*1 GRAF, KAREN Appellant, Plaintiff and CONTINENTAL WESTERN INSURANCE
COMPANY and CLAIMS MONTANA
SERVICES, INC., Respondents. Defendants No. 03-054. October Heard Submitted 2003. April Decided
89 P.3d *2 Shannon, Conner and Daniel (argued) For Dennis Appellant: Shannon, PLLP, & Great Falls. Conner Cathy J. Lewis F. James Respondents: For Robert P.C., Falls Alexander, Great Higgins, Zadick & (argued), Ugrin, Smith, Walsh, & Clarke (Continental); Gregoire, William J. (MCS). Falls Gregoire, Great Bishop (argued), Bishop,
For Amici L. Randall & Curiae: Jarussi Firm, (MTLA); Anner-Hughes, Billings Roberta Law Edwards Twidwell, Bradley Garlington, J. and Kevin A. Lohn & Luck (NAII). Robinson, PLLP, Missoula Opinion
JUSTICE LEAPHART Court. delivered (Graf) summary entered appeals Karen Graf District, Court, Eighth District Court the District Judicial which the that, concluded as a matter of a defense verdict in the Insurance action Western provided Company Continental (Continental) Services, (MCS), and Montana Claims Inc. with et subsequent seq., reasonable basis defense Grafs 33-18-201 (UTPA) MCA, Unfair Trade Practices Act claim. Grafs motions to reconsider, alter or amend the were denied. reverse. Appeal
Issues on jury Does the verdict in the underlying favor insureds in case, appealed and later released of a reserving as settlement claims, provide MCS Continental and with a “reasonable basis” defense to Karen Grafs UTPA claim a matter of law? Does the verdict in favor the insureds in the underlying provide case estoppel” MCS with “collateral *3 to Karen Grafs UTPA claim? 3. Did the Court determining District err in all facts raised
in Karen Grafs faith case were known to her before she settled her underlying claim; and that brought since she could have her allegations of by misconduct the attention of the Court way District 60(b) motion, of a Rule she is from proceeding foreclosed with at UTPA claim? 4. Did finding, the District Court err in undisputed material
fact, that “Continental the liability concluded that of its insureds was reasonably in part upon based the of opinions trucking its expert, Gene Breeden?” Background
Factual and Procedural The District found undisputed material facts to be follows: 14, 1994,
1. o’clock, On approximately October at p.m., 3:00 Plaintiff Graf Karen drove her car 15th southbound on Street and was a red stopped light for at the 15th intersection of Street and Falls, River Drive in Great Montana. time,
2. On the date Armstrong, employee same Daniel an of Ranch, with two trailers driving Goosebill was a semi-truck southbound on 15thStreet towards traveling attached and was River Drive. hill, Armstrong was unable coming
3. While down 15thStreet ran red and rear-ended stop through lights and his truck two by that was stopped the vehicle driven Mr. Steven Cloutier being light. at the second red vehicle, truck Armstrong’s After the Cloutier struck striking
4. pushed the rear of vehicle. Her vehicle was across Grafs Drive, it with a intersection of River collided semi- where proceeding through was the intersection. tractor/trailer that Ranch and therefore Daniel 5. insured Goosebill independent adjusters Armstrong. MCS to Continental retained adjusting portions assist in the claim. dispute, Because were unable to settle their Graf parties
6. Romaine, Armstrong, Raymond filed a lawsuit Daniel Ranch, and Goosebill Ranch designated agent of Goosebill (“GoosebillDefendants”), No. BDV-95-1050. Cause negligently 7. Graf contended the Goosebill Defendants The injuries. caused the accident and her Defendants denied allegations represented was Great Falls negligence. Graf Iwen, attorney John now deceased. of its insureds was not
8. Continental concluded that clear, upon opinions trucking of its based expert, Gene Breeden. jury, tried Honorable Kenneth
9. Grafs case was before 27,1997. at beginning May During Neill on least some presiding, trial, attorney attorney Hartelius Iwen. Channing assisted trial, the close all 10. At Graf moved a directed verdict at for trial, motion. she had Judge evidence. Neill denied that Prior summary judgment that was denied. moved also on 1997. May The entered notwithstanding the verdict 12. Graf then moved for on Judge August trial. Neill denied both motions for new 18, 1997. timely Appeal September filed a Notice of
13. Graf *4 Cloutier, January 5,1998, Sonja who Steven and Beginning 14. on action, in a Cause separate sued the Goosebill Defendants also ADV-96-1274, jury, tried case to Honorable No. their represented The Cloutiers were presiding. Thomas McKittrick Hartelius. attorneys Channing and Great Falls Dennis Conner evidence, Judge In the close of 15. the Cloutier after all negligent as McKittrick ruled the Goosebill Defendants were against a directed matter of law. He entered the issue of negligence. Defendants on January 15, on jury damages 16. The then awarded the Cloutiers 1998. verdict, paid Cloutiers’jury
17. Continental the amount ofthe gave the Cloutiers the Goosebill Defendants a Satisfaction of Judgment was filed on June 21,1998, September
18. On settled her it was Graf case while still appeal, reply to the time brief have been prior her would due Supreme at the Montana Court. provided
19. Grafs settlement that Graf could an action reserve against for “bad faith” The Judgment Continental. Graf part was released as of the settlement. 23, 1999, attorney August Iwen, represented
20. On John who lawsuit, Graf in her trial and her filed appeal, claiming 33-18-242, Continental violated Ann. and Code also alleging infliction outrage claims or intentional of severe emotional distress. Iwen, attorney
21. After the death of John Dennis Conner took over representation Grafs in this lawsuit. Conner’s substitution was filed on October
Discussion jury 1. Does the verdict in of the the underlying favor insureds in case, appealed later released reserving as settlement claims, provide Continental awith “reasonable basis” defense to Karen as Grafs claim a matter of law? In granting summary MCS, Continental
District Court reasoned follows:
This Court finds that the of the verdict for significance jury Defendants, Goosebill special place jury and the as the final system, arbiter of fact our constitutional defense, MCS with reasonable basis as a matter of law. Further, undisputed no UTPA will lie under the material short, statutory facts here. In Graf now bad faith cannot claiming lawsuit jury was has when just opposite. decided system, justice our serves as the final arbiter of the
facts, evidence, with “charged weighing judging credibility *5 70 each case. Edmonson witnesses, a verdict” in reaching
of the (1991). 614, Montana’s Co., U.S. 625 500 Concrete v. Leesville state’s jury in this role of important reflects the Constitution This 26,1972 Constitution. Montana Art. II judicial system. § See underlying in jury’s verdict Grafs second-guess the will not case. that a requirement District Court’s that Graf contends
¶9 a bad faith asserting to liability prerequisite establish plaintiff 33-18-242(6)(b), MCA, only requires claim contrary to is litigation. to faith condition bad precedent settlement as a for factual provides “the law MCS contend that Continental and ¶10 case;” in “that done by jury, and that was disputes to be decided facts, of the credibility deciding the entrusted with jury, conclusion;” the insurer’s witnesses, confirmed liability-ultimately jury’s the face of the proceed to in a UTPA claim and that to allow justice.” system role in our jury’s verdict would “eviscerate with Graf. agree that a assumption on an ruling is based The District Court’s claim; underlying relitigate the claimant seeks to faith or UTPA in the claim and the issues underlying negligence the issues in the that and, thus, rendered a verdict jury if a has the same UTPA claim are suit, have been those issues underlying in the to the claimant adverse is incorrect. assumption This necessarily conclusively resolved. in the the issues from separate UTPA claim are The issues in a 247, 252-53, 658 (1983), 202 Mont. In Klaudt v.Flink underlying claim. 1065, 1067-68, held: we P.2d settle promptly faith and to negotiate good obligation
The Section determined. has been not mean claims does 33-18-203(6) arises when obligation the insurer’s states evaluating “reasonably clear.” liability has become the insurer whether jury must determine insurance This it then had. the facts good given negotiated ultimate apart jury’s separate is consideration added.] [Emphasis action. any given the merits consideration claimant that a UTPA reasoning erred The District Court that an claim and underlying liability on the establish must first reasoning This a claim. necessarily defeats such adverse claimant third-party “[a] provides, the UTPA which in the face of flies after the section until under this may not file an action claimant in favor entered settled or claim has been 33-18-242(6)(b), we held MCA.As claim.” Section on the 71 Dist., 28, 153, 300 Eighth Jud. 2000 MT Mont. ¶ Ins. Co. v. MT Safeco 123, 28, 834, 2 28: P.3d ¶ ¶ 33-18-242(1), MCA, that an expressly Section independent an of action. insurer is an cause See Fisher, 308, 201, 16, 452, 16, MT 991 P.2d 297 ¶ ¶ agree third-party 16. We with Safeco that a claimant who wishes independent required, by such an action under UTPA is statute, until “after claim has been wait settled or [is] entered in favor of the claimant claim.” See Peris generally Ins. Co. Safeco 491-92, (discussing legislative 276 Mont. 916 P.2d *6 (6)(b)). intent language of subsection The of the statute itself provides underlying reasoning. Only third-party those prevail claimants are able to who achieve settlement or at trial may, turn, bring in an UTPA action-meaning meritless UTPA theoretically claims extinguished are before a claim is ever filed. provision The protect serves to both insurers from frivolous claims and judicial economy. facilitate Similarly, Lough in Co. Insurance North America 242 ¶14 171, 789 576, P.2d granted summary judgment district court
in UTPA suit in favor Liberty of the defendant Mutual. The dispositive presented issue on appeal third-party was whether a may claimant maintain a bad faith action an insurer after settling liability with the insured when was not established in the underlying reversing summary case. In judgment we held: 33-18-242(6)(b), MCA,
Section requires entry or settlement prior on the to instigation the bad faith claim. That section not require liability does that insured be established precedent as a condition to the bad faith litigation.
Appellant
in this case alleges violations of subsection
requires
showing of reasonably
no
clear
liability,
subsection
6, which
The District
granting respondent’s
does.
Court erred in
summary judgment
appellant
motion for
basis that
failed
liability prior
establish
to suit.
reverse and
remand for further proceedings
opinion.
consistent with this
Lough,
174-75,
the UTPA faith to effectuate good attempted investigation a reasonable reasonably clear. liability had become of the claim when settlement in the have to establish UTPA, does not a claimant Under the A defense is sufficient. that claim suit; a settlement of finding that jury to a tantamount suit is not verdict in the verdict for Accordingly, jury UTPA. did violate the the insurer law, not, matter of suit does in the the defense 33-18-242(5), MCA. under a “reasonable basis” establish verdict, as a matter a defense ruling argues that Graf defense to a reasonable basis designed the UTPA was abuses claim, the claim settlement promotes agree. deter. We will a defense verdict assumes that rationale The District Court’s to a all facts relevant disclosure of complete the result of always be or half-truths. through obfuscation procured and was not UTPA claim particular at a insurer knows on what the focus The UTPA standards stage. trial, settlement investigative during in time-before point Klaudt, the insurance evaluating “[i]n As we noted given good negotiated the insurer determine whether must apart separate is This consideration it then had. facts Klaudt, action.” any given merits of ofthe ultimate consideration jury’s Unless one assumes P.2d at 1067-68. at 202 Mont. file in the claims everything was aware of negligence suit jury in the is no stages, there negotiation and settlement during investigative did) (as jury’s that the concluding the District basis an the UTPA. Such under all fact issues necessarily resolves *7 are not negligence in suits entirely unwarranted. Juries assumption is correspondence evaluations investigative reports, to all privy way into claims files. find their that is, that very inquiries; address these designed is The UTPA a good make and did the insurer investigation reasonable
was there a claim in of a and fair settlement a prompt to effectuate attempt 33-18-201(6), reasonably Section clear? liability had become which self-serving in the an insurer holding puts The District Court’s MCA. a defense obtaining thereby prohibitions, violating these position as a using that defense claim and verdict on If, matter of as a UTPA claim. subsequent a dismissal of to seek basis claim, insurers defense to a UTPA law, verdict constitutes a defense that, in knowing any cost verdicts at defense encouraged to obtain are Such scrutiny. from UTPA themselves so,they will have shielded doing in precedent policy defeat the embodied the UTPA-that public would is, retrospectively insurer conduct is to be measured adopted by Legislature enacting in the UTPA. We standards in reverse the District Court’s conclusion that a defense verdict Grafs negligence establishes, a matter that Continental and MCS had a “reasonable defense under 33-18- § basis” 242(5), MCA. favor in
¶19 Does the verdict in of the insureds provide case Continental and MCS with a “collateral estoppel” to Grafs UTPA claim? when, The that during pendency District held of her
appeal, Graf chose to settle her claim her appeal and dismiss Court, final collaterally estopped became and she was from “relitigating through Armstrong’s liability” a UTPA claim. ¶21 The District Court reasoned that since there was a final on the the underlying merits in case and in since defendants that case and in the UTPA suit in privity, are “all the elements of collateral have, estoppel” clearly however, applied are met. We three-part test if estoppel determine collateral works bar to (1) litigation: Was the issue prior adjudication decided identical (2) with the presented one in the action in question? Was there a final (3) judgment on the merits? Was party against the plea whom is asserted party or in with a privity party prior adjudication? to the 123, 16, 305 Rausch v. 2001 MT Hogan, 16, 28 ¶ P.3d ¶ The District Court to recognize failed that the first criterion issue) (identity of is The missing. present two suits separate and distinct question issues. The in the underlying suit was whether Armstrong and/or Goosebill were negligent whether damage caused to Graf. The suit question the UTPA is whether the ran insurer’s conduct afoul of the unfair claim settlement practices 33-18-201, MCA, (4), enumerated in specifically subsections (6) (13). fallacy The of the District Court’s conclusion that Graf is collaterally estopped “re-litigating Armstrong’s liability” from is most (4) apparent text of it is an subsection unfair settlement practice pay claims to “refuse to claims without conducting investigation upon a reasonable all available based (4) (6) information.” Unlike subsections is not subsection showing “reasonably liability” linked to clear (whether not) liability suit. Since or a factor in is not (4), one “re-litigate” question subsection does not have to pursuing the claim. *8 that, litigate Graf did not argue although and MCS Continental suit, have been raised” negligence ofbad faith it “could issue Heckerman, identity and criterion is satisfied. Hall thus issue 869, 345, 15, This 2000 MT 15 P.3d ¶ 302 Mont. ¶ ¶ held that argument analysis. not have “a third- does withstand party independent who such an action under claimant wishes to statute, underlying wait until ‘after the claim required, UTPA is to has or a favor of the claimant on judgment [is] been settled entered in ” Co., claim.’ If bad faith claims underlying Ins. Safeco underlying be in the litigated the insurer can and “should” suit, claims at that level plaintiff litigate who fails to such negligence collaterally will claim. estopped pursuing be from a UTPA Such given result would be UTPA does allow claims anomalous underlying to be until the has either settled the claim or filed claimant 33-18-242(6)(b), Rhetorically, why obtained a verdict. Section MCA. only UTPA allow faith claims to be filed after settlement would the (as posits) the claimant or for claimant if litigated of bad faith in the required already were to have the issue alleged suit? Since were not issues underlying Grafs violations suit, have in the there was no negligence which “could been raised” identity of issues. underlying negligence hold that the defense verdict in the
¶23 We estop a UTPA claim collaterally pursuing suit does not Graf from against Continental and MCS. that, the District err in since Graf failed concluding 3. Did 60(b) in Rule in the raise the issue of insurer misconduct motion suit, a UTPA precluded pursuing she is now from claim? District Court that:
¶25 The held alleged that forms the basis Grafs UTPA [TJhe misconduct her became known to Graf before she settled pre-trial these brought allegations She could have case. by way court of a trial misconduct the attention the trial 60(b) Graf is By settling Rule motion. for a bad faith allegations from these as a basis estopped using claim. fallacy set forth This conclusion suffers the same mistakenly is, the assumes that
above-that District Court in the properly litigated are allegations ofUTPA violations focuses on whether the insurer suit. The UTPA suit negligence good attempted investigation conducted a reasonable Section 33-18- equitable settlement. prompt, effectuate fair 201(4) be issues can or MCA. These are not should injuries. suit litigated personal *9 finding Did the Court err in that Continental concluded District ¶27 in liability reasonably that the of insured not based its was upon opinions trucking its Gene Breeden? expert, the of in opinion, its District noted that relied In ¶28 Armstrong part upon trucking expert, its who concluded that was not at fault and did not cause the Graf contends that this accident. conclusion was in error because the record shows that Continental’s liability undisputed. response, beliefs as to were far In it did argued, Continental states that has not and the District Court rule, that opinion not Breeden’s an absolute defense to Grafs Rather, verdict, UTPA jury’s “[i]t claim. is the defense or in alternative, estoppel, collateral that forms of the basis Continental’s ruling.” and the agree District Court’s with Continental appeal legal that this can resolved by addressing significance be of verdict, including the defense of estoppel. issue collateral We need not weight address the be to the expert testimony accorded of Mr. Breeden. Reversed proceedings
¶29 and remanded for further consistent with opinion. GRAY, NELSON, REGNIER,
CHIEF JUSTICE JUSTICES COTTER and RICE concur. specially
JUSTICE WARNER concurring. agree by One, I with the result reached the Court Issue but a different reason. The Court is in its at correct conclusion in a issues UTPA claim are separate distinct from the issues in underlying liability suit. The issue in is underlying suit of the Defendant. In this UTPA claim the issue is whether an insurer claims failing service violated the statutes in a conduct failing reasonable in investigation attempt good in faith to liability reasonably However, settle the claim when became clear. both here, Claims, the Defendants along Continental Western and Montana Court, analyze with the in matter connection with the defense verdict, entry not the of a final judgment. my view, judgment in underlying a final that the insured
suit liable is not to the Plaintiff must have the result that as a matter refusing the insurer not act unreasonably did to settle 33-18-242(6)(b), MCA, important claim. is an purpose Such § states: third-party may
A file an action under this section claimant judgment after claim has been settled or a
until on the claim. the claimant entered favor added.] [Emphasis view, bars language, my third-party statutory This on the if a final is entered in favor the defendant action in favor of the I cannot see how such claim. could achieved without insured Defendant in the action be all available information as investigation upon a reasonable based 33-18-201(4), MCA. Nor could be required was not jury correctly clear if a determined that insured liable. We to be the law. have determined such
Only third-party those claimants who are able to achieve - turn, may, at an UTPA action prevail settlement or trial meaning theoretically extinguished UTPA claims are meritless protect filed. to both provision before claim is ever This serves judicial economy. and facilitate insurers from frivolous claims [Emphasis added.]
Safeco, 28. ¶ third-party This means that those claimants who are necessarily
¶33 Thus, prevail able to trial cannot a UTPA action. the not at that Court’s statements at 15 “A defense verdict in ¶ jurya that the did not finding suit is not tantamount to insurer violate UTPA,” “[accordingly, jury verdict for the defense in the a not, underlying suit does matter establish ‘reasonable MCA,” 33-18-242(5), technically correct, are but basis’ under § misleading. are also the defense Ajury judgment verdict that results in a final bars In subsequent UTPA action on the same claim as a matter of law. instance, holding was the District Court’s error that UTPA claim case bars defense verdict
- judgment. as holding that the verdict the same a final but was judgment upon appealed Graf based this instance Plaintiff verdict verdict. Graf contended for several reasons was Thus, susceptible judgment error. and verdict were result of Both verdict and the being improperly set aside as entered. of no Central consequence. would in such instance be 186, 168, 320 Stockyards Fraser 133 Mont. P.2d Montana 429, 440, (1966), Mont. 981, 991; Great R.Co. 148 O’Brien v. Northern 710, jury’s based 421 P.2d 716. Before final, dismissed, was successful appeal was Graf became and before Thus, claim remains within the achieving her UTPA settlement.
77 33-18-242(6)(b), MCA, summary ambit of judgment dismissing such claim is improper. question There is no parties did not intend to foreclose a
UTPA suit of the settlement agreement. The release specifically provided that it was not to be construed as indicating that any party prevailed on the merits of the action. The District Court was correct that the decision in this case acts
as a disincentive for an company insurance to settle cases on appeal. Yet it is no more aof disincentive settle than the rule that it is an unfair practice trade to condition a settlement on a settlement of a UTPA action. Inc., Shilhanek v. D-2 Trucking, 122, 19, 519, 2003 MT ¶ ¶ P.3d 19. In this instance Defendants opted to settle the underlying though even they were entitled to the presumption that the judgment of the District Court was correct. They necessarily did so in contemplation defending a UTPA claim.