TCF Enter., Inc. v. Rames, Inc.

544 P.3d 206

2024 MT 38

TCF ENTERPRISES, INC., d/b/a Malmquist Construction and Cincinnati Insurance Company, Plaintiffs and Appellees,

v.RAMES, INC., formerly d/b/a Central Insurance Agency, Defendant and Appellant.

DA 22-0731

Supreme Court of Montana.

Submitted on Briefs: October 18, 2023

Decided: February 27, 2024

APPEAL PROM: District Court of the Eleventh Judicial District, In and For the County of Flathead, Cause No. DV-2020-521, Honorable Robert B. Allison, Presiding Judge

For Appellant: Brooke B. Murphy, MurphyMyers PLLC, Billings, Montana Jesse Beaudette, Boyher, Erickson, Beaudette & Tranel, P.C., Missoula, Montana

For Appellees: Todd A Hammer, Marcel A Quinn, Hammer, Quinn & Shaw PLLC, Kalispell, Montana

Justice Ingrid Gustafson delivered the Opinion of the Court.

¶1 Defendant and Appellant Rames, Inc. formerly d/b/a Central Insurance Agency (Rames), appeals from the February 28, 2022 Orders Re[:] Summary Judgment and the November 22, 2022 Final Judgment issued by the Eleventh Judicial District Court, Flathead County. The District Court’s summary judgment order granted summary judgment to Plaintiffs and Appellees TCF Enterprises, Inc. d/b/a Malmquist Construction (Malmquist) and Cincinnati, Insurance Company on the issue of liability and denied Rames’s competing summary judgment motion regarding the duty of care and a professional services exclusion. Following a September 6-8, 2022 trial, a jury awarded damages to Malmquist in the amount of $1,022,257.85.

¶2 We address the following restated, issues on appeal:

1. Whether the District Court erred by granting Malmquist’s motion for summary judgment regarding liability.

2. Whether the District Court erred by denying Rames’s motion for summary judgment and determining the policy’s professional services exclusion would not have barred coverage for defense and indemnity.

3. Whether the District Court abused its discretion by precluding certain evidence at trial

4. Whether the District Court abused its discretion in instructing the jury.

¶3 We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

¶4 Malmquist is a general contractor located in Whitefish. In 2017, Malmquist was the general contractor on the construction of a condominium building located at 139 East Second Street in Whitefish (the 139 Project), as well as a residential project known as the Solem Project As part of both projects, Malmquist contacted C&H Engineering and Surveying, Inc. (C&H). Malmquist requested prices from C&H for surveying costs, and, for the 139 Project, the separate cost for a "geo-tech report[.]"

¶5 As a general contractor, Malmquist typically uses several subcontractors on each project. The first time a subcontractor contracts to work on a project for Malmquist, Malmquist sends them a new vendor packet. Malmquist’s new vendor packet lists requirements a subcontractor must complete prior to beginning work, including reviewing in-voicing/payment guidelines, filling out and returning a subcontractor profile and W-9 form, and providing workers compensation and general liability insurance certificates. Malmquist’s new vendor packet notes that "[a]ll information and insurance must be in our office before work can begin." As relevant here, the packet includes a sample certificate of liability insurance which contains the following required language:

TCF Enterprises Inc. DBA Malmquist Construction is named as an Additional Insured with respect to General Liability, including Primary/Non-Contributory and Completed Operations coverage, per forms CG2010 0413 and GC2037 0413 or equivalent. Waiver of Subrogation in favor of TCF Enterprises Inc. DBA Malmquist Construction on General Liability.

¶6 C&H received the new vendor packet from Malmquist on June 6, 2017. After receiving the new vendor packet, Sue Hjalmarsson (Hjalmarsson), C&H’s office manager, emailed Traci Waddell (Waddell), the office manager of Rames (then known as Central Insurance Agency) that day:

C&H Engineering certificate of insurance Hi Traci,

Can you please send work comp and liability certificates to Malmquist Construction? I attached their sample which shows what they need and also has their address. Please email to admin@malmquist.com

Thank you,

Sue Hjalmarsson

Office Manager

Malmquist’s sample certificate of liability insurance from the new vendor packet was attached to Hjalmarsson’s email to Waddell. After receiving Hjalmarsson’s email, Waddell sent an email to Malmquist, with Hjalmarsson cc’d,

C & H Engineering

See attached GL cert. WC to follow.

Thanks Traci

Waddell’s email had a certificate of liability insurance attached, with Malmquist listed as the certificate holder, which contained the following language:

The certificate holder is listed as an additional insured on a primary and noncontributory basis for General Liability per policy for GCD037 04/05, for ongoing and completed operations. Waiver of subrogation for General Liability applies to certificate holder.

In contrast to what was represented on the certificate provided by Waddell, Rames did not actually procure additional insured coverage, for Malmquist and did not list Malmquist as an additional insured on C&H’s policy through a scheduled endorsement.

¶7 C&H ultimately performed work as a subcontractor to Malmquist on both the 139 Project and the Solem Project. On the 139 Project, C&H was hired to conduct a subsurface soils investigation for the proposed condo building. As reflected in C&H’s report to Malmquist, C&H visited the site "to observe the subgrade soils present" and "provide[d] recommendations regarding subgrade improvements for the proposed structure[’]s foundation." Though it performed soil testing, the test pits dug by C&H did not go low enough to reach the native soils at the 139 Project site. C&H provided recommendations regarding undocumented fill, subgrade preparation, and the placement of structural fill. C&H’s report noted that if its recommendations were followed, "it is expected that total and differential settlement will be less than ¾-inch." The condominium constructed for the 139 Project ended up settling over four inches.

¶8 The developer of the 139 Project sued Malmquist in March of 2019, alleging negligence, professional negligence, and breach of contract relating to the construction of the building. Malmquist tendered the suit to Travelers Insurance, seeking defense and indemnity as an additional insured under C&H’s commercial general liability (CGL) Policy No. 680-J940924-18-47 (the Policy). The Policy contained a blanket additional insured endorsement which would require a written contract between C&H and Malmquist for additional insured status to apply, as well as a professional services exclusion. Travelers denied coverage to Malmquist for two reasons: (1) that Malmquist was not covered as an additional insured under the blanket additional insured endorsement because there was no written contract reflecting such between C&H and Malmquist, and (2) separately, even if Malmquist was named as an additional insured, the Policy’s professional services exclusion would bar coverage. Malmquist eventually paid over $2.2 million to repair the building and settle the lawsuit against it.

¶9 Malmquist filed the present lawsuit against Rames on June 3, 2020. After Rames filed its Answer, both parties filed competing motions for summary judgment. Malmquist’s summary judgment motion requested the District Court find in its favor, on the issue of liability because Rames failed to procure the coverage requested, misrepresented the coverage procured, and breached the standard of care. Rames’s motion for summary judgment asserted Rames did not owe a duty to Malmquist and it was unreasonable for Malmquist to rely on the certificate of insurance showing Malmquist was an additional insured and that, even if Malmquist was an additional insured under C&H’s CGL policy, the Policy’s professional services exclusion barred coverage. After the parties fully briefed the competing summary judgment motions, the District Court held a hearing on February 8, 2022. The District Court thereafter issued its Orders Re[:] Summary Judgment on February 28, 2022. The court’s order granted Malmquist’s motion for summary judgment and denied Rames’s motion for summary judgment. The court found Rames did have a duty to procure the additional insured coverage, negligently failed to do so, negligently misrepresented that it had, and breached the standard of care. In addition, the court found the Policy’s professional services exclusion would not have barred coverage for defense and indemnity.

¶10 With liability established following the District Court’s summary judgment order, the matter proceeded to a jury trial. At trial, Rames sought to admit a portion of the deposition of Hayley Scheel (Scheel), Malmquist’s office manager, wherein she was cross-examined regarding 24 other certificates of insurance from other subcontractors on Malmquist projects as evidence of Malmquist’s comparative negligence. The District Court prohibited the introduction of this evidence, finding testimony regarding the other certificates was not relevant and would unnecessarily confuse the jury. Rames also sought to introduce testimony from Tyler Frank (Frank), the owner of Malmquist, regarding Malmquist’s contract with the 139 Project owner and that contract’s requirement that the owner be named as an additional insured on the CGL policies of all subcontractors. The District Court again prohibited the introduction of this evidence, finding it would unnecessarily confuse the jury because it was "not the contract that is being litigated in court" and the owner had been fully compensated.

¶11 Before trial, the parties attempted to stipulate to as many jury instructions as possible. Relevant to this appeal, both Malmquist and Rames proposed modified versions of the pattern general pre-jury selection instruction which attempted to set forth the background of the case. The relevant portion of Instruction No....