Montana Supreme Court Explores Insurers’ Duty to Defend

Insurance providers might breathe a bit easier to know that the Montana Supreme Court recently ruled in their favor.

Insurance companies commonly write language into their policies that give them both a “right” and a “duty” to defend against any claims that would trigger their coverage. However, insurance companies and their policy holders frequently disagree on whether claims should trigger coverage. That was the situation in one case recently before the Montana Supreme Court.

Farmers Ins. Exch. V. Minemeyer

The case was Farmers Insurance Exchange and Truck Insurance Exchange v. Dennis Minemeyer. As the Montana Supreme Court stated, the case had one central question: Should Minemeyer’s insurers have defended him against a lawsuit that he felt was malicious?

The case has its roots in a 2012 lawsuit that several people filed against Brad Davey and Dale Yatsko. The lawsuit dealt with issues related to the financing and development of a golf course on Davey and Yatsko’s land. As a result of the lawsuit, the individuals who filed it were able to place a constructive trust and lien against the land, limiting Davey and Yatsko’s ability to capitalize on it.

Davey and Yatsko eventually got the lawsuit dismissed in 2017. In 2018, Davey and Yatsko sued the individuals who had earlier sued them, claiming the earlier case had been baseless and malicious. In 2019, they amended their suit to name Minemeyer as a defendant. Although Minemeyer had not signed the 2012 lawsuit as a plaintiff, Davey and Yatsko said he had “assisted” the signed plaintiffs by “providing false information and making defamatory statements about them.”

After Davey and Yatsko named Minemeyer as a defendant, Minemeyer asked Farmers and Truck to defend him from the prosecution. Minemeyer sought help from Farmers based on his homeowners insurance policies that covered him from 2010 to 2020 and his commercial general liability (CGL) policies that covered him from 2014 to 2017. Minemeyer sought help from Truck based on his CGL policies that covered him from 2018 to 2021.

In 2021, Farmers and Truck (Insurers) filed a motion for summary judgment. They sent copies of their insurance policies and claimed they had no duty to defend Minemeyer against the lawsuit by Davey and Yatsko. Similarly, they claimed they had no duty to indemnify him against any resulting damages. They argued their policies did not cover the lawsuit, and the district court that originally handled the case agreed.

Minemeyer appealed, arguing that the Insurers had a duty to defend him against the claims of “bodily injury” and “property damage” put forth by Davey and Yatsko.

The Court’s Opinion

The Court reviewed four separate issues on its way to deciding that the Insurers did not have any duty to defend Minemeyer. These corresponded with the four separate claims made by Minemeyer: slander, malicious prosecution, property damage and bodily injury.

How did the Court address these issues?

• It declared that the Insurers had no duty to defend against the alleged slander or malicious prosecution because Minemeyer failed to show that he had coverage. Specifically, he failed to provide dates for the alleged slander or malicious prosecution that fell within his coverage dates. This was a fairly basic mistake and one that, ultimately, Minemeyer’s argument could not overcome.

As the Court noted, “An insurer has a duty to defend when a complaint against an insured alleges facts which, if proved, would result in coverage.” This is a fairly low bar, but insurance companies often face claims that do not present these basic facts. The Court continued, “If the insured meets the initial burden of showing that the claim falls within the basic scope of coverage, then the burden shifts to the insurer [to argue the claim is excluded].” However, after failing to provide dates, Minemeyer could not satisfy the initial burden.

• Similarly, Minemeyer failed to meet his initial burden for his claims of property damage and bodily injury, although for different reasons.

With those claims, the Court found that Minemeyer failed to point toward damages that his policies could cover. Specifically, the Court reviewed the definitions his policies provided for “property damage” and “bodily injury.”

The relevant part of the policies said that “property damage” included the “loss of use of tangible property[.]” However, the court pointed out that this definition did not support a claim that tied economic losses to the legal debates over a property. Those legal debates were not the “tangible” property, itself, nor did they affect the use of the “tangible” property.

Similarly, the Court found that the claims of “bodily injury” related only to a pair of affidavits that Davey and Yatsko filed after they had already filed their lawsuit. The Insurers argued that the original lawsuit did not involve any claims of bodily injury, and the Montana Supreme Court agreed. “We agree with the District Court that the [lawsuit by Davey and Yatsko] failed to set forth a claim of bodily injury which would be covered by any of the Policies.” The Court further clarified that because Davey and Yatsko failed to present any factual evidence to support their claims, there were no facts to support Minemeyer’s request for defense.

Summarily Dismissed

With its decision, the Supreme Court affirmed the District Court’s summary dismissal of Minemeyer’s claims. In so doing, it reaffirmed that courts can consider insurers’ duty to defend as a matter of law. Courts do not always need to review all the evidence of a case to determine whether certain events trigger coverage.

Insurance disputes continue to rely on the policy language. Coverage dates and policy terms continue to function as they should.

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