Intentional Acts Can’t Be Insured

No Fortuity – No Coverage

Insurance, by definition, insures only against contingent or unknown events. To obtain coverage for defense or indemnity an insured only needs to establish that the suit against the insured was fortuitous – accidental – unintentional acts.

In Mid-Century Insurance Company v. Windfall, Inc., Mettle, LLC D/B/A Mettle Strategic Marketing Solutions, Jim Mcgowan, Brooke Redpath, Tara Halls, Tia Metzger, And Megan Richter, United States District Court, D. Montana CV 15-146-M-DLC (05/23/2016) the USDC for the District of Montana was asked to provide coverage for defense and indemnity as a result of intentional acts. The District Court reviewed all of the defendants arguments in copious detail before reaching its decision.


This action presents a dispute among the parties regarding whether Mid-Century has a duty to defend the Respondents against litigation pending in state court. Lee Enterprises, owner of local newspaper The Missoulian, brought charges against Respondents in the underlying state proceeding, alleging that Respondents wrongfully used Lee Enterprises’ confidential and proprietary information to compete with Montana Marketing Group (“MMG”), a marketing and advertising agency that operates on behalf of The Missoulian. Mid-Century insures Windfall, Inc. (“Windfall”), which is named as one of the Respondents and which employs or employed McGowan, Richter, and Metzger. Mid-Century accepted the defense of Windfall, McGowan, Richter, and Metzger under a reservation of rights. Metzger has also secured independent counsel.

Five individuals and two business entities are named defendants in the underlying proceeding; the same seven individuals and entities are the Respondents in the present action. All of the individual Respondents worked for The Missoulian and had some connection to the newspaper’s advertising department. Each resigned from The Missoulian during the spring of 2015. In 2001, McGowan, formerly The Missoulian’s Sales Director, formed Windfall, an advertising and marketing agency in Missoula, and he worked there while also employed by The Missoulian. Additionally, McGowan, along with Halls and Redpath, owns Respondent Mettle, L.L.C. (“Mettle”), a business based in Missoula that develops marketing strategies for its clients.


Mid-Century argues that it is entitled to judgment as a matter of law because Windfall’s insurance policy does not provide coverage for the allegations against Respondents in the underlying state proceeding. Respondents agree that summary judgment is appropriate, but they argue that it should be granted in their favor, claiming that Mid-Century has a duty to cover their defense in the state court litigation.


Coverage for Mettle, Halls, and Redpath

Mid-Century argues that Mettle, Halls, and Redpath are not insureds under the policy. Respondents have not addressed this claim in their brief, and justifiably so—Mid-Century correctly asserts that there is no grant of coverage to these Respondents. Insurance is a contract of personal indemnity so if not named as an insured or made an insured by definition there is no potential for coverage.

Coverage for Windfall & Mettle

Windfall is the named insured under the Mid-Century policy. Windfall’s Businessowners’ Liability insurance policy listed the following as insureds under the policy: Windfall itself; Windfall’s “executive officers and directors … , but only with respect to their duties as [Windfall’s] officers or directors”; Windfall’s stockholders, “but only with respect to their liability as stockholders”; and Windfall’s employees and managers, “but only for acts within the scope of their employment … or while performing duties related to the conduct of [Windfall’s] business.”

Mettle is a separate business entity from Windfall. It is not a partner, member, or shareholder of Windfall. Halls and Redpath are principals and owners of Mettle, and they have no established connection to Windfall. The policy does not apply to Halls, Redpath, or Mettle. Mid-Century, who did not insure them, owes no duty to defend them.

The Initial Grant of Coverage

 The parties dispute whether Mid-Century’s duty to defend was triggered by the filing of the complaint in the underlying matter. Metzger joins Respondents in arguing that the policy extends to the actions alleged in the state court proceeding. Argument on this issue proceeds along two lines: (1) whether there was “bodily injury” or “property damage” caused by an “occurrence,” and (2) whether there was a “personal or advertising injury.” The Court considers each in turn.

“Bodily Injury” or “Property Damage”

Mid-Century argues that there was no initial grant of coverage because Lee Enterprises did not allege either “bodily injury” or “property damage” in the underlying litigation. The Court agreed with Mid-Century. There is no coverage under a theory of “bodily injury” or “property damage.”

Here, there was neither “bodily injury” nor “property damage” because there can be no serious argument in favor of coverage under a theory of bodily injury, and Lee Enterprises has alleged damage only to intellectual and not to tangible property. Further, even had there been “property damage,” it would not have been caused by an “occurrence.” Under Montana law, there is no “occurrence” when the insured acts intentionally and “the consequences of those acts are objectively intended or expected from the standpoint of the insured ….” Employers Mut. Cas. Co. v. Fisher Builders, Inc. __ P.3d __, 2016 MT 91, ¶ 18 (Mont. 2016).

Lee Enterprises has not claimed that Respondents accidentally took and used confidential and proprietary information. Nor has it alleged that Respondents intentionally took its intellectual property but merely accidentally or negligently solicited its customers. If the allegations contained therein are true, the underlying complaint gives rise to only one possibility—that Respondents intended both their actions and the ensuing consequences.

There may be a factual dispute as to the wrongfulness of Respondents’ conduct; however, there can be no dispute that the same conduct was intentional. Regardless of the merits of Respondents’ defense before the state court, there are no facts suggesting that their conduct constituted an “occurrence” such that Mid-Century’s duty to defend was triggered.

“Personal and Advertising Injury”

Mid-Century also argues that there was no initial grant of coverage because Lee Enterprises did not allege “personal and advertising injury” in the state proceeding.

There is no statutory or standalone federal constitutional right to privacy. Thus, if Lee Enterprises had a “right of privacy,” it would have to exist under the common law. Under Montana law, a common law cause of action for invasion of privacy exists when there is a wrongful intrusion into one’s private activities in such a manner as to outrage or cause mental suffering, shame or humiliation to a person of ordinary sensibilities.

The common law right of privacy is limited to natural persons. Lee Enterprises has not alleged a violation of its right of privacy because it has no violable right of privacy. As a corporation, it cannot bring a claim limited to natural persons. It is incapable of mental suffering, shame or humiliation. The policy defines an “advertisement” as “a notice that is broadcast or published to the general public or specific market segment about your goods, products or services for the purpose of attracting customers or supporters.”

There was neither an “advertising idea” nor an “advertisement.” There was no initial grant of coverage.  Summary judgment for Mid-Century regarding coverage is appropriate.


The duty to defend arises when a complaint against an insured alleges facts, which if proven, would result in coverage. Mid-Century had no duty to defend Metzger at the time the underlying complaint was filed because the allegations in the complaint, if true, did not trigger coverage.


Here, the underlying suit alleged intentional acts that resulted in neither bodily injury, property damage, or advertising injury. Rather, it claimed that the defendants stole its intangible intellectual property to its damage. The loss claimed was not fortuitous. The loss claimed was not a risk insured against. The loss claimed was against some who were not insureds of the policy. The arguments by the defendant insureds were creative but non-availing.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.  He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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