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Xl Specialty Insurance Company v. Progressive Casualty Insurance Company

January 20, 2011

XL SPECIALTY INSURANCE COMPANY PLAINTIFF - APPELLEE,
v.
PROGRESSIVE CASUALTY INSURANCE COMPANY DEFENDANT - APPELLANT, AND DARRELL E. BOWMAN, PATROL HELICOPTERS, INC.; ET AL. DEFENDANTS.



Appeal from the United States District Court for the District of Montana Richard F. Cebull, Chief District Court Judge, Presiding D.C. No. CV-08-73-BU-RFC-JCL; D.C. No. CV-08-73-BU-RFC-JCL

FILED

NOT FOR PUBLICATION

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

XL SPECIALTY INSURANCE COMPANY Plaintiff - Appellant, v. PROGRESSIVE CASUALTY INSURANCE COMPANY, et al. Defendant - Appellees.

MEMORANDUM*fn1

Argued and Submitted December 7, 2010

Seattle, Washington Before: O'SCANNLAIN and TALLMAN, Circuit Judges, and EZRA, District*fn2 Judge.

This case arises out of a fatal accident between a passenger vehicle and a fuel truck, owned and operated by Patrol Helicopters, Inc. ("Patrol") and insured by Progressive Casualty Insurance Company ("Progressive"). The truck was en route to refuel a helicopter owned by Patrol and insured by XL Specialty Insurance Company ("XL"). XL brought a declaratory judgment action in district court to determine whether its policy covered Patrol's liability on the underlying accident. Progressive and Patrol filed counterclaims seeking coverage under XL's policy.

All parties moved for summary judgment before Magistrate Judge Jeremiah C. Lynch.

The magistrate judge found that XL's policy covered the accident and XL was not prejudiced by any late notice given by Patrol. The magistrate judge also determined, however, that Progressive's counterclaim seeking coverage was, in effect, one for equitable contribution under Montana law and that the "selective tender rule" barred Progressive from seeking equitable contribution from XL. Chief District Court Judge Richard F. Cebull adopted the magistrate judge's Findings and Recommendations. All parties appealed. We have jurisdiction under 28 U.S.C. § 1291 and we affirm.

The Montana Supreme Court has adopted a specific test to determine whether a policy provides coverage when the insurance contract states that coverage "arises out of" the ownership, maintenance or use of an instrumentality. Specifically, a court should consider whether the injury "originate[s] from, or grow[s] out of, or flow[s] from" the insured entity. Wendell v. State Farm Mut. Auto. Ins. Co., 974 P.2d 623, 639 (Mont. 1999). According to the Wendell court, this test is satisfied if the insured instrument is "a prime accessory, without which the injury-producing incident or the severity of the injuries would not have occurred." Id. In adopting this test, the court "align[ed] [itself] with those jurisdictions adopting an expansive . . . interpretation of the [arising out of] phrase." Id.

Here, XL's policy provided coverage for any accident "arising out of the ownership, maintenance or use of the aircraft." The fuel truck involved in the accident was en route to refuel the helicopter. Although not involved in the accident itself, the helicopter was "a prime accessory, without which the injury-producing incident" would not have occurred. Id. The injuries therefore originated from, grew out of, and flowed from the maintenance of the aircraft. See id. We consequently hold that the district court did not err in determining that there was coverage under the XL policy per Montana law. Cf. Georgeson v. Fidelity & Guar. Ins. Co., 48 F. Supp. 2d 1262, 1267 (D. Mont. 1998)(finding coverage under a utility truck's "arising out of" insurance policy when another vehicle hit the truck and hooked a cable to which both the truck and the underlying claimant working on a telephone poll were attached); Fire Ins. Exch. v. Tibi, 51 F. Supp. 2d 1065 (D. Mont. 1995) (finding coverage under a vehicle's "arising out of" insurance policy when a firearm discharged while unloading the vehicle).

The district court also appropriately determined that XL was not prejudiced by late notice. Montana has adopted a "no prejudice" rule, which states that in the absence of "some showing of material prejudice to the underinsurance carrier, a claim for underinsured motorist coverage may not be precluded on a technicality." Sorenson v. Farmers Ins. Exch., 927 P.2d 1002, 1004 (Mont. 1996); see also Lee v. Great ...


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