*1 SERVICES TIDYMAN’S MANAGEMENT Washington corporation; LENORA INC., BATEMAN, EARHART, VICKI DAVIS HEALD, YOUNGQUIST, THERESA CAROL GAUSTAD, YOUNG, BARBARA SHARON KYLE MARK MOLES, BAILEY, DIANE RADEMAN, DREW CHADNEY OLSEN, DAN
SAWYER, NAGRONE, THOMAS NAGRONE, NACCARATO, DARRELL PAT
DAHMEN, SELLS, JANELLE TERRI WILLIAM BILL ORTON, EVANSON, TAMMY EVANSON, EVANSON, LARRY THOMPSON, GUICE, GUICE, JASON JAMIE RICK SQUIBB, BAILLIE, LAURA JEFFREY TUCKER, TUCKER, AMY MARYBETH WETSCH, STOCKTON, LAURA JERRY
STREETER, KUHN, CLARA NANCY TED McDONALD, NUXOLL, CINDY NUXOLL and DEAN CARLSON, individuals, Appellees, Cross-Appellants, Plaintiffs,
v.
DAVIS;
MICHAEL A.
MAXWELL;
JOHN
Appellees,
Defendants
NATIONAL
FIRE
UNION
INSURANCE
PITTSBURGH, PA;
COMPANY OF
1-10,
JOHN DOES
Appellant.
Defendant
DANo.
13-0228.
April
Submitted on Briefs
2014.
August 1,
Decided
2014.
For John L. Monte Beck and Anthony Jackson, Amsden, PLLC, Bozeman; F. Beck & G. Patrick Schneider, Hagestad, Perry Steinbrenner, Mtlodragovich, Dale & (Attorneys PC, Plaintiffs, Individual Appellees and Cross- Missoula for Appellants); Gregory Munro, Law, Attorney Missoula; S. at William (Co-counsel Law, Appellees Leaphart, Attorney W. at Helena for Cross-Appellants); Black, Office, Michael G. Black Law Clinton (Attorney Tidyman’s Management Services); King, James B. for Evans, Lackie, P.S., & Spokane, Washington; Craven Kathleen L. DeSoto, Robinson, PLLP, (Attorneys Garlington, Lohn & Missoula for McPhee, Witherspoon, & ); WorMand A. Davis James A. Michael Firm, Hoistad, Law PLLC, Washington; A. Hoistad Dean Spokane, Maxwell). PLLC, (Attorneys John Missoula for Moore, Cockrell, Cockrell, R. For Amicus Curiae: Dale P.C., Sheehy, Sheehy Axelberg, Kalispell; Martha Goicoecha & Lawyers Trial Firm, Billings (Attorneys Law Montana Defense for Wilspn, Firm, Association); Rogers Jon A. Brown Law Guy W. P.C., (Attorneys Independent Association Billings National for Attorneys, Adjusters); Amy Eddy Sandler Trial Eddy, Insurance Firm, PLLP, Trieweiler, Terry Trieweiler Law Whitefish Kalispell, Lawyers Trial (Attorneys Policyholders United and Montana for Association). Opinion of the Court. WHEAT delivered JUSTICE Pittsburgh, Company National Union Fire Insurance (NUFI) Montana Fourth Pennsylvania appeals from the order of the Court, County, granting Judicial District Missoula summary judgment stipulations motion motions to approve part, entry accordingly. and enter We affirm judgment with part, proceedings reverse in and remand for consistent Opinion.
ISSUES following address the issues: ¶2 We Montana,
1. correсtly Did the District Court conclude that rather Washington, applied law in this case? than concluding 2. District err in that NUFI had Did the Court under analyzing breached its without defend policy? denying hearing 3. District err in NUFI a Did the discovery and collusion related to the reasonableness settlements? interest, awarding pre-judgment Did the District Court err accruing? interest began its determination when the AND BACKGROUND
FACTUAL
PROCEDURAL
*4
May 21,
Tidyman’s Management
and
plaintiffs
On
(Davis)
(TMSI)
complaint against
filed a
Michael A. Davis
Services Inc.
(Maxwell)
capacities
and
officers and
John Maxwell
their
Tidyman’s
complaint
subsidiary,
ofTMSI and/or its
LLC. The
directors
arising
merger
out
between
alleged
corporate
duties
of a
breach
LLC,
requested
Tidyman’s
TMSI
which created
and
SuperValu,
damages
attorney
merger
The
punitive
fees.
at issue occurred
financial
from
despite advice
advisor TMSI had retained that the
sold,
company
complaint alleged
should be
and the
that the directors
officers,
Maxwell,
including
misrepresented
Davis and
had
Washington corporation
merit
the transaction. TMSI is a
with its
Montana,
principal place
ofTidyman’s
of business in
and is a member
Essentially,
LLC.
shareholders
TMSI.
employee
own
8, 2007,
January
plaintiffs
On
had filed a
in federal
complaint
alleging
Employee
Security
court
violations of the
Retirement Income
(ERISA). They
complaint
Act of 1974
amended their
in December 2007
allegations against
to include
the officers
and directors
TMSI for
corporate fiduciary
breach of
In
duties.
the course of the federal
litigation,
ERISA claims settled. The
also settled their
against
TMSI, except
claims
the officers and directors of
for those
against
claims
During
litigation,
Davis
Maxwell.
the federal court
provided
through
NUFI
a defense to Davis and Maxwell
their
(McPhee).
counsel,
respective
Kang (King)
James
and James McPhee
settlements,
After the
the federal district court dismissed the federal
prejudice
court аction without
after declining
supplemental
to exercise
jurisdiction
to 28 U.S.C. 1367. See
pursuant
over the state law claims
§
Davis,
Nagrone
v.
CV-07-04-M-DWM-RKS,
No.
2010 U.S. Dist. LEXIS
(D.
Nagrone Davis,
v.
21, 2010);
Apr.
Mont.
No. CV 07-04-M-
(D.
DWM-RKS,
14, 2010).
incurred in their positions ofTidyman’s as officers and directors LLC. Policy, Pursuant provided legal defense for Davis and throughout the federal court litigation. When the plaintiffs court, they filed state plaintiff added TMSI as a their suit Davis and Maxwell in their capacities as directors and officers of the LLC—of which TMSI was a member. On August after the litigation commenced, (Lermond), state court had Jessica Lermond who Claims, (Chartis), worked Chartis Inc. managed which claims on NUFI, behalf sent a letter to counsel for Davis and Maxwell asserting that NUFI would no longer cover defense costs in the matter. coverage upon She based the denial of the “Insured v. Insured” 4(i) exclusion set forth Clause as amended Endorsement #13 of Policy, stating: *5 4(i) [by] as amended Policy forth in Clause As set any payment make 13,, not be hable [NUFI] shall Endorsement (other an than Insured brought by any for Loss which Claim) byor a Securities solely respect to but with Employee, of the security holder by any brought or which is Company; security unless such derivatively, or directly Company, whether of, totally independent instigated and continued Claim is holder’s of, active of, or assistance the solicitation totally without .... of, Insured or intervention participation that foregoing, appears that on the Please note based Fourth 21,2010, in the Montana May [sic] filed in on Complaint Policy District, implicate not County ofMissoula does Judicial Lermond’s conceded that NUFI has ensuing litigation, In the understanding corporate a flawed incоrporated interpretation structure. 12,2010, letter, August on and Maxwell received this After Davis complaint to add NUFI as TMSI amended their plaintiffs until Lermond’s alleged TMSI that
defendant. Policy under the 5,2010, letter, provided had a defense August NUFI claims, the previous to their Maxwell. In addition to Davis and declaratory judgment sought TMSI also plaintiffs and under the Maxwell was covered liability asserted Davis and Policy. 2, 2010, counsel, King, a letter to sent September On Davis’s pay continue to defense inquiring
Lermond as to whether NUFI would action, options: so he could advise his client about his costs for the pay to continue to for going whether the carrier is Please advise including trial and through of defense of this matter the costs fees, expenses, etc. Your attorney's expert to include reasonable you left a voice mail coverage letter states that there is no but paying about “a Motion Dismiss.” letter on respond, King up sent a follow When Lermond failed to my September to up “This will serve as a follow September 2010: I this matter. would correspondence your regarding [sic] 2nd September forthwith.” On question posed to the appreciate answer coverage. for lack of While filed a motion to dismiss and, “forthwith” respond failed to pending, motion was Lermond McPhee, counsel, obliged to 26,2010, send on October Maxwell’s requesting a King, again a third letter on behalf of himself and response pay as to whether the insurer would defense costs. On 28,2010, explaining: October counsel Chartis contacted McPhee you letter to “[biased Ms. Lermond’s she advised May 21,2010, Complaint longer any coverage filed on there is no Policy.” Accordingly, for this matter under the since there is no going National Union not to continue to coverage, pay costs of defense of this matter. day, King containing
The same received a letter from Lermónd language. same Both letters invited the counsel to submit might documentation or other information that show NUFI’s *6 position was in error. Meanwhile, 25, 2010, on October King “stipulation filed a
resulting coverage” court, from refusal provide insurer’s to with the his recognizing inability pay client’s to for a defense and need to protect stipulation himself. The provides that Davis is an insured Policy; damages under the that 29 million sought dollars for alleged fiduciary director; Davis’s breach of duties as an officer and/or that wrongfully NUFI has denied a defense to Davis and Davis lacks himself; to assigns rights, the funds defend that Davis all claims and plaintiffs; causes of action NUFI to the plaintiffs and that the judgment against will not seek to execute personal Davis’s assets. The plaintiffs approve and TMSI filed a motion to stipulation entry that for 5,2010. judgment 19,2010, of on November On November Allan Baris (Baris), NUFI, representing King sent and McPhee a advising letter of “changes [NUFI’s] them to from position that set forth in 5, August Jessica Lermond’s letter of provided 2010.” The letter Maxwell, NUFI would subject advance defense costs to Davis and to a 29,2010, full of rights. reservation On November the plaintiffs, TMSI filed stipulation an identical to the one with Davis and approve moved to the stipulation entry judgment. for of day, That plaintiffs same moved for summary judgment, alleging that NUFI had breached its to defend Maxwell and Davis stipulated and was liable for the plaintiffs, settlement between the TMSI, 16, 2010, Davis and Maxwell. On December NUFI filed a request for evidentiary hearing jury demand on the two motions approve stipulations 23,2010, entry judgment. On December 26(c) NUFI moved for a protective pursuant order to M. R. Civ. P. postponing discovery until after the court had ruled on NUFI’s motion 10, 2011, On dismiss. June the District Court on ruled several motions, denying NUFI’s motion to protective dismiss and motion for a July order. On NUFI moved for application Washington motion. On Court denied law. The District and Delaware discovery requests 2011, served a number NUFI November order to avoid protectivе for a moved plaintiffs plaintiffs. certain compel later moved requests. complying with 10,2012, NUFI February denied. On request depositions and claims plaintiffs’ that the grounds on the summary moved standing lacked by the and that not covered were a covered claim. to assert motions for argument on the Court heard oral The District approve the motions to
summary judgment and hearing, parties both At the on December stipulations related to the reasonableness arguments presented following: were the plaintiffs’ arguments Among settlements. amount, eveiy year, Mike to the respect [W]ith MR. AMSDEN: And there were five valuations sign a valuation. Davis had Young, performed some by Ernst and performed some about performed on an And those were Columbia Financial Advisors. annual basis.... analyze firm is Tim do from the Galusha
So what we had Sather for the assets those, up and come with value put together, them sought and the million, the amount we which is about people these lost. today. It’s the amount amount we seek a little more wondering you if could discuss THE COURT: So I’m establish, or any need sort of evidence this idea that we don’t to cross- to allow NUFI opportunity evidence or additional *7 mean, why I of the settlement. challenge examine or the amount to, if I listen not even something that at least should is that not should consider? jury question, on interesting question. depending And
MR. AMSDEN: That’s an says, framed, Judge Molloy absent [federal Court] District how it’s fraud, probably You stipulated judgment the is enforceable. language, which slightly Court used different Supreme noticed the said, collusion, is stipulated fraud or the absent deny to its insureds company To allow an insurance enforceable. defense, go then plaintiffs its insureds and require we of, merits, purpose case on the defeats establish same insureds, you your says, you provide if don’t a defense rule that yourself. one to provide can’t planned those they The rеason had to commission
MR. MUNRO: they John appraisals, you, the five that showed is because had they to the pay planned determine how much would out pensioners. they exactly And to do that have to know what the Sather, plan any given expert, simply is worth at time. So our took adopted the most of them the figure, those and conservative as thing only only being and that’s the that’s was the basis for —that stipulated judgment.... what was filed here as a [Sjecondly, I presumption, want to address Montana’s reasonable, bothering settlement was because I can tell that that’s said, the court. And as John since we said the settlement is no presumed plaintiff prove reasonable. There’s burden reasonable, on the it’s the burden is Defendant. The Defendant may inquiry attack and show that it’s unreasonable. And the is simply whether the settlement was fraudulent or collusive. This counterintuitive, may actually seem but there’s some real wisdom the rule for a couple behind reasons. responded arguments: with its own Now,
MR. plaintiffs argued MACDONALD: have that Montana submitted, Interestingly, law has to apply. they and I heard numerous, counsel, from opposing proposed findings references in they’ve Notably, proposed asked this Court enter. in their own court, findings they they asked the [ac]knowledge that it can’t be collusive, and that it fair must be and reasonable and within the range expected jury verdict. That’s right from their own proposed findings they’ve you they asked to enter. And admit the stipulation length must be the negotiations. result arm’s And there are Montana cases like recognize Sell that a hearing required. reasonableness Mr. And Zadick will address —he’s far more I experienced than am and has knowledge cases, of all the Montana and I’ll let him address those .... I think question So that the court raised and important is why they Why they do resist it? having do resist a reasonableness hearing? collusion We think it’s because the fact even what we got today, discovery although and we haven’t taken the in— plaintiffs asking are for million stipulated judgments, dollar I gotten pages think produced. pages we’ve documents production we’vereceived so far. we think the stipulations So are unreasonable. presented arguments why
Mr. Macdonald also settlement amount was unreasonable: Three ofthe other directors sued 100,000 each; had settled for dollars had previously tried *8 million dollars; improperly for 4 the suit was settle Davis to with ofthe LLC officers or directors and Maxwell as brought against Davis by TMSI; and that the made decision was because the business had in favor the employee shareholders voted majority of the the co-counsel, Zadick on law expounded Mr. transaction. His in Montana: settlements governing stipulated reasonableness [Tjhere require[s] from guidance MR. the courts ZADICK: to or not the amount was of whether determination reasonable. Cream, case, it was revitalized Independent Milk It was
my Judge Hatfiéld cited it. also case in Grindheim where today. It’s in the Keating, yet which hasn’t been addressed cited stated, Independent But in Milk and Cream the court briefing. stated, good “A quote, recovery the Court suffered Supreme obligation as the amount.” The the faith is conclusive faith; what that mean? it good indemnitor. Suffered in does Was comes appropriate? Along fair? it it the Was reasonable? Was decision, the Court determined “the Keating [in which having policy, under the in no defendant denied position effected negotiations to criticize the settlement plaintiff, paid excessive.”]... unless amount settlement is . guidance Supreme So It there’s the from Court. can’t be excessive. It can’t be unreasonable.... ways challenge
So there are it and there is evidence on already having had reasonableness in the record without opportunity go discovery. forward with 4, 2013, Januaiy On grantеd the District Court motion summary approve stipulations and motions entry ofjudgment. Notably, the District Court concluded that Montana law impose any duty upon case did not court to consider the stipulated agreement, reasonableness of the amount of the and that Nonetheless, argument NUFI’s speculative. collusion was District was upon noted that settlement amount based estimated time, citing value at of the SuperValu merger, TMSI and Tim (Sather) retired, opinion. Although Sather’s Sather had since his supporting opinion prepared part previous affidavit his of the Having litigation part ofthe record before the District Court. ruled Court, in favor plaintiffs, the District on March that the entitled to on prejudgment concluded were interest 4,2013. beginning January appeals NUFI award plaintiffs cross-appeal. and the *9 OF REVIEW
STANDARDS
law, including interpretation
This Court reviews de novo issues of
¶13
law,
contract,
summary
on choice of
and
of an insurance
decisions
Co.,
rulings. Newman v. Scottsdale Ins.
125,
MT
20-
¶¶
2013
133,
24,
grant
deny
348. The
to
370 Mont.
301 P.3d
decision
interest
reviewed to determine whether the district
prejudgment
is
Constr., Inc.,
Crazy
the law. DiMarzio v.
Mt.
correctly interpreted
court
231, 23,358
119,
DISCUSSION Montana, correctly Did the District Court conclude that rather Washington, applied than law this case? appeal, argues incorrectly On that District Montana,
applied Washington, rather than law. NUFI relies on Co., Mitchell v. State Farm Ins. 102,315 281,68 MT 2003 Mont. P.3d Co., Modroo v. Nationwide Mut. Fire Ins. 703; 275, 345 MT Mont. Exch., 262, 191 and Tucker v.Farmers Ins. 389; 247, 351 P.3d 2009 MT argue Mont. 215 P.3d to that should Montana law not control only anticipated place because Montana is of performance insurance contract factors used to determine which state has the significant relationship support application most to the issue do not of Montana take opportunity clarify governing law. We to the rule resolution of conflict of law issues where an insurance contract does not provision. contain a choice-of-law Conflicts between an insured and an generally insurer are Mitchell, Mitchell,
resolved contract law. 16. In we forth set process for analyzing a conflict of laws issue when an insurance provision. explained does not contain a choice-of-law We that where a specify contract does not apply arising the law that will to an issue contract, from a using the matter should be determined the law of the significant state has the relationship” which “most to the transaction Mitchell, parties, respect with to that issue. 17-18. In ¶¶ (Second) we relied on 188 of the Restatement rule, setting forth this § Laws, provides: which of Conflict of (1) rights and the of parties respect duties with to an issue in contract are determined the local of the state law which, issue, respect significant with that has the most relationship parties the transaction under Principles]. [Choice-of-Law in 6 principles § stated (1971). (Second) of the Section 6 Laws § Restatement Conflict of court, to constitutional subject “[a] provides that Restatement on choice own state restrictions, statutory directive of its will follow directive, other statutory there no such and that where of law” (Second) Laws may considered. Restatement factors be Conflict of 28-3-102, MCA, statutory directive provided 6. We concluded § § occurred ofthe contract apply performance if Montana law should provides “[a] Mitchell, 28-3-102 18-23. Section in Montana. See ¶¶ place ofthe usage according to the law interpreted is to be contract or, place indicate a if it does not performed where be it is place where usage the law and according to performance, contract, we in the insurance Interpreting plаce performance made.” place designates contract that where an insurance observed arises, occurs performance claim state where a performance be Mitchell, (citing Kemp v. judgment. obtains where the insured (1979)). 20, 24 Because Co., 526, 533, 601 P.2d 183 Mont. Allstate Ins. *10 Montana, and the Montana, occurred in performance in the claim arose Mitchell, 22-23. controlled. See ¶¶ statute Mitchell, did not overrule Mitchell in Modroo. We We discussed a court determines rather, analytical process where explained the but provision. contract’s choice-of-law to enforce an insurance whether select an effective Modroo, fail to contracting parties 54-56. Where ¶¶ the Restatement 188 of provision, explained, we § choice-of-law Mitchell, 28-3-102, MCA, decision in and our governs. Consequently, § analysis the insurance may reach such when control. Before a court however, court must the provision, a choice-of-law contract contains has a adopts the contract the state whose law determine whether Montana, pursuant than materially greater interest the issue Modroo, 187 of the 58. Section 187-188 of the Restatement. ¶ §§ pertinent part: provides Restatement
(2) their parties govern the of the state chosen The law particular if the applied, will he even rights contractual and duties by an could not have resolved parties is one which the issue issue, unless to that agreement in their directed explicit provision either
(a) relationship parties to the state has no substantial the chosen basis for the no other reasonable or the transaction and there is choice, parties [sic]
(b) contrary to state would be of the law of the chosen application materially greater which has a a state a of fundamental state in the determinatiоn of the interest than the chosen which, be the under the rule would particular issue of§ choice applicable state law in the absence of effective of of parties. law 187(2) added). (Second) (emphasis Laws §
Restatement of Conflict of n 188(2) Modroo, of the we examined the factors set forth § “materially greater to determine Montana had a Restatement whether Ohio, the insurance contract’s chosen state. interest” in the issue than Modroo, 58-59. Those factors are: ¶¶
(a) (b) contracting, place negotiation of of of the place (c) (d) contract, the location of place performance, of (e) contract, domicil, residence, subject matter nationality, place incorporation place of of business of the parties. (citation omitted).
Modroo, Our observations about ¶ performance in the of significance place occurred context Modroo, determination. See 62. Because we determined that the ¶ case, governed insurance choice-of-law provision contract’s we Modroo, analysis. did not reach Mitchell See analysis Mitchell set forth the rule for conflict of laws in the insurance context where the contract at issue does not contain a choice- provision. provide process of-law Modroo built on that decision to determining enforce a provision, process whether to choice-of-law and a analysis provision. where a court declines to enforce such a This significance Tucker, misstated our decision in Modroo in recently stating adopted significant “[w]e the "most relationship’ (Second) in the approach contained Restatement Laws Conflict 188(2)] applicable to determine the state in determining law [§ Tucker, choice-of-law conflict in contraсt disputes.” (citing 41¶ 50). Modroo, then a materially greater We launched into interest analysis, though even the contract at issue in Tucker not did contain Tucker, provision. analyzed choice-of-law 43-47. We ¶¶ *11 of significance place performance of as one of the factors in the materially greater analysis, Mitchell, interest though place even voider Tucker, performance of should have controlled. See 45. This was in ¶ error. pointed The U.S. District Court for the District ofMontana out
¶19 problems the with our Tucker in Am. decision Great Assur. Co. v. (D. Co., 1158, 1164 Prop. Supp. Discover & Cas. Ins. 779 F. 2d Mont. 2011): in approach questions “Montana’s choice-of-law insurance disputes fairly Supreme was settled before the Montana Court’s
93 straightforward [Tucker]” explained that decision in court question Mitchell would have resolved the choice-of-law application oí Co., Am. Assur. Supp. F. of Montana. Great. 2d in Tucker in favor interest” test “materially greater the applying at 1167. In factor-based the Tucker continued, applied, Idaho law to conclude Modroo, of that test in application the paradoxically cited when choice- Modroo presence of a contractual premised entirely Co., Am. F. at 1168. The Great. Assur. Supp. 2d provision. of-law place of Tucker's discussion significance analyzed court also “Tucker seemingly misapplies analysis, concluding: performance its road, in Modroo and it a one less reasoning presents different Co., Great. Assur. Am. traveled, F. the earlier fine of cases.” than 1168. We conclude that Tucker the rules Supp. misapplied 2d from at Modroo, suggests Mitchell extent it and should be overruled to the factors the rule from “materially greater supplant that interest” Mitchell not an contract does contain choice-of-law where insurance provision. however, Despite precedent, this somewhat-convoluted correctly
trial in the instant resolved choice-of-law court case issue. and to Mitchell 28-3-102, MCA, in concluding The trial court cited to § “[t]he controls dispute, observing Policy that Montana law ” ‘anywhere place performance indicates that the in the world/ anticipated trial court an Accordingly, the reasoned Montana was place performance applied. agree. law Because Montana We contract provision, did not contain choice-of-law Montana was an anticipated place performance, and this action involved Montana brought workers who suit in Montana and to a settlement Montana, 28-3-102, See § agreement applies. MCA; Montana law Mitchell, 18-22. ¶¶ 2. District concluding Did the Court err had defend, duty
breached under analyzing coverage its without policy? The duty complaint against to defend arises when insured which, Farmers Union
alleges if proved, coverage. facts would result Mut. Staples, Ins. Co. v. MT 108, 21, 321 99, 90 P.3d Mont. It is “independent indemnify from and than the broader created Staples, by same insurance contract.” 21. The “can arise through pleadings, when insurer receives notice of a covered risk discovery, through ready final notice of issues declared trial.” Co., Nielsen Ins. 05-47-M-DWM, v. TIG No. Dist. CV 2006 U.S. LEXIS (D. (D. 4, 2006) adopted at 442 F. May Supp. *6 Mont. 2d 972 *12 94 “ 2006). 31, alleges which May complaint
Mont.
‘Where a
facts
coverage
policy
a risk outside the
of the
but also avers facts
represent
covered,
which,
duty
if
proved, represent a risk
the insurer is under
”
Co.,
Staples,
(quoting
21
Atcheson v.
Ins.
165
defend.’
¶
Safeco
(1974)).
239, 245-46,
549, 552
Mont.
527 P.2d
Policy
narrowly
recognition
exclusions must be construed
ofthe
protective purpose
policy
fundamental
of an insurance
and the
obligation
provide
Staples,
of the insurer to
a defense.
22. The
¶
perspective
insurer must construe factual assertions from the
of the
perspective. Staples,
rather than from its
insured
own
22. Unless
¶
“unequivocal”
against
there exists an
demonstration that the claim
an
policy’scoverage,
insured does not fall within the
insurance
insurer
Staples,
has a
to defend.
22. It is well-established that where an
¶
unjustifiably,
insurer refuses to defend a claim and does so
the insurer
from
estopped
denying coverage
and becomes liable for defense costs
cases).
judgments.
Staples,
(listing
See
27¶
words,
insured,
In other
where an insurer refuses to defend its
at
peril.
Independent
does so
its
See
Milk & Cream Co. v. Aetna Life
(1923) (“The
Co.,
152, 157,
1109, 1110
Ins.
68 Mont.
216 P.
refusal of
unjustified
insurer to defend the action was
and it did
at
so
its
reason,
peril.”).
previously
For this
we have
recommended that where
an insurer believes it is not required
provide
a defense under the
policy,
prudent course of action is to defend the insured under a
rights
declaratory judgment
reservation of
and file a
action to discern
coverage.
301,
See State Farm Mut.
Co. Freyer,
Auto. Ins.
v.
2013 MT
37,
403;
372 Mont.
312 P.3d
Palmer Diacon v. Farmers
¶
Ins.
Exch.,
91, 102-03,
(1993);
261 Mont.
861 P.2d
902
see also
Newman,
(providing
that the
participated
insurer could have
¶
while,
meantime,
mediation or
negotiations,
settlement
in the
seeking
a declaratory judgment
that it had no
of indemnification under
(“If
policy);Staples,
[the
dispute coverage,
insurer] wished to
it could
Staples
rights
have defended
under a reservation of
and later
sought judicial
through
declaratory
determination
judgment action
existed.”).
to determine
whether
“Montana
clearly provides
case law
that where the insurer
refuses to defend a claim and
unjustifiably,
does so
insurer
(internal
becomes
judgments.” Staples,
liable
defense costs and
20¶
quotation omitted);
Co.,
v.
see Lee USAA Cas. Ins.
2004 MT
Moreover,
“[an insurer]
320 Mont.
policy that the determination First, the District Court’s contends that NUFI ig erroneous and federal suit is “the same” as the state action instant if the two Next, argues that even NUFI reversible error. constitutes analyze by failing to same, Court still erred the District cases were the requirement that impose to persuade to us coverage. attempts NUFI coverage finding before breach analyze policy court must a district Our case NUFI’s invitation. accept would duty to defend. The Dissent instead, is however, question, threshold law, clear that the makes that, if alleges proven, facts the insured complaint against whether any “[I]f 21. there is coverage. Staples, See trigger policy would must disputes factual coverage, to those to the facts relevant dispute coverage.” Staples, be resolved favor claims Davis effect, matter whether the it does not litigation federal and state were the same both the and Maxwell —all Policy was on notice that NUFI was
that matters is whether Policy was on notice that the If NUFI was potentially implicated. Staples, See triggered. to defend was duty implicated, potentially recognized, beginning the District Court 20-24. As ¶¶ explained The District Policy implicated. was saw that in federal court complaint amended the Plaintiffs filed their “[w]hen as officers capacity in their аgainst Davis and Maxwell alleging claims action, court directors, in this state the same claims at issue and arose defense for its insureds provide [sic] National Unions’ (Emphasis .” coverage under the potential was a as there added). throughout the federal Davis NUFI defended after the state suit was letter confirms that Ms. Lermond’s litigation. potentially NUFI, Policy was still filed, although aware triggered, had been which Policy that a exclusion concluded implicated, The letter on precluded coverage. “[B]ased further states: any Complaint May longer coverage filed there is no added). Policy.” (Emphasis Although this matter under the the letter provide legal invited factual or information to refute counsel NUFI’s coverage position, subsequent McPhee observed in a communication pursuant to this Court’s decision in In re the Rules Professional Conduct, 110, 299 321, 2 2000 MT Mont. P.3d insurer was not client and not obliged provide “input his he was the insurer with analysis. corroboration” for its coverage respond, NUFI did not letter, attorneys’ following pay communications Lermond’s did not attorney’s fees, thereby providing declined to continue a defense. actions, significance If there was doubt as to the of NUFI’s dispelled by doubt was the October 2010 letter to McPhee from Chartis, in unequivocally which the carrier stated that “since there is coverage, no not going pay [NUFI] is to continue to costs defense Finally, recognition of this matter.” the insurer’s Policy that the was when, potentially implicated was cemented after the first filed, settlement had been it receded from its position and agreed rights. to defend under a reservation of These facts show that Policy NUFI saw that the implicated, but refused to provide a defense thereby breached its to defend. If we were to hold the District Court in error for failing analyze
coverage, as the urges, providing Dissent we would be insurers with an requirement avenue to circumvent the clear imposed by precedent our that where the policy insurer believes a exclusion applies, it should rights defend under a reservation of and seek a determination of coverage through declaratory judgment a action. Where an insurer policy precludes believes a exclusion coverage, our case law is clear as to the prudent process e.g. NUFI, to follow.See Staples, instead, 28. ¶ took by refusing its chances to defend Davis and Maxwell in the state liability action. NUFI cannot avoid for the settlement agreement by attempting to convince this Court it necessary was to analyze coverage Policy under the determining before it had breached when, duty the to explained many before, as we have times defend— proper process analysis to seek such through declaratory a judgment action. of Many arguments and urge NUFI the Dissent analysis we address call for that proper would have been had NUFI process adhered to the correct and declaratory judgment filed a action coverage they to discern proper stage are not at this —but proceedings. Research, Travelers Cas. & Sur. Co. v. RibiImmunochem MT 174, 469, support NUFI’s provides no 326 Mont. P.3d coverage analyze required to Court was argument that District case, In that this duty find a to advance defense costs. before it could a claim was not a court’s decision that Court indeed affirmed district the insurer had duty and no to defend arose—where by policy covered a a reservation and the insured under already defended indemnified Co. Co., Cas. & Sur. does rights. Cas. & Sur. 45. Travelers Travelers that, policy a not an insurer invokes a contention where support insured, court must declining'to an a district exclusion defend duty its analyze coverage determining the insurer has breached before “unequivocal” there an demоnstration Only to defend. when has been analysis a is such relevant is not within the claim not Staples, That is to a court’s determination. See district case here. Auth., v. Ins. cites Geraldine Mont. Mun. The Dissent also Town 267, 198 14-33, and Grindheim
2008 MT 347 Mont. P.3d ¶¶ Am., 794, 801-08(1995), support to Supp. v. Ins. Co. 908 F. its Safeco finding position analyze policy coverage a court must before duty Although a to cases the courts insurer is under defend. those analysis analyze policy coverage, necessarily such is not elected case, required. recognized complaint the insurer Policy Policy “no potentially implicated when concluded longer” coverage for Maxwell because ofthe “Insured offered Davis and again recognized Policy implicated v. Insured Exclusion.” It was when under coverage position it revised its elected to defend a . rights, stipulation. the insurer following reservation of the first Where recognized complaint implicated Policy itself potentially required defense, analysis no provide it to we can see need for further duty conclude the defend was invoked. The District Court’s language that a arose from determination to defend the contract necessary. no adequate analysis policycoverage was further was Finally, preclude finding the Dissent concludes that fact issues effectively sought that NUFI breached the because it defend lack coverage determination when it filed its motion to dismiss for represented Davis at all coverage, and because Maxwell and were dismiss, however, agreed only times. for a motion to pay while to defend pending, that motion failed its insureds advance Schwan, *15 defense costs. Unlike State Farm Fire & Cas. Co. v. 192, 308 216, 371 MT whether an Mont. P.3d where issue was insurer where another insurer duty had breached to defend was defense, actually being paid already providing attorneys were not (or being by) their clients reimbursed in this matter. insurer declaratory if were to an insurer’s motion to dismiss as a Even we treat still breached judgment action —which we do not —NUFI would have rights by failing to defend to defend under a reservation of awaiting judicial coverage. while determination argues finding coverage NUFI also that the District Court erred ¶32 by estoppel. Specifically, argues NUFI that since Davis and Maxwell times, coverage by estoppel apply. were defended at all should not NUFI further contends that on which the cases District here, distinguishable relied are from the facts at issue and that we judgments should not sanction excess without consideration of bad Finally, faith. NUFI that the District Court asserts should have taken fashioning equitable into account the “unclean hands” in relief. found, agree, The District Court unjustifiably we that NUFI
refused to to provide continue a defense to Davis and Maxwell. Although Policy NUFI was on notice that potentially was 5, 2010, implicated, very August it made clear in its and October 2010, letters that it would not defend Davis and Maxwell. It was not agreed until November that NUFI to advance defense costs however, under a of rights. By point, reservation Davis had already stipulated to a settlement and way Maxwell was on the Moreover, reaching an identical stipulation. litigation, the instant understanding NUFI has admitted that the corporate structure upon originally which based its refusal to defend was in error. Since unjustifiably defend, NUFI estopped refused to it is now from denying coverage. Staples, 28. Our require case law does not consideration of additional factors to determine exists when an insurer has breached its argument defend. NUFI’s concerning bad faith in encompassed excess in the discussion below. 3. Did the denying District Court err in hearing NUFI a discovery on reasonableness and collusion related to settlements? argues that the District Court by approving erred the 29
million dollar without allowing hearing award NUFI a or discovery stipulations whether were reasоnable and non-collusive. NUFI argues the District applicable Court misread case law in concluding independent duty there was no on the court to conduct a hearing reasonableness and cites numerous cases from Montana and other jurisdictions support its contention that a reasonableness hearing required. argues NUFI further the Sather report
99 and claims not evidence figure competent is drawn is from which cast doubt plaintiffs into evidence presented other numbers challenges to amount accuracy valuation. NUFI’s Sather’s a holding not procedurally by that the District erred allegations substantively by hearing approving reasonableness separate also amount, because it was unreasonable. stipulated settlement improperly was the settlement was unreasonable because contends argument in turn. collusive. We address each hearing. a requirement a. Procedural reasonableness 5, 2012, summary judgment hearing, NUFI At the December to hearing required were discovery and a reasonableness argued emphasized that the the value discern of the loss. NUFI are “although were settlements -unreasonable because gotten I think asking stipulated judgments, for 29 million dollar we’ve counsel, Zadick, 99 Mr. pages produced.” documents NUFI’s reasonableness, concerning most extensively discussed Montana cases way he had with in one or another. The District which been involved hearing required not to hold a separate Court determined that it was on reasonableness. review, thorough Mr. we cannot Even aided Zadick’s
identify any
we,
applying
other court
instance
which
law, have
a
hold a
Montana
held that
court must
reasonableness
insurer
hearing
stipulated
agreement
related to
settlement
where an
Milk,
Independent
its
In
we declined to
has breached
defend.
litigate
pay
judgment
an insured to
its claim and
before
require
indemnification,
duty to
seeking
where the insurer had breached the
Mont,
158-59,
Milk, 68
P. at 1111.
Independent
defend.
at
216
Co.,
decision, Keating
v.
Ins.
Following that
Universal Underwriters
89, 100, 320
(1958),
Mont.
357
we
that where
133
P.2d
concluded
“in
company
coverage
policy,
denied
under the
it was
insurance
had
no position
negotiations
by plaintiff,”
to criticize the settlement
effected
amount
did not
paid
unless the
was excessive—which
insurer
Howerton,
CV-89-036-GF,
Farm
Co. v.
No.
8
claim. State
Fire & Cas.
(D.
27,1990),
there,
inapposite
M.F.R.
Mont. Nov.
because
provided
rights
had
a defense
a reservation of
insurer
under
In
agreement
subsequent
in a
action.
sought
invalidate the
(D.
Am.,
CV-89-176-GF,
Ins.
No.
McCarvel v.
Co.
M.F.R.
of N.
1991), the
District Court for the
of Montana
Mont.
U. S.
District
hearing
permit
elected to hold
the insurer
establish
reasonableness,
precedent requires
never stated that our
such
but
808-09,
Grindheim,
Supp.
908 F.
at
federal district
course.
grant partial summary judgment
argument
declined to
where
court
relief
from
supporting
monetary
sought
and evidence
some
best,...
InNielsen,
rudimentary.”
“at
company
ahearing
insurance
plaintiffs’ damages
pursuant
on the
was held
to a settlement
specifically
agreement, but the federal district court
concluded that
require
does not
an independent
“Montana law
review of
Nielsen,
or collusion.”
reasonableness
hearing following stipulated resulting settlement from a breach of defend, the to we rеquire do such settlements to be reasonable. 27-1-302, MCA, general statute, Section Montana’s damages provides reasonable, “[djamages must in all cases be obligation and where an any appears right kind to create a grossly to unconscionable and oppressive damages contrary to justice, substantial no more than damages Substantively, precedent reasonable can be recovered.” our recognized principle has this beginning Independent with the seminal decision, upheld Milk where we the settlement at issue after recognizing Milk, that it was “fair and Independent reasonable.” Mont, 157, 216 decision, at P. at Following that in Keating, 133 Mont, at 320 P.2d at suggested we that where a defendant company insurance the duty niight breaches to defend it criticize a paid settlement if the settlement was in excessive. And the case, distinguishable, yet applicable, still Wash. Water Power Co. v. Morgan Co., (1968), Elec. 152 Mont. 448 P.2d we explained that: defend, obligated
Where
insurer is
to
refuses to do so after
notice,
protect
no
against
insured,
[sic]
makes
settlement
the
fails,
unreasonable,
[sic]
to show that the settlement was
the
summary judgment
insured is entitled to
as a matter of law
the insurer
for
paid
good
the amount
in
faith in
Employers’
[Boutwell
settlement
the insured.
v.
Liability
(5th
1949)].
Corp.,
Assurance
After a has moved to have a settlement excessive, contends a settlement is unreasonable or where the insurer Mont, here, Keating, 133 at 320 P.2d at as it does see tending specific insurer must set forth facts to demonstrate that the maybe request settlement amount unreasonable district court here, Where, hearing. to hold a reasonableness the court declines to hearing argued hold a reasonableness and unreasonableness is as a precluding summary judgment, “gobeyond fact issue the insurer must affidavits, byor pleadings depositions, her own answers file, interrogatories, designate and admissions on specific facts showing genuine that there is a issue for trial.” Corp See Celotex v. (internal (1986) Catrett, 477 U.S. 106 S. Ct. omitted). burden, If quotations the insurer carries this there is a entry factual issue which precludes summary judgment upon a claim amount, payment hearing of a settlement and a on reasonableness McCarvel, should be held. See 9 M.F.R. at 491. So, question here is hearing whether a reasonableness given argument
required, NUFI’s there is a factual basis to challenge the reasonableness of the settlement amount. NUFI continually argued the throughout reasonableness issue In proceedings. request evidentiary hearing, its initial for an NUFI argued that the amount of the supported by settlements was not competent jury evidence and demanded a trial. In its brief opposing approve motions to stipulations entry judgment, argued figure the 29 million dollar was unreasonable only because it was opinions experts based “unsworn whom plaintiffs paid retained and and who have never been cross-examined argued [NUFI’s] counsel.” NUFI that the misconstrued report suggest Sather’s that 29 million dollars was a reasonable or 2 McCarvel, result, the federal district court relied on a treatise reach this view, explaining “[i]n the same when an insurer refuses to defend a claim within the policy coverage, settles, showing and the insured the insurer faces the burden of that the represent legal obligation settlement does not within the or that the amount of McCarvel, (citing Long, settlement was unreasonable.” 9 M.F.R. at 490 1A The Law of (1990)). Liability 5.22, 5-159 fully § Insurance This is anot accurate statement ofthe law explained question in Montana. We have that the to defend cases is not whether policy coverage, represents legal a claim is within the or whether the settlement which, obligation policy, complaint alleges proved, within the but whether the facts if give policy coverage. Staples, agree would rise 21. While we with the result and McCarvel, process reasoning only cautiously. we endorse the court’s *19 numbers, but lots of analyzes It asserted: “Sather viable valuation. corporation or the ESOP damages the opine he what does nowhere no out that pointed It also venture.” joint of the as a result suffered advisor, financial TMSI’s price at the identified buyer had been if to another bring sold Scott, might suggested corporation Zachary At the is based. million dollars the 29 figure on which chain —the argument that raised the hearing again NUFI summary judgment not reasonable: amount was stipulated settlement is important and is that the court raised I think question So the having a reasonableness plaintiffs] ... resist why [the do got even what we the fact hearing? We think it’s because collusion although the discovery haven’t taken the today, and we in— I judgments, stipulated million asking for 29 dollar plaintiffs are pages think produced. of documents gotten pages we’ve stipulations far. we think the we’vereceived so So production are unreasonable. appeal. NUFI also arguments on continues to raise these
NUFI raised that reflect arguments previously other reiterates greater magnitudes amount is That the settlement reasonableness: had settled with other plaintiffs for which the than the amount offered Davis himself the amount the had directors and Zachary reveal that settlement, own numbers and that the entity a standalone corporation of the as opined that the value Scott was 11 million dollars. required not to conduct concluded it was The District Court thus, to the only slight analysis hearing and devoted
reasonableness concluding that NUFI settlements. stipulated reasonableness ofthe agreement, stipulated million dollar settlement liable for the 29 the court reasoned: stipulated into the Maxwell entered
At the time Davis and acting were a defense and they were left without judgments, Moreover, million the $29 interests. within their own best of the at the time the estimated value upon is based SuperValu merger. [TMSI] and the amount report support
The court cited to Sather’s not, however, arguments any of the The court did address settlement. ofthe 29 upon to bear the reasonableness raised that would tend settlement amount. million dollar necessary to further consideration is conclude that We million dollar settlement the 29
determine whether least, very At the reasonable, NUFI has raised. light questions ofthe arguments genuine are sufficient to raise a issue of material NUFI’s amount, precluding fact to the of the settlement reasonableness summary judgment, on this record. We therefore reverse District *20 entry summary judgment Court’s of to the extent that the order stipulations entry judgment of the sum of 29 approved dollars, hearing million and remand for the District Court to hold a on the reasonableness of the settlement amount. So as to focused determination, may inform its reasonableness District Court set parameters hearing, ofthe and determine its discretion whether and discovery necessary prior hearing. to what extent further to the establishing stipulated The burden of the unreasonableness of the (burden McCarvel, See 9 M.F.R. judgment shall rest with NUFI. at 491 establishing stipulated of unreasonableness ofa settlement rested with defend). insurer where insurer had breached c. Collusion. ¶45 collusive, As to its contention that the settlement was NUFI’s
primary legal argument is that Davis and had no incentive to amount, and, consequently, minimize the settlement the settlement se unreasonable per improperly because was collusive. NUFI that, mostly Washington argue relies law to separate from reasonableness, may challenge stipulated an insurer a settlement as improperly argues collusive. NUFI requires Montana law also Howerton, court to consider collusion because in the federal district judgment found a court consent collusive where the amount of the judgment prior consent was three times a settlement offer. NUFI points further to our Freyer, decision the concern about the insured’s lack of incentive to minimize the settlement amount. To collusive, support its characterization of the settlement as TMSI, argues that Davis stood to benefit from a of favor and that of stipulated agreement the amount settlement was over previously seven times what the had offered to from accept as a amount. emphasizes timing Davis settlement NUFI also ofthe entry of stipulated settlements. authority, Neither Montana nor the facts to which NUFI directs attention, persuade
our us that the District Court improperly disposed argument. precedent of NUFI’s collusion Montana require does not court stipulated to consider whether a settlement is collusive where the Nielsen, has insurer breached the to defend. 2006 U.S. Dist. approach LEXIS at **32-33. Montana’s to settlement agreements recognizes under such circumstances objective “creating strong performance disincentives default in the ofthe (Second) (1982); this 58, cmt. a Judgments § duty,” see Restatement Freyer, See ¶¶ a defense. provided has the insurer is less true whеre settlement enforceability (discussing compared as a defense provided has where the insurer agreements defense). Howerton and In both provided has not insurer where under a defense provided had significant that the insurer Freyer, it was Thus, not those cases do Freyer, 37. rights. e.g. See a reservation of necessary to consider that it is collusion assertion support NOTTs here, of collusion exists. where, no evidence not rise to level attention do brings to our The facts NUFI of some Sort the existence implies The term “collusion” collusion. breakingthe law. or otherwise defrauding at another agreement aimed 2004). (Brian ed., ed., West 8th Dictionary Law Garner See Black’s collusive, NUFI would have to be agreements For the settlement wrongdoing between of an effort towards point to evidence explained: and Maxwell. As the District plaintiffs and Davis collusion between argues that there was Although [NUFI] in the Davis and Maxwell and counsel for Plaintiffs’ counsel *21 judgments, this Court drafting entering stipulated and into ofthe by [NUFI] The issues raised argument speculative. [NOTTs] finds relatively quickly into after being entered stipulations of the letter, Maxwell or that Davis and August [NOTTs] Plaintiffs, or that “negotiated” stipulated judgments with largest stipulated beneficiaries of the to be one of the Davis stood to rethought agreed its denial and judgment, [NUFI] or that had defend, not rise to the level of collusion. do negotiation arguments regarding timing agreeWe that NOTTs only wrongdoing. fail to We can agreement of the settlement establish in Nielsen: echo the of the federal court sentiment Defendant has described only say, Court can so what. What [T]he in practice the usual custom and which nothing other than consequence ofan insurer’s failure parties engage Montana as a to defend.
Nielsen, regards 49002 at *38. With 2006 U. S. Dist. LEXIS settlement, Davis had to Davis from the potential financial benefit part rights any judgment plaintiffs all his to the assigned provide initial refusal to a defense was agreement. settlement NOTTs protect speedy decisions enough justify Davis’s and Maxwell’s plaintiffs; agreements with the by stipulating themselves to settlement simply because it became cannot call that decision collusive changed Finally, tune. exposure own its (cid:127)conscious its Freyer regarding on Howerton and arguments NUFI advances based not, more, collusion, the settlement amount do without establish through inquiry. the reasonableness The settlement can be addressed by a valuation that executed before the supported amount is instant proceeding began, allegation and there is no evidence or determining somehow amount. participated Davis Maxwell showing wrongdoing, highlights Without some fact the facts NUFI reasonableness, speak to not collusion. proposes The Dissent that the settlement was collusive because of policy
the nature of the Directors and Officers at issue and because alleged plaintiffs improperly manipulated NUFI has that the their pleadings attempt coverage. in an to create the Policy fact that not, suggests, was a Directors and Officers does as the Dissent improperly warrant the conclusion that the settlement was reached in that, this case. The insinuation because of the type policy, there was some incentive for Davis and settle case does not suggesting they amount a material fact did so here. The defendant, not, choice not to include the LLC as a strategic whether does not in our view constitute improperly manipulating pleadings in an attempt coverage.” to “manufacture This case is distinguishable Co., Adjusting 508, 509-10, 765 from Surras v. Underwriters 234 Mont. (1988), which, although P.2d 712-13 the complaint alleged negligence, a policy, covered risk under the the fact that wrongdoer had been convicted for an intentional crime in cоnnection with the act clearly at issue showed that the act was intentional and was not covered. The here alleged have at all times that their action implicated a risk that was covered under the Policy liability Davis — and Maxwell incurred in their capacities as directors or officers Tidyman’s repeatedly LLC—as the insurer itself recognized. The genuine Dissent mistakes insinuations for issues material fact. genuine conclude We issues material fact regarding preclude summary judgment reasonableness on the amount of the Accordingly, settlements. we reverse the on the Stipulated settlements and remand this matter *22 hearing a determine whether the 29 million dollar stipulated settlement amount Although is reasonable. we can a envision case where a collusion relevant, inquiry might be require the facts NUFI has raised do not inquiry arguments such an here. NUFI’s regarding the settlement through amount will inquiry. be addressed the reasonableness interest, by 4. Did the District err awarding pre-judgment or ¶51 began accruing? in its determination when the interest who is MCA, person “[e]ach 27-1-211, provides Section ¶52 being made certain capable or damages certain to recover entitled upon person in the is vested right to recover that and the calculation damages interest on the to recover day is entitled also particular a Court, entering judgment in day ... .” The District from that dollars, plaintiffs concluded that million in the amount of 29 4,2013, January beginning interest pre-judgment were entitled summary judgment motion for plaintiffs’ granted when it the date The agreements. stipulated settlement approve motions to pre- entitled to they were cross-appeal, contend that plaintiffs, on 2010, 5, the first when beginning on November judgment interest filed. stipulation was out, however, pre is entitled to party points As NUFI met: three criteria are
judgment only interest when (2) (1) obligation; underlying monetary the existence of an being made certain capable recovery amount of is certain (3) on a obligation vests calculation; right to recover particular day.
DiMarzio, satisfied Here, could have been none of these criteria settlement stipulated approved until the District Court provided they themselves agreements The settlement agreements. by the court. they approved not effective until were would become made certain capable being not certain or recovery amount of ineffective, the finally, if found to be either. And court-approved, until with, legal right stipulations could not have vested correctly determined the that the District Court recovery. We conclude January beginning on pre-judgment entitled to interest plaintiffs were agreements 4,2013, settlement approved when the court in the favor. and entered
CONCLUSION for further in and remanded part, part, Affirmed in reversed Opinion. with this proceedings consistent McGRATH, RICE COTTER and JUSTICE JUSTICES
CHIEF concur. McKINNON, dissenting part. in concurring part
JUSTICE (1) this Court have erred my the District Court and opinion, defend, considering whether without finding that NUFI had facts, if would result “alleges proven, which plaintiffs’ complaint MT 108, Staples, Mut. Ins. Co. v. coverage,” Farmers Union (2) summary judgment granting Mont. 90 P.3d *23 108 genuine there are issues ofmaterial fact as to whether NUFI
although
I
the District Court and this Court
duty
breached a
to defend. believe
recognize
opinion
to
that an insurer’s assertion of an
have failed
coverage
equate
of
does not
to an insurer’s
regarding the existence
opinion,
outright
expressed
refusal to defend. NUFI
based on the
coverage
did not
In
alleged
plaintiffs’ complaint,
facts
exist.
necessarily
duty
fact,
In
doing,
so
NUFI did not
breach a
defend.
by
represented
throughout
were
counsel
Davis
my
disputed
Additionally,
timeframe.
it is
view that this Court has also
failed, in
respect,
appreciate
a fundamental
the difference between
colloquially known as directors and
type
a
of insurance
officers
insurance, where the “insured v. insured” exclusion is a cornerstone of
insurance,
policy,
casualty
versus the more common form of
such
Finally,
automobile and homeowners insurance.
principles
basic
process require hearing
only
due
a
to determine not
the reasonableness
settlement,
of the
but also whether it
made in good
was
is,
reasons,
faith —that
absent fraud and collusion. For all of these
I
(a)
(c)
subparts
dissent as to Issue 2 and
of Issue 3.1
duty
It is well established in Montana that an
insurer’s
to defend
insurer, through
its insured arises when the
reference to pleadings,
trial,
discovery,
ready
or final issues declared
has received notice of
representing
facts
a risk covered
the terms of the insurance policy.
(D.
Am.,
794,
v.
Ins. Co.
908 F. Supp.
Grindheim
798 Mont.
Safeco
1995) (citing cases); Staples,
20. The insurer must look to
¶
allegations
complaint
of the
to determine
whether
exists
policy,
giving
under the
thus
rise to the
duty
insurer’s
to defend.
Rumph,
249, 14, 339
Farmers Union Mut. Ins. Co. v.
MT
2007
Mont.
¶
934;
Co.,
170 P.3d
Graber v. State Farm Fire & Cas.
244 Mont.
(1990).
265, 270,
required
P.2d
The insurer is
to defend
unequivocal
“unless there exists an
demonstration that
the claim
against the insured does not fall under
policy’scoverage.” Rumph,
14. Where the insurer refuses to
¶
defend
claim and does so
unjustifiably,
the insurer becomes liable for defense costs and
judgments.
Co.,
Lee v. USAA Cas. Ins.
2004 MT
320 Mont.
174,
examining whether the complaint alleged representing facts Policy a risk covered the terms of the duty NUFI had a —that holding 1 I concur the Court’s decision as to Issues 1 and and in the Court’s (b) subpart under 3. Issue essence, right to deny the insurer the Opinion, we defend. 27-30. ¶¶ proceedings by holding that duty to in these contest a defend coverage. to determine brought separate action insurer should have 24,28. judicial from having foreclose the insurer thus Opinion, We ¶¶ defend, distinct of a which is the existence determination of the actual examination indеmnify, based on an from a Policy. Staples, of the complaint terms allegations May in the filed complaint proceedings these not complaint state court. It is Fourth Judicial District Court —a *24 grew Nagrone litigation. the in which into filed in federal court finds, Policy of the without examination The Court nevertheless Nagrone litigation in the complaint, NUFI’s defense the instant that in Policy proceedings. Opinion, the implicated” present the “potentially to be a new standard disagree appears 21<. I with what previously have duty the of a when we determining existence defend may only examining a after the duty been clear that to defend be found have particular complaint ofthe to determine whether facts allegations of by risk the terms the insurance alleged representing been covered policy. alleged plaintiffs May complaint contend that their conduct,” in the engaged “wrongful
Davis and Maxwell defined that Policy, triggered duty They and that the to defend. claim dispute wrongful not conduct of and Maxwell NUFI does the Davis estopped denying is from to defend duty and that NUFI therefore Nagrone litigation. Davis and in the because defended Maxwell not Nagrone litigation asserts the is the same as the ¶59 NUFI that present assuming erred litigation the District Court and explains Nagrone brought otherwise. NUFI lawsuit was directors, against TMSI and officers Davis and including TMSI’s and Maxwell, former by employees alleging leading TMSI that the actions (ERISA). merger to the 1998 federal NUFI paid violated law TMSI’s litigation, in the to a of Nagrone subject defense costs reservation explains plaintiff TMSI in the rights. NUFI isa current action and suing Davis and in their as officers capacities and directors Moreover, Tidyman’s, of LLC. action is current between insureds (1) (thereby invoking coverage) one of the five of exclusions to because LLC) (Tidyman’s, plaintiffs here are directors of the insured Maxwell, they have sued who are defendants Davis also directors (2) TMSI, LLC; of percent security of the as a 60 holder plaintiff (Davis LLC, brought against this lawsuit directors the LLC two Maxwell) (five with insureds who the assistance other LLC). argues are also directors of the NUFI further that the factual is, substance, complaint against basis of the a claim TMSI’s officers formed, having the LLC to and directors allowed be and not the words, In other officers and directors insured LLC. NUFI asserts wrongful forming that the conduct the basis of the claims prior occurred to the formation of the LLC and insured was committed TMSI, by officers and directors of rather than officers and directors Clearly, LLC. no premised NUFI had to defend claims insured, wrongful conduct committed before its individuals LLC, even existed. “The determination allegations complaint of whether of a represent potentially
assert facts which a risk covered the terms of necessarily an insurance contract upon calls court to construe the Grindheim, terms of the insurance contract.” F. Supp. at 800. The construction of governed by insurance contracts Montana is general interpretation chapter law contract set forth in Title MCA, and the caselaw that developed has thereunder in the context of Grindheim, insurance. Supp. ambiguity, F. at 800. Absent an language of an governs insurance contract its interpretation. Grindheim, 28-3-303, Supp. 800; -401, 908 F. at MCA. When there §§ defend, a dispute as to the existence of a the court must ] “compare[ allegations liability advanced in complaint with language to determine whether the obligation insurer’s to defend was ” Staples, ‘triggered.’ doing, 22. In so liberally the court “must *25 allegations complaint construe in a so that all doubts about the meaning allegations of the are finding resolved in favor of that the obligation to defend was activated.” Staples, ¶ spite precedent, “compare[ this the Court fails to allegations ] оf liability complaint advanced in a policy language with to determine ” the Staples, obligation whether insurer’s to defend ‘triggered.’ was 22. The Court does not refer to provisions even the terms and of the Policy or the in allegations complaint, holding the instead “NUFI the Policy implicated... saw . NUFI defended Darts and throughout the litigation.” Opinion, federal 27. This is the analysis crux of defend, the Court’s on the existence of the premised it is pleadings the false notion that in the federal litigation pleadings were “the same” as the present litigation. 4,27. Opinion, ¶¶ (D O) explains Policy that the is directors and officers &
policy with an exclusion to when an brings insured a lawsuit against pertinent provisions another insured. The are set forth costs, 8, concerning defense 13. Clause Endorsement 8 and Clause part: in relevant states The Insureds duty to defend. any not assume does
The Insurer them. against made any Claim and contest shall defend right shall have the Insureds foregoing, Notwithstanding right .... This Insurer Claim to the of the tender the defense is first the Claim of the date days exercised within [must be any must not take Insured, Insureds and the an against made action, prejudice that would action, any required or fail to take Claim]. respect to such or the Insurer with of the Insureds rights foregoing, complied with Insureds have Provided that the Claim, of the the defense obligated to assume shall be Insurer false fraudulent.... groundless, is even if such Claim .or of a Claim the defense not assumed the Insurer has When nevertheless, advance the Insurer shall to this Clause pursuant Insured, to the prior Defense Costs request at the written by the payments Claim. Such advanced disposition final of a Insureds or the by the repaid to the Insurer Insurer shall be or the that the Insureds and to the extent Company... in the event conditions of the terms and shall not be entitled under Company Loss. payment such into any liability, enter not admit or assume The Insureds shall any or incur any judgment, agreement, stipulate any settlеment of the Insurer.... prior written consent Defense Costs without unreasonably withheld.... not be The Insurer’s consent shall v. Insured the “Insured to Endorsement which contains Pursuant read, Exclusion,” in Clause 4 were amended the exclusions fisted follows: part, relevant any payment make for Loss not be liable to Insurer shall (i) which is made an Insured...
connection with Claim (other solely but with Employee, than an brought any Insured Claim) or Company; which to a Securities or respect directly Company, whether by any security holder of the brought instigated security holder’s Claim derivatively, unless such of, totally without totally independent and continued of, or of, participation of, or active or assistance solicitation of, Insured;.... intervention determining occasions, in the context on numerous We have arises, claim that examined the insurer’s to defend
whether Ribi and Sur. Co. v. Travelers Cas. applies. e.g. See exclusion *26 33-45, 326 Immunochem Research, 50, 23-27, Inc., MT 2005 ¶¶ Mont.. Auth., 174, 469; Town v. Montana Man. Ins. 108 P.3d Geraldine of 14-33, 796; 2008 MT 347 Mont. 198 P.3d see also ¶¶ Grindheim, Thus, 908 F. at 801-08. Supp. NUFI’s claim that an similarly duty be considered. a to applies exclusion should defend If exists, assuming duty, may NUFI has breached that then NUFI be judgment. held liable for defense costs and the But we cannot hold NUFI liable for the settlement in the absence some Policy the complaint. argues examination the that the plain language Policy coverage of the D & O excludes for lawsuits In my opinion, obligated between insureds. we are at least to consider language the plain Policy and examine whether the named parties are insureds NUFI. today significant jurisprudence The Court effects a shift in our
holding
unnecessary
analysis
that it is
to conduct such
if the
“potentially implicate”
policy. Opinion,
claims
the
30.-Thisbroad and
¶
effectively
analysis
nebulous standard
moots
future need for an
policy
complaint.
practically any
and the
Since
conceivable claim
alleged
“pоtentially implicate”
an insured could
the policy, the
duty
insurer will have a
in every
today’s
to defend
case. Under
decision, an
mere
reading
policy
insurer’s
act of
and the complaint
recognizes
is evidence that
the insurer
the policy
“potentially
implicated,” and is thus sufficient to
trigger
duty
insurer’s
to
contrary
defend. This is flat
precedents,
our
which have held that
is not triggered
defend
until an examination of
policy
complaint actually
and the
representing
reveals facts
a risk
covered
Mont,
policy. Staples, 20; Rumph,
14; Graber,
the terms of the
217; Grindheim,
at
THE COURT: So Mr. has really duty didn’t to defend essentially argued they breach paid Why they right? aren’t they because these costs. plaintiffs]: They pay [co-counsel AMSDEN for the didn’t MR. they they all all the the cost pay the costs. And didn’t costs—even they pay timely.... did didn’t pay, Plaintiffs [co-counsel NUFI]:...
MR. MACDONALD assert duty dispute that National Union breached a to defend. We grant summary . If the Court our motion for that... doesn’t required, pending, hearing [is] we think a least hearing nonetheless. And needs address at First, following three issues. whether National Union breached costs, any so, and duty pay defense if whether evidence, unjustified.... actually I present think we’re entitled to Honor, duty. [co-counsel Your that we Mr. Beck didn’t breach put for the on Mr. McPhee’s declaration. He’s relied on plaintiffs] Mr. of counsel about statements McPhee and statements pay timely not we did or didn’t and we pay whether or whether take paid. We think there’s evidence that Court must before We concluding any policy. that we breached under don’t something can decide a matter of law that think it’s the Court policy. we cost that the insured’s breached under counsel, paid, have been now Mr. Davis Mr. Maxwell’scounsel they that, paid dispute they up say, you so haven’t stand Now, paid
cost. We we have the cost. Mr.—counsel for Mr. believe submitted, maybe sitting that he costs hasn’t but he April has submitted bills after October 28. He submitted bills in they paid. were here, policy policy еvery they unlike the one of the cases So cite, Honor, says squarely obligation Your to advance prior disposition very defense costs is to final of the claim. It is a indicated, policy. very different These —as counsel this is a A type policy. sophisticated [¶] O] different & for a they negotiated 18 company, policy. different endorsements to the It off the negotiated by wasn’t shelf. There were endorsements insureds, company. you sophisticated a sizeable And have Davis Maxwell, policy provided paying who understood that their prior disposition of defense costs to final of the claim. thinkWe happened. that’s We don’t think there’s breach. *28 explained Mr. Macdonald further to the duty District Court: “The Honor, policy, under this Your pay disposition is to before final already paid said, [NUFI] claim.... the invoices. National Union has say it pay will continue to will the defense costs of and Davis Maxwell grants unless and until this Court summary judgment in favor of Union, National Your Honor.” Macdonald emphasized that “Mr. Maxwell Mr. Davis have never been left without counsel this case.” moving party, plaintiffs As the the have the initial “burden of
demonstrating complete any absence of genuine factual issues.” Taxi, 18, 24, Trapper 1375, Wood v. Old 286 Mont. 952 P.2d 1379 (1997). (NUFI) burden, If the meet nonmoving party the then has the opportunity genuine to demonstrate that a issue of Kniss, 238, 18, material fact does exist. Semenza v. 2008 MT 344 ¶ 427, 189 P.3d Significantly, Mont. “all reasonable inferences that might be from drawn the offered evidence should be drawn favor of Mont, party opposing summary the judgment” i.e., Wood, NUFI. 286 — 23, 952 Furthermore, at P.2d at 1379. generally speaking, “whether [a] duty has been a question breached is of fact to be decided finder Demaree, 479, 482, 567, of fact.” Brown v. 272 Mont. 901 P.2d (1995) (emphasis omitted); see Effects, also Precision Theatrical Inc. v. Banks, N.A., 505, 143 United 2006 MT 333 Mont. P.3d ¶ (the breach of a is a question susceptible summary of fact not judgment); Lorang Co., v. Fortis Ins. 2008 MT 345 Mont. 12, 192 (questions may P.3d 186 of fact be determined as a matter of reach but minds could judgment only if reasonable summary law on issue). one on the conclusion regarding facts Here, disputed there are NUFI has shown that defend, summary thus precluding
whether it breached letter on behalf of August judgment. begin, To Chartis’s McPhee, (King counsel for Davis Maxwell informing NUFI — that NUFI not state coverage there was no respectively) —did description (Opinion, Contrary costs. to the Court’s deny would defense longer no cover 5), ] not that NUFI would “assert[ the letter did fact, letter no discussion in the matter.” In contains defense costs position The letter advised counsel of NUFl’s simply of defense costs. analyzed letter coverage. precedent, on Consistent with our Policy, then conducted a plaintiffs’ complaint and the terms of understanding Tidyman’s “coverage analysis.” Based on Chartis’s filed history, appears Complaint that the “[I]t the letter concludes: District, County May 21, 2010, in the Judicial Montana Fourth Missoula, implicate Policy. you not We ask that confirm our does history company.” NUFI clear that this understanding of was you “[i]f McPhee] its or are “coverage position” [King was and that aware of information that would indicate that National Union’s inaccurate, factually, otherwise, position legally either please provide possible.” us with information as soon as letter denying requests did not that NUFI all further state Indeed, of defense reimbursement costs. McPhee continued bill in representing for services rendered after 5,2010 letter, August 2,2010, a letter King September sent dated [NUFI] inquiring going pay “whether to continue to for the costs of had inquiry unnecessary defense” —an would have been August 5,2010 actually letter addressed costs. defense explicit arguably denial of not occur until ¶69 An defense costs did *29 King, letters October 2010 from Chartis McPhee and which not going pay “[NUFI] stated: is to continue to the costs of defense of This, fact, this mattеr.” in letter that plaintiffs’ is the the counsel Notably, by referred to in the District as the “bombshell” letter. denial), (i.e., stipulated date the October already settlement had been finalized. Evidence in the record indicates 5,2010 letter, McPhee August that within a week agreed terms King plaintiffs upon with counsel for the the material including the stipulation, judgment, million with no $29 signed “Stipulation Resulting notice to Davis from Insurer’s NUFI. 25,2010, Coverage” days Refusal to Provide on October three before least, Accordingly, very the “bombshell” letter was issued. at the parties’ during actions and communications this timeframe establish August 5, that an of fact as to issue exists whether 2010 letter amounted to a refusal to defend. The District Court and this Court authority by resolving exceeded their this factual have issue with a particular interpretation plainly of the letter —one that favors the plaintiffs. Moreover, in response reply inquiries to claims that it did not counsel, provided
from Davis’s
NUFI has
evidence that
it twice
attempted
King
actually
to contact
and that
King
advised
pay
McPhee that it would
defense costs. In contrast to the
$18,000
months,
claim that McPhee was owed
and had not
in
paid
been
has
that it
provided
paid
evidence
the invoices it received in an
appropriate timeframe and that
for
counsel Davis and Maxwell have
always
paid.
Lermond,
been
NUFI provided the affidavit of
who
represented that NUFI
pay
would
defense costs of Davis and
to pursue
Maxwell
the motion to dismiss and that she paid defense
litigation
costs of the
during
incurred
the second half of
toup
May
did,
early
Significantly,
fact,
Davis
have
during
dispute,
counsel
the timeframe in
which undermines the
27)
finding
Court’s
(Opinion,
duty.
of a breach of
See
¶
State Farm Fire
Schwan,
216, 23,371
192, 308
& Cas. Co. v.
MT
Mont.
¶
P.3d 48
(“Neither does the failure of State Farm Fire to pay
Stacey’s
fees
First,
constitute a breach ofthe
defend
these circumstances.
that failure did not affect the Turners —defense counsel and a full
provided
defense were
to them. State Farm Fire further notes that a
request
payment
of Stacey’s fees has not been made to it. As noted
above, payment of
counsel
this context is a matter of contribution
insurers.”). Finally,
between
there
a dispute
regarding
of fact
seeking
judicial determination,
whether NUFI did defend while
dismiss,
through their
regarding
motion
of coverage.
existence
evidence,
choosing
Court discounts NUFI’s
instead to credit
and,
plaintiffs’ allegations
allegations,
based on those
to hold that
27,31.
Opinion,
NUFI breached a
to defend.
goes
The Court
so
¶¶
finding
far as to make a
that NUFI “failed to defend its insureds or
costs,” Opinion,
propositions
advance defense
31—two
that are
evidence,
disputed,
documentary
with
approach
NUFI. The Court’s
in error.
respect
clearly
inappropriate
It is
for a court deciding
summary judgment
evidence,
a motion for
weigh
to choose one
another,
disputed
credibility
fact over
or to
assess
the witnesses.
Schenk,
675;
Andersen v.
2009 MT
353 Mont.
220 P.3d
*30
Ctr.,
283, 28,345
336,
Mont.
Air v.
Jet
2008 MT
Corporate
¶
Edwards
having to
factual
1111. If
court finds itself
resolve
190 P.3d
the
Larson Lumber
summary judgment
appropriate.
then
not
disputes,
LLC,
61,MT
Landscaping
¶
v. Bilt Rite Constr. &
Co.
parties’ allegations
supporting
and
Davis of judgments by failing approval stipulated to seek NUFI’s being during that NUFI was settlement the time when records show continuing pay those costs. In this billed for defense costs and was Policy regarding stipulated includes a consent clause regard, judgments: any liability, or into
The Insureds shall not admit assume enter judgment, any incur any agreement, stipulate any settlement or prior Costs consent the Insurer. without written Defense of settlements, Costs Only stipulated judgments those Defense by have consented to the Insurer shall be recoverable which been this The shall policy. as Loss under the terms of Insurer’s consent withheld, Insurer, unreasonably provided not be when pursuant not the defense of Claim to this Clause has assumed effectively be in the defense and the shall entitled to associate Claim, provided of further negotiation any any settlement any in all the Insurer withhold consent to may events Costs, settlement, any portion stipulated or Defense thereof, to the extent such Loss is not covered under terms i policy. added.) (Emphasis timing determining The critical in Davis and events is whether settlement, consent, entered without stipulated into a NUFI’s noted, foregoing provision. As in the contravention evidence stipulated and drafts of the primarily email communications
record — King, McPhee, counsel settlement —indicate that material of the engaged regarding were discussions terms August 2010, stipulated early signed settlement in Davis 25,2010 stipulation final October the “bombshell”letter —all before 27). (Opinion, This of October to which the Court refers defend, suggests supposed evidence that the breach 27), (Opinion, the Court a matter of occurred which finds as law after McPhee, King, and the settlement had been finalized stipulation executed plaintiffs’ counsel and Davis. thus was (cid:127) arguably notice to NUFI and before reached without regarding whether NUFI would continue to pay communication A defense costs. fact-finder is needed resolve whether this series actually events violated the consent clause and whether NUFI *31 duty to defend. breached its facts, burden, disputed Given these and our
precedent requiring might that “all reasonable inferences that be [NUFI],” from drawn the offered evidence should be drawn in favor of Mont, Wood, 23,952 my summary at P.2d at it is view inappropriate. stipulated judgment A should be . presumptively only valid when the has a duty insured breached discussion, foregoing dеfend. Based on the NUFI cannot be held to have breached a to defend aas matter of law. result, reaching contrary the Court appreciate has failed to
the fundamental distinction between directors and officers liability
general
insurance
the more
form casualty
of
insurance. D & O
type
insurance is a
designed
protect
insurance
directors and
“discharging
corporation
officers who were
duties to the
when the
al.,
actionable conduct arose.” 9A Lee R. Russ et
Couch on Insurance
(Thomson/West 2005).
3D, 131:31, 131-36to
D
§
131-37
& O insurance
developed as shareholder’s derivative suits and class actions became
sought
more common and directors and officers
indemnification
Assocs.,
against
liability.
City
the risks of
Biltmore
LLC v. Twin
Fire
(9th
2009).
Co.,
Ins.
572 F.3d
corporations,
Cir.
Insured
turn, began suingtheir
operational
own directors and officers to recoup
by
losses
poor
lawsuits,
caused
business decisions. In reaction to these
D
policies
insured-versus-insured exclusion arose in & O
to protect
against
the insurer
collusion and
expansion
coverage.
unintended
Biltmore,
The for trigger liability by insurance is a claim someone hot under contrast, the control of the insured By people buy himself. casualty against insurance by the risks created their own bad luck Thus, or carelessness. one buys fire gets insurance and carelessly leaving indemnified even for a fit candle untended and burning buys down one’s own house. And one automobile comprehensive get and collision indemnified for carelessly damaging one’s own car.
Though overlap, many there is ofthe risks that affect the price of liability insurance differ from the risks that casualty affect insurance, particularly moral hazard example, and collusion. For collide someone else to with nobody intentionally induces almost burning down his car, might his have an interest but someone Companies it than it worth. own if he owed more on was house “fidelity to insure the traditionally purchased have bonds” dishonesty. employee if an against employees’ Thus company company company, from insurance “bonded”and stole company for indemnify had issued the bond would have loss. hazard are much risks such collusion moral
Because against another insured on the greater for claims one insured strangers, liability policiestypically for same than claims Allowing would turn coverage. them from such claims exclude insurance, company casualty into because the liability insurance its own company would be able to collect the insurance from mistakes, it acts its directors and through since officers. collusion, against and also protects exclusion course liability to a selling fidelity risk for what amounts insurance ignored, companies bond. If the exclusion then those who were only pay protection against they third claims party want the additional financial burden cannot control would have to bear companies for claims over more control. paying which have *32 omitted). Thus, (emphasis added, F.3d 572 at 668-69 footnote insurer, Policy’s protects NUFI, Insured v. Insured exclusion here. alleged collusive lawsuits as D liability policies “generally & do not obligate O insurer to defense, provide only expenses a but to reimburse incurred defense al., 131:31, supra, of claims at against the insured.” Russ et 131-36. § (co-counsel NUFI) Gary Consistent with these Zadick principles, Court: emphasize policy stated the District “I first wanted to this is your different. This a defense policy says, is we’llreimburse costs.” Zadick continued: a policy. policy.
This is a different This is reimbursement Ms. counsel Montana paid Lermond invoice of Davis’ for the court action, billing November 2010. That’s in the record invoices. Ms. Keane, here then. today, paying who is has been the bill since She paid Spring ofMr. in the when it the invoice 2011 submitted. explained:
Zadick Honor, liability goes out policy,
Under a Your the insurer and attorney, day him from The insured pays selects the one. doesn’t case], any type policy present [in advance cost. Under this policy, company, a D & O the defense costs are billed to the they They pay insured. them and submit for reimbursement. So a there is difference. case, therefore, distinguishable involving alleged
This
from cases
casualty
breach of the
to defend under a traditional
insurance
appreciate
analysis.
fact the Court has failed to
in its
—a
matter,
“procedural”
As a final
I believe the Court’s
(a)
regarding
(subparts
“substantive” distinction
(b)
reasonableness
3)
unnecessary.
Issue
is inartful and
While we have never
a court to
required
hearing,
always
conduct
reasonableness
we have
fair, reasonable,
held that the amount of the
must be
good
Indep.
,
faith.
Milk &
Co. v.
Cream
Aetna
Ins. Co. 68 Mont.
Life
152, 157, 216
1109, 1110 (1923);
P.
Keating v. Universal Underwriters
Co.,
351,
(1958);
Ins.
133 Mont.
Washington
320 P.2d
Co.,
Morgan
126, 138, 448
683,
Co. v.
Water Power
Elec.
152Mont.
P.2d
27-1-302,
(1968);
see also
MCA (“Damages must in all cases
§
be
reasonable,
obligation
and where an
kind
appears
create a
right
grossly
oppressive damages contrary
unconscionable and
justice, no
damages
substantial
more than reasonable
can be
recovered.”);
Freyer,
State Farm Mut. Auto. Ins. Co. v.
MT
36, 372
191, 312
Mont.
P.3d 403 (recognizing
“[t]he
the concerns that
insured has little
incentive minimize the settlement
amount
negotiating a stipulated judgment” and that
[is no]
“there
assurance
stipulated
that a
judgment represents
proper
calculation of the
Dev.,
damages”);
actual
LLC,
LeMond v. Yellowstone
2014 MT
cf.
50-52,
375 Mont.
breached, the stipulated judgment presumed Opinion, reasonable. 41.1 further agree that the district court given should be discretion *33 parameters to define the of hearing scope and the discovery. Opinion, However, I disagree that alleged by ¶ the facts NUFI here not genuine do create a issue of material fact as to the existence of Opinion, presents Davis, Maxwell, collusion. 48. NUFI evidence that plaintiffs, through counsel, and the respective negotiated and partially
121 expressly stipulated settlement million executed the $29 before alleges Additionally, NUFI costs. pay defense refused to attempt in an pleadings their manipulated improperly Co., Mont. Adjusting v. Underwriters coverage. In Burns create manipulate attempt to (1988), rejected an we 765 P.2d “ ‘To hold observing: coverage, to manufacture in order pleadings candor, and deals, lack undercover is to invite otherwise involving an insurer as a device pleadings of the tort manipulation ” 510-11, 765 P.2d Mont. at involved.’ 234 not otherwise be who could Fire & v. St. Paul State Bank & Merchs. Farmers (quoting at 713 (Minn. 1976)). Co., 840,844 n. 7 Ins. 242 N.W.2d Marine likely a State, very and justice truly day I find it a sad fair resolutions provide the courts belief that huge public’s blow to to a dismissively says “sowhat” this Cotut disputes, when collusion, and when this was obtained allegedly custom other than usual “nothing this as further condones consequence as a engage in Montana parties in which practice (internal marks quotation Opinion, 48 failure to defend.” an insurer’s omitted). regardless of whom justice fairly, exist to administer Courts never there is my opinion, party represents. particular and what a justice. administration for collusion in the place and in to Issues the Court’s decision as I concur in While (b) 3,1 dissent as to Issue of Issue holding subpart under the Court’s (a) (c) of Issue 3. subparts