State Farm Fire & Casualty Co. v. Schwan, 2013 MT 216

On June 19, 2004 Whitney Schwan died in a single-vehicle crash involving Travis Turner; Turner was driving a Dodge Stratus owned by his mother.
Turners had two relevant State Farm policies: an automobile liability policy (State Farm Auto) and a homeowners policy (State Farm Fire).
In 2007 Schwans sued Turner’s estate and the Turners in an Underlying Action alleging negligent operation and related allegations; Schwans demanded policy limits under both policies.
State Farm Auto defended the Turners; State Farm Fire did not hire separate counsel and believed Turner defense was being handled by Stacey, the Auto defense attorney, with communications indicating no separate defense needed.
In January 2008 State Farm Fire filed a Declaratory Action seeking a ruling it owed no duty to defend or indemnify the Turners under the homeowners policy; it later retained Turners’ chosen counsel for the declaratory action.
A court-ordered mediation in September 2008 led to a settlement assigning Schwans the rights under the Turners’ homeowners policy to collect on a $750,000 consent judgment against the Turners; Schwans then replaced Turners in the Declaratory Action. They moved for summary judgment arguing a breach of the duty to defend; the District Court granted it to Schwans. State Farm Fire appeals, contending no breach occurred and seeks reversal and remand.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Did the District Court err in concluding that State Farm Fire breached its duty to defend?	Schwans contend that any defense by State Farm Auto does not excuse State Farm Fire's duty to defend.	State Farm Fire argues it fulfilled its duty by ensuring Turners were fully defended, even without hiring additional counsel.	No breach; district court erred; remanded to determine coverage under Turners’ homeowners policy.

Farmers Union Mut. Ins. Co. v. Staples, 321 Mont. 99, 90 P.3d 381 (Mont. 2004) (duty to defend is broader than indemnity; mixed-action framework)
Home Ins. Co. v. Pinski Bros, Inc., 160 Mont. 219, 500 P.2d 945 (Mont. 1972) (insurer’s duty to defend can extend to multiple counts in a complaint)
Buss v. Superior Court, 939 P.2d 766 (Cal. 1997) (defense must be provided immediately and in full for a mixed action)
Newman v. Scottsdale Ins. Co., 370 Mont. 133, 301 P.3d 348 (Mont. 2013) (mixed-action rule requires defending all potentially covered counts)
Farmers Ins. Exch. v. Johnson, 354 Mont. 192, 224 P.3d 613 (Mont. 2009) (duty to defend can be fulfilled without hiring separate counsel in certain circumstances)
Horace Mann Ins. Co. v. Barbara B., 61 Cal. App. 4th 158 (Cal. App. 4th 1998) (insurer’s duty defense may be fulfilled without duplicative counsel)
Nielsen v. TIG Ins. Co., 442 F. Supp. 2d 972 (D. Mont. 2006) (insurer breach can be found for failure to participate in defense and settlement)
Signature Dev. Co., Inc. v. Royal Ins. Co., 230 F.3d 1215 (10th Cir. 2000) (insurer breach when nonresponsive to settlement and defense efforts)
Aetna Cas. & Sur. Co. v. Coronet Ins. Co., 358 N.E.2d 914 (Ill. App. 1976) (insurer refused to participate in defense or settlement negotiations)
Lujan v. Gonzales, 501 P.2d 673 (N.M. App. 1972) (insurer breached duty by failing to assist defense)