Written By Jean Meyer
Whether an intentional act is an “occurrence” can be a source of confusion and possible conflict between an insurer and an insured. In this vein, revisiting Emplrs Mut. Cas. Co. Fisher Builders, Inc., 2016 MT 91 is a worthwhile lesson in evaluating the parameters of when an intentional act may still give rise to an “occurrence,” thus triggering coverage, under a commercial general liability policy.
That case arose out of the following fact pattern. Jerry and Karen Slack (“Homeowners”) owned a vacation home near Flathead Lake, Montana. The Homeowners decided to remodel their home and hired Fisher Builders (“Contractor”) to undertake the remodel. During the course of the remodel, the Contractor discovered ant-infested planks at the subject home and decided to salvage what usable materials could be salvaged and burned the remaining ant-infested boards. At some point during this work, the deck at the subject property collapsed. Thereafter, a member of the Lake County Planning Department conducted a site visit and issued a cease and desist order, halting all work on the project. The Planning Department revoked the Homeowner’s construction permit, citing multiple violations of Lakeshore Protection Regulations and noting that the “existing structure on the site had been destroyed.” The Homeowners appealed the revocation of their construction permit to the District Court, and ultimately reached a settlement with Lake County that allowed them to construct a smaller home than had originally been approved.
The Homeowners then initiated a negligence action against the Contractor. The Contractor gave notice to his insurer, who provided a defense in the underlying action under a reservation of rights while filing a declaratory action, alleging there was no coverage and it had no duty to defend or indemnify any party in the underlying action. The District Court granted the Contractor’s insurer’s declaratory action, via a motion for summary judgment, concluding that the Contractor’s conduct “was clearly intentional and did not fit within the meaning of ‘occurrence’ under the policy, ‘regardless of whether [the Contractor] intended the consequences or not. In turn the Homeowners appealed and the Montana Supreme Court was confronted with determining whether the District Court erred concluded the alleged acts and subsequent consequences did not constitute an “occurrence” covered by the policy.
In evaluating whether the acts made by the Contractor constituted the Montana Supreme Court laid out the following straightforward two-part test: (1) whether the act itself was intentional; and, (2) if so, whether the consequence or resulting harm stemming the act was intended or expected from the actor’s standpoint. Thus, an “accident” / “occurrence” may include intentional acts, but insurance coverage is excluded when the consequences of those acts are objectively intended or expected.
Thus, the Montana Supreme Court concluded that the District Court erred by reasoning that there was no occurrence / accident where there were “intentional conduct with unintended results.” As an illustration of such an instance where an intentional act may yield unintended consequences, the Montana Supreme Court observed: “Strange and wonderful indeed are the circumstances in which persons are killed or injured by the intentional pulling of the trigger of an ‘unloaded’ gun, and it is clear that such situations the discharge itself and the resulting injuries are accidental.”
For additional information concerning what constitutes an “occurrence” in Montana or about construction defect litigation in Montana, generally, you may reach Jean Meyer by telephone at (406) 219-8422 or by e-mail at meyer@meyerconstructionlaw.com