NOT FOR PUBLICATION FILED

UNITED STATES COURT OF APPEALS MAY 23 2022

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

STATE FARM MUTUAL AUTOMOBILE No. 21-35408

INSURANCE COMPANY,

D.C. No. 2:20-cv-00015-BMM Plaintiff-Appellee,

v. MEMORANDUM*

TRIPLE L, INC.,

Defendant-Appellant,

and

PENSKE TRUCK LEASING CO., L.P.,

Defendant,

JOHN OELEIS,

Intervenor-Defendant.

STATE FARM MUTUAL AUTOMOBILE No. 21-35409

INSURANCE COMPANY,

D.C. No. 2:20-cv-00015-BMM Plaintiff-Appellee,

v.

TRIPLE L, INC.; PENSKE TRUCK

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3.

LEASING CO., L.P.,

Defendants,

and

JOHN OELEIS,

Intervenor-Defendant- Appellant.

Appeal from the United States District Court for the District of Montana Brian M. Morris, District Judge, Presiding

Argued and Submitted April 14, 2022 San Francisco, California

Before: BYBEE and R. NELSON, Circuit Judges, and BOLTON,** District Judge. Dissent by Judge R. NELSON.

Triple L, Inc. (“Triple L”) and John Oeleis (“Oeleis”) appeal the district

court’s grant of summary judgment in favor of State Farm Mutual Automobile

Insurance Company (“State Farm”). We have jurisdiction pursuant to 28 U.S.C.

§ 1291, and we reverse and remand.

Oeleis was performing mail delivery services for Triple L in East Glacier,

Montana when he fell off a Triple L-leased truck and injured himself on December

7, 2016. At the time of his accident, Oeleis was an employee of Phoenix R.C.M.,

** The Honorable Susan R. Bolton, United States District Judge for the District of Arizona, sitting by designation.

2 Inc. (“Phoenix”), which had an arrangement with Triple L whereby Phoenix

drivers, like Oeleis, serviced Triple L’s contract with the United States Postal

Service to deliver mail in rural Montana. Triple L maintained an insurance policy

on the truck involved in Oeleis’s accident with State Farm, which provided

coverage for bodily injury to others but also contained an exclusion to coverage for

injury to a Triple L “‘employee’ which arises out of that employee’s employment”

(the “Employee Exclusion”). After Oeleis sued Triple L in state court, State Farm

sought declaratory judgment in federal district court that it had no obligation to

defend or indemnify Triple L in the underlying lawsuit based on, inter alia, the

Employee Exclusion. The district court granted summary judgment in favor of

State Farm, finding the Employee Exclusion barred coverage for Oeleis’s injuries

because, under Montana’s four-factor “control test,”1 Oeleis was also an employee

of Triple L at the time of his accident.

We review a grant of summary judgment de novo, employing “the same

standard of review as the district court under Federal Rule of Civil Procedure 56.”

Flores v. City of San Gabriel, 824 F.3d 890, 897 (9th Cir. 2016). We view the

evidence in the light most favorable to the non-movant and determine “whether

there are any genuine issues of material fact and whether the district court correctly

1 The four factors of the control test are: “(1) direct evidence of right or exercise of control; (2) method of payment; (3) furnishing of equipment; and (4) right to fire.” Schrock v. Evans Transfer & Storage, 732 P.2d 848, 851 (Mont. 1987).

3 applied the relevant substantive law.” Soc. Techs. LLC v. Apple Inc., 4 F.4th 811,

816 (9th Cir. 2021) (citation omitted).

The district court erred in applying the control test in this case. Under

Montana law, courts are to “turn first to interpreting the language of the policy

when resolving disputes over insurance coverage.” ALPS Prop. & Cas. Ins. Co. v.

Keller, Reynolds, Drake, Johnson & Gillespie, P.C. (“Keller”), 482 P.3d 638, 644

(Mont. 2021). When examining the insurance contract, courts are “bound to

interpret its terms according to their usual, common sense meaning as viewed from

the perspective of a reasonable consumer of insurance products.” Park Place

Apartments, L.L.C. v. Farmers Union Mut. Ins. Co., 247 P.3d 236, 239 (Mont.

2010) (citation omitted). Courts must “construe those policies strictly against the

insurer and in favor of the insured,” Steadele v. Colony Ins. Co., 260 P.3d 145, 149

(Mont. 2011) (citation omitted), and exclusions from coverage must “be narrowly

and strictly construed because they run contrary to the fundamental protective

purpose of an insurance policy[,]” Keller, 482 P.3d at 644 (citation omitted).

The Montana Supreme Court has already determined the “usual and

common sense meaning” of the term “employee” in the context of an exclusion

that bars insurance coverage for injuries to an insured’s employees. Farmers Union

Mut. Ins. Co. v. Horton, 67 P.3d 285, 289 (Mont. 2003). This definition does not

incorporate the right to control the details of an individual’s work or otherwise

4 invoke the control test applied by the district court. Instead, the term only “refer[s]

to all those engaged in . . . services for wages and salary by another.” Id.

Although this definition conflicts with Montana’s use of the control test to

determine employment status in other contexts, this distinction makes sense when

considering the different situations in which the control test and Horton apply. As

previously noted, exclusions to coverage are construed “narrowly and strictly” in

accordance with the fundamental protective purpose of insurance. Keller, 482 P.3d

at 644. The control test, in contrast, is most frequently used in Montana to

determine whether an individual is an independent contractor or an employee for

purposes of workers’ compensation, the “objective” of which is “to provide,

without regard to fault, wage-loss and medical benefits” to injured workers. Mont.

Code Ann. § 39-71-105(1) (West); see Carlson v. Cain, 664 P.2d 913, 917 (Mont.

1983) (citing State ex rel. Ferguson v. Dist. Ct., 519 P.2d 151, 153 (Mont. 1974)).

Workers’ compensation thus has a distinct protective purpose of providing benefits

to a broader category of workers. See id. This purpose is reflected in the operation

of the control test itself, which sets a higher standard for showing that a worker is

an independent contractor than for showing a worker is an employee. See Am.

Agrijusters Co. v. Mont. Dep’t of Labor & Indus., 988 P.2d 782, 787 (Mont. 1999).

Indeed, “independent contractor status must be established by a convincing

accumulation of evidence under the factors and other tests” whereas “employee

5 status may be established on the strength of the evidence under one of the four

factors standing alone.” Id. (citing Sharp v. Hoerner Waldorf Corp., 584 P.2d

1298, 1302 (Mont. 1978)). Given these diverging protective purposes, it is no

wonder why the control test has never been used in the context of an exclusion to

insurance coverage.

Here, in analyzing the applicability of the Employee Exclusion under

Montana law, the district court should have first turned to the language of the

Employee Exclusion itself and interpreted its terms according to their usual and

common sense meaning. Keller, 482 P.3d at 644; Park Place Apartments, 247 P.3d

at 239. Construing the Employee Exclusion narrowly and strictly, the court should

have next applied Horton’s definition of employee to the undisputed facts. See 67

P.3d at 289. Because it is undisputed that Phoenix, not Triple L, paid Oeleis’s

wages in exchange for his services, the Employee Exclusion did not bar coverage,

and the district court erred in granting summary judgment on that basis. See id.

REVERSED AND REMANDED.

6

FILED

State Farm Mut. Auto. Ins. Co v. Triple L, Inc., Nos. 21-35408, 21-35409

MAY 23 2022

R. NELSON, Circuit Judge, dissenting: MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS

John Oeleis was paid by Phoenix but controlled by Triple L in his day-to-day

work activities. The question here is what constitutes an employment relationship—

in other words, not who is an employee but who is an employer. All concede that

Oeleis was Phoenix’s employee because Phoenix signed Oeleis’s paychecks. But

there is no reason that he was not also Triple L’s employee. That is why the district

court correctly employed the control test under Montana law to determine that Oeleis

falls under the employee exclusion in the insurance contract between Triple L and

State Farm. I would thus affirm the district court’s grant of summary judgment to

State Farm.

The majority reads Farmers Union Mut. Ins. Co. v. Horton, 67 P.3d 285

(Mont. 2003), far too broadly to apply to all employee insurance exclusion cases.

But that was not Horton’s holding and the majority’s broad application is a leap from

just a single case. Indeed, Horton did not even address the primary issue relevant

here: who was an employer was not at issue. In Horton, the Montana Supreme Court

interpreted an employee insurance exclusion that listed leased employees as

excluded and temporary workers as not excluded. Id. at 287. It rejected the

somewhat quixotic argument that because only leased workers were enumerated, all

employees had to be covered by insurance, including regular employees. Id. at 289.

1 In doing so, it defined an employee as “one engaged in services for wages or

salary by another.” Id. at 288. Like the majority, I would also apply that definition.

As a person engaged in services for wages or salary paid by another, Oeleis was an

employee. But Horton does not purport to identify all employees in insurance

exclusion cases. Nothing in the Horton definition requires the person who formally

pays the employee also be the person for whom the employee engages in services.

So the definition does not help us understand whose employee one is. Horton does

not answer that question, because in Horton it was never in dispute.

When the employer is at issue, Montana courts have uniformly used the

control test. See, e.g., Ramsbacher v. Jim Palmer Trucking, 417 P.3d 313, 318

(Mont. 2018) (en banc); Brookins v. Mote, 292 P.3d 347, 355 (Mont. 2012); Papp v.

Rocky Mountain Oils & Mins., 769 P.2d 1249, 1257 (Mont. 1989). Because the legal

issue here is the same as the control test cases, I would hold that the control test

applies.

Oeleis is an employee under Triple L under the control test. This four-factor

test requires one of four factors to be met: (1) direct evidence of the right or exercise

of control the details of the work; (2) method of payment; (3) furnishing of

equipment; and (4) the right to fire. Potter v. Mont. Dep’t of Lab. & Indus., 853 P.2d

1207, 1211 (Mont. 1993). The district court found that the first, third, and fourth

factors supported that Oeleis is Triple L’s employee. Not only did Triple L control

2 Oeleis’s work based on the requirements in its USPS contracts, but it also furnished

Oeleis’s equipment and could pull drivers from a route for violating their

employment requirements. Thus, Oeleis was Triple L’s employee under any “usual,

common sense meaning.” Park Place Apartments, LLC v. Farmers Union Mut. Ins.

Co., 247 P.3d 236, 239 (Mont. 2010) (citation omitted).

The majority is correct that the control test is usually associated with being an

employee versus an independent contractor. Maj. 5–6. That is because its purpose

is to determine whose employee a worker is: an employee of a company or an

employee of one’s own, which we call an independent contractor. This is consistent

with Horton’s employee definition, which requires that the employee be paid by

another in the insurance exclusion context.

Although we must construe exclusions in insurance contracts narrowly to

protect insurance consumers, Maj. 4, both State Farm and Triple L should have

known that Phoenix’s employees could be considered Triple L’s employees as well

when the parties signed the insurance contract. The Montana Supreme Court has

held that “an employee may have more than one immediate employer” under the

Montana Constitution and the control test. Ramsbacher, 417 P.3d at 319 (citing

Papp, 769 P.2d at 1257).

True enough, when asking who is an employee, typically the control test is

less generous compared to a test based solely on who writes an employee’s

3 paychecks. And in applying this strained limitation, the majority relies on “the

fundamental protective purpose of insurance.” Maj. 5. But no Montana case—

including Horton—has applied that policy presumption to ignore a clear

employment relationship. We go beyond our duty to consider the right questions—

who Oeleis’s employers are and whether Oeleis can be an employee of two

companies—in deciding whether we think he should receive insurance money. And

Oeleis is Triple L’s employee under the control test.

True, applying the control test here might create a liability uncovered by

insurance. But that is the fault (or perhaps the intent) of the contracting parties. And

the Montana legislature may remedy this issue if it finds it problematic. But this

court must apply Montana law as is and not try to implement policy preferences.

4