OFFICERS’ SHOOTING: Summary judgment for County & Deputies rejected over claim of sham affidavit testimony that Plaintiff was pointing gun at ground when he opened door to unknown persons on porch in dark who shot him and claims of qualified immunity… case settled following ruling for $525,000… DeSoto/Watters.

Yellowstone Co. Deputies Tyler Sennett and Brandon Trujillo responded to a call from a third party seeking a welfare check at Travis Tolan’s home. They arrived in the predawn darkness with no lights or sirens and went onto his porch and shined a flashlight through the window. Tolan heard the noise and saw the lights and because he had been the victim of a burglary, feared that his home was being broken into. He retrieved his pistol and walked toward the door and called out “Hello.” The Deputies did not respond. He then turned on the porch light and still the Deputies said nothing. He then opened the door and when they saw him holding a gun, shot him through the chest. He incurred $235,000 medical expenses and was hospitalized for 16 days. According to his attorney, by all accounts he is lucky to be alive.

Tolan sued the County and Deputies. Magistrate DeSoto recommended denying the parties’ summary judgment motions. Defendants objected. Judge Watters, following de novo review, adopted DeSoto’s findings & recommendations in full:

Defendants first object to Judge DeSoto’s rejection of their argument that Tolan’s affidavit — in which he stated that his gun was pointed at the ground — is a sham affidavit and should be disregarded. The sham affidavit rule prohibits a party from creating an issue of fact by submitting an affidavit that contradicts his deposition testimony. It is intended to preserve the value of summary judgment by preventing parties from fabricating issues of material fact. However, the 9th Circuit advises that it “‘should be applied with caution’ because it is in tension with the principle that the court is not to make credibility determinations when granting or denying summary judgment.” Yeager (9th Cir. 2012); ACandS (9th Cir. 1993).

The “inconsistency between a party’s deposition testimony and subsequent affidavit must be clear and unambiguous to justify striking the affidavit.” Van Asdale (9th Cir. 2009). An affidavit cannot “flatly contradict” prior testimony. Id. For instance, Cole (ED Cal 2022) found a contradiction when a slip & fall plaintiff repeatedly said in her deposition that she did not recall seeing anything wet on the floor but later said in her affidavit that she felt herself slip on a wet substance on the floor. The Court emphasized that she was explicitly asked in her deposition about the condition on the floor and whether she thought it was wet.

However, an affidavit can elaborate upon, explain, or clarify testimony without creating a contradiction. Van Asdale. In Walden (D.Mont. 2017), a plaintiff alleging sexual harassment described in her deposition and affidavit different ways her emotional distress manifested. In her deposition she described that she “couldn’t handle” the stress but did not have difficulty sleeping or eating or stomach problems and did not know if she experienced nausea, tension, or anxiety. In her affidavit she said she experienced panic attacks, shaking in her hands and arms, and perfuse perspiration. Judge Christensen found that her affidavit merely elaborated on her testimony, particularly counsel did not specifically ask during her deposition how her stress physically manifested and the vagueness of the question justified her failure to explain her physical symptoms in the first instance.

A court can disregard a contradictory affidavit when it contains facts that the affiant testified he could not remember. Yeager. Yeager did not recall answers to 185 questions in his deposition — including ones about difficult-to-forget events like his involvement in a plane crash — despite being shown numerous exhibits to refresh his recollection. 3 months later he filed a declaration that contained answers to the questions he could not recall. His only explanation was that he reviewed certain documents that triggered his memory. The 9th Circuit affirmed the District Court’s finding that “the disparity between the affidavit and deposition is so extreme” that Yeager’s testimony was contradictory and his explanation for remembering the facts was weak. It found the affidavit to be a sham and disregarded the declaration.

Defendants argue that Tolan’s deposition and affidavit contradict each other because he did not recall his gun’s position during his deposition yet described its position in his affidavit and provided no explanation for his recollection. Tolan responds that he was never asked about the position of his gun during his deposition and thus his description of its position in his affidavit was merely supplemental information.

Tolan’s deposition and affidavit do not clearly & unambiguously contradict because he did not say anything in his deposition about the position of his gun. His comments in his affidavit about the position of his gun merely elaborated on his deposition testimony, as in Walden. Had he stated in his deposition that he pointed his gun in a direction other than at the ground or was asked specifically about his gun upon opening the door and omitted the information, then a clear & ambiguous contradiction as in Cole would exist.

Further, Tolan never stated that he could not remember the position of his gun. In his deposition:

Q. What do you remember about answering the door?

A. I remember answering it, I remember saying “hello,” and then I remember 4 shots fired, I remember grabbing my stomach, closing the door, walking into my house, grabbing my stomach and then laying on the ground.

He was then asked if the police entered the house. The only questions about the gun were whether he had it when he opened the door, what hand it was in, and whether that was his dominant or non-dominant hand. He was asked an open-ended, vague question about what happened after he encountered Sennett and Trujillo. Failing to respond to that question with the position of the gun is an honest discrepancy given the framing of the question, which justifies his elaboration in his affidavit. His affidavit is not a sham and the Court will consider it in determining the remaining issues.

Defendants next object to Judge DeSoto’s denial of qualified immunity. They primarily argue that there is no genuine dispute of material fact as to the position of Tolan’s gun — that he was raising it at the Deputies — and that his action created an immediate threat that justified deadly force. This objection is improper because it merely rehashes arguments presented to Judge DeSoto. Additionally, it is contingent on the Court’s finding that Tolan’s affidavit should be disregarded as a sham. Since it is not a sham and creates a material issue of fact, Defendants’ objection based on the dispute over the position of his pistol fails.

Judge Desoto correctly noted that where one points a gun in the officers’ direction, the officers are “undoubtedly entitled to respond with deadly force.” George (9th Cir. 2013). Additionally, one’s furtive movement, harrowing gesture, or serious verbal threat may give rise to an immediate threat. Id. However, merely possessing a deadly weapon does not render an officer’s response per se reasonable and entitle him to qualified immunity. Id.

As in Lopez (9th Cir. 2017) and George, a genuine dispute exists as to the position of Tolan’s gun and whether the position created an immediate threat to the Deputies. Reading the facts in a light most favorable to him, his gun was pointed at the ground. Assuming this is true, the Deputies’ conduct would be unjustified because he presented no immediate threat.

Even if the Court considered the Deputies’ statements as the undisputed version it still could not find summary judgment for them based on Lopez. Both statements lack the specificity with respect to the position of Tolan’s gun that is necessary to find that he undisputedly posed an immediate threat. As in Lopez, the Deputies never allege that he pointed his gun at them and instead “use carefully-phrased language,” Lopez, that he began to raise or began to swing his gun at them.

The Court is left with the Deputies’ statements that they feared for their safety before they shot Tolan, since they did not describe another furtive movement, harrowing gesture, or serious verbal threat to justify use of force. George. Such statements on their own are not enough to justify such a concern. Deorle (9th Cir. 2001). This is particularly so given that the Deputies were responding to a welfare check, not a report of a crime or domestic disturbance, George, and that they did not warn Tolan to drop his weapon, let alone of their identity as law enforcement, Hughes (9th Cir. 2016). Accordingly, the Court finds no clear error with Judge DeSoto’s findings & recommendations on this issue.

Defendants assert that Judge DeSoto erroneously ignored the mistake doctrine in her qualified immunity analysis. They contend that even if the Deputies mistakenly believed that Tolan raised the pistol, their belief was reasonable. She did not address the mistake doctrine even though Defendants raised it in their briefing, so the Court will review this argument de novo.

The mistake must be reasonable. Pearson (US 2009). Lopez rejected an officer’s invocation of the mistake doctrine relating to the position of the plaintiff’s gun and his perception of a threat because, viewing the facts in a light most favorable to the plaintiff, the gun never rose to a position that posed a threat. The Court concludes the same here based on its holding that a genuine dispute exists as to the position of Tolan’s gun and the reasonableness of the Deputies’ use of force. The mistake doctrine does not save their argument that the use of force was reasonable. The Court finds no clear error with Judge DeSoto’s findings that a genuine dispute of fact exists as to whether the Deputies are entitled to qualified immunity.

Judge Desoto’s findings & recommendations are adopted in full. Defendants’ motions for summary judgment are denied.

(Following this ruling the parties mediated with CJ Johnson who made a double-blind recommendation of $525,000 which was accepted by both sides.)

Tolan v. Yellowstone Co. et al, 44 MFR 291, 11/22/22.

Nathan Wagner (Siefert & Wagner), Missoula, for Tolan; Dep. Yellowstone Co. Attys. Melissa Williams & Mark English.

VACCINATION ANTI-DISCRIMINATION: HB 702 permanently enjoined as unconstitutional and preempted by federal law as applied in healthcare settings… Molloy.

No party questions the authority of the Montana Legislature and Governor to exercise their authority to enact or modify public health and anti-discrimination laws. The challenge in this case stems from an ostensibly purposed anti-discrimination statute — HB 702 (2021) — and its incongruent impact on healthcare providers and patients, hospitals, nursing homes, doctors’ offices, immunocompromised individuals, and health care workers. The legislation was enacted when political and individual concerns came to light around 12/20 during a worldwide health crisis that caused millions of deaths, inundation of hospital beds, exhausted and depleted equipment, and the need to deal with a remarkably lethal pathogen identified as COVID-19. Federal, state, and local governments took steps to try to minimize and thwart the consequences of the pandemic. Individuals of different persuasions or views objected to COVID-19 vaccinations because they had been developed on seemingly short timelines or for religious or other reasons including being against any vaccination. Some objected to COVID-19 vaccination mandates and other recommended steps to minimize the terror of the pandemic including business restrictions and imposed precautions affecting individuals.

It was in this environment that HB 702 was enacted. Whether by intent or by oversight it did not deal specifically with COVID-19 but encompassed all vaccines. Its scope & breadth caused critical concerns for healthcare providers by limiting their ability to know the vaccination status of patients and employees. It preemptively precludes providers and other employers from knowing the vaccination status of employees or patients if the employee or patient refuses to answer any inquiry about vaccination or immunity passports. The statutes allow a question but no one must answer. That situation creates untoward problems for providers of any description in trying to protect the environment where services to patients are rendered and to prevent the spread of diseases.

The striking irony for the Court stems from an acknowledgment of the role of Dr. Maurice Hilleman in the history of the development and efficacy of vaccines. He is known as the “Father of Modern Vaccines.” The irony is that he was born in Miles City, graduated from Montana State College in 1975, and was the most prolific vaccine scientist of the 20th Century. He is estimated to have saved more lives through vaccines he invented than any other medical scientist. Among the many he developed are hepatitis A and B, Hemophilus influenza type B pneumococcus, meningococcus, and Varicella (chicken pox) and he was the first to combine viral vaccines when he created the MMR vaccine for measles, mumps, and rubella. The importance and efficacy of vaccines is clear if only from his accomplishments; his measles vaccine alone is credited with preventing almost a million deaths.

Following a hearing 3/18/11 a preliminary injunction was granted against enforcement of §312. Plaintiffs seek a permanent injunction against Defendants from enforcing §312 in healthcare settings on the grounds that it is preempted by ADA, OSHA, and CMMS regulations, unconstitutional under the equal protection clauses of the Montana and US constitutions, and unconstitutional under the inalienable rights section of the Montana Constitution.

A 3-day bench trial was held to determine whether MCA 49-2-312 & 313 offend the Supremacy Clause or federal and state constitutional principles of equal protection or protection of inalienable rights. (Because §313’s sole purpose is to except certain health care settings from the protections of §312, a reference to §312 assumes discussion of both sections.) Having heard or read all the evidence, I find that §49-2-312 is unconstitutional and is preempted by federal law.

§49-2-312 was not enacted exactly as drafted. Gov. Gianforte’s lawfully exercised amendatory veto creates the constitutional problem. The Legislature passed HB 702 and transmitted it to the Governor 4/28/21. He returned an amendatory veto the same day stating that “no person should be compelled to involuntarily divulge their personal health information as a condition of participating in everyday life” and that his amendments would ensure that the bill would not put licensed nursing homes, long-term care facilities, or assisted living facilities in violation of Centers for Medicare and Medicaid Services regulations and healthcare facilities would not violate the bill by asking employees about their vaccination status for the purpose of providing an accommodation to protect the safety of unvaccinated or nonimmune individuals. The Legislature incorporated his amendments and returned HB 702 for his signature.

Defendants argue that the Legislature, exercising its “police power,” can authoritatively classify §49-2-312 as an anti-discrimination law. It is codified within “Prohibited Discriminatory Practices” of the Human Rights Title, Title 49. Despite this stated purpose, it restricts management in healthcare settings from establishing vaccination status to assist with setting workplace policies or vaccination requirements regarding any vaccine-preventable disease. It also severely limits healthcare settings’ ability to prevent or minimize the risk of spreading preventable infection during current or a future mass-infection or pandemic health crisis.

Plaintiffs proved that vaccinations have been and continue to be a critical tool in the public health “toolbox” when creating a safe and effective healthcare environment. Vaccines approved by the FDA under emergency authorization or traditional approval processes are deemed scientifically safe & effective. Even so, resolution of this case does not turn on whether vaccines are safe and effective, but whether §312 is preempted by federal law or is unconstitutional. It is in both instances.

Defendants argued one specific issue or defense at trial — that Plaintiffs lack standing to bring these claims. Because Plaintiffs have standing and §312 is both preempted by federal law and violates the Montana and US Constitutions, they are entitled to permanent injunctive relief against enforcement of §312 in healthcare settings. Defendants are further enjoined from enforcing the law as it relates to the COVID-19 vaccine against all healthcare facilities and individual practitioners and clinics subject to the CMMS Interim final rule so long as that rule remains in effect.

MMA et al v. AG Knudsen and Labor & Industry Commissioner Esau, 44 MFR 290, 12/9/22.

Justin Cole & Kathryn Mahe (Garlington, Lohn & Robinson), Missoula, for Plaintiffs; Raphael Graybill (Graybill Law Firm), Great Falls, for Plaintiff Intervenor Montana Nurses Association; Brent Mead, Christian Corrigan, and Michael Russell (Montana DOJ), and Emily Jones (Jones Law Firm), Billings, for Defendants.

SSD/SSI: 2015/16 applications improperly denied by ALJ Marchioro in light of treating physician opinions and Claimant’s testimony as to panic disorder and agoraphobia pursuant to pre-17 regulations… Court initially erred in applying new standard to affirm ALJ… Morris.

Shauna Winters applied for disability benefits in 9/15 and SSI in 12/16, both alleging disability beginning 8/7/15. ALJ John Arkoosh identified that she had severe impairments including history of brain trauma resulting from a brain aneurysm as well as anxiety and ADHD, but that they did not meet or medically equal severity of a listed impairment and that she has only moderate limitations in her ability to interact with others, mental functioning, and ability to adapt or manage herself. She requested a hearing which was held in Boise in 12/17. Arkoosh concluded that she was not disabled 8/7/15 through the date of his decision 4/2/18. She requested review which the Appeals Council granted and remanded for hearing before ALJ Stephen Marchioro. He issued an unfavorable decision 10/16/20. The Appeals Council denied Winters’s appeal. She petitioned this Court to reverse or remand Marchioro’s decision. The Court affirmed Marchioro. Winters moved to alter judgment due to the Court’s reliance on §404.1520c which applies only to cases filed after 3/27/17. The Court agrees that applying the new standard constitutes clear error and submits the following amended order.

For claims filed before 3/27/17 an ALJ determines disability status by considering the opinions of “acceptable medical sources” which include physicians, psychologists, optometrists, and podiatrists. Non-acceptable medical sources (“other sources”) include nurse practitioners, physician assistants, clinical social workers, naturopaths, chiropractors, audiologists, and therapists. The 9th Circuit, based on regulations in effect at the time Winters filed her claim, distinguishes among treating physicians, examining physicians, and non-examining physicians and each is accorded a different weight.

Winters argues that Marchioro inappropriately rejected the opinion of LCSW Tricia Harsch because she submitted the only opinion based on a treating relationship. However, social workers are not “acceptable medical sources” that an ALJ may consider under the pre-17 standard. Marchioro gave her opinion limited weight and provided germane reasons for doing so. He accorded greater weight to the opinions of the state agency reviewing physicians which, on its own, represented a germane reason to discount Harsch’s opinion.

Winters argues that Marchioro failed to give proper weight to her examining physician Psychologist Michael Emery and failed to offer legitimate reasons for rejecting his testimony. He diagnosed Winters with cognitive dysfunction due to aneurysm, anxiety disorder with panic attack, agoraphobia, obsessive compulsive disorder, depression, and childhood sexual trauma. He opined that her short-term memory was markedly impaired and her long-term memory was variable and noted that her social functioning and general adaptation were markedly impaired by memory loss, emotional liability, agoraphobia, and panic attacks. Marchioro discounted Emery’s opinion because it was formulated based on Winters’s “one time visit” and “necessarily based to some extent, perhaps a great extent, on claimant’s self-report and presentation on this single occasion.” That he “examined Plaintiff only once is not a specific, legitimate reason for rejecting a doctor’s opinion.” Xiong (E.D. Cal. 2010). Marchioro’s findings also lacked detailed reasons to support the conclusion that a brief treatment note controverts Emery’s thorough examination and diagnosis. Marchioro’s explanation for discounting Emery’s opinion fails to provide specific and legitimate reasons. He erred in discounting them.

Marchioro erred in finding that Winters’s agoraphobia and panic disorders are non-medically determinable at step 2. He disregarded the record, which includes acceptable medical evidence resulting from psychologists’ examinations and evaluations, as well as Winters’s consistent reporting of panic disorder symptoms. He recognized her impairment when reporting that she “has a history of treatment for obsessive compulsive disorder/panic disorder” but takes issue with Emery’s opinion because his diagnosis represents the only diagnosis. A psychologist is a qualified medical source for diagnosing mental impairments. The regulations do not require that the record include multiple diagnoses. Even if one existed, Winters’s treating physicians including Dr. Lyons, Dr. Bastian, Dr. Gage, and Dr. Morelli all reported that she had symptoms connected to panic disorders. Her panic and agoraphobic disorders were diagnosed by an acceptable medical source using objecting testing.

Marchioro also disregards Winters’s self-reported symptoms related to panic disorders. For example, she reported that she is “just afraid to walk out her door,” she has anxiety about leaving the house alone, and she avoids interactions with others. Marchioro erred in relying on her failure to seek or follow prescribed treatment. She explained that in some instances she has not refilled medications due to negative side effects, financial reasons, and terminated health insurance, and in some instances she has not followed prescribed treatment such as mental health counseling. She provided adequate reasons that may be attributed to her mental impairment rather than her own preferences. Marchioro reports that she “usually goes out of her house every day to perform various activities.” However, her testimony and the record demonstrate that she leaves to attend doctor appointments and counseling and rarely leaves otherwise.

Marchioro found Winters’s panic disorder not medically determinable. As a result he did not consider any resulting limitations at step 4. His error clouded his evaluation of the opinion evidence and her subjective reports. He erred in denying her application.

Remand for an immediate award of benefits proves appropriate. The record is fully developed and further proceedings would serve no useful purpose.

Winters v. SSA, 44 MFR 289, 12/13/22.

Eric Rasmusson (Rasmusson Law Offices), Missoula, of counsel for Olinsky Law Group, for Winters; AUSA Victoria Francis and Special AUSA Sara Moum.

INSURANCE: No coverage under homeowner policy for embezzlement claims… Haddon.

Mountain West Farm Bureau issued a Country Home Policy to Janna & Adam Pummill which was in effect 11/14 to 8/19 when it was converted to a City Squire Policy. It afforded personal liability defense & coverage under Section II — “Farm Liability Coverage,” Coverage F, for bodily injury. Coverage, but not a defense, was provided under Section II, Coverage M, for damage to property of others caused by an insured. Section V provides Umbrella Coverage for bodily injury, property damage, or personal and advertising injury.

Joshua Patterson, Patterson Enterprises Inc. and Rocky Mountain Equipment sued Adam Pummill in Missoula Co. State Court alleging that he and Patterson had joint business dealings in which he as business manager of PEI and RME had full access to their bank accounts, financials, and QuickBooks but never had authority to sign checks. They asserted that he embezzled money from both companies, which caused PEI financial difficulty in 6/17 and to sell equipment at or below market value to avoid repossession. An audit disclosed that he had embezzled hundreds of thousands of dollars “to fund his lavish lifestyle” including $5,000 of company funds for Janna’s breast augmentation surgery, personal truck payments, and non-business-related expenses.

The complaint asserted breach of duty of loyalty, breach of duty of care, conversion, unjust enrichment, tortious interference with business relations or prospective economic advantage, NIED, negligence, actual & constructive fraud, and actual malice.

Adam demanded coverage for defense. Mountain West assumed defense under a full reservation of rights.

Janna sued Patterson in Missoula Co. State Court claiming that he authored and published a Facebook post about her that disclosed private healthcare information. Patterson counterclaimed against Janna alleging conversion and unjust enrichment for using company funds for her breast augmentation. The counterclaims were consolidated into the underlying action. Janna demanded coverage under the policy for defense. Mountain West assumed defense under full reservation of rights.

Mountain West requests a declaration that it no longer has a duty to defend and has no duty to indemnify Pummills. A hearing was held 11/30/22.

Pummills acknowledged in their answer to Mountain West’s 1st amended complaint that “bodily injury” was not articulated in the underlying action and that the Patterson counterclaims do not allege “bodily injury” as defined in Coverage F. Given their failure to file a statement of disputed facts in response to Mountain West’s statement, no genuine material dispute of fact exists, including that the underlying actions do not allege “bodily injury.”

Pummills do not assert that “property damage” is applicable in the underlying actions that establish coverage. All allegations are economic and do not constitute “property damage” under Montana law. Windfall (D.Mont. 2016) (“Under Montana law, there is no ‘property damage’ when only economic damage is alleged in the underlying complaint.”) (citing Graber (Mont. 1990)).

The underlying allegations against Adam involve his role as PEI’s and RME’s business manager providing access to company finances and accounting systems to embezzle money and thereby cause them to lose money and credibility. Similarly, the allegations against Janna concern conversion and unjust enrichment, tied directly to business and economic litigation issues. No “occurrence” exists when an insured acts intentionally and “the consequences of those acts are objectively intended or expected from the standpoint of the insured.” Fisher (Mont. 2016). The underlying allegations asserted that Pummills intended their actions and the consequences. “Property damage’ caused by an “occurrence” is not alleged.

Summary judgment is granted for Mountain West.

Mountain West Farm Bureau Mutual Ins. v. Pummill, 44 MFR 288, 12/1/22.

Bradley Luck & Leah Handelman (Garlington, Lohn & Robinson), Missoula, for Mountain West; James O’Brien (O’Brien Law Office), Missoula, for Pummills.

INSURANCE: Injured driver of leased mail truck employed by USPS contractor excluded from auto policy coverage under truck policy by Comp Exclusion because contractor had statutory obligation to provide comp even though it did not do so… summary judgment for insurer on remand from reversal of summary judgment for insurer based on Employee Exclusion… Morris.

Triple L maintained contracts with the USPS to deliver mail to rural areas near East Glacier. It owned no trucks and directly employed no drivers, but contracted with 3rd parties for trucks and drivers. It obtained its drivers from Phoenix, RCM. and leased its trucks from Penske.

Jeffrey Love is president of Triple L. His wife Milka is president/secretary/treasurer. Triple L initially employed drivers to perform its USPS contracts. Milka formed Phoenix in 2004 and Triple L transferred its drivers to Phoenix partly as a means of avoiding higher work comp rates that resulted from Jeffrey having been injured while working for Triple L. Triple L and Phoenix are registered under the same email address and operate from Loves’ residence.

John Oeleis was allegedly injured while operating a tailgate lift on a Triple L leased truck 12/7/16. He submitted a claim under Phoenix’s comp policy and filed a separate action against Triple L and Penske in Gallatin Co. State Court alleging negligence and violation of Montana’s OSHA.

State Farm insures the trucks that Triple L leases from Penske. The Employee Exclusion bars coverage of damages for injury to Triple L’s employees that arise out of that employee’s employment. The Workers’ Compensation Exclusion bars coverage of damages for injury that would otherwise be covered by a comp policy.

State Farm issued a reservation of rights letter to Triple L and filed this declaratory action. It argued in its initial summary judgment briefing that the policy excluded Oeleis’s injuries under both exclusions. Triple L argued that it covered Oeleis’s injuries because Phoenix employed Oeleis. The Court granted summary judgment for State Farm, finding that Oeleis served as a Triple L employee and that the Employee Exclusion barred coverage because he qualified as an employee under Montana’s 4-factor “control test.” The 9th Circuit reversed (2-1 memorandum). On remand, this Court ordered supplemental briefing and conducted a new hearing 10/27/22. State Farm contends in its supplemental briefing that the Comp Exclusion bars coverage.

The 9th Circuit determined that the Court erred in applying Montana’s “control test” rather than analyzing the Employee Exclusion according to its “usual, common sense meaning.” It looked to the Montana Supreme Court’s interpretation of the “usual and common sense meaning” of “employee” in the context of insurance exclusions that seek to bar coverage for injuries to an insured’s employees. Horton (Mont. 2003) determined that “employee” in this context instead “refers to all those engaged in services for wages and salary by another.” The 9th Circuit concluded that Oeleis was not Triple L’s employee because Phoenix — not Triple L — paid his wages.

This Court’s initial summary judgment declined to address State Farm’s argument that the Comp Exclusion also applies and the 9th Circuit did not consider the Comp Exclusion.

The Comp Exclusion states: “There is no coverage for an insured or for that insured’s insurer for any obligation under any type of workers’ compensation, disability, or similar law.” State Farm asserts that the plain language bars coverage because Triple L was obligated under the Montana WCA to provide comp. Triple L responds that the Comp Exclusion does not apply or that its language is ambiguous requiring construction in favor of extending coverage to Triple L.

“The party seeking the benefit of a particular policy provision bears the burden of proving its application.” Ribi (Mont. 2005). State Farm argues that the WCA supplies the standard for analyzing the Comp Exclusion. Triple L urges the Court to avoid looking to the WCA to understand the exclusion’s meaning and scope and instead import the 9th Circuit’s Employee Exclusion analysis into its evaluation of the Comp Exclusion. The Court declines the invitation. The plain text of the Comp Exclusion indicates clearly that comp law supplies the legal standard. The Comp Exclusion specifies that the policy bars coverage “for any obligation under” comp law.

The 9th Circuit opinion additionally draws an explicit distinction between the scope of insurance law and comp law. Exclusions to insurance coverage generally must be “narrowly and strictly construed because they run contrary to the fundamental protective purpose of an insurance policy.” Triple L (quoting ALPS (Mont. 2021)). Comp law sweeps more broadly due to its “distinct protective purpose of providing benefits to a broader category of workers.” Triple L (citing MCA 39-71-105(1); Carlson (Mont. 1983).

Courts in this District have applied Montana’s comp law when interpreting similar comp exclusions. Colmore (D.Mont. 2007) concerned insurance liability for the death of a ranch employee. Tutvedt (D.Mont. 2012) involved insurance liability for a farm employee’s injuries. They analyzed the comp exclusions under the WCA and concluded that they barred coverage.

Triple L relies on Animals of Montana (D.Mont. 2015) to argue that the definition of “employee” in the State Farm policy should dictate the Court’s analysis. It addressed potential insurance coverage under the employer’s liability policy for injuries suffered by a short-term employee who had been fatally mauled by a grizzly. The comp exclusion barred coverage “for any injury to any employee(s) &/or independent contractor(s) &/or volunteer(s).” The insurer admitted that potential application of the exclusion “ultimately depends” on the policy’s definition of “employee” and Judge Lynch concluded that it controlled. The definition excluded temporary workers. The policy failed to define “temporary worker.” The insurer urged the Court to look to the WCA for guidance as to who constitutes a “temporary worker.” Lynch rejected this invitation when the policy failed to define “temporary worker” in any manner, let alone in a manner that had been “crafted in consideration of workers’ compensation law.” He concluded that a material fact question remained as to whether the worker qualified as a “temporary employee” and denied summary judgment on the basis that the insurer had failed to prove his employment status.

Animals is distinguishable because its exclusion differs significantly from the State Farm Comp Exclusion and because State Farm has made no claim that the definition of “employee” should be used in determining coverage, but argues instead that the WCA’s statutory scheme controls the definition of “obligation” under comp law.

State Farm argues that Triple L owed Oeleis an obligation under the WCA to obtain comp. Triple L counters that it owed no obligation because Phoenix employed him, and additionally claims that the Comp Exclusion applies only where an insured seeks coverage for obligations arising directly from a comp claim, and no obligation arose because it never obtained comp for Oeleis. Both of Triple L’s arguments falter.

First, Triple L cannot rebut the presumption that it employed Oeleis for purposes of comp law. MCA 39-71-118(6) (employees who are leased to another company are “presumed to be under the control and employment” of the company to which they are leased). The 9th Circuit left undisturbed this Court’s findings that “Triple L maintained the right to exercise significant control over the detail of Oeleis’ work” and that it “retained exclusive supervisory control over all aspects of the bulk mail delivery operations and equipment, particularly including safety.” Triple L — not Phoenix — retained control over “all aspects” of Oeleis’s work. MCA 39-71-117(3). Oeleis qualifies as a Triple L employee for purposes of the WCA.

Second, Triple L misconstrues the nature of obligations under comp laws. Comp exclusions typically preclude coverage for injuries where an employer has an obligation under comp law that could have been handled through a comp claim. Producers Dairy (Haw. 1987). Whether an employer obtained comp is immaterial. To reward an employer for failing to abide by its statutory obligations would undermine public policy and create perverse incentives for employers. MCA 39-71-105. “Where an employer has failed to comply with the workers’ compensation statute, liability in actions for damages expressly permitted by the workers’ compensation statute in that situation” constitutes an obligation under workers’ compensation law. Tri-State (Wash. 1984). The insured in Evanston (C.D.Cal. 2010) had chosen not to obtain comp. The Court determined nevertheless that the policy barred coverage for the worker’s injuries “because the Policy at issue explicitly excludes [the insured’s] obligations under workers’ compensation law.”

Oeleis qualifies as Triple L’s employee under the WCA. MCA 39-71-118(1)(a). It owed him an obligation under the WCA to obtain comp. §401(1). It organized Phoenix in part to avoid higher comp rates after Jeffrey Love was injured while working for Triple L. Triple L now provides comp for its drivers and has admitted that not obtaining comp for Oeleis was a mistake. That it failed to obtain comp for him does not alter its obligations under the WCA. The Comp Exclusion in the State Farm policy bars Triple L’s coverage.

Triple L’s efforts to identify ambiguity in the policy are unavailing. It argues that “Insured” could mean either Triple L or Oeleis and that “Insurer” could mean either State Farm or some other insurer. An “obligation,” according to Triple L, means an obligation imposed on an insured “pursuant to a workers’ compensation or disability claim.” These purported inconsistencies differ markedly from the conflicting provisions in Holeman (Mont. 1998) and Mitchell (Mont. 2003). The policy in Holeman imposed contradictory requirements on claimants that made compliance with both provisions impossible. The policy in Mitchell contained limitations that contravened a consumer’s reasonable expectation of coverage and rose to the level of public policy violations. No such ambiguity exists here. A reasonable consumer would interpret “Insured” as Triple L, the listed insured in the State Farm policy. Triple L’s suggested interpretation of “obligation” mirrors its unsuccessful arguments as to applicability of the Comp Exclusion.

Summary judgment is granted for State Farm.

State Farm Mutual Auto Ins. v. Triple L, Penske Truck Leasing, and Oeleis, 44 MFR 287, 12/2/22.

Bradley Luck & Leah Handelman (Garlington, Lohn & Robinson), Missoula, for State Farm; Matthew Haus (Tarlow, Stonecipher, Weamer & Kelly), Bozeman, for Triple L; Mark Kovacich & Ben Snipes (Kovacich Snipes Johnson), Great Falls, for Oeleis.