In its recent decision in Emplrs Mut. Cas. Co. v. Fisher Builders, Inc., 2016 MT 91 (Mont. Apr. 16, 2016), the Supreme Court of Montana had occasion to consider what constitutes an “occurrence” in the context of a defective construction claim.
Fisher Builders concerned an underlying construction contract in which the insured, Fisher, was hired to remodel and renovate the claimants’ summer home. During the course of the project, Fisher was required to perform some demolition work, which caused the deck of the claimants’ home to collapse. This resulted in claimants losing their permit to redevelop their home and being forced to dramatically alter their renovation plans. Claimants eventually brought suit against Fisher, and Fisher in turn, sought coverage for the matter under its general liability policy issued by Employers Mutual.
The Employers Mutual policy insured property damage resulting from an occurrence (defined by the policy as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions”), and also precluded coverage for property damage expected or intended from the standpoint of the insured. In the ensuing coverage action, summary judgment was granted in favor of Employers Mutual, with the court reasoning that Fisher’s conduct was intentional, and thus not an occurrence, regardless of whether Fisher intended the consequences. Specifically, the lower court reasoned that under Montana law as articulated by the Supreme Court of Montana, the standard general liability policy definition of “occurrence” does not encompass intentional conduct with unintended results.
On appeal to the Supreme Court, the underlying claimants, prosecuting the appeal on behalf of Fisher, argued that the lower court erred in concluding that the alleged acts did not qualify as an occurrence. Looking to its prior decisions on the issue of what constitutes an occurrence – one involving a situation in which the insured punched another individual, and one in which the insured intentionally caused a co-worked to inhale smoke – the Court noted that intentional acts can constitute an “occurrence” when the consequences may not have been intended or expected by the insured. The Court explained that this analysis focuses on “1) whether the act itself was intentional, and 2) if so, whether the consequence or resulting harm stemming from the act was intended or expected from the actor’s standpoint.”
The Court further explained that the second part of this analysis necessarily requires an objective rather than a subjective inquiry. Thus, an insured’s protestations that it did not intend to cause harm to another is not determinative of the intended or expected question. As the Court explained, “It would be a rare case indeed, as reflected in the absence of such cases in our precedent, where an insured would acknowledge that he intended to injure or cause harm to others.” Rather, the test is whether an objectively reasonable insured would have intended or expected the outcome. In so noting, the Court confessed that its prior jurisprudence on the issue was inconsistent, but that it hoped to eliminate this confusion going forward. As it explained:
The District Court erred by reasoning that “the Montana Supreme Court has rejected” the Slacks’ argument that the term accident may “include intentional conduct with unintended results.” In fairness to the District Court, this Court has not been consistent in the analysis to be applied when considering this coverage issue. Nonetheless, holding otherwise could broadly eliminate coverage for many damage events that began with an initial act of intention but led to unexpected results. As we said many years ago, pointed out by the Slacks: “Strange and wonderful indeed are the circumstances in which persons are killed or injured by the intentional pulling of the trigger of an ‘unloaded’ gun, and it is clear that in such situations the discharge itself and the resulting injuries are accidental.”
With this standard in mind, the Court concluded that the lower court erred in granting summary judgment in Employers Mutual’s favor, as it applied the wrong standard and it did not inquire into whether Fisher intended damage to claimants’ property. Central to the Court’s reasoning was testimony that Fisher may not have intentionally caused the deck to collapse, or that at the very least, factual questions concerning Fisher’s expectations and intentions precluded a grant of summary judgment.