Montana high court affirms $1M verdict against agency

The Supreme Court of Montana on Tuesday unanimously affirmed a $1 million verdict against an insurance agency that failed to obtain additional insurance for a general contractor on behalf of a subcontractor.

The five justices said in TCF Enterprises Inc. et al. v. Rames Inc. that the trial court judge correctly found that Big Sky, Montana-based Rames, formerly known as Central Insurance Agency, breached its duty of care to the general contractor by not procuring coverage for it as part of a contract with C&H Engineering and Surveying Inc.

The court also disagreed with Rames’ argument that a professional services exclusion in the policy issued to C&H would have barred coverage for a construction defect suit against TCF, which does business as Malmquist Construction.

Whitefish, Montana-based Malmquist was the general contractor for the construction of a condominium building as well as another residential project. It contracted with C&H to perform surveying and subsurface soils investigation for the condominium project and required the subcontractor to name it as an additional insured on its commercial general liability policy, court records show.

When starting work with a new subcontractor, Malmquist requires it to provide several documents, including workers compensation and general liability insurance certificates.

C&H contacted Rames about sending certificates of insurance to Malmquist. Although Rames sent the certificates of insurance to Malmquist, the agency did not procure additional coverage for the contractor or add it to the list of additional insureds on C&H’s policy.

The developer of the condominium project sued Malmquist for negligence in March 2019 after the building settled more than four inches as a result of inaccurate calculations by C&H. Malmquist sought coverage from Travelers Cos. Inc., which provided liability coverage to C&H. Travelers refused, saying Malmquist was not an additional insured and that the professional services exclusion applied to bar coverage.

Malmquist eventually paid $2.2 million to repair the condominium building. The contractor then sued Rames in June 2020, and the trial court judge found that Rames breached its duty of care by failing to procure the additional coverage for Malmquist.

A jury concluded that Rames should pay just over $1 million to Malmquist.

Rames sought review from the Montana Supreme Court, arguing that the trial court erred in finding it was liable for breaching its duty of care, improperly instructed the jury and made incorrect evidentiary rulings.

The parties and their representatives did not respond to requests for comment.