NO. 89-549
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
DOROTHY LOUGH ,
Plaintiff and Appellant,
-vs-
INSURANCE COMPANY OF NORTH AMERICA
AND LIBERTY MUTUAL FIRE INSURANCE CO.,
jointly and severally,
Defendant and Respondent.
APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone,
The Honorable G. Todd Baugh, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Jerrold L. Nye argued; Nye & Meyer, Billings,
Montana
For Respondent:
Jon T. Dyre argued; Crowley Law Firm, Billings,
Montana
Submitted: March 14, 1990
.-...
:-.-..f?ecided:
March 2 3 , 1990
I , . I.-
' Clerk
Justice Diane G. Barz delivered the Opinion of the Court.
The District Court of the Thirteenth Judicial District,
Yellowstone County, granted Liberty Mutual Fire Insurance Company's
motion for summary judgment in this case involving alleged
violations of the Unfair Trade Practices provisions of the Montana
insurance code. Dorothy Lough appeals the order of the District
Court granting Liberty Mutual's motion. We reverse and remand.
Appellant was injured in an elevator located in the College
Park ~rofessional ~uilding in Billings. Montgomery Elevator
Company maintained the elevator and was insured by Liberty Mutual.
Ragner and Lynda Martinsen owned the building and were insured by
Insurance Company of North America (INA). Appellant incurred
medical bills for the treatment of her injury. In response to
appellant s claims against them for her injuries, both insurance
carriers asserted the other's insured was at fault. Several months
after her injury, appellant obtained counsel to pursue her claims
and a lawsuit was filed.
Liberty Mutual voluntarily contributed $1,500 toward
appellant's medical bills on behalf of its insured although it
disclaimed any liability on the part of its insured and later
flatly denied liability. Appellant filed suit against Montgomery
and the Martinsens alleging negligence. Appellant was able to
negotiate a settlement with Montgomery and the Martinsens in the
underlying lawsuit. In the release concurrently executed,
appellant accepted $10,000 in consideration for the same. It is
significant that appellant reserved the right to pursue bad faith
claims against both INA and Liberty Mutual. Neither Liberty Mutual
nor Montgomery Elevator contributed to payment of the $10,000
settlement. Only appellant executed the release although all
parties executed the subsequent stipulation dismissing the action.
Appellant filed a separate lawsuit against Liberty Mutual and
INA claiming both engaged in deceptive trade practices by failing
to investigate and negotiate settlement of her claim in good faith.
INA settled with appellant after which the District Court granted
Liberty Mutual's motion for summary judgment.
The dispositive issue on appeal is whether a third party
claimant may maintain a bad faith action against an insurer after
settling with the insured when liability has not been established
in the underlying case. Appellant contends respondent was not
entitled to judgment as a matter of law because the District Court
misapplied 33-18-242, MCA, to the facts of this case.
Respondent argues appellant failed to satisfy the two
conditions precedent to filing a bad faith claim:
1) disposition of the underlying claim by settlement or
judgment; and
2) establishment of liability by settlement or judgment.
Respondent contends no settlement occurred between appellant
and its insured, Montgomery Elevator, because neither Montgomery
Elevator nor Liberty Mutual contributed any part of the $10,000
settlement paid to appellant. Because appellant's execution of the
release constituted an abandonment of her claims against
Montgomery, respondent maintains appellant failed to satisfy the
first of two prerequisites to a bad faith claim in that no
settlement was reached with the insured. We disagree. Respondent
participated in negotiation of the settlement and agreed to
dismissal of the underlying cause. Thus, appellant's claims
against both Montgomery and the Martinsens were settled.
The second of two prerequisites for a bad faith claim,
respondent asserts, is that liability be established in the
underlying settlement or judgment. In other words, prior to
assertion of a bad faith claim, judgment must be rendered in favor
of the plaintiff upon trial of the matter or in the settlement
process the insured or insurer must acknowledge the insured's
liability. Respondent claims Montgomery's clear denial of
liability contained within the release precludes appellant's claim
in the instant case.
Although both parties rely heavily on this Court's decision
in Fode v. Farmers Insurance Exchange (1986), 221 Mont. 282, 719
P.2d 414, we conclude that 5 33-18-242, MCA, enacted in 1987, is
controlling. By adopting respondent's argument and affirming the
District Court, this Court would be ignoring the plain meaning of
the statute and imposing a condition precedent not contemplated by
the legislature.
Section 33-18-242, MCA, permits a third party claimant to
bring an independent cause of action against an insurer for
violation of subsections (I), (4), (5), (6), (9) or (13) of 5 33-
18-201, MCA. Those subsections allow third party claimants to
recover damages from insurers that:
(1) misrepresent pertinent facts or insurance
policy provisions relating to coverages at
issue;
(4) refuse to pay claims without conducting a
reasonable investigation based upon all
available information;
(5) fail to affirm or deny coverage of claims
within a reasonable time after proof of loss
statements have been completed;
(6) neglect to attempt in good faith to
effectuate prompt, fair, and equitable
settlements of claims in which liability has
become reasonably clear;
(9) attempt to settle claims on the basis of
an application which was altered without
notice to or knowledge or consent of the
insured ;
(13) fail to promptly settle claims, if
liability has become reasonably clear, under
one portion of the insurance policy coverage
in order to influence settlements under other
portions of the insurance policy coverage;
Section 33-18-201, MCA.
Section 33-18-242 (6)(b), MCA, requires settlement or entry
of judgment on the underlying claim prior to instigation of the bad
faith claim. That section does not require that liability of the
insured be established as a condition precedent to the bad faith
litigation.
Appellant in this case alleges violations of subsection 4,
which requires no showing of reasonably clear liability, and
subsection 6, which does. The District Court erred in granting
respondent's motion for summary judgment on the basis that
appellant failed to establish reasonably clear liability prior to
suit. We reverse and remand for further proceedings consistent
with this opinion.
Reversed and remanded.
We concur: &=-
A*T-
Chief Justice