Northland Casualty Company v. Mulroy et al
Filing
106
ORDER granting 66 Motion for Summary Judgment; granting 75 Motion for Summary Judgment; denying 90 Motion for Reconsideration; denying as moot 95 Motion to Stay; denying as moot 97 Motion in Limine. The Clerk of Court shall enter judgment in favor of Plaintiff Northland Casualty Company and Third-Party Defendant Glacier Insurance of Libby, Inc., and shall CLOSE this case. Signed by Judge Dana L. Christensen on 8/9/2016. (ASG, )
FILED
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
NORTHLAND CASUALTY
COMPANY, a Connecticut Corporation,
Plaintiff and
Counter-Defendant,
AUG 09 2016
Clerk, U S Distrid Court
District Of Montana
Missoula
CV 13-232-M-DLC
ORDER
vs.
JOSEPH S. MULROY DBA YORLUM
RANCH AND YORLUM RANCH LTD,
NORTHWEST LOG HOMES LLC, and
DUANE KEIM,
Defendants,
JOSEPH S. MULROY,
Counterclaimant and
Third-Party Plaintiff,
vs.
GLACIER INSURANCE OF LIBBY,
INC., a Montana Corporation,
Third-Party Defendant.
Before the Court are the following motions in this insurance coverage case:
(1) Defendant Joseph S. Mulroy's ("Mulroy") motion to reconsider, pursuant to
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Rules 59 and 60 of the Federal Rules of Civil Procedure, the Court's order
granting PlaintiffNorthland Casualty Company's ("Northland") motion for
summary judgment regarding coverage; (2) Northland's second motion for
summary judgment regarding Mulroy's counterclaims; and (3) Third-Party
Defendant Glacier Insurance of Libby, Inc.'s ("Glacier") second motion for
summary judgment regarding Mulroy's contract and individual-capacity tort
claims. For the reasons explained below, Mulroy's motion is denied and
Northland's and Glacier's motions are granted.
Having recited the facts of this case on numerous occasions in prior orders,
the Court will proceed straight to its analysis of the pending motions.
LEGAL STANDARDS
I.
Motion for reconsideration
Post-judgment motions for reconsideration, to the extent they are properly
labeled as such, are governed by Rules 59(e) and 60(b) of the Federal Rules of
Civil Procedure. "A district court may grant a Rule 59(e) motion if it is presented
with newly discovered evidence, committed clear error, or if there is an
intervening change in the controlling law." Wood v. Ryan, 759 F.3d 1117, 1121
(9th Cir. 2014) (citations and internal quotation marks omitted). "Clear error
exists when ... [a] court is left with the definite and firm conviction that a mistake
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has been made." Jn re Adamson Apparel, Inc., 785 F.3d 1285, 1291 (9th Cir.
2015) (citations omitted). "[A] Rule 59(e) motion is an extraordinary remedy, to
be used sparingly in the interests of finality and conservation of judicial
resources." Id. (citations and internal quotation marks omitted).
"Rule 60(b) allows a party to seek relief from a final judgment, and request
reopening of his case, under a limited set of circumstances," which include the
interests of justice. Gonzalez v. Crosby, 545 U.S. 524, 528 (2005). "Relief under
Rule 60(b )( 6) will not be granted unless the moving party is able to show both
injury and circumstances beyond its control prevented timely action to protect its
interest." Gardner v. Martino, 563 F.3d 981, 991 (9th Cir. 2009). The rule
represents "an exception to finality," Gonzalez, 545 U.S. at 529, and "was not
intended ... to afford a substitute for appeal." Twentieth Century Fox Film Corp.
v. Dunnahoo, 637 F.2d 1338, 1341-1342 (9th Cir. 1981) (quoting Title v. United
States, 263 F.2d 28, 31 (9th Cir. 1959)).
Pre-judgment motions for reconsideration, however, are governed by Rule
7.3 of the District of Montana Local Civil Rules. Rule 7.3(a) requires the movant
to seek leave of the Court before filing the motion. Rule 7.3(b)(2) provides that
the motion for leave may assert, as grounds for filing the motion for
reconsideration, that "new material facts emerged or a change of law occurred
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after entry of the order."
II.
Motion for summary judgment
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). Summary judgment is warranted where
the documentary evidence produced by the _parties permits only one conclusion.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). Only disputes over
facts that might affect the outcome of the lawsuit will preclude entry of summary
judgment; factual disputes that are irrelevant or unnecessary to the outcome are
not considered. Id. at 248. In ruling on a motion for summary judgment, a court
must view the evidence "in the light most favorable to the opposing part." Tolan
v. Cotton, 134 S. Ct. 1861, 1866 (2014) (quoting Adickes v. S.H Kress & Co., 398
U.S. 144, 157 (1970)). "[T]he evidence of the nonmovant is to be believed, and
all justifiable inferences are to be drawn in his favor." Id. at 1863 (quoting
Anderson, 477 U.S. at 255).
ANALYSIS
A federal court sitting in diversity applies the substantive law of the forum
state to state law claims. Mason & Dixon lntermodal, Inc. v. Lapmaster Intern.
LLC, 632 F.3d 1056, 1060 (9th Cir. 2011). Therefore, as in previous orders in this
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case, the Court decides these motions pursuant to Montana law.
I.
Mulroy's motion for reconsideration
Mulroy contends that the Court's July 21, 2015 order finding no coverage
for the damage to Mulroy's log home, and Defendants Duane Keim's ("Keim")
and Northwest Log Homes' ("Northwest") actions in constructing that home, has
been rendered erroneous by the Montana Supreme Court's April 19, 2016 decision
in Employers Mutual Casualty Company v. Fisher Builders, Inc., 371P.3d375
(Mont. 2016) [hereinafter, Employers MutualJ. Mulroy claims that as a result of
Employers Mutual, "it [is] legally irrelevant whether or not the failure of[] Keim
or Northwest ... to chemically treat logs was itself a volitional act or intentional
business choice"-a conclusion which formed the basis for the Court's conclusion
that there was no "occurrence" in this case. (Doc. 92 at 8.) Northland counters 1
that while Employers Mutual clarified the law with respect to whether particular
circumstances constitute an "occurrence," nevertheless there was no "occurrence"
1
Northland also correctly points out that Mulroy's motion is procedurally improper
because it fails to comply with Local Rule 7.3, to which Mulroy replies that enforcing the Local
Rules in this instance "would be the proverbial elevation of form over substance." (Doc. 99 at
3.) While the Court rejects Northland's procedural argument here, it is not, as Mulroy seems to
suggest, because the Local Rules represent some inflexible, trivial set of requirements which a
litigant can ignore on a whim. On the contrary, Rule 7 .3 provides ample ground to deny
Mulroy's motion for reconsideration, regardless of how firmly he is convinced that Employers
Mutual resets the table in this case. Instead, the Court reaches the substance ofMulroy's motion
simply for the sake of expediency.
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when Keim built Mulroy a log home with beetle-infested logs. Moreover,
Northland claims that multiple policy exclusions not expressly considered by the
Court in the July 2015 order preclude coverage here2 • The Court agrees with
Northland and denies Mulroy's motion to reconsider the coverage question.
In its July 2015 order, the Court concluded that the facts established in the
underlying action did not trigger coverage under the commercial general liability
("CGL") insurance policy issued by Northland to Keim and Northwest. Citing
Blair v. Mid-Continent Casualty Company, 339 Mont. 8, 12 (Mont. 2007), and
Landa v. Assurance Company ofAmerica, 307 P.3d 284, 289 (Mont. 2013), the
Court indicated that an "occurrence" under the CGL policy at issue cannot include
intentional acts on the part of the insured. The analysis, then, was straightforward:
because Keim and Northwest admitted liability to the counts in the underlying
complaint and to Mulroy's allegation that "[r]easonable and prudent standards in
the construction of log homes include the chemical treatment of logs for beetle
larvae and insects prior to installation" (Doc. 39-1 at 3), Keim's and Northwest's
"decision not to treat the logs ... [could not] reasonably be characterized as an
2
Similar to the Court's observation in the July 2015 order, though there is no need to
reach the applicability of policy exclusions even in light of Employers Mutual, coverage would
likely be precluded in this case by those exclusions in the CGL policy designed to prevent the
policy from serving as a warranty ofKeim's and Northwest's workmanship--i.e., the ''your
work" exclusion and similar provisions.
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'occurrence' under the policy, as it was a volitional act and business choice .... "
(Doc. 49 at 17.)
In Employers Mutual, the Montana Supreme Court ruled that "occurrence"
analyses focused exclusively on the intentionality of an insured's acts-akin to the
Court's analysis described above-are incomplete. 371 P.3d at 378-380. Similar
to the case at bar, the underlying action in Employers Mutual involved issues with
a construction project. The plaintiffs in the underlying action, the Slacks, hired
Defendant Fisher Builders to remodel their existing home on Flathead Lake. Id. at
376. The county planning department conditioned the building permit for the
project on the Slacks and Fisher Builders incorporating the existing structure into
the remodel and leaving the existing deck unchanged. Id. Once the project was
underway, Fisher Builders discovered a carpenter ant infestation in the existing
structure, and took steps to remove the affected lumber. Id. Ultimately, howeyer,
the deck collapsed and the county revoked the building permit. Id. The Slacks
then sued Fisher Builders for negligence and Fisher Builders tendered the claim to
its insurer, Employers Mutual Casualty Company ("EMC"), who defended Fisher
Builders under a reservation of rights. Id. at 376-377. Fisher Builders and the
Slacks settled, with Fisher Builders consenting to judgment and assigning its
rights under the EMC policy to the Slacks. Employers Mutual, 371 P.3d at 377.
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However, EMC then filed a declaratory action, alleging that there was no coverage
under the CGL policy in place because the Slacks' injuries were not the result of
an "occurrence," and the state court granted EMC's motion for summary judgment
in that regard. Id.
On appeal, EMC maintained its coverage position, arguing that Blair and
Landa precluded coverage because Fisher Builders intentionally removed the
infested boards from the existing structure, which resulted in collapse of the deck
and revocation of the building permit. Id. at 377-378. Fisher Builders and the
Slacks, citing Northwestern National Casualty Company v. Phalen, 597 P .2d 720
(1979), argued that there was an "occurrence" under the circumstances because,
though Fisher Builders' intentional acts triggered the Slacks injuries, Fisher
Builders neither expected nor intended the injuries at the time of those acts. Id.
The Montana Supreme Court agreed, holding that the proper inquiry for
determining whether acts constitute an "occurrence" is: "(1) whether the act itself
was intentional, and (2) if so, whether the consequence or resulting harm
stemming from the act was intended or expected from the actor's standpoint." Id.
at 3 78 (citing Phalen, 597 P .2d at 725). Because the district court failed to
consider this second prong of the analysis, the Montana Supreme Court reversed
and remanded. Id. at 381.
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Though Phalen provides that it is "the actor's standpoint" which dictates
whether a consequence was expected or intended, the Montana Supreme Court in
Employers Mutual made clear that "the second prong of the analysis ... is an
objective inquiry." 371 P.3d at 379. The rationale for this is obvious-few, if
any, insureds in cases such as these would acknowledge their subjective intent to
harm the parties injured by their actions. Thus, it is left to the courts "to determine
objectively what injuries could reasonably be expected to result from an
intentional act." Id.
Turning to the case at bar, the Court acknowledges that its previous
coverage analysis now appears incomplete. However, like the Employers Mutual
court's analysis of Blair and Landa, application of the two-step Phalen inquiry
does not change the result here. At the first step, it is undisputed that Keim's and
Northwest's decision not to treat the logs used in constructing Mulroy's home was
an intentional act. At the second step, regardless ofKeim's or his insurance
agent's personal experience in the log home building business, or whether there
has to-date been a finding or legal conclusion that Keim and Northwest violated
industry standards, the presence of wood-boring beetles in logs is a reasonably
expected result of the intentional act of purchasing standing dead timber. This is
especially true given that the logs came from a log broker in a region of North
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America suffering from a widespread and highly-publicized beetle epidemic,
albeit caused by a different type of beetle. Moreover, ifthe presence of the beetles
is an objectively, reasonably expected result, then surely the potential for those
insects to cause damage to the logs in which they burrow and reside is an
objectively, reasonably expected result.
Because Employers Mutual changes the coverage analysis in this case, but
does not result in coverage for Mulroy's injuries, his motion for reconsideration is
denied.
II.
Northland's second motion for summary judgment
Northland moves for summary judgment on Counts One through Six of
Mulroy's Second Amended Counterclaim, which include the following claims: (1)
breach of contract, (2) negligence, (3) negligent misrepresentation, (4)
constructive fraud, (5) fraudulent concealment, and (6) violations of Montana's
Unfair Trade Practices Act ("UTPA"), Montana Code Annotated§ 33-18-201.
(Doc. 63 at 8-15.) As will be explained, the Court grants Northland's motion with
respect to each count.
A.
Breach of contract claim
Mulroy contends that Northland breached its insurance contract with Keim
and Northwest by failing to: (1) "disclose material information regarding
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coverage"; (2) "provide a meaningful defense by failing to consider the interests of
its insured and settlement of the underlying action"; and (3) "indemnify its
insured." (Id. at 8-9.) The Court has already considered subparts two and three of
this claim-Northland satisfied its duty to defend and, because there was no
coverage for Mulroy's injuries, had no duty to settle or provide indemnification to
Keim and Northwest in the· underlying action. (Doc. 49 at 18.) As to the third
subpart, Mulroy fails to cite any provision in the insurance policy outlining
Northland's contractual duty to disclose material information regarding coverage3 •
Instead, as Northland aptly points out, Mulroy attempts to argue that his breach of
contract claim is in essence a placeholder for any number of contractual claims
that may or may not ultimately stick. While it is true that "[t]here are a number of
ways in which an insurer can breach its contract" (Doc. 82 at 19), Mulroy has
chosen three 4, had summary judgment entered on two of them, and fails to prove
3
The Court struggles to imagine what such a provision would even look like, given that
the text of the insurance policy itself consists entirely of "material information regarding
coverage."
4
The Court rejects Mulroy's contention that, pursuant to Rule 15(b) of the Federal Rules
of Civil Procedure, he should be permitted to argue a heretofore unasserted claim for breach of
the implied covenant of good faith and fair dealing, based on his expert witness's "inject[ion ofJ
the issue into this litigation." (Doc. 82 at 21.) When a party asserts issues outside of the
pleadings in opposition to a motion for summary judgment, courts in the Ninth Circuit should
construe the assertion as a motion to amend the pleadings out of time, pursuant to Rule 15(b).
Desertrain v. City of Los Angeles, 754 F.3d 1147, 1154 (9th Cir. 2014). Courts should, in turn,
review the motion pursuant to Rule 15(a), and should consider the following with respect to the
motion: "bad faith, undue delay, prejudice to the opposing party, futility of amendment, and
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the third. The Court grants Northland's motion with respect to Count One of
Mulroy' s Amended Counterclaim.
B.
Tort claims
Mulroy asserts claims against Northland, individually and as assignee of
Keim and Northwest, for negligence, negligent misrepresentation, constructive
fraud, and fraudulent concealment. The Court has ruled, with respect to similar
claims against Glacier, that personal injury tort claims are not assignable under
Montana law. (Doc. 69 at 8.) Thus, the Court grants Northland's motion for
summary judgment as to Mulroy's tort claims brought as assignee of Keim and
Northwest. This leaves Mulroy's individual-capacity tort claims.
1.
Negligence
As to his negligence claim, Mulroy contends that Northland owed him the
following duties under the law: ( 1) "a duty of reasonable care in the provision [of]
insurance necessary to meet the needs of its insureds and prospective insureds";
(2) "the duty to reasonably inquire about the coverage needs of the insureds and to
whether the plaintiff has previously amended the complaint." Id. (citing Johnson v. Buckley, 356
F.3d 1067, 1077 (9th Cir. 2004)). These five factors cut against granting Mulroy leave to
amend-there is no reasonable excuse for waiting two and a half years to assert a breach of the
covenant claim, and likewise no excuse for failing to assert the claim in two amended pleadings,
the latter of which Mulroy filed just two months before Northland's instant motion for summary
judgment. Moreover, considering the Court's rulings on Northland's duties to defend, settle, and
indemnify, adding a breach of the covenant claim is likely a futile amendment.
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insure the provision of necessary coverage"; and (3) "the duty of reasonable care
to properly train, supervise and direct the activity of its agents." (Doc. 63 at 10.)
He further argues that Northland breached those duties by failing to properly train
and supervise insurance agents selling its insurance policies, and by failing to
meet the coverage needs of its insureds. (Id.) Northland counters that ifthe above
duties were owed by anyone under the circumstances, Montana law provides that
they were owed by Glacier, the insurance agent. Northland is correct.
"It is well established that an insurance agent owes an absolute duty to
obtain the insurance coverage which an insured directs the agent to procure."
Monroe v. Cogswell Agency, 234 P.3d 79, 86 (Mont. 2010). While in the process
of evaluating a client's coverage needs and prospectively reviewing insurance
policies for the client, an independent insurance agent-one who, like Glacier,
"does not have an exclusive relationship with one particular insurer"-does not
represent the insurer. Id. at 88. Instead, the insurance agent "only becomes an
agent of the insurer ... after it has selected that insurer's specific policy" for the
client. Id.
Because Mulroy and Northland have no relationship whatsoever absent
Keim's and Northwest's assignment, and the Court has ruled that Keim's and
Northwest's tort claims were not assignable, it follows that Northland owed no
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duty directly to Mulroy with respect to Keim's and Northwest's insurance
purchasing and coverage. Nevertheless, the record also demonstrates that
Northland did not have a legal duty to provide Keim and Northwest any particular
coverage or inquire about their coverage needs, and in fact did not even
communicate with Keim and Northwest in any manner regarding coverage. At the
time Keim and Northwest purchased insurance from Glacier, and Glacier gathered
information regarding the type of coverage best suited for Keim and Northwest,
Glacier did not serve as Northland' s agent, and any of Glacier's statements or
representations could not be attributed to Northland through agency principles.
Likewise, Northland had no duty to train and supervise Glacier or its employees at
the time Glacier procured coverage for Keim and Northwest because Glacier was
not Northland's agent until after the procurement occurred. If any party owed
Keim and Northwest a duty with regard to provision of requested coverage, or to
properly train and supervise employees to that end, it was Glacier. Accordingly,
the Court grants Northland motion for summary judgment on Mulroy's negligence
claim.
2.
Negligent misrepresentation, constructive fraud, and
fraudulent concealment
Apart from disagreeing with the Court's previous determination that Keim
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and Northwest could not assign their tort claims to Mulroy, Mulroy does not
respond to Northland's motion for summary judgment regarding his individualcapacity negligent misrepresentation, constructive fraud, and fraudulent
concealment claims. The Court therefore considers Northland's motion on these
claims well-taken. However, on their merits, these claims are subject to summary
judgment in Northland's favor. Each tort requires proof of an untrue or
incomplete representation by the alleged tortfeasor. See, e.g., Deichl v. Savage,
216 P.3d 749, 753 (Mont. 2009) (negligent misrepresentation); Dewey v. Stringer,
325 P.3d 1236, 1240 (Mont. 2014) (constructive fraud); Durbin v. Ross, 916 P.2d
758, 762 (Mont. 1996) (fraudulent concealment). Nothing in the record suggests
that Northland made any representations, of any kind, to Keim and Northwest
prior to their purchase of the CGL policy. Certainly, then, Northland made no
representations to Mulroy. Ultimately, it appears that the only representations
made by Northland came after the beetle infestation became apparent in July 2011,
and took the form of true statements regarding whether Mulroy's losses were
covered. For these reasons, the Court grants Northland's motion for summary
judgment on the remainder ofMulroy's tort claims.
C.
UTPA claim
Mulroy, individually and as assignee of Keim and Northwest, asserts a
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three-pronged UTPA claim against Northland. He alleges that Northland: (1)
"misrepresented or omitted pertinent facts regarding the insurance policy and
coverage thereunder"; (2) "failed to conduct a reasonable investigation which
would have belied [Northland's] positions on defense and indemnity"; and (3)
"placed such unreasonable conditions on the provision of defense and indemnity
that they were tantamount to a failure to affirm or deny coverage within a
reasonable time." (Doc. 63 at 15; see Mont. Code Ann.§ 33-18-201(1), (4), (5).)
Because the Court has ruled that there was no coverage for Mulroy's injuries
under the CGL policy, and that Northland breached neither its duty to defend nor
its duty to indemnify, Mulroy's UTPA claim fails as a matter of Montana law. See
Mont. Code Ann.§ 33-18-242(5) ("An insurer may not be held liable under
[subsections (1), (4), and (5)] ifthe insurer had a reasonable basis in law or in fact
for contesting the claim"); Truck Ins. Exchange v. Waller, 828 P.2d 1384, 1388
(Mont. 1992); Steadele v. Colony Ins. Co., 260 P.3d 145, 150 (Mont. 2011)
("where an insurance policy excludes coverage, a third party's bad faith claim fails
as a matter of law"); Truck Ins. Exchange v. 0 'Mailia, 343 P .3d 1183, 1188
(Mont. 2015) (insured's first-party bad faith counterclaim was properly dismissed
in the absence of coverage, because the claim was "dependent on whether the
[insurer's] policy was applicable to the underlying claims"). The Court grants
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Northland's motion for summary judgment on Mulroy's UTPA claim.
III.
Glacier's second motion for summary judgment
On March 31, 2016, the Court granted in part Glacier's first motion for
summary judgment, finding that Keim and Northwest could not assign their
personal injury tort claims to Mulroy. After Glacier filed that motion, but prior to
the Court's ruling, Mulroy filed his Second Amended Third-Party Complaint,
wherein he asserted for the first time breach of contract and breach of the covenant
of good faith and fair dealing claims. Thus, currently pending against Glacier are
Mulroy' s individual-capacity negligence, negligent misrepresentation,
constructive fraud, and fraudulent concealment claims, as well as his contractrelated claims brought as assignee of Keim and Northwest. Glacier moves for
summary judgment on all of these remaining claims.
A.
Tort claims
The above discussion pertaining to Northland's motion for summary
judgment on Mulroy's tort claims is applicable to Glacier's motion as well. As to
Mulroy's negligence claim, it is clear that Glacier's duties with respect to
procurement of insurance coverage-some of which Mulroy articulates in his
third-party pleading-flowed to Keim and Northwest, as the clients, insureds, and
parties requesting insurance products. Monroe, 234 P.3d at 86. There is no basis
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in Montana law, however, for extending those duties to an insured's customers.
Indeed, to hold so would create an impossible requirement for insurance agents,
who would henceforth be responsible for informing anyone who hired the agents'
insurance clients of the details of those clients' coverage, and for estimating
whether a potential set of circumstances might fall within or outside of that
coverage. Thus, Mulroy' s negligence claim as assignee fails because it could not
be assigned, and his individual-capacity claim fails because Glacier did not owe
him the duties he alleges.
Mulroy's individual-capacity negligent misrepresentation, constructive
fraud, and fraudulent concealment claims also fail for reasons similar to those
discussed above. Just as there is no evidence of any misrepresentation on
Northland's part towards Keim, Northwest, or Mulroy, there is no evidence of any
misrepresentation on Glacier's part towards Mulroy. Glacier and Mulroy had
never communicated regarding Keim's and Northwest's CGL policy until they
first discussed the beetle infestation in July 2011, at which time Glacier insurance
agent Kevin Peck ("Peck") purportedly stated "he thought it was covered or that ..
. it should be covered." (Doc. 87-2 at 12.) This statement cannot be considered a
representation sufficient to trigger a fraud-based claim because it came after the
injury at issue, and thus could not have caused any detrimental reliance. Apart
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from Peck expressing his personal view about Mulroy's claim, there was no
communication, written or oral, true or false, between Mulroy and Glacier prior to
July 2011.
Mulroy attempts to gain a foothold specific to his negligent
misrepresentation claim by citing Peck's alleged statement to Keim in 2005 that
the Northland CGL policy would cover replacement of rotten logs in a structure.
(Doc. 78-1 at 10.) Glacier and Peck deny this statement, and Mulroy in turn
contends that it constitutes a material fact issue because he relied upon Keim's and
Northwest's assurance that they were adequately insured for the project. (Doc. 88
at 27.) However, even if Peck did make this statement, Keim and Northwest never
relayed it to Mulroy, nor did they ever discuss the full scope of the CGL policy or
whether certain factual circumstances would fall within coverage. Instead, the
record reflects that, in 2005, Keim and Northwest requested and received a general
liability policy from Northland through Peck, and in 2007, before hiring him to
build the main log home on his property, Mulroy simply asked Keim ifhe had
general liability insurance. The record simply does not support the conclusion that
Glacier affirmatively misrepresented or concealed information.
Based on the foregoing, the Court grants Glacier's motion for summary
judgment with respect to Mulroy's individual-capacity tort claims.
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B.
Contract claims
Glacier moves for summary judgment on Mulroy's breach of contract and
breach of the covenant of good faith and fair dealing claims, contending that both
claims actually sound in tort and therefore could not have been assigned to him
under Montana law. Mulroy counters that contract claims are assignable, that he
nevertheless would have an individual-capacity contract claim against Glacier as a
third-party beneficiary5, and that Montana law allows simultaneous contract and
tort claims for the breach of a professional services contract.
Mulroy's assigned contract rights and claims stem from what he describes
as "the agreement by Glacier to provide Keim and Northwest with insurance
services including advice, consultation, sale and renewal of appropriate
insurance." (Doc. 63 at 25.) The parties appear to agree that such an implied
agreement exists. (See Doc. 77 at 8-9.) With respect to his breach of contract
claims, Mulroy contends that implicit in the implied contract were Glacier's
"duties to properly evaluate the insurance needs of Keim and Northwest, to advise
Keim and Northwest regarding insurance needs and the availability of appropriate
5
Mulroy's Second Amended Third-party Complaint contains only assignment-based
contract claims and belies this individual-capacity theory of contract liability-not until his
response to the instant motion for summary judgment has Mulroy asserted a third-party
beneficiary theory. As it is not specifically pied, the Court will not consider this basis for
liability.
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insurance products, to properly assist in the procurement and renewal of the same,
and to accurately explain the coverage obtained and disclose material information
regarding the same." (Doc. 63 at 26.) Mulroy also contends that the implied
contract contained an implied covenant of good faith and fair dealing, and that
Glacier breached the covenant "by failing to provide accurate information and by
failing to observe reasonable commercial standards applicable to Glacier's
industry when it consulted with and advised Keim and Northwest regarding sale
and renewal of appropriate insurance." (Id. at 27.)
As the Court discussed in its March 31, 2016 order regarding Glacier's first
motion for summary judgment, when the core substance of a claim affects how
that claim will proceed in the courts, the Montana Supreme Court consistently and
under a wide range of circumstances looks to the gravamen of the claim. See, e.g.,
Erickson v. Croft, 760 P.2d 706 (Mont. 1988) (statutes of limitations); Tin Cup
Cnty. Water and/or Sewer Dist. v. Garden City Plumbing & Heating, Inc., 200
P.3d 60, 67 (Mont. 2008) ("The plaintiff may choose between a tort and contract
cause of action only where the substance of the complaint and the nature of the
action give them the right to choose. [The plaintiff], therefore, may pursue a
contract cause of action only if the gravamen of its complaint sounds in contract.
[The plaintiff] must point to the violation of a specific contractual provision in
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order for its complaint to sound in contract.") (citations omitted); Lay v. State
Dep't ofMilitary A.ff, Disaster & Emergency Servs. Div., 351P.3d672 (Mont.
2015) (looking to the gravamen of the complaint in determining whether the
Montana Human Rights Act provides an exclusive remedy).
Here, the duties purportedly assumed by Glacier through selling Keim and
Northwest an insurance policy are nearly exactly the same duties alleged by
Mulroy to have been breached in his negligence claim against Glacier. Mulroy
cannot point to any specific contractual provisions imposing these duties upon
Glacier, nor does he cite to any record evidence that the duties were contemplated
in the implied oral contract between Glacier, Keim, and Northwest. As a result,
the evidence before the Court compels the conclusion that Mulroy' s contract
claims are merely tort claims pied in the language of contract. The phrasing of the
claims supports this conclusion, as does their timing-Mulroy amended his thirdparty claims during the pendency of Glacier's first motion for summary judgment,
and one could certainly conclude that Mulroy opted to include the contract claims
as a hedge against a finding by this Court that personal injury tort claims are not
assignable in Montana. Indeed, absent the "contract" claims, this order would
have ended three pages ago.
Having concluded that Mulroy's contract claims, as pied, are actually tort
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claims cloaked in the language of contract, the Court further finds that the claims
were not assignable to Mulroy under Montana law. Consequently, the Court
grants Glacier's motion for summary judgment on Mulroy's breach of contract and
breach of the covenant of good faith and fair dealing claims.
CONCLUSION
It is clear from the substantial record in this case, developed over numerous
rounds of motions for summary judgment, that liability for the damage to Mulroy's
home falls squarely and solely on Keim's and Northwest's shoulders. Glacier did
nothing more than sell Keim and Northwest exactly what they asked for, and
Northland did nothing more than defend Keim and Northwest in the underlying
action until its opinion on coverage was judicially confirmed. Liability cannot be
shifted in this case as a result of Mulroy's decision to settle the underlying action
in exchange for an assignment of rights or the failure of Keim and Northwest to
grasp the extent of their CGL coverage.
Accordingly, IT IS ORDERED that:
(1)
Mulroy's motion for reconsideration (Doc. 90) is DENIED.
(2)
Northland's second motion for summary judgment regarding
Mulroy's counterclaims (Doc. 66) is GRANTED.
(3)
Glacier's second motion for summary judgment regarding Mulroy's
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third-party claims (Doc. 75) is GRANTED.
(4)
Glacier's pending motion to stay (Doc. 95) and Northland's pending
motion in limine (Doc. 97) are DENIED AS MOOT.
(5)
The Clerk of Court shall enter judgment in favor of Plaintiff
Northland Casualty Company and Third-Party Defendant Glacier
Insurance of Libby, Inc., and shall CLOSE this case.
DATED this 9th day of August, 2016.
Dana L. Christensen, Chief istrict Judge
United States District Court
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