J & C Moodie Properties, LLC v. Deck, 2016 MT 301

Moodie sued Haynie (general contractor) for construction defects; Haynie was insured sequentially by Farm Bureau (policy to Apr 22, 2009) and Scottsdale (policy from Apr 29, 2009 to Feb 18, 2010).
Construction continued into the Scottsdale policy period (completed Sept 2009).
Scottsdale received notice of the suit in March 2013, communicated with Haynie, then issued a May 20, 2013 coverage denial invoking policy exclusions and took no further action or reservation of rights.
Farm Bureau defended Haynie under a reservation of rights, warning of potential personal exposure.
Haynie and Moodie stipulated to a $5,650,000 judgment (Haynie assigned his rights under the Scottsdale policy to Moodie and Moodie agreed not to execute against Haynie).
District Court granted summary judgment for Moodie: Scottsdale breached its duty to defend, the stipulated judgment was reasonable, and Scottsdale was not entitled to discovery; the Supreme Court affirmed breach, reversed on the reasonableness ruling, and remanded for a reasonableness hearing and discovery.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did Scottsdale breach its duty to defend?	Scottsdale abandoned Haynie by denying coverage and doing nothing further, exposing Haynie to risk.	No breach: Haynie was defended by Farm Bureau so Scottsdale’s duty was satisfied.	Scottsdale breached its duty by denying coverage without defending or seeking declaratory relief and failing to coordinate with co-insurer.
Was the stipulated $5,650,000 judgment reasonable (entitling Moodie to summary judgment on payment)?	The judgment reflected expert opinions on negligent construction and was a foreseeable consequence of Scottsdale’s breach.	Judgment may be unreasonable; Scottsdale presented facts (tax records, appraisal questions) suggesting a potential $2M windfall to Moodie and other issues with damages.	Reversed: Scottsdale raised specific factual issues sufficient to require a reasonableness hearing.
Is Scottsdale entitled to discovery on reasonableness?	Moodie sought to preclude discovery; Scottsdale argued it needed discovery to challenge reasonableness.	Moodie argued discovery unnecessary and should be barred.	Remanded for appropriate discovery per Tidyman’s II — district court must allow material and relevant evidence bearing on reasonableness.

State Farm Fire & Cas. Co. v. Schwan, 371 Mont. 192 (insurer’s coordination and actions can satisfy duty to defend even if it doesn’t hire separate counsel)
Westchester Surplus Lines Ins. Co. v. Keller Transp., Inc., 382 Mont. 72 (insurers did not abandon insured where defense was provided and coverage was litigated)
State Farm Mut. Auto. Ins. Co. v. Freyer, 372 Mont. 191 (insured justified in limiting liability where insurer improperly abandons defense)
Tidyman’s Mgmt. Servs. v. Davis, 376 Mont. 80 (insurer’s burden to plead specific facts to trigger reasonableness hearing)
Tidyman’s Mgmt. Servs. v. National Union Fire Ins. Co., 384 Mont. 335 (procedure and scope for reasonableness hearing and discovery after insurer breaches duty to defend)
Newman v. Scottsdale Ins. Co., 370 Mont. 133 (insurer that unjustifiably refuses to defend becomes liable for defense costs and judgments)