First SEC. Bank of Bozeman v. Goddard

No. 14279
IN THE SUPREME COURT OF THE STATE OF MONTANA
1979

FIRST SECURITY BANK OF BOZEMAN, a
Montana Banking Corporation,
Plaintiff and Respondent,
-vs-
JOHN M. GODDARD and CLEO C. GODDARD,
Defendants and Third Party Plaintiffs,
-vs-
BANKERS UNION LIFE INSURANCE COMPANY,
Third Party Defendant and Appellant.

Appeal from: District Court of the Eighteenth Judicial
District,
Honorable W. W. Lessley, Judge presiding.
Counsel of Record:
For Appellant:
Bolinger and Wellcome, Bozeman, Montana
Roy Andes argued, Bozeman, Montana
For Respondents:
William Douglas argued, Libby, Montana
Landoe, Brown, Planalp, Kommers & Lineberger,
Bozeman, Montana
James M. Kommers argued, Bozeman, Montana

Submitted: February 2, 1979

App 1 (-- i;
Decided : APR 2 5 1979
Filed:
Mr. Justice John C. Sheehy delivered the Opinion of the
Court.

This is an appeal by third party defendant, Bankers
Union Life Insurance Co. (BULIC) from a judgment in the
District Court, Eighteenth Judicial District, Gallatin

County, finding BULIC liable on a policy of credit disability
insurance issued by it to John M. and Cleo C. Goddard, third
party respondents. The District Court sitting without a

jury found BULIC liable to Goddard for disability benefits
in the amount of $4,227.95, and further liable to Goddard
for exemplary damages in the sum of $5,000.00.

We affirm the District Court for the reasons following.
First Security Bank of Bozeman is a Montana banking corpora-
tion operating in Bozeman, Montana. In the conduct of its

ordinary business, the bank acted as an agent for BULIC,
whereby the bank issued credit life and disability insurance
policies for BULIC to insure payment of monies owing to the
bank in case of the untimely demise or disability of the
borrower.

On October 2, 1975, an officer of the bank prepared a
note and security agreement for execution by the Goddards
and on that same date mailed the instruments to the Goddards
in Libby, Montana. The face amount of the note was $5,529.96,

which sum included a premium of $248.84, financed by the
bank and payable to BULIC, for credit life and credit disa-
bility insurance for the Goddards.
The Goddards received the instruments by mail on either
October 4 or 5, 1975, and upon receipt of them, the Goddards
executed the instruments, and placed them in the mail, with
postage prepaid, addressed to the bank. The bank physically
received the instruments on October 7, 1975.
A written application by the Goddards for disability
insurance is not a part of the appellate record, but in the
District Court, the parties stipulated that an application
for disability insurance was made by the Goddards to BULIC
contemporaneously with the execution of the note and security
instrument. Thereafter, it is stipulated, the insurance
company accepted the application for disability insurance on
October 7, 1975 and issued its policy no. 848208, providing
such insurance to the Goddards.
The Goddard note of October 2, 1975 to the bank was a
renewal note covering a prior existing note indebtedness
from Goddard. All interest on the preexisting note was
computed up to and including October 1, 1975 and stopped on
that date. The interest on the renewal note commenced on
October 2, 1975.
On October 5, 1975, John M. Goddard experienced some
physical discomfort, which he initially attributed to some
minor flu or other minor malady, for which he felt rest and
aspirin would provide a cure. The discomfort however grew
in intensity so that on October 7, 1975, Goddard went to Dr.
William T. Matthews of Libby for examination. Dr. Matthews
diagnosed the condition of Goddard at that time to be one of
"coronary disease" which totally disabled Goddard until June
1, 1976.
The credit insurance policy contained,under the heading
"Exceptions," the following language:
 ". . .
No benefits shall be payable under the
Disability portion of this policy, listed
in section E if Total Disability is caused
by, or results from: . . . (3) A pre-
existing illness, disease or physical
condition which manifested themselves
to the insured debtor by requiring medical
diagnosis or treatment, or would have caused
a reasonably prudent person to have sought
medical diagnosis or treatment within six
months preceding the taking of the application
for insurance and which caused loss within
the six months following effective date of
the insurance policy, provided, however, that
disability commencing thereafter resulting
from such conditions shall be covered, .
. ."
Policy no. 848208, issued by EULIC had an effective
date of October 7, 1975, a termination date of October 7,
1978, and provided a monthly indemnity for disability in the
sum of $153.61 with benefits payable from the 31st day of
total disability to the beneficiary, First Security Bank of
Bozeman.
Goddard made written claim to BULIC for disability
benefits on November 5, 1975. In his statement of claim,
he indicated he had last worked on October 5, 1975, and that
he had been continuously disabled from that date.
Dr. Matthews' written report to the insurance company
states that Goddard ceased work because of disability on
October 5, 1975.
Goddards made no payments on the note indebtedness to
the bank after October 2, 1975. They repeatedly demanded
BULIC make such payments out of the credit disability insurance
policy, but BULIC refused. The court found that as a direct
result thereof the bank declared a default by the Goddards
in the payment of the note indebtedness. In January 1976,
the bank accelerated the payments due under the note,
repossessed the Goddards vehicle and sold it at a distress
sale. On February 2, 1976, the bank filed this action in the
District Court against the Goddards to collect a deficiency
from the Goddards in the amount of $2,452.95, plus interest,
attorney fees and costs. Goddards appeared in the action,

and brought a third party complaint against BULIC for the
insurance coverage, and for punitive damages for refusing to
pay the Goddard claim. As we indicated, the District Court
entered judgment in favor of Goddards against BULIC, and
separately entered judgment in favor of the bank against
Goddards for the deficiency amount due on the note, plus
attorney fees. No appeal is taken from the bank judgment
against Goddards.
The several issues presented by appellant can be resolved
by the answers to the following questions:
(1) What is the effective date of the disability

insurance provided by BULIC?

(2) What is the date of onset of Goddards' disability?
(3) Is Goddard estopped to deny disability beginning
at an earlier date, based on a misrepresentation?
(4) Should the court have limited Goddards damages to
the amount due on the obligation?
(5) Should consequential damages have been awarded in

this case?
(6) Are exemplary damages in this case proper and if

so, are they supported in the evidence?
EFFECTIVE - -OF DISABILITY INSURANCE
DATE
BULIC's contention on this point is that since the

insurance policy was issued effective October 7, 1975, and
since it is clear that Goddards' disability began on October
5, 1975, his disability preexisted the insurance date on the
policy and the claim for disability is thereby excluded.
This contention requires consideration of the provisions
of section 40-4207, R.C.M. 1947, now section 33-21-203 MCA,
which provides in part:
-5-
 "The term of any credit life insurance
or credit disability insurance shall,
subject to acceptance by the insurer,
commence - - - - -
on the date when the debtor
becomes obligated - - creditor
to the ..
."
(Emphasis added.)
There is no question that the insurance company accepted
the risk on October 7, 1975. BULIC contends however that
Goddard could not have become obligated to the bank until
October 7, 1975, because the note and security agreement

from Goddard was not received by the bank until October 7,
1975; and because on that date, the bank, having received
the note, cancelled the previous note and its indebtedness,
and then in fact accepted the new obligation.
BULIC further contends that on October 4 or 5, when
Goddard signed and mailed the note, he was not "obligated"
upon the note. BULIC bottoms this contention upon an examination

of the Uniform Commercial Code provisions, relating to the

rights of the bank. BULIC contends that the bank as a
holder under section 87A-3-301, R.C.M. 1947, now section 30-

3-301 MCA, or as a holder in due course under section 87A-
3-305, R.C.M. 1947, now section 30-3-305 MCA, could not
enforce the note because a "holder" is defined in section
87A-1-201(20) , R.C.M. 1947, now section 30-1-201 (20) MCA,

as one in possession of the note. Section 87A-1-201(20) ,
R.C.M. 1947, now section 30-1-201(20) MCA, identifies a
holder as:
". . . a person who is in possession of
. . . an instrument .
. . drawn, issued or
endorsed to him or to his order or to
bearer or in blank."
It is BULIC's contention that since the bank was not in
possession of the note until October 7, 1975, it could not
enforce the note before that date under section 87A-3-301,
R.C.M. 1947.
or section 87A-3-305k and BULIC claims that Goddard cannot
be said to have become "obligated" on the note until October
 This contention of BULIC goes against the grain of the
legislative intent that is evidenced in the statutes relating
to credit life and disability insurance. We have quoted
previously the provisions of section 40-4207, which fixes
the beginning term of credit disability insurance. In
addition, section 40-4209, R.C.M. 1947, now section 33-21-
204(2) MCA, relating to the delivery of the policy provides
that if the policy is not delivered at the time the indebted-
ness is incurred, an application shall be taken from the
debtor. The provisions of section 40-4209, with respect to
the application require that:
.
". . The application or notice of proposed
insurance shall state that, upon acceptance
by the insurer, the insurance shall become
effective as of - - - indebtedness
the date the
is incurred."(~m~hasis added.
Such statutory provisions are as much a part of the
credit disability insurance policy as though they were
written therein. McIntosh et al. v. Hartford Fire Insurance
Company (1938), 106 Mont. 434, 78 P.2d 82; Lee v. Providence
Washington Insurance Company (1928), 82 Mont. 264, 266 P.

The District Court took the position that the Goddards
became obligated to the bank on the date that they signed
the note in Libby and mailed it to the bank. We hold this
position to be correct. Under section 55-216, R.C.M. 1947,
(since repealed) every contract on a negotiable instrument
was deemed incomplete and revocable until delivery of the
instrument had been accomplished, especially as regards a
remote party.
Under the Uniform Commercial Code appears that nondelivery
is no defense as to a holder in due course (section 87A-3-
305, R.C.M. 1947), but is a defense as to one not a holder
-7-
in due course. (Section 87A-3-306, R.C.M. 1947.) With
respect to the liability of a maker of a negotiable instrument,

section 87A-3-413, R.C.M. 1947, now section 30-3-413 MCA
provides in part:
" (1) The maker or acceptor engages that he
will pay the instrument according to . . .
its tenor - - - - - his engagement."
at the time of
(Emphasis added.)
When is the "time of his engagement" at which a maker
of a promissory note becomes liable? Surely it is when he
issues and delivers the promissory note. Under section 87A-
3-102(1) (a), R.C.M. 1947, now section 30-3-102(1) (a) MCA, he
issues the instrument upon the first delivery thereof to a
holder. Under section 87A-1-201(14), now section 30-1-

201(14) MCA, the maker accomplishes delivery of the instrument
when he voluntarily transfers its possession. Negotiable
instruments have no validity until delivered. This is still
true under the UCC. Rex Smith Propane, Inc. v. National
Bank of Commerce (U.S.D.C. Texas 1974), 372 F.Supp. 499.
"A note takes effect from the time of
its delivery and not from its date. Until
the maker of the note parts with the
possession and control of the instrument,
he may cancel it or dispose of it as
he pleases and a note is not executed until
it is delivered . . ."
"When the note and trust deed were so deposited
[in the mail] . . .the maker, parted with the
possession of and lost control over the papers
and all right to retake or reclaim them. Under
such circumstances, the delivery was complete
. . ." Birrer v. Beckler (Ill. 1914), 106
N.E. 206. See also: Investors Commercial
Corporated v. Metcalf (Ill. 1957), 140 N.E.2d
924.
Thus, the promissory note was deemed delivered at the
time it was mailed to the bank. The note thereupon became the
property of the payee when it was posted to the bank. It
was beyond the control of the makers at that time. The
time of mailing therefore became the "time of his engagement"
under section 87A-3-413, now section 30-3-413 MCA fixing the
liability of the maker. It was at that time that Goddard
became obligated to the creditor under the terms of section
40-4209, R.C.M. 1947, now section 33-21-204(2) MCA.

- -OF ONSET OF GODDARDS DISABILITY
DATE - -
The District Court found that at the time Goddard

mailed the promissory note to the bank there was not existing

such illness, disease or physical condition for which he had
a medical diagnosis of a totally and permanently disabling
nature, or which would have caused a reasonably prudent
person to have sought diagnosis or treatment. That finding
is a negation of the conditions which would exclude coverage
under the BULIC policy.

Under Rule 52(a), Mont.R.Civ.P., findings of fact made
by the District Court shall not be set aside unless clearly
erroneous, and due regard is to be given to the opportunity
of the trial court to judge the credibility of the witnesses.

Here the evidence is that the date of mailing of the

promissory note was on October 4 or 5, 1975; that the onset
of Goddards discomfort did not occur until October 5; and:that

he did not go to a medical doctor until October 7, 1975. In
fact the evidence is uncontroverted. Since the District
Court accepted the credibility of the Goddards with respect
to these matters, and nothing in the record makes such
evidence inherently incredible,there is substantial evidence
to support the findings of the court. See Arrowhead, Inc.
v. Safeway Stores, Inc. (1978), Mont . , 587 P.2d
411, 35 St-Rep. 1830, and cases cited therein.
ESTOPPEL - VIRTUE OF MISREPRESENTATION
BY -
Under this contention, BULIC argues that Goddard
misinformed the insurance company as to the date of the
beginning of his disability and is therefore estopped to
claim any other date of onset. Goddards statement of claim
to BULIC indicated that he was totally disabled on October
5, 1975 and was his last day of work. He was examined by
Dr. Matthews on October 7, and in Dr. Matthews' report, it
is stated that Goddard was totally disabled from October 5.
Goddard testified that he asked Dr. Matthews to "backdate"
the onset of his disability. When he was testifying however,
he stated that he worked until October 7, 1975. BULIC
claims that the initial statement that his disability began
on October 5, 1975 is fraudulent and by virtue thereof
Goddard is estopped from claiming any other time of disability.
The District Court found that Goddard's coronary disease
was diagnosed on October 7, 1975.
The elements of equitable estoppel (section 93-1301-6,
R.C.M. 1947, now section 26-1-601 MCA) which BULIC claims
apply here include the contention that BULIC denied Goddard's
claims because of his representation that the disability
began on October 5, 1975, and that BULIC returned his premium
based upon such representation. What this argument of BULIC
disregards is that it denied the claim because of its mistaken
impression that the effective date of the insurance was
October 7, 1975. BULIC had mistakenly concluded that the
obligation was not incurred as far as Goddard was concerned
until the bank had actual physical possession of the note
and security instrument and issued the insurance policy. As
we have demonstrated above under the first issue, this is
not the law. Therefore the representation by Goddard, if
false, was not material to the risk assumed by BULIC under
its insurance policy. It requires a material misrepresentation

by an applicant relied on by the insurer to avoid coverage
under an insurance policy. See section 40-3713, R.C.M.
1947, now section 33-15-403 MCA. It was not the representation
by Goddard that his disability commenced on October 5, 1975
that caused BULIC to change his position for the worse;

rather, it was BULIC's mistaken position that October 7 was
the date when Goddard became obligated to the bank that

caused it to deny coverage. Estoppel has reference to the

conduct of the person estopped.Bagley v. Hotel Florence
Company (1974), 165 Mont. 145, 526 P.2d 1372. Estoppel has
no application where the omissions of the party claiming
estoppel brought about the problem.
- -
THE PROPER MEASURE OF DAMAGES AND CONSEQUENTIAL DAMAGES
Under these issues, BULIC claims that the amount of

damages awarded by the District Court, $4,227.95, was excessive.
BULIC contends that the insurance contract was an
agreement for payment of money only and therefore the proper
measure for damages for a breach of the agreement is section

17-303 R.C.M. 1947, now section 27-1-312 MCA, which provides:
"The detriment caused by the breach of an
obligation to pay money only is deemed
to be the amount due by the terms of
the obligation with interest thereon."
BULIC further contends that under the Insurance Code,
section 40-4206(2), R.C.M. 1947, now section 33-21-202 MCA,
states that the amount payable under a credit disability insurance
plan shall equal the aggregate of the periodic unpaid
scheduled installments "in the event of disability". Since
Goddard was disabled for seven months, BULIC contends the
maximum statutory benefit payable will be seven times $153.61,
which equals $1,075.27. Any amount in excess of that for
direct damages BULIC contends is improper.
-11-
 Moreover, BULIC also contends that Goddard is not
entitled to consequential damages and that the only amounts
which the court may properly award over the seven unpaid

installments is such interest as may be found due. Goddard
answers this issue claiming that section 17-301, R.C.M. 1947,
now section 27-1-311 MCA is applicable and that Goddard is
entitled to receive "the amount which will compensate the
party aggrieved for all the detriment proximately caused
thereby." Goddard further contends that section 17-303 is
intended only as a guide to the estimation of damages under
the cases of Zook Brothers Construction Company v. State of
Montana (1976), Mont. , 556 P.2d 911, 33
St-Rep. 809; Wyatt v. School District No. 104 (1966), 148

Mont. 83, 417 P.2d 221; and Orford v. Topp (1959), 136 Mont.
227, 346 P.2d 566. Goddard also relies on Wiseman v. Holt

(1973), 163 Mont. 387, 517 P.2d 711, but this case was

overruled in Whitney v. Bails (1977), Mont . I

560 P.2d 1344, 34 St.Rep. 134.
Neither of the positions taken by the opposing parties

here quite hits the mark as to the proper measure of damages
recoverable in such a case as the one at bar.
Under the pleadings of the parties, and the findings of
the court, the claim of Goddard is one sounding in tort
involving a breach of contract. In their third party complaint,
Goddards allege that BULIC "wrongfully refused to make payment
of the insurance benefits to which [Goddard] were entitled,
with the result that [Goddard's] automobile was repossessed"
by BULIC. No breach of contract as such is alleged in the
third party complaint. The District Court did not make a
finding that a breach of contract, as such, existed here.
Rather it found that BULIC had "failed and refused" to make
the payments under the disability insurance policy to Goddard
and as a direct consequence, the bank declared his default,
accelerated the payments due under the note, and thereafter
repossessed Goddards vehicle and sold it at a distress sale.
Thereafter, the court found, the bank commenced the instant
case to collect a deficiency sum from Goddard.
In its conclusions, the District Court found that BULIC
had violated the provisions of Chapter 42, Title 40, R.C.M.
1947. It is on this basis that the court founded its award
of damages and punitive damages.
A cause of action may sound in tort although it arises
out of a breach of contract, if a defaulting party, by
breaching the contract, also breaches a duty which he owes
to the other party independently of the contract. This
distinction was carefully noted in Battista v. Lebanon
Trotting Association (U.S.C.A. 6th 1976), 538 F.2d 111,
where the Sixth Circuit Court applied Ohio law. There the
court noted that under Ohio law a tort arises out of a
breach of contract if the party also breaches a duty which
he owes to another independently of the contract, and which
duty would exist even if no contract existed. It is this
factor that determines whether an action of this kind is one
of contract or of tort. The federal court noted that two
cases in Ohio had recently allowed tort damages in breach of
contract cases and said:
 "These cases are the first in Ohio to
recognize the legal trend toward punishing
an insurance company for willful refusal
to pay a valid claim. Such a tort claim,
however, is founded upon a legal duty
rather than a contractual duty.
"'An insurer owes its insured an implied-
in-law duty of good faith and fair dealing
that it will do nothing to deprive the
insured of the benefits of the policy.
(Fletcher v. Western National Life Insurance
Company, 10 Cal.App.3d 376, 89 Cal.Rptr.
78, 47 A.L.R.3d 286, 305 (1970).) '
". . . This special duty, enforced through
tort liability, is necessary because of
the relationship between the parties and
the fact that in the insurance field the
insured usually has no voice in the preparation
of the insurance policy and because of the
great disparity between the economic positions
of the parties to a contract of insurance;
and furthermore, at the time an insured
party makes a claim he may be in dire
financial straits and therefore may be
especially vulnerable to oppressive tactics
by an insurer seeking a settlement or a
release.
"The special considerations existent in
a consumer-held insurance contract do
not apply to an ordinary contract between
businessmen .
. ." 538 F.2d at 117, 118.
In Montana, insurance companies insuring credit disability
risks have a statutory duty that exists beyond the insurance
contract itself. Their statutory duty under section 40-
4213, R.C.M. 1947, now section 33-21-105 MCA, is that all
claims shall be settled as soon as possible and in accord-
ance with the terms of the insurance contract. Thus, BULIC
not only had a contractual duty to make payment of a valid
claim to Goddard, but it had the statutory duty to do so as
soon as possible. It is the breach of that statutory require-
ment, a duty independent of the insurance contract, that
gives rise to tort liability in the case at bar.
Thus, the insurer's duty of good faith and fair dealing
with its insureds in the payment of claims has statutory
blessing and authority. Accordingly, the measure of damages
in such a case as the one at bar is provided in section 17-
401, R.C.M. 1947, now section 27-1-317 MCA which allows
compensation "for all the detriment proximately caused
thereby whether it could be anticipated or not."

This Court recognized that a breach of contract might
also give rise to an action in tort in State ex rel. Larson
v. District Court (1967), 149 Mont. 131, 136, 423 ~ . 2 d598,

600, when it said:
"Thus, in the insurance contract we have
a unique situation; that is, some acts
may be both breaches of contract and
violations of the laws of Montana."

- ISSUE OF PUNITIVE DAMAGES
THE -
BULIC makes a two-pronged attack on the $5,000.00
punitive damages awarded by the District Court. BULIC

contends that there is no authority for punitive darriages
in

this case because of breach of contract and that in any
event the evidence is insufficient to support an award of
punitive damages.
The propriety of recovery of punitive damages for
breaches of insurance contracts where a statutory duty is
also violated was settled in this state in State ex rel. Larson.

Here BULIC distinguishes Larson saying a violation of

section 40-4213, that "all claims shall be settled as soon
as possible" is not a statute for which a penalty is assessed.
Therefore, even under Larson, BULIC contends that punitive
damages may not be awarded in this case.
BULIC contends that section 40-4213, R.C.M. 1947, now
section 33-21-105 MCA has no self-executing criminal sanction.

To enforce it, BULIC argues that one must first get an order
from the Commissioner of Insurance, section 40-4215, R.C.M.
1947, now section 33-21-111 MCA. Thereafter, there should
be a judicial review, section 40-4216, R.C.M. 1947, now
section 33-21-112 MCA, after which penalties for violations
of the orders - - Commissioner - Insurance are set forth
of the of
as criminal penalties. Section 40-4217, R.C.M. 1947, now
section 33-21-113 MCA. BULIC points out there is no specific
statute assessing a criminal penalty directly for a violation
of section 40-4213.
BULIC1s contentions on this point cannot be sustained,
because a violation of section 40-4213, with respect to
failure of prompt payment of claims in credit disability
cases, is subject to the general penalty provided by section
40-2617, R.C.M. 1947, now section 33-1-104 MCA. That section
provides :
"Each violation of any provision of this
code, with respect to which violation a
greater penalty is not provided by other
applicable laws of this state, shall,
- addition - - administrative penalty
in to any
otherwise applicable thereto, upon conviction
in a court of competent jurisdiction of
this state be punishable by a fine of not
less than $50 or more than $1,000
or by imprisonment in the county jail for
not less than 30 days or more than 90
days or by both such fine and imprisonment."
There being a criminal penalty available for a violation
of section 40-4213, this case is within the rule set forth
in Larson, and in Paulson v. Kustom Enterprises, Inc.
(1971), 157 Mont. 188, 483 P.2d 708. We distinguish State
ex rel. Cashen v. District Court (1971), 157 Mont. 40, 482
P.2d 567 because in Cashen no criminal penalty was involved.
BULIC next contends that even if punitive damages could
be awarded here, there is no evidence that BULIC acted
wantonly, maliciously or oppressively so as to entitle
Goddard to such punitive damages.
The findings of the District Court noted the failure
of BULIC to make the payments, the direct consequence of
the acceleration of Goddards' note, the subsequent
repossession of Goddards' vehicle to be sold at a distress
sale and finally, the filing of the deficiency action against
Goddards. The District Court also noted that BULIC was

repeatedly requested by counsel for Goddard "and implored to
make payment of the disability benefits" and that the
failure and refusal of BULIC to make payment of the disability
benefits was an oppressive act or omission on the part of
BULIC. The court'concluded that by virtue of the violation
of section 40-4213, and the distress which resulted therefrom
to Goddard, that Goddards were entitled to exemplary damages.

It is not necessary to show actual malice to recover
punitive damages. Harrington v. Holiday Rambler Corporation

(19781, Mont. , 575 P.2d 578, 35 St.Rep. 46. Fraud
or malice may be actual or presumed. Section 17-208, R.C.M.
1947, now section 27-1-221 MCA. Inplied malice may be shown

by proof that defendant engaged in a course of conduct
knowing it to be harmful and unlawful. Ferguson v. Town

Pump, Inc. v. Wallace Diteman (1978), Mont . I

580 P.2d 915, 921, 35 St.Rep. 824, 831; Miller v. Fox (1977),
Mont. , 571 P.2d 804, 34 St.Rep. 1367; Cashin
v. Northern Pacific Railway Company (1934), 96 Mont. 92, 28

"Malice-in-law" is implied where the defendant's conduct
is unjustifiable. Cherry-Burrell Company v. Thatcher

(U.S.C.A. 9th 1939), 107 F.2d 65, 69 (applying Montana law).
Here, BULIC's conduct was both harmful to Goddard and
unlawful because it violated a statute. Its malice will
therefore be implied because its actions were unjustifiable.
BULIC claims it was acting in good faith in denying the
disability benefits because Goddard and his doctor had
reported Goddard to be continuously disabled from October

5, two days before BULIC claims insurance coverage commenced.
Again, it is not the claim of Goddard or his doctor as to
the commencement of the disability, but BULIC's incorrect
position that the coverage commenced on October 7, that
brought about the denial. BULIC has persisted in insisting
 that the coverage began on October 7 even through this
appeal, in the face of sections 40-4207 and 40-4209 which
provide that the term of credit disability insurance shall
become effective when the indebtedness is incurred.
No issue is raised by BULIC as to the amount of exemplary
to
damagedhe awarded. The office of an award of exemplary
damages is to punish the defendant for malicious and wrongful
acts, be the malice actual or presumed, where the defendant
should suffer some additional penalty for the wrongful
conduct and where the exemplary damages will serve as a
warning to others and as a deterrent and punishment to the
defendant. See Kesler v. Rodgers (Utah 1975), 542 P.2d 354.
The judgment of the District Court is affirmed.

C&k-.-.-&bq-
Justice

We Concur:

Chief Justice

/ Justices
/