by Wilton H. Strickland

On previous occasions I have written about commercial general liability coverage in Montana, explaining that such coverage is triggered ONLY if the alleged bodily injury or property damage was caused by an “occurrence” (defined as an “accident” in most policies). However technical this issue might seem, it is of great importance to businesses because it often determines whether your liability insurer must defend or indemnify you against a lawsuit.

As I explained in The Montana Lawyer and on this very website, confusion tends to swirl around this issue because of situations where the defendant committed intentional conduct but no intentional harm. Some decisions hold that intentional conduct alone means that there is no accident and thus no coverage. For example, the Montana Supreme Court has held that the intentional construction of a building that contains unintentional or negligent defects is not an accident and does not trigger liability coverage.  Lloyd A. Twite Family P’ship v. Unitrin Multi Line Ins., 346 Mont. 42, 192 P.3d 1156 (2008). Other decisions go the other way, holding that if the defendant did not intend harm, such harm remains accidental and still triggers coverage despite intentional conduct. For example, the Montana Supreme Court has held that the intentional firing of a gun that wounded another person was an accident because the shooter was incoherent and didn’t mean to hit her target. Safeco Ins. Co. of Am. v. Liss, 303 Mont. 519, 16 P.3d 399 (2000). Yes, Montana jurisprudence is often difficult to puzzle out.

However, a recent decision by the Montana Supreme Court clarifies the issue and signals that, indeed, intentional conduct alone perishes the notion of an accident and defeats coverage. In Landa v. Assurance Co., 371 Mont. 202, 307 P.3d 284 (2013), the Court held that an insured business owner was not entitled to defense or indemnity against a lawsuit by a former employee who asserted claims of negligence and fraud. Most important was the Court’s holding that the legal theories in the complaint made no difference to the coverage analysis — only the alleged facts mattered, and those alleged facts stated that the business owner had acted intentionally when making empty promises to transfer clients and the business to the plaintiff. The intentional nature of the conduct defeated liability coverage notwithstanding any unintentional harm, and also notwithstanding legal terminology such as “negligence” (a point that I have argued with the courts and even with fellow attorneys on various occasions).

What business owners should take from this is the following: your commercial general liability coverage is not airtight, and the protection it offers is limited to accidents (e.g., slips and falls, car crashes, etc.). Be cautious in your business dealings to avoid any possible allegation that you have misled or deceived someone, for you may find yourself on the hook as the business owner did in Landa. The best way to protect yourself is, as I have said here before, to put everything in writing.

UPDATE

The Montana Supreme Court has flip-flopped on this issue, as explained in my later post here.