HomeMy WebLinkAboutPublic-City v MMIA Notice of Entry of Judgment and Opinion.pdf i
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1 CURT DRAKE FILE
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Drake Law Firm, P.C. i ?
�C aEV'c;t.=.£..7 "Y.'-
2 111 North Last Chance Gulch FP ED
Suite 3J, Arcade Building -----
3 P. O. Box 1181 _..- - ---- - --
Helena, MT 59624-1181
4 Telephone: (406) 495-8080
5 ATTORNEYS FOR DEFENDANT
MONTANA MUNICIPAL INTERLOCAL AUTHORITY
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7 MONTANA FIRST JUDICIAL DISTRICT COURT, LEWIS AND CLARK COUNTY
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THE CITY OF BOZEMAN, ) Cause No. CDV-2010-395
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Plaintiff, ) Judge: Honorable Kathy Seeley
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-vs- )
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MONTANA MUNICIPAL INTERLOCAL ) NOTICE OF
12 AUTHORITY and GOVERNMENT ) ENTRY OF JUDGMENT
ENTITIES MUTUAL, INC., )
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Defendants. )
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15 TO: THE CITY OF BOZEMAN, PLAINTIFF, AND ITS ATTORNEY OF RECORD.
16 YOU ARE HEREBY NOTIFIED THAT the Court has entered the attached
17 "Memorandum and Order on Motions for Summary Judgment," dated April 16, 2012,
18 granting the Motions for Summary Judgment of MMIA and GEM. A copy of the Court's
19 Order is attached.
20 This is your notice of entry of judgment under Rule 77(d), M. R. Civ. P.
21 DATED this �e-)day of April, 2012.
22 DRAKE W FIRM, P.C.
BY:
23 DOCKETED `f Curt Drake
�--� 111 North Last Chance Gulch
24 DATE--tSuite 3J, Arcade Building
P. O. Box 1181
25 EETIAL Helena, MT 59624-1181
26 1. NOTICE OF ENTRY OF JUDGMENT
r--I s E N,`T
I CERTIFICATE OF SERVICE
2 I, Curt Drake, attorney for Defendant Montana Municipal Interlocal Authority, hereby
3 certify that I mailed a true and correct copy of the NOTICE OF ENTRY OF JUDGMENT,
4 postage fully prepaid by U. S. Mail, on this day of April, 2012, to the following:
5 Elizabeth A. O'Halloran, Esq.
MILODRAGOVICH, DALE,
6 STEINBRENNER & NYGREN, P.C.
P. O. Box 4947
7 Missoula, MT 59806-4947
8 Joe Seifert, Esq.
KELLER, REYNOLDS, DRAKE,
9 JOHNSON & GILLESPIE, P.C.
P. O. Box 598
10 Helena, MT 59624-0598
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12 Curt Drake
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26 2. NOTICE OF ENTRY OF JUDGMENT
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8 MONTANA FIRST JUDICIAL DISTRICT COURT
LEWIS AND CLARK COUNTY
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10 THE CITY OF BOZEMAN, Cause No. CDV-2010-395
11 Plaintiff,
12 MEMORANDUM AND ORDER
V. ON MOTIONS FOR
13 SUMMARY JUDGMENT
MONTANA MUNICIPAL
14 INTERLOCAL AUTHORITY and
GOVERNMENT ENTITIES
15 MUTUAL, INC.,
16 Defendants.
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18 Plaintiff City of Bozeman (City) filed a complaint for declaratory
19 judgment seeking a determination of responsibility for payment.of a$3,000,000
20 judgment entered against the City in Delaney and Co., Inc. v. City of Bozeman,
21 Gallatin County Cause No. DV-03-354. Defendants Montana Municipal Interlocal
22 Authority (MMIA) and Government Entities Mutual, Inc. (GEM), have answered, and
23 all parties have filed motions for summary judgment. The motions have been briefed
24 and were orally argued on September 22, 2011. The Court will resolve all motions in
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1 this single Order. The Court concludes that the City's motion should be denied, and
2 the motions of MMIA and GEM should be granted.
3 STANDARD OF REVIEW
4 Summary judgment is appropriate when "the pleadings, the discovery
5 and disclosure materials on file, and any affidavits show that there is no genuine issue
6 as to any material fact and that the movant is entitled to judgment as a matter of law."
7 Rule 56(c)(3), M.R.Civ.P.
8 The party moving for summary judgment must establish the absence of
9 any genuine issue of material fact and entitlement to judgment as a matter of law. Tin
10 Cup County Water and/or Sewer Dist. v. Garden City Plumbing, 2008 MT 434, 122,
11 347 Mont. 468, 200 P.3d 60. Once the moving party has met its burden, the party
12 opposing summary judgment must present affidavits or other testimony containing
13 material facts that raise a genuine issue as to one or more elements of its case. Id.,
14 54 (citing Klock v. Town of Cascade, 284 Mont. 167, 174, 943 P.2d 1262, 1266
15 (1997)). Conclusory statements and assertions will not prevent summary judgment.
16 Id. In this instance, the parties agree there are no material issues of fact to be
17 decided. The issues before the Court involve questions of law—the interpretation of
18 the Memorandum of Liability Coverage.
19 DISCUSSION
20 Delaney and Company, Inc. (Delaney), is a Montana corporation and
21 property developer in the Bozeman area. In 2003, Delaney was negotiating with
22 Lloyd Mandeville to purchase property for a development that was to include a waste
23 transfer station site. Delaney and Mandeville agreed on a price per acre for the
24 property, and Delaney then made additional arrangements in furtherance of the
25 development.
MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Page 2
I Delaney discussed his development plans with the Bozeman city
2 manager. The city manager told Delaney that he would review the plans and provide
3IDelaney's
Delaney with waste transfer station design layouts. Instead, the city manager
4undertook negotiations to purchase the property on behalf of the City without
5 knowledge.
6 The City ultimately purchased the property, and Delaney filed suit
7 against it, alleging constructive fraud, negligent misrepresentation, and intentional
8 interference with prospective economic advantage. During the course of the litigation,
9 the district court held that, as a sanction for discovery abuses, the City was liable to
1 o Delaney. The matter then proceeded to jury trial on the issue of damages. The jury
11 awarded$3,000,000 to Delaney for lost profits, and the verdict was affirmed on
12 appeal. Delaney & Co. v. City of Bozeman, 2009 MT 441, 354 Mont. 181, 222 P.3d
13 1618.
14 MMIA, a public entity risk pool to which the City belongs, paid the
15 judgment under a reservation of rights conditioned on a judicial determination of
16 which party or parties—the City, MMIA, and/or its reinsurer, GEM— are
17 ultimately responsible for payment of the judgment. MMIA's coverage has a limit of
18 $750,000 for each claim, with a$1,500,000 limit for each occurrence. GEM reinsures
19 above those limits for claims not subject to the tort claim.limitations of Section
2 o 2-9-108, MCA. In Delaney,the district court determined that the judgment against the
21 City was not subject to the statutory limits, and this determination was upheld on
22 appeal. Id., 125.
23 The City contends that MMIA is responsible for payment of the
24 judgment pursuant to the terms of the Memorandum of Liability Coverage issued to
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MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Pagc 3
1 the City for the time period at issue. Both MMTA and GEM seek a determination that
2 there is no coverage for the Delaney judgment as a matter of law.
3 Although MMIA is not an insurance provider in the usual sense, the
4. Montana Supreme Court has applied principles of insurance policy interpretation to
5 coverage disputes relating to MMIA indemnity agreements with municipalities. See,
6 e.g., Town of Geraldine v. Mont. Mun. Ins. Auth., 2008 MT 411, 18, 347 Mont. 267,
7 198 P3d. 796.
s An insurance contract is construed according to the general principles of
9 contract law:
10 General rules of contract law apply to insurance policies and we
construe them strictly against the insurer and in favor of the insured.
11 Courts give the terms and words used in an insurance contract their
usual meaning and construe them using common sense. Any ambiguity
12 in an insurance policy must be construed in favor of the insured and in
favor of extending coverage. An ambiguity exists where the contract,
13 when taken as a whole, reasonably is subject to two different
interpretations. Courts should not, however, "seize upon certain and
14 definite covenants expressed in plain English with violent hands, and
distort-them so as to include a risk clearly excluded by the insurance
15 contract."
16 Travelers Cas. &Sur. Co. v. Ribi Immunochem Research, Inc., 2005 MT 50, ¶ 17, 326
17 Mont. 174, 108 P.3d 469 (citations omitted).
18 A contractual ambiguity does not exist simply because one party claims
19 to perceive language as ambiguous. The supreme court recently reaffirmed this
20 principle, stating:
21 A contract provision is ambiguous if it is susceptible, without violence,
to more than one reasonable interpretation. Whether a provision is
22 ambiguous is a question of law, which courts resolve from the viewpoint
of the layperson "untrained in the law or the insurance business."
23 "Ambiguity does not exist just because a claimant says so," or just
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because the parties disagree as to the meaning of the contract provision.
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MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Pagc 4
1 Further, courts will not distort contractual language to create an
ambiguity where none exists.
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3 Giacomelli v. Scottsdale Ins. Co., 2009 MT 418, 132, 354 Mont. 15, 221 P.3d 666
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(citations omitted).
5 The language of a contract governs its interpretation if it is clear,
6 explicit and does not involve an absurdity. Section 28-3-401, MCA. If the words of a
7 contract are "clear, certain, and unambiguous, the language alone controls and there is
8 nothing for the courts to interpret or construe." Morning Star Enters. v. R.H. Grover,
9 247 Mont. 105, 111, 805 P.2d 553, 557 (1991); Section 1-4-101, MCA. The Court
1 o concludes that the issue to be resolved in this case does not involve a contractual
11 ambiguity; rather, the question is whether the language of the relevant exclusion
12 negates coverage.
13 In support of its motion for summary judgment, the City sets forth a
14 detailed analysis of the provisions of the Memorandum of Liability Coverage it
15 contends obligates MiVIIA. Essentially, the City asserts that coverage exists under the
16 property.damage or public official errors and omissions clauses of the memorandum.
17 It points out that the threshold factors required to generate coverage are a finding of
18 damages resulting from property damage, or by errors and omissions caused by an
19 occurrence as those terms are defined in the policy. According to the City, the
2 o damages awarded by the jury were directly tied to Delaney's claims of constructive
21 fraud, negligent misrepresentation and intentional interference with prospective
22 economic damage.
23 Citing Town of Geraldine, GEM points out that the Montana Supreme
24 Court has "repeatedly held that it is the acts giving rise to the complaint which form
25 the basis for coverage, not the complaint's legal theories or conclusory language."
MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Pagc 5
1 Town of Geraldine, 124. GEM asserts that because all of the conduct alleged in the
2 complaint was intentional and willful, no matter how it may be stylized legally, it does
3 not fit within the definition of an "Occurrence" as that tenn is defined in the
4 memorandum. The relevant portions of that definition state:
5 "Occurrence" - - means:
6 1. With respect to Bodily Injury or Property Damage, an accident or
event which results during the COVERAGE PERIOD, in Bodily
7 Injury or Property Damage neither expected nor intended from
the standpoint of the Covered Party, . . .
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3. With respect to Public Officials Errors and Omissions, actual or
9 alleged conduct during the Coverage Period as described in the
definition of Public Officials Errors and Omissions.
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11 (MMIA's Mem. Supp. Mot. Summ. J., Ex. 1, at 4 of 20.) The definition of"Public
12 Officials Errors and Omissions" referred to in subparagraph 3 states that it "means any
13 act, omission, neglect, or breach of duty, including nonfeasance, misfeasance, and
14 malfeasance by the COVERED PARTY." (Id., at 5 of 20.)
15 GEM maintains that in terms of the public officials errors and omissions
16 provision, if the acts of the covered party are intentional or deliberate, they are
17 excluded from coverage. It notes that the Delaney complaint did not allege an
18 "occurrence"but rather willful and intentional misconduct. Moreover, it argues that
19 the City's claims under the property damage provisions of the memorandum render
20 the errors and omissions claims irrelevant because they are mutually exclusive
21. according to the terms of the Memorandum.of Liability Coverage.
22 Both GEM and M1VBA acknowledge that the City is covered
23 presumptively under the language of the memorandum that describes general grants of
24 authority. However, they assert that the broad areas of coverage are subject to the
25 exclusions. GEM and MMIA also maintain that because the City still owns the
MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Page 6
1 property, it has suffered no loss or damage as those terms are defined in the
2 memorandum. Relying on exclusion 23, they argue that the Delaney judgment
3 constitutes a financial gain to which the City was not entitled. The exclusion states:
4 "Any liability of the COVERED PARTY arising in whole or in part out of the
5 COVERED PARTY obtaining remuneration or financial gain to which the
6 COVERED PARTY was not legally entitled." (Id., at 11 of 20.) GEM also avers that
7 exclusion 24, or at least the first paragraph thereof, applies as well. It states that
s coverage is excluded for "[a]ny liability arising out of any deliberately dishonest or
9 fraudulent act or omission, or any criminal or malicious act or omission, or any willful
1 o violation of the law." (Id., at 11 of 20.)
11 11 The City proffers the "reasonable expectations" doctrine as a basis for
12 avoiding the exclusions for deliberate dishonesty and willful statutory violation. This
13 concept is explained in Hanson v. Employers 1lMut. Cas. Co., 336 F. Supp. 2d 1070,
14 1075 (D.Mont, 2004):
15 The reasonable expectations doctrine provides that the
objectively reasonable expectations of insurance purchasers about the
16 terms of their policies should be honored even if a painstaking study of
the policy would negate those expectations. An insurance contract is to
17 be interpreted from the viewpoint of a consumer with average
intelligence, with no training in law or insurance.
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19 (Citations omitted.)
20 NMA and GEM assert that the reasonable expectations doctrine has no
21 application to the situation in this case because the City is not an average insurance
22 consumer. Instead, it is one of the founding members of MMIA, has held a seat on its
23 board of directors since its inception, and signed the most recent MMIA liability
24 program agreement in 2009. The City is a member of a pool of self-insured—all
25 sharing responsibility for claims made against the Authority. The nature of this type
MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Page 7
1 of organization was discussed in City of Arvada v. Colorado Intergov'd Risk Sharing
2 Agency, 19 P.3d 10, 13 (Colo. 2001), in which the Colorado Supreme Court observed:
3 [I]nsurance pools do not undertake the indemnification of a third party.
Rather, an insurance pool is, in essence, an extension of each member,
4 as the funds that provide the coverage come directly from the members,.
and the type and extent of coverage is determined collectively by the
5 members themselves. Thus, self-insurance pools are more properly
likened to simple self-insurance than to insurance companies.
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7 After consideration of the arguments of all parties, the Court concludes
8 that coverage is excluded under exclusion 23. For this reason, it need not address
9 application of exclusion 24. The Montana Supreme Court decisions in Delaney and
10 City of Dillon v. Mont. Mun. fits. Auth., 2009 MT 393, 353 Mont. 370, 220 P.3d 623,
11 are instructive. City of Dillon involved a question of whether interest earned on
12 wrongfully retained pension benefits, was "financial gain" as that term appeared in a
13 policy exclusion identical to exclusion 23 in this matter. The court held that it was,
14 and stated:
15 The District Court held that while the Williams claim was a covered
loss, the clause referred to as the "financial gain" exclusion precluded
16 coverage. The District Court applied the "financial gain" exclusion only
to Williams' claim for the principal amount of her unpaid pension
17 benefits, but declined to apply it to Williams' claim for interest:
This approach construes and applies the "financial gain"
18 exclusion too narrowly, and in contravention of its plain language. The
exclusion, as noted above, provides that there is no coverage for"[a]ny
19 liability" of.Dillon that arises "in whole or in part" from Dillon's
obtaining money that it is not entitled to. The clear and explicit
20 language of a contract governs its interpretation, § 28-3-401, MCA, and
the words are to be understood in their ordinary and popular sense, §
21 28-3-501, MCA. The unambiguous plain language of an insurance
policy coverage exclusion is applied. We therefore apply the plain
22 language of the MMIA memoranda governing exclusions from
coverage.
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24 Id., ¶¶ 12, 13 (citation omitted).
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MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Pagc 8
I The City contends that the Delaney judgment does not represent
2 financial gain to the City— instead it constitutes lost potential profits to Delaney, As
3 such, in the City's view, exclusion 23 does not apply. Viewed from this perspective,
4 any future financial gain that may be realized by the City is irrelevant when
5 considering the application of the exclusion. However, as the Montana Supreme
6 Court decision recognizes, the award made to Delaney was based on the testimony of
7 the City's own expert, who established his calculation based upon what the City could
8 realize as profit from the property. That decision states:
9 Delaney presented the testimony of a consultant who had been
retained by Bozeman to assist the city in preparing a master plan for the
10 development of the Mandeville property. His work included an
economic analysis and a feasibility study of various ways in which the
11 property could be developed. His analysis predicted a profit to Bozeman
of$ 3,000,000, which was ultimately the amount of the jury's verdict.
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13 Delaney, ¶35.
14 The City argues that the supreme court's decision in City of Dillon is
15 "inapposite" to the situation in Delaney, primarily because in City of Dillon there was
1 G a conversion of property not present in the instant case. The City asserts:
17 It is the conduct associated with the acquisition of property, not the
holding of the property itself, that supported Delaney's three claims...
18 These claims are based upon the conduct of the City of Bozeman
officials in.pursuing legitimate title to real property when the actual title
19 was held by Mandevilles, not Delaney and Company.
20 (Combined Br. Resp. MMIA's & GEM'S Brs. Supp. Mots. Summ. J., at 7.)
21 However, the City's characterization fails to acknowledge two salient
22 factors. The first is that City of Dillon does not limit the application of the language
23 in exclusion 23 to situations only involving conversion; conversion was simply the
24 underlying factual circumstance in that case. The second is that the verdict in Delaney
25 represents what the jury considered to be wrongful, willful conduct by a city official
MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Page 9
1 resulting in the City obtaining financial gain to which it was not legally entitled. The
2 supreme court recognized this fact in affirming the district court when it stated: "In
3 this case, Bozeman tortiously interfered with Delaney's ability to acquire the
4 Mandeville property, causing Delaney to suffer a loss of profits." Delaney, 124.
5 Attached as an exhibit to the City's combined response brief to MMIA's
6 and GEM'S motions for summary judgment is the affidavit of Chris Kukulski,
7 Bozeman city manager, which contains a statement that the City paid $3,057,000 for
8 the Mandeville property and that, as of the date of the affidavit, the City has realized
9 no financial gain from the acquisition. However, that situation is irrelevant to the
10 issue of whether MMIA is obligated to assume the debt.
11 Delaney affirmed a jury instruction that stated in part: "Your award
12 should include lost profit or other prospective gain from the operation of Delaney &
13 Company's business, which in this case was the purchase and development of the
14 Mandeville Ranch property." Id., 139. As MNIIA points out in its reply brief, the
15 Delaney judgment represents profit to Delaney lost to the City after expenditures made
16 in pursuit of that profit. In Ophus v. Fritz, 2000 MT 251, 124, 301 Mont. 447, 11
17 P.3d 1192, the supreme court relied on the two dictionary definitions to define profit:
18 "Profit" is defined in Black's Law Dictionary as "the excess.of revenues over
19 expenditures in a business transaction." BLACK'S LAW DICTIONARY 1226 (7th ed.
20 1999). Likewise, Webster's dictionary defines "profit" as "the excess of the selling
21 price of goods over their cost." WEBSTER's NEW AMERICAN DICTIONARY 415 (1995).
22 What the City gained and Delaney lost was the projected $3,000,000
23 over the expenditures incurred in obtaining and developing the property, according to
24 the testimony of the City's own expert. That gain was only realized through the
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MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Page 10
1 tortious actions of the City, which still retains the property and thus the future
2 profit-value of the property.
3 In SAFCO Ins. Co. v. Liss, 2000 MT 380, ¶ 30, 303 Mont. 519, 16 P.3d
4 399, the Supreme Court noted that"well-established"public policy precludes
5 indemnification of willful acts. It would be contrary to public policy in this case to
6 require the insurers to pay the City for acts that were determined to be wrongful as a
7 matter of law.
8 Based on the foregoing, IT IS HEREBY ORDERED that the City's
9 motion for summary judgment is DENIED. The motions for summary judgment of
1 o MVIIA and GEM are GRANTED.
11 DATED this //.� day of April 2012.
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13 ( '�,1� �
KATW SEFF��* EY
rict
14 Dist CourtMJudge
15 pc: Elizabeth A. O'Halloran
Curt Drake
1G Joe Seifert
17 T/KS/bozeman v mont municip auth m&o mots summ j.wpd
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MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT— Page 11