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News : A Case In Review: Swank Enterprises, Inc. v. All Purpose Services, Ltd.
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A CASE IN REVIEW: SWANK ENTERPRISES, INC. V. ALL PURPOSE SERVICES, LTD.
In November 1996, Swank Enterprises (Swank) and the City of Libby entered into a contract for the construction of a water treatment plant. Swank subcontracted out the painting of the filter tanks and pipes at the plant to All Purpose Services (All Purpose), which painted the tanks and pipes from December 1997 to February 1998 and used an improper type of paint in doing so. The City of Libby sued Swank for the costs associated with repainting the pipes under theories of negligence and vicarious liability. Swank tendered defense to All Purpose's insurance provider, Continental Western Insurance Company (Continental), and made a demand for indemnity, since Swank was listed as an additional insured on two policies All Purpose had with Continental. One was in effect from January 25, 1997 to January 25, 1998, and the other was in effect from January 25, 1998. Both policies addressed "the named insured" and contained exclusions for "property damage" arising out of All Purpose's operations and "property damage" to All Purpose's "product" However, only the most recent policy specifically stated that the exclusions applied to any additional insureds. Continental refused to defend or indemnify Swank because of these exclusions. Swank then tendered defense of the claim to its own insurer, St. Paul Fire and Marine Insurance Company (St. Paul). St. Paul settled with the City of Libby for a total settlement of $148,001.77. Swank and St. Paul brought a declaratory action against Continental and a claim seeking indemnification against All Purpose. The District Court ruled in favor of Swank and concluded that Continental was entirely liable for the settlement and costs and fees, but denied prejudgment interest. The relevant issues before the Supreme Court were (1) whether the 1997 policy or the 1998 policy was the applicable policy; (2) whether the policy exclusions applied to additional insureds; and (3) whether Continental should have only been liable for a pro-rated amount with St. Paul. The Court held that the 1997 policy was the applicable policy. According to the policy, the property damage occurred when All Purpose applied the wrong paint, not when it was first discovered that the wrong paint had been applied, since the application of improper paint during the 1997 policy period physically and materially altered the treatment center's tanks and pipes, resulting in a detriment to the City of Libby. The Court further held that the exclusions did not apply to Swank because the policy exclusions were, at best, "ambiguous" and therefore should be narrowly construed against the insurer. Finally, the Court declined to address the issue of whether Continental was liable for the entire amount for the first time on appeal, since Continental did not raise the issue below. Swank Enterprises, Inc. v. All Purpose Services, Ltd., 336 Mont. 197. |
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