                 IN THE SUPREME COURT OF THE STATE OF IDAHO

                                       Docket No. 37861


COUNTY OF BOISE, a political           )
subdivision of the State of Idaho,     )
                                       )
                                       )
          Plaintiff/Appellant,
                                       )                    Twin Falls, November 2011 Term
                                       )
v.
                                       )                    2011 Opinion No. 126
IDAHO COUNTIES RISK MANAGEMENT )
                                       )                    Filed: November 30, 2011
PROGRAM, UNDERWRITERS (ICRMP),
                                       )
and DOES I through X,
                                       )                    Stephen W. Kenyon, Clerk
                                       )
          Defendant/Respondents.
                                       )
______________________________________ )

       Appeal from the District Court of the Fourth Judicial District of the State of
       Idaho, Ada County. Hon. Cheri C. Copsey, District Judge.

       The Judgment of the district court is affirmed.

       Brassey, Wetherell & Crawford, LLP, Boise, for appellant. Robert T. Wetherell
       argued.

       Anderson, Julian & Hull, Boise, for respondents. Phillip J. Collaer argued.
                                  _____________________

J. JONES, Justice.
        This is an insurance coverage dispute between the County of Boise (the County) and its
insurer, Idaho Counties Risk Management Program (ICRMP). ICRMP refused to defend the
County in Fair Housing Act (FHA) litigation in federal court, which the County claimed breached
its insurance agreement. The district court determined the FHA claims against the County were
excluded from the policy and granted summary judgment to ICRMP. We affirm the district court.
                                            I.
                                       BACKGROUND
       Alamar Ranch, LLC (Alamar) sued the County in federal court in January 2008, alleging
the County violated the FHA. At the time, the County had a Public Entity Multi-Lines Insurance

                                                1
Policy (the Policy) with ICRMP, which included errors and omissions coverage. 1 The County
timely notified ICRMP of Alamar’s FHA claims. ICRMP declined to defend the County because
ICRMP determined that Alamar’s claims were beyond the scope of the Policy’s coverage.
Alamar’s complaint alleged 2:
             4. This case arises out of Boise County’s violations of the Fair Housing Act,
                42 U.S.C. § 3601 et seq. (“FHA”). . . .

             6. On April 19, 2007, Alamar submitted an application to the [County’s
                Planning and Zoning Commission (P & Z)] requesting a Conditional Use
                Permit (“CUP”) allowing Alamar to operate a 72-bed [residential treatment
                facility (RTC)] and private school on [its] Property. . . . Alamar was
                required to apply for a CUP because the RTC is identified by Boise County
                as a use to be reviewed by Boise County under the conditional use process.
                The question under the CUP process, however, is not whether this proposed
                use should be allowed (it is an allowed use) but whether conditions of
                approval are warranted to ensure that such use does not “cause any damage,
                hazard, nuisance or other detriment to persons, property, or natural
                resources in the vicinity.”

             7. On August 2, 2007, Alamar presented its application to the P & Z during a
                public hearing. . . . On August 15, 2007, the P & Z once again convened to
                request responses from both Alamar as well as members of the public
                opposed to the application. . . .

             10. Although Alamar satisfied its burden of demonstrating at the hearing that
                 Alamar’s project satisfied each of the nine standards in the Boise County
                 Zoning and Development Ordinance (“BCZDO”) for issuance of a CUP, the
                 application was denied by vote of the P & Z commissioners at the
                 conclusion of the August 15, 2007 hearing (the P & Z arrived at a 3-3 tie
                 vote on the motion, which Boise County deemed a denial of the
                 application).

             11. On September 28, 2007, the P & Z issued a written decision denying
                 Alamar’s application. Because there was no basis within the CUP standards
                 to deny the application, the P & Z commissioners, as a pretext,
                 manufactured the following reasons for the denial of the application . . . .
                 Neither rationale is among those listed in the BCZDO for denial of a CUP.

             12. On October 18, 2007, Alamar timely filed a notice of appeal of the P & Z’s

1
 The term of the policy was from October 1, 2008 to October 1, 2009, but it had a retroactive term for errors and
omissions coverage, dating to November 29, 1985.
2
 This opinion retains the paragraph numbering and emphasis that appears in Alamar’s complaint and in the various
provisions of the Policy.


                                                       2
               decision to the Boise County Board of Commissioners (“Board”). In its
               appeal, Alamar informed Boise County that it had a duty under the FHA to
               approve the CUP and allow the project to be built so that housing could be
               made available for the “handicapped” youth that Alamar proposed to serve.
               ...

           13. The Board heard the appeal at a public hearing held on January 28, 2008.
               ...

           14. The Board deliberated (on the record) on March 10, 2008. The Board,
               knowing that it could not issue an absolute denial of the application, instead
               reversed the denial of the application. In doing so, however, it carried out
               its discriminatory purpose of preventing the project from being built by
               knowingly imposing numerous conditions on the CUP that individually or
               cumulatively made the proposed use of the property impossible. In essence,
               the conditions were a pretext designed to conceal the Board’s
               discriminatory motive of preventing the project from being built.

           15. On April 21, 2008, the Board entered a written decision and order
               delineating several onerous, arbitrary and discriminatory conditions for the
               permit. . . .

           25. Boise County refused to make the necessary accommodation [for
               handicapped individuals] by placing onerous, arbitrary and unreasonable
               conditions on the approval of the application which destroyed the feasibility
               of the project. . . .

           30. Upon information and belief, Boise County has approved other
               developments without such conditions.

           31. Upon information and belief, a discriminatory reason more likely than not
               motivated the challenged decision of Boise County. . . .

           36. Boise County unlawfully interfered with the exercise of [FHA] rights by
               obstructing the construction or availability of housing for individuals
               protected under the FHA. . . .

           38. Pursuant to 42 U.S.C. § 3613(c), Alamar requests punitive damages.

       The Policy had, in its General Conditions, a statement regarding ICRMP’s duty to defend
the County:
           Defense of Claims or Suit. We may investigate or settle any covered claim or
           suit against you. We will provide a defense with counsel of our choice, at our
           expense, if you are sued for a covered claim.

Section IV of the Policy, the errors and omissions section, provided:

                                                 3
       We agree, subject to the terms and conditions of this Coverage, to pay on your
       behalf all sums which you shall become legally obligated to pay as damages
       because of any claim which is first made against you during this Policy Period,
       arising out of any wrongful act by you.

The Policy defined “wrongful act” as used in the errors and omissions section:
       “Wrongful Act” means the negligent performance of or failure to perform a legal
       duty or responsibility in a tortious manner pursuant to the Idaho Tort Claims Act or
       be [sic] premised upon allegations of unlawful violation of civil rights pursuant to
       Federal law arising out of public office or position.

The Policy also contained numerous exclusions specifically applicable to the errors and omissions
section:
       The Errors and Omissions Insuring Agreement does not cover any claim: . . .

           2. Arising out of any dishonest, fraudulent, criminal, malicious, deliberate or
              intended wrongful act committed by you or at your direction. . . .

           4. Resulting from a wrongful act intended or expected from the standpoint of
              any insured to cause damages. This exclusion applies even if the damages
              claimed are of a different kind or degree than that intended or expected. . . .

           12. To any claim of liability arising out of or in any way connected with the
               operation of the principles of eminent domain, condemnation proceedings,
               inverse condemnation, annexation, regulatory takings, land use regulation or
               planning and zoning activities or proceedings, however characterized,
               whether such liability accrues directly against you or by virtue of any
               agreement entered into by or on your behalf. . . .

           16. No claim exists where the alleged harm for which compensation is sought
               derives from performance or nonperformance of terms of a contract,
               concerns the measure of performance or payment related to contract
               performance, derives from fines, penalties or administrative sanctions
               imposed by a governmental agency, or is generated by intergovernmental
               handling or allocation of funds according to the law. The claims for which
               this section provides defense and indemnification must arise out of conduct
               of a tortious nature or be premised upon allegation of unlawful violation of
               civil rights pursuant to state or federal law.

       The County filed this action against ICRMP, seeking a declaratory ruling that ICRMP had
a duty to defend and indemnify it against Alamar’s claims. Both parties moved for summary
judgment. The district court determined “that if coverage exists, it arises only under the Errors and
Omissions Insuring Agreement.” The County apparently conceded this point. The parties also

                                                 4
agreed that the errors and omissions section did apply to Alamar’s allegations, so, unless ICRMP
could invoke an exclusion, ICRMP had a duty to defend the County.
        The district court concluded that Alamar’s claims arose from or were connected with
planning and zoning or land use decisions and that Alamar alleged intentional misconduct. The
court further determined that the Policy expressly excluded coverage for those types of claims. It
therefore held that ICRMP had no duty to defend the County and granted summary judgment to
ICRMP. The County timely appealed. The only issue for this Court is to determine whether the
district court erred in holding that the County’s claim for defense was excluded.
                                               II.
                                           DISCUSSION
        A.      Standard of Review.
        In reviewing a grant of summary judgment, “this Court employs the same standard as
used by the district judge originally ruling on the motion.” Hoyle v. Utica Mut. Ins. Co., 137
Idaho 367, 371, 48 P.3d 1256, 1260 (2002). Summary judgment must “be rendered forthwith if
the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” I.R.C.P. 56(c). We exercise free review over matters of law.
Martel v. Bulotti, 138 Idaho 451, 453, 65 P.3d 192, 194 (2003).
        B.      The district court correctly determined that the County’s claim for the
                Alamar litigation was excluded from coverage under the Policy.
        Because the parties do not present any factual disputes on appeal, the question before the
Court is whether ICRMP, as a matter of law, properly refused to defend the County. An
insurer’s “duty to defend arises upon the filing of a complaint whose allegations, in whole or in
part, read broadly, reveal a potential for liability that would be covered by the insured’s policy.”
Hoyle, 137 Idaho at 371–72, 48 P.3d at 1260–61. The insurer need only look at the words of the
complaint “to determine if a possibility of coverage exists.” Id. at 373, 48 P.3d at 1262. If the
complaint discloses no possibility of coverage, the insurer may properly decline to defend
against it. Id. at 375, 48 P.3d at 1264.
                1.      The Alamar claims arose out of or were connected with land use
                        regulation or planning and zoning activities.
        The Policy expressly excludes “any claim of liability arising out of or in any way
connected with . . . land use regulation or planning and zoning activities or proceedings, however

                                                 5
characterized.” The County contends that “ICRMP asks the Court to stretch [this] exclusion to
include the civil rights claims.” They argue that because Alamar alleged FHA violations, and
because the FHA is a subsection of the Civil Rights Act of 1968, ICRMP can and should have
expressly listed it as an exclusion. Because the Policy does not specifically exclude such civil
rights claims, the County suggests that the plain language of the Policy cannot be read to exclude
Alamar’s FHA claims.         The County also argues, with regard to the Policy’s exclusion of
intentional acts, that violations of the FHA can be either intentional or unintentional, and
Alamar’s complaint is sufficient to put the County on notice of either theory. According to the
County, the Policy’s exclusion of claims for intentional wrongful acts does not apply here
because Alamar could also have pursued the unintentional theory. The County thus contends
that the complaint is reasonably read to include some covered claims, so ICRMP had a duty to
defend.
          In response, ICRMP points out that the land use exclusion is written in the broadest
language, clearly excluding any possibility of coverage for any activities or proceedings in any
way connected with regulation of the usage of land. ICRMP contends that there is no claim in the
complaint that does not arise out of the County’s activities relating to Alamar’s land use
application. It is irrelevant for purposes of the land use exclusion whether the County’s violation
of the provisions of the FHA were or were not intentional.
          We agree with ICRMP. Alamar’s claims did indeed arise out of, or were connected with,
the County’s land use regulations. Alamar alleged that decisions made by the P&Z and Board on
its land use application constituted violations of the FHA. The County is correct that Alamar’s
causes of action are readily categorized as civil rights claims. However, Alamar’s complaint
could not more obviously allege “liability arising out of or . . . connected with . . . land use
regulation or planning and zoning.” The County admitted as much in its complaint in this action:
          On or about January 13, 2009, Alamar Ranch, LLC, filed an action in U.S. District
          Court, District of Idaho, against County of Boise alleging violations of the [FHA].
          The violations are alleged in connection with the: (1) County of Boise Planning
          and Zoning Commission’s denial of a conditional use permit for a residential
          treatment facility designed to house individuals allegedly protected under the Fair
          Housing Act . . . and/or (2) County of Boise Board of Commissioners’ imposition
          of conditions of permit approval . . . . (emphasis added).

As the district court wrote, “[U]nder a reasonable reading of the Alamar complaint there is no


                                                  6
arguable potential that Alamar’s claims could be interpreted as anything other than alleging
Boise County’s discriminatory actions arose out of planning and zoning or land use regulation or
proceedings.” Because the Policy clearly excluded such claims, ICRMP had no duty to defend
the County. Because of the district court’s correct holding in this regard, we need not consider its
ruling with regard to the intentional act exclusion.
               2.      There is no exception to the errors and omission exclusions that
                       “resurrects” coverage.
       The County argues that any exclusion which would otherwise relieve ICRMP’s duty to
defend is inapplicable because “an exception . . . found in Paragraph 16 of Section IV of [the
Policy] resurrects coverage for torts and civil rights claims.” ICRMP counters that accepting the
County’s argument “would render all of the exclusions in [the Policy] meaningless in the context
of an alleged civil rights violation.” Exclusion Sixteen provides:
           No claim exists where the alleged harm for which compensation is sought
           derives from performance or nonperformance of terms of a contract, concerns
           the measure of performance or payment related to contract performance, derives
           from fines, penalties or administrative sanctions imposed by a governmental
           agency, or is generated by intergovernmental handling or allocation of funds
           according to the law. The claims for which this section provides defense and
           indemnification must arise out of conduct of a tortious nature or be premised
           upon allegation of unlawful violation of civil rights pursuant to state or federal
           law.

The exclusion has no application in this case.
       The first sentence of Exclusion Sixteen makes it clear that the errors and omissions
coverage does not apply to contract disputes, penalties imposed by a governmental agency, or
harms generated by handling of public funds. The second sentence of the exclusion relates only
to the first sentence and clarifies that the coverage exclusions listed in the first sentence do not
extend to tortious acts otherwise covered. For example, the first sentence would exclude
coverage for an action alleging a breach of contract while the second sentence clarifies that the
exclusion would not apply to a claim brought by one contracting party against the other for
conduct of a tortious nature or violative of civil rights. Furthermore, no language in either
sentence of Exclusion Sixteen can be read to apply in any manner to the exclusion for all claims
arising out of land use regulation.




                                                  7
                                          III.
                                      CONCLUSION
       The district court properly granted summary judgment to ICRMP based on the land use
exclusion in the Policy, and we therefore affirm the Judgment of the district court. Costs on
appeal are awarded to ICRMP.


       Chief Justice BURDICK, and Justices EISMANN, W. JONES and HORTON CONCUR.




                                             8
