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Revelation Indus. v. St. Paul Fire & Marine Ins. Co.

Revelation Indus. v. St. Paul Fire & Marine Ins. Co.

Supreme Court of Montana

January 14, 2009, Argued and Submitted; April 10, 2009, Decided; April 30, 2009, Released for Publication

DA 07-0752

Opinion

 [***920]  [**184]   Justice Patricia O. Cotter delivered the Opinion of the Court.

 [*P1]  Revelation Industries (Revelation) sued its insurer, St. Paul Fire & Marine Insurance Company (St. Paul), for refusing to defend and  [**185]  indemnify Revelation in a lawsuit with Phillips Environmental Products, Inc. (Phillips). The Eighteenth Judicial District Court ruled that St. Paul had no duty to defend Revelation. Revelation appeals. We reverse and remand.

ISSUES

 [*P2]  A restatement of the issues on appeal is:

 [*P3]  Did the District Court err when it determined that St. Paul had no duty to defend Revelation based on the contents of Phillips' complaint?

 [*P4]  Did the policy requirement of an "event"  [****2] excuse coverage in this case?

 [***921]  FACTUAL AND PROCEDURAL BACKGROUND

 [*P5]  In 1999, Revelation and Phillips entered into an oral arrangement under which Revelation would design and develop for Phillips a specific product known as a WAG Bag. This bag was a disposable sanitary bag to be used with Phillips' portable environmental toilets. Revelation, in turn, subcontracted with Manchester Packaging Corporation (Manchester) to produce these bags in accordance with Phillips' specifications. Notwithstanding Manchester's written affirmation that the produced bags met Phillips' specifications, the bags Manchester shipped to Revelation did not contain cornstarch as required by Phillips. Revelation, without knowledge of the bags' nonconformity, provided them to Phillips. Phillips promptly claimed the bags did not meet its requirements and in March 2000 terminated its relationship with Revelation.

 [*P6]  Over the next several months, Revelation made numerous futile attempts to meet with Phillips in an effort to resolve Phillips' concerns and salvage the parties' arrangement. Finally, at a meeting of the parties on October 4, 2000, Phillips claimed to have suffered significant damages for which it held Revelation  [****3] responsible. Because St. Paul was its insurer under a Commercial General Liability (CGL) policy, the following day, Revelation contacted St. Paul by telephone, informed the insurer of the potential claim, and requested coverage. St. Paul responded by memorializing the conversation in a letter to Revelation. In this letter, St. Paul reiterated the following facts:

As I understand this matter, Revelation Engineering entered into a verbal joint venture with Phillips Enviro to produce a field toilet. Your responsibility was to design a biodegradable bag system for the human waste. Your [sic] were to be paid a royalty  [**186]  by Phillips for your design. You contracted the manufacture of the bag system to Manchester Packaging Corp. Apparently, Manchester left out cornstarch as a component of the polymer bag system. The omission was discovered by Phillips, and they have indicated a claim against you . . . . You have requested a written statement of claim from Phillips, which you have yet [sic] received.

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2009 MT 123 *; 350 Mont. 184 **; 206 P.3d 919 ***; 2009 Mont. LEXIS 159 ****

REVELATION INDUSTRIES, INC., formerly known as Revelation Engineering, Inc., Plaintiff and Appellant, v. ST. PAUL FIRE & MARINE INSURANCE COMPANY, Defendant and Appellee.

Prior History:  [****1] APPEAL FROM: District Court of the Eighteenth Judicial District, In and For the County of Gallatin, Cause No. DV 2001-472. Honorable Mike Salvagni, Presiding Judge.

Revelation Indus. v. St. Paul Fire & Marine Ins. Co., 2007 Mont. Dist. LEXIS 776 (2007)

CORE TERMS

insurer, coverage, subcontractor, district court, duty to defend, allegations, cases, give rise, indemnify, bags, damages, completion of work, deny coverage, pleadings, scenario, property damage, obligation to defend, insurance policy, occurrence, declaratory, insurer's duty to defend, policy coverage, no duty, involvement, manufacture, assertions, discovery, trigger, garage, allegation of the complaint

Civil Procedure, Appeals, Standards of Review, De Novo Review, Summary Judgment Review, Standards of Review, Insurance Law, Obligations of Parties, Insurers, Allegations in Complaints, Business Insurance, Commercial General Liability Insurance, Duty to Defend, Coverage, General Overview, Policy Interpretation, Ambiguous Terms, Construction Against Insurers, Claim, Contract & Practice Issues, Exclusions