The Montana Supreme Court Brings Clarity to the Meaning of “Accident” in a CGL Policy’s Occurrence Definition

On Behalf of | Oct 7, 2016 | Insurance Law

In Employers Mutual Cas. Co. v. Fisher Builders, Inc., 383 Mont. 187, 371 P.3d 375 (2016), the Montana Supreme Court was called upon to interpret the term “accident” in a CGL policy’s “occurrence” definition. The Court found that the term “accident” could include intentional acts if the damages “were not objectively intended or expected by the insured.” Therefore, triable issues of fact existed regarding whether the insured, a construction contractor, had objectively intended or expected to violate a construction permit during a remodeling project.

In this case the insured, Fisher Builders, was hired to remodel an existing vacation home. The building permit for the project required that the remodeled home incorporate the existing structure and that the existing deck for the structure remain unchanged. However, during construction, Fisher violated the building permit by elevating the existing structure to pour a new foundation when an infestation of carpenter ants was discovered. After removing the ant infested planks the deck collapsed. Following the collapse, a local planning authority revoked the building permit, halting all work on the project. Thereafter the homeowners sued Fisher for negligence. Coverage for the suit was denied with the insurance company, EMC, filing a declaratory judgment action.

Previously, the Montana Supreme Court had held that an intentional act could possibly constitute a covered “occurrence” if the harm stemming from the act was unintended or unexpected. See Northwestern Nat’l Cas. Co. v. Phalen, 182 Mont. 448, 597 P.2d 720 (1979) (overturning summary judgment for the insurer finding questions of fact regarding whether the insured intended or expected to cause the injury when the insured punched another man outside a bar). See also, Millers Mut. Ins. Co. v. Strainer, 204 Mont. 162, 663 P.2d 338, 341 (1983) (coverage found for injuries resulting from a practical joke and noting that “a person may act intentionally without intended or expecting the consequences of that act.”)

In Fisher Builders, the Court brought clarity to the question and ruled that an “accident” can include intentional acts and that coverage is excluded when the consequences of those acts are objectively intended or expected from the standpoint of the insured. The Court focused on the objective nature of the inquiry and set forth a two-pronged objective test that asked (1) whether the insured’s act was intentional; and (2) whether the consequences of the act were objectively expected or intended by the insured. Thus, the question was whether Fisher Builders objectively intended or expected the deck to collapse in violation of the construction permit.

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