State Farm v. Freyer
2013 MT 301
| Mont. | 2013Background
- This is Montana Supreme Court Freyer II, Oct. 15, 2013; State Farm insured the Freyer family vehicles.
- Heath Freyer died in a rollover involving Vail Freyer; Alicia Freyer, Heath’s daughter, has derivative claims.
- Policy: $50,000 Each Person; $50,000 to Heath’s estate already paid; Alicia’s derivative claims contested.
- Freyer I (2010 MT 191) held Alicia’s derivative claims could be covered under Heath’s policy, not solely Heath’s limit.
- After remand, State Farm paid additional amounts and the parties pursued various breach, bad-faith, and UTPA claims.
- District court granted summary judgment in State Farm’s favor; Montana Supreme Court partially reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract for indemnification | Freyer/Vail: breach occurs despite ‘reasonable basis’ | State Farm: indemnity fulfilled or moot by prior payments | District court erred; breach established, damages to be determined. |
| Common-law bad faith and covenant claims | State Farm acted in bad faith by delaying and denying coverage | State Farm had a reasonable basis in law to contest coverage | Court upheld summary judgment for State Farm on these claims. |
| UTPA claims for misrepresentation/settlement conduct | UTPA violated by misrepresenting policy and settlement options | Defense supported by reasonable basis in law | Summary judgment for State Farm upheld; no UTPA liability. |
| Statute of limitations defenses waiver | Waiver improper due to amended counterclaims; new theory | Defense timely raised or not necessary to decide | Issue not reached; disposition based on other issues. |
Key Cases Cited
- Bain v. Gleason, 223 Mont. 442 (Mont. 1986) (derivative claims limited by per-person policy terms)
- Treichel v. State Farm Mut. Auto. Ins. Co., 280 Mont. 443 (Mont. 1997) (emotional distress as stand-alone bodily injury under certain policies)
- Palmer by Diacon v. Farmers Ins. Exch., 261 Mont. 91 (Mont. 1993) (insurer not liable for bad faith if reasonable contest; jury issues preserved)
- Ellinghouse, 223 Mont. 239 (Mont. 1986) (insurer not liable for bad faith where reasonable basis to contest exists)
- Redies v. Attys. Liab. Protec. Socy., 2007 MT 9 (Mont. 2007) (reasonableness of insurer's legal interpretation is a question of law)