NORTHFIELD INSURANCE COMPANY, and LLOYDS OF LONDON, Plaintiffs and Appellants, v. MONTANA ASSOCIATION OF COUNTIES, Defendant and Respondent.
No. 00-072
Supreme Court of Montana
September 26, 2000
2000 MT 256 | 57 St.Rep. 1049 | 301 Mont. 472 | 10 P.3d 813
Submitted on Briefs April 27, 2000.
For Appellants:
For Respondent: Stuart L. Kellner; Hughes, Kellner, Sullivan & Alke, Helena.
JUSTICE GRAY delivered the Opinion of the Court.
¶1 Northfield Insurance Company (Northfield) and Lloyds of London (Lloyds) appeal from the order entered by the First Judicial District Court, Lewis and Clark County, granting the motion filed by the Montana Association of Counties, Joint Powers Insurance Authority (MACO) to dismiss their complaint for declaratory judgment. We affirm.
¶2 The sole issue on appeal is whether the District Court abused its discretion in dismissing the complaint seeking declaratory relief for lack of a justiciable controversy.
BACKGROUND
¶3 The present case stems from a class action lawsuit entitled Alan Doe, et al. v. Park County, et al., currently pending before thе United States District Court for the District of Montana, Billings Division, in which the plaintiffs allege they were sexually abused while incarcerated at the Park County Detention Center (Detention Center). The Doe plaintiffs have asserted claims for negligence, violation of their constitutional rights, and intentional and negligent infliction of emotional distress against the Park County Sheriff and several jailers at the Detention Center.
¶4 MACO‘s self-insurance fund is the primary insurer for numerous public entities in Montana, including Park County. Pursuant to its primary insurance policy, MACO has assumed the defense and indemnification of Park County and the individual Park County officials named in the federal suit. Northfield and Lloyds are secondary assurance companies under a Public Entities All Lines Aggregate Insurаnce Policy (Policy) issued to MACO. Northfield and Lloyds
¶5 Among other things, Section II of the Policy provides comprehensive general liability indemnification for all sums which the assured becоmes obligated to pay by reason of errors, omissions or negligent acts arising out of the performance of employment duties, including law enforcement duties. Section II states that any claim for damages “which the Assured intended or expected or reasonably could have expected” is excluded from coverage, as is “any claim resulting frоm the sexual or physical abuse or molestation of any person by the Assured.”
¶6 Section IV of the Policy provides errors and omissions indemnity for any loss incurred by reason of a “Wrongful Act.” The term “Wrongful Act” is defined to include any “act of neglect or breach of duty including misfeasance, malfeasance, and non-feasance by the Assured.” Section IV states thаt any claim for damages “for bodily injury” or “arising out of law enforcement activities” is excluded from coverage.
¶7 MACO moved to dismiss Northfield‘s and Lloyds’ complaint for declaratory judgment pursuant to
STANDARD OF REVIEW
¶8 In evaluating a
DISCUSSION
¶9 Did the District Court abuse its discretion in dismissing the complaint seeking declaratory relief for lack of a justiciable controversy?
¶10 The remedial purpose of the Uniform Declaratory Judgments Act (Act), “to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations,” is to be liberally construed.
¶11 In granting MACO‘s motion to dismiss in the present case, the District Court
¶12 The test of whether a justiciable controversy exists contains three elements:
First, a justiciable controversy requires that parties have existing and genuine, as distinguished from theoretical, rights or interest. Second, the controversy must be one upon which the judgment of the court may effectively operate, as distinguished from a debate or argument invoking a purely politicаl, administrative, philosophical or academic conclusion. Third, [it] must be a controversy the ju-dicial determination of which will have the effect of a final judgment in law or decree in equity upon the rights, status or legal relationships of one or more of the real parties in interest, or lacking these qualities be of such overriding public moment as to constitute the legal equivalent of all of them.
Brisendine, 253 Mont. at 364, 833 P.2d at 1020-21 (quoting Lee v. State (1981), 195 Mont. 1, 6, 635 P.2d 1282, 1284-85 (quoting Matter of Secret Grand Jury Inquiry (1976), 170 Mont. 354, 357, 553 P.2d 987, 990)). We apply the justiciable controversy test to actions for declaratory judgment to prevent courts from determining purely speculative or academic matters, entering anticipatory judgments, providing for contingencies which may arise later, declaring social status, dealing with theoretical prоblems, answering moot questions, or giving abstract or advisory opinions. See Brisendine, 253 Mont. at 365, 833 P.2d at 1021; Montana Dept. of Nat. R. & C. v. Intake Water Co. (1976), 171 Mont. 416, 440, 558 P.2d 1110, 1123 (citations omitted).
¶13 In Brisendine, for example, a denturist sought a judicial declaration that he was not prohibited from entering into a professional relationship with a dentist while the issue was still pending before the Board of Dentistry. Brisendine, 253 Mont. at 362-63, 833 P.2d at 1019-20. We upheld the district court‘s determination that no justiciable controversy existed because the complaint lacked specificity regarding his proposed business association and because Brisendine had not exhausted his administrative remedies. We determined that an action for declaratory judgment while the underlying controversy was still pending before an administrative board was premature and would serve only as an impermissible advisory opinion. Brisendine, 253 Mont. at 365, 833 P.2d at 1021.
¶14 Applying the justiciable controversy test to the present case, Northfield and Lloyds do not have an existing and genuine interest at stake at this time, even under the broad language of the Act. Northfield and Lloyds seek a declaration that they have no duty to indemnify MACO pursuant to the secondary Policy, even though the record fails to establish anything more than a hypothetical controversy regarding indemnification. While it is true that
¶15 In Hardy, the plaintiffs sought a judicial declaration that several preemptive rights of first refusal pertaining to real property were unreasonable restraints on alienation. Hardy, 206 Mont. at 523, 672 P.2d at 275. We held that no justiciable controversy existed because the record did not reflect an intent by any party to sell property outside the first refusal clause; nor was any third party seeking relief from the clause.
No litigant before us is in immediate danger of sustaining direct injury from the
pre-emptive clause. Therefore we do not have a justiciable controversy over which the judicial power to determine real controversies may be exercised. Broad language in the Uniform Dеclaratory Judgments Act, section[s] 27-8-101, et seq., MCA , may not be used as a platform for courts in this state to plunge into indefinite amorphous ponds of contract interpretation.
Hardy, 206 Mont. at 525, 672 P.2d at 276.
¶16 Similarly here, Northfield and Lloyds can claim no immediate danger of direct injury from the indemnification provisions of the Policy. First, MACO has made no formal request for indemnification. In this regard, Northfield and Lloyds contеnd that a justiciable controversy exists because MACO forwarded them the Doe complaint, thereby implicitly claiming a right of indemnification. However, putting a secondary insurer on notice of a lawsuit does not constitute a claim for indemnification. Thus, any determination of Northfield‘s and Lloyds’ duty to indemnify would require us to speculate that MACO will eventually seek indemnificatiоn.
¶17 Moreover, MACO has not exhausted its self-insured retention funds vis-a-vis the federal litigation. Consequently, while the parties advance opposing arguments on whether the duty to indemnify arises when a complaint is filed or when a final settlement or judgment is entered, we need not resolve that question here. A secondary insurer‘s duty to indemnify cannot be said to exist if primary covеrage has not been exhausted. See 16 Ronald A. Anderson, Couch on Insurance 2d § 62:41, at 55-56 (rev. ed. 1999 Supp.). Thus, a final settlement or adjudication of the underlying federal case within MACO‘s primary coverage funds would render any determination as to Northfield‘s and Lloyds’ duty to indemnify moot. Similarly, if the underlying federal case is adjudicated in favor of MACO‘s insureds, no liability will exist on which indemnification could be sought. In that event, any determination as to Northfield‘s and Lloyds’ duty to indemnify via this declaratory relief action also would be moot.
¶18 The judicial determination Northfield and Lloyds seek involves a contractual duty which has not yet arisen and which may, in fact, never arise. A determination of the issue, therefore, would constitute an advisory opinion and courts hаve no jurisdiction to issue such opinions. See Brisendine, 253 Mont. at 365, 833 P.2d at 1021; Hardy, 206 Mont. at 524, 672 P.2d at 275.
¶19 Generally, a justiciable controversy also must be a controversy on which a judicial determination will have the effect of a final judgment regarding the rights, status or legal relations of one or more of the parties. Brisendine, 253 Mont. at 364, 833 P.2d at 1021. The declaratory relief Northfield and Lloyds seek here regarding their indemnification obligatiоns under the Policy does not satisfy this standard. The underlying federal case which is the subject of any potential indemnification under the Policy has yet to be settled or tried. Assuming arguendo that coverage and indemnification under the Policy are precluded on the facts alleged in the federal complaint, the plaintiffs in that action could still amend their complaint to add claims and legal theories which would trigger coverage. In addition, facts may still emerge during the course of the litigation which would give rise to Northfield‘s and Lloyds’ duty to indemnify MACO under the Policy. Either event would nullify any declaratory judgment that Northfield and Lloyds have no duty to indemnify. As a result, either event would require the District Court to amend or withdraw the declaratory judgment.
¶20 Nоtwithstanding, Northfield and Lloyds contend that declaratory judgment is appropriate because all the federal claims in the underlying case arise from alleged intentional acts of sexual abuse. They posit that, because Montana law recognizes the validity of both sexual abuse exclusions and intentional act exclusions as contained in the Policy, MACO can obtain indemnification as a result of the federal litigation under no set of facts nor under any legal theory ultimately pled or moved. As discussed above, however, it would be premature at this stage in the underlying federal litigation to determine conclusively that any claims upon which
¶21 In addition and importantly, the cases Northfield and Lloyds cite—but do not analyze or discuss—do not support their position. For example, in New Hampshire Ins. Group v. Strecker, an insured sought defense and indemnification pursuant to an umbrella сommercial liability policy when he was named as a defendant in a civil suit after pleading guilty to three counts of felony sexual assault of his daughter. New Hampshire Ins. Group v. Strecker (1990), 244 Mont. 478, 798 P.2d 130. The insurer filed an action for declaratory judgment that policy exclusions for willful violation of a statute and for intentional acts precluded coverage. We upheld the district court‘s declaratоry judgment in favor of the insurer after concluding that the undisputed facts established that the insured intentionally molested his daughter. New Hampshire Ins., 244 Mont. at 479-80, 798 P.2d at 130-32.
¶22 Similarly, in Farmers Union Mut. Ins. v. Kienenberger, we upheld a declaratory judgment that an insurance company had no duty to defend or indemnify its insured in a civil suit filed against the insured after the insured‘s 13-year-old son pled guilty to sexual intercourse without consent. Farmers Union Mut. Ins. v. Kienenberger (1993), 257 Mont. 107, 108-09, 847 P.2d 1360, 1360-61. There again, we were willing to interpret and apply an intentional act policy exclusion only after first concluding that the relevant underlying fact—that the insured committed an intentional crime—was undisputed. Farmers Union, 257 Mont. at 109, 847 P.2d at 1360-61.
¶23 In contrast to these cases cited by Northfield and Lloyds, the underlying facts in the present case are disputed and the underlying litigation has not been finally adjudicated or settled. It simply is not appropriate to determine whether the conduct of the insureds in the present case falls within the exclusions of the Policy prior to a determination or stipulation as to the underlying facts, and the cases relied upon by Northfield and Lloyds do not suggest otherwise.
¶24 Northfield and Lloyds also rely on Ridley for the proposition that the declaratory judgment they seek need not act as a final resolution of all issues between them and MACO. In Ridley, we construed the plain language
¶25 In Ridley, a tortfeasor‘s insurer refused to pay any medicаl expenses to a third-party tort victim prior to final settlement of his claims, even though the insurer had admitted ninety percent liability. Consequently, Ridley sought a declaration that the insurer was obligated to pay his medical expenses pursuant to
¶26 Here, unlike in Ridley, the District Court did not dismiss Northfield‘s and Lloyds’ declaratory action on the grounds that a declaratory judgment would not resolve all issues between the parties. It dismissed the action because any relief granted would be mere speculation and because subsequent proceedings in the federal litigation
¶27 Moreover, the essential fact necessary to the declaratory judgment in Ridley—namely that the insured was at least ninety percent at fault for the accident—was admitted by the insurer in that case, and the primаry remaining factual issue was the causal relationship between the accident and the extent of the victim‘s injuries. Ridley, 286 Mont. at 328-29, 951 P.2d at 988-89. The legal issue presented for declaratory judgment—whether the UTPA required the insurer to pay the victim‘s medical expenses in advance of a full and final settlement of all his claims—was separate from, and would not be affected by, a finаl resolution of the liability issue. Consequently, the controversy was one on which the judgment of the court could effectively operate. See Brisendine, 253 Mont. at 365, 833 P.2d at 1021. Thus, while a declaratory judgment need not resolve all issues between the parties, it must resolve those issues addressed in a manner that will have the effect of a final adjudication. Cf. Ridley, 286 Mont. at 331, 951 P.2d at 990; and Brisendine, 253 Mont. at 364, 833 P.2d at 1020-21.
¶28 Here, Northfield and Lloyds seek а declaratory judgment as to their duty to indemnify under the Policy at some future time which might never arrive and on the basis of largely disputed factual allega-tions which may yet be modified and legal theories which may yet change. The judicial determination Northfield and Lloyds seek would serve only as speculative advice, subject to possible amendment or nullificаtion upon final resolution of the underlying federal case; it would not act as a final adjudication on the indemnification issue. The justiciable controversy test is designed to prevent judgments from resting on such shifting sands.
¶29 We hold that the District Court correctly concluded that no justiciable controversy exists. As a result, we further hold that the court did not abuse its discretion in dismissing Northfield‘s and Lloyds’ complaint for declaratory judgment.
¶30 Affirmed.
CHIEF JUSTICE TURNAGE, JUSTICES HUNT, NELSON and REGNIER concur.