author: JUSTICE TRIEWEILER

text:
    IN RE THE MARRIAGE OF JOAN L. BROSS, Petitioner and Appellant, and BRIAN ARTHUR BROSS, Respondent and Respondent.
    No. 92-172.
    Submitted on Briefs August 13, 1992.
    Decided January 12, 1993.
    50 St.Rep. 13.
    256 Mont. 174.
    845 P.2d 728.

      For Petitioner and Appellant: Stephen C. Mackey, Towe, Ball, Enright & Mackey, Billings.
    For Respondent and Respondent: John A. Dostal, Brown, Ger-base, Cebull, Fulton, Harman & Ross, Billings.
   JUSTICE TRIEWEILER

delivered the Opinion of the Court.

Joan L. Bross appeals from a decree of dissolution of her eighteen year marriage to Brian Arthur Bross, entered in the Thirteenth Judicial District Court, Yellowstone County, on November 18, 1991. The District Court awarded Joan maintenance in the amount of $3000 per month for five years and $1000 per month thereafter, and provided for termination of this award upon the death of either party, Brian’s retirement, or Joan’s remarriage or cohabitation in a “marital-like” relationship.

We affirm in part, and reverse in part.

The issues raised by petitioner are restated as follows:

1. Did the District Court err when it granted petitioner a maintenance award of $3000 per month for 5 years, and $1000 per month thereafter?

2. Did the District Court err when it concluded that petitioner’s maintenance award would terminate upon her cohabitation in a marital-like manner?

3. Was the District Court’s conclusion that maintenance would terminate if petitioner remarried or cohabited in a marital-like manner a violation of her constitutional rights?

Joan and Brian were married on June 9,1973. At the time of their dissolution on November 18, 1991, Brian was 40 years old and Joan was 39 years old. The couple’s two children, Alexandra and Allen, were 13 and 11 years old, respectively, at the time of the dissolution.

Joan and Brian met while they were attending Iowa State University in Ames, Iowa and were married after Brian’s graduation. Joan withdrew from college because she had been doing poorly, and worked at various jobs during the first few years of their marriage. Her income provided for the couple’s support while Brian attended medical school and began his residency. Since their first child was born in 1977, Joan has not been employed outside of the home.

The Bross family moved to Billings in 1982 when Brian began his medical practice as an anesthesiologist. Brian’s practice has been successful, and during the three calendar years prior to dissolution, Brian’s net disposable income, after payment of taxes and business expenses, averaged approximately $15,000 a month. Joan and Brian spent almost all of their disposable income each month on purchases that primarily furthered their lifestyle. Other than their retirement plans, the parties have no savings nor investments.

Joan returned to college in 1988 and received her B.A. degree from Rocky Mountain College in 1991 with a double major in art and Christian Thought. She has enrolled in graduate school at the University of Iowa to pursue a Ph.D. in theology and ethics, and someday hopes to teach college. In that capacity, she expects to eventually earn an annual salary of $22,000 to $36,000.

After the date of separation, Brian voluntarily paid Joan $3000 per month for her living expenses, and an additional $500 per month as support for the one child who was living with her. However, Joan found she was unable to live on this amount, and supplemented it with about $500 a month from her share of the proceeds from the sale of their airplane.

Joan and Brian were able to agree on issues involving child custody, child support, and property division, but were unable to agree on the amount and duration of spousal maintenance. Joan requested $66,000 per year for eight years; $48,000 per year for the next five years; $36,000 per year until her 65th birthday; and $30,000 per year thereafter. Joan also requested a continuation of $30,000 per year maintenance in the event of her remarriage. Brian offered to pay maintenance of $36,000 per year for five years, asserting that this was a reasonable time for Joan to complete her Ph.D., and that she should then be able to support herself.

The comb entered its findings of fact and conclusions of law, and issued the final decree on November 18, 1991. Joan was awarded $3000 per month for five years and $1000 per month thereafter. Maintenance is to cease upon the death of either party, Brian’s retirement, or Joan’s marriage or cohabitation in a marital-like relationship. While Joan is living in Iowa City, Brian will be the primary residential custodian. However, the children will be with Joan for two months each summer and during certain holiday periods, and during those times Brian will pay child support to Joan in the amount of $500 per month per child.

Joan moved to amend or make additional findings, amend judgment, and for a new trial on the issue of maintenance. These motions were denied by an order dated January 15,1992. From this order, Joan appeals.

STANDARD OF REVIEW

When reviewing an award of maintenance, we will affirm the district court’s findings unless they are clearly erroneous. In re Marriage of Dorville (Mont. 1992), [254 Mont. 111,] 836 P.2d 588, 589, 49 St. Rep. 658; In re Marriage of Eschenbacher (Mont. 1992), [253 Mont. 139,] 831 P.2d 1353, 1355, 49 St. Rep. 393, 394.

I

Did the District Court err when it granted petitioner a maintenance award of $3000 a month for five years, and $1000 a month thereafter?

Before a court may award maintenance, it must find that the spouse seeking maintenance lacks sufficient property to provide for her reasonable needs and is unable to support herself through appropriate employment. Section 40-4-203(1), MCA. Once this threshold has been met, the court must then consider the factors set out under Section 40-4-203(2), MCA, when deciding the amount and duration of maintenance:

(a) the financial resources of the party seeking maintenance, including marital property apportioned to him, and his ability to meet his needs independently ...
(b) the time necessary to acquire sufficient education or training to enable the party seeking maintenance to find appropriate employment;
(c) the standard of living established during the marriage;
(d) the duration of the marriage;
(e) the age and the physical and emotional condition of the spouse seeking maintenance; and
(f) the ability of the spouse from whom maintenance is sought to meet his needs while meeting those of the spouse seeking maintenance.

We have said that while a district court must consider each of these factors, it is not necessary for the court to set forth a specific finding for each element. To determine the final maintenance award, all relevant facts should be considered by the court as a whole. In re Marriage of Dunn (1991), 248 Mont. 95, 99, 809 P.2d 571, 573.

In this case, the parties agreed that a maintenance award was appropriate. Our review will be limited to the question of whether the court’s findings as to amount and duration were clearly erroneous.

After considering the evidence and the court’s findings, we conclude that the court did properly consider each of the factors under Section 40-4-203(2), MCA, and that substantial evidence exists to support the court’s findings. The court reviewed the proposed monthly expenditures, the couple’s work history and skills, the standard of living Brian and Joan had attained, and present and future employment prospects. The court also had before it information regarding Joan’s likely expenditures while attending school in Iowa, her anticipated housing and educational costs, and heard testimony regarding the expected length of time it would take Joan to complete her Ph.D. The court was aware of how the couple’s property had been divided, and whether there were any income-producing assets.

It is not a question of whether we could be persuaded to reach a different conclusion after considering the same evidence. The test is whether the District Court had adequate evidence to support its conclusions. In this instance, we hold that the court’s findings were supported by substantial evidence and are not clearly erroneous.

Joan contends that the court did not place enough emphasis on the standard of living she had enjoyed during her marriage, and argues that this should have been the determinative factor, rather than her reasonable needs. As we made clear in Dunn, no one factor is determinative, and all relevant facts must be considered as a whole in determining the final award. Dunn, 809 P.2d at 573.

The record shows that the court did consider the couple’s standard of living, noting that Joan’s requested maintenance would comport with her established standard of living. However, after considering all relevant facts, the court concluded this was more than her reasonable needs. Since Joan would be entitled to no maintenance if she had sufficient income to pay for her reasonable needs pursuant to Section 40-4-203(1), MCA, it is logically inconsistent to assert that her reasonable needs should not be considered in arriving at the amount of maintenance to which she is entitled.

Joan also asserts that it was error for the court to ignore the tax impact in determining the amount of maintenance. In its findings of fact, the court did acknowledge that Joan’s expenditures included a provision for tax liability but made no specific reference to the fact that her award of $3000 per month will be taxed. Joan cites In re Marriage of Lee (1991), 249 Mont. 516, 816 P.2d 1076, for the proposition that it was error for the court to not specifically address the tax consequences of the award. Joan’s reliance on Lee is misplaced because that case involved the equitable distribution of marital property rather than a maintenance award. We will not invalidate the court’s decision in regard to a maintenance award due to the fact that tax liabilities were not specifically addressed.

II

Did the District Court err when it concluded that petitioner’s maintenance award would terminate upon her cohabitation in a marital-like manner?

The District Court placed an additional durational limitation on Joan’s maintenance award when it included a provision for termination if Joan cohabits in a marital-like manner. However, there is no basis in law nor fact for such a limitation.

Specifically, Section 40-4-203(2), MCA, provides that a “maintenance order shall be in such amounts and for such periods of time as the court deems just, without regard to marital misconduct, and after considering all relevant facts ....” (Emphasis added.) Based on the relevant facts, the District Court found that a reasonable duration for maintenance was five years at $3000 per month, and $1000 per month thereafter, subject to offsets depending on Joan’s income.

Termination of that award is provided for in Section 40-4-208, MCA, under the following circumstances:

(1) a change in circumstances so substantial and continuing as to make the award unconscionable; and
(2) the recipient’s remarriage.

Here, without any facts to support such a presumption, the court is assinning that if Joan cohabits, there will be a substantial change in her financial circumstances. That presumption is not supported by substantial evidence and is, therefore, clearly erroneous.

Furthermore, we have previously held that cohabitation is not subject to Section 40-4-208(4), MCA, which provides for the automatic termination of maintenance upon the remarriage of the recipient spouse. In re Marriage of Bourque (1990), 241 Mont. 38, 43, 785 P.2d 699, 702. (Section 40-4-208(4), MCA, did not apply where a party was alleged to be living with another person in a quasi-marital relationship.) Absent a showing of changed circumstances which would justify a modification of maintenance, maintenance will not automatically terminate when a recipient spouse cohabits with another individual.

We therefore reverse that part of the District Court’s judgment which terminated Joan’s continued right to maintenance based on cohabitation in a marital-like state.

Ill

Was the District Court’s conclusion that maintenance would terminate if petitioner remarried or cohabited in a marital-like manner a violation of her constitutional rights?

Joan contends that the court’s provision terminating maintenance should Joan cohabit in a marital-like manner violates her constitutional rights to due process, privacy, and equal protection. Furthermore, she asserts that Section 40-4-208(4), MCA, which provides for termination of maintenance upon the recipient’s remarriage, is unconstitutional in that it violates her constitutional guarantee to equal protection under the law.

We will not consider Joan’s constitutional claims on the cohabitation provision since we have reversed the District Court on this issue and her claims are moot. In regard to Joan’s challenge of Section 40-4-208(4), MCA, it is well established that a party does not have standing to challenge the constitutionality of a statute unless he has been adversely affected by the challenged statute. Allmaras v. Yellowstone Basin Properties (1991), 248 Mont. 477, 480, 812 P.2d 770, 771; State v. Booke (1978), 178 Mont. 225, 230-31, 583 P.2d 405, 409. Joan has not been adversely affected by the statute in question because her maintenance award has not been terminated due to remarriage, and she presents no facts to suggest that she has plans to remarry which are being frustrated by this provision. As such, we hold that Joan does not have standing to challenge this statute under the Montana Constitution.

Accordingly, the decision of the District Court to award Joan maintenance in the amount of $3000 per month for five years, and $1000 per month thereafter, to terminate upon the death of either party, Brian’s retirement, or Joan’s remarriage is affirmed. However, the restriction which would terminate maintenance upon Joan’s cohabitation in a marital-like manner is reversed and this case is remanded for appropriate modification of the decree.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, HUNT, McDONOUGH, GRAY and WEBER concur.


source: Caselaw Access Project

author: JUSTICE GRAY

license: Public Domain

text:
    EDGEWATER TOWNHOUSE HOMEOWNER’S ASSOCIATION, Plaintiff, Respondent, and Cross-Appellant, v. ROGER HOLTMAN, Defendant, Appellant, and Respondent on Cross-Appeal.
    No. 91-513.
    Submitted on Briefs March 12, 1992.
    Decided January 12, 1993.
    50 St.Rep. 10.
    256 Mont. 182.
    845 P.2d 1224.

      For Appellant: Charles J. Tornabene, Patterson, Marsillo, Tornabene, Schuler & McKenna, Missoula.
    For Respondent: Lon Dale, Milodragovich, Dale & Dye, Missoula.
    For Amicus Curie: William O. Bronson, James, Gray & Mc-Cafferty, Great Falls (MT Big Sky Paralegals Assoc.; Nat’l. Assoc, of Legal Assts. (NALA); Nat’l. Fed. of Paralegal Assoc.; and Legal Asst. Mgmt. Assoc.)
   JUSTICE GRAY

delivered the Opinion of the Court.

Roger Holtman appeals from a judgment of the Fourth Judicial District Court, Missoula County, granting summary judgment in favor of the Edgewater Townhouse Homeowner’s Association and dismissing his counterclaim. The Edgewater Townhouse Homeowner’s Association cross-appeals the District Court’s denial of claimed attorney’s fees for attorney-supervised paralegal work.

We phrase the issues on appeal as follows:

1) Did the District Court err in granting summary judgment for the Association?

2) Did the District Court err in dismissing Holtman’s counterclaim?

The Edgewater Townhouse Homeowner’s Association (the Association) is a condominium association of eleven condominiums located in Missoula. The Association is governed by its articles of incorporation and its bylaws, filed respectively with the Montana Secretary of State and the Missoula County Clerk and Recorder. Pursuant to Art. I, Sect. 3 of the bylaws, all owners or occupants of the units are subject to the rules contained in the bylaws and articles of incorporation. Roger Holtman (Holtman) purchased Unit #1 in 1985.

In March of 1988, the Association held meetings to discuss the installation of a new heating system for the condominiums. Holtman opposed installing a new system and argued to either repair the existing central heating system or allow the unit owners to pinchase individual systems of their choice. At a meeting on August 23, 1988, the unit owners present voted to install a Weil-McLain heating system. Holtman did not attend the meeting. After receiving bids, the Association assessed each member $3,900 to cover the costs. Holtman subsequently refused to pay the assessment or allow the Association access to his condominium to install the new system.

On February 5,1989, while Holtman was out of town, a neighbor heard running water in Holtman’s condominium. A meeting of the Board members was called and the situation was declared an emergency requiring entry into Holtman’s unit. After a unit owner entered Holtman’s condominium, the Association authorized a plumber to fix the leak and install the new heating system. When Holtman returned, he found that he was locked out of his damaged condominium, the new heating system was partially installed and, allegedly, asbestos contaminated his basement. He refused to allow further installation or pay for the heating system.

The Association filed a complaint on February 17, 1989, seeking an injunction to require the installation of the new heating system, damages, costs and attorney’s fees. Holtman answered by generally denying the Association’s allegations. On May 10,1989, Holtman filed a third-party complaint against the individual unit owners, claiming they had deprived him of his property rights, invaded his privacy, and wrongfully contaminated his condominium with asbestos. Nearly a year later, the District Court granted the Association’s motion for an “alternative writ” to require the installation of the Weil-McLain heating system, and determined that the installation was necessary to preserve the property during the litigation. On September 17, 1990, the District Court granted the third-party defendants’ motion for summary judgment and dismissed the third-party complaint. Although the judgment was certified as final pursuant to Rule 54(b), M.R.Civ.P., Holtman did not appeal.

On January 14, 1991, the Association moved for summary judgment on its complaint. Two weeks later, Holtman responded by filing a counterclaim against the Association without obtaining leave of court; the allegations against the Association mirrored those made against the individual unit owners in Holtman’s earlier third-party complaint. On February 14, 1991, the Association moved to dismiss or strike the counterclaim. On June 4, 1991, the District Court filed orders granting both the motion for summary judgment and the motion to strike the counterclaim. In entering judgment, the District Court awarded the Association $16,367.92 in attorney’s fees; that amount was decreased by $4,000 in a supplemental judgment in response to Holtman’s objection. Both parties appeal.

Did the District Court err in granting summary judgment for the Association?

Under Rule 56(c), M.R.Civ.P., summary judgment is proper when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Summary judgment was not intended, nor can it be used, as a substitute for existing methods in the trial of issues of fact. Hull v. D. Irvin Transport (1984), 213 Mont. 75, 81, 690 P.2d 414, 417.

In granting the Association’s motion for summary judgment, the District Court stated that the Association complied with its bylaws and applicable statutes in changing the heating system and entering Holtman’s condominium. Specifically, it found that six of the eleven unit owners voted for installation of the heating system at the August 23,1988, meeting. On that basis, the court further found that the quorum and voting majority requirements of the bylaws were met. We conclude that the District Court improperly decided disputed issues of fact.

Insofar as the bylaws are pertinent here, one membership in the incorporated association is appurtenant to each unit. Consequently, each unit is allowed only one vote. As a result, there are a total of eleven votes in the Association. Regardless of the number of individuals who may co-own one unit, the unit nevertheless can cast only one vote at Association meetings. The bylaws also provide that a majority vote at a meeting at which a quorum is present is binding upon all unit owners. A quorum requires the representation in person or by proxy of 50% of the total authorized votes and a majority is defined as more than 50% of the total authorized votes.

The District Court relied on the minutes of the August 23 meeting in determining that the Association complied with its bylaws. The minutes list the six individuals present as Ken, Mike, Doug, Lois and Jerry, and Andrea. In numerous references in the record, the names “Lois and Jerry Covault” appear to refer to the co-owners of one unit. Because each unit has only one vote to cast, it is possible that only five of eleven voting units were present at the meeting in question. If this is the case, no quorum existed because the bylaws require the presence of unit owners having 50% of the total authorized votes to constitute a quorum for the transaction of Association business.

In light of Holtman’s contention that the Association did not comply with the procedures as required by its bylaws in deciding to change the heating system, a genuine issue of material fact exists regarding whether a quorum existed at the August 23,1988, meeting. Absent a quorum, no decision made at that meeting is binding on other unit owners. We conclude that the District Court erred in granting summary judgment.

Did the District Court err in dismissing Holtman’s counterclaim?

In responding to the Association’s February 17, 1989, complaint, Holtman generally denied the allegations and did not assert a counterclaim. On February 1, 1991, Holtman filed a counterclaim against the Association without leave of court. The District Court determined that the counterclaim arose out of the same transaction or occurrence as the Association’s complaint filed in February, 1989; therefore, it was a compulsory counterclaim governed by the timeliness requirements of Rule 13(a), M.R.Civ.P. Applying Rule 13(f), M.R.Civ.P, which governs omitted counterclaims, the District Court dismissed the untimely counterclaim because Holtman did not obtain leave of court.

Holtman does not dispute the District Court’s characterization of his counterclaim as compulsory under Rule 13(a), M.R.Civ.R He argues that the District Court’s result was unduly harsh and that “justice requires” the acceptance of the counterclaim under these circumstances.

We look to Rule 13(f), M.R.Civ.R, in addressing this issue: When a pleader fails to set up a counterclaim through oversight, inadvertence, or excusable neglect, or when justice requires, the pleader may by leave of court set up the counterclaim by amendment.

Although we have not interpreted this subsection of Rule 13, M.R.Civ.R, we have held generally that the decision to allow an amendment is left to the discretion of the trial court. Stanford et al. v. Rosebud County et al. (Mont. 1992), [254 Mont. 474,] 839 P.2d 93, 95, 49 St.Rep. 828-30. In interpreting the identical federal rule, the Ninth Circuit Court of Appeals has held that a trial court’s denial of leave to assert an omitted counterclaim under Rule 13(f), F.R.Civ.P., is reversible only when it constitutes an abuse of discretion, even though the rule is generally applied liberally. Ralston-Purina Co. v. Bertie (9th Cir. 1976), 541 F.2d 1363, 1367. We adopt that standard of review for the issue before us.

In a case factually analogous to the one before us, the Third Circuit Court of Appeals affirmed a trial court’s dismissal of an untimely compulsory counterclaim for failure to meet the “leave of court” requirement of Rule 13(f), F.R.Civ.P. Owens-Illinois, Inc. v. Lakeshore Lane Co. (3d. Cir. 1979), 610 F.2d 1185, 1188. Here, as in Owens, Holtman filed his counterclaim nearly two years after his answer and did not obtain leave of court to do so, as required by Rule 13(f), M.R. Civ.P. Under these circumstances, we hold that the District Court did not abuse its discretion in dismissing Holtman’s untimely counterclaim. To hold otherwise would render the “leave of court” requirement of Rule 13(f), M.R.Civ.R, meaningless.

We note that the District Court’s award and denial of certain attorney’s fees is based in part on its grant of summary judgment to the Association. In light of our conclusion that summary judgment was in error, we vacate the award of attorney's fees.

Affirmed in part, reversed in part, and remanded to the District Court for farther proceedings consistent with this opinion.

JUSTICES HARRISON, TRIEWEILER, McDONOUGH and WEBER concur.


author: JUSTICE WEBER

text:
    JIM G. HEAD and TAMI J. HEAD, husband and wife, on their own behalf, and on behalf of their minor daughter, MELISSA HEAD, Plaintiffs and Respondents, v. CENTRAL RESERVE LIFE OF NORTH AMERICA INSURANCE COMPANY, a foreign corporation, Defendant and Third Party Plaintiff and Appellant, CENTRAL RESERVE LIFE OF NORTH AMERICA INSURANCE COMPANY, a foreign corporation, Third Party Plaintiff and Appellant, v. JAMES R. PAULI, Third Party Defendant and Respondent.
    No. 92-326.
    Submitted on Briefs October 22, 1992.
    Decided January 12, 1993.
    50 St.Rep. 20.
    256 Mont. 188.
    845 P.2d 735.

      For Appellant: Daniel W. Hileman, Murray & Kaufman, PC., Kalispell.
    For Respondent: Stephen C. Berg, Warden, Christiansen, Johnson & Berg; George B. Best, Kalispell.
   JUSTICE WEBER

delivered the Opinion of the Court.

Defendant Central Reserve Life of North America Insurance Company, appeals the decision by the Eleventh Judicial District, Flathead County, Montana, awarding plaintiffs Jim G. Head and Tami J. Head a judgment in the amount of $172,765.13 plus attorney's fees in the amount of $43,191.28 and costs of $4,165.73, for a total judgment of $220,122.14. We affirm.

The issues presented for our review are:

1. Whether the District Court erred in allowing the case to be tried by a jury.

2. Whether the District Court erred in directing a verdict in favor of third-party defendant Pauli and in denying Central Reserve’s motion for a directed verdict.

3. Whether there was sufficient credible evidence to support the jury’s verdict.

4. Whether the District Court abused its discretion in awarding attorney’s fees and costs to the Heads.

Plaintiffs Jim G. Head and Tami J. Head (Heads) brought this action individually and on behalf of their minor daughter, Melissa Head, against Central Reserve Life of North America Insurance Company (Central Reserve). Central Reserve provided group insurance benefits to employees of Viking Logging (Viking) of Columbia Falls, Montana. Jim Head was employed by Viking.

Viking agreed to provide health insurance coverage for its employees in 1984. The testimony during the trial conflicted as to the date that the employees met with Bruce Reimer (Reimer), the president of Viking, and James R. Pauli (Pauli), an insurance agent, to discuss health insurance benefits and to complete enrollment applications for the group insurance plan. Jim Head testified that he could not remember filling out the application himself, but he did recall answering questions to facilitate the application. Pauli and Ron Kunik, a Central Reserve agent, both testified that they probably would have asked questions of applicants rather than have the employees fill them out themselves. Pauli was not an agent for Central Reserve, but had agreed to act as a go-between between Central Reserve and Reimer because he had handled other insurance matters for Reimer. Pauli was a “captive” insurance agent for Bankers’ Life and thus could not sell policies for other insurance providers. Bankers’ Life did not provide group plans for loggers at that time. The record establishes that entries on the application form were completed by at least two persons.

Kunik provided information to Pauli about Central Reserve’s health insurance coverage and Pauli conveyed this information to Reimer and the Viking employees. The completed insurance applications were dated July 16, 1984, the date that Reimer issued a check for the first premium payment for the policy. The record contains conflicting evidence about the date the applications were completed, which may have been as early as June 22,1984. Reimer testified that he issued the check on the same date as the only meeting with Pauli. Four witnesses (Jim Head, another Viking employee, Pauli and Kunik) testified that more than one meeting took place and that applications were filled out prior to July 16,1984. Various testimony was presented as to who in fact filled out the applications. It is not clear who completed the questions relating to Tami Jo Head and Melissa Head. However, there is evidence that neither Jim Head nor Pauli completed all of the questions on the application.

These factual issues subsequently became critical because on July 11, 1984, Dr. Pitman of Columbia Falls tentatively diagnosed Melissa Head, then 9 months old, as possibly having Von Recklinghausen’s disease. He referred Melissa to a Whitefish pediatrician, Dr. Casazza, for a second opinion. Dr. Casazza confirmed Dr. Pitman’s diagnosis on July 12,1984. Von Recklinghausen’s disease is more precisely referred to and known as neurofibromatosis.

The testimony at trial established that neurofibromatosis is a condition which manifests itself by brown spots known as cafe-au-lait spots and is not a disease, but rather a predisposition to the formation of tumors on nerve cells, on the coverings of nerve cells, on the spinal cord and on the brain. Neurofibromatosis is not recognized by any medical testing, it has no symptoms and there is no known medical treatment. Medical testimony established that while cafe-au-lait spots are not uncommon in young children, more than six such spots is considered a sign of neurofibromatosis. Neurofibromatosis is diagnosed only by physical examination and requires no medical intervention or treatment prior to the development of tumors or other complications. Dr. Mary Anne Guggenheim, who first saw Melissa in December 1987, analogized the condition to that of having high cholesterol which might predispose an individual to heart attack or stroke.

Except for numerous scattered café-au-lait spots indicating neurofibromatosis, Dr. Casazza found Melissa to be normal. He referred Melissa to a Kalispell ophthalmologist, Dr. Steve Weber, to determine whether an optic glioma (tumor) had formed on Melissa’s optic nerve; referred the Heads to Shodair Hospital in Helena, Montana, to determine whether future children might also be subject to the condition; and referred Melissa to Shriner’s Hospital in Spokane to determine if the condition was affecting her orthopedically.

Dr. Casazza testified that neurofibromatosis is untreatable prior to formation of tumors. After July 12,1984, Dr. Casazza saw Melissa only for well-baby checks. He testified that he was aware of Melissa’s neurofibromatosis during these examinations, although the condition did not change and required no treatment. He advised the Heads to be attentive for additional cafe-au-lait spots and to maintain contact with Dr. Weber and Shriner’s Hospital as suggested by them. Dr. Casazza and Dr. Guggenheim each testified that they did not treat Melissa for neurofibromatosis but merely followed her condition.

Dr. Weber continued to examine Melissa periodically to determine whether she developed amblyopia (lazy eye) or optic nerve glioma. Medical testimony established that neurofibromatosis is not classified as a disease or illness. All medical experts discussed neurofibromatosis in terms of a condition as opposed to a disease or illness. All testified that they had not rendered medical treatment for the condition of neurofibromatosis prior to 1987. When asked what he had done for Melissa, Dr. Weber described himself as a “tense observer, watching for the appearance of an optic nerve glioma or other vision-threatening complications” which would make medical treatment necessary.

Medical testimony also established that children with neurofibromatosis are predisposed to optic nerve glioma although tumors can occur at any location in the body where there are nerves. Many people with neurofibromatosis never develop any symptoms more serious than a few lumps and bumps; others with the condition develop serious abnormalities, such as the subject of the movie “Elephant Man.” In addition to tumors which can cause bone cysts and skeletal deformity, there may be problems with blood vessels, bone growth and blood flow through the lungs. With the optic nerve, there can be vision problems and loss of sight. Drs. Weber and Casazza monitored Melissa’s condition to make sure she did not develop these problems.

Central Reserve established an effective date of August 1,1984 for health insurance coverage under Viking’s plan. Central Reserve handled Melissa’s neurofibromatosis as a preexisting condition under the plan. Paragraph 24 of the plan, entitled “General exclusions of the plan,” provides:

No benefits will be paid for charges ...

21. Due to a preexisting illness. Benefits will be paid for charges incurred after the end of a continuous period up to twelve (12) months which ends after the effective date of coverage and during which no medical care, diagnosis, advice or prescribed drugs were received;...

Central Reserve believed that the visits to Drs. Casazza and Weber constituted “medical care” so as to defeat the running of the twelvemonth period for preexisting illnesses. Because Central Reserve originally denied a 1984 claim for Melissa which mentioned neurofibromatosis, the Heads submitted no further claims to Central Reserve relating to neurofibromatosis until late 1987. Central Reserve paid claims for a 1987 CAT scan and anMRI, but later denied them.

In 1987, Melissa began falling, experiencing headaches and a bulge formed on the left side of her head. She was referred to Dr. Guggenheim at Shodair Hospital in Helena. Dr. Guggenheim testified that Melissa had a hole in her skull bone which caused accumulation of fluid outside the brain pushing forward into the area behind her left eye. Dr. Guggenheim testified that although the team of medical specialists initially thought Melissa had a tumor, her problems were the result of a rare abnormality which was not easily diagnosed. Eventually a craniotomy was performed at Children’s Hospital in Denver, Colorado, in February 1988. From that time until July 31, 1991, Melissa has had nine surgeries in Denver and one in Detroit, Michigan.

Melissa’s first surgery was a massive craniotomy using rib and cranial grafts to try to reconstruct her skull and get it back to a normal position as Melissa had no bone behind her left eye. Since then, other surgeries have been performed to try to stop an erosion of the skull bone and repair holes in Melissa’s skull. In December 1990, a shunt was placed in her spine to help drain off fluid and keep pressure down in her brain, which seems to be stopping further bone erosion. In July 1991, the last surgery prior to the trial was performed and more bone was grafted to fill holes in hopes that this will finally solve the problem. All bills for these surgeries were submitted to Central Reserve and all were denied on the ground that the preexisting illness provision of the plan had not been met.

Although Central Reserve had previously denied the December 1984 claim without explanation, it sent a letter to the Heads dated March 28, 1988, denying benefits related to neurofibromatosis because Melissa was not “treatment free” for at least a period of twelve months in accordance with the preexisting illness provision of the plan. Drs. Casazza, Guggenheim and Weber all testified that no treatment had been rendered for the disease until late 1987 when Melissa began to experience symptoms.

Mary Decker, owner of Medical Claims Services in Missoula, testified to an extensive history of processing health claims for different health insurance carriers. She testified that she had reviewed all claims related to neurofibromatosis presented to her by the Heads and, after reviewing the policy, calculated the total owing for unpaid medical expenses, if the neurofibromatosis was covered under the plan, at $172,765.13. Ms. Decker also testified that she is familiar with preexisting condition clauses containing terminology similar to that in Central Reserve’s plan. She determined that there was no twelve-month period during which Melissa was “treatment free” as this phrase is understood in the insurance claims industry because Melissa had not gone without medical care for twelve consecutive months. She based her opinion on Dr. Casazza’s referrals to Dr. Weber, Shodair and Shriner’s Hospital, which would not have occurred but for the neurofibromatosis.

Ms. Decker testified that the industry interpretation of this language would not find that Dr. Casazza’s well-baby examinations constituted the rendering of medical care to Melissa so as to defeat the running of the twelve-month period and that the insurance industry would find that only the two visits to Dr. Weber would defeat the running of the twelve-month period. However, Dr. James Pellagalli, on behalf of Central Reserve, testified that even the visits to Dr. Casazza constituted medical care to defeat the running of the twelve-month period. He further testified that the same would be true if Melissa saw another physician for well-baby checks and that physician also knew of or made an independent diagnosis of neurofibromatosis.

Viking’s group health insurance plan is considered an employee welfare benefit and thus, any state claims relating to insurance coverage are preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Section 1001, et seq. (1988). Over Central Reserve’s objection, the case was tried to a jury, commencing on September 23, 1991. After hearing most of the evidence, the District Court granted third-party defendant Pauli’s motion for a directed verdict. At the close of the evidence, it denied Central Reserve’s motion for a directed verdict. The jury returned a verdict in the Heads’ favor against defendant Central Reserve. The District Court subsequently granted the Heads’ post-trial motion for attorney’s fees.

L

Did the District Court err in allowing the case to be tried by a jury?

Central Reserve would have this Court reverse the jury verdict and remand the case for a non-jury trial, which it maintains is in accordance with ERISA. ERISA is silent with respect to jury trials. Nonetheless, Central Reserve contends that the federal circuit courts have consistently held that there is no right to a jury trial in actions governed by ERISA. Central Reserve supports this argument by citing cases which have alleged a wrongful denial of pension benefits. See, e.g., Pane v. RCA Corp., (3rd Cir. 1989), 868 F.2d 631; Nevill v. Shell Oil Co., (9th Cir. 1987), 835 F.2d 209; In re Vorpahl (8th Cir. 1982), 695 F.2d 318; and Wardle v. Central States, Southeast and Southwest Areas Pension Fund (7th Cir. 1980), 627 F.2d 820, cert. denied, 449 U.S. 1112, 101 S.Ct. 922, 66 L.Ed.2d 841 (1981).

Prior to the 1975 enactment of ERISA, pension cases were traditionally decided by trust law, which was considered to be equitable in nature. ERISA provides for civil actions to recover benefits as follows:

(a) Persons empowered to bring a civil action

A civil action may be brought —

(1) by a participant or beneficiary —
(A) for the relief provided for in subsection (c) of this section, or
(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;

29 U.S.C. Section 1132(a)(1) (1988).

The United States Supreme Court has not addressed the issue of a jury trial -under ERISA and not all federal circuits have analyzed the jury trial issue in the same manner as Pane, which held broadly that a Section 1132(a)(1)(B) cause of action for recovery of benefits is equitable in nature. Pane, 868 F.2d at 636. Although the Supreme Court has not ruled directly on this issue, it has looked to the common law in place at the time ERISA was enacted to determine the standard of review applicable for a denial of benefits. See Firestone Tire and Rubber Co. v. Bruch (1989), 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80.

The legislative history of ERISA makes clear that the Act should be construed consistent with the Labor-Management Relations Act of 1947 (LMRA). Fuller v. INA Life Ins. Co. of N.Y. (Sup. 1988) 533 N.Y.S.2d 215, 217 (citing Pollock v. Castrovinci (S.D. N.Y. 1979), 476 F.Supp. 606, aff'd 622 F.2d 575 (2d Cir. 1980)). Under the LMRA, a suit for money damages under a collective bargaining agreement regulated by the LMRA is entitled to a jury trial. Fuller, 533 N.Y.S.2d at 217 (citing Allen v. United Mine Workers of Am. (6th Cir. 1963, 319 F.2d 594).

The law is less clear for actions where the participant or beneficiary of an ERISA plan seeks to recover medical benefits. Steeples v. Time Ins. Co. (N.D. Okla. 1991), 139 F.R.D. 688, 691. ERISA actions to recover these benefits under Section 1132(a)(1)(B) may be brought in either state or federal courts. 29 U.S.C. Section 1132(e) (1988). There is a growing trend in the federal courts and the few state courts that have addressed the issue, to allow a jury trial based on the legal nature of the claim. See, e.g., Rhodes v. Piggly Wiggly Ala. Distrib. Co. (N.D. Ala. 1990), 741 F. Supp. 1542; Vicinanzo v. Brunschwig & Fils, Inc. (S.D. N.Y. 1990), 739 F. Supp. 882; Gangitano v. NN Investors Life Ins. Co. (W.D. Fla. 1990), 733 F. Supp. 342; Walker v. Sperry & Hutchinson Co. (Sup. Ct. 1989), 544 N.Y.S.2d 958; and Springer v. Wal-Mart Associates’ Group Health Plan (N.D. Ala. 1989), 714 F.Supp. 1168, rev’d on other grounds, 908 F.2d 897 (11th Cir. 1990).

Although ERISA as a whole generally deals with trust and fiduciary issues, the nature of a particular issue determines whether a jury trial is appropriate. Steeples, 139 F.R.D. at 693. The historical basis for suits to recover fringe benefits by employees is steeped in contract law, which has not generally provided for equitable remedies if legal remedies are available. In Firestone, 489 U.S. at 112,109 S.Ct. at 955, 103 L.Ed.2d at 94, the United States Supreme Court noted that the absence of discretion regarding the approval or denial of the benefits sought made that case “like any other contract claim.”

This Court has adopted the reasoning of the Eleventh Circuit Court of Appeals from Lincoln v. Board of Regents of Univ. System (11th Cir. 1983), 697 F.2d 928, 934, cert. denied, 464 U.S. 826, 104 S.Ct. 97, 78 L.Ed.2d 102, wherein the court stated:

An action for reinstatement and back pay under Title VII is by nature equitable and entails no rights under the seventh amendment. An action for damages under Section 1981, however, is by nature legal and must be tried by a jury on demand.

Breese v. Steel Mountain Enterprises (1986), 220 Mont. 454, 716 P.2d 214, 216.

When ERISA is silent, as it is on the matter of jury trials, it is appropriate in a case decided on state contract law principles to adopt state law if to do so does not conflict with the following three queries (known as the Kimball Foods test): (1) whether the issue requires a nationally uniform body of law; (2) whether application of state law would frustrate the federal program’s objectives; and (3) whether application of a federal rule would disrupt commercial relationships predicated on state law. Mardan Corp. v. C.G.C. Music, Ltd. (9th Cir. 1986), 804 F.2d 1454, citing United States v. Kimball Foods (1979), 440 U.S. 715, 99 S.Ct. 1448, 59 L.Ed.2d 711. Applying state law in this instance does not conflict with the Kimball factors. Significantly, there is no uniform federal rule to apply.

Several federal courts have held that a plaintiff seeking contract or other legal damages under ERISA is guaranteed a jury trial under the Seventh Amendment to the United States Constitution. The District Court here relied on Transamerica Occidental Life Ins. Co. v. DiGregorio (9th Cir. 1987), 811 F.2d 1249, in which the plaintiff’s insurer brought a declaratory judgment action to interpret a double indemnity clause in its contract. The Transamerica court noted that the nature of the underlying controversy, legal or equitable, determines whether a party may properly obtain a jury trial. Transamerica, 811 F.2d at 1251-52.

In Transamerica, the Ninth Circuit upheld the lower court’s decision that the claim was legal in nature because it was based upon a contract. Transamerica, 811 F.2d at 1252. The contract involved a life insurance plan, a type of “employee welfare benefit plan” treated like health insurance plans under ERISA. The Heads’ claim is also a contract action. It is not a suit against a plan administrator or a fiduciary, but rather is a suit against an insurer to recover benefits under a health insurance policy.

Contract law is traditionally considered to be legal rather than equitable and thus entitles a plaintiff to a jury trial if requested. The District Court here recognized this fundamental distinction and permitted the trial to proceed with a jury. In the Heads’ complaint, they alleged a breach of contract and other state law claims. The other state law claims were subsequently dismissed as preempted by ERISA; thus, the case proceeded solely on the contract claim. We agree with the District Court’s determination that contract law applies. We conclude that a jury trial was appropriate when plaintiffs sued in state comet based on a breach of contract claim under ERISA to recover benefits under a group health insurance plan when issues of fact are controverted.

We hold that the District Court did not err when it denied Central Reserve’s motion to dismiss the Heads’jury demand.

II.

Did the District Court err in denying Central Reserve’s motion for a directed verdict and in granting Pauli’s motion for a directed verdict?

After most of the evidence was presented at trial, the District Court granted third-party defendant James R. Pauli’s motion for a directed verdict. The Heads did not object to Pauli’s motion. The District Court denied Central Reserve’s motion for a directed verdict after the remaining evidence was presented.

Central Reserve contends that the issue of Pauli’s negligence should have gone to the jury because either Pauli or Jim Head was responsible for the errors on the insurance application. It has maintained the same throughout this proceeding, despite the testimony of its own agent, Ron Kunik, who testified as to his own responsibilities in the application procedure. Kunik further testified that Pauli followed Kunik’s instructions.

The District Court found no evidence of negligence on the part of Pauli. Amotion for directed verdict is proper only in the complete absence of any evidence to warrant submission to the jury. Britton v. Farmers Ins. Group (1986), 221 Mont. 67, 88, 721 P.2d 303, 317. Contrary to Central Reserve’s contention, our review of the record has disclosed nothing to support Central Reserve’s claim. We conclude that the District Court correctly found no evidence of negligence on the part of Pauli.

On the other hand, the Heads presented credible evidence relating to the issues of Central Reserve’s insurance coverage to warrant submission to the jury. When the District Court considers a motion for directed verdict, all inferences of fact must be considered in the light most favorable to the opposing party. Britton, 721 P.2d at 317. The District Court could reasonably have determined that factual issues were controverted. The jury was charged to determine whether Melissa had ever gone for a period of twelve months without “medical care, diagnosis or advice” relating to her neurofibromatosis. To resolve that question, the jury had to ascertain what the words “medical care” meant under Central Reserve’s health insurance plan. We conclude the factual issues warranted submission to the jury.

We hold that the District Court correctly denied Central Reserve’s motion for a directed verdict. We further hold that the District Court did not err by granting Pauli’s motion for the same.

III.

Does sufficient credible evidence support the jury verdict?

Central Reserve contends that there is no evidence that Melissa Head ever went for a twelve-month period without “medical care, diagnosis or advice” relating to her neurofibromatosis and that all the evidence establishes that she was never twelve months without medical care.

Central Reserve’s argument is based on its own interpretation of the phrase “medical care,” which is not defined in Central Reserve’s policy. The jury heard a great deal of testimony relating to the definition of that policy term. Medical experts testified that in the broadest sense, the care they provided to Melissa would be considered medical care. However, Drs. Weber and Casazza both testified that they “followed” Melissa’s condition and did not render medical care and that they provided no treatment for neurofibromatosis. Both further testified that they made observations and did not give advice or diagnose symptoms. Dr. Weber testified that Melissa could have gone without some of the appointments with him in which he followed her condition, specifically those during the twelve-month time period during which the jury ultimately determined Melissa was without medical care. He further testified that he may not have recommended those visits if he had foreseen there would be this problem with insurance coverage.

In fact, Central Reserve did not use the term “medical care” in its correspondence to the Heads refusing to cover the medical expenses — it merely used the words “treatment free” without further explanation. If the terms of an insurance policy are ambiguous, obscure or open to different constructions, the construction most favorable to the insured or other beneficiary must prevail, particularly if an ambiguous provision in the policy attempts to exclude the liability of an insurer. Atcheson v. Safeco Ins. Co. (1974), 165 Mont. 239, 247, 527 P.2d 549, 553.

Central Reserve’s literal interpretation of “medical care” in this case attempts to exclude its liability and prevent Melissa Head from meeting the requirements of the preexisting conditions clause in its policy. In Brasher v. Prudential Ins. Co. of Am. (W.D. Ark. 1991), 771 F. Supp. 280, 282-83, the court discussed a requirement in a disability insurance policy coming within the ambit of ERISA which prevented the plaintiff from qualifying as “totally disabled” under the policy. The plaintiff conceded that a literal application of the policy language would preclude recovery in his case but contended that such an interpretation required him to be practically catatonic before being entitled to benefits. He supported his public policy argument by citing Helms v. Monsanto Co. (11th Cir. 1984), 728 F.2d 1416, 1420, reh’g denied, 734 F.2d 1481 (1984), in which the court refused to adopt a strict and literal interpretation of the policy’s definition of “total disability” that would preclude all but the entirely helpless from receiving benefits and in which the court adopted a more realistic definition. Brasher, 771 F. Supp. at 282. See also, Russell v. Prudential Ins. Co. of Am. (5th Cir. 1971), 437 F.2d 602; Madden v. ITT Long Term Disability Plan for Salaried Employees (9th Cir. 1990), 914 F.2d 1279, 1285, cert. denied,_U.S._, 111 S.Ct. 964, 112 L.Ed.2d 1051 (citing Helms); and Torix v. Ball Corp. (10th Cir. 1988), 862 F.2d 1428, 1431 (recovery may not be denied on the basis of overly restrictive interpretations of the plan’s language).

The Brasher court noted that under the Helms construction, a material question existed as to whether or not the plaintiff was “totally disabled.” That analysis is similar to the interpretation of “medical care” as applied to Melissa Head.

Our review of a jury verdict is very narrow in scope. We will not reverse the jury’s findings if they are supported by substantial credible evidence. Whiting v. State (1991), 248 Mont. 207, 213, 810 P.2d 1177, 1181. Substantial evidence is defined as that evidence that a reasonable mind might accept as adequate to support a conclusion. When conflicting evidence exists, the weight and credibility given to it are within the province of the jury. Whiting, 810 P.2d at 1181. Evidence which is inherently weak and conflicting may still be considered substantial. Further, when determining if substantial evidence exists, this Court views the evidence in the light most favorable to the prevailing party. Whiting, 810 P.2d at 1181.

We conclude that there is substantial evidence in the record for the jury to reasonably interpret the policy to find that Melissa received no medical care for neurofibromatosis for a twelve-month period.

We hold that there is substantial credible evidence to support the jury verdict.

IV.

Did the District Court err when it awarded attorney’s fees to the Heads?

The District Court granted the Heads’ post-trial motion for attorney’s fees and costs and awarded an amount of 25% of the jury verdict plus costs of $4,165.73 for a total of $47,357.01 in fees and costs. Central Reserve contends that the Heads did not meet the test for awarding fees. They contend, further, that if fees and costs are allowed, the amount awarded here is excessive and should be limited to a “lodestar” determination.

An award of attorney’s fees is discretionary in an ERISA action by a participant or beneficiary to recover benefits. 29 U.S.C. Section 1132(g)(1) (1988). A determination to award attorney’s fees in an ERISA action should only be reversed for abuse of discretion. Hummell v. S. E. Rykoff & Co. (9th Cir. 1980), 634 F.2d 446, 452. An abuse of discretion is found only when there is a definite conviction that the court made a clear error of judgment in its conclusion upon weighing relevant factors. Hummell, 634 F.2d at 452. This requires the trial court to state its reasons for granting or denying fees. Hummell, 634 F.2d at 452-53. In Hummell, the Ninth Circuit adopted the following guidelines to apply in the exercise of discretion under Section 1132(g)(1):

They should consider these factors among others: (1) the degree of the opposing parties’ culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of fees; (3) whether an award of fees against the opposing parties would deter others from acting under similar circumstances; (4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties’ positions.

Hummell, 634 F.2d at 453.

The courts have almost universally adopted the above five factors for consideration in determining whether to award fees. Garred v. Gen. Am. Life Ins. (W.D. Ark. 1991), 774 F. Supp 1190, 1201.

In Landro v. Glendenning Motorways, Inc. (8th Cir. 1980), 625 F.2d 1344, 1356, the court stated that “Section 1132(g), like the rest of ERISA, is remedial legislation that should be construed liberally in favor of those persons it was meant to benefit and protect” and that a prevailing participant in a suit under Section 1132 to enforce rights under his plan, “should ordinarily recover an attorney’s fee unless special circumstances would render such an award unjust.” The Landro court further stated that mere absence of bad faith on the part of the losing defendant is not such a “special circumstance.” Landro, 625 F.2d at 1356.

The District Court here noted the Landro rationale for awarding fees to those persons who are to be protected and benefitted by ERISA in its reasoning for awarding fees to the Heads, stating:

... [T]he Heads appear totally unable to pay attorney fees and if attorney fees are paid out of the jury’s award, the Heads will still have unpaid medical bills in a similar amount. Given the Heads inability to pay and the apparent ability of the insurance company to pay, an (sic) given the fact that the Heads were required to go to court to obtain an interpretation of a somewhat ambiguous provision, Heads should recover their attorney fees and costs.
Balancing the factors traditionally used by Montana Coruts and also used by the Ninth Circuit, the Court is of the opinion that the 25% contingency fee is very reasonable. Considering the likelihood that no recovery would be had at all, the difficulty and high stress nature of the case, the inherent delay and the degree of skill and perseverance required, as well as the result obtained, the Court finds that both the $43,191.28 attorney fees and the $4,165.73 in attorney costs would be allowable. (Citations omitted.)

The District Court cited Stimac v. State (1991), 248 Mont. 412, 812 P.2d 1246, in which we held that courts should consider eight factors when assessing whether to award the full amount of the contingent-fee agreement as a reasonable attorney’s fee under Section 39-3-214(1), MCA. Those factors include: (1) the novelty and difficulty of the issues; (2) the time and labor required to properly perform the legal service; (3) the character and importance of the litigation; (4) the result obtained; (5) the experience, skill and reputation of the attorney; (6) the customary fee for similar services; (7) the ability of the client to pay for the services; and (8) the risk of no recovery. Stimae, 812 P.2d at 1249. The District Court’s order specifically states that it considered relevant factors from both Hummell and Stimae in making the decision to allow fees. We conclude that the District Court considered the proper factors in determining whether to award attorney’s fees and clearly stated the reasoning behind the decision.

Central Reserve alternatively asserts that even if the District Court properly determined that the Heads were entitled to attorney’s fees, it abused its discretion by awarding the Heads attorney’s fees in the amount of $43,357.01. This Court recently addressed the proper determination of attorney’s fees in an ERISA action in Audit Services, Inc. v. Frontier-West, Inc., (1992), 252 Mont. 142, 827 P.2d 1242. In Audit Services, we approved the “lodestar/multiplier” approach, which essentially contains two parts: (1) the district court must determine a “lodestar” amount by multiplying a reasonable hourly rate for the area by the number of hours reasonably expended on the case; and (2) decrease or increase the “lodestar” amount based on other factors from Kerr v. Screen Extras Guild, Inc. (9th Cir. 1975), 526 F.2d 67, cert. denied (1976), 425 U.S. 951, 96 S.Ct. 1726, 48 L.Ed.2d 195 Audit Services, 827 P.2d at 1251.

We further stated that the “results obtained” factor is particularly important and “where a party has obtained excellent results, counsel should recover a full compensatory fee.” Audit Services, 827 P.2d at 1250. We noted that the district court “necessarily has discretion in making the equitable judgment of whether the fees requested are excessive.” Audit Services, 827 P.2d at 1252.

Here, the District Court followed the “lodestar/multiplier” approach. We will not overturn its decision absent an abuse of discretion. Counsel for the Heads presented testimony subject to cross-examination and submitted an affidavit as well, detailing his time spent on the case. He presented testimony to establish that 208.10 hours was a reasonable amount of time for a case such as this. He testified that he multiplied hours by $75 prior to January 1,1991 and $80 after that date for himself, by $70 per hour for an associate and by $35 per hour for paralegals to arrive at the total of $14,744.50. Another attorney in the Kalispell area testified that the hourly rate, whether it be $75 or $80 per hour, is very reasonable for that particular area and in fact is probably on the low end for someone of similar experience in such a case.

Counsel for the Heads further testified that he agreed to represent the Heads for a 25% contingency fee, less than his standard contingent rate, while knowing from the beginning that the case would generate many hours of work. He testified that he accepted the case because he wanted a declaration that Melissa was entitled to future medical benefits as well as past benefits and because he was aware of the heavy debt owed by the Heads. He also testified that he felt that the issues were such that the case could as easily have been lost before the jury as won. The issues in this case were by no means clearly in favor of his clients and he bore a substantial risk of no recovery for them, in which case he too may have recovered nothing.

In Audit Services, we affirmed an award of an attorney’s fee greater than the lodestar amount. Audit Services, 827 P.2d 1252. The initial lodestar amount is presumed to be a reasonable attorney’s fee. However, the court has discretion to increase or decrease this amount as circumstances warrant. Audit Services, 827 P.2d at 1250. “Although fee awards are left to the discretion of the district court, ‘[i]t remains important... for the district court to provide a concise but clear explanation of its reasons for the fee award’.” Audit Services, 827 P.2d at 1250-51, quoting Hensley v. Eckerhart (1983), 461 U.S. 424, 103 S.Ct 1933, 76 L.Ed.2d 40.

The initial lodestar amount here for attorney’s fees was $14,744.50. The District Court increased the award to $43,357.01, an amount equal to 25% of the judgment against Central Reserve for medical expenses, the agreed upon contingency fee in this case. In its decision to increase the lodestar amount here, the District Court properly considered the Stimac factors, which are similar to those used by the Ninth Circuit in awarding fees. See Moore v. Jas. H. Matthews & Co. (9th Cir. 1982), 682 F.2d 830, 838-39. In Moore, the Ninth Circuit remanded the case for a redetermination of attorney’s fees using a lodestar/multiplier approach. Moore, 682 F.2d at 839-41. We conclude that the District Court has provided an adequate rationale to support its decision as to the amount of attorney’s fees to be awarded to the Heads and that it was not an abuse of discretion to award attorney’s fees in excess of the original lodestar amount.

We hold that the District Court did not err in its award of attorney’s fees. Counsel for the Heads has stated that should this appeal be affirmed, he will seek additional attorney’s fees connected with this appeal. We therefore remand this case to the District Court for consideration of an additional award of attorney’s fees to compensate the Heads’ counsel for his services connected with this appeal.

Affirmed and remanded for consideration of additional attorney’s fees.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, McDONOUGH and HUNT concur.


author: CHIEF JUSTICE TURNAGE

text:
    GREGG A. MOSELY Applicant, v. LAKE COUNTY, JUSTICE COURT, LAKE COUNTY, MONTANA, CHARLES O. WHITSON, JUSTICE OF THE PEACE, Respondent.
    No. 92-371.
    Dated January 12, 1993.
    50 St.Rep. 28.
    256 Mont. 206.
    845 P.2d 732.
   OPINION AND ORDER

This matter came before us on application by Gregg A. Mosely for a writ of supervisory control. Mosely raised numerous issues regarding the proceedings in which he was involved in the Justice Court of Lake County, Montana, including whether the Justice Court exceeded its jurisdiction. By Order dated November 12, 1992, we denominated Mosely’s application as one for a writ of certiorari, granted the writ, and provided the parties an opportunity to brief the jurisdictional issues. Because we decide this case on jurisdictional grounds alone, we set forth neither the other issues raised by Mosely nor the facts upon which those issues are argued.

Mosely was charged in the Justice Court, Lake County, Montana, with intentionally introducing fish into Lake Mary Ronan. A person convicted of this offense is “guilty of a misdemeanor punishable by a fine of not less than $500 and may be fined up to the amount necessary to eliminate or mitigate the effects of the violation ....” Section 87-5-721(2), MCA.

The Justice Court ultimately accepted Mosely’s plea of guilty to the charge, fined him $515, suspended his fishing privileges and ordered “restitution to be paid.” The record reflects that the “restitution” amount was intended to be the dollar amount necessary to eliminate or mitigate the effects of the violation, as authorized by Section 87-5-721(2), MCA. Mosely paid the fine and subsequently received from the Lake County Attorney’s Office a statement for “present restitution amount regarding costs associated with” his offense; the stated restitution amount “to date” was $1,547.62.

Initially, it is clear that the Justice Court was not authorized to impose “restitution” for a violation of Section 87-5-721(2), MCA. Restitution can be required only when a sentence is deferred or suspended. See Sections 46-18-241 and 46-18-201, MCA. The Justice Court neither suspended execution, nor deferred imposition, of sentence here. It is equally clear, however, that Section 87-5-721(2), MCA, authorizes a sentencing court to impose a fine in the amount necessary to mitigate the effects of the violation. On this basis, the State argues that the ordered “restitution” properly can be deemed a “fine” of the mitigation amount as authorized by Section 87-5-721(2), MCA, under these circumstances. Even if accepted, this argument does not change the outcome here, as discussed below.

The jurisdiction of the justices’ courts over criminal offenses is set forth in Section 3-10-303, MCA. For the most part, the jurisdictional grants contained therein are general in nature; for example, the justices’ courts have exclusive jurisdiction over misdemeanors punishable by a fine not exceeding $500, and concurrent jurisdiction with the district courts over misdemeanors punishable by a fine exceeding $500. Sections 3-10-303(1) and 3-10-303(3), MCA. Notwithstanding these general jurisdictional grants, however, the legislature set forth a specific grant of jurisdiction to the justices’ courts with regard to fish and game violations: justices’ courts have jurisdiction “of all violations of fish and game statutes punishable by a fine of not more than $1,000 or imprisonment for not more than 6 months, or both.” Section 3-10-303(2), MCA.

The statute which Mosely was charged with violating, Section 87-5-721, MCA, is inarguably a fish and game statute. As amended by the legislature in 1991, a violation of the statute is a misdemeanor punishable by a fine “up to the amount necessary to eliminate or mitigate the effects of the violation.” Id. In other words, the legislature set no limit whatsoever on the fine which could be imposed as punishment for violating the statute.

We determine first a matter conceded by the State: namely, that the specific jurisdictional grant over violations of fish and game statutes contained in Section 3-10-303(2), MCA, controls over the general grant of concurrent jurisdiction over misdemeanors punishable by afine exceeding $500 contained in Section 3-10-303(3), MCA. Where, as here, a general provision and a particular provision are inconsistent, the particular intention controls. Section 1-2-102, MCA.

Next, we address the extent of the justices’ courts’jurisdiction over the offense with which Mosely was charged. The State urges us to conclude that only the amount of the “fine” exceeding $1,000 was in excess of the court’s jurisdiction. However, the plain language of the specific jurisdictional grant mandates our conclusion that the Justice Court did not have any jurisdiction whatsoever over the offense charged.

Section 3-10-303(2), MCA, grants the justices’ courts jurisdiction over “violations of fish and game statutes punishable by a fine of not more than $1,000 ...” (Emphasis added.) As discussed above, a violation of Section 87-5-721(2), MCA, is punishable by an open-ended, potentially limitless fine equalling the costs of eliminating or mitigating the effects of the violation. A violation of the statute is “punishable by” a fine of more than $1,000. Thus, the violation is not within the jurisdictional grant to the justices’ courts’ contained in Section 3-10-303(2), MCA. The jurisdictional statute simply does not say, as the State urges, that jurisdiction depends on the punishment “imposed.” For that reason, we need not address potential difficulties with a statute granting jurisdiction on the basis of a sentence ultimately imposed.

We note that this result is almost certainly the product of inadvertence by the 1991 Montana legislature. It appears that when the legislature amended Section 87-5-721, MCA, to provide for an enhanced fine to cover mitigation costs in 1991, it may have inadvertently failed to make a corresponding amendment to the justices’ courts’jurisdiction over violations of fish and game statutes. The fact remains, however, that the legislature used plain words in both the jurisdictional statute and Section 87-5-721, MCA, and those words leave no room for interpretation or a search for legislative intent by this Court. Our role is to ascertain what is contained in the statute, not to insert what has been omitted or omit what has been inserted. Section 1-2-101, MCA.

IT IS ORDERED that:

1. The conviction and sentence in this matter be and the same are hereby vacated; and

2. This matter is remanded to the Justice Court, Lake County, Montana, with directions to dismiss the charge of violating Section 87-5-721, MCA, heretofore filed against Gregg A. Mosely.

The Clerk is directed to mail a true copy of this Opinion and Order to Douglas J. Wold, Esq., to the Office of the Attorney General of the State of Montana, and to the Honorable Charles O. Whitson, Justice of the Peace, Lake County, Montana.

DATED this 12th day of January, 1993.

/s/KARLA M. GRAY

/s/ JOHN CONWAY HAR.RTSON

/a/ WILLIAM E. HUNT. SR.

/s/ r.c. McDonough

/a/ TERRY TRTEWETLER

/a/ FRED J. WEBER. * * *

CHIEF JUSTICE TURNAGE

concurring in part and dissenting in part:

I agree with the majority statement that the 1991 legislature in amending Section 87-5-721, MCA, inadvertently failed to consider an amendment to Section 3-10-303, MCA, and that the legislature may want to address the problem presented in this case.

I do not agree with the majority, however, that the case should be dismissed. The Justice Court fine of $515 is within the statutory sentencing jurisdiction granted justice courts and can be supported under the provisions of Section 3-10-303, MCA. Section 87-5-721, MCA, is the section that the legislature may want to address concerning the misdemeanor penalty, specifically the provision that a fine “necessary to eliminate or mitigate the effects of the violation” may be imposed. If the legislature deems some form of penalty is required to eliminate or mitigate effects of violations in such matters, they may want to consider recourse to a civil action as being appropriate.

I would affirm that portion of the Justice Court’s sentence imposing the $515 fine and strike the remaining portion of the sentence.


author: JUSTICE HUNT

text:
    PORTAL PIPE LINE COMPANY, Plaintiff and Appellant, v. STONEWALL INSURANCE COMPANY, UNITED STATES FIRE INSURANCE COMPANY, AMERICAN CENTENNIAL INSURANCE COMPANY and FIRST STATE INSURANCE COMPANY, Defendants and Respondents.
    No. 92-013.
    Submitted on Briefs July 30, 1992.
    Rehearing Denied February 11, 1993.
    Decided January 14, 1993.
    50 St.Rep. 30.
    256 Mont. 211.
    845 P.2d 746.

      For Plaintiff and Appellant: Bruce R. Toole, Lawrence B. Cozzens, Jon T. Dyre, Crowley, Haughey, Hanson, Toole & Dietrich, Billings.
    For Defendants and Respondents: L, Randall Bishop, Jarussi & Bishop, Billings (First State).
   JUSTICE HUNT

delivered the Opinion of the Court.

Appellant Portal Pipe Line Company appeals from an order of the Montana Thirteenth Judicial District Court, Yellowstone County, granting respondent First State Insurance Company’s cross-motion for summary judgment pursuant to Rule 56, M.R.Civ.P.

We affirm.

Portal presents five issues for this Court to consider:

1. Did the District Court err in determining that Ashland’s negligence claims did not constitute an “occurrence” as defined by First State’s policy?

2. Did the District Court err in allowing First State to rely on exclusions without reserving the right to do so prior to the time the Ashland litigation was settled?

3. Did the District Court err in determining that the “product” exclusions language excluded coverage for Ashland’s oil damage claims?

4. Did the District Court err in determining that the “operations performed” exclusion language excluded coverage for Ashland’s oil damage claims?

5. Did the District Court err in determining that the “level of performance” exclusion language excluded coverage for Ashland’s loss of use claims?

The complexity of this case requires that we provide a backdrop before discussing the relevant facts to the present case. Portal Pipe Line Company (Portal) operates a crude oil pipeline running from Reserve, Montana, east through North Dakota and into Minnesota. In 1984, Portal was sued by Ashland Oil Company (Ashland) which had contracted for the purchase of crude oil to be transported to its refinery at St. Paul, Minnesota, through Portal’s pipeline. In 1984, Ashland claimed that Portal earned enormous profit by permitting certain shippers to inject an extremely volatile high vapor pressure butane-gas (B-G mix) for blending by Portal into its common stream of crude oil. This was allegedly done in violation of the Portal tariff, a contract which strictly governs the handling and operation of the crude oil pipeline.

As a result of B-G mix injections, Ashland claimed that it lost money each month from March 1980 through February 1984. On March 1, 1984, Portal prohibited further injections of the highly volatile butane-gas into the crude pipeline. Ashland’s litigation was settled on December 21, 1988.

In the present action before this Court, Portal sued its excess insurers seeking to recover the dollars it spent settling Ashland’s claims for punitive and compensatory damages. Originally, the respondents consisted of four insurance companies providing insurance to Portal from September 30, 1979, to September 30, 1984. During each of those five years, United States Fidelity and Guaranty Company (USF&G) provided primary insurance coverage of $500,000. The four respondents named in this action were excess insurers, each providing $10,000,000 of insurance coverage over and above the $500,000 of USF&G’s primary coverage.

Portal’s complaint alleged six separate counts seeking declaratory judgment, breach of contract, and several tort claims. On March 29, 1990, the court ordered the tort claims bifurcated upon stipulation of all the parties.

On January 25, 1991, the court granted summary judgment in favor of respondent Stonewall Insurance Company on the declaratory judgment and breach of contract claims. Portal dismissed with prejudice all claims against respondents American Centennial Insurance Company and United States Fire Insurance Company. Portal then filed a motion for partial summary judgment requesting the District Court declare, as a matter of law, that at least some coverage must exist under the First State insurance contract. First State filed a cross-motion arguing that the undisputed material facts established an absence of coverage. On August 29,1991, the District Court issued its memorandum and order granting partial summary judgment to First State on the claims for declaratory judgment and breach of contract. On October 29,1991, the court issued its order dismissing all remaining counts of Portal’s tort claims based upon Portal’s original dismissal against the other respondents. It is from these two orders that Portal appeals.

I.

Did the District Court err in determining that Ashland’s negligence claims did not constitute an “occurrence” as defined by First State’s policy?

In order for summary judgment to be properly granted, the moving party must demonstrate that there is no genuine issue of material fact in light of the substantive principles that entitle the party to summary judgment as a matter of law. Rule 56(c), M.R.Civ.P.; Richland National Bank & Trust v. Swenson (1991), 249 Mont. 410, 816 P. 2d 1045. If the moving party meets this burden, then the burden shifts to the nonmoving party to demonstrate a genuine issue of material fact. Swenson, 816 P.2d at 1050. “ ‘Mere denial or speculation will not suffice, the non-moving party must show facts sufficient to raise a genuine issue.’ ” Swenson, 816 P.2d at 1050 (quoting Frigon v. Morrison-Maierle, Inc. (1988), 233 Mont. 113, 117, 760 P.2d 57, 60). All reasonable inferences that may be drawn from the offered proof are to be drawn in favor of the party opposing the summary judgment. Cereck v. Albertson’s, Inc. (1981), 195 Mont. 409, 411, 637 P.2d 509, 511.

With these principles in mind, we will discuss the following issues:

First State’s insurance policy provided coverage for property damage which was caused by an “occurrence.” The relevant portion of First State’s insurance agreement states the following:

To indemnify the INSURED for ULTIMATE NET LOSS ... all sums which the INSURED shall be obligated to pay by reason of the liability imposed upon the INSURED by law or liability assumed by the INSURED under contract or agreement for damages and expenses, because of:
B. PROPERTY DAMAGE, as hereinafter defined:
to which this policy applies, caused by an OCCURRENCE, as hereinafter defined, happening anywhere in the world.
The policy also defines “occurrence” as:
[A]n accident or event including continuous repeated exposure to conditions, which results, during the policy period, in PERSONAL INJURY or PROPERTY DAMAGE neither expected nor intended from the standpoint of the INSURED.

Portal maintains that the damage caused to Ashland was neither an intended nor expected result of its decision to allow B-G mix into its pipeline in violation of the tariffs. As a result, Portal argues that its negligence claims fall under First State’s policy definition of “occurrence.”

We have previously defined occurrence policy language in Northwestern National Casualty Company v. Phalen (1979), 182 Mont. 448, 597 P.2d 720. We interpreted the language to mean that:

[I]t precludes coverage for bodily injuries or damages, though not specifically intended by the insured, if the resulting harm was within the expectation or intention of the insured from his standpoint.

Phalen, 597 P.2d at 726.

We explained that the use of the word “occurrence” had a broader definition than the word “accident” and that the intent of the policy is to insure the acts or omissions of the insured, including his intentional acts, excluding only those in which the resulting injury is either expected or intended from the insured’s standpoint. Phalen, 597 P.2d at 726.

In New Hampshire Insurance Group v. Strecker (1990), 244 Mont. 478, 798 P.2d 130, we determined the applicability of this exclusion by utilizing a two-pronged test. If either prong of the test is satisfied, the acts at issue will fall within the exclusion provision and are not covered under the policy:

The first prong is satisfied if the injury was not caused by an accident. The second prong is satisfied if the injury was either expected or intended from the standpoint of the insured.

Strecker, 798 P.2d at 132.

The record reflects, and Portal does not dispute, that Portal intentionally accepted high vapor pressure liquids for transportation through its pipeline. The B-G mix could not have been introduced into the pipeline without Portal’s conscious business decision to do so. The tariff prohibited the introduction of a product that would exceed vapor pressure of 13 pounds. Portal interpreted the tariff in a manner which permitted it to ignore the injection point pressure readings. Portal knew, despite its subjective contentions to the contrary, that its actions were expected to cause injury to Ashland’s refinery.

Portal relies heavily upon our holding in Lindsay Drilling v. U.S. Fidelity & Guaranty (1984), 208 Mont. 91, 676 P.2d 203, where we held that similar policy language excluded from coverage damage caused by the company or its employees. However, because the complaint raised the possibility that core samples were salted by third parties as a result of Lindsay’s negligence, we held that a duty to defend could not be ruled out on summary judgment.

In Lindsay, core samples were taken which were intended to permit accurate evaluation of the precise nature of the mineral content of the land included within the mining claim offered for sale. The accuracy of any assay of the mining core samples depended upon their purity. Plaintiff alleged that the samples were “salted,” perhaps by an unknown defendant gaining access through the negligence of Lindsay.

Unlike a mining claim core sample, the material contained within the oil stream is always blended and “materially altered” as new injections from various shippers come on stream. There is no uncertainty, in this case, as to who contaminated the common stream. Therefore, Lindsay is not applicable to this case. We hold that the District Court did not err in determining that Ashland’s negligence claims did not constitute an “occurrence” as defined by First State’s policy.

II.

Did the District Court err in allowing First State to rely on exclusions without reserving the right to do so prior to the time the Ashland litigation was settled?

Portal maintains that First State is estopped from asserting certain policy defenses because it did not adequately reserve its rights. First State sent Portal three reservation of rights letters during the pendency of the Ashland litigation. In the letters, First State denied coverage on four grounds: (1) that the policy was not an occurrence which took place within the effective date of the policy; (2) that public policy may prohibit coverage for punitive damages sought by Ash-land; (3) that damages claimed by Ashland did not constitute property damages under the policy; and (4) that the policy did not cover any injury or destruction of any oil sold, handled, or distributed by Portal. First State did not advise Portal of any other policy defenses.

It is well established in Montana that an insurer has an obligation to inform the insured of all policy defenses it intends to rely upon. Section 33-18-201(14), MCA, of the Unfair Trade Practices Act provides that an insurer may not:

[F]ail to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim....

In Safeco Insurance Company v. Ellinghouse (1986), 223 Mont. 239, 725 P.2d 217, we interpreted the above statute, stating:

Where an insurer, without reservation and with actual or presumed knowledge, assumes the exclusive control of the defense of claims against the insured, it cannot thereafter withdraw and deny liability under the policy on the ground of noncoverage, prejudice to the insured by virtue of the insurer’s assumption of the defense being, in this situation, conclusively presumed ... the loss of the right of the insured to control and manage the case is itself prejudicial.

Ellinghouse, 725 P.2d at 221 (quoting 14 Couch, Insurance 2d, Section 51.85 (2d ed. 1982).)

In this instance, First State does not have the conflict of interest present in Ellinghouse. First State did not have a duty to defend Portal, nor did it assume any defense of Portal. Portal obtained independent counsel which represented Portal throughout Ashland’s litigation. Although First State did participate in settlement negotiations which were likely to involve First State, this did not constitute an assumption of Portal’s defense. Portal was not prejudiced by First State’s reliance on the different exclusions. We hold that First State did not waive its policy defenses and is not estopped from asserting those defenses.

III.

Did the District Court err in determining that the “product” exclusions language excluded coverage for Ashland’s oil damage claims?

A review of the language under Section B(3) of First State’s insurance policy indicates that coverage does not apply:

[Ujnder Coverage 1(B) [Property Damage], to injury to or destruction of or loss of... (3) any goods, products or containers thereof, manufactured, sold, handled, or distributed, or work completed by or for the INSURED, out of which the OCCURRENCE arises.

Exclusions of this kind are an attempt by the insurance industry to eliminate the “moral hazards” to the insurer. Donald M. Zupanec, Scope of Clause Excluding From Contractor’s or Similar Liability Policy Damage to Property in Care, Custody, or Control of Insured, 8 A.L.R. 4th 563 (1981). The purpose of this type of exclusion is intended to eliminate the possibility that an insured will either cut corners or take unreasonable risks in the performance of its insured operations and then shift the loss onto the insurer. With this intent in mind, and applied to the facts of this case, the clause is not ambiguous or unclear.

In Philadelphia Fire & Marine Insurance Company v. City of Grandview (Wash. 1953), 255 P.2d 540, the Washington Supreme Court defined “handled” contained in a similar exclusion clause as:

To handle or to distribute, within the meaning of the insurance policy, implies a conscious control over and a conscious intent to parcel out whatever is to be distributed.

Grandview, 255 P.2d at 545.

Grandview involved the accidental mixing of gas into the city’s water main which caused one house to explode and damaged the next door neighbor’s house. The Washington Supreme Court ruled that the city of Grandview did not handle the gas within the contemplation of the insurance agreement because it was not in the business of handling gas but only water. As a result the exclusion did not apply.

The facts of this case are just the opposite. Portal’s business involves the controlling of injection and transportation of petroleum products in its common stream. Portal took conscious control over and maintained a conscious intent to “parcel out” crude petroleum, including the B-G mix which it allowed to be intentionally mixed into the common stream.

Portal cites Smedly Company v. Employers Mutual Liability Insurance Company of Wisconsin (Conn. 1956), 123 A.2d 755, which interpreted “handled” in a similar insurance policy exclusion that referred to those commodities which the insured is in the business of buying, selling, dealing, and trading.

This interpretation affords no relief to Portal. Portal was also in the business of selling petroleum products. Portal had its own “allowance oil” which it placed into the common stream and regularly sold to Ashland. Since Portal cannot differentiate its own allowance oil from that of its shippers, the common stream consisted of the same goods and products which Portal regularly traded and dealt. We hold the District Court did not err in determining that the “product” exclusions language excluded coverage for Ashland’s oil damage claims.

IV.

Did the District Court err in determining that the “operations performed” exclusion language excluded coverage for Ashland’s oil damage claims?

Endorsement #2 of First State’s insurance policy incorporates the Broad Form Endorsement from Portal’s USF&G primary insurance policy, together with USF&G’s Exclusion A(2)(a). The exclusion modifies the Broad Form Endorsement with the ensuing language:

This insurance does not apply:

(2)....
(a) To property while on premises owned by or rented to the insured for the purpose of having operations performed on such property by or on behalf of the insured.

The same exclusionary language existed in Topeka Railway Equipment, Inc. v. Foremost Insurance Company (Kan. 1980), 614 P.2d 461. In that case, the insured, Topeka Railway, was in the business of repairing and remodeling railroad cars. A number of railway cars were delivered to Topeka at a United States Air Force base. Two of the cars were damaged when one of the insured’s cars came loose and rolled down the tracks, causing a collision. The insured was nothing more than a permissive user of the tracks. In rejecting the application of the language, the Kansas Court ruled that:

The (y)(2)(a) exclusion was rejected on the basis that the accident did not occur on the premises owned by or rented to the insured.

Topeka Railway, 614 P.2d at 463.

In this instance, the facts are just the opposite. We conclude that Portal’s pipeline constituted “premises owned by ... the insured.” Portal, however, contends that the word “operations” is undefined in First State’s policy which makes the exclusion clause ambiguous and should be strictly construed against First State. We acknowledge that the term “operations” is not defined in the insurance agreement. Therefore, we must look to the plain and ordinary meaning of the word.

Webster’s defines “operation” as “performance of a practical work or of something involving the practical application of principles or processes.” Webster’s New Collegiate Dictionary 797-98 (1973). The evidence reflects that all of the crude petroleum which comprised the common stream was delivered to Portal so that it could be injected into the pipeline, blended into the common stream, and then pumped to Minnesota through the application of pressure from Portal’s compressors and booster stations along the way. We adopt the reasoning of the District Court that if the common stream was at first “clean” or “bargained for” then it became contaminated or “unbargained for” when, while making its way through the pipeline, Portal watered it down with B-G mix. The property was damaged while Portal performed pipeline operations upon it while it was on the premises of Portal for precisely that purpose. We hold that the District Court did not err in determining that the “operations performed” exclusion language excluded coverage for Ashland’s oil damage claims.

V.

Did the District Court err in determining that the “level of performance” exclusion language excluded coverage for Ashland’s loss of use claims?

Portal asserts that the “level of performance” exclusion does not apply to Ashland’s oil claims. First State’s insurance policy Exclusion C provides that coverage would not apply under the resulting conditions:

[T]o loss of use of tangible property which has not been physically injured or destroyed, resulting from:
(1) a delay in or lack of performance by or on behalf of the INSURED of any contract or agreement or
(2) the failure of the INSURED’S products or work performed by or on behalf of the INSURED to meet the level of performance, quality, fitness or durability warranted or represented by the INSURED: but this exclusion does not apply to loss of use of other tangible property resulting from the sudden and accidental physical injury to or destruction of the INSURED’S products or work performed by or on behalf of the INSURED after such products or work performed by or on behalf of the INSURED have been put to use by any person or organization other than the INSURED. [Emphasis added.]

Portal’s tariff with Ashland is a contract of carriage under the Interstate Commerce Act. The tariff mandated that petroleum products exceeding 13 pounds of vapor pressure were not to be transported in the pipeline. If something is injected into the pipeline which would exceed 13 pounds, then the product received by Ashland was considered contaminated and deprived Ashland the benefit of its bargain. In its lawsuit, Ashland contended that Portal’s common stream did not meet the specifications of the tariff and that such nonconformance caused extensive damage. We agree with the District Court that the tariff was a contract of carriage which expressly warranted and represented that the “products or work performed” by Portal in creating and transporting its common stream of crude petroleum would attain a certain defined level of“quality” or “fitness.” We hold that the District Court did not err in determining that the “level of performance” exclusion language excluded coverage for Ashland’s loss of use claims. We hold that the granting of summary judgment in favor of First State was proper.

We affirm.

CHIEF JUSTICE TURNAGE, JUSTICES HARRISON, McDONOUGH and GRAY concur.