13-3 at 9.) Dixon challenges Rochdale's denial of coverage on the grounds that the Policy is ambiguous and violates Montana's public policy.
Dixon first argues that the terms "arising out of" and "course of employment" are ambiguous and therefore must be construed in favor of coverage.In response, Rochdale argues that the policy language unambiguously requires an injury to be related to an employee's job duties. Rochdale has the better argument.
As a threshold issue, the parties dispute whether the Court should consider legal authority interpreting the "arising out of and in the course of employment" language contained in Montana's Workers' Compensation Act, Mont. Code Ann. § 39-71-407. Dixon's primary argument on this front, however, is his mistaken belief that the relevant workers' compensation law mandates "course and scope" language. (Doc. 29 at 13-15.) To the contrary, the Workers' Compensation Act language is consistent with the language in Rochdale's Policy. In his reply, Dixon pivots and argues that Montana caselaw addressing "arising out of" in the insurance context is more applicable than caselaw addressing "arising out of and in the course of employment" in the workers' compensation context. (See Doc. 37 at 8.) While this Court is bound to apply interpretational guidelines imposed by the Montana Supreme Court, this does not preclude considering judicial interpretation of identical language in the workers' compensation arena. See, e.g., Troutt, 246 F.3d at 1160 ().
Dixon first argues that "arising out of" is always ambiguous in the insurancecontext and therefore must be construed in favor of coverage here. See Troutt, 246 F.3d at 1160; Pablo v. Moore, 995 P.2d 460, 462-63 (Mont. 2000). Rochdale, on the other hand, argues that the only reasonable reading of "arising out of" in this context is to have "some reasonable connection with," which is consistent with its definition under the Workers' Compensation Act. See Pinyerd v. St. Comp. Ins. Fund, 894 P.2d 932, 935 (Mont. 1995). Rochdale has the better argument. While both Troutt and Pablo recognized the inherent ambiguity of the term "arising out of," the court in Troutt adopted Pinyerd's "reasonable connection" definition. See 246 F.3d at 1160. In order for the term to be ambiguous, Dixon must show it is subject to another reasonable interpretation. He has not done so, primarily because it is...
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