FTCA: Claims against US for tribal officers shooting BB guns at Plaintiff’s workplace resulting in BB striking Plaintiff in eye not amenable to dismissal for lack of subject jurisdiction under present circumstances… Morris.

2 Blackfeet officers arrived unannounced at Martin Marceau’s workplace 8/29/12 and began discharging BB guns. A BB struck Marceau in the eye. The Tribe operates its law enforcement services under a 638 contract with the US. Marceau sued the US alleging negligence, NIED, vicarious liability, and negligent hiring & supervision. He contends that the officers’ status as BIA employees grants jurisdiction to the Court for FTCA purposes and imposes liability on the US for their negligence. The US moved to dismiss for lack of subject jurisdiction, arguing that it has not waived its sovereign immunity for Marceau’s claims and that the discretionary acts exception precludes jurisdiction for negligent hiring & supervision.

Marceau must demonstrate that the 638 contract encompassed the officers’ actions and that the actions fell within the scope of their employment under Montana law. Shirk (9th Cir. 2014). The parties agree that they were on duty, in uniform, and on patrol. The US contends that they were not within the scope of their employment because shooting the BB guns could not have benefitted their employer. Courser (Mont. 1984). The Court has no evidence as to why they stopped at Marceau’s place of business. They apparently had confiscated the BB guns 29 days before the incident as part of their duties. The Court has no evidence as to why they possessed them at the time of the incident. We imbue police officers with significant authority to fulfill their mission of protecting & serving the public. Schultz (NM 2013) (citing cases from around the US). Officers are never really “off-duty.” Even when he is off the clock, he may be called to duty, either by a superior or by something he sees in the community. Id. Given this unique role, anything that an officer does when he is on duty, in uniform, and on patrol could be viewed as within the scope of his employment. The Court cannot say that only one legal inference may be drawn as to whether the act occurred during the course of employment. Keller (Mont. 1940). Under Montana law, a jury must decide this question of fact. Id. The Court will not dismiss Marceau’s claim for lack of subject jurisdiction under these circumstances.

The US contends that a deliberate act caused Marceau’s injury. Most deliberate acts would fall outside the FTCA even had the officers been within the scope of their employment. Marceau’s complaint alleges no intentional torts, but alleges that the officers acted negligently, their employer acted negligently, and these negligent acts caused his injury. This Court should refrain from a jurisdictional finding of disputed facts where substantive issues are intertwined with the question of jurisdiction. SVG (9th Cir. 1983). Whether the officers acted intentionally or negligently represents a disputed fact, which could affect the issue of jurisdiction. The Court need not reach that question here.

To prevail on its argument that Marceau’s negligent hiring and supervision claim falls within the discretionary act exception to the FTCA the US must show that the actor retained an element of judgment or choice rather than following a policy which mandated a specific course, and then that the judgment or choice was a consideration of public policy which is shielded by the discretionary function exception. Bailey (9th Cir. 2010). The US contends that all decisions relating to hiring, training, and managing personnel involve choice or judgment based on considerations of public policy, citing Nurse (9th Cir. 2000) (employment, supervision, and training of employees general “fall squarely within the discretionary function exception”). The US does not address the 1st prong of the test and identifies no federal statute, regulation, or policy that mandates a specific course regarding oversight of tribal officers, and also fails to explain whether it followed an existing policy. Marceau contends that the officers violated existing policies, pointing to 25 CFR 12.21 which requires the BIA to “evaluate the effectiveness of these special law enforcement commissions and to investigate any allegations of misuse of authority,” and to a requirement in the BIA Manual that supervisors “review reports on use of force and take appropriate action on such reports” and “advise the District Commander of all allegations of misconduct and use of force.” He alleges that another officer had previously gone to a party with a police dog and instigated the dog to bite someone — a use of force. He contends that the officers violated existing policies related to the use of force. He further points out that the BB guns had been confiscated 29 days before his injury, and contends that the officers likely breached policies related to storage, inventory, and accountability of the guns. The US provides no response to his allegations that it violated existing policies. The Court lacks sufficient evidence to determine whether the US violated a policy relating to its hiring and supervision, and cannot grant its motion to dismiss for lack of subject jurisdiction for Marceau’s negligent hiring and supervision claim under these circumstances.

Marceau v. US, 42 MFR 512. 6/10/15.

Patrick Flaherty, Daniel Flaherty, and Paul Gallardo (Flaherty Law Office), Great Falls, for Marceau; AUSA George Darragh.

EXPERT DISCLOSURE rulings in dispute over insurance coverage of burned home (repairable or total loss)… Molloy.

The parties dispute whether fire damage to Mark & Margaret Laslovich’s home is repairable or whether it constitutes a total loss. State Farm objects to their expert disclosures and seeks to exclude the experts from testifying at trial and to strike the disclosures from the docket.

Charles Lee and Joe Novak. Plaintiffs’ disclosure provides that Lee will opine that he reviewed the initial repair estimates of State Farm’s repair experts and found their assumptions and cost for electrical work “woefully inadequate.” He is also expected to testify that Dayspring did not follow industry standards or consider electrical codes. Their disclosure is similar as to Novak’s plumbing opinions. Thus it appears that Lee and Novak have been specifically retained to offer expert opinions as to electrical and plumbing estimates. Expert reports are required pursuant to Rule 26(a)(2)(B). None has been disclosed. Their testimony may be excluded unless Plaintiffs can show that failure to comply with 26(a)(2)(B) was substantially justified or harmless. Rule 37(c)(1). They have done neither, but merely assert that State Farm has not been prejudiced because it can discern from the information provided what adverse opinions are being proffered. However, although it may be able to discern that Lee and Novak disagree with its estimates, without the report it has no idea of how they reached their conclusions that its estimates “were off by almost 50%” and “30%.” Their opinion testimony is excluded.

Cary Shulund. Plaintiffs’ disclosure provides that Shulund will opine that he reviewed State Farm’s repair experts and found their assumptions and cost of repairs for general construction “inaccurate and inappropriate.” Unlike the disclosure for Lee and Novak, Shulund’s disclosure notes that “he reviewed Dayspring’s estimates, reviewed the site within weeks of the fire, and assisted in providing the information for a bid from Tony Laslovich Construction.” Shulund has factual knowledge as to the bid process similar to the way a treating physician may have an opinion formed during the course of treatment.Goodman (9th Cir. 2011). These opinions are admissible as long as the disclosure identifies the subject of the testimony and the facts & opinions that will be offered. Rule 26(a)(2)(C); Cooke (D.Ariz. 2013) (opposing party should be able to and be entitled to read an expert disclosure, determine what adverse opinions are being proffered, and make an informed decision as to whether it is necessary to take a deposition and whether a responding expert is needed). Because Shulund’s disclosure adequately outlines the subject of his testimony — the Laslovich bid — and summarizes the facts & opinions related to the bid, he may testify as to his opinions. However, like the treating physician whose opinion testimony pursuant to 26(a)(2)(C) is limited to opinions formed during treatment, his expert opinions are limited to those relating to and arising from the Laslovich Const. bid. Absent an expert report, the rest of his testimony is excluded because Plaintiffs have failed to show that their lack of compliance with 26(a)(2)(B) was substantially justified or harmless.

Mark Edgell. Similar to Shulund, Edgell’s disclosure was comparable to that of a treating physician. He prepared a bid to rebuild the home and has factual knowledge as to this process. His disclosure adequately discloses a bid process as the subject of his testimony and summarizes the facts & opinions as they relate to this bid process pursuant to 26(a)(2)(C); those opinions may be offered at trial. Any of his opinions that go beyond the scope of the bid process are excluded.

Rick Anderson. Plaintiffs’ disclosure states that Anderson has agreed to address any bad faith claims, but given the requested bifurcation and the fact that the parties are still in discovery, he has not been retained yet. Even if he could be categorized as a non-retained expert — which he does not appear to be — Plaintiffs’ disclosure neither states what his opinion will be nor what facts it is based on. State Farm cannot be expected to discern from this disclosure what opinion is being proffered and how to respond. His disclosure is insufficient under both 26(a)(2)(B) and (C). Although Plaintiffs concede that his disclosure is insufficient, they ask that he be allowed to testify in rebuttal to State Farm’s witnesses on claims handling. Rule 26(a)(2)(D)(ii) requires that rebuttal evidence be offered solely to contradict or rebut evidence on the same subject identified by the opposing party in its 26(a)(2) disclosures and that the disclosure be within 30 days of the other party’s disclosure. State Farm’s disclosure of liability experts, which may have included a bad faith expert, occurred over 30 days ago. Plaintiffs’ disclosure of Anderson as a rebuttal expert at any point after those 30 days would be untimely. They do not argue that the failure is harmless, but insist that they were under the assumption that the parties were delaying litigation of the bad faith issue. Even so, a stipulation absent a court order has no effect on the Scheduling Order and this case is not bifurcated. Their failure to comply with 26(a)(2) was not substantially justified. Anderson is precluded from offering expert opinions.

State Farm further challenges Plaintiffs’ disclosures as based on inaccurate information. Such challenges are properly raised on cross.

Pursuant to LR 26.2(a), expert disclosures “are not routinely filed.” However, it would be inappropriate to strike “Plaintiffs’ Disclosure of Liability and Damages Experts” filed at Doc. 16 because it is the subject of the present motion and the only version of the disclosure in the record. See Rule 5(d)(1) (disclosures under 26(a)(1) or (2) must not be filed until they are used in the proceedings or the court orders filing). State Farm’s motion to strike is denied.

Laslovich v. State Farm Fire & Casualty, 42 MFR 503, 5/14/15.

Wayne Harper (Harper Law Firm), Butte, for Lasloviches; Bradley Luck & Randall Colbert (Garlington, Lohn & Robinson), Missoula, for State Farm.

SANCTIONS: $515,119.90 attorney fees incurred by insurer awarded against Plaintiff’s attorneys for reckless, frivolous conduct in prosecuting bad faith case stemming from suit against CPA firm for bad TIC investment of ranch sale proceeds… priority of original Plaintiff in $4,650,000 settlement squandered by acceptance of 5 additional clients with higher fee agreements… questionable settlement without participation by insurer… insurer set up for bad faith suit to cover up and justify wrongful distribution of monies in trust… Lovell.

Billie Redding, 76, sold her ranch for $3.3 million in 2004 and, upon advice of her accountant at Anderson ZurMuehlen to avoid tax liability and provide income, acquired tenancy-in-common shares of commercial properties sold by DBSI, which went bankrupt 4 years later. In 6/12 Redding and 6 others settled with AZ in a global settlement for $4 million from New York Marine and $650,000 from AZ. Redding’s share after fees & costs was $450,844.87. Redding then asserted bad faith claims against NYM, which the Court dismissed as a “fishing expedition that yielded no catch” in a 104-page order (42 MFR 282) reported in the 3/7/15 MLW.

Shortly after entry of the Court’s opinion and order of 2/27/15 there was a flurry of activity and even the lawyers lawyered up. NYM moved for $1.4 million in fees & costs pursuant to the Court’s inherent authority and 28 USC 1927. Ward Taleff appeared on behalf of Redding’s counsel Linda Deola and Brian Miller and filed a notice of appeal and motion for stay of enforcement of judgment which was granted. Maxon Davis appeared on behalf of Redding’s counsel Richard Layne. Miller and Layne filed a notice of appeal on behalf of Redding. Jonathan McDonald appeared on behalf of Redding. All of Redding’s counsel filed an opposition to Defendants’ request for fees. The other parties responded with zeal but directed their attack as much to the Court’s summary judgment as to the question of fees. Deola and Miller filed self-serving affidavits and argument opposing fees and the summary judgment now under appeal. And just as Plaintiff’s counsel surprisingly seem to have “doubled down” in their positions, I am more convinced than ever that they are wrong on the law. The Court previously set forth a lengthy review of the facts but at that time did not draw conclusions as to Plaintiff’s attorneys’ conduct, which is now drawn into sharp question by the demand for fees on the basis of their vexatious litigation and bad faith. Prior to this case I had some contact with Deola and her performance was quite satisfactory; in fact, I admired her ability. I have had slight experience with Miller and certainly no problems. I have never seen Layne (of Portland) nor heard his voice and have no further information about him. The issue is whether fees should be awarded to NYM against Deola, Layne, and Miller and their firms. A correct evaluation of all pertinent facts requires consideration of all 3 phases of this litigation. I take no pleasure in this examination.

For purposes of deciding NYM’s motion for fees, the Court finds that Deola had a conflict of interest when she acquired multiple new clients to compete with Redding, who had previously established the only timely claim to the $2 million limit of AZ’s 2008 policy. She has not demonstrated that she had obtained Redding’s informed consent for the 5 new representations, but the Court doubts that any such consent would have been valid. Her acquisition of multiple competing claims was a violation of MRPC 1.7 in that there was a significant risk that the additional clients — all unrelated to each other and to Redding — might easily be placed in the position of having to share in and compete with Redding’s sole claim to the $2 million proceeds of the 2008 policy. Nor was it reasonable for Deola to believe that she could provide competent, loyal, and diligent representation to Redding and each of the other 5 clients, and certainly not on a theory that she could make Redding whole by a future bad faith claim against NYM. Any such plan would constitute a wholly improper purpose for this suit. This conflict was made even more egregious given that Deola had a financial interest in the disbursements of funds between Redding (14% fee) and her 5 new clients (30-33% fee). “Some conflicts are nonconsentable, meaning that the lawyer involved cannot properly ask for such agreement or provide representation on the basis of the client’s consent.” MRPC 1.7, cmt. No disinterested lawyer could believe that Redding should accept Deola’s representation of 5 competing clients, especially when her personal financial interest tilted overwhelmingly in favor of the competing clients. While Layne did not participate in the fees generated by Deola’s new clients, he apparently condoned her conduct.

Why would Deola do a complete about face and squander Redding’s rightful priority? Why would she waive Redding’s substantial right to the entirety of the 2008 policy and allocate to her only a pro rata share? Redding testified that she had hoped to receive the entire $4.65 million settlement. Deola had exclusive control of the entire $4 million insurance funds. It was in her firm trust account. She had the duty to disburse the funds in trust properly. It was her duty to consider all prudent courses. She could have refused to make any disbursement that would not do justice to Redding. She could have filed an interpleader. Hers was a high duty. Why did she not consider other alternatives? One reason could have been the conflicting fee agreements, which lead the Court to this undesirable and unavoidable conclusion: Deola received 14% of every dollar she allocated for payment to her client of 3 years, but 1/3 of every dollar she gave her new clients. All this resulted in a fee of $1,215,631 to Deola’s and Miller’s firm. By denying Redding her proper proceeds of $2 million and subjecting her to the pro rata disbursement she gained an additional $200,000 in fees. Why would Layne tolerate this? Deola also gained $935,000 in fees by taking on the extra clients. The effect of this on Redding was to diminish her net recovery by almost $700,000 and waive any recovery on AZ’s excess liability.

It is apparent that Deola and AZ’s general counsel Curt Drake excluded NYM from their negotiations. Was this a violation of NYM’s rights under the policy? When Drake told Deola in 6/3/12 and 6/4/12 that NYM was going to put up $4 million, AZ’s defense counsel Patrick HagEstad had not even been consulted by Drake. It was a surprise to HagEstad when Deola “accepted” AZ’s $4.65 million offer 6/5/12. He told the NYM adjuster that Deola was accepting her own offer. Deola and Drake settled without the active participation of NYM, which was denied the right to participate in drafting the written agreement. It nonetheless paid the $4 million to the Deola/Miller trust account, under reservation.

Deola, Layne, and Miller acted in bad faith and vexatiously by continuing this litigation after the lack of merit was plain, by wrongfully attempting to set up NYM for this bad faith suit in order to cover up and justify their earlier wrongful distribution of monies in trust, and by intentionally or recklessly misstating the facts and/or the law for improper purposes. These acts multiplied the proceedings, showed disrespect for the Court’s resources, harassed opposing counsel, and caused unjustified expense to Defendants. The instances of questionable conduct appear to have been part of a larger litigation scheme for an improper purpose. Requirements for §1927 sanctions have been met.

There is other pending litigation filed by AZ that bears on these fees. AZ set all these events in motion when it harmed its long-time trusting client, Redding, as well as other clients. The initial harm was compounded by AZ being greatly underinsured. NYM rightfully defended under reservation because coverage was unclear. AZ therefore sued NYM in a coverage action that was heard by this Court, and AZ settled with NYM, then sued NYM again to clarify or set aside this settlement, and NYM has counterclaimed for breach of the insurance contract. This 2nd suit by AZ against NYM could result in a judgment in favor of NYM against AZ for damages, the measure of which could consist of fees paid by NYM in the instant case filed by Redding.

The Court will impose a sanction consisting of the amount that NYM paid to defense counsel as fees & costs for services and expenses after 2/14/14, which is the date when AZ CEO Gary Carlson testified that AZ did not authorize settlement with Redding when her counsel made the policy limit demand in 2/11. Sanctions of $515,119.90 are imposed on Layne, Deola, and Miller, and the firm of Morrison, Sherwood, Wilson & Deola, jointly, payable to NYM, representing reasonable restitution in light of the unjustified, unnecessary, and extraordinary expense suffered by NYM.

Redding v. New York Marine & General Ins., 42 MFR 521, 6/25/15.

Jonathan McDonald (Hunt & McDonald), Helena, for Redding; Ward Taleff (Taleff Law Office), Great Falls, for Deola and Miller; Maxon Davis (Davis, Hatley, Haffeman & Tighe), Great Falls, for Layne; Mark Goodman & Michelle Alborzfar (Hogan Lovells), San Francisco, and Gary Zadick (Ugrin, Alexander, Zadick & Higgins), Great Falls, for NYM.

INSURANCE: Fact issues as to whether grizzly maul decedent was “temporary worker” or “employee” preclude summary judgment on duty to indemnify animal facility… because there is potential for coverage if victim is found to have been temporary worker, insurer has duty to defend against tort claims… findings & recommendation… Lynch.

Benjamin Cloutier was fatally mauled 11/4/12 while cleaning a grizzly bear enclosure at Animals of Montana, which owns and trains animals for photography, advertising, and film. It was insured under a Commercial Exotic Animal Owner’s Claims-Made Liability policy through Lloyd’s Underwriters. AM did not have work comp. Benjamin’s parents Ronald & Adelle Cloutier received death benefits from the UEF, and in 4/14 sued AM and owner Troy Hyde in State Court for wrongful death & survivorship. AM tendered defense to the underwriters, which accepted subject to reservation of rights. Liberty Corporate Capital, as lead underwriter, seeks a declaration that it has no duty to defend or indemnify AM and Hyde in the State Court action. Defendants counterclaim alleging bad faith.

Liberty asserts that Bush Hog (Mont. 2009) stands for the proposition that an employer who is uninsured for work comp may not seek indemnity from a 3rd party. In Bush Hog, a ranch worker died while using a post hole digger for fencing. It held that “an uninsured employer is prohibited from bringing either a contribution claim or an indemnity claim against a third party after settling with the injured employee.” However, the uninsured employer in Bush Hog was asserting a common law claim for indemnity, while AM and Hyde are seeking contractual indemnification from their commercial liability insurer. Also, the manufacturer of the post hole digger was a 3rd-party stranger to the employer-employee relationship. Bush Hog found that it would not be equitable to require such a stranger to indemnify the employer for liability that could have been avoided had the ranch provided comp. In contrast, Liberty has a contractual relationship with the employer and is obligated to provide AM and Hyde with liability coverage. There is nothing in Montana public policy to prevent an insurer from contractually agreeing to provide injured employees coverage that goes beyond remedies available under the work comp scheme, or prevent a CGL insurer from agreeing to provide coverage for temporary workers even if the employer has not secured comp. While Bush Hog eliminates common law indemnity as a remedy for an uninsured employer seeking to recover from a 3rd-party stranger, it says nothing about the issue here: whether an uninsured employer may bring a contractual indemnity claim against its commercial liability insurer.

Liberty invokes the injury-to-employee exclusion:

… this insurance does not apply to any bodily injury … sustained by any “employee” including but not limited to independent contractor(s) and/or any sub-contractors &/or any volunteer(s) &/or any individual(s) auditioning for any job which is/are working on behalf of the insured in any capacity, under its direct supervision &/or care, control &/or direction.

Liberty argues that the undisputed facts show that Benjamin was an employee of AM because he was “a person in the service of another under a contract for hire” and AM had “the power or right to control [him] in the material details of how the work [was] to be performed.” However, the definition further specifies that:

“Employee” does not include any “leased worker, a temporary worker, a volunteer, any independent contractor(s) &/or sub-contractors, or any type of auditioning personnel or any casual labor &/or any pick-up help.

Identical language can be found at the end of the injury-to-employee exclusion. Defendants argue that the undisputed facts establish that Benjamin was a temporary worker and thus not an employee as defined by the policy. The policy does not define “temporary worker.” Liberty cites WCA §39-71-116(4), which defines a temporary worker as one “whose services are furnished to another on a part-time or temporary basis to fill a work assignment with a finite ending date to support or supplement a workforce in situations resulting from employee absences, skill shortages, seasonal workloads, and special assignments and projects. While the Montana Supreme Court has not addressed the issue, a majority of courts have interpreted identical “furnished to” language to mean that a temporary worker must have been provided by a 3rd-party such as a temporary staffing agency. Liberty maintains that the WCA’s definition is the only reasonable one and contends that a sophisticated business like AM would reasonably understand that terms in a CGL policy’s injury-to-employee exclusion are to be defined in accordance with work comp law. However, it cites no authority that under Montana law CGL policy terms are to be construed from the viewpoint of a sophisticated business rather than that of “a consumer with average intelligence not trained in the law or insurance business.” Newbury (Mont. 2008). Further, the cases it relies on specifically defined “temporary worker” using the same “furnished to” language in the work comp statutes. While the definition in the WCA is reasonable, so is Defendants’ Merriam Webster definition: “continuing for a limited amount of time; not permanent” or “intended to be used for a limited amount of time.” Because “temporary worker” is reasonably subject to different interpretations, it must be construed against Liberty and in favor of coverage. While there is no evidence that Benjamin was “furnished to” AM by a 3rd-party, the dictionary definition results in the possibility of coverage because there is a factual question as to whether his employment was temporary. While Defendants provide statements supporting their argument that he had been hired on a temporary basis, Liberty has provided evidence suggesting that he was returning indefinitely to the job he previously had. The question of whether he was a temporary worker is thus a disputed factual one. Unless another exclusion unequivocally applies, the fact that there is potential coverage if Benjamin is found to have been a temporary worker precludes summary judgment on the duty to indemnify but gives rise to a duty to defend.

Liberty also cites the policy’s work comp exclusion:

Worker’s Compensation/Employer’s liability coverage is specifically excluded from this policy for any injury to any employee(s) &/or independent contractor(s) &/or volunteer(s).

It argues that the fact that Cloutiers’ claims in the underlying action seek tort damages rather than work comp benefits should have no effect on whether the comp exclusion applies. While the Montana Supreme Court has yet to address the issue, Liberty points to a majority of courts that have held that comp exclusions may nonetheless apply where an employer is exposed to tort liability for failing to procure comp. But even assuming that Montana would follow the majority rule, Liberty admits that whether the comp exclusion applies depends on whether Benjamin was a “temporary worker” excepted from the definition of “employee.” The question is not whether he was an employee for comp purposes, but whether he was an “employee” as defined by the policy. Whether he was a temporary worker is a disputed material fact issue.

Recommended, summary judgment be granted for Defendants to the extent that they seek a declaration that Liberty has a duty to defend AM and Hyde against Cloutiers’ underlying claims, and that summary judgment be denied to the extent the parties seek a declaration on Liberty’s duty to indemnify.

Liberty Corporate Capital v. Animals of Montana, Hyde, Cloutier, 42 MFR 481, 5/12/15.

Tim Dailey & Perry Schneider (Milodragovich, Dale & Steinbrenner), Missoula, for Liberty; Herman Watson & Christopher Young (Trial Lawyers), Bozeman, and Gary Zadick (Ugrin, Alexander, Zadick & Higgins), Great Falls, for AM and Hyde; Anthony Jackson, John Amsden, and Justin Stalpes (Beck & Amsden), Bozeman, for Cloutiers.

INSURANCE: Employee exclusion in truck company’s policy valid under Montana law where NJ shipper allegedly improperly loaded truck which caused it to overturn in NC, resulting in death of driver… Tibi dicta cannot withstand scrutiny in light of Reading, which is still good law despite subsequent MLPA… Tibi public policy concerns not at issue since driver’s estate received $132,627 in work comp and coverage is available under shipper’s policy for any liability by shipper… Christensen.

The estate of Shane Allen sued Tekkote Corp. in New Jersey, alleging that Allen picked up a Watkins truck in NJ for transport to North Carolina, and that as a result of improper loading by Tekkote, the load shifted on a highway in NC, causing the truck to overturn, ultimately resulting in Allen’s death. Tekkote notified its insurer Travelers, which notified Watkins’ insurer ATTIC and tendered defense and requested indemnity under the ATTIC policy. ATTIC and Watkins seek a declaration that ATTIC has no duty to defend or indemnify Tekkote.

Tekkote asserts that at the time of Allen’s death it was an insured under the ATTIC policy because it was “using” the Watkins truck with Watkins’ permission by virtue of having loaded the freight onto it 2 days earlier. An “insured” includes “anyone else while using with the Named Insured’s permission any Covered Trucking Unit.” It cites cases from NJ and elsewhere that apply the “complete operations” theory and hold that coverage under similarly worded motor vehicle policies can be available to an alleged omnibus insured under a permissive use clause so long as “the negligent act which caused the injury or is alleged to have caused it constitute18 a part of the loading [or] unloading process.” Kennedy (NJ 1997).

ATTIC contends that Tekkote is not an insured under its policy because it was no longer using the truck at the time of the accident. Citing cases from Florida and elsewhere, it contends that the Court should apply the “at rest” doctrine that coverage is not available to an alleged omnibus insured under a permissive use clause when the loading process is complete and the freight is “at rest.” FCSC(Fla. Dist. App. 1983).

The Montana Supreme Court has not directly addressed this question. While inclined to adopt the “at rest” theory (particularly where the accident occurred 2 days after the loading process in NJ), the Court does not need to wade into this dispute and attempt to predict Montana law. Because the Court concludes that the policy’s employee exclusion is valid, enforceable, and unambiguously excludes Tekkote’s claim, ATTIC has no duty to defend or indemnify Tekkote, even assuming that it was an insured at the time of the accident.

Tekkote correctly concedes that, assuming the exclusion is enforceable, the plain language unambiguously bars coverage. It bars coverage for “any bodily injury to any employee of an insured arising out of and in the course of the employee’s employment by an insured.” However, Tekkote contends that the exclusion is unenforceable as against public policy and Montana’s MLPA, which requires that, absent a statutory exception, a motor vehicle liability policy must provide minimum limits to the person named in the policy and any other person, as insured, against loss from liability for damages arising out of the ownership, maintenance, or use of the vehicle. MCA 61-1-301(1)(a); Grimsrud (Mont. 2005). However, MCA 61-6-103(4) does provide an exception to the MLPA for liability associated with injuries of an employee of an insured:

A motor vehicle liability policy need not insure any liability under any workers’ compensation law or any liability on account of bodily injury to or death of an employee of the insured while engaged in the employment, other than domestic, of the insured.

Allen’s injuries were insured under North Carolina work comp law and represent a liability on account of injury to or death of an employee of Watkins, the named insured on the policy. Thus the employee exclusion in the ATTIC policy is valid & enforceable and provides coverage for Tekkote’s claim.

Tekkote contends that the Court should nevertheless be persuaded by Judge Hatfield’s dicta in Tibi (21 MFR 162, 1996) that an employee exclusion was unenforceable to the extent that it precluded coverage for a 3rd-party omnibus insured seeking liability coverage for injuries sustained by an employee of the named insured. He reasoned that §61-6-103(4) was only applicable when an employee of the named insured sought to recover directly from his employer, and that 103(4) was therefore inapplicable when an employee of the named insured sought to recover from a 3rd-party omnibus insured, who was not the injured employee’s employer. Although his reasoning has some persuasive force, it cannot withstand scrutiny in light of Reading (Mont. 1968). Reading addressed almost identical facts (Great Falls sanitation employee injured while loading garbage cans into City truck, sued store for loading cans excessively heavily) and concluded that there was no coverage for the omnibus insured because “it is unreasonable [to interpret the policy such] that it would result in granting more protection to an employee of an omnibus insured than an employee of the named insured when it was the latter who paid the premiums.” In seeking to limit §61-6-103(4), Tekkote and Travelers make essentially the same argument that Readingrejected: they ask the Court to interpret “the insured” as referring only to the insured claiming coverage. However, the statute, like the exclusion in Reading,does not refer to “the insured claiming coverage.” As to the canons of construction, Tekkote and Travelers are on the same or worse footing as the plaintiffs in Reading. As inReading, they are strangers to the policy and in addition ask the Court to construe an alleged ambiguity in a statute in their favor, while “the rules of statutory construction require the language to be construed according to its plain meaning.” Spoonheim (Mont. 1996). Reading held that “the insured” in the policy plainly refers to “any insured.” This Court finds no reason to interpret it differently as it is used in §103(4). Nor, as in Reading, is the Court persuaded that the statutory reference to “the insured” should be interpreted to create the “unreasonable” result where an employer must grant “more protection to an omnibus insured than an employee of the named insured when it was the latter who paid the premiums.”

The Court rejects Tekkote’s contention that Reading is no longer good law simply because the MLPA was subsequently enacted. The Montana Supreme Court has never expressly or impliedly overturned Reading. Further, this Court’s analysis is primarily guided by Reading’s holding that the plain meaning of “the insured” refers to any insured.

This is not a case in which the public policy concerns raised in Tibi are at issue. Hatfield correctly noted that “the purpose of the mandatory insurance law is to protect the public from uncompensated losses arising from the use of a motor vehicle.” The parties have stipulated that Allen’s next of kin and dependents received $132,627.01 in work comp under Watkins’ comp coverage. Moreover, Tekkote is separately insured by Travelers, and to the extent that it is deemed liable for Allen’s injuries, additional coverage will be available to compensate his estate. Thus the Court is not faced with an uncompensated victim, and its decision does not leave Allen’s estate pursuing damages from a judgment-proof defendant.

The employee exclusion in the ATTIC policy is valid & enforceable under Montana law. Tekkote’s and Traveler’s cramped interpretation of §103(4) is unreasonable and contrary to its purpose and plain meaning. Because the exclusion unambiguously bars coverage for Tekkote’s claim, ATTIC and Watkins are entitled to judgment as a matter of law.

American Trucking & Transportation Ins. v. Travelers Property Casualty and Tekkote, 42 MFR 466, 5/4/15.

Brad Condra (Milodragovich, Dale & Steinbrenner), Missoula, for ATTIC; Robert Carlson (Corette Black Carlson & Mickelson), Butte, for Travelers and Tekkote.