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Missoula Cty. Sch. Dist. #1 v. Pacific Emp. Ins.12/28/1993
s due and paid arose under the contractual obligation of the School District to Anderson and are, therefore, excluded from coverage under the insurance policy.
Similarly, I cannot agree with the opinion of the Court which characterizes the policy contract exclusion as "ambiguous." The contract exclusion, while broad, is very specific — it applies to amounts due under any contractual obligation. There are no exceptions to this exclusion. There is no language in the exclusion that limits its application to only third-party contracts, to construction or other special-type contracts, to contracts under which an obligation of indemnity is assumed, or to "internal contractual obligations." This Court reads into the exclusion limiting language, by the expedient of finding that the limitations are not there. That turns the rules of construction upside down. I do not believe that the policy contract exclusion at issue here even requires construction, much less that it be construed against Pacific on the theory that it is ambiguous. The exclusion may be broad; it is not, however, ambiguous. When the language of a contract is clear and unambiguous, as it is in this case, the contract does not require the application of the rules of construction, and it is this Court's duty to enforce the contract as made by the parties. Keller v. Dooling (1991), 248 Mont. 535, 539, 813 P.2d 437, 440.
Finally, the potential for mischief which will be generated by the Court's opinion is disturbing, to say the least. Under this opinion, school districts with similar insurance policies will have free rein to discharge tenured teachers under contract, knowing that their liability insurer will have to pay all attorney's fees to defend the administrative appeals, and will then have to pay all compensation and fringe benefits ultimately awarded if it turns out that the termination was not for good cause. This is a win-win, no-risk situation for the school district; there is simply no incentive not to roll the dice and fire teachers where good cause might be questionable or, perhaps, lacking altogether.
The School District can breach an employment contract by firing the teacher without regard to whether there is good cause or not. If the teacher loses the administrative appeal, then the teacher is gone and the school district does not have to pay salary and benefits from and after termination. If the teacher wins the administrative appeal, then the teacher is gone or reinstated and the school district does not have to pay salary and benefits from and after termination or, at least from and after termination through the point of reinstatement.
If, as the Court points out, citing United Pacific Insurance Co. v. First Interstate Bancsystems of Montana, Inc. (D. Mont. 1987), 664 F. Supp. 1390, 1394, "the purpose of liability insurance is to protect against risk," I am hard pressed to discover where, under the facts of this case, the School District assumed or incurred any risk at all. It paid in settlement exactly what it would have paid (interest excluded) had it not breached Anderson's employment agreement and had it, instead, continued her employment. Pacific is now required to indemnify the School District for the costs, attorney's fees and damages associated with the improper termination. And, the School District got rid of an unwanted teacher. There is no risk in that for the School District!
Worse, that scenario certainly does not provide any incentive to a school board of trustees and to a school administration to insure that there is good cause before terminating a teacher's employment. In fact, quite the opposite is true. I cannot believe that it was realistically in the
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