*1
Rеspondent
BRITTON,
Cross-Claimant,
BILL
and Cross-
(TRUCK
v. FARMERS INSURANCE GROUP
Appellant,
Appellant
Cross-Defendant,
EXCHANGE),
INSURANCE
Cross-Respondent.
No. 84-322.
Submitted Oct.
1985.
April
1986.
Decided
Rehearing
Aug.
Denied
1986.
MR. JUSTICE SHEEHY of the Court. delivered must meet principally We determine case that an insurer payment an to decline standard of a lawful basis for refusal loss; reliance the insurer insured’s claim for an insured’s and that declining pay- insured in on inadmissible evidence of arson lawful ment not meet the standard of a of an insured’s loss does basis for the insured’s claim. refusal of (FIG) granting Bill Group appeals judgment
Farmers Insurance $214,748.54 punitive dam- compensatory damages E. Britton $400,000.00, District ages following rendered verdict Court, District, County. Fourth Judicial Lake of the District Court cross-appeals judgment
Bill E. from a 30-14-133, denying attorney’s under Section him fees and costs MCA. view the backdrop applicable law before we
It is well to have a facts this case. insurance contract justifiable expectations parties to an
72
must include a broad freedom in the insurer to evaluate claims
policy
under
reject
and to
nonmeritorious claims. That freedom
imperiled
would be
if
imposed
the law
high duty
performance
so
of
on the
rejection
insurer that a reasonable
of a claim would invite a
judgment
“bad
against
faith”
open
the insurer. The law must leave
to insurers the use of
in investigating, negotiating
reasonableness
paying
Chavers v.
Security
Casualty
claims.
National
&Fire
(Ala. 1981),
Co.
However, an
corresponding
policy
insurer has
duties to its
holder. The
diligence
insurer must use due
in reviewing and deter
mining
claims,
pay
promptly.
meritorious
and must
such claims
Those
implied. They
duties are
expressly bargained
not
are
the insurance
contract. A
express
breach of
of those
duties
opens the
judgment
insurer to a
damages.
for contract
If the mis
deed of the
insurer
breach of the contract is also a violation of
public policy,
implied duty
or a
good
breach of the
of
faith and fair
dealing,
injured party
against
has a tort action
the insurer for
faith,”
“bad
notwithstanding
complained may
that the act
of
also be
(1982),
a breach of contract. Weber v. Blue Cross Montana
196
of
454,
198;
Security
Mont.
(1979),
P.2d
First
Bank v. Goddard
407,
1040;
181 Mont.
598 P.2d
State ex rel. Larson v. District Court
(1967),
131,
149 Mont.
One
policy
duty
in this case is the
of insurers
under
policy”
statute,
the “valued
or “stated value”
Section 33-24-
102,
law,
MCA.
stranger
statutory
No
policy
to American
our valued
provides
statute
in the absence of criminal fault or fraud that when
improvements
insured
property
on real
are considered to
abe
total
loss,
applicable
the amount
coverage
pol
insurance
written
icy
conclusively
contract is taken
to be the true amount of the loss
and measure of damages.
provisions
policy
The
of our valued
stat
ute,
33-24-102,MCA,
part
Section
every policy
are a
insur
fire
Goddard, supra;
ance issued in Montana.
McIntosh v.
Firе
Hartford
(1938),
434,
82;
Ins. Co.
Washington
106 Mont.
78 P.2d
Caldwell v.
Fidelity
(1933),
National Ins. Co.
94 Mont.
We have
construing
few cases
the effect of the valued
statute,
jurisdictions
but it is clear
considering
from the
like stat
utes,
us,
acceptable
to
that such a statute determines automati
cally
conclusively
loss,
the amount of loss recoverable for total
(1937),
Grandview Inland Fruit Co. v.
Fire Ins. Co.
Hartford
may
necessity
Wash.
We determine as a matter of law this under the statute, comply insurer did Section 33-24- not with the valued 102, MCA, mortgagee which particularly regard to the Bank with payment any against regardless was entitled to of claim of arson Britton, insured As the failure of the insurer Britton. to the insured 33-24-102, MCA, if in comply unimportant to with Section would be then he fact Britton had to cause the loss for committed arson coverage would not be entitled to event. appeal has rights parties
The on therefore examination of of the applicable three facets of law as far as Britton is concerned: (1) arson, coverage If to and Britton committed he is not entitled nullity; judgment his is a
(2) suspected committed ar- reasonably If the insurer that Britton son, incurring judgment pay it could decline to his claim without faith,” though jury might later determine “bad a court or approved; insured not arson
(3) If
unreasonably
pay
claim,
the insurer
declined
his
failed
to
and
arson,
prove
subject
charges
Britton’s
it is
faith”
also
to “bad
if it
public policy
implied
duty
good
violated
breached the
faith
of
fair dealing
doing.
in so
fact,
is
presents
It
notable that each facet
of
issues
determina-
properly
tion which
jury
instructed
forecloses us from deter-
mining contrariwise,
jury
unless the
as
erred
a matter of law.
words, questions
other
province
fact come
the sole
within
Egbert
(Mont.
Gee
jury
jury
1984),
v.
prevails.
and the
verdict
[209
Barry
1,]
City
Butte
v.
St.Rep. 515;
Mont.
P.2d
115 Mont.
I. DID FIG VIOLATE ITS DUTY OF FAITH GOOD IN DENYING PAYMENT OF BRITTON’S CLAIM? subject
On FIG claims that it was entitled to a directed verdict question from District Court on the bad faith claim for damages; extra-contractual District Court erred that the refusing permit which FIG introduce *7 evidence information deny FIG had reaching obtained and relied on in its decision to claim; Britton’s in instructing that the District Court erred the portions 33-18-201, MCA, on of Section which had no basis in the evidence; and, admitting that District in testi- the Court erred the mony Clark, of Arthur M. M.D. Britton, rancher, trainer,
Bill E. a horse and ranch breeder owned a Ronan, County, in Lake large near on had which he constructed a purchased horse arena. Britton ranch in Before Ronan 1974. time, 1970, he had since had a serious heart cоndition which open-heart required surgery him medical and had caused uninsured 1976, lim- expenses. surgery In again his heart condition forced and ability personally. his Ro- ited to train horses He decided to sell the property August in nan and it with a Poison. In listed local realtor 1981, the an for the realtor received offer from a California resident agreed price terms were property. and purchase Britton to buyer at the same time exception wanted on with Septem- In reside in California. property lease the and continue to seeking for 1981, actively a lessee and were ber the realtor Britton complete in sale. property the Britton order mortgage a to the Ronan State property subject The Britton was his bank provided quit a claim deed to the so Bank. Britton he was a while affairs could be order in the event sale occurred hospitalized Spokane, Washington. Brit- agent,
In the Lanktree solicited summer of Mike inspected property he es- ton’s and insurance business. Lanktree $144,500.00. FIG is- timated the market value of horse arena at August sued its of fire effective which insurance of its value. coverage included for the horse arena at 80% market $116,000.00 policy provided Accordingly, FIG’s stated value cov- erage. personal separate property Other and insured for real was amounts. September prepared late arena for his stud Britton
horse, kept which was to be arena Britton absent while friend, hospitalization prospective Spokane. due to a easy McCready, Ethel was to for the stud horse and to make care her, hay placed had to the in the adjacent straw and stalls been arena. September
Prior to had occurred a series vandalisms property the arena make had been stolen. Britton wanted to 21,1981, an September placed sure that he the arena was secure. On key All hasp only additional lock on a had a knob lock. door that doors, including other were with an internal tack room door secured hook-eyes. left locking padlocks inside devices such Britton p.m. September the arena and returned secure at about 6:00 on to his house located a distance from the arena. considerable checking the early September
Britton to bed 21 after went 12:30, approximately McCready arena. At arrived his friend Ethel and found Britton went to the bathroom Britton bed. At 1:00 a.m. containing sev- up to take medication. While he observed a vehicle porch driveway eral in the his He turned the individuals home. light driven of his on and off times and the vehicle was home several a.m., away. Mc- approximately He he and returned to bed. At 3:00 Cready front How- knocking loud on the door. were awakened Morigeau, motorist, Britton passing ard was at the door told depart- attempted call the fire that his on fire. arena was *8 pickup arena, ment arriving just shortly and then drove his to the after the first fire truck had come to the scene. Britton сlaimed he fire, had a given oxygen by firefighters heart failure at the was Hospital. and went to the Ronan Because he did not want to receive medication or hospital treatment of extensive nature from the Ronan, stayed hospital he at the morning until the next when he Spokane was driven to for treatment.
Although day fire, five saddles were in the arena on the three were missing found to be after the fire. The remains of the other two saddles were found in investigation the tack room. The by after County the fire the Lake Sheriffs Office discloses that tack open. room door had been forced dispute damage
Britton does not the fire and to the horse Investigation by arena were the result of someone’s arson. the State Laboratory Crime presence identified the of an accelerant to the fire by a investigator substance similar to kerosene. Britton’s revealed entry by evidence of a forcible other than firemen to an external door as well as to the internal tack room door from which the sad- dles missing were report after the fire. Britton filed a theft concern- ing County the saddles with the Lake Sheriffs Office.
Following arena, the fire to the horse the State Fire Marshall con- ducted investigation, an polygraph which included a examination of Bank, Britton. At suggestion of officers of the Britton retained Lloyd Ingraham attorney represent as an him in connection with proof fire loss. Britton submitted a of loss to the insurance com- pany on November policy relating 1981. FIG’s to when the loss payable provided was payable days the loss “shall be after proof loss, provided, company as herein is received this ascertainment of by agreement the loss is either made between the company expressed insured writing filing and this company provided.” January of an award as'herein On attorney from representing received an FIG a letter which attorney informed Britton that the amount of the loss had not yet been ascertained and that the circumstances of the fire were still investigation. yet ready under “Farmers is not to make a final deter- coverage mination as to either or amount.” added.) (Emphasis Pur- suant to the letter Britton submitted to a sworn statement taken January 25, FIG on 1982. February 19, 1982, Britton,
On position FIG took the that Russell insured, a son of the was an insured under the and that FIG position was entitled to re- take his sworn statement also. That April attorney iterated on in a letter from FIG’s to Mr. Ingraham attorney rejecting which stated “we are Mr. Brit- opportunity ton’s claim until we have had an to take the sworn *9 son, statement of his Russell Britton.” policy by “Package The insurance issued FIG to Britton is a containing Protection” coverages, several divided into sections. Sec- policy tion 1 of the is devoted to hazard insurance for farm build- ings, arena, including improvements the horse and other on real property, personal property. and scheduled and unscheduled There is no policy pertaining definition of 1. “insured” to Section insured, course, The named is Bill E. 2 Britton. Section of the policy provides liability coverages and medical for automobiles and like vehicles. 2 Section contains a definition of “insured” which insured, would include the named his relatives while residents of his household, pertaining question to the use of insured vehicles. The insured, FIG’s insistence that Britton’s an son was under Section policy of the and that the insurer was entitled to take the examina- tion of the son was charge scotched the District Court its to jury:
“Some of the evidence in this case mentions Russell Britton con- being insured, nection telling you with an I am now that the court has ruled as a matter of law that Russell Britton is not an insured under Mr. Britton’s insurance contract.” provisions policy respect
The contractual of FIG’s with to re quirements loss, provided only in case of fire that the insured must reasonably required. submit to examination under oath often as policy Under only Section of the Bill E. Britton was the insured. policy mortgagee FIG’s issued to Britton also contained a clause proceeds payable which made the first of a loss to Ronan State Bank mortgagee. provision as the mortgagee clause included a insurance, therein, mortgagee only “this as to the interest of the by any neglect mortgagor shall not be invalidated of the act or property owner of the described . . . .” shortly FIG’s files on fire three esti- this loss contained after the damage repair, mates of Britton. One of those esti- one obtained $75,000, pаrts building remaining mates was for if the of the burned repair. employees were used in memos Various interoffice between FIG total. indicated the belief of the writers that the loss was 12, 1982, February to let
One of FIG’s interoffice memos dated said attorney for FIG Pocatello Branch claims office know that the $75,000 pay, authority pay mortgagee. had “Not to received talking pay.” authority but to start This was extended to FIG’s at- torney February 1982. paid
On March sum of FIG Ronan State Bank the $75,000 mortgagee under the clause on condition demanded partial assignment FIG that Ronan State Bank deliver to FIG a mortgage to the Bank and a full release from the Bank of against its claim the insurer. “general applicable
Under the 1 in conditions” to Section policy, “Loss, payable Section 13 relates loss clause. It states any, adjusted paya- if shall be with named insured be and shall payee ble to him unless specifically other is named hereunder.” added.) (Emphasis adjust payment FIG did not Bank Britton, with the named insured.
FIG subrogation claims under the paragraphs right partial to receive from the assignment mortgage, Bank a of Britton’s and to stand in respect partial the shoes of the Bank with assignment. policy provides: The insurance Company liability “. . . shall claim that no existed as to If *10 mortgagor owner, shall, payment the or to the extent loss to of of mortgagee, subrogated mortgagee’s the be rights to all the of recov- ery, sue; but impairing mortgagee’s right without . . .” to
At payment Bank, the time of the to Rоnan State FIG did not claim either liability to the Bank or to Britton that no existed as to yet Britton. respect proof It had not acted with to Britton’s of loss. Ronan State mortgage Bank commenced an action to foreclose its complaint 10,1982. from Britton filing May its on E. Ols- Donald son, president Bank, the explained why: of the action,
“Yes. The reason that we instituted a foreclosure the —we — obligation had an approximately at the time of the fire is a — dollars, matter of thirty-five recollection I a hundred thousand — think it seventy- is. The after we received the settlement for the dollars, amount, payment five thousand gave or a that we the in- — company, surance at their insistence and these were documents — they prepared, assignment assignment the an of our mort- gage obligation and sitting that amount. So now we were with less money owing Mary to the Bank in that sum. There’s a contract to lady prop- Schroer that Mr. buying Britton had. That was a he’s erty unpaid from. mortgage, We had an on our and the in- balance company seventy-five surance assignment had an in the amount of thousand dollars. obligation, mortgages against
“And so the total the total or lien decreased; going property, they up, had not been were fact accruing because interest on our on the Schroer contract and mortgage company assign- and on the interest the insurance had an air, title, only way ment of .... So we could clear the clear the felt, mortgage we to to institute a forеclosure action on the bring Britton, company, bring the insurance in Mr. so we could get Because, was, disposed the matter resolved and of. as it there way purchaser, willing purchaser, buy property was no would subject outstanding interests that were there and that were not resolved. This was the reason that we did institute that action.” added.) (Emphasis July 19, 1982, action,
On appeared in the and foreclosure against coverage pro- cross-claimed FIG full for the amount of the policy, vided compensatory damages and for further punitive damages by reason of “bad faith.” responded
FIG to the August foreclosure action on set- ting up partial as a against right cross-claim Britton its under its assignment mortgage requesting foreclosure the same against against Britton. It further defended Britton’s cross-claim by alleging, time, intentionally for the first that Britton had caused fire, guilty respect had been of fraud his in the with interest insured, property proper proof and that he had not submitted a loss. filing claim,
Prior to the of its answer to Britton’s FIG had cross rejected loss, never proof writing nor informed him in or otherwise intentionally that FIG contended Britton had burned Instead, July horse arena. FIG had written to Brit- ton, advising canceling him terminating coverage it was his policy, giving under his as a reason that “we believe that the fire loss your property September insured 1981 was a result of a fire of person persons set unknown incendiary an having nature added.) your property.” access to (Emphasis insured facts, must, foregоing light We have set out in a as we *11 jury agreed favorable to Britton since the with his contentions of Company fact. Anaconda v. 66, Whittaker 188 Mont. However, FIG, cause, put P.2d 1177. trial of the was able to the jury following before the the information that FIG contended proved that Britton had set the fire: Lanktree, agent, came to the fire scene at 10:00 a.m.
day surveying damages adjuster fire. he David After the called Drynan, immediately Drynan of Missoula who also came. concluded “suspicious,” that the “multiple fire was and that there were sets.” The regional investigation case was referred to the officeof division of FIG purpose investigation. for the of further investigator. division retained Richard Kirsh as He arrived on September site points origin on and identified five different possibly many eight. as He testified that it was a well fire, planned gallons that the minimum amount of accelerant was 10 premises. fuel and that whoever set the fire was familiar with the Russell, A further investigator, FIG Mike arrived on October scene, photograph to review and interview Britton and records, other County individuals. He found from a review of Lake adversely documents which would affect Britton’s financial condi- tion. report Russell his of October 1981 which he wrote to the company “undeveloped identified leads” which included contact previous with companies gather insurance concerning information previous fires, the two contacts with the Montana State Fire Mar- acquire shall’s polygraph office the rеsults of a examination ad- Britton, ministered to and a recommended interview with Britton’s son, Russell, possess who was believed to knowledge substantial re- garding the fire. any dates,
Without transcript pages reference to nor to FIG’s brief appeal on states: up
“Farmers followed investigator the recommendations of Rus- sell, and as a representatives result of all the efforts made Farmers, insured, Britton, it was determined that the was intention- ally responsible setting for the damaged of the fire which his arena. Accordingly Farmers denied Britton’s claim.” record,
From clearly appears that whatever was concluded Russell, from investigation deny including decision to claim, was never communicated either to his Britton or to lawyer before the foreclosure action was instituted. following
The further go facts however did before cause: by ingredients premises,
The fire had been fueled on the straw and liquid petroleum-based accelerant. After the fire the smell of diesel reported “heavy.” arriving to be Firemen at the scene had diffi- culty knocking keeping acknowledged the fire down. Britton incendiary. fire was The fire had been set someone familiar with premises placing Approximately because of the of the “sets.” purchased one week gallons before the fire Britton 50 to 55 of diesel *12 only to heat his house. although use for diesel fuel was fuel Britton’s money purchase September. Britton had no The made in was usually by but spare heating delivered truck for fuel. His fuel was container pickup made a little used this time the of the fuel was placed in the by delivered and tank Britton. The straw had been by day pointed out Britton. arena the before the fire at locations arena, addition, and was Britton had sole means of access to the day girl friend premises alone after his son and on the entire Rusty departed morning He that his son on the before the fire. knew leaving McCready not return and would not return. Ethel would premises her to the home until 2:30 or 3:00 a.m. after she closed evening. gone duties at a to the arena at least two bar that He had during day preceding pickup. up times the fire his He was out of his bedroom at 1:30 to 1:45 a.m. upon
The arena was locked firemen. The doors had the arrival of day preceding been locked and the fire. secured Britton on the only keys Britton had the All to the arena. doors were locked when forcibly appeared, they required firemen first break were every into door. personal property prem-
Britton had from the removed valuable ises, tack, halters, taking saddles, all of the bridles and blankets out milk of the tack placing room and them on the floor of the house locked, which could not be them and covered with horse blankets. only After the fire the saddles were found remains two arena; reported three other saddles were stolen. pressure
Britton was under financial at the time of the fire because $132,000 Bank, owing his debts: State secured all to the Ronan arena; $40,000 prоperty owing including the horse Mary prop- purchase Schroer on the contract for deed for the of the erty occurred; $8,800 Sally owing judg- when the fire on a Lucas ment fire miscellaneous obtained her one month before the $186,800. approximately $6,000, making other debts of a total of pressure Britton had no income since was under from the them, satisfy obligations Bank had not and Lucas to owed to April reduced his the Bank had to borrow addi- debt to since tional amounts from the Ronan State Bank order to make contract, by quit payment property his on the Schroer had deeded Bank, given claim and had Ronan State deed to Ronan State Mary assignment buyer’s Bank an interest in the Schroer con- of his totally unproductive, being used for tract. The arena was was not any purpose, and had for sale since mid 1978. been purchased Britton had his Farmers Insurance one month before the on August fire suspects 1981. Other were eliminated by authorities.
FIG’s brief contends that the Office of the State Fire Marshall was opinion that Britton caused the fire and communicated this opinion to Farmers. However transcript FIG’s reference to does not bear out this testimony statement. Deputy State Fire Mar- shall Churchwell was to the effect that the Fire Marshal’s office had suspects, son, two Bill Rusty. They and his had eliminated Rusty suspect. They had op- determined that Britton had the *13 portunity to set the fire and had a pres- motive because of financial Churchwell, sure. On cross examination оf he was unable to estab- lish gain financial proceeds for Britton from the of the insurance policy. Churchwell repair had estimated the cost of to the fire dam- age $135,000, to be proceeds since the insurance would consti- $116,000, tute there was a loss to Britton under Churchwell’s esti- mate, $19,000 from the fire. it,
With all those jury facts before the decided 11 to 1 that Bill E. Britton did not intentionally arena; set fire to the horse unani- mously that wholly destroyed his arena was as defined in the in- structions; damages that his for the breach of the insurance contract $116,000, 1; amounted to unanimously that FIG had implied-in-law breached the good covenant of dealing faith and fair in its conduct of the claim. We should note in an that earlier trial cause, the same jury question had deadlocked on the whether Britton had started the fire and a mistrial had been declared. We bound, however, are appeal by findings on this of the second jury. testimony
The at the relating trial damaged to the value of the property reflects that replacement Garold Jette testified a value of $182,600. horse arena to be The Bank witness of the Ronan State Bank testified that property total value of the in- cluding improvements $260,000, the other in the land was on which the Bank had $131,000 loaned as of the date of the fire a total of (rounded). agent, Lanktree, Mike replace- testified that ment $144,500. value of the Deputy horse arena was State Fire Marshall damage property $135,000. testified the to the amounted to
Witnesses for FIG аgents they testified that as for FIG had ob- repair tained estimates for the damage. of the fire One estimate $25,000, $75,000 approximately $98,000. one for and one for Mike Crouch company testified for the the settlement with the $75,000 repair. estimate of on the Ronan State Bank was based repair presented at persons making estimates was None of the damage. FIG respective of fire trial substantiate their estimates damage. testify fire presented as to the value of the no witnesses damages it, finding testimony With the before $116,000 is unshakable of the contract amounted to from the breach Moreover, in the rec- jury nor we have basis us. neither the relying lesser esti- justified in on ord to determine whether FIG was repair damage the stated value mates of the cost of of the fire than justify the lesser in the no testified to because witnesses estimates. Favoring FIG? Improperly
A. Did the Trial Court Exclude Evidence circumstantial evidence FIG contends that addition to the above (1) fire, also have been allowed to show Britton set the it should and two polygraph evidence of examinations which Britton failed (2) suspects successfully that Britton passed; other evidence recovery history subsequent of insur- had a of three other fires and proceeds ance from those fires. Stotts, first,
Taking polygraph appears that Mike em- issue ployed office, September fire of the State Fire Marshal’s after the polygraph conducted three tests of Britton. Britton sub- polygraph A hear- mitted a motion limine to exclude the results. ing April 13, was held on the motion before the first trial Judge jurisdic- and before District John S. Henson who was then *14 tion the cause. Ph.D., hearing, Lykken, qualified
At the David and called expert Lykken him polygraph interrogation. as an on testified that value,” allowing polygraph probative the results have “zero polygraph par allowing evidence in the courtroom would be on a testimony astrologers and fortune tellers. courtroom, FIG’s hearing, present
At the in the Mike Stotts was proof on the counsel him in connection with an offer of did not call Stotts, results, interrogated polygraph but counsel for Britton polygraph developed performed him the examina- from that he had determining the various medications tions without the effect of taking. after been Stotts wrote which Stotts knew that Britton had Hensor, the Backster polygraph the examination to one Robert at California, Detection, requesting infor- Diego, School of Lie San could problem and medication mation as to whether Britton’s heart deceptive. Hensor an- appeared be the reasons that Britton to be in writing question swered that he could not answer the as medi- though regarded cation polygraph deceptive. he the results as FIG failed to polygraph make a record as to the details of the ex- Lucas, aminations Sally of Russell Britton and the results of which FIG now claims should have been admitted to evidence.
Judge granted Henson poly- motion limine and excluded graph Britton, on State v. Beachman (Mont. test relying 1980), 337, Gropp v. Lotton Rep. 1558; 616 P.2d 37 St. 160 Mont. 415, 661, 503 P.2d determining polygraph that Montana results (After are inadmissible in Judge civil and criminal trials. Henson’s 37-62-302, MCA, order in effective, Section pro- became which polygraph vides that results may of a examination not be introduced law.) or admitted in a court of May
On Britton moved for an order in limine to exclude prior all reference in occurring proper- the trial to fires to Britton’s may ties on which he proceeds. ruling have received insurance In motion, the District testimony Court had before it the of Britton hearing May 19, 1983, at a deposition held on Sally and the H. September Lucas taken on 1982.
Britton testified that he morning had disclosed on the of the fire to investigator information about other during fire losses course of his life. Boss, One involved the fire loss of a Trail which is a combination mobile home and two-horse trailer. Britton testified caught Trail Boss had pulling fire as he was it down the pickup. $16,000 road with his proposed sale, It was worth on a $7,000 there was a loan to the Ronan State Bank. The insurance coverage $11,000. April was The trailer fire occurred in 1979. Ovando, involving he had a fire loss a farm home at Mon- $10,000 tana. He received a check covering mortgage insurance buy which place he used to trailer house of a home at Ovando. present He was not when Billings, the fire occurred but inwas Mon- destroyed tana. The home chimney because of a fire. A property Hamilton, Montana, third fire involved which was in possession of his former wife after divorce. His name was on the occurred, insurance simply and when the fire loss signed he proceeds mortgage insurance prop- holder on the wife’s erty. present He was not when the fire occurred. deposition Sally unworthy Lucas is of consideration. It is
unintelligible fires, regarding prior replete ir- and is with hearsay upon hearsay. relevancies and Judge granted Henson the motion in limine to exclude reference
85 23, prior May the fires at the on commencement of the first trial trial, During Judge 1983. R. the course of the second before District McPhillips, proof. sought D. from FIG made an offer of It to elicit testimony Adam Kirsch the effect that he had loaned to $7,106 9, 1979; repaid April 1977 and that it was that in con- on 1977, making security nection with in- the loan the Bank took a $16,000. terest on a Trail Boss which was was the market for It year. insured and a loan was made for one In a fire March trailer, occurred proceeds to the horse the insurance were received and two weeks later the loan was made to the Ronan State Bank. proof basis of the offer of was that it showed evidence of a com- mon Judge McPhillips proof, scheme or motive. denied the offer of stating Judge already that Henson had ruled in the matter.
Taking
first,
the matter
polygraph
of the refusal of the
it is
results
clear that
the District
in denying
polygraph
Court was correct
the
Lotton,
Gropp
v.
evidence.
supra. FIG contends that because it is
being
polygraph
sued fоr “bad faith” the
ought
results
to be admis-
proof
sible as
good
refusing
pay
faith
the claim. FIG
on Moskos v. National Ben Franklin Ins. Co.
principally
relies
(1978),
Moskos,
Ill.App.3d
60
There a later different decision another division of appellate level in respecting admissibility poly- Illinois graph results within the knowledge denying of the insurer when Lynch v. & claim on the basis of Mid-American Fire arson. Marine Ins. Co. 567, 575, Ill.App.3d 49 Ill.Dec. appellate N.E.2d court said: .“. . proof The trial court polygraph refused an offer of that a test given was to Boes opinion and the examiner’s was that he showed deception setting knowing when he denied the fire or who did. The parties dispute did not the evidence would have been inadmis- purposes sible for showing guilty is of arson. There Boes authority admissibility proof good for its if limited of defendant’s Moskus.) in refusing pay faith (citing As the evidence would likely improperly to have been the arson considered as to despite any limiting defense not instruction the trial court did deny- in balancing against probative err prejudice value and *16 ing admission.” polygraph
We hold that the were inadmissible in this results public case. policy Such was the declared state in Section 37- of this 62-302, tried, thоugh Judge MCA when this case was even Henson’s ruling preceded public policy. the The effective date of that declared District properly Court Montana in followed the decided law of Gropp v. Lotton (1972), 415, denying 160 Mont. P.2d 661 in evi 503 dence of polygraph the results. manner,
In like
we find no
in the denial
the Dis
error
trict
testimony relating
prior
Court of evidence or
to
fires on which
may
case,
proceeds.
have received insurance
In the usual
questions
admissibility
largely
of evidence are left
to the sound
court, subject
only
discretion of the
in
trial
to review
case of mani
fest abuse. Cech v. State
(1979),
522,
The
184 Mont.
B. Reliance Deny on Inadmissible Evidence to Fire Claim.
We rely come now to consider whether FIG was entitled to on foregoing payment inadmissible evidence to decline of the insurance proceeds escape charge good so it had not acted faith. jury in this case has decided that on the circumstantial presented FIG,
evidence to it and the other evidence on the cause, duty good FIG did indeed breach its faith. We hold that FIG rely deny pay was not entitled to on evidence to inadmissible ment of Britton’s claim.
It is duty good not within the bounds of faith between an rumor, rely hearsay, insurer and the insured for the insurer to polygraph deny results or other inadmissible evidence to a loss under a fire insurance force the insured court action so proceeds may to collect the of his claim. While an insurer utilize evidence, develop inadmissible facts or evidence admissible reasonably payment does not if claim act it declines of an insured’s Na- Chavers v. testimony. merely upon inadmissible evidence (Ala. 1, Security Casualty 1981), tional Fire Co. 405 So.2d 8. Jury? C. Did the District Court Overinstruct erred position FIG’s the District Court under this issue is that reproduction of the including charge jury a verbatim its proscribed practices fourteen unfair claim settlement contained (Section MCA). 33-18-201, the Montana Insurance Code argument majority of the un claim is based on its practices fair claims settlement enumerated Section 33-18-201 Rich applicability FIG have no issue this case. relies on County land (1955), 267; v. Anderson P.2d 129 Mont. Bogovich Chicago-Milwaukee-St. Co. v. Paul & Railroad Pacific Trowbridge (1949), Garrison v. 971; 122 Mont. 203 P.2d 464, among 119 Mont. 177 P.2d others. arguable
There was at an least basis for the submission to for the following determination of issues under the unfair claims set- *17 (1) practices 33-18-201, misrep- tlement in contained Section MCA: issue; resenting policy provisions relating coverages insurance to at (2) failing reasonably promptly upon com- acknowledge to and act (3) claims; respect failing adopt imple- munications with and claims; prompt ment investigation reasonable standards for the (4) pay conducting investiga- refusal to claims without a reasonable (5) upon information; deny failing tion based or available to affirm coverage proof within a statements reasonable time after of loss (6) completed; have been neglecting good in faith to effectuate set- (7) clear; liability reasonably compel- tlements which had become ling litigation the insureds to the amounts due institute to recover recovered; by offering substantially ultimately less than the amounts (8) attempting to settle a claim for less than the amount to which a by advertising reasonable man would be reference to ma- entitled to (9) application; making payments terial or an to insureds and claims accompanied by setting beneficiaries not statements forth the cover- (10) age made; payments delaying under which the investi- were pre- gation payment by requiring of claims to submit an insured liminary reports subsequent proof of loss which claim formal (11) substantially information; contains failure same clear; promptly liability reasonably settle a claim if has become (12) promptly explanation of the ba- failing provide a reasonable sis for denial of a claim. practices listed Section
Of the fourteen unfair settlement
33-18-201, MCA, only
appear
applicable
case.
two
to be not
to this
(1)
They
applica-
attempting
are:
on the basis of an
to settle claims
insured;
knowledge
tion which is altered without notice or
(2) making
appealing from arbi-
known to insureds a
compel
inclu-
tration awards to
settlements.
determine that the
We
practices
sion of those two unfair claims settlement
charge
prejudicial
error
not
where
was harmless
this case. Such
is
appears
that without the erroneous instruction the same verdict
(1979),
Refrigeration
would be
v. Schulz
188 Mont.
rendered. Wolfe
511,
D. Di- Should the District Court have Granted FIG’s Motion rected Verdict? granting
FIG contends erred in not its mo- that the District Court tion for directed it from extra-contractual verdict so as to relieve damages liability implied duty good and for faith and fair its dealing. only
A
properly granted
motion for directed
is
verdict
complete
jury,
absence of
evidence to warrant submission to the
light
and all
inferences of fact must be considered
most
Jacques
party.
v. Montana National
opposing
favorable to the
1319;
Guard
199 Mont.
P.2d
if the evidence viewed
in light
plaintiff
most favorable to
indicates reasonable men could
differ as
ver
to the conclusions drawn from the evidence a directed
(1982), 196
proper.
dict is not
Weber v. Blue Cross Montana
Mont.
Arson
and a
be
circumstantial
(1)
someone; (2)
prima
if
motive
facie case is shown there is
arson
(3)
unexplained surrounding
the insured: and
circumstantial evi
Cas
implicating
dence
Lawson v. State Farm Fire and
the insured.
*18
ualty
(1978),
Company
App.
Insurance
41
Had FIG in this on admissible circumstantial case relied promptly claim, dence and denied the we then have been con- would strained to hold that Britton was not entitled to extra-contractual damages punitive damages in this case. There were other ele- claim, however, ments in its handling jury of the that made a issue duty whether FIG dealing breached its of fair in at least the fol- lowing respects:
1. It created an issue of total loss to the horse arena to avoid the application policy of the valued statute. pay
2. It payable failed to mortgage under the loss clause the stated value of the loss mortgagee to the Bank. negotiate
3. It did payment not mortgagee its to the Bank with the required by insured as policy. its
4. In making payment Bank, mortgagee to the partial it took a as- signment (a) mortgage, Bank’s which had the effect of not reducing (b) mortgage by Britton, debt on the continuing owed charges (c) interest on that portion assigned, precip- of the debt itating mortgage foreclosure action the Bank.
5. deny It failed to coverage of the within claim a reasonable time after proof completed. loss statements hаd been
6. It never question directly raised the of arson with Britton until it filled its answer and cross-claim in the action. foreclosure
7. It subrogation claimed right under the without first de- nying (We the claim to record, its though insured. know from the it application here, has no the Bank later contended with the in- company surance it right partial assignment had no to a under subrogation its clause. taking partial assignment The effect of place was to company judgment insurance ahead of a creditor case.) wrongfully delayed 8. It upon the claim from Britton its insistence that Russell Britton was an policy. insured under the
There were therefore good sufficient elements of breach of faith in the handling of the Britton claim for the District Court to submit the issue of damages punitive extra-contractual damages to the jury.
The District carefully good Court this case covered the issue of charge faith in its jury. jury to the The court instructed the good was a breach of unreasonably pay faith to refuse valid liability claim and such subject refusal would the insurer to for all damages proximately in- resulting from the conduct. The denying structed that FIG could be incorrect a claim and not be *19 unwarranted, be unreasonable subject liability. to Its refusal had to justification. and without issues of properly the
The District this case submitted Court jury. We damages punitive damages to the and extra-contractual find no error on this issue. Testimony Dr. of Admitting the
E. Did the District Court Err Clark? videotape assigns to
FIG the admission evidence as error deposition Clаrk, the deposition M. M.D. FIG contends of Arthur sympathy cumulative, probative value invoked the was had no and passion jury. of and the testimony relevant argued Dr. was
Britton’s counsel that Clark’s physically capable of set- question of Britton the whether not testimony concerning the condi- fire ting the and also relevant for fire, immediately the lack of smoke lungs of after the tion Britton’s that he did lungs, support in his of Britton’s contention offered not set the fire. by the responds videotape deposition was edited that the
Britton portion showing the Britton’s diseased and District Court to delete enlarged heart. an ob
The version was submitted to the without edited jection by FIG, cautionary court under instruction from the a damages, but the video that was not be considered for only participate in the fire physically to show he whether was able way in the FIG he did. claimed post-trial of denying
The district in his motions judge order 103(a) and objection found the been Sections FIG have waived. (a)(1), point are accord. We find no error M.R.Evid.
II. SEPA- SHOULD THE DISTRICT HAVE GRANTED COURT TORT ISSUES? RATE THE AND TRIALS ON CONTRACT to deter- the trials so as The District Court declined to bifurcate (1) intentionally caused the separate mine in trials whether (2) good of faith. fire and whether FIG committed breach (a) preclusion of prejudice FIG claims from the denial because examinations, prior in- regarding polygraph evidence (b) burning by losses; finding intentional surance claims fire for (c) or- proceedings; preclude error the insured would further — presentation claiming der FIG it was enti- evidence present tled to its first of its defenses evidence because affirmative (d) and, burning misrepresentation; commingling of intentional regarding the evidence with evidence affirmative defenses FIG. practices unfair claims settlement and the wealth of upon separate District Court trials denied motion impression judge in jurisdiction mistaken the district earlier had denied during bifurcation of the issues. Several times trial *20 the District Court made off-the-cuff comments that the case should have purposes denying been severed for of In order trial. its the post-trial FIG, by made motions the District Court the noted judge earlier district had decided not to bifurcate the trial and that questions judge “while this combining the of wisdom the claims be- very problems cause of proof, obvious in that arise the it will not Judge disturb Henson’s order.”
Although by no Judge order District be in Henson can found the denying bifurcation, record parties is from clear the record that all assumed that he had brought done so and it was never to the atten- Judge tion McPhillips of District Judge in District Henson had fact not so a ordered denial.
In Klaudt v. Flink 247, 1065, 202 Mont. 658 P.2d 64, St.Rep. party we held that a third to the insurance contract join could against his cause of action the for of insurer violation the unfair claims of underlying settlements act our code with the action against the liability insured in individual a case. 1985, legislature 33-18-241, MCA, the enacted Section effective 1, 1985,
October against to the effect trial a claim an the of good insurer for lack in handling of faith its a or settlement of claim could nоt be underlying consolidated with the trial of the claim if good the against party lack faith is claim different from the party against stipula- underlying whom the is claim made without (1985). 504, tion of counsel. Section Ch. Laws of Montana That apply case, statute does not to this both because of the effective claim. party date this and because case involves a first issue, In deciding keep this must in we mind status indicated, pleadings As case. we Ronan State Bank started a Britton, against by foreclosure filing action and its com- FIG others plaint May for Bank’s foreclosure 1982. Britton answered the complaint by July foreclosure answer on 1982 which Britton against included a cross- cross-claim codefendant FIG. Britton’s contract, allege claim not but one does cause action rather act, practices Sec- unfair claims settlement tort for violation of the 33-18-201, MCA tion by filing its complaint of foreclosure responded to the Bank’s
FIG remaining for foreclosure defendants against own cross-claim then set out ten defenses mortgage, partial its interest Brit- alleged that The third defense against Britton’s claim tort. conditions of the terms and ton had failed to meet intentionally Britton had alleged that recovery; FIG’s fourth defense by fire; alleges concealment willful FIG’s fifth defense caused prop- in the insured involving his interest facts Britton of material by to submit a by swearing and failure erty by fraud false policy; sixth required its time proper proof of loss within the to sworn statements to submit defense is one that Brittоn refused estoppel, records; defense raises produce the seventh and refused to fraud; eighth is a claim for its defense failure consideration punitive is that damages; its ninth defense mitigation of Britton’s law; de- applicable and its tenth damages permitted under are not 50-63-405, MCA. Section fense is that Britton’s claims are barred trial, stating in its separate April moved for a On FIG motion: the defenses separate trial of
“. . . to order a [moves Court] (includ- Cross-Claim in their answer to Plaintiffs raised Farmers terms and conditions ing of failure to meet the defenses *21 concealment, fire, mis- policy, setting of willful insurance intentional proper fraud, a representation, swearing, failure to submit false properly to a son to submit insured’s Proof of Loss and failure of the statement) the remain- directing that the trial of and further sworn postponed be ing by in his Cross-Claim issues raised the Plaintiff issues, separate of the said trial until after final determination of allegations the trial of “Defendant Farmers further moves Cross-Claim, immediately the trial required, if of Plaintiffs follow Farmers, before the same and be tried on the affirmative defenses of jury.” trial, its brief, separate because supporting argued FIG for a a in its if decided of trial time and
case would take a lesser amount negate Britton’s cross-claim. favor would remedies, Britton, in con Here, one having a choice of two Recovery tort, in pursue his claim tort. in elected to tract and one barring his him effect of by would have the on his claim tort
93 Cоmpany (Mont. Massett v. Anaconda claim for of contract. breach 1981), If St.Rep. Court had 630 P.2d 38 961. District trials, granted separate it would have then con- FIG’s motion for verted claim to one breach of contract. Britton Britton’s for tort for precluded presenting any to would then have been from evidence as consequential tort, any relating damages alone for let evidence punitive by damages right jury His the first trial. to a trial Const, claim, guaranteed by II, his tort Mont. Art. Section and the Seventh Amendment to the Federal Constitution would prejudiced. have been claim, regarding
Under tort fact issues of viola- inextricably tions the Unfair Claims Settlement Act are woven attempt with FIG’s FIG burning. claim intentional made no State ex rel. sustain its other affirmative defenses. As we said in Fitzgerald v. District Court 106,] Mont. 703 P.2d [217 St.Rep. 1061:
“It is clear us that exemplary damages the issue of case is so proof secondly interwoven with the negligence first of of will- fulness, wantonness, separation oppression, malice or their 42(b), under Rule for single M.R.Civ.P. decision a seriatim juries Court, or different is an abuse of discretion the District which would result litigation.” extended and needless FIG, Moreover, having separate filed its for a motion trial while Judge McPhillips cause, jurisdiction up was in failed follow procure entry on its motion to or granting written order minute denying separate Judge McPhillips If orally trials. denied the mo- assumption tion on Judge sepa- Henson had earlier denied trials, rate duty it was the for counsel FIG to alert the district judge assumption. as to his mistaken In those circumstances the dis- judge may trict put not be in error. separate
FIG April filed its motion for on trials days later, April 23, 1984, hap- the case came on for trial. What pened separate interim as to the motion is not trials found procured FIG granting record. neither a written order or de- motion, nying entry nor caused minute to be made of the dis- position of the motion. case then went to trial without bifurca- by FIG, tion. From the nature and extent of the motion made it is granted clear that if the court had the motion would have been *22 reversible error. separate
FIG’s for simply motion trial was not directed to the issue Rather, burning by requested of intentional Britton. the motion that all of FIG’s be first tried before Britton’s tort claim could defenses be considered.
FIG’s affirmative defense of “failure to meet the terms and condi- policy” tions of the insurance following would include the issues of fact by contended for pretrial Britton and in included the order: That the damages by by caused the fire exag- claimed Britton were gerated and in by excess of the investiga- amounts indicated tion; Rody $75,000 the bid of John was reasonable and completely structure; would repair damaged and that Britton re- cooperate fused to identifying in the location of Russell Britton. concealment, FIG’s affirmative defenses misrepresentation, of willful fraud, and swearing false pretrial raised these issues of in fact order: That proof Britton submitted a of loss for three saddles which were neither burned nor stolen at the time of the fire and were purрose fraud; concealed for proof and that his of loss for the three saddles was fraudulent. FIG’s affirmative defense of proper Britton’s failure to proof submit a of loss was intertwined as an issue of fact with Britton’s reject claim that the failure of FIG to proof deny of loss and to the claim estop- constituted waiver and pel. FIG’s further affirmative defense that the failure in- of the properly sured’s son to submit to his sworn statement raised issues of both law and fact as to whether Russell Britton was an insured policy under whether he did fact submit to a sworn statement.
The issues of fact inextricably and law under FIG’s defenses were intertwined with the issues and contentions of Britton that the dam- ages $75,000 caused the fire paid exceeded the which the FIG Bank; proof Britton had submitted of loss accordance with “the payment stated value” law and was entitled to $116,000; that contending actions of FIG were unreasonable right Bank, subrogation paying had a after that Rus- sell policy, Britton was an insured under the that Britton had inten- tionally barn, willfully burned the that he had concealed the saddles proceeds loss, and had claimed insurance for their and that FIG had rejected submitted, never proof his claim after of loss had been causing him emotional distress.
Obviously impossible it would have been for the District grant Court separate FIG a trial defenses claimed overlapping FIGwithout on issues raised his tort claim. litigation law is to avoid multifariousness and to (Mont. Carlson v. resolve all issues Cain and lawsuits one trial. *23 1985), 607, St.Rep. Affirmative 129,] 700 P.2d 42 695. Mont. [216 claim, for go defenses which do to the merits of as not defendant’s example jurisdiction, or of lack of defense of a statute limitation bifurcation, may lend but affirmative defenses which themselves to when dispute the claim on fact do not. It is merits of a issues of plaintiff’s is- issues of are interwoven intertwined with the fact ex in State by sues raised that the rule we announced defendant Fitzgerald (Mont. 1985), rel. v. Court District 106,] 703 Mont. [217 1061, 42 St.Rep. applies; sepa- P.2d grant of FIG’s motion for rate trials of its an affirmative defenses in this case would have been discretion, abuse reversible us.
Finally, earlier, parties, including as we stated all for counsel FIG, Judge assumed that District had in fact an Henson entered denying assumption past order This bifurcation. mistaken continued Judge the time when McPhillips District a new denied trial after post-trial appeal motions. It not until this that FIG raised the issue that Judge District Henson in Thus had not fact so ruled. is in position asking put Judge Farmers District Court McPhillips point in brought error on a This not his attention. Court looks with raising appeal on disfavor issues on not addressed to the District A underlying Court in trial action. court cannot put error, trial, in be denying on its order for a new on a motion Gar brought matters not to its attention notice or otherwise. See Eclipse v. Grocery diner Company Mont. P. 490.
III. DID COUNSEL FOR ARGU- BRITTON MAKE IMPROPER MENT TO THE JURY? closing argument,
In jury: Britton’s counsel to the stated “. .. And the here is evidence this: Mr. Britton has not been con- any victed of regard criminal offense in this situation . . . .” closing argument, part: said to he . coming “. . And saying we’re not that arsonists hеre and punished they should, by proper shouldn’t be because authori- —ties not some company.” California insurance ground closing arguments The evi- objection to the is that nonprosecution proceeds dence of for insurance is arson cases Company Assurance v. admissible, American Home relying not (3rd Sunshine 1985), Inc. Supermarket, other Cir. 753 F.2d cases. law, provision
The issue arose because of the the stated value 33-24-102, MCA, policy provides the valued law Section which applies part “without criminal fault on the of the insured.” pertinent jury, considering
It was to Britton’s case that policy applicable, also know whether the valued law is should Otherwise, whether under its Britton was without criminal fault. terms, apply. the valued statute would not brought up argument,
Prior to final the matter was to the court follows: conviction, say just get
“MR. DALE: we And then terms of Mr. Britton hasn’t been convicted of criminal offense. Yes, “THE of that.” COURT: and that’s end objection ruling. argument FIG made Brit- made no to this proper in ton’s counsel was the circumstances.
IV. DID BY THE CONSUMPTION OF ALCOHOLIC BEVERAGE JURY THE THE INFLUENCE OUTCOME OF CASE? jury per
FIG invalid se because maintains that the verdict here was “drinking by jury begun.” of a after deliberations have case, jury considering The this record reveals that while the was jury was taken of the asked if it would be to dinner. Some members alright charge yes to have a drink. The told them after bailiff juror receiving approval no from her “boss.” The evidence was that glass during had more and that no than one of wine or beer dinner juror consumption impaired was observed in condition from the an of the one drink. Realty Company
This issue is controlled Wibaux v. Railway Company Northern 101 Mont. 54 P.2d Pacific culpable, party litigant 1175. There this Court that unless is held a consumption beverage by during juror of alcoholic a its delibera tions which is not excessive and which is not shown to have led to a jury miscarriage justice grounds is not for reversal of a verdict. persons serving on a judges While we caution and bailiffs that no beverages, during their deliberation should be allowed alcoholic adopt per in- particularly county expense, se rule at we decline to validating jury presented has made verdicts on the record here. FIG consumption showing glass no that the of one of beer wine jurors during any way influence the outcome several dinner did the case.
V. CONCLUSION. judgment
Accordingly, we affirm the District Court favor of the Bill E. Britton. cross-claimant
CROSS-APPEAL assigns appeal Britton as error in his cross the refusal Dis- attorney’s trict him Court to award nontaxable costs to fees and Act, 30-14-133, under the Consumer MCA. Protection Section verdict, Following made motion Britton for determination the District Court for Consumer Act relief under Section Protection 30-14-133, MCA. Because consideration of Britton’s motion was still pending appeal Court, at the time FIG its filed we reinvested District Judge McPhillips jurisdiction with to determine whether protection February was entitled to consumer relief. On Judge McPhillips findings District and conclu- entered fact regard representation sions law in to the issue. He found that the basis,” of Britton cоntingency was “on a and that Britton’s “attor- neys arrangement.” had made their fee The Court District found 2,841.02 that a spent by plaintiff’s attorneys total of hours were prosecution of the case which was the court determined reasona- ble under the found circumstances. District Court further hourly attorney’s $75.00 an hour was a reasonable rate for services in the attorneys cause. It also found that had advanced $34,654.84, $5,513.26 costs of only qualified of which as taxable Judge McPhillips costs. attorney’s declined fees costs on and further ground $400,000.00 punitive that the damages total award of *25 pay plus sufficient attorney’s fees the nonallowable costs. cross-appeal, argues
On the refusal of District attorney’s Court to award under Pro- fees costs the Consumer punitive rightfully tection Act he damages invades the award which Salois v. Mutual Omaha jury, obtained from and that under of Company Insurance (1978), 355, 1349, 581 P.2d a viola- Wash.2d by unfair tion entitles claims settlement act an insurer aggrieved party to Act. The relief under the Consumer Protection Salois judge agreed applied, district relief for the but denied reasons stated above. proper damages jury in a may
Punitive be a case awarded where guilty oppression, the defendant has been fraud or malice damages example by way addition to actual “for the sake of punishing 27-1-221, the defendant.” Section MCA. The function punitive damages just puni- says is as the statute the office of damages attorney’s tive up is not to make fees or noncоllectible expenses may point, litigant to which a feel On that entitled. District denying Court was error in relief. Court, however, right wrong District reached the result for the
reason. 30-14-103, MCA, part
Section of the Unfair Trade Practices and provides compe- Consumer Protection Act that “Unfair methods of deceptive practices tition and unfair or acts or the conduct of added.) trade or commerce (Emphasis are unlawful.” Under Section 30-14-133, MCA, person guilty practice of an unfair trade under subject damages Section 30-14-103 is ag- to actual incurred grieved party may up which the court its discretion increase three times.
However, the Consumer Protection Act was meant to be inter- preted conjunction interpre- and enforced in guided with and tations of the Federal Trade Commission and the federal courts re- lating 30-14-104, to the Federal Trade Commission Act. See Section interpretation MCA. No of the Unfair Trade Practices and Con- rules, sumer Protection Act regulations can be inconsistent with the and decisions of the Federal Trade Commission Act. Section 30-14- 104, MCA. hand, Act,
On the other the Unfair Claims Settlement Practices 33-18-201, MCA, Section springs from a different source than the part response by Federal Trade Commission Act. It is of a the state to the government respect mandate of the federal that with to insur- companies commerce, ance engaged in interstate the state should provide regulation companies effective of insurance and their practices. 1944, Supreme longstanding United States reversed a Court v. U.S. South-Eastern Underwriters Assoc.
rule
322 U.S.
533,
reh. denied 323 U.S.
64 S.Ct.
88 L.Ed.
65 S.Ct.
26,
Following Congress adopted Act, Regulation the McCarran-Ferguson Insurance *26 9,1945. 1011, seq., 33, The U.S.C. Section March et Stat. enacted regu- McCarran-Ferguson provided Act if states undertook to business, bring in- regulation late the insurance the state would industry exceptions in law surance the state within the to federal relating taxation, provided by the practices anti-trust and trade Service, McCarran-Ferguson Congressional See U.S. Act. Code and 2, (1945), Report Judiciary. Vol. at 670 of on House Committee Under the Act McCarran-Ferguson influence of the insurance promoted regula- commissioners of the code for the states model companies. legislature adopted tion of insurance In our a com- plete chapter recodification of the insurance It included a code. practices purpose adopt- trade and The of in fraud. stated Montana ing practices regulate the trade was law the business of insurance in expressed Congress accordance with the intent of Mc- as Carran-Ferguson 40-3501, (1947). Act. Former Section R.C.M. present Unfair Claims Practices Act code Settlement of our adopted (1977). pur- Ch. Laws of Montana The stated pose of regulate practices act was “to trade the business insurance in with congress expressed accordance as intent McCarran-Ferguson providing defining [the or determi- Act] practices nation all such in this state which constitute unfair competition deceptive practices methods or unfair acts and or or by prohibiting practicés the trade so That defined determined.” language is 33-18-101, now found Section MCA.
Under 15 U.S.C. Section the federal anti-trust laws and practice the federal trade applicable laws are not to the business insurance in the state to the extent activities insur that such of the industry ance regulated are state law.
It will be purpose seen Prac- therefore of the Unfair Trade tices Consumer Protection Act is to conform to the Federal hand, purpose Trade Commission On the Un- Act. other Act, relating companies, fair Claims is to Settlement to insurance provide regulation effective state accordance with the McCarran- Act, Ferguson exempt regulations. so as to federal be from the provisions We therefore of the Unfair Trade hold may Act, Practices and Consumer Protection relied on Britton applied company practices, not respect be with to insurance may must insur be to such relief as arise out of the confined practices. ance code for unfair claims settlement Accordingly, rе- judgment we affirm the of the District Court with spect attorney’s to denial of fees nontaxable costs. further event, appeal we award costs on this to Britton.
MR. JUSTICES HUNT MORRISON and concur. *27 WEBER, separately concurring:
MR. JUSTICE I majority opinion exception concur that I not with the do agree regarding with all of the statements whether the District granted separate Court should have trials on contract tort separate agree issues as set forth in II. I trials are not Part do appropriate paragraph II. as stated the last of Part pointed parties, including majority opinion,
As out in the all of the FIG, Judge the counsel an for assumed that Henson had entered past denying assumption order bifurcation. This mistaken continued Judge McPhillips the time trial on the when denied a new trial after post appeal merits and trial motions. It until this that FIG was not Judge against raised the issue Henson fact had not ruled may agree majority bifurcation. I FIG not with the conclusion that put McPhillips Judge point brought his error on a not atten- prior appeal. join tion and not raised I time of this therefore proper the conclusion that it to re- would not be for this court separate mand for trials.
MR. JUSTICE GULBRANDSON and the HONORABLE ROB- HOLTER, Judge, sitting ERT M. JUSTICE HAR- District for MR. RISON, join special in the concurrence of MR. JUSTICE WEBER. LOBLE, sitting Judge, HONORABLE HENRY for District TURNAGE, dissenting: MR. CHIEF JUSTICE respectfully I judge dissent. The trial did not consider and rule upon (FIG) appellant Group’s sepa- Farmers Insurance motion for rate trial on that motion’s merits. impression
The trial court was under the erroneous that District Henson, case, Judge previously presided in who had had denied repeatedly, judge a cross-defense motion for The trial separate trial. trial, during the case. recognized that he should have severed the Well, example, For he “THE I it’s another said: COURT: think prime example why pur- have been severed this case should added.) poses “THE (Emphasis again, trial.” And he said: added.) here, (Emphasis COURT: If I I’d sever this case.” were over Further, Well, prime just he “THE is another stated: COURT: this example sword cuts why these cases should be severed. That old added.) 28, 1984, deny- ways.” In (Emphasis both his order of June motions, ing post-trial judge trial said: Farmers’ bifurcating into a contract action irregularity “The of not the trial separate point and a is first of contention. tort action Farmers’ Judge pre-trial proceedings herein “District Henson ordered Judge together. contract and tort claim tried This will not disturb Flink, Klaudt v. Judge 247,] P.2d Henson’s order. Mont. [202 1065, suggests may the contract tried to action and the tort be Judge combining questions this gether. wisdom of While very problems proof, claims because obvious arise in added.) Judge (Emphasis will not disturb Henson’s order.” judge the same order of June the trial said: “The prejudiced exclusion of the evidence the Cross-Defendant’s why Another reason Farmers’ defense in the bad faith claim. ought cause to have been bifurcated.” added.) (Emphasis 42(b), M.R.Civ.P., Rule provides as follows: “Separate trials. The court in furtherance of convenience or to cross-claim, prejudice may claim, avoid separate any order a trial of counterclaim, third-party claim, any separate or or of issue or of claims, cross-claims, counterclaims, claims, number of third-party issues.”
This
separate
Court has endorsed
prejudice
the use of
trials to avoid
Railway
State ex rel. Northern
Co.
judicial economy.
and for
Pacific
v.
(1970),
District Court
91,
Monaco v. Cec
145;
155 Mont.
467 P.2d
coni
180 Mont.
Appellant was entitled to have the trial court consider its motion separate for trial on the judge merits. The trial did not exercise his In State ex discretion at all when he failed rule on the motion. rel. (Mont. 1983), McGinnis v. District Court [_ _,] Mont. 1207, 1208, 673 St.Rep. 1858, 1859, P.2d it is said: purpose 42(b), M.R.Civ.P., broad dis- “The provide Rule is to cretion in the handling proce- District Court in the of the trial added.) (Emphasis dures.” judgment of the lower court be the trial cannot sustained when
judge, fact, responsibility under a mistake of abdicated his to exer- 42(b) cise deciding his discretion in a Rule motion. Had he ruled on it, the merits granted repeatedly of the motion he he would have said.
I agree do not majority opinion with the that Britton’s case was only system pleading pos- tried in tort. Under our of notice it is not simply by pleadings sible to determine the issues examination of the ques- alone. Resort must also be had to other sources to resolve this In prepared tion. this cause it is clear that the case was and tried question on the of whether the insurance contract was breached first and second as to judge whether bad faith was involved. The trial so, noted, said as above when in his order of June 1984 he re- ferred to “. . . the contract and tort claim.” added.) (Emphasis Questions jury No. 3 and of the verdict read as follows:
“QUESTION damages 3: Bill NO. What did E. Britton incur as a breach insurance contract result of the Farmers Insurance Group?
“QUESTION (Truck Group NO. 4: Did Farmers Insurance Insur- good Exchange) implied-in-law ance breach the covenant of faith dealing handling its conduct Bill E. Britton’s claim?” fair added.) (Emphasis given replete The instructions to the were references to with parties insurance contract. The of the briefs show that the case and tort prepared theory. This is also tried on a contract interrogatories true pretrial and the answers In the thereto. 23, 1983, May order of it is set forth that of cross-claimant Brit- one ton’s pro- contentions is that he “. . . is his entitled to insurance (Em- insurance contract Farmers . . .” pursuant with . ceeds to the phasis added.) July In judge’s 1983 order of the trial predecessor partial summary judgment, which denied a motion for repeated references are made to the “insurance contract” and it is said: policy, “To recover under the insurance Britton has cross- against Group.” claimed Farmers Insurance FIG’s brief filed on April it is said: Britton has stated a cross-claim responsive pleading
“In his against attempting pol- Farmers to recover under a insurance fire icy issued Farmers for a fire which occurred in horse Britton also claims dam- Ronan, arena located south of Montana. ages alleged bad Farmers, part on the as well as viola- faith Act, tions of the Montana Unfair Claims Settlement Practices Sec- added.) 33-18-201, seq., (Emphasis tion et MCA.” many There are other instances shown in the record which substan- upon tiate the contract and tort theories which Britton’s case was *29 prepared and tried.
Granting separate not have been re- trials under these facts would versible error. The trial court had discretion.” Its decision “broad separate scope motion would not have been limited trial FIG.
Contrary majority opinion, to the the two claims were not so “inex- tricably together woven” their bifurcation would have been re- Fitzgerald State ex rel. v. District Court versible error. The case of (Mont. 1985), 106,] Mont. 42 St.Rep. 703 P.2d cited [217 majority authority “inextricably theory for their woven” did question separate not involve the trials for contract and bad but, rather, faith separate liability claims damages, trials for an entirely different matter. judge upon
The trial predecessor relied an judge order of his which Thus, was never made. he failed to exercise his discretion when de- 42(b) ciding a Rule previous motion for bifurcation. The district judge had never ruled that the contract and tort actions should be together. consequence tried As judge a the trial did not consider issue on recognized its merits. He separate justified trials were but granting separate trial, instead of mistakenly placed his reli- ance on non-existing previous ruling by predecessor his district judge. I would reverse and remand the case to the lower court for separate trials in repeatedly accordance emphatically with the expressed opinion of judge the trial trial of the contract and bad faith claims should have been bifurcated.