Parker v. Safeco Insurance Co. of America

07/19/2016
DA 15-0528
Case Number: DA 15-0528
IN THE SUPREME COURT OF THE STATE OF MONTANA
2016 MT 173J. RUSSELL PARKER,
Petitioner and Appellant,
v.
SAFECO INSURANCE COMPANY OF AMERICA,
and JOHN DOES 1-5,
Respondent and Appellee.
APPEAL FROM: District Court of the Fifth Judicial District,
In and For the County of Madison, Cause No. DV 29-14-46
Honorable Loren Tucker, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Jory C. Ruggiero, Bradley R. Jones, Western Justice Associates,
Bozeman, Montana
For Appellee:
Brooke B. Murphy, Ryan J. Gustafson, Matovich, Keller & Murphy, P.C.,
Billings, Montana
Submitted on Briefs: May 18, 2016
Decided: July 19, 2016
Filed:
__________________________________________
Clerk
Chief Justice Mike McGrath delivered the Opinion of the Court.
¶1 J. Russell Parker appeals from the District Court’s order filed August 12, 2015,
granting summary judgment in favor of defendant Safeco Insurance Company. We
affirm.
¶2 We restate the issue on appeal as follows:
Whether the District Court erred in construing Parker’s insurance policy with
Safeco to exclude coverage for damage caused by a large rock falling down a
hillside into Parker’s cabin.
FACTUAL AND PROCEDURAL BACKGROUND
¶3 In March 2014 a large boulder dislodged from a hillside several hundred feet from
Parker’s vacation cabin near Sheridan, Montana. The boulder fell down the hillside and
into Parker’s unoccupied structure, causing substantial damage. Parker submitted a claim
to his insurer Safeco.
¶4 Safeco hired an engineer who examined the incident within 12 days of the rock
fall. Safeco’s expert reconstructed the 440-foot path that the boulder took down the
hillside and into Parker’s cabin, and found the “fresh scar” where the boulder dislodged
from the cliff. The expert observed “a significant amount of soil remnants” where the
boulder originally sat in the cliff, and opined that expansion of soil and water in cracks in
the rock caused it to dislodge. Upon receiving the expert’s report, Safeco requested more
information as to the cause of the rock fall. The expert responded that the freeze-thaw
process or “frost wedging” of the soil and water in the rock joints was the cause. The
following day, on April 3, 2014, Safeco sent a copy of the expert’s report to Parker.
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¶5 On April 14, 2014, Parker’s expert examined the site. He concurred with Safeco’s
expert as to the original location of the boulder on the cliff, and as to the role of the
freeze-thaw process in the rock fall. Parker’s expert did not observe “soil” at the cliff
site, but rather “infilling from weathered granitic gneiss.” About ten days later Safeco
wrote Parker stating that his claim appeared to be excluded by the earth movement
exclusion in the insurance policy.
¶6 The Safeco policy contained an exclusion from coverage for damages caused by
“earth movement.” The policy provided:
BUILDING PROPERTY LOSSES WE DO NOT COVER
We do not cover loss caused directly or indirectly by any of the following
excluded perils. Such loss is excluded regardless of any other cause or
event contributing concurrently or in any sequence to the loss. These
exclusions apply whether or not the loss results in widespread damage or
affects a substantial area;
. . .
9. Earth Movement, meaning:
a. the sinking, rising, shifting, expanding or contracting of earth, all
whether combined with water or not. Earth movement includes but
is not limited to earthquake, landslide, mudflow, mudslide, sinkhole,
subsidence, movement resulting from improper compaction, site
selection or any other external forces, erosion including collapse or
subsidence of land along a body of water as a result of erosion or
undermining resulting from the action of water.
b. erosion, shifting or displacement of materials supporting the
foundation; and
c. volcanic blast, volcanic explosion, shockwave, lava flow, lahars and
fallout of volcanic particulate matter.
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This exclusion applies whether the earth movement is caused by or
resulting from human or animal forces or any act of nature.
After the experts made their reports and especially after Safeco concentrated on
determining the cause of the boulder fall, debates arose, and continue, over whether any
“soil” was involved in the boulder fall, and whether rock is “earth” as used in the policy
language. Safeco’s expert concluded that freezing and thawing of water and soil in the
joints of the rock outcrop, over time, caused the boulder to break free and fall. Parker’s
expert opined that no actual “soil” was involved in the boulder fall because the
decomposition of the granitic gneiss at the site from which the boulder fell does not
create “soil” that is susceptible to expanding with freezing water. Safeco denied Parker’s
claim, informing him that the “rockfall is considered earth movement from landslide
which is specifically excluded under your policy.”
¶7 Parker sued Safeco for breach of contract and for damages under the Unfair Trade
Practices Act, §§ 33-18-201 and -242, MCA. Safeco argued that the earth movement
exclusion precluded coverage. Parker argued that the policy language was ambiguous;
that Safeco had wrongfully changed its theory of why there was no coverage; that “earth
movement” did not describe a single falling boulder; and that excluding coverage was
contrary to his reasonable expectations. Both parties moved for summary judgment. The
District Court granted Safeco’s motion and denied Parker’s motion.
¶8 The District Court first analyzed Parker’s argument that Safeco failed to notify
him of the policy defenses it intended to rely upon and had thereby waived the right to
raise those defenses. The District Court found that Safeco promptly and clearly informed
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Parker that it intended to rely on the earth movement exclusion. Therefore, the District
Court concluded that he could not have been surprised by the reason for denial. In
addition, Parker could not demonstrate any prejudice arising from Safeco’s
communications on coverage and so could not hold Safeco to have waived its policy
defenses.
¶9 The District Court analyzed Parker’s argument that the language of the policy
exclusion was ambiguous, beginning with the legal premise that ambiguous language in
an insurance policy will be construed against the insurer who drafted it. However, the
District Court determined that disagreement over the meaning of policy language does
not create an ambiguity and absent an ambiguity a court must enforce the contract as
written. The District Court analyzed Parker’s reliance upon Kresge v. State Farm Fire
and Casualty, 2012 WL 8499731 (Colo. Dist., Nov. 4, 2012), a case with similar facts
and policy language. The District Court found that Kresge’s conclusion that the policy
language was ambiguous was flawed and should not be followed.
¶10 The District Court then analyzed the Safeco policy language, determining that an
excluded earth movement event could be either small or large, and could include only a
few rocks or many. Accepting Parker’s argument that one rock could not constitute an
excluded landslide would result in courts being “called upon to distinguish between one
rock and two, or two and three” when there is “no principled basis to do so.” The Safeco
policy language excluded coverage regardless of the size of the event and regardless of
whether it is described by one of the listed examples. “The damage to Parker’s home
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resulted from earth movement, an occurrence which the text of the policy unambiguously
excludes from coverage.”
¶11 The District Court considered Parker’s argument that “only soil constitutes earth”
and that a rock is not earth under the policy exclusion—that a soil slide would be
excluded but a rock slide would not. The District Court concluded that “earth” as used in
the policy includes both rock and soil, relying upon the policy’s examples of “earth
movement” events to include earthquake, landslide, volcanic blast and lava flow. These
examples of earth movement could occur with or without soil movement, or with a
mixture of soil and rock. Therefore, the District Court concluded that it is clear that
“earth” in the policy language must mean “the land surface of the world” which “clearly
includes rock.” “There is no principled basis to distinguish between the movement of
two or three boulders compared to one boulder. The fall of a large boulder is a landslide.
The exclusion applies.”
¶12 The District Court considered Parker’s argument that because the insurance policy
represented a contract of adhesion, it was proper to defer to Parker’s “reasonable
expectations” about the scope of Safeco’s coverage. The District Court found no support
for Parker’s argument. The earth movement exclusion did not nullify any coverage
granted elsewhere in the policy and Parker’s purported conversations with the adjuster
after the rock fall as well as Safeco advertising that he did not read before purchasing the
policy were irrelevant. Because the Safeco policy clearly excluded coverage for Parker’s
loss, he could not demonstrate to the District Court that he had a reasonable expectation
of coverage, and he could not establish that the policy was oppressive or unconscionable.
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¶13 Finally, the District Court rejected Parker’s claims under the UTPA. Safeco had a
reasonable basis in fact for contesting the claim under the earth movement exclusion.
Because the policy “unambiguously excludes coverage for earth movement,” the District
Court granted summary judgment to Safeco and Parker appeals.
STANDARD OF REVIEW
¶14 The district court’s interpretation of an insurance policy is reviewed as an issue of
law, to determine whether the interpretation was correct. Wendell v. State Farm, 1999
MT 17, ¶ 10, 293 Mont. 140, 974 P.2d 623. General rules of contract law apply, and we
construe insurance policies against the insurer and in favor of the insured. Travelers Cas.
& Sur. Co. v. Ribi Immunochem, 2005 MT 50, ¶ 17, 326 Mont. 174, 108 P.3d 469. A
court should interpret terms in an insurance policy according to their usual,
common-sense meaning as viewed from the perspective of a reasonable consumer of
insurance products. Park Place Apts. v. Farmers Union, 2010 MT 270, ¶ 12, 358 Mont.
394, 247 P.3d 236. Ambiguity exists when the insuring document, taken as a whole, is
reasonably subject to differing interpretations, and ambiguity should be construed in
favor of the insured. Travelers, ¶ 17.
¶15 This Court reviews a district court’s order on a motion for summary judgment by
applying the same criteria as the district court under M. R. Civ. P. 56. Thornton v.
Flathead County, 2009 MT 367, ¶ 13, 353 Mont. 252, 220 P.3d 395.
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DISCUSSION
¶16 Issue: Whether the District Court erred in construing Parker’s insurance policy
with Safeco to exclude coverage for damage caused by a large rock falling down a
hillside into Parker’s cabin.
¶17 The Safeco policy in this case provided several exclusions from coverage, one of
which was loss due to “earth movement.” Parker contends that because a large rock
caused the damage to his cabin, there was no “earth movement.”
¶18 The text of the policy contains the bolded heading of “BUILDING PROPERTY
LOSSES WE DO NOT COVER.” The policy excludes coverage for damage from “earth
movement,” defined as the “sinking, rising, shifting, expanding or contacting of earth.”
The policy provides that earth movement includes but is not limited to earthquake,
landslide, mudflow, mudslide, sinkhole, subsidence and erosion. The policy provides
that earth movement includes volcanic blasts, lava flows and “fallout of volcanic
particulate matter.” The policy provides that the coverage exclusion applies whether the
earth movement is caused by human forces or an act of nature, and whether or not the
earth movement event is widespread.
¶19 The District Court read this provision as a whole, without isolating single words,
to determine that the clear intent of the policy language was to expansively exclude
coverage for damage caused by any movement of materials that make up the Earth’s
surface. As the District Court noted, the term “earth” includes more than just soil such as
that found in a garden. Reasonable people would recognize that rocks of all sizes
ordinarily comprise more or less of the surface of the earth upon which we live. Digging
a shovel or two of earth in most places in Montana will yield both soil and rock.
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Construing the policy to exclude only damages caused solely by soil movement would
improperly distort the policy language. Giacomelli v. Scottsdale Ins. Co., 2009 MT 418,
¶ 35, 354 Mont. 15, 221 P.3d 666.
¶20 Further, there is nothing in the language of the exclusion to indicate that there is
any basis for separating rock from soil when considering “earth movement.” To the
contrary, the policy language includes landslides and lava flow as examples of earth
movement. The Montana District Court in Yellowstone County construed “landslide” in
an insurance policy exclusion as “the rapid downward movement of a mass of rock, earth,
or artificial fill on a slope.” Deschner v. Hartford, Cause DV 10-1800, Montana
Thirteenth Judicial District Court, Yellowstone County (2013). “The ordinary meaning
of the term ‘landslide’ includes rocks falling down a bluff.” Dupps v. Travelers Ins. Co.,
80 F.3d 312, 314 (8th Cir. 1996). These cases reflect the common understanding of the
term landslide as a movement, falling or sliding of whatever is on the surface of the earth
and some distance below the surface. Clearly, in many instances this would include both
soil and rocks of varying size. Other courts have held that the ordinary meaning of
“landslide” in a similar earth movement policy exclusion includes movement of “soil or
rock on or from a steep slope.” Murray v. State Farm, 509 S.E.2d 1, 8 (Sup. Ct. App. W.
Va. 1998); Deschner; Dupps, 80 F.3d at 314. Similarly, as the District Court explained,
lava (a specific example of earth movement listed in the policy) is molten rock per se,
and not soil. We agree with the District Court that the clear intent of the Safeco policy
language was to broadly exclude coverage for any and all types of earth movement.
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¶21 We disagree with Parker’s basic contention that the District Court found that the
Safeco policy was ambiguous and yet failed to construe it against Safeco. While
ambiguity in insuring language is construed so as to extend coverage, courts considering
coverage issues must examine the document as a whole, giving words their usual
meaning. Mitchell v. State Farm, 2003 MT 102, ¶ 26, 315 Mont. 281, 68 P.3d 703.
Significantly, the District Court never determined that any of the policy language was
ambiguous. The fact that the District Court here had to consider and discuss the words of
the policy in order to apply it does not equate with a finding that the policy language was
ambiguous. Consideration and interpretation of the policy language is simply the court’s
function when disputes arise.
¶22 The extent that the parties “struggled” as Parker describes it, to apply the policy
language was attributable in part to Parker’s argument that “earth” could only mean soil,
so that the exclusion did not apply. There is no language in the earth movement
exclusion requiring the involvement of “soil” or limiting the exclusion to events
involving soil. The policy exclusion applies regardless of the cause of the earth
movement. The clear examples of earth movement provided in the policy make it clear
that it is not limited to movement of soil. The policy exclusion examples include
earthquake, landslide, mudflow, mudslide, along with volcanic blast, volcanic explosion,
shockwave, lava flow, lahars and fallout of volcanic particulate matter. We agree with
the District Court that “earth” as used in the policy is clearly intended to be broadly
inclusive of all natural materials that comprise the surface of the earth, including rocks
and soil.
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¶23 Parker further contends that the District Court wrongfully resolved a genuine issue
of material fact in deciding the summary judgment motions. Parker’s expert visited the
site and could not find any “soil” of a type that could have combined with water to freeze
and thaw and cause the rock fall event. However, this again relates to the rejected
contention that the presence or absence of “soil” is determinative of coverage. The
District Court granted summary judgment based upon the language of the policy, not
upon a resolution of a factual dispute.
¶24 As noted, Parker relies heavily upon the Colorado lower court decision in Kresge
in support of his position. In that case a single boulder fell on insured’s property and the
insurer denied coverage under the “earth movement” exclusion in the policy. The insured
argued that a boulder is not “earth” any more than a tree or an animal carcass, and that a
single boulder cannot be a “landslide.” That court determined that a majority of other
state courts have recently held that the earth movement exclusions are ambiguous, and at
the same time there is “so much judicial disagreement” about the earth movement clause
that it must be ambiguous. The Colorado court determined that “reasonable consumers”
could expect the boulder fall to be covered.
¶25 While many state courts have considered whether “earth movement” coverage
exclusions are ambiguous, the vast majority of those cases were decided in the context of
disputes over whether the exclusion applied to human-caused events. See, for example,
the cases collected at Appendix A in Murray. The policy in this case applies the
exclusion to earth movement regardless of its cause, making the debate over
human-caused events irrelevant. We do not find Kresge persuasive.
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¶26 In Deschner, the court considered an incident in which “one or multiple pieces of
rock” fell from the Rimrocks in Billings. When that rock hit the ground it broke into
pieces and fell onto plaintiff’s house, severely damaging it. The insurer denied coverage
under its earth movement exclusion and the district court granted summary judgment to
the insurer. The parties presented several dueling expert opinions as to whether a
“rockfall” constituted a “landslide” from a geologist’s perspective, and plaintiff argued
that this disagreement demonstrated that the term “landslide” was ambiguous.
¶27 The district court concluded that it need not consider the opinions of the various
experts about rock falls and landslides because they do “not bear upon a reasonable
consumer’s understanding of the term landslide as used in the ‘Earth Movement’
exclusion.” This Court recently held that expert testimony is inadmissible when the issue
was construction of the language of a deed which, like the construction of an insurance
policy, is a question of law. Wicklund v. Sundheim, 2016 MT 62, ¶¶ 15-17, 383 Mont. 1,
367 P.3d 403. See also Jordan v. Allstate, 116 Cal. App. 4th 1206, 1218 (2004) (rejecting
expert testimony as an aid in construing insurance policies from the viewpoint of a
reasonable lay person). Montana Rule of Evidence 702 allows for the use of expert
testimony to “assist the trier of fact to understand the evidence or to determine a fact in
issue.” Dubiel v. Montana DOT, 2012 MT 35, ¶¶ 16-17, 364 Mont. 175, 272 P.3d 66.
¶28 It is well established that a court should interpret terms in an insurance policy
according to their usual, common-sense meaning as viewed from the perspective of a
reasonable consumer of insurance products. Park Place Apts., ¶ 12. The District Court
consulted dictionary definitions of the term “landslide” to determine that it is “the rapid
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downward movement of a mass of rock, earth, or artificial fill on a slope.” The event
under consideration—a large boulder falling off a cliff, breaking upon impact, and then
continuing downhill to hit the insured’s house—was a landslide under the earth
movement exclusion and therefore not covered.
¶29 We agree with the district court’s analysis in Deschner that a common
understanding of the term “landslide” in the context of the earth movement exclusion in
the Safeco policy would include the large boulder that came down the hill and onto
Parker’s cabin. Parker attempts to distinguish Deschner on the basis that the boulder in
that case fell from its cliff and then broke into two or more pieces, whereas the boulder
that hit his cabin stayed intact. There is no basis in the Safeco policy language for such a
distinction and no reasonable person would expect coverage to turn upon whether the
falling rock stayed intact or broke into two or more pieces.
¶30 Parker contends that Safeco wrongfully changed its reason for excluding coverage,
and therefore should be prohibited from denying coverage. Portal Pipe Line Co. v.
Stonewall Ins. Co., 256 Mont. 211, 217-18, 845 P.2d 746, 750 (1993); § 33-18-201(14),
MCA. The insured seeking to impose coverage in this situation must demonstrate that
the insurer’s change of position caused him prejudice. Safeco v. Ellinghouse, 223 Mont.
239, 245, 725 P.2d 217, 221 (1986). Early in the process Safeco informed Parker by
letter that it was denying coverage because the event was “considered earth movement
from landslide which is specifically excluded under your policy.”
¶31 In this case Parker contends that Safeco’s reasons for denying coverage were
deficient because they did not also mention that freezing and thawing in fissures up on
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the cliff caused the boulder to fall. Parker contends that he was prejudiced because he
could have had an expert examine the scene earlier had he known about the freezing and
thawing. The District Court found, and we agree, that Safeco promptly informed Parker
that it would rely upon the earth movement exclusion in the policy, and that Safeco
considered the falling boulder to constitute a “landslide” under the examples given in the
policy. The District Court further found that Safeco promptly provided a copy of its
expert’s report on the freezing-thawing cause of the event.
¶32 Finally, we agree with the District Court’s determination that Safeco’s conduct did
not constitute a violation of the UTPA, which prohibits insurers from engaging in unfair
and deceptive practices. Section 33-18-101, MCA. Here, Safeco promptly investigated
the claim and hired an engineer to examine the facts. Safeco provided Parker with all the
information it had about the event as it became available. As the District Court
determined, the “UTPA encourages insurers to provide more information rather than
less.” Safeco informed Parker of its determination that the earth movement exclusion
applied, and did not change its initial statement to him that the earth movement exclusion
in the policy precluded coverage for his claim. In any event, whether the rock fall was
caused by freezing soil or freezing water or a mixture thereof, the earth movement
exclusion applied whether the material was “combined with water or not” and it applied
whether or not the movement was caused by “external forces” or erosion.
¶33 Because Safeco properly denied Parker’s claim based upon an express coverage
exclusion in the policy, the District Court properly found that there was no basis for a
claim under the UTPA.
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CONCLUSION
¶34 Having considered the arguments and authorities raised by the parties, the decision
of the District Court is affirmed.
/S/ MIKE McGRATH
We Concur:
/S/ PATRICIA COTTER
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ JIM RICE
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