High Country Paving, Inc. v. United Fire & Casualty Company
14 F.4th 976
| 9th Cir. | 2021Background
- High Country Paving purchased multiple commercial liability policies from United Fire, including commercial auto, umbrella, and commercial general liability (CGL).
- In August 2016 a company trailer detached, causing a fatality and injuries; United Fire paid the auto and umbrella limits ($3 million) but denied coverage under the CGL based on the Aircraft, Auto or Watercraft (AAW) exclusion and the Multiple Liability Coverages Limitation (MLCL) endorsement.
- High Country sued for breach of contract (and separately for bad faith and UTPA claims); the breach claim was removed to federal court on diversity grounds.
- On cross-motions for summary judgment the district court held the AAW and MLCL provisions unambiguous but unenforceable under Montana’s Property and Casualty Insurance Policy Language Simplification Act (PSA) as interpreted in Montana Petroleum Tank Release Compensation Bd. v. Crumleys because the policy lacked a table of contents or a notice section of important provisions.
- The Ninth Circuit found no controlling Montana Supreme Court precedent on whether §33-15-337(2)’s formal requirements, if violated, preclude enforcement of otherwise unambiguous exclusions given §33-15-334(2)’s statement that §33-15-337(2) is “not intended to increase the risk assumed under policies subject to” the PSA, and therefore certified the dispositive question to the Montana Supreme Court and stayed proceedings.
Issues
| Issue | Plaintiff's Argument (High Country) | Defendant's Argument (United Fire) | Held |
|---|---|---|---|
| Whether a policy’s failure to include a table of contents or notice section (violating Mont. Code Ann. §33-15-337(2)) makes otherwise unambiguous exclusions unenforceable | Crumleys requires listing important provisions; omission renders exclusions void and unenforceable | §33-15-334(2) says §33-15-337(2) is not intended to increase the insurer’s assumed risk, so clear exclusions remain enforceable despite technical noncompliance | Ninth Circuit did not decide on the merits; certified the question to the Montana Supreme Court |
| Whether the AAW exclusion and MLCL endorsement are ambiguous and therefore construed for coverage | Pro-coverage construction (ambiguity in exclusions favors insured) | Pro-enforcement: exclusions are unambiguous and preclude CGL coverage | District court found the provisions unambiguous; Ninth Circuit did not finally resolve this issue on appeal and deferred further proceedings pending certification |
Key Cases Cited
- Ticknor v. Choice Hotels Int’l, 265 F.3d 931 (9th Cir. 2001) (federal courts in diversity must predict state law decisions of the highest court)
- Gee v. Tenneco, 615 F.2d 857 (9th Cir. 1980) (same principle on applying state law in federal diversity cases)
- Lehman Bros. v. Schein, 416 U.S. 386 (U.S. 1974) (federal courts may certify unsettled state-law questions to state supreme courts)
- Kremen v. Cohen, 325 F.3d 1035 (9th Cir. 2003) (factors to consider before certifying a question to a state court)
- Montana Petroleum Tank Release Compensation Bd. v. Crumleys, 174 P.3d 948 (Mont. 2008) (Montana Supreme Court interpretation of §33-15-337(2) regarding PSA formatting requirements)