PERSONAL JURISDICTION not exercised over Pennsylvania/Tennessee LLC that manufactured heater that allegedly caused fire in National Guard shelter assembled by Montana corporation using HVACs created by Florida corporation… Christensen.

A National Guard “Unified Command Suite B2 Custom Made Shelter” ignited in Ohio 12/19/17. It was assembled in Montana by Nomad Global Communication Solutions, a Montana corporation, using HVAC units created by Hoseline, a Florida corporation. Nomad furnished Hoseline expense reports for its incurred and expected damages related to the fire remediation and filed this action against Hoseline claiming product liability, breach of contract, and breach of warranty for delivering faulty HVAC components. Hoseline answered Nomad’s complaint and impleaded Tutco, a Pennsylvania LLC with its principal place of business in Tennessee, which manufactured the open coil heater component that was incorporated into the Hoseline HVAC. Nomad asserts claims against Tutco for product liability, negligence, breach of warranty, and contribution & indemnity. Tutco moves to dismiss Hoseline’s 3rd-party complaint for lack of personal jurisdiction.

Tutco sold the heater to Hoseline, and Hoseline sold the HVAC unit to Nomad. Tutco advertises its products nationally through its website, sells its products in Montana directly and indirectly, and derives part of its revenue from Montana. It filed the declaration of former National Sales Manager Richard Farrell that while “Tutco has customers that may have locations in Montana,” it does not “design any products specifically for use in Montana, does not market any product specifically to [or for use in] Montana, and does not direct any advertising specifically into Montana.” He states that in 2018-19 its sales to Montana businesses only accounted for .002% of its annual sales and as of 12/11/20 it had not made any sales to Montana businesses during the year. Otherwise, according to Farrell, Tutco has little to no contacts with Montana and no knowledge that Hoseline was selling its products to “Nomad in Montana or elsewhere.” Neither Hoseline nor Nomad filed affidavits or declarations opposing Tutco’s motion to dismiss.

General jurisdiction over Tutco is absent. It is undisputed that it is a Pennsylvania LLC headquartered in Tennessee. In other words, it is not incorporated in Montana nor does it have its principal place of business here. Accordingly, only under exceptional circumstances, not present here, would Tutco be considered “at home” in Montana.

Hoseline and Nomad contend that this standard is met because of Tutco’s substantial dealings in Montana: it advertises nationally through its website, directly sells some of its products in Montana, indirectly sells through the stream of commerce its products to Montana buyers, derives some part of its revenue from Montana, and its sales to Montana accounted for .002% of its 2018-19 sales. But even under these facts, its business dealings with Montana are not “so constant and pervasive” as to render this the “exceptional case” where exercise of general jurisdiction would be proper. Indeed, the out-of-state corporation in Martinez (9th Cir. 2014) arguably had a greater presence in the forum state, yet the Court held that those contacts were not sufficient to satisfy the “exceptional circumstances” standard of Daimler (US 2014).

Although Hoseline’s arguments regarding the potentially misleading character of Tutco’s .002% figure are valid, it cites no cases suggesting that an out-of-state corporation’s annual revenue of “many millions of dollars” from a forum state is sufficient to subject it to general jurisdiction.

The Court agrees with Tutco that specific jurisdiction is not proper under Montana’s long-arm statute because the tort did not “accrue” in Montana. To the extent that Ford (US 2021) affects this Court’s analysis, it only pertains to the relatedness element of the constitutionality of specific jurisdiction. Clarke (D.Nev. 2021) (the impact of Ford on personal jurisdiction jurisprudence is invalidation of the 9th Circuit’s but-for test for determining relatedness). However, since the long-arm statute fails here, this Court need not address the relatedness element of the constitutionality prong. Tackett (Mont. 2014).

Montana’s long-arm statute permits exertion of personal jurisdiction over any person subject to a “claim for relief arising from the commission of any act resulting in accrual within Montana of a tort action.” MRCivP 4(b)(1)(B). Tutco asserts that the tort did not accrue in Montana because the “injury causing event” — the fire — occurred in Ohio. Hoseline and Nomad contend that it accrued in Montana because the injury to Hoseline — its damages related to the repair and remediation — occurred in Montana. The Court agrees with Tutco; the tort accrual provision does not establish personal jurisdiction over Tutco.

A tort accrues “where the events giving rise to the tort claims occurred, rather than where the plaintiffs allegedly experienced or learned of their injuries. Tackett. The plaintiff in Tackett alleged that the out-of-state defendants procured a wire transfer from plaintiff’s Montana bank account under false pretenses and with the intent to defraud him. However, the alleged conspiracy was formulated and executed outside of Montana, the defendants’ actions all occurred outside of Montana, and the only “link” to Montana was the plaintiff. The plaintiff’s “single act of authorizing his local bank in Montana to wire funds to the defendants is insufficient to establish that his tort action accrued in Montana.” Id. Nomad may have experienced or discovered its injury in Montana, but the events giving rise to the tort claim, at least those involving Tutco, did not occur in Montana. The only contacts with Montana occurred when Hoseline sold the HVACs containing Tutco’s heaters to Nomad and when Nomad suffered its damages related to the Ohio fire.

Hoseline also argues that a different rule governs product liability cases, citing Ford (Mont. 2019) and several decisions from this Court for the proposition that a tort action accrues in the state where the injury is suffered. Its assertion is mistaken. In Ford, the Montana Supreme Court confined its long-arm analysis to one short paragraph wherein it held that the tort accrued in Montana because the plaintiff was “driving in Montana when the accident occurred.” Contrary to Hoseline’s assertion, it did not suggest that a product liability tort accrues where “the injury was suffered.” The remainder of the opinion concerned the constitutionality prong of specific jurisdiction, not the tort accrual provision, and the US Supreme Court’s affirming opinion did not address Montana’s long-arm statute. Additionally, this Court’s decisions in the context of product liability are inconsistent with Hoseline’s argument. In Meeks (D.Mont. 2019), Rodoni (D.Mont. 2019), and Bullard (D.Mont. 1967), individual consumers were physically injured through use of out-of-state defendants’ products in Montana, while the “injury causing event” here is the fire in Ohio — not physical injuries to consumers in Ohio, but economic damages that Nomad suffered in Montana due to the fact that Nomad is a Montana corporation. Thus this case is more in line with Tackett than any of the product liability cases illustrated above. But even under the logic of these cases — that a tort accrues where the injury causing event occurred — Hoseline does not prevail because the injury causing event was the fire which occurred in Ohio. Therefore Montana’s long-arm statute does not permit exercise of specific jurisdiction over Tutco because it did not commit any act resulting in accrual of a tort in Montana.

Hoseline and Nomad argue in the alternative that the Court should grant jurisdictional discovery to determine whether Tutco has more contacts with Montana that might subject it to either general or specific jurisdiction. It asserts that it expects to discover how long Tutco has been providing products to Montana, what products it provides to Montana, whether its business in Montana has been continuous or intermittent, its monetary sales in Montana, its share of the open coil heater market in Montana, whether it sends sales reps to Montana, whether it has a subsidiary or parent in Montana, and the identity of the manufacturers that incorporate Tutco products. However, discovery in those areas is unlikely to reveal facts that would support exercise of general jurisdiction, nor do Hoseline or Nomad assert specifically how jurisdictional discovery will yield more facts to support specific jurisdiction.

Tutco’s motion to dismiss is granted.

Nomad Global Communication Solutions v. Hoseline; Hoseline v. Tutco; 44 MFR 242, 4/14/21.

Dominic Cossi (Western Justice Associates), Bozeman, for Nomad; Brad Condra (Milodragovich, Dale, & Steinbrenner), Missoula, for Hoseline; Ryan Heuwinkel (Bohyer, Erickson, Beaudette & Tranel), Missoula, for Tutco.

INSURANCE: Coverage under homeowners or umbrella policies for damages claimed by buyers of house whose trusses had been modified to expand living area precluded by “real estate sale,” “owned property” exclusions… insurer that defended under reservation entitled to recoup defense costs… Cavan.

Matthew Grieshop built a house in Red Lodge in 2011-12 and added some rooms in 2015-16. He entered into a buy-sell with Joshua & Kate Delavan 4/27/19. They had it inspected and advised Grieshop of needed repairs. After the repairs were complete, they closed in 6/19. On 9/12/19 Delavans sued Grieshop in State Court alleging that Grieshop had caused damages to the trusses when he modified the home to accommodate additional living space and failed to disclose the modifications and/or damages. He tendered the suit to Safeco under his homeowners and umbrella policies. Safeco explained that it would provide a defense under reservation with the possibility of withdrawal and/or pursue a declaratory action as well as seek reimbursement for defense costs. It followed up 1/2/20 stating its reasons why it believed there was no coverage and urging Grieshop to consult an attorney. It again cautioned that he may be required to pay defense costs. The parties further disputed their coverage positions in a series of communications in which Safeco gave notice of intent to file this declaratory action, which it did 3/16/20. Grieshop and Delavans counterclaimed against Safeco for unfair settlement practices, breach of the implied covenant, and breach of fiduciary duty. Delavans seek a declaration that the policies provide coverage for their underlying claims. Delavans amended in 7/20, supplanting claims for negligent misrepresentation and fraud with claims for negligence-failure to disclose and continuing nuisance. Safeco sent Grieshop its updated coverage position addressing Delavans’ amended complaint and additional allegations. It informed him that it would continue to defend him subject to its reservation but cautioned that it would maintain this declaratory action. The parties request summary judgment.

Safeco argues that the “real estate sale” exclusion clearly & unambiguously bars Personal Liability Coverage because the underlying suit stems from Delavans’ purchase of Grieshop’s property. It relies on Huckins (Mont. 2017) where a similar sale exclusion was found to bar coverage for failure to disclose information in a real estate transaction.

Grieshop counters that Safeco has a duty to defend under the umbrella policy because a claim for Defense Coverage does not involve a claim for “bodily injury, personal injury, or property damage” to which the real estate sale exclusion applies. He further argues that the real estate sale exclusion’s use of “arising out of” is inherently ambiguous under Montana law, citing Newman (D.Mont. 2014). He further asserts that under the merger doctrine set forth in Urquhart (Mont. 1998), the buy-sell was legally extinguished and precludes using the real estate sale transaction to deny indemnification under the policy.

Delavans contend that it is premature to adjudicate coverage because whether there are “defects” from Grieshop’s renovations is disputed in the underlying suit, “arising out of” in the real estate sale exclusion is ambiguous and should be construed against Safeco, and the facts giving rise to Delavans’ claims against Grieshop occurred prior to their purchase of his home and continue to occur and thus their damages do not necessarily arise out of the buy-sell.

The homeowners policy’s exclusions include:

Coverage E – Personal Liability does not apply to:

(3) liability arising out of any written or oral agreement for the sale or transfer of real property, including but not limited to liability for:

(a) known or unknown property or structural defects … [or] …

(d) concealment or misrepresentation of any known defects.

The umbrella policy contains a similar “real estate sale” exclusion:

This policy does not apply to any:

…

5. bodily injury, personal injury, or property damage:

f. arising out of a written or oral agreement for the sale or transfer of real property, including but not limited to liability for:

(1) known or unknown property or structural defects … [or] …

(4) concealment or misrepresentation of any known defects, including but not limited to fungi, wet or dry rot, or bacteria.

The plain language of the policies unambiguously excludes coverage for claims that arise out of written or oral agreements for the sale or transfer of real property, including liability for known or unknown property or structural defects and concealment or misrepresentation of known defects.

Delavans’ claims are premised on Grieshop’s modification of the trusses and his failure to advise them of the alleged damages to the trusses prior to the sale. They state 9 causes:

I. negligence-property damage;

II. negligence-failure to disclose;

III. continuing nuisance;

IV. constructive fraud;

V. negligent infliction of emotional distress;

VI. breach of contract;

VII. breach of the implied covenant;

VIII. attorney fees;

IX. recision.

The underlying factual basis for all of them is the same: his modification of the trusses and sale of the property. While all claims arguably fall within the real estate sale exclusion, the claims in Counts II, IV, VI, VII, VIII, and IX unequivocally fall within the exclusion. For each of them, the allegations relate directly to sale of Grieshop’s property to Delavans. Count II alleges that Grieshop owed them “a duty to disclose all material adverse facts with respect to the home that they had listed for sale.” Thus Grieshop’s alleged duty and breach relate directly to the sale of the home. Count IV is expressly based on Grieshop’s alleged duty to disclose the damage to the trusses “so that [Delavans] could make an educated decision as to whether or not to purchase the home.” Count VI alleges breach of the purchase agreement for failing to disclose material adverse facts and defects. Count VII alleges breach of the implied covenant for lack of honesty by taking advantage of Delavans “as unsophisticated homebuyers and failing to disclose adverse material facts and defects with respect to the home.” Count VIII seeks attorney fees pursuant to the buy-sell. Count IX seeks rescission of the buy-sell because Delavans allege that they gave consent based on Grieshop’s fraud, mistake of facts, and misrepresentations. Since all of these claims are clearly based on the sale of the property, they are unequivocally excluded by the real estate sale exclusion.

Both Grieshop and Delavans argue that “arising out of” in the real estate sale exclusion is ambiguous but offer no alternative reasonable interpretation or authority demonstrating that it is ambiguous in the context of a similar real estate sale exclusion. Accordingly, the Court does not find that the real estate sale exclusion is ambiguous.

Urquhart applied the merger doctrine to a dispute over whether covenants in a contract for deed merged into a warranty deed. Even assuming that Urquhart has some relevance to the underlying suit, it has nothing to do with application of an insurance policy’s real estate exclusion.

Delavans argue that there is a disputed fact issue in the underlying suit as to whether the truss alterations are “defects” that trigger the real estate sale exclusion and thus the coverage issue is not justiciable at this stage. However, the exclusion does not require a “defect” to exclude liability arising from a real estate transaction. It provides that there is no coverage for liability arising out of any “written or oral agreement for the sale or transfer of real property, including but not limited to liability for known or unknown property or structural defects.” “Including but not limited to” plainly shows that a “defect” is not a prerequisite to trigger the exclusion. Thus, regardless of whether a “defect” is found in the underlying suit, Delavans’ claims are excluded if they arise out of an agreement for the sale of a residence.

Counts I, III, and V are also likely excluded by the real estate sale exclusion. In Count I Delavans allege that Grieshop owed them a duty “as prospective purchasers of the residential premises at issue in this case, to avoid causing damaging to the property” and he breached that duty when he altered the trusses. His alleged duty is therefore based on their status as prospective purchasers. Additionally, if no sale occurred, he would owe no general duty of care to them in relation to the residence. In Count II they allege that the damage to the trusses interferes with enjoyment of their property. They argue that their nuisance claim does not solely arise out of the real estate transaction — that Grieshop is liable for damaging the trusses before they bought the home and the negligent remodel is a continuing nuisance. Yet, without the agreement for sale of the property they would have no claim against him. They did not suffer any property damage or injury at the time the trusses were damaged since they had no ownership interest in the property. In Count V they allege that Grieshop’s conduct caused emotional distress which was “a reasonably foreseeable consequence” of his negligent acts. But they did not suffer emotional distress when the trusses were altered, nor was their emotional distress foreseeable at that time. If not for the sale of the home they would not have suffered emotional distress, and their emotional distress would not have been a foreseeable consequence of Grieshop’s actions.

Nevertheless the Court must construe the allegations of a complaint in favor of finding the obligation to defend. But to the extent that those counts can be construed to relate to Grieshop’s actions in conducting the remodel, as opposed to the subsequent sale of the property, Delavans’ claims are also excluded by the “owned property” exclusion:

2. Coverage E — Personal Liability does not apply to:

b. property damage to property owned by an insured;

c. property damage to property rented to, occupied or used by or in the care of any insured.

Safeco argues that it has no obligation to defend or indemnity Delavans’ claims that Grieshop “damaged his own home before selling it to the Delavans.” Delavans assert that the exclusion is ambiguous and also does not apply to them as subsequent owners and 3rd-party beneficiaries under the policy. Grieshop argues that it does not apply because he “no longer owns the house and did not own the house when Delavans initially made their claim.”

Safeco plainly has the better argument, which is supported by several closely analogous cases. For example, in Panico (10th Cir. 2011), the underlying action involved sale of a home built by Panicos. After the sale, they were sued by the purchaser for serious design and construction defects. The district court determined that the claims were not covered by the policy and the 10th Circuit agreed, relying in part on an exclusion for “property damage to property rented to, occupied or used by or in the care of any insured.” It collected cases from other jurisdictions which “have held that an owned property exclusion bars coverage of a home purchaser’s negligence claims against the insured.” Then it concluded that the exclusion applied because “Panicos owned the property at all relevant times, i.e., when the Panicos made the alleged misrepresentations to the buyers, when the Panicos negligently constructed the property, and when the Panicos maintained the property.” The same straightforward conclusion applies here. Grieshop owned the property when he altered the trusses and allegedly caused the damage which is the subject of Delavans’ claims. The owned property exclusion unequivocally bars coverage of Delavans’ claims against him.

Grieshop’s argument that it does not apply because he no longer owns the house and did not own it when Delavans made their claim is unavailing. The policies provide personal liability coverage for suits against an insured for property damages caused by an occurrence. Occurrence is defined as “an accident, including exposure to conditions which results in … property damage.” “‘Property damage’ means physical damage to or destruction of tangible property, including loss of use of this property.” Thus property damage occurs at the time of physical damage. Therefore if personal liability coverage existed it would trigger when property damage occurred, not when the claim was asserted. Delavans plainly allege that the damage to the property occurred when Grieshop altered the trusses. It matters not that they did not discover the problem until after transfer of the home.

Delavans’ remaining arguments against application of the owned property exclusion are similarly unpersuasive. It is not ambiguous because “property,” “property owned,” and “property used” are not defined by the policy. Oxford defines “property as “a (usually material) thing belonging to a person, group of persons, etc.; a possession; (as a mass noun) that which one owns; possessions collectively; a person’s goods, wealth, etc.” Black’s defines it as “any external thing over which the rights of possession, use, and enjoyment are exercised.” In accordance with these commonly understood definitions, a reasonable consumer of insurance products would have no difficulty understanding what would be included within “property,” “property owned,” and “property used.” Moreover, Panico and the numerous cases cited therein applied the exclusion without difficulty. None of the cases suggests that the exclusion is ambiguous for failing to define “property.”

Nor is there merit to Delavans’ argument that they are 3rd-party beneficiaries of the policies. Under Montana law, one cannot assume that they are a 3rd-party beneficiary under an insurance contract merely because they benefit from it. Diaz (Mont. 2011) (“There is a plain distinction between a promise, the performance of which may benefit a third party, and a promise made expressly for the benefit of a third party.”). To be a 3rd-party beneficiary, one “must be able to ‘show from the face of the contract that it was intended to benefit him or her.’” Id. Delavans are not the named insureds under the policies, which do not mention or identify them, and there is no indication from the face of the policies that they were intended to benefit them in any way.

Delavans alternatively contend that there is coverage for the damage to the trusses under the 1st-party Coverage A of the homeowners policy. They assert that the policy was in effect when Grieshop caused the damages and the fact that he has since transferred the property to them is of no consequence, and there are no exclusions which would bar coverage under Coverage A. However, they do not cite any authority for the proposition that 1st-party property coverages can benefit a subsequent purchaser or create a duty to indemnify the insured for claims that he negligently damaged his property. Moreover, they do not qualify as “insureds” under Coverage A which lists “Matt Grieshop” as the named insured and defines “Insured” as:

(1) you; and

(2) so long as you remain a resident of the resident premises, the following residents of the residence premises:

(a) your relatives;

(b) any other person under the age of 24 who is in the care of any person described in (1) or (2)(a) above.

Anyone described above who is a student temporarily residing away from your residence premises while attending school shall be considered a resident of your residence premises.

The policy further provides that “you” and “your” refer to the named insured shown on the Policy Declarations, which is Grieshop. Delavans do not fall under any of these definitions. There is no indication that the policy was intended to benefit Delavans or any subsequent purchaser in any way.

Grieshop also contends that he is entitled to a defense under the Defense Coverage provision of the umbrella policy regardless of coverage under the homeowners policy because its language only requires that his claim is not covered by his underlying insurance and that this prerequisite is met because Safeco has disclaimed coverage. The Court agrees with Safeco that Grieshop ignores the provision’s opening clause requiring that a claim be covered by the umbrella policy first and foremost and that since there is no coverage for Personal Liability, there can be no Defense Coverage.

Grieshop further argues that coverage should be provided under the umbrella policy because he reasonably expected that Safeco would provide a defense if a claim was not covered under the homeowners policy. However, “the reasonable expectations doctrine is inapplicable where the terms of the policy at issue clearly demonstrate an intent to exclude coverage.” Fisher (Mont. 2013).

Delavans request a stay pending resolution of the underlying suit, relying on Cameron (D.Mont. 2020), which stayed the indemnity part of the claim pending disposition of the underlying action or resolution of the duty to defend. The Court having determined that Safeco has no duty to defend, it likewise finds that it has no duty to indemnify. “A conclusion that there is no duty to defend compels the conclusion that there is no duty to indemnify.” Wessel (Mont. 2020). The Court therefore declines Delavan’s motion to stay pending disposition of the underlying suit.

Safeco is entitled to recoup defense costs paid on Grieshop’s behalf in the underlying suit pursuant to Ribi (Mont. 2005) (An insurer must timely and explicitly reserve the right to seek reimbursement and provide the insured with specific and adequate notice of the possibility of reimbursement.) Safeco wrote Grieshop 11/20/19 agreeing to defend him in the underlying suit but reserving its right to seek reimbursement of defense costs. Thus within 6 weeks of tendering the claim to Safeco he was given explicit notice of the right to seek reimbursement, which was reiterated in 4 subsequent letters. Grieshop’s reliance on Horace Mann (Mont. 2013) and Banjosa (D.Mont. 2019) and other cases for the proposition that equity does not favor reimbursement of attorney fees is unavailing since Safeco does not seek to recover fees expended in connection with prosecution of this action. Safeco is required to comply with Rule 54(d) to recoup its expenses but need not relitigate whether fees & costs are recoverable.

Because the Court has found that there is no coverage for Grieshop under the policies, his UTPA and bad faith claims necessarily fail. TIE (Mont. 2015). His claim for breach of fiduciary duty, based on Safeco’s request to recoup defense costs, likewise fails in light of the Court’s determination that Safeco is entitled to recover these costs.

Safeco Ins. v. Grieshop and Delavan, 44 MFR 241, 3/31/21.

Ryan Heuwinkel (Bohyer, Erickson, Beaudette & Tranel), Missoula, for Safeco; Joel Todd, Red Lodge, for Grieshop; Cory Gangle (Gangle Law Firm), Missoula, for Delavans.

INSURANCE: Personal jurisdiction found over non-contracting GEICO entities in 2nd amended complaint challenging subrogation practices… Molloy.

James Lee Const. and James & Tracy Lee represent a putative class challenging subrogation practices of GEICO and related entities. There are 4 motions pending. This order addresses only the personal jurisdiction component of GEICO’s motion to dismiss.

The Court previously granted GEICO’s motion to dismiss the non-contracting GEICO entities for lack of personal jurisdiction based in part on rejection of boilerplate allegations of personal jurisdiction based on a conspiracy theory. (MLW 8/15/20). GEICO again seeks to dismiss the GEICO entities with which Lees do not hold an insurance policy for lack of jurisdiction under Rule 12(b)(2), arguing that the 2nd amended complaint fails to comply with Rule 8(a)(2), the law of the case doctrine forecloses Plaintiffs’ attempt to reintroduce these previously dismissed entities, and Plaintiffs’ claims are not based on GEICO Indemnity’s and GEICO Casualty’s forum-related conduct.

Although a bit unusual in the personal jurisdiction context, GEICO first relies on Rule 8(a)’s demand for “a short and plain statement of the claim” to argue that Plaintiffs’ 2nd amended complaint presents a befuddling picture of how the non-contracting GEICO entities relate to this case that is insufficient to establish personal jurisdiction. This argument is better addressed in the context of analyzing their forum-related conduct.

GEICO further argues that this Court’s order dismissing the non-contracting GEICO entities mandates dismissal. But law of the case does not apply in the context of amended pleadings following a dismissal without prejudice. Askins (9th Cir. 2018). While a defendant is free to argue that the amended pleading does not cure the deficiencies identified in the original complaint and “the district court may decide the second motion to dismiss in the same way it decided the first,” the “court is not bound by any law of the case.” Id. The Court must therefore consider personal jurisdiction over the non-contracting GEICO entities anew.

Montana courts apply a 2-step test to determine whether they have personal jurisdiction over a non-resident. Milky Whey (Mont. 2015). First, they consider whether it exists under MRCivP 4(b)(1), which subjects parties to general jurisdiction if they are “found within the state of Montana” and to specific jurisdiction “as to any claim for relief arising from the doing personally, or through an employee or agent, of any” of the enumerated acts in Rule 4(b)(1)(A)-(G). Second, courts consider whether the exercise of personal jurisdiction comports with due process.

GEICO concedes that “GEICO Indemnity and GEICO Casualty conduct insurance operations, including subrogation activities in Montana.” Thus the GEICO entities, including the non-contracting entities “transact business within Montana” MRCivP 4(b)(1)(A). Step 1 of the specific jurisdiction inquiry is therefore satisfied.

The more complicated question is whether the exercise of jurisdiction is constitutional. The Due Process Clause requires that a defendant “have certain minimum contacts with [the forum state] that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe (US 1945). “Due process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the random, fortuitous, or attenuated contacts he makes by interacting with other persons affiliated with the State.” Walden (US 2014). The “minimum contact” requirements must be met as to each individual defendant. Bristol-Myers (US 2017).

Plaintiffs argue that personal jurisdiction exists because they were harmed by the in-state conduct of the GEICO Payment Recovery Unit which “the participating GEICO affiliates jointly utilize, direct and support” for all their subrogation activities, including activities in Montana. GEICO responds that “Plaintiffs’ allegation that GEICO Indemnity and GEICO Casualty utilized the Payment Recovery Unit for subrogation activities on other claims with respect to other insureds is insufficient” to confer specific jurisdiction. It maintains that “Plaintiffs’ claims simply do not arise from any of GEICO Indemnity or GEICO Casualty’s forum-related conduct.” Its argument is unpersuasive in light of Ford Motor (Mont. 2019).

GEICO premises its due process argument on the ground that Plaintiffs fail to causally connect the non-contracting entities’ forum-related conduct to Lees’ specific claims, relying on the Shute (9th Cir. 1990) test which asks whether “in the absence of” the defendant’s forum activity, the plaintiff’s “injury would not have occurred.” But as Ford Motor just made clear, such a “causation-only approach” improperly narrows the inquiry: “We have never framed the specific jurisdiction inquiry as always requiring proof of causation — i.e., proof that the plaintiff’s claim came about because of the defendant’s in-state conduct.” Rather, specific jurisdiction may also exist where a claim “relates to the defendant’s contacts with the forum.”

Plaintiffs have alleged that all the named GEICO entities utilize the Property Recovery Unit and jointly developed its subrogation procedures. They have also alleged that it operates within Montana and specifically worked on Lees’ claim. GEICO concedes that both GEICO Casualty and GEICO Indemnity utilize the Unit “for subrogation recoveries of their insureds under the insurance policies.” Plaintiffs’ wrongful subrogation claims therefore at minimum “relate to” the non-contracting GEICO entities’ use of the Unit and its subrogation of insurance claims in Montana. Moreover, these claims can only be brought in Montana in light of Montana’s unique subrogation laws and the fact that Lees are Montana citizens. Given the “strong relationship among the defendant, the forum, and the litigation,” specific jurisdiction exists. Id.

GEICO’s motion to dismiss is denied insofar as it seeks to dismiss GEICO Indemnity and GEICO Casualty for lack of personal jurisdiction. Its other arguments will be addressed by separate order.

James Lee Const. and Lee v. GEICO, 44 MFR 240, 3/25/21.

Alan Lerner (Lerner Law Firm), Kalispell, Allan McGarvey & Jinnifer Mariman (McGarvey Law), Kalispell, Brian Joos & Judah Gersh (Viscomi, Gersh, Simpson & Joos), Whitefish, and Evan Danno (Danno Law Firm), Kalispell, for Plaintiffs; Courtney Henson (Snell & Wilmer – Tucson), Sheila Carmody (Snell & Wilmer – Phoenix), and Ian McIntosh & William Morris (Crowley Fleck), Bozeman, for GEICO.

INSURANCE: Personal jurisdiction found over non-contracting GEICO entities in 2nd amended complaint challenging subrogation practices… Molloy.

James Lee Const. and James & Tracy Lee represent a putative class challenging subrogation practices of GEICO and related entities. There are 4 motions pending. This order addresses only the personal jurisdiction component of GEICO’s motion to dismiss.

The Court previously granted GEICO’s motion to dismiss the non-contracting GEICO entities for lack of personal jurisdiction based in part on rejection of boilerplate allegations of personal jurisdiction based on a conspiracy theory. (MLW 8/15/20). GEICO again seeks to dismiss the GEICO entities with which Lees do not hold an insurance policy for lack of jurisdiction under Rule 12(b)(2), arguing that the 2nd amended complaint fails to comply with Rule 8(a)(2), the law of the case doctrine forecloses Plaintiffs’ attempt to reintroduce these previously dismissed entities, and Plaintiffs’ claims are not based on GEICO Indemnity’s and GEICO Casualty’s forum-related conduct.

Although a bit unusual in the personal jurisdiction context, GEICO first relies on Rule 8(a)’s demand for “a short and plain statement of the claim” to argue that Plaintiffs’ 2nd amended complaint presents a befuddling picture of how the non-contracting GEICO entities relate to this case that is insufficient to establish personal jurisdiction. This argument is better addressed in the context of analyzing their forum-related conduct.

GEICO further argues that this Court’s order dismissing the non-contracting GEICO entities mandates dismissal. But law of the case does not apply in the context of amended pleadings following a dismissal without prejudice. Askins (9th Cir. 2018). While a defendant is free to argue that the amended pleading does not cure the deficiencies identified in the original complaint and “the district court may decide the second motion to dismiss in the same way it decided the first,” the “court is not bound by any law of the case.” Id. The Court must therefore consider personal jurisdiction over the non-contracting GEICO entities anew.

Montana courts apply a 2-step test to determine whether they have personal jurisdiction over a non-resident. Milky Whey (Mont. 2015). First, they consider whether it exists under MRCivP 4(b)(1), which subjects parties to general jurisdiction if they are “found within the state of Montana” and to specific jurisdiction “as to any claim for relief arising from the doing personally, or through an employee or agent, of any” of the enumerated acts in Rule 4(b)(1)(A)-(G). Second, courts consider whether the exercise of personal jurisdiction comports with due process.

GEICO concedes that “GEICO Indemnity and GEICO Casualty conduct insurance operations, including subrogation activities in Montana.” Thus the GEICO entities, including the non-contracting entities “transact business within Montana” MRCivP 4(b)(1)(A). Step 1 of the specific jurisdiction inquiry is therefore satisfied.

The more complicated question is whether the exercise of jurisdiction is constitutional. The Due Process Clause requires that a defendant “have certain minimum contacts with [the forum state] that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int’l Shoe (US 1945). “Due process requires that a defendant be haled into court in a forum State based on his own affiliation with the State, not based on the random, fortuitous, or attenuated contacts he makes by interacting with other persons affiliated with the State.” Walden (US 2014). The “minimum contact” requirements must be met as to each individual defendant. Bristol-Myers (US 2017).

Plaintiffs argue that personal jurisdiction exists because they were harmed by the in-state conduct of the GEICO Payment Recovery Unit which “the participating GEICO affiliates jointly utilize, direct and support” for all their subrogation activities, including activities in Montana. GEICO responds that “Plaintiffs’ allegation that GEICO Indemnity and GEICO Casualty utilized the Payment Recovery Unit for subrogation activities on other claims with respect to other insureds is insufficient” to confer specific jurisdiction. It maintains that “Plaintiffs’ claims simply do not arise from any of GEICO Indemnity or GEICO Casualty’s forum-related conduct.” Its argument is unpersuasive in light of Ford Motor (Mont. 2019).

GEICO premises its due process argument on the ground that Plaintiffs fail to causally connect the non-contracting entities’ forum-related conduct to Lees’ specific claims, relying on the Shute (9th Cir. 1990) test which asks whether “in the absence of” the defendant’s forum activity, the plaintiff’s “injury would not have occurred.” But as Ford Motor just made clear, such a “causation-only approach” improperly narrows the inquiry: “We have never framed the specific jurisdiction inquiry as always requiring proof of causation — i.e., proof that the plaintiff’s claim came about because of the defendant’s in-state conduct.” Rather, specific jurisdiction may also exist where a claim “relates to the defendant’s contacts with the forum.”

Plaintiffs have alleged that all the named GEICO entities utilize the Property Recovery Unit and jointly developed its subrogation procedures. They have also alleged that it operates within Montana and specifically worked on Lees’ claim. GEICO concedes that both GEICO Casualty and GEICO Indemnity utilize the Unit “for subrogation recoveries of their insureds under the insurance policies.” Plaintiffs’ wrongful subrogation claims therefore at minimum “relate to” the non-contracting GEICO entities’ use of the Unit and its subrogation of insurance claims in Montana. Moreover, these claims can only be brought in Montana in light of Montana’s unique subrogation laws and the fact that Lees are Montana citizens. Given the “strong relationship among the defendant, the forum, and the litigation,” specific jurisdiction exists. Id.

GEICO’s motion to dismiss is denied insofar as it seeks to dismiss GEICO Indemnity and GEICO Casualty for lack of personal jurisdiction. Its other arguments will be addressed by separate order.

James Lee Const. and Lee v. GEICO, 44 MFR 240, 3/25/21.

Alan Lerner (Lerner Law Firm), Kalispell, Allan McGarvey & Jinnifer Mariman (McGarvey Law), Kalispell, Brian Joos & Judah Gersh (Viscomi, Gersh, Simpson & Joos), Whitefish, and Evan Danno (Danno Law Firm), Kalispell, for Plaintiffs; Courtney Henson (Snell & Wilmer – Tucson), Sheila Carmody (Snell & Wilmer – Phoenix), and Ian McIntosh & William Morris (Crowley Fleck), Bozeman, for GEICO.

INSURANCE: Claims against mother of death shooter who was forbidden to possess firearms not covered by business policies… Cavan.

Raymond Hansen shot and killed Terry Klein Sr. 8/23/16 in Richland Co. as Klein was operating an excavator repairing a canal. Klein’s PR Jason Klein sued Hansen and his mother Lola (“Hansen”) alleging that she had breached her duty to keep his firearms away from him following his 2007 federal guilty plea to addict in possession of firearms and sentence prohibiting him from owning, using, or being in constructive possession of firearms. It is disputed whether the murder weapon was one of the guns he relinquished to his parents. Hansens say it was not; law enforcement concluded that it was a .45 semi-automatic which does not match the guns he surrendered. Raymond, then 36, was sentenced by Judge Simonton to 100 years at MSP, no parole for 25 years.

According to Raymond, his father had taken his guns and he knew where they were at his father’s residence but he was unable to access them. Lola and her husband Arnold’s bar & casino were insured by Employers Mutual Casualty under a CGL policy and commercial umbrella policy. Lola tendered defense and indemnification of the suit to EMC, which agreed to defend pursuant to reservation. It seeks a declaration that no coverage for the claim exists under the policies because the allegations bear no relationship to the conduct of Hansen’s bar & casino business. Lola moved to stay or dismiss this case pending resolution of the underlying action or for summary judgment on EMC’s duty to defend, and EMC requests judgment on the pleadings on the duty to defend and the duty to indemnify.

EMC initially construed the underlying complaint as alleging that Lola “was negligent in storing firearms at her residence or allowing access by Raymond Hansen to guns on the property where her residence is located.” It further asserted that the complaint alleged that “Raymond Hansen took possession of one or more firearms from Lola Hansen’s personal residence or property.” However, the complaint does not actually specify that Hansen negligently stored the firearms at her residence, or that Raymond obtained the gun used in the killing from Hansen’s personal residence or property. It only alleges in a broad manner that Hansen was negligent in storing them. Apparently recognizing this issue, EMC’s briefing asserts that “the underlying complaint in no way implicates Hansen’s conduct of her business.” It points out that the complaint never alleges that Raymond was acting as an employee of Hansen’s business when he killed Klein, that Hansen assumed responsibility for keeping certain firearms from him in furtherance of the conduct of her business, or that her business conduct imposed a duty on her to keep firearms from her son.

EMC’s revised observation is correct. The complaint is wholly silent as to the involvement of Hansen’s business. There is nothing in it that remotely suggests that her business is connected to the alleged conduct. Even assuming that the attached affidavit raises a factual dispute as to whether Raymond could access firearms at his parents’ residence, the dispute does not involve or implicate Hansen’s business.

In light of the complaint’s silence, Hansen essentially invites the Court to speculate that there might be facts that could show that the underlying allegations were somehow connected to her business. But the Montana Supreme Court has made clear that an insured’s duty to defend is not triggered “by speculating about extrinsic facts and unpled claims regarding potential liability.” Weitzel (Mont. 2016). Rather, “where the insurer has no knowledge of facts outside the complaint that may potentially trigger coverage, the complaint and the policy constitute the universe with regard to the insurer’s duty to defend.” Id. Twite (Mont. 2008) (“If the facts alleged in the complaint do not come within the policy’s terms, then there is no duty to defend.”); Graber (Mont. 1990) (“the insurance company must look to the allegations of the complaint to determine if there is liability coverage,” and “where the complaint alleges events not within the coverage of the policy then the insurer has no duty to defend.”).

Application of this principle is exemplified by Rumph (Mont. 2007). A passenger injured in a 1-vehicle rollover sued the driver (Alex), the driver’s father (Nathan), and Nathan’s businesses. In an amended complaint, the passenger alleged that Alex was too intoxicated to safely drive the pickup and had rendered the seatbelts inoperable by installing large speakers in the rear seat, thereby exacerbating the injuries. One of Nathan’s businesses was an auto repair garage that was insured under a FUMI Commercial Lines Garage Policy. Because neither the complaint nor the amended complaint raised facts that implicated Nathan’s auto repair business, FUMI denied coverage. The insured’s attorney Brad Anderson subsequently discovered additional facts that he argued brought the accident under the garage policy. He asserted that the seatbelts had been disabled in Nathan’s garage with Nathan’s tools and materials. He also characterized Alex as an employee of the garage and contended that the pickup was a shop vehicle used for garage-related errands. FUMI thereafter provided a defense under reservation and sought declaratory relief. Judge Day granted summary judgment for FUMI. On appeal, the insureds argued that the amended complaint, considered “together with” or “coupled with” the additional facts that Anderson had uncovered, established that the accident was covered under the garage policy because it arose from “garage operations.” The Supreme Court rejected the argument, noting that the amended complaint made no reference to Nathan’s garage, that Alex had allegedly disabled the seatbelts in the garage with the garage’s tools, that Alex was Nathan’s employee, or that the pickup was used as a shop vehicle. It explained that FUMI was only required to look at the allegations in the amended complaint to determine if coverage existed and that it was “irrelevant that the amended complaint ‘together with’ additional facts may have triggered coverage under the garage liability policy” and:

Based on the facts alleged in the Nielson’s amended complaint, FUMI correctly determined that the accident was outside the garage coverage, as no reference was made to anything remotely “necessary or incidental to a garage business.” In other words, there was an “unequivocal demonstration” that the Nielsen’s claim was not covered by Nathan Rumph’s Commercial Lines Garage Policy.

Likewise here, the underlying complaint does not reference anything remotely related to the conduct of Hansen’s business. Accordingly, just as in Rumph, EMC has unequivocally demonstrated that the complaint against Hansen does not fall within the policy’s coverage.

Hansen argues nevertheless that an insurer cannot ignore knowledge of facts which may give rise to coverage simply because those facts are not alleged in a complaint, and therefore EMC is charged with knowledge of facts beyond the pleadings, including those set forth in her Statement of Undisputed Facts. However, her business is mentioned in only 2 instances in the Statement, and neither alleges or implies that she took possession of Raymond’s firearms in furtherance of the conduct of her business.

First, Hansen states that Raymond was an “occasional employee” of her business and did maintenance as needed.

Her testimony actually states that he had not worked for Hansens for several months prior to the shooting of Klein, but even had he been so employed, she has offered no theory under which this fact could potentially bring the claim within coverage. That Raymond occasionally did maintenance at Hansen’s business does not render storage of his firearms within the conduct of her business. There is no indication that he was acting as an employee at the time of the shooting or that Hansen in any way assumed responsibility for the firearms in furtherance of the conduct of her business.

Second, Hansen states that she cleared the firearms and ammunition out of Raymond’s residence “perhaps with the assistance of an employee of” her business. Again, she actually testified that she was uncertain who assisted her with the task: “I’m guessing — no, I’m not supposed to guess. I would have to speculate, because it could have been an employee from the South 40 and I don’t recall.” To survive summary judgment a party must set forth “non-speculative evidence of specific facts.” Frost (D.Mont. 2020); Cafasso (9th Cir. 20110. Hansen’s testimony that she does not recall who may have assisted her in removing the guns, but that it could have been an employee of her business, is entirely speculation and conjecture. But even if true, that an employee may have assisted in removal of the firearms does not make such removal or storage related to or in furtherance of the conduct of her business.

This case falls squarely within the 2nd Revelation Industries (Mont. 2009) scenario: “The complaint alleges facts that do not come within the coverage of the liability policy and the insurer has no knowledge of any other facts that could result in coverage.” EMC has no duty to defend.

Having determined that EMC has no duty to defend, the Court likewise finds that it has no duty to indemnify. “A conclusion that there is no duty to defend compels the conclusion that there is no duty to indemnify.” Wessel (Mont. 2020). Nor do the Brillhart (US 1942) factors discourage exercise of jurisdiction, as urged by Hansen. First, “the Ninth Circuit instructs that where a federal court is deciding an issue of insurance coverage or another ‘routine issue of state law,’ it is a ‘rare circumstance’ where a court should decline jurisdiction because state law supplied the law governing the decision.” Rick’s Auto Body (D.Mont. 2017). Second, there is no particular evidence that EMC was forum shopping. Finally, EMC is not a party to the underlying action and there is no parallel state declaratory action pending.

Hansen also argues that the policies violate MCA 33-15-337(2) because they failed to include a “notice section of important provisions” and the umbrella policy also failed to “include a table of contents.” Citing Crumley’s (Mont. 2008), Hansen argues that EMC’s failure to comply with the Simplification Act renders its policy defenses ineffective and the Court should therefore refuse to enforce the language defining “who is an insured” and find that it has a duty to defend. It is requesting the Court to disregard the definitional phrase “but only with respect to the conduct of a business of which you are the sole owner” or “but only with respect to the conduct of your business.” The Court declines to do so.

First, the Simplification Act provides that it is “not intended to increase the risk assumed under policies subject to [the Act].” Application of the Act as requested by Hansen would do exactly that. Second, this case is substantially different from Crumley’s, which involved an action to recover costs of cleanup and corrective action for a diesel tank leak. The Court found that the insurer’s failure to highlight the 120-hour notice provision in a table of contents or notice section violated the Act and that the notice provision was therefore void and unenforceable. It did not elaborate on what provisions are sufficiently “important” to requirement mention in a table of contents or notice provision. The EMC provisions defining “who is an insured” are not extensions of coverage or endorsements excluding coverage and did not require any action by Hansen to implement or maintain coverage, and thus Crumley’s does not compel the conclusion that its failure to highlight the definition in a separate notice section violates the Act. Nor does the Court read Crumley’s to mean that the general absence of a table of contents in the umbrella policy warrants rewriting the policy to include risks that are clearly beyond its intended scope.

EMC’s motion for judgment on the pleadings is granted.

Employers Mutual Casualty v. Hansen, 44 MFR 239, 3/15/21.

James Zadick (Ugrin Alexander Zadick), Great Falls, for EMC; John Wright (Halverson, Mahlen & Wright), Billings, for Hansen.