Truck Insurance Exchange v. O’Mailia

Truck Insurance Exchange v. O’Mailia, 2015 MT 42 (Feb. 17, 2015) (McKinnon, J.) (5-0, aff’d)

Issue: (1) Whether the district court properly granted summary judgment to the insurer on the basis that no property damage occurred during the policy period; and (2) whether the district court violated O’Mailia’s right to due process by dismissing his counterclaims with prejudice.

Short Answer: (1) Yes, and (2) no.


Facts: O’Mailia was hired to install a water heater on the premises of the newly built Famous Dave’s restaurant in Kalispell in 2007. O’Mailia was covered by a commercial general liability policy from TIE, which he held from July 2006 – November 2009, when he terminated coverage. In March 2010, a fire broke out in Famous Dave’s and was eventually traced to installation and maintenance of the water heater, which heated wood framing near the heater to the point where it eventually caught fire.

Famous Dave’s sued Diamond Plumbing & Heating, which inspected the water heater before the fire, and Diamond sought indemnification from several third-party defendants, including O’Mailia. O’Mailia notified TIE of the claim and asked TIE to provide a defense. TIE initially denied coverage but then decided o defend under a reservation of rights.

Procedural Posture & Holding: TIE petitioned for declaratory relief that O’Mailia’s policy did not cover claims arising from the fire. O’Mailia filed counterclaims and sought punitive damages. The parties filed cross-motions for summary judgment, and the district court granted TIE’s motion, holding the damage to the wood was not property damage, but a condition that increased the risk of property damage, and dismissing O’Mailia’s counterclaims with prejudice. O’Mailia appeals, and the Supreme Court affirms.

Reasoning: (1) O’Mailia claims that wooden materials near the water heater were exposed to excessively high temperatures during the policy period, constituting “continuous or repeated exposure to substantially the same general harmful conditions,” and falling within the policy definition of an “occurrence.” But the Court notes that “for property damage to occur, there must be physical injury to or loss of use of tangible property.”

(2) The district court held that TIE’s policy provided no coverage, and that TIE had no duty to defend. There was therefore no basis for O’Mailia’s counterclaims, and the district court did not err in dismissing them without prejudice.