No. 85-498
IN THE SUPREME COURT OF THE STATE OF MONTANA
1987
LINDA M. HART-ANDERSON,
Plaintiff and Respondent,
-vs-
GERALDINE C. HAUCK and STATE FARM
INSURANCE COMPANY,
Defendants and Appellants.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable William J. Speare, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Christopher P. Thimsen argued for Hauck, Billings,
Montana
Dzivi, Conklin & Nybo; William Conklin argued for
State Farm, Great Falls, Montana
For Respondent:
Crowley Law Firm; Ronald D. Lodders argued, Billings,
Montana
submitted: November 24, 1957
Decided: January 8, 1988
Filed:
1P6j -3 -
-""3 - -
- .
Clerk
Mr. Justice L . C. Gulbrandson delivered the Opinion of the
Court.
Defendants Geraldine Hauck and her insurer, State Farm
Insurance Company (State Farm), appeal a Yellowstone County
District Court jury verdict and judgment which; (1) found
Hauck negligent and 100% liable for an automobile accident
involving the respondent/plaintiff Linda Hart-Anderson,
(2) found that State Fa.rm had breached its statutory
obligations to respondent under Montana.'~Unfair Claims
Settlement Practices Act (the Act), and (3) awarded $687 to
respondent for property damages to her car, (4) awarded
$25,000 to respondent as compensatory damages for emotional
distress, and (5) awarded $687,000 to respondent as punitive
damages against State Farm.
A decision was entered by this Court on March 17, 1987.
Hart-Anderson v. Hauck (Mont. 1987), 44 St.Rep. 508.
Hart-Anderson petitioned this Court for partial
reconsideration under Rule 34, M.R.Civ.P. The petition was
briefed by the parties and we granted oral argument. We now
withdraw the original opinion and issue this opinion in its
place.
Appellant State Farm raises the following issues on
appeal:
(1) whether the District Court erred in instructing
the jury that S 33-18-201(7), MCA, applies to third party
claimants;
(2) whether the District Court erred in allowing
respondent's expert witness to state legal opinions that
State Farm violated the Act;
(3) whether the District Court erred in prohibiting
respondent from cross-examining plaintiff's expert witness on
his knowledge and interpretation of case law on negligence
and rear-end collisions;
(4) whether the District Court erred in instructing
the jury that a violation of the Act may be considered as
evidence of presumed malice;
(5) whether the District Court committed prejudicial
error by refusing to bifurcate the trial into a negligence
action and a bad faith action;
(6) whether the evidence is sufficient to support the
jury's verdict that State Farm breached obligations imposed
by the Act;
(7) whether the evidence is sufficient to support the
award of $25,000 for emotional distress;
(8) whether the District Court erred in submitting the
issue of punitive damages to the jury and whether the
punitive damages award of $687,000 is supported by the
evidence;
(9) whether the punitive damages award violates State
Farm's rights under the excessive fine clause and the due
process clause of both the United States and the Montana
Constitutions.
Appellant Hauck raises two issues:
(1) whether the District Court erred in instructing
the jury that there was no preexisting damage to plaintiff's
car ;
(2) whether the District Court erred in instructing
the jury that, as a matter of law, the actions of another
driver had no bearing upon this case.
Because of instructional and evidentiary errors, we
reverse the judgment and remand this cause for a new trial.
On the morning of December 6, 1982, plaintiff was
driving her car east on Broadwater Avenue in Billings,
Montana. Geraldine Hauck was some distance behind the
plaintiff also driving east on Broadwater. The streets were
very icy that morning. Plaintiff planned to turn right at
the corner of Broadwater and Tenth Street. As she approached
the corner, a large delivery truck entered the intersection
from her right. Plaintiff applied her brakes causing her car
to slide to the right. Her car hit the curb and bounced back
into her lane of traffic. Plaintiff proceeded very slowly
around the corner. Appellant Hauck saw that the plaintiff's
vehicle was having trouble on the icy street. Appellant
Hauck also planned to turn right on Tenth Street and she
attempted to brake her vehicle to avoid the plaintiff's
vehicle in front of her. Hauck testified that she could not
avoid plaintiff's vehicle by passing it on the left because
of the delivery truck, which was blocking the road on that
side. Hauck was unable to slow her car enough to avoid
striking t.he plaintiff's vehicle from the rear. Hauck's
vehicle struck the plaintiff's vehicle and pushed it across
Tenth Street and into a car driven by Agnes Heald. No one
suffered physical injuries.
At the time of the accident, Hauck had an automobile
insurance policy with State Farm. Hauck promptly reported
the accident to State Farm. On December 1.7, 1982, the
plaintiff submitted her accident report and claim for $687 to
State Farm. Plaintiff's initial written accident report did
not mention that she had slid into the curb. However,
shortly after she filed her report, the plaintiff admitted to
State Farm's adjuster, Doyle Hailey, that she did slide into
the curb. Hailey told plaintiff that he would only pay 50%
of the cost of repairing her car because he believed that she
was also negligent. Prior to this offer, Hailey did not
interview witness Heald or the police officer who
investigated the accident. In late December 1982, Heald
filed her accident report and claim with State Farm. Heald
did not see the plaintiff 's vehicle strike the curb and her
report made no mention of that fact.
Plaintiff believed that State Farm should pay 100% of
her claim. An attorney called Hailey on behalf of plaintiff
and stated that plaintiff was not negligent, that it was
clear that Hauck was 100% liable, that the refusal to pay all
of plaintiff's damages was unjustified, and that plaintiff
would accept a settlement payment of 90% of her damages. In
January 1983, Hailey telephoned the attorney, stated that
plaintiff was 50% negligent and refused to pay plaintiff 90%
of her damages. Plaintiff secured counsel and filed this
action alleging that Hauck had been negligent and that State
Farm had violated the Unfair Claims Settlement Practices Act.
The District Court held the jury trial in this case in
May 1985. Plaintiff's counsel read an agreed statement of
facts into the record in the jury's presence. Among other
things, the statement said,
Defendant State Farm Insurance Company
has offered to pay 50 percent of
plaintiff ' s damage. This offer was
communicated at the time of State Farm's
first contact with the plaintiff and has
never been increased or decreased.
State Farm's counsel moved to amend the second sentence
quoted above. He claimed he had informed plaintiff's counsel
that he did not agree to that sentence but that his partner
signed the statement (apparently not knowing of the dispute).
The plaintiff filed a trial brief which admits that State
Farm offered to settle both the bad faith action and the
negligence action for a total of $5,000. Therefore, we find
that the second sentence quoted above, pertaining to the
increase or decrease of the offer, was misleading and should
be stricken from the agreed statement of facts upon retrial.
Appellant Hauck introduced evidence at trial. of two
repair estimates submitted by plaintiff. One estimate was
dated October 8, 1982, approximately two months before the
accident occurred. That estimate was for $687. The mechanic
who prepared that estimate testified that he believed the
date on the estimate was mistaken. He also testified that he
had previously said, in a statement given to Hailey, that as
far as he could remember the estimate was written in October
and not in December. The date of plaintiff's other estimate
was September 15, 1982, almost three months before the
accident occurred. The estimate was for $750. The mechanic
who prepared that estimate testified that he did not remember
making the estimate but admitted, at his deposition, that as
far as he knew the date on the estimate was correct.
The plaintiff called two expert witnesses to testify at
trial. Albert Benoit, now retired but previously the branch
claims manager for Farmers Insurance Group for 25 years,
testified that Hauck was 100% at fault in the accident and
that plaintiff was not negligent at all. Benoit testified,
without objection, that State Farm 1. violated subsection
(4) of the Act by refusing to pay the claim without
conducting a reasonable investigation based upon all the
available information, 2. violated subsection (6) of the Act
by neglecting to attempt in good faith to effectuate prompt,
fair and equitable settlement of the claim where liability
was reasonably clear, and 3. violated subsection (7) of the
Act by compelling plaintiff to institute litigation to
recover amounts due by offering substantially less than the
amount recovered. Earl Hanson, an experienced Billings
attorney, also testified as an expert witness. Hanson
testified that Hauck was clearly 100% negligent and that the
plaintiff was not negligent in the accident. He further
testified, over objection, that State Farm agents violated
subsections ( 6 ) , (7) and possibly (4) of the Act in the way
they handled plaintiff's claim.
Counsel for Sta-te Farm attempted to cross-examine
Hanson as to case law involving negligence and rear-end
collisions. After plaintiff's objection, the District Court
refused to allow this cross-examination. Counsel for State
Farm made an offer of proof citing two Montana Supreme Court
cases, cases from Texas, Tennessee, and California, and
several Montana District Court cases.
Plaintiff also called Thomas Poindexter, an eye
witness, to testify at trial. He testified that the delivery
truck was a contributing factor to plaintiff hitting her
brakes and sliding into the curb. He also testified that if
plaintiff had not applied her brakes because of the truck,
causing her to slide into the curb and come almost to a stop,
that the accident would not have occurred.
The District Court instructed the jury, over State
Farm's objection, that subsection (7) of the Act applied to
and protected any person, rather than only insureds. The
District Court also instructed the jury, over objection, that
the jury could consider a violation of the Act as evidence of
presumed malice. The jury returned the verdict described
above. This appeal followed.
The first issue concerns the court's instruction to the
jury relative to subsection (7) of the Act. Section
33-18-201, MCA (the Act), states in pertinent part:
No person may, with such frequency as to
indicate a general business practice, do
any of the following:
(4) refuse to pay claims without
conducting a reasonable investigation
based upon all available information;
(6) neglect to attempt in good faith to
effectuate prompt, fair, and equitable
settlements of claims in which liability
has become reasonably clear;
(7) compel insureds to institute
litigation to recover amounts due under
an insurance policy by offering
substantially less than the amounts
ultimately recovered in actions brought
by such insureds;
(9) attempt to settle claims on the
basis of an application which was altered
without notice to or knowledge or consent
of the insured;
(10) make claims payments to insureds or
beneficiaries not accompanied by
statements setting forth the coverage
under which the payments are being made;
(11) make known to insureds or claimants
a policy of appealing from arbitration
awards in favor of insureds or claimants
for the purpose of compelling them to
accept settlements or compromises less
than the amount awarded in arbitration;
(12) delay the investigation or payment
of claims by requiring an insured,
claimant, or physician of either to
submit a preliminary claim report and
then requiring the subsequent submission
of formal proof of loss of forms, both of
which submissions contain substantially
t.he same information;
Regarding subsection (7) of the Act and over
appellant's objection, the trial court instructed the jury
that:
[N]o insurance company may, with such
frequency as to indicate a general
business practice, do any of the
following: ... Compel any person to
institute litigation to recover amounts
due under an insurance policy by offering
substantially less than the amounts
ultimately recovered in such actions.
(Emphasis added. )
We set out the above subsections of the Act to
demonstrate that the Act, by its own terms, provides certain
protections to insureds, others to claimants and insureds,
and another to insureds and beneficiaries. See Royal Globe
Ins. Co. v. Superior Court, etc. (Cal. 1979), 592 P.2d 329,
334.
Using the analysis for statutory construction cited by
this Court in Klaudt v. Flink (Mont. 1983), 658 P.2d 1065,
1067, 40 St.Rep. 64, 66, we find that subsection (7) of the
Act does not protect third party claimants. The first step
of the analysis is whether our interpretation is consistent
with the statute as a whole. As stated, the statute extends
some protections to insureds, some to insureds and claimants,
and another to insureds and beneficiaries. Our
interpretation is consistent with these distinctions clearly
made in the statute. The second step is whether our
interpretation reflects the legislature's intent considering
the plain meaning of the statutory language. The language of
subsection (7) protects "insureds" and plainly that term
does not include third party claimants who are not insured by
the defendant insurance companv. The third step is whether
the interpretation is reasonable so as to avoid absurd
results. The statute here distinguishes between claimants,
insureds and beneficiaries. Our interpretation here
recognizes and defers to that distinction. As this Court
stated in Klaudt, 658 P.2d at 1067, in holding that
subsection (6) of the statute does protect third party
claimants,
It would be absurd to assume that the
legislature would insert these words into
the statute without them having some
meaning, as the legislature is presumed
not to pass useless or meaningless
legislation.
Plaintiff incorrectly asserts that the Klaudt Court
held that 5 33-18-201, MCA, in its entirety, applies to, and
protects third party claimants. The Klaudt Court addressed
only subsection (6) of the statute. We hold that the
District Court committed reversible error in instructing the
jury that subsection (7) of the statute applied to any
person.
Our interpretation of subsection (7) of the statute is
supported by Green v. Holm (Wash.App. 1981), 622 P.2d 869.
In Green, the court addressed a Washington administrative
regulation on unfair insurance practice which was almost
identical to S 33-18-201(7), MCA. The court found that the
plaintiffs could not successfully state a claim under the
regulation because they were third party claimants, not
insureds. The Washington Supreme Court has since held that a
third party claimant has no cause of action against an
insura.nce company for unfair claims settlement practices.
Tank v. State Farm Fire & Cas. Co. (Wash. 1986), 715 P.2d
1133.
The second issue is the propriety of the expert witness
testimony. Appellants objected to attorney Hanson's opinion
testimony that State Farm violated various subdivisions of
the statute. Relevant Montana Rules of Evidence are:
Rule 702. If scientific, technical, or
other specialized knowledge will assist
the trier of fact to understand the
evidence or to determine a fact in issue,
a witness qualified as an expert by
knowledge, skill, experience, training,
or education may testify thereto in the
form of an opinion or otherwise.
Rule 704. Testimony in the form of an
opinion or inference otherwise admissible
is not objectionable because it embraces
an ultimate issue to be decided by the
trier of fact.
The Commission Comment to Rule 704, M.R.Evid., provides that:
[Tlhe Commission intends this rule to
follow the existj-ng Montana practice of
not allowing the witness to give a legal
conclusion or to apply the law to the
facts in his answer.
Additionally, § 25-7-102, MCA, provides that:
[A111 questions of law, including ...
the construction of statutes and other
...
writings, are to be decided by the
court ... and all discussions of law
are to be addressed to the court.
With this statutory framework in mind, we examine case
law bearing on the issue presented. In Safeco Ins. Co. v.
Ellinghouse (Mont. 1986), 725 P.2d 217, 43 St.Rep. 1689, this
Court recently addressed the plaintiff's use of expert legal
testimony in an insurance bad faith case. In Safeco,
Ellinghouse was originally sued in a negligence action.
Safeco, his insurer, initially accepted coverage of the claim
and retained counsel to represent him. Over a year later,
Safeco determined that an insurance policy exclusion applied
to the claim and that there was no coverage under the policy.
Safeco secured Ellinghouse's signature on a "non-waiver"
agreement and, a month later, formally denied coverage to
Ellinghouse. Ellinghouse later secured his own counsel and
settled the negligence claim out of court. Meanwhile, Safeco
had filed a declaratory judgment action to determine whether
Ellinghouse had liability coverage under the policy.
Ellinghouse counterclaimed against Safeco for, among other
things, bad faith. Ellinghouse introduced expert legal
testimony that:
[Ilt was a general principle of law that
prejudice was always presumed to exist
whenever a representation of coverage had
been made and a defense provided, that
the "courts are quite unanimous in saying
that insurance companies must either deny
coverage immediately or thereafter be
estopped from doing so," and that the
"completed operations" exclusion had "no
application" to this case.
Safeco, 725 P.2d at 224. There was also apparently expert
legal testimony on what Safeco's legal duties were in the
case, on what the legal effect of the non-waiver agreement
was, and that Safeco wrongfully denied coverage. This Court
held that such testimony was not reversible error under the
unique facts of that case, given that the trial court held
there was coverage as a matter of law. However, this Court
said, "[als a general rule, an attorney cannot advise the
jury as to the law of the case." Safeco, 725 P.2d at 225.
The Second Circuit Court of Appeals in Marx & Co., Inc.
v. Diners' Club, Inc. (2d. Cir. 1977), 550 F.2d 505, stated
reasons which help explain the general rule later cited in
Safeco. In Marx, the court held that the federal district
court erred in permitting an expert witness to give his
opinion as to the parties' legal obligation under a contract
for registration of stock. Among other things, the expert
opined (1) that the defendant had no legal excuses for
nonperformance and (2) as to what was required of the
defendant under the "best efforts" obligation under the
contract. In condemning the testimony, the federal court
stated:
[Sluch testimony "amounts to no more than
an expression of the [witness'] general
belief as to how the case should be
decided." McCormick on Evidence, S 12 at
26-27. The admission of such testimony
would give the appearance that the court
was shifting to witnesses the
responsibility to decide the case.
McCormick on Evidence, S 12 at 27. It is
for the jury to evaluate the facts in the
light of the applicable rules of law, and
it is therefore erroneous for a witness
to state his opinion on the law of the
forum. (Citation omitted.)
Marx & Co., Inc., 5 5 0 F.2d at 5 1 0 . The court further
cautioned that,
[Wle must be especially careful not to
allow trials before juries to become
battles of paid advocates posing as
experts on the respective sides
concerning matters of domestic law.
Marx &Co., Inc., 5 5 0 F.2d at 511.
Here, the jurors had the ability a.nd the competence,
based upon their common experiences and knowledge, to decide
whether (1) State Farm refused to pay plaintiff Is claim
without conducting a reasonable investigation based upon all
available information; and (2) State Farm neglected to
attempt in good faith to effectuate a prompt, fair and
equitable settlement of a claim in which liability had become
reasonably clear. Hanson's challenged testimony, opining
that State Farm violated subsections ( 4 1 , (6) and (7) of the
Act invaded the province of the jury and simply instructed
the jury how to decide the case. That testimony was highly
prejudicial to State Farm and, therefore, we hold that the
District Court committed reversible error in admitting
Hanson's legal opinions.
Appellants did not object to the respondent soliciting
legal. opinions from Benoit and we do not here address the
propriety of that testimony. For a further discussion of
expert legal testimony, see Kulak v. Nationwide Mutual
Insurance Company (N.Y. 1976), 3 5 1 N.E.2d 735.
The third issue concerns the District Court's ruling
restricting State Farm's cross-examination of attorney
Hanson. By way of qualifying Hanson as an expert legal
witness, plaintiff elicited Hanson's testimony that he has
practiced law for almost twenty years, that he has given
speeches to professional organizations on topics including
bad faith and insurance bad faith, that he had worked in the
insurance business and that he was generally familiar with
the principles of evaluating liability in rear-end car
crashes. On cross-examination, Hanson agreed that he tries
to read this Court's decisions soon after they are decided
and that the law in most states is similar to Montana law
with regard to rear-end collision and liability.
State Farm's counsel then attempted to cross-examine
Hanson about an Idaho case reported in the Pacific Reporter
and about a Texas Court of Civil Appeals case. Counsel
sought to show through these cases that the following driver
in rear-end collision cases is not always 100% liable. The
District Court sustained plaintiff's objection to this line
of questioning. State Farm then made an offer of proof that
various cases demonstrated that in rear-end collisions
similar to the instant case the following driver was not 100%
liable. The cases included reported cases from Montana,
California, Idaho, Texas and Tennessee, Montana District
Court decisions, and cases where Hanson's law firm took
positions allegedly inconsistent with his testimony on
negligence. The court refused to allow State Farm to use any
of these cases in cross-examination. The record demonstrates
that State Farm's attempted use of case law was designed, at
least in part, to test attorney Hanson's expertise.
This Court has zealously guarded the right of
cross-examination. In this regard, we have stated:
Rule 705, Mont.R.Evid., mandates that the
opinion of a qualified expert is
admissible, and if opposing counsel
believe the opinion is not founded on
sufficient data, cross-examination is the
shield to guard against unwarranted
opinions.
Stewart v. Casey (1979), 182 Mont. 185, 193, 595 P.2d 1176,
The right of cross-examination may not be
unduly restricted and may extend not only
to facts stated by the witness in his
direct examination, but to all other
facts connected with them which tends to
enlighten the jury upon the question in
controversy.
State Highway Commission v. Bennett (1973), 163 Mont. 386,
We hold that the District Court erred in precluding the
cross-examination of Hanson on the Montana decisions, both
Supreme Court and District Court, and on the cases involving
Hanson's law firm. Appellants were entitled to test the
knowledge, competency and qualifications of the expert
witness. We do not rule on the use of foreign decisions as a
District Court may properly exclude their use if they present
evidence only repetitive or cumulative to evidence abducted
from Montana cases. In sum, we find that Montana cases are
preferred in cross-examination of this kind, especially where
the expert witness has conceded his familiarity with Montana
law.
The fourth issue concerns the District Court's
instructions on presumed malice. The court gave instruction
number 27 stating:
You are instructed that when a person
knows or has reason to know of facts
which create a high degree of risk of
harm to the substantial interests of
another, and either deliberately proceeds
to act in conscious disregard of or
indifference to that risk, or recklessly
proceeds in unreasonable disregard of or
indifference to that risk, his conduct
meets the standard of willful, wanton,
and/or reckless to which the law of this
State will allow imposition of punitive
damages on the basis of presumed malice.
That standard is a correct statement of the law under Owens
v. Parker Drilling Co. (Mont. 1984), 6 7 6 P.2d 162, 4 1 St.Rep.
66. The controversy here arises from the court's instruction
number 29, which states:
If you find that State Farm Insurance
Company has violated the Unfair Claims
Settlement Practices Act, then such
violation may be considered by you as
evidence of presumed malice, as that term
is defined in these instructions.
State Farm argues that this instruction allows the jury to
disregard the Owens standard and predicate a finding of
presumed malice upon a statutory violation alone. We agree.
Conceivably, a jury could use the challenged instruction to
perform an "end-run" around the Owens standard for presumed
malice. Moreover, the Owens Court addressed the newly
formulated standard for presumed malice and stated:
The standard is equally applicable to
statutory violations and other wrongful
conduct. Thus, where a statute is
designed to protect the substantial
interests of a person from a high degree
of risk, and the statute is violated
either intentionally or recklessly, a
jury question of punitive damages is
raised. (~mphasis original.)
in
Owens, 6 7 6 P.2d at 1 6 5 . Owens requires an intentional or
reckless statutory violation for the issue of punitive
damages to go to the jury. The instruction here allows the
jury to consider a statutory violation as evidence of
presumed malice. Thus, the jury could find that State Farm
had negligently violated the Unfair Claims Settlement
Practices Act and they could further consider that negligent
violation as evidence of presumed malice. That is not the
law under Owens. We hold that the District Court erred in
giving instruction number 29.
The fifth issue is whether the District Court should
have bifurcated this trial into a negligence action and a bad
faith action. Given our holding today, we need not address
the propriety of the District Court's refusal to bifurcate.
Upon retrial, this action will be bifurcated and tried in
accordance with our decision in Fode v. Farmers Ins. Exchange
(Mont. 1986), 719 P.2d 414, 43 St.Rep. 814.
Because we remand this cause for a new trial on all
issues, we decline to address issues six, seven, eight and
nine listed above and the two issues raised by appellant
L
Hauck.
Reversed and remanded.
pi?
Justice/
\
We concur:
Justices
Mr. Justice John C. Sheehy, dissenting:
This reversal is a follow-up from the unfortunate
decision of this Court in Safeco Ins. Co. v. Ellinghouse
(1986), 725 P.2d 217, 43 St.Rep. 1689. This reversal evinces
growing elitist philosophy this Court, distrust
juries which bodes no good for insurance claimants in this
state.
We begin with the flat statement that Geraldine C. Hauck
was 100% negligent in causing the accident. The jury said
so. A. G. Benoit, a top flight adjuster for one of the
largest underwriting concerns in Billings said so. Earl
Hanson, an attorney representing both insurance companies and
both insurance claimants, said so. This Court said so in
McDonough v. Smith under facts nearly identical:
Defendant contends, however, that his evidence
tended to show that the damage to plaintiff's car
was caused by plaintiff's own negligence. True,
the answer of the defendant contained such a
charge, but there is an entire absence of any
evidence to support such allegation. Under the
record presented here, the jury would not have been
warranted in finding for the defendant on any
theory, except that his car did not strike that of
plaintiff. There was no evidence from which the
jury could have determined that the damage to
plaintiff's car resulted from any other cause than
that it was struck by the defendant. If they could
have found that the cars did not collide, then the
reason why plaintiff's car struck the fence
resulting in the damage complained of would have
rested in conjecture and speculation.
McDonough v. Smith (1930), 86 Mont. 545, 551, 284 P. 542,
The jury verdict answered the following questions:
1. Do you find that Defendant Mrs. Hauck was
negligent and that her negligence was a proximate
cause of the property damage suffered by the
Plaintiff, Linda Hart-Anderson? Yes X
2. Do you find that Plaintiff Linda Hart-Anderson,
was negligent, and that her negligence was a
proximate cause of the property damage she
suffered? No X
3. If your answer to both 1 and 2 was "yes" then
assign a percentage to each of them apportioning
the negligence which proximately caused the
accident between them in the following blanks:
Mrs. Hauck 100%
Mrs. Hart-Anderson 0%
4. What is the amount in dollars of damage to Mrs.
Hart-Anderson's car which was caused by this
accident? $687.00
5. Did State Farm Insurance Company breach the
obligations imposed by the Unfair Claims Settlement
Act of Montana as given to you in the instructions?
Yes X
6. Did such breach proximately cause damage to
Linda Hart-Anderson? Yes X
7. What is the dollar amount of damages suffered
by Linda Hart-Anderson for emotional distress as
defined in these instructions, if any? $25,000.00
8. Is Linda Hart-Anderson entitled to receive
punitive or exemplary damages from State Farm
Insurance Company under the instructions given you
on punitive or exemplary damages? Yes X
If "yes" then in what amount? $687,000.00
Under 33-18-201, MCA, it is an unfair claims
settlement practice for an insurance company to fail to
acknowledge and act reasonably promptly upon communications
with respect to claims under insurance policies; to refuse to
pay claims without conducting a reasonable investigation
based upon all available information; to neglect to attempt
in good faith to effectuate prompt, fair and equitable
settlements of claims in which liability has become
reasonably clear; and to compel insureds to institute
litigation and recover amounts due by offering substantially
less than the amounts ultimately recovered in actions brought
by such insureds.
The majority opinion takes umbrage in finding that the
District Court instructed the jury that an insurance company
should not compel any person, and not just insureds, to
institute litigation in order to recover what is justly due
that person. The majority finds that the legislature did not
"intend" to so protect third party claimants, but only
intended to protect "insureds." I submit that such intent is
not what is to be deduced from the whole of S 33-18-201, MCA,
which in broad and repetitive language steps out to protect
Montana persons dealing with insurance companies, both
insureds and third party claimants. What legislative intent
can be distinguished as different when the legislature
provides that it is not good faith if the insurer neglects to
effectuate prompt, fair and equitable settlements and also
provides that insureds should not be forced to go to court to
collect their due claims? If an insurance company neglects
to effectuate prompt, fair and equitable settlement of claims
where liability has become reasonably clear, is it not simply
an extension of that neglect to compel third party claimants
to go to court or else accept less than is due them? The
ignominious result of the majority opinion is that now the
District Court cannot instruct the jury that it is bad faith
for an insurer to force a third party claimant to go to court
to collect his claim, even though by so doing, the insurer
"neglects to attempt in good faith to effectuate prompt, fair
and equitable settlements" and fails "to acknowledge and act
reasonably promptly upon communications with respect to
claims." The kind of nitpicking indulged by the majority in
determining the legislative intent of S 33-18-201(7), MCA,
confounds the intent and purpose of the statute.
The majority objects to the statement of the District
Court, read to the jury that:
Defendant State Farm Insurance Company has offered
to pay 50% of plaintiff's damage. This offer was
conununicated at the time of State Farm's first
contact with the plaintiff and has never been
increased or decreased.
The statement read by the District Court is absolutely
true. It was the refusal of the insurance company to
recognize its 100% obligation for the plaintiff's damages
that brought about the lawsuit. That is what the District
Court was informing the jury. It would have been improper
for the District Court to read to the jury a statement that
later the insurer tried to settle both the bad faith action
and the negligence action for a total of $5,000. The latter
figure was simply an offer of compromise which would be
inadmissible in any event.
Two things may be said with respect to the majority
opinion and its treatment of the Earl Hanson testimony.
First, all of the things to which Hanson testified were also
testified to by the lay insurance adjuster, A. G. Benoit. No
objection was made on appeal to the testimony of A. G.
Benoit. Yet, this Court reverses on the testimony given by
Earl Hanson, which is clearly compatible with the
unobjected-to testimony of A. G. Eenoit.
Second, the cross-examination of Earl Hanson as proposed
by the insurer's attorney was properly denied by the District
Court. Allowance of such cross-examination would have meant
that the jury would be trying not only the facts of this case
but the facts in other reported cases in this state and other
states which were not relevant to the issues presented here.
The District Court should be sustained in its statement which
in essence told the insurer's attorney that the jury in this
case was going to try one set of facts and one set of facts
only.
The majority objection to the giving of court's
instruction no. 29, set forth in the majority opinion, is
only further quibbling. Instruction no. 29 has to be read in
conjunction with instruction no. 27. Instruction no. 29
merely told the jury that violations of the Unfair Claims
Settlement Practice Act could be considered by them as
evidence of presumed malice, "as - - term is defined -
- that - in
these instructions. " (Emphasis added. ) Instruction no. 27
told the jury that if the defendant "recklessly proceeds in
unreasonable disregard or indifference to [the] risk [of
harm] , his conduct meets the standard of willful, wanton
and/or reckless to which the law of this State will allow
imposition of punitive damages on the basis of presumed
malice." The two instructions read together state the law.
There is no question that the insurer in this case proceeded
deliberately and intentionally to refuse to pay the full
damages to which Linda Hart-Anderson was entitled. The
majority would require the jury to attempt to determine
punitive damages in a vacuum without consideration of the
violations of the Unfair Claims Settlement Practice Act.
That requirement is absurd.
The majority have withdrawn from their original opinion
their conm~enton instruction no. 30. The court in this case
properly instructed the jury, in instruction no. 30:
More than one person may be responsible for causing
injury. If you find that the defendant, Geraldine
Hauck, was negligent and that her negligence
proximately caused the plaintiff ' s property damage
it is not a defense that some third person may also
have been negligent.
It was following instruction no. 30, that the court gave
instruction no. 31, which stated:
You are instructed that the actions of the driver
of the Consolidated Freightways truck have no
bearing upon this case as a matter of law. That is
to say, the liability, if any, of Geraldine Hauck
for the damage to Linda Hart-Anderson's car is not
reduced or eliminated by the fact that the driver
of the Consolidated Freightways truck may also have
been at fault.
Those instructions, read together properly state the law of
this case. Consolidated Freightways was not a party to this
action. Under the theory of joint and several liability,
Geraldine Hauck, if liable, was liable for all of that
portion of negligence that the jury assigned to her. In that
light, jury instruction no. 30 was perfectly proper and
should be given again on retrial with instruction no. 31.
More than ever, this case points up the necessity of
this Court examining the duty of insurance companies toward
third party claimants in the light of the mandatory insurance
law. Section 61-6-301, MCA. As I pointed out in my dissent
in Fode v. Farmers Insurance Exchange (Mont. 1986), 719 P.2d
414, 419, 43 St.Rep. 814, 820, the purpose of the mandatory
insurance law is to protect third party motorists on our
highways. The duty of the insurer to protect third party
claimants and not harass them or refuse to pay their just
claims is of greater import under mandatory insurance laws.
The rights of the third party claimant now in automobile
accident cases arise not merely through the insurance
contract between the other motorist and his company hut
through the determination of the legislature that the general
traveling public is to be protected. It is worth repeating
the statement in Ferguson v. En~ployersMutual Cas. Co. (S.C.
1970), 174 S.E.2d 768, 771:
The primary purpose of a compulsory motor vehicle
liability insurance is to compensate innocent
victims who have been injured by the negligence of
financially irresponsible motorists. Its purpose
is not like that of ordinary liability insurance to
save harmless the tort feasor himself. The injured
person's rights against the insurer are not derived
through the insured as in the case of voluntary
insurance. They are statutory and become absolute
on the occurrence of an injury covered by the
policy. (Citation omitted.)
In the absence of federal regulation of insurance companies'
settlement practices, and the incomplete and limited
statutory reach of state regulation, this Court has a duty to
protect motorists from the unfair practice that was exhibited
by State Farm in this case. Damages of $ 6 8 7 may not loom
large in the state's economy, but are important to the person
involved. If the person involved has a choice of either 50%
of his damages or going to court, it is more than likely that
going to court will be out of the question because of the
upfront costs that are necessary. The protection of Linda
Hart-Anderson for one-half of $ 6 8 7 may not seem terribly
important, but the multiplication of Linda Hart-Andersons by
several hundred throughout the State of Montana every year
has substantial importance. The jury decided not to condone
this business practice of State Farm Mutual. The jury took a
proper course in awarding punitive damages. It is a
regrettable action for this Court to set aside that award for
the flimsy reasons given.
I
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Justice (/
1-
Mr. Justice William E. Hunt, Sr.:
I concur in the foregoing dissent of Mr. Justice Sheehy.