INSURANCE-RELATED COURT CASES
Digested from case reports published online
COURT DECISIONS
Parsing a buy-sell agreement
In April 2016, Clifford Christian contracted with Weatherall Builders, which was insured under a commercial general liability policy issued by United Fire & Casualty Company, to serve as general contractor on his project to construct four townhomes in Helena, Montana. During the policy period, Christian verbally requested to be named an additional insured, and Weatherall requested a certificate of liability insurance from its agent, Insurance Unlimited. The certificate stated: “Certificate holder [Christian] to be named as an additional insured with waiver of subrogation given [for] general liability (form CG 7151) as per written contract.”
One of the homes was pre-sold to Linda and Albert Parisian, who had entered a buy-sell agreement. Weatherall contracted with Zachary Beveridge to landscape the homesites, including that of the Parisians. Beveridge claimed he was never paid for this work and in 2017 sued Weatherall and the Parisians to obtain payment.
Christian was named as a third-party defendant in Weatherall’s answer and third-party complaint, which asserted contract payment claims, and also was named as a third-party defendant by the Parisians.
In their initial answer and third-party complaint against Christian, the Parisians denied that they were responsible for any alleged contractual damages owed by Christian.
The Parisians contended that “[i]f and to the extent that the Parisians are determined to be liable to [Beveridge] under any theory or pursuant to any claim for damages in this action, Mr. Christian is liable to indemnify the Parisians” and claimed “compensatory damages against Mr. Christian.” The Parisians did not seek any other substantive relief. Christian counterclaimed against the Parisians, asserting that they would be unjustly enriched if granted the requested relief, which the Parisians denied in their answer to the counterclaim.
A settlement was reached in the underlying action in July 2019 and the case dismissed, but not before Christian had sought defense and indemnification from United Fire for the Parisians’ claims against him.
United Fire denied Christian’s request for defense and indemnification, stating that the policy had not been triggered by the claims and therefore afforded no coverage because “[n]o ‘bodily injury,’ ‘property damage,’ or ‘personal and advertising injury,’ as those terms are defined in the policy, is alleged, and there was no ‘occurrence.’”*** Thereafter, Christian’s estate initiated an action against United Fire.
United Fire moved for summary judgment, and the district court ruled that the insurer had no duty to defend Christian, granting summary judgment to United Fire. The court reasoned that even if the policy applied to Christian as an additional insured, the pleadings of the underlying action “demonstrate[] the Parisians did not allege property damage which might be imputed to Christian.”
Recognizing that the Parisians had alleged that “Christian was negligent in failing to honor his contractual duties to pay his subcontractors,” the court nonetheless concluded that “[t]his does not constitute a claim for ‘bodily injury,’ ‘property damage,’ or ‘personal and advertising injury’ that could be imputed to Christian.” The estate appealed.
On appeal, the estate asserted that the district court erred by holding that the Parisians did not allege property damage in their complaint that could have been imputed to Christian, which would have triggered the duty to defend and to indemnify under the United Fire policy.
The estate argued that the Parisians’ allegations, including that they were damaged by “Mr. Christian’s negligence and/or failure to perform his contractual obligations,” should be construed to invoke a property damage claim. Specifically, the estate contended that the language of the Parisians’ complaint “could only mean they were asserting a construction defect claim based on negligent construction of the project,” for which contract and tort damages were sought.
Despite the estate’s focus on the use of the term “negligence” used in its complaint, the Montana supreme court held that the Parisians’ claims arose solely from their buy-sell agreement with Christian and his failure to uphold his end of the agreement. The complaint alleged that, under the agreement, Christian was responsible for completing the Parisians’ home, and that Christian contracted with Weatherall, who in turn contracted with Beveridge to complete the work owed to the Parisians under the agreement. Beveridge claimed he was not paid and sued Weatherall and the Parisians. In response, the Parisians complained that “[a]ny damages incurred by [Beveridge] in this action were solely due to Mr. Christian’s negligence and/or his failure to perform his contractual obligations which were owed to the Parisians and/or his subcontractual obligations owed to [Beveridge].”
According to the court, the estate attempted to expand the Parisians’ use of the term “negligence” to mean that the Parisians were claiming property damage by way of a construction defect. Nowhere in the Parisians’ complaint, however, did they allege a problem with their home itself, or any other injury beyond Christian’s failure to pay Beveridge, which led to Beveridge’s suit against the Parisians. Instead, the Parisians’ complaint was premised entirely on obtaining indemnity from Christian for the claims Beveridge brought against them pursuant to the buy-sell agreement with Christian.
The court concluded that the district court properly held that United Fire appropriately denied Christian’s claims for defense and indemnification.
Christian v. United Fire and Casualty Company—Supreme Court of the State of Montana—May 30, 2023—No. DA 22-0154.
