United Nat. Ins. v. St. Paul Fire & Marine

214 P.3d 1260

2009 MT 269

352 Mont. 105

UNITED NATIONAL INSURANCE COMPANY, a Pennsylvania Corporation, Defendant and Appellant, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, a Minnesota Corporation, Plaintiff and Appellee.

No. DA 07-0684.

Supreme Court of Montana.

Submitted on Briefs October 16, 2008.

Decided August 14, 2009.

For Appellant: Elizabeth O'Halloran; Milodragovich, Dale, Steinbrenner & Nygren, P.C.; Missoula, Montana.

For Appellee: Paul C. Meismer; Meismer & Associates, PLLC; Missoula, Montana.

Justice W. WILLIAM LEAPHART delivered the Opinion of the Court.

¶ 1 United National Insurance Company (United National) appeals from the opinion and order of the District Court for the Fourth Judicial District, Missoula County, granting St. Paul Fire & Marine Insurance Company's (St. Paul) motion for summary judgment and denying United National's motion for summary judgment and awarding St. Paul damages and attorney fees. We affirm in part, reverse in part.

¶ 2 We consider the following issues on appeal:

¶ 3 1. Did the District Court err in granting St. Paul's motion for summary judgment and denying United National's motion for summary judgment, holding United National breached its duty to defend its insured, Swank Enterprises?

¶ 4 2. Did the District Court err in awarding St. Paul attorney fees for defense of the initial personal injury action and for the declaratory judgment action?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 In August 2001, general contractor Swank Enterprises (Swank) entered into a contract with subcontractor Advanced Fireproofing & Insulation (Advanced Fireproofing) to have Advanced Fireproofing perform fireproofing work as part of a construction project at the Kalispell Regional Medical Center (KRMC). Michael Booth (Booth) was an employee of subcontractor Advanced Fireproofing. In January 2002, while performing fireproofing work at the KRMC project, Booth fell from a hydraulic lift called a "scissor lift" and sustained injuries. Swank owned the scissor lift Booth was using at the time of the accident and had provided the lift for Advanced Fireproofing's employees to use while working on the KRMC project.

¶ 6 Booth stepped backwards off the lift and fell approximately seven feet after a portion of the platform guardrail system on the scissor lift had been removed and was replaced with a latching chain rather than an actual guardrail, in violation of safety statutes and regulations. Because scissor lifts fall under the definitions of "scaffold" contained in the United States Department of Labor and Occupational Safety and Health Administration (OSHA) and the Montana Scaffolding Act (Scaffolding Act), a scissor lift must comply with the regulatory and statutory requirements applicable to scaffolds. Experts for both parties agree the lift was unsafe, it violated industry standards and government regulations, and the removal of the guardrail, and its replacement with a latching chain, was a cause of Booth's accident.

¶ 7 The prime contract between Swank and KRMC contained the following provisions pertaining to safety: "[t]he contractor shall enforce safety procedures ..." "[t]he contractor shall have overall responsibility for safety precautions and programs in the performance of the Work," and "[t]he Contractor shall seek to avoid injury, loss or damage to persons or property by taking reasonable steps to protect: .1 its employees and other persons at the Worksite; .2 materials and equipment stored at on-site or off-site locations for use in the Work; and .3 property located at the site and adjacent to Work areas...." Furthermore, regarding "materials brought to the worksite" the contract stated "[t]he Contractor shall be responsible for the proper delivery, handling, application, storage ... of all materials and substances brought to the worksite by the Contractor in accordance with the Contract Documents and used or consumed in the performance of the Work." The subcontract between Swank and Advanced Fireproofing also contained an indemnity provision stating that the subcontractor will "indemnify and hold harmless" the contractor for all "claims, damages, loss and expenses" resulting from "performance of the Subcontractor's Work."

¶ 8 In the underlying personal injury action (Booth v. Swank Enterprises, et al.), Booth sued Swank, along with Skyjack, Inc., the manufacturer of the lift, and Hytopz, Inc., the company that sold the lift to Swank. Swank's liability insurance carrier, St. Paul, tendered the defense to Advanced Fireproofing under the indemnity clause in the subcontract and to United National under the commercial general liability policy, under which Swank qualified as an additional insured. United National rejected the tender of defense, arguing the general contractor could not shift responsibility to the subcontractor for the general contractor's own statutory duties to maintain and supervise the scissor lift at the job site, and thus United National had no duty to defend or cover the loss. Because United National refused the tender of defense, St. Paul continued to defend the claims asserted by Booth and, in August 2004, St. Paul settled the claim with Booth.

¶ 9 The subcontract between Swank and Advanced Fireproofing required Advanced Fireproofing to purchase and maintain commercial general liability insurance listing Swank as an additional insured. According to the requirements of the subcontract, Advanced Fireproofing purchased liability insurance from United National. The policy contained an endorsement extending insurance coverage to "certain additional insureds" and United issued a certificate of insurance showing Swank as an additional insured. The certificate of insurance states specifically that "Swank Enterprises and all related entities, the owner, and all other parties as required by contract, are named as Additional Insured on a Primary Non-Contributing Basis."

¶ 10 The current action began in September 2004 when St. Paul brought a declaratory judgment action against United National, seeking payment of the amount it paid to settle the claim with Booth as well as the attorney fees and costs it incurred in defending the original action and the declaratory judgment action. Both parties then filed cross-motions for summary judgment. In a June 2007 opinion and order regarding the declaratory judgment, the District Court granted St. Paul's motion for summary judgment and denied United National's and awarded St. Paul a judgment of $140,000, which equaled the amount St. Paul paid to settle the claim in Booth v. Swank Enterprises, et al. In an October 2007 order and judgment, the District Court ordered United National to pay St. Paul the $140,000 awarded in the June 2007 judgment as well as $24,695.54 in attorney fees for its defense of Swank in Booth v. Swank Enterprises, et al., and $7,095.66 in attorney fees for the declaratory judgment action. United National now appeals the District Court's judgment and order awarding St. Paul damages and attorney fees.

STANDARD OF REVIEW

¶ 11 Our standard of review of an appeal from a summary judgment order is de novo. National Cas. Co. v. American Bankers Ins. Co. of Florida, 2001 MT 28, ¶ 13, 304 Mont. 163, 19 P.3d 223. We review a district court's summary judgment to determine whether it was correctly decided pursuant to Rule 56, M.R. Civ. P., which provides that summary judgment is only appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. National Cas. Co., ¶ 13. In the current case, both parties moved for summary judgment, agreeing there were no genuine issues of material fact.

¶ 12 The interpretation of an insurance contract is a question of law, which we review de novo to determine whether it is correct. Cusenbary v. United States Fid. & Guar. Co., 2001 MT 261, ¶ 9, 307 Mont. 238, 37 P.3d 67. We are guided in our interpretation of insurance policies by the well-established principle that when the language of a policy is clear and explicit, the policy should be enforced as written. National Cas. Co., ¶ 13.

¶ 13 We review a district court's decision to award attorney fees for an abuse of discretion. Renville v. Farmers Ins. Exch., 2004 MT 366, ¶ 20, 324 Mont. 509, 105 P.3d 280. A district court abuses its discretion when it acts arbitrarily, without employment of conscientious judgment, or in excess of the bounds of reason resulting in substantial injustice. Kuhr v. City of Billings, 2007 MT 201, ¶ 14, 338 Mont. 402, 168 P.3d 615.

DISCUSSION

¶ 14 Did the District err in granting St. Paul's motion for summary judgment and denying United National's motion for summary judgment, holding United National breached its duty to defend its insured, Swank Enterprises?

¶ 15 United National argues that "[n]either principles of contractual indemnity, nor the additional-insured endorsement to the United National policy, permit St. Paul to shift Swank's liability to Advanced Fireproofing or United National." United National claims that doing so would undermine the Montana Scaffolding Act's goal of making scaffolding operations safe. United National further argues that, even if the additional insured endorsement applied, "the St. Paul policy [should] be deemed primary, and the United National policy excess, with respect to Booth's claim." United National concludes the District Court erred in determining the additional insured endorsement contained in Advanced Fireproofing's policy provided coverage for Swank's own negligence, and Advanced Fireproofing owed no duty to indemnify or provide insurance to Swank for Swank's liability to Booth.

¶ 16 St. Paul argues that at issue is not liability under the Scaffolding Act because "[t]here was never any determination that [Swank] violated any duties it owed to [Booth]" and the alleged violations were never proved and the matter was "resolved in a compromise settlement without disposition of the liability on...