No. 88-137
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
BROOK W. GARRETSON AND LINDA GARRETSON,
Plaintiffs and Appellants,
-vs-
MOUNTAIN WEST FARM BUREAU MUTUAL INSURANCE
CO., and WESTERN AGRICULTURAL INSURANCE CO.,
Defendants and Respondents.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable Diane Barz, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Calvin A. Calton; Calton, Hamman, Calton C Wolfe,
Billings, Montana
For Respondent :
James D. Walen; Felt & Martin, Billings, Montana
Submitted on Briefs: June 22, 1988
Decided: September 23, 1988
Filed: SEP 2 3 1988
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
Plaintiffs Brook and Linda Garretson appeal a District
Court order granting summary judgment in favor of Mountain
West Farm Bureau Mutual Insurance Company (Farm Bureau).
Summary judgment was granted January 12, 1988, in the
Thirteenth Judicial District, Yellowstone County. We affirm.
On May 19, 1987, plaintiff-appellant Brook Garretson
was involved in an automobile accident. The vehicle driven
by Garretson, a 1984 Chrysler Laser, was "totalled." The
Garretsons purchased the vehicle December 19, 1986, for
$8,995. At the time of the accident, the Garretsons'
outstanding balance on their car loan was $8,295.
The Garretsons insured the vehicle with Farm Bureau and
the insurance policy included the following provisions:
Appraisal. (Not applicable to liability
coverages). If you and we fail to agree
on the amount of loss, either one can
demand that the amount of loss be set by
appraisal. If either makes a written
demand for appraisal, each shall select a
competent, independent appraiser and
notify the other of the appraiser's
identity within 20 days of receipt of the
written demand. The two appraisers shall
then select a competent, impartial
umpire. If the two appraisers are unable
to agree upon an umpire within 15 days,
you or we can a l a judge of a court of
sc
record in the state where the residence
[sic] premises is located to select an
umpire. The appraisers shall then set
the amount of the l o s s . . .Each
appraiser shall be paid by the party
selecting that appraiser. Other expenses
of the appraisal and the compensation of
the umpire shall be shared equally.
Suit against us. No action shall be
brought against us unless there has been
compliance with the policy provisions and
the action is started within four years
after the date of discovery of loss or
damage.
The Garretsons' insurance claim was investigated by Gary
Cantrell (Cantrell), Farm Bureau's claims representative.
Cantrell initially valued the car at $6,295 and offered to
settle the claim in that amount. According to Garretson,
Cantrell stated that if the offer were refused, the value
would be determined through arbitration and the Garretsons
would receive $5,400 to $5,500 for the vehicle. Cantrell
contends he merely described the appraisal procedures set
forth in the insurance policy. The Garretsons assert
Cantrell later phoned Linda Garretson at work and attempted
to settle the claim with her.
The Garretsons demanded payment in the amount of
$8,295. When Farm Bureau refused, the Garretsons filed a
complaint on June 16, 1987, alleging bad faith. On July 13,
1987, counsel for Farm Bureau demanded the Garretsons' loss
be appraised through the procedures set forth in Garretsons'
policy. The Garretsons refused, contending the most accurate
estimation of their loss was the remaining amount of their
loan. Additionally, the Garretsons claim an accurate
appraisal is impossible because the damage is so severe.
Yet, according to Farm Bureau, severely damaged vehicles can
still be appraised by experts with reasonable accuracy.
Summary judgment was granted in favor of Farm Bureau on
January 12, 1988. The District Court found Farm Bureau had
neither breached the contract nor acted in bad faith, and was
entitled to value the vehicle through the appraisal process.
The District Court also noted Western Agricultural Insurance
Company was not a proper defendant in this action.
The parties have stated the issues in this case in
differing ways. We believe the critical issue on appeal is
whether a private automobile insurance policy may require the
parties to submit to an appraisal process to determine the
value of the loss in the event there is a disagreement as to
value. Although the policy does not specifically provide
that the parties are bound by the process, the wording
indicates the appraisal process is intended to generate a
valuation which is final and binding.
Prior to 1985, S 28-2-708, MCA, stated:
Restraints upon legal proceedings void.
Every stipulation or condition in a
contract by which any party thereto is
restricted from enforcing his rights
under the contract by the usual
proceedings in the ordinary tribunals or
which limits the time within which he may
thus enforce his rights is void.
This statute has been included in the laws of Montana since
1895 and is a codification of the common law rule. See,
Wortman v. Montana Central Railway Co. (1899), 22 Mont. 266,
278, 56 P. 316, 321. The effect of S 28-2-708, MCA, was that
contract provisions requiring arbitration of all future
contract disputes were void. See, e.g. Smith v. Zepp (1977),
173 Mont. 358, 369, 567 P.2d 923, 929.
The 1985 Montana Legislature amended S 28-2-708, MCA,
adding the law would not affect the validity of an agreement
enforceable under the "Uniform Arbitration Act, I Title 27,
'
Chapter 5 of the Montana Codes. The amendment validates
arbitration provisions in a contract if they meet the
requirement stated in the Uniform Arbitration Act. This
obviously has a limiting effect on the scope of $ 28-2-708,
MCA. Both parties refer to the Act in their arguments, but
we find the Act inapplicable to the present case. Section
27-5-114, MCA, states in part:
(2) A written agreement to submit to
arbitration any controversy arising
between the parties after the contract is
made is valid and enforceable except upon
such grounds as exist at law or in equity
for the revocation of a contract. This
subsection does not apply to:
(b) any agreement concerning or relating
to insurance policies or annuity
contracts except for those contracts
between insurance companies;
This statute clearly excludes the Garretsons' auto insurance
policy and the current dispute is not controlled by the
Uniform Arbitration Act.
Prior to 1985, contract provisions requiring
arbitration to resolve all future disputes were invalid.
However, we had developed at least one exception to this
rule. While we had concluded that a contract could not
require binding arbitration of all future disputes, those
disputes relating solely to questions of fact, such as value
or quantity, were subject to arbitration.
The roots of this exception predate the codification of
the general rule. In Randall v. American Fire Ins. Co.
(1891), 10 Mont. 340, 353, 25 P. 953, 956-957, this Court
stated:
[Tlhe question, as to how far courts will
be governed by a provision in the
contract, requiring that controversies
arising as to the rights and liabilities
of parties thereunder be submitted to
arbitration, has engaged the profound
consideration of both American and
English courts of last resort. The
conclusion reached, and probably settled
beyond further controversy, is that a
provision in a contract, requiring all
- . .
differences or controversies arising
between the parties as to their rights
and liabilities thereunder, to be
submitted to arbitration, will not be
allowed to interfere with or bar the
litigation of such controversies when
brought into court. To enforce such
provisions would be to allow parties to
barter away the jurisdiction of courts to
determine the rights of parties and
redress their wrongs. Therefore such
provisions are disregarded as against
public policy. But many of the same
eminent authorities hold that a provision
in a contract requiring that the value or
quantity of a thing which might be
involved in a controversy thereunder be
ascertained and determined by
arbitration, or in some other possible
and reasonable manner, does not oust the
jurisdiction of the courts, but only
requires a certain character of evidence
of a fact in controversy. Therefore a
provision in a contract like the one
under consideration in the case at bar,
requiring that the value of the assured
property, under certain conditions, shall
be ascertained by appraisal, is not
disregarded as against public policy, but
is upheld has valid. (Citations
omitted.) (Emphasis in original.)
The Randall case was cited with favor in School District No.
1 v. Globe & Republic Ins. Co. (1965), 146 Mont. 208,
212-213, 404 P.2d 889, 892, where we upheld the validity of
an insurance policy provision requiring arbitration when the
parties disputed the amount of loss incurred. In Globe, we
noted a distinction between an agreement requiring a private
appraisal to settle a dispute regarding a pure question of
fact, i.e., the value of the loss incurred, and an agreement
requiring binding arbitration as to the resolution of all
future disputes. See also, Palmer Steel Structures v.
Westech, Inc. (1978), 178 Mont. 347, 350, 584 P.2d 152, 154;
Smith v. Zepp (1977), 173 Mont. 358, 369, 567 P.2d 923, 929;
and State ex rel. Cave Const. Co. v. District Court (1967),
150 Mont. 18, 22, 430 P.2d 624, 626.
Where there is no disputed issue of material fact,
summary judgment is proper. We agree respondent is entitled
to judgment as a matter of law. The District Court did not
err in granting summary judgment since there is no disputed
issue of material fact. Rumph v. Dale Edwards, Inc. (1969)
183 Mont. 359, 365, 600 P.2d 163.
The appellants' complaint arose from a dispute over the
amount of loss resulting from an automobile accident. By the
terms the insurance contract, if either party demands an
appraisal, that amount of loss to the vehicle must be set by
an appraisal. Here, the dispute deals with the amount of
loss and the insurance contract clearly provides for an
appraisal of such dispute. The parties must comply with the
appraisal process before filing a complaint. The contract
provisions in Globe were almost identical to those before us.
There we held appraisal provisions were not contrary to
public policy and therefore it was proper for either party to
demand an appraisal. Upon like reasoning, the District Court
properly granted Farm Bureau's motion for summary judgment.
W agree with t h e D i s t r i c t Court's conclusion t h a t t h e
e
p a r t i e s a r e bound by t h e a p p r a i s a l p r o c e s s s e t f o r t h i n t h e
insurance policy. T h e r e f o r e , we a f f i r m t h e D i s t r i c t C o u r t ' s
o r d e r o f summary iudgment.
Affirmed. A
W e concur: