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Missoula Cty. Sch. Dist. #1 v. Pacific Emp. Ins.12/28/1993
, 50 St.Rep. 1741
Submitted on Briefs November 18, 1993.
This appeal arose in the Fourth Judicial District, State of Montana, in and for the County of Missoula, the Honorable Douglas Harkin presiding. We affirm in part and remand.
This Court, in the case of Trustees, Missoula County Sch. Dist. No. 1 v. Anderson (1988), 232 Mont. 501, 757 P.2d 1315, set forth the background facts of this case. Therein we found that a teacher, Carol Anderson (Anderson), was improperly dismissed for incompetence based on poor performance following four interviews upon her return to teaching following a sabbatical leave. The opinion of this Court reversed the district court's decision which set aside the findings of fact and conclusions of law of the State Superintendent and the County Superintendent. We directed the court to reinstate the decision of the State and County Superintendent.
One year after this Court returned the case to the District Court to implement our decision, Anderson and the Trustees entered into a settlement agreement and a release. That settlement agreement involved payments to Anderson as follows:
2. Payments. In consideration of the Release set forth above
the District hereby agrees to pay a sum totaling $81,585.07 as negotiated and compromised by Anderson and the District which is the sum of the following amounts:
Total Net Annual Income $64,473.74
Total Interest $12,023.81
Total Medical $ 5,387.81
Receipt of $81,885.36 is expressly acknowledged.
The District further agrees to pay the interest required by [the Teachers' Retirement System] in addition to the [Teachers' Retirement System] contribution.
The District agrees to pay the federal income tax, state income tax and FICA deducted from gross salary to the appropriate state and federal agencies.
With these facts, we now consider the problem of who is going to pay the settlement.
In 1984, the Trustees of the Missoula School District No. 1 (Trustees), purchased a School Professional Legal Liability Insurance Policy from an insurance representative of Western States Insurance Agency, Inc. (Western States). The policy came through Pacific Employers Insurance Company (Pacific); the effective dates were from December 1, 1984 to December 1, 1987. Prior to purchasing the policy, and upon inquiry whether there were any lawsuits outstanding, a trustee informed the Western States representative that a "tenured teacher's [Anderson] dismissal is being challenged at this time through the regular channels, now in the hands of the County State Superintendent of Schools."
Upon being presented the above amounts, Pacific denied coverage of the claims on the grounds that the policy provided an exclusion for claims made against the insured for "any amounts due under the terms of any contractual obligation. . . ." Pacific characterized the payment agreement between the School District and Anderson as one arising out of a "contractual obligation." The Trustees argue that the School District's settlement with the dismissed teacher was based upon negligent firing and, therefore, the clause which provides for coverage for errors, omissions, and claims made "(a) by reason of any act, error, or omission in services rendered in the discharge of the School District . . . ." applies.
Several issues are set forth; two by the respondent Trustees:
1. Whether the District Court erred by holding that the "contract exclusion" provision of the insurance agreement, authored by Pacific, was not applicable to preclude coverage under the insu
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