State, Judicial Branch, Office of the Court Administrator v. Berdahl
2017 MT 26
| Mont. | 2017Background
- Charlene Berdahl, a court reporter, filed a human rights sexual harassment complaint (and later HRB proceedings) against Judge George Huss arising from alleged romantic/sexual overtures and workplace retaliation.
- Huss requested defense/indemnity under Mont. Code Ann. § 2-9-305; the State initially provided a defense under reservation of rights while investigation proceeded.
- The State later informed Huss it concluded his conduct was outside the course and scope of employment and refused to indemnify or consent to settlement, citing § 2-9-305(6)(c).
- Huss and Berdahl entered a private stipulation and confessed judgment for $744,371; Huss assigned his rights against the State to Berdahl and agreed she would not execute against him.
- The State filed a declaratory judgment action seeking a declaration it owed no duty to defend or indemnify Huss and that the settlement was not enforceable against the State; the District Court ruled for the State.
- The Montana Supreme Court affirmed, holding § 2-9-305(6)(c) bars enforcement of settlements made without the employer’s consent and relieves the State of defense/indemnity obligations here.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the State is obligated to pay the stipulated settlement | Berdahl: common-law insurer principles require the State to cover the settlement; the State breached its duty to defend and cannot invoke § 2-9-305(6)(c) | State: obligations arise solely under § 2-9-305 (not common-law insurance); settlement without State consent triggers statutory exclusion | Held: State not liable; § 2-9-305(6)(c) bars indemnity for settlements made without employer consent |
| Whether common-law insurance duties govern over § 2-9-305 | Berdahl: treat State as insurer; apply commercial insurance precedents to enforce settlement | State: no insurance contract/fund; statute is controlling and displaces common law | Held: Statute controls; common-law insurance rules inapplicable |
| Whether State’s reservation-of-rights or decision to decline participation in mediation estops State from invoking § 2-9-305(6)(c) | Berdahl: State’s conduct effectively refused defense and should be estopped from denying indemnity | State: it provided defense under reservation, timely notified Huss it would not consent to settlement; no estoppel | Held: No estoppel; State’s conduct did not negate subsection (6)(c) applicability |
| Whether the State could make a pre-judicial coverage determination under § 2-9-305(7) | Berdahl: § 2-9-305(7) improperly lets administrators make binding coverage decisions | State: subsection (7) permits employer to determine exclusions or seek judicial clarification | Held: Subsection (7) authorizes the employer’s determination and option to seek a declaratory judgment; no error |
Key Cases Cited
- Farmers Union Mut. Ins. Co. v. Staples, 321 Mont. 99, 90 P.3d 381 (discussing insurer liability for stipulated settlements)
- Tidyman’s Mgmt. Servs. v. Davis, 376 Mont. 80, 330 P.3d 1139 (insurance principles for stipulated settlements)
- Mont. Sports Shooting Ass’n v. State, 344 Mont. 1, 185 P.3d 1003 (summary judgment standard review)
- Woods v. State, 378 Mont. 38, 340 P.3d 1254 (statutory preemption of common law principles)
- Simms v. Schabacker, 377 Mont. 278, 339 P.3d 832 (specific statute controls over general statute)