Mountain West Farm Bureau Mutual Insurance Company v. Tutvedt et al
Filing
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ORDER granting 22 Motion for Summary Judgment. Signed by Judge Donald W. Molloy on 1/27/2012. (dle)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
MOUNTAIN WEST FARM BUREAU
)
MUTUAL INSURANCE COMPANY INC.,)
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Plaintiff,
)
)
vs.
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BRUCE and HAROLD TUTVEDT,
)
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Defendants.
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___________________________________ )
CV 11-44-M-DWM
ORDER
Plaintiff Mountain West Farm Bureau Mutual Insurance Company, Inc.
("Mountain West") seeks summary judgment in this insurance dispute. It asks for
a declaration that it owes no duties under Policy Number CQM11243 ("the
Policy") to defend or to indemnify Defendants ("the Tutvedts") against claims
made in Cloy Hartung v. Bruce P. and Linda Tutvedt, et al., DV 10-765A,
Eleventh Judicial District, Flathead County, Montana. For the reasons set forth
below, Mountain West is entitled to summary judgment.
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I. Statement of Facts
The parties disagree about whether the Policy in question covers injuries to
the Tutvedts’ employee, Cloy Hartung, that he suffered while in the course of his
employment on the Tutvedts’ farm in Montana. In the underlying case, Hartung
alleges he was attempting to unclog an auger pipe when Bruce Tutvedt
“reenergized” the auger, causing the amputation of Hartung’s right hand and wrist.
Hartung filed tort claims against the Tutvedts in state court, claiming they are not
protected from further liability despite workers’ compensation exclusivity and also
that Montana’s workers’ compensation exclusivity is unconstitutional.
Mountain West and the Tutvedts agree that Hartung was the Tutvedts’
employee, that he suffered bodily injury in the course of his employment, and that
he received workers’ compensation benefits. They disagree about whether the
Policy covers his injury. Mountain West argues Hartung’s injury is not covered
because the Policy excludes 1) coverage for bodily injury to a person receiving
workers’ compensation benefits and 2) coverage for bodily injury to employees.
The Tutvedts respond that the Policy provides coverage for bodily injury to
an employee covered by workers’ compensation based on the language of
Exclusion 14 of the umbrella coverage section of the Policy. Exclusion 14
excludes coverage for:
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Bodily injury to:
a. Any of “your” employees unless such liability is covered by valid
and collectible employer’s liability insurance as described in the
schedule of “underlying insurance” and then only to the extent that
coverage is available under that policy.
(Emphasis added.)
The Tutvedts contend that “employer’s liability insurance” includes workers’
compensation coverage. Alternatively, they argue that Exclusion 14 and other
exclusions in the policy that explicitly deny coverage for bodily injury to
employees covered by workers’ compensation are contradictory and the Policy is
therefore ambiguous. Other relevant policy language is discussed below.
II. Analysis
A party is entitled to summary judgment if it can demonstrate “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). Where the documentary evidence
produced by the parties permits only one conclusion, summary judgment is
appropriate. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 251 (1986). Because
this action was brought under diversity jurisdiction, the substantive law of
Montana as the forum state applies. Stanford Ranch, Inc. v. Maryland Cas. Co.,
89 F.3d 618, 624 (9th Cir. 1996).
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The interpretation of an insurance policy is a question of law. Steadele v.
Colony Ins. Co., 260 P.3d 145 (Mont. 2011)(citations omitted). General rules of
contract law apply. Id. “Insurance policies are construed strictly against the
insurer,” id. (citation omitted), and exclusions from coverage are narrowly
construed. Farmers Union Mut. Ins. Co. v. Staples, 90 P.3d 381, 385 (Mont.
2004)(citation omitted). However, an insurer has no duty to defend if there is an
‘unequivocal demonstration” that the claim does not fall within the policy’s
coverage. Id. If there is no duty to defend, generally neither is there a duty to
indemnify, because the duty to defend is a broader duty “aris[ing] where the
alleged facts even potentially fall within the scope of coverage.” Skinner v.
Allstate Ins. Co., 127 P.3d 359, 363–64 (Mont. 2005).
Ambiguous provisions of an insurance policy are also construed against the
insurer. Giacomelli v. Scottsdale Ins. Co., 221 P.3d 666, 672 (Mont.
2009)(citation omitted). “An ambiguity exists where the insurance contract, taken
as a whole, is reasonably subject to two different interpretations.” Steadele, 260
P.3d at 148–149. But Courts will not “‘seize upon certain and definite covenants
expressed in plain English with violent hands, and distort them so as to include a
risk clearly excluded by the insurance contract.’” Travelers Cas. and Sur. Co. v.
Ribi Immunochem Research, Inc., 108 P.3d 469, 474 (Mont. 2005)(quoting
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Mitchell v. German Commercial Accident Co., 161 S.W. 362, 363 (Mo. App.
1913)); see also Giacomelli, 221 P.3d at 672.
Two sections of the Tutvedts’ Policy are relevant here: Section II, titled
“Farm Liability Coverages,” dkt # 23-1, 4–8, and Section V, the umbrella section,
titled “Personal and/or Farm and Ranch Umbrella,” id. at 9–17.
A. Workers’ compensation exclusions
Both Section II and Section V of the Policy contain exclusions for bodily
injury to a person receiving workers’ compensation benefits. Section II excludes
coverage for:
24. Bodily injury to any person eligible to receive any benefits required
to be provided or voluntarily provided by any insured under any
workers’ compensation, nonoccupational disease, disability or
occupation disease law.
Id. at 7 (bold in original). Section V states that Mountain West does “not cover
damages for ‘bodily injury’...either actual or alleged arising out of any of the
following,” id. at 10, including:
33. Workers’ Compensation & Similar Laws. “Bodily injury” to any
person eligible to receive any benefits required to be provided or
voluntarily provided by any “insured” under any Workers’
Compensation, disability or occupational disease law whether or not
collectible.
Id. at 12.
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Exclusion 24 of Section II and Exclusion 33 of Section V unequivocally
exclude coverage in this case. Hartung suffered a bodily injury. He was eligible
to receive, and did in fact receive, benefits provided by the insured—the
Tutvedts—under workers’ compensation. Accordingly, both exclusions preclude
coverage for Hartung’s injury.
B. Exclusions for bodily injury to employees
Both sections of the Policy also contain exclusions for bodily injury to
employees.
Exclusion 28 of Section II excludes coverage for “bodily injury sustained by
any farm employee arising out of employment.” Id. at 8. “Farm employee” is
defined as “someone employed by you whose duties are in connection with the
maintenance or use of the insured location as a farm.” Id. at 2. “Farming”
includes the “ownership, maintenance or use of the premises for the production of
crops or the raising or care of livestock including all necessary operations
pertaining thereto.” Id.
The parties agree that Hartung is a farm employee or “ranch hand” who
sustained a bodily injury in the scope of his employment. Thus, Exclusion 28 of
Section II unequivocally precludes coverage under the Farm Liability portion of
the Policy.
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Similarly, Section V of the Policy excludes coverage for:
14. Employee Injury. Bodily injury to:
a. Any of “your” employees unless such liability is covered
by valid and collectible employer’s liability insurance as
described in the schedule of “underlying insurance” and
then only to the extent that coverage is available under that
policy.
b. spouse, child, brother, sister or parent of that employee
as a result of a above.
Id. at 10 (emphasis added). Unless the underlined exception applies, this
exclusion unequivocally precludes coverage for bodily injury to Hartung, the
Tutvedts’ employee.
C. The exception to Exclusion 14 of Section V does not encompass the
Tutvedts’ workers compensation
The Tutvedts argue that the exception to Exclusion 14 of Section V,
underlined above, provides coverage for Hartung’s injuries. First they contend
that because the Policy does not define “employer’s liability insurance” and no
section of the Policy is designated as employer’s liability insurance, “employer’s
liability insurance” must refer to workers’ compensation coverage. However, the
exception in Exclusion 14 of Section V does not apply here and the Tutvedts’
proposed reading is strained.
Regardless of whether “employer’s liability insurance” encompasses
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workers’ compensation coverage, the Tutvedts do not fit the exception. The
exception’s plain language requires that the insured’s employer’s liability
insurance be “described in the schedule of underlying insurance.” Id. The
Tutvedts’ “Schedule of ‘Underlying Insurance’” is included in the “Additional
Policy Declarations” for Section V of the Policy. Dkt # 27-1, 6. The schedule
lists “personal liability,” “‘farm’ and ranch liability,” “‘auto’ liability,” “business
liability,” “‘recreational motor vehicle’ liability,” and “‘watercraft’ liability”
coverage. Id. It does not list employer’s liability insurance or workers’
compensation. Id. Thus, the exception does not apply to the Tutvedts, and
Exclusion 14 precludes coverage for their employee’s bodily injury.
Moreover, reading “employer’s liability insurance” to include workers’
compensation is too clever by half. As noted by the California Supreme Court,
employer’s liability insurance and workers’ compensation are
“generally....mutually exclusive.” Producers Dairy Delivery Co. v. Sentry Ins.
Co., 718 P.2d 920, 927 (Cal. 1986)(“[E]mployers’ liability insurance is
traditionally written in conjunction with workers’ compensation policies, and is
intended to serve as a ‘gap-filler,’ providing protection to the employer in those
situations where the employee has a right to bring a tort action despite the
provisions of the workers’ compensation statute or the employee is not subject to
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the workers’ compensation law”)(citing John Alan Appleman, Insurance Law and
Practice vol. 7B, § 4571, 1–4 (Walter F. Berdal ed., rev. ed. 1979)).
The Policy’s use of these terms also indicates they are mutually exclusive.
Where the Policy refers to workers’ compensation coverage, it uses the term
“workers’ compensation.” See Exclusion 24, § II, and Exclusion 33, § V, supra at
6. And though the Policy does not define “employer’s liability insurance,” some
customers may opt to procure the Policy’s “Employer’s Liability” coverage,
Coverage H of Section II. Dkt # 23-1, 4. The Tutvedts’ Policy does not include
Coverage H, which is only available in Wyoming. Id. This is confirmed by the
list of liability coverages they purchased. Dkt # 27-1, 4–5. However, the Policy
distinguishes “Employer’s Liability” coverage from workers’ compensation; the
Policy would not permit coverage under Coverage H if workers’ compensation
applied because Exclusion 24 of Section II applies to all the coverage options
available under Section II. When interpreting an insurance policy, [courts] read
the policy as a whole and, if possible, ...reconcile its various parts to give each one
meaning and effect. Newbury v. State Farm Fire & Cas. Ins. Co. of Bloomington,
Ill., 184 P.3d 1021, 1024 (Mont. 2008). The Policy’s use of the term “Employer’s
Liability” to describe a type of coverage distinct from workers’ compensation
suggests that the term “employer’s liability insurance” in Exclusion 14 of Section
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V also does not encompass workers’ compensation.
Even if “employer’s liability insurance” encompassed workers’
compensation, the Tutvedts do not meet the requirements to fit the exception. No
employer’s liability insurance or workers’ compensation are listed in their
schedule of underlying insurance. Furthermore, the two types of coverage are
generally mutually exclusive, and the Policy itself uses “workers’ compensation”
to refer to workers’ compensation coverage and “Employer’s Liability” coverage
to refer to a different type of coverage option that is distinct from workers’
compensation.
Because the exception does not apply, Exclusion 14 of Section V precludes
coverage for “bodily injury...to any of [the Tutvedts’] employees,” including
Hartung.
C. Because the exception does not apply, it is unnecessary to decide whether
the provisions are inconsistent.
Exclusions 24 and 28 of Section II preclude coverage under the liability
section of the Policy because Hartung, a farm employee of the Tutvedts acting in
the scope of his employment, suffered a bodily injury that was covered under
workers’ compensation. Exclusions 14 and 33 of Section V preclude coverage
under the umbrella section of the Policy for the same reasons. Since the exception
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to Exclusion 14 does not apply, the Policy precludes coverage. It is not necessary
to reach the question of whether the Policy would be ambiguous if the exception
applied. In deciding a coverage question the Court will not “create an ambiguity
in an insurance policy where none exists.” Newbury, 184 P.3d at 1025.
Accordingly, the provisions are not contradictory and the Policy is not ambiguous.
III. Conclusion
Four exclusions in the Tutvedts’ Policy apply here and preclude coverage of
Hartung’s injuries. The Tutvedts do not qualify for the exception to Exclusion 14
of Section V because their schedule of underlying insurance does not list any
employer’s liability insurance. Interpreting “employer’s liability insurance” to
include workers’ compensation would distort the language of the policy and read
the exception in a vacuum, without considering the rest of the Policy. The
exclusions are not contradictory and the Policy is not ambiguous.
Therefore IT IS ORDERED that Plaintiff’s Motion for Summary Judgment
(dkt # 22) is GRANTED.
The Clerk is directed to enter judgment in favor of Plaintiff and against
Defendant in accordance with this Order.
The Clerk is directed to notify the parties of the entry of Final Judgment in
this case.
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Dated this 27th day of January, 2012.
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