No. 91-564
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
ST. PAUL FIRE & MARINE
INSURANCE COMPANY,
Plaintiff and Appellant,
ALLSTATE INSURANCE COMPANY
and GARY GLASSING,
Defendants and Respondents.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Joel G. Roth, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Gary M. Zadick, Mark F. Higgins, Ugrin, Alexander,
Zadick & Slovak, Great Falls, Montana
For Respondents:
Susan P. Roy, Garlington, Lohn and Robinson,
Missoula, Montana
Submitted: May 12, 1992
Decided: February 19, 1993
Filed:
Justice Terry N. Trieweiler delivered the opinion of the Court.
Plaintiff St. Paul Fire and Marine Insurance Company filed its
complaint in the District Court for the Eighth Judicial District in
Cascade County to recover amounts paid to its insured pursuant to
the underinsured motorist coverage provided by its policy. St.
Paul's claim against defendant Gary Glassing was dismissed by the
District Court based on tbat court's conclusion that it lacked
personal jurisdiction over Glassing. St. Paul's claim against
Allstate Insurance Company was dismissed because of its failure to
state an actionable claim against Allstate. From this judgment,
st. Paul appeals. We reverse in part and affirm in part.
The issues are:
1. Did the District Court have personal jurisdiction over
Gary Glassing pursuant to Rule 4B(l)(b), M.R.Civ.P.?
2. Is an insurer which provides underinsured motorist
coverage a third party entitled to bring a direct claim under
§§ 33-18-201 and -242, MCA, when a primary insurer fails to
effectuate prompt and reasonable settlement?
FACTUAL BACKGROUND
St. Paul's insured, Ellen Lynn, and Glassing were involved in
a motor vehicle collision in Bozeman on June 12, 1985. A personal
injury action was filed by Lynn against Glassing in Gallatin County
District Court, and on November 17, 1989, judgment was entered in
favor of Lynn in the net amount of $95,377.92.
At the time of the underlying motor vehicle collision, St.
Paul insured Lynn with a policy which provided coverage in the
e v e n t t h a t Lynn was i n j u r e d by an underinsured m o t o r i s t . A t the
same t i m e , A l l s t a t e i n s u r e d ~ l a s s i n ga g a i n s t l i a b i l i t y r e s u l t i n g
from t h e o p e r a t i o n of his motor v e h i c l e . However, t h e l i m i t of
Glassing's liability coverage was $50,000.
I n t h e complaint which gave rise t o t h i s a c t i o n , St. Paul
a l l e g e d t h a t p u r s u a n t t o i t s p o l i c y of i n s u r a n c e w i t h Lynn, it p a i d
t o h e r the amount of h e r judgment a g a i n s t G l a s s i n g t h a t exceeded
Allstate's policy l i m i t s . I t a l l e g e d that t h e amount of t h a t
payment was $51,461.16. St. Paul a l s o a l l e g e d two s e p a r a t e claims
based upon i t s payment t o Lynn.
I n i t s f i r s t c a u s e of a c t i o n , St. Paul a l l e g e d t h a t by v i r t u e
of i t s payment t o i t s i n s u r e d , it became subrogated both by law and
by t h e terms of i t s p o l i c y w i t h Lynn t o h e r c l a i m a g a i n s t G l a s s i n g
t o t h e e x t e n t of i t s payment. I t sought recovery from G l a s s i n g i n
t h a t amount.
I n i t s second c a u s e of action, St. Paul a l l e g e d that on
s e v e r a l o c c a s i o n s p r i o r t o e n t r y of judgment i n f a v o r of Lynn,
A l l s t a t e refused t o s e t t l e her claim a g a i n s t Glassing by payment of
its policy l i m i t s t o her. St. Paul a l l e g e d t h a t by r e f u s a l t o pay
t h e p o l i c y l i m i t s b e f o r e judgment was e n t e r e d a g a i n s t G l a s s i n g f o r
a g r e a t e r amount, A l l s t a t e breached i t s o b l i g a t i o n t o its own
i n s u r e d and t o S t . Paul, and t h a t a s a r e s u l t , St. Paul w a s
r e q u i r e d t o pay $51,461.16 t o i t s i n s u r e d . I t sought recovery of
t h a t amount, plus interest, from G l a s s i n g and f r o m Allstate.
Although t h e r e c o r d i s vague r e g a r d i n g dates and s p e c i f i c
procedures, it appears t h a t p r i o r t o t h e t i m e t h i s c l a i m was f i l e d
in State District Court, a similar or identical claim was filed in
the united States District Court for the District of Montana.
Before that claim was removed to the State District Court, the
Federal District Court dismissed St. Paul's claim against Allstate
for the reason that it did not state a claim for which relief could
be granted. The parties subsequently stipulated in this case that
the prior ruling by the Federal District Court would be the law of
the case for purposes of the State Court proceeding, and that
dismissal of that case could be appealed to the Montana Supreme
Court when final judgment was entered in the State District Court.
After being served with the State Court complaint, Glassing
moved to dismiss the claim against him for the reason that the
District Court lacked personal jurisdiction over him. In support
of that motion, Glassing submitted an affidavit in which he stated
that he moved to Minnesota on July 1, 1990, had been working and
living there since, and had no plans to return to Montana.
On October 10, 1991, the District Court entered its order
granting the motion to dismiss Glassing based on lack of personal
jurisdiction. The court noted that Glassing moved from Montana to
Minnesota on about July 1, 1990, after graduating from Montana
State University and that this action was not filed until June 17,
1991. The court concluded that St. Paul's subrogation claim
against Glassing arose from the terms of its insurance contract
with Lynn and that the claim was not based on any act of the
defendant which occurred in Montana. Therefore, the District Court
concluded that since the defendant could not be found in Montana
for the purpose of establishing general jurisdiction, and did not
come within any of the subsections of Rule 4B(1), M.R. Civ.P., there
was no basis for asserting personal jurisdiction over him.
St. Paul appeals the dismissal of Glassing in the State
District Court and the dismissal of Allstate by the Federal
~istrict Court, which by stipulation became part of the final
judgment entered in the State District Court.
I
Did the District Court have personal jurisdiction over Gary
Glassing pursuant to Rule 4B(l)(b), M.R.Civ.P.?
On appeal, St. Paul contends that Montana courts have personal
jurisdiction over Glassing pursuanttothe Montana long-arm statute
found in Rule 4B(l)(b), M.R.Civ.P., since its claim is based upon
the defendant's tortious conduct committed within this state.
Glassing denies that this state has personal jurisdiction over
him for two reasons. First, he contends that St. Paul's suit is
not based on his tortious conduct, but is based upon a contractual
relationship between St. Paul and its insured which permitted St.
Paul to pursue a claim for subrogation. Second, Glassing contends
that even if his conduct comes within Montana's long-arm statute,
it is unreasonable for this state's courts to exercise jurisdiction
over him, and plaintiff's claim should be dismissed pursuant to our
decision in Simmom v State (l983), 206 Mont. 264, 670 P.2d 1372.
.
We conclude that St. Paul's claim against Glassing is based
solely upon defendant's commission of acts within the State of
Montana which resulted in the accrual of a tort action. While the
5
defendant is correct that St. Paul has a contractual agreement with
its insured allowing it to pursue subrogation, the contractual
authorization is neither necessary nor the basis for St. Paul's
suit against Glassing.
We have previously held that:
Subrogation is a device of equity which is designed
to compel the ultimate payment of a debt by the one who
in justice, equity and good conscience should pay it.
Bowerv.Tebbs, 132 Mont. 146, 314 P.2d 731. . . .The
theory behind this principle is that absent repayment of
the insurer the insured would be unjustly enriched by
virtue of recovery from both the insurer and the
wrongdoer, or in absence of such double recoverv bv the
insured, the third ~ a r t v
would so free des~itehis lesal
oblisation in connection with rt.he1 loss. [Emphasis
added. ]
Skaugev. MountainStatesTel. & Tel. Co. (1977), 172 Mont. 521, 524-25, 565
We have also held that a right to subrogation, such as the one
exercised by the plaintiff in this case, is not dependent on the
terms of a contract.
Subrogation in a legal sense arises upon the fact of
payment by the insurer, rather than by contract between
the parties. Skauge, 565 P.2d at 630. It is the
substitution of another person in :placeof the creditor,
so that the person substituted will. succeed to the rights
of the creditor in relation to the debt or claim. Skauge,
565 P.2d at 630.
McDonaldv. Grassle (1987), 228 Mont. 25, 29, 740 P.2d 1122, 1125.
In this case, St. Paul became substituted for its insured as
a matter of law when it paid Ellen Lynn pursuant to its insurance
policy with her and is entitled to pursue her right to collect the
amount of her judgment against the defendant. However, St. Paul's
right to subrogation arises from the judgment entered in favor of
its insured against the defendant, and that judgment is a result of
the defendant's tortious conduct within the State of Montana.
Since the allegations in Count I of St. Paul's complaint are
based upon Glassing's tortious conduct committed within the State
of Montana, we hold that Rule 4B(l) (b), M.R.Civ.P., permits the
exercise of personal jurisdiction over Glassing by the District
Court for the conduct complained of in the plaintiff's complaint.
In Simmons, we held that where a nonresident defendant is not
"presentn within the state for purposes of establishing general
jurisdiction, each of the following criteria must be met before
personal jurisdiction can be exercised without violating due
process :
(1) The nonresident defendant must do some act or
consummate some transaction with the forum or perform
some act by which he purposefully avails himself of the
privilege of conducting activities in the forum, thereby
invoking its laws. (2) The claim must be one which
arises out of or results from the defendant's
forum-related activities. (3) Exercise of jurisdiction
must be reasonable.
Simmons, 670 P.2d at 1378.
It is clear that the first two criteria are satisfied.
Glassing committed a tort within Montana and St. Paul's claim
results from that tort.
We have held that the following factors should be considered
to determine whether the exercise of personal jurisdiction is
reasonable:
1. The extent of defendant s purposeful interjection
into Montana;
2. The burden on defendant of defending in Montana;
3. The extent of conflict with the sovereignty of
defendant's state;
4. Montana's interest in adjudicating the dispute;
5. The most efficient resolution of the controversy;
6. The importance of Montana to plaintiff s interest in
convenient and effective relief; and
7. The existence of an alternative forum.
Jacksonv.Krol1, PomerantzandCameron (1986), 223 Mont. 161, 166, 724 P.2d
717, 721. See Taubler v. Giraud (9th Cir. 1981), 655 F.2d 991, 994;
Simmons, 670 P . Z ~at 1383-85.
We conclude that it is reasonable to exercise personal
jurisdiction over Glassing under the circumstances present in this
case for several reasons: There is no conflict with Glassing's
current state of residence; Montana has a strong interest in
adjudicating liability based upon the operation of motor vehicles
on its roadways: and the most efficient and convenient forum within
which to resolve the issues raised by the plaintiff's pleadings is
the State of Montana where the witnesses to the underlying tort are
most likely located and where the judgment in the underlying action
has been entered.
For these reasons, we conclude that Montana's long-arm statute
provides a basis for exercising personal jurisdiction over Glassing
and that the exercise of personal jurisdiction under the
circumstances in this case is reasonable. The District Court's
judgment dismissing plaintiff's complaint against Glassing based on
lack of personal jurisdiction is, therefore, reversed.
II
Is an insurer which ~rovides
underinsured motorist coverage a
third party entitled to bring a direct claim under 3 5 33-18-201 and
-242, MCA, when a primary insurer fails to effectuate prompt and
reasonable settlement?
St. Paul next contends that its insured, Ellen Lynn, had a
third-party claim against Allstate pursuant to 5 5 33-18-201 and
-242, MCA, because of Allstate's repeated refusal to settle her
claim for its policy limits prior to a jury trial and a verdict in
her favor. St. Paul contends that just as it is subrogated by law
to Lynn's claim against Glassing, it is an equitable subrogee of
Lynn with regard to her statutory third-party claim against
Allstate.
In support of its argument, St. Paul cites this Court to
numerous opinions from other jurisdictions which have held that
where a primary insurance carrier negligently and in bad faith
fails to settle a claim against its insured within the insured's
primary policy limits, and a judgment is then entered against its
insured for an amount greater than the policy limit so that the
insured's excess liability carrier becomes responsible for payment
of the excess amount, the excess carrier is equitably subrogated to
the rights of the insured and entitled to maintain an action for
bad faith against the primary carrier. See Continental Casualty Co. v.
Reserve Ins. Co. (Minn. 1976), 23 8 N.W. 2d 862; Valentine v Aetna Ins. Co. (9th
.
Cir. 1977), 564 F.2d 292; Centenniallns. Co. v. LibertyMutualIns. Co. (Ohio
1980), 404 N.E.2d 759.
St. Paul contends that even though it is not an excess
liability carrier, the issue is the same, the public policy is the
same, and this Court should, therefore, allow equitable subrogation
for an underinsurance carrier under the circumstances in this case.
There is merit to St. Paul's argument, and under other
circumstances, this Court would consider St. Paul's argument.
However, determinative of our holding in this case is the fact that
even in the cases relied upon by St. Paul the primary insurer had
no independent duty to the excess insurer. The courts which have
allowed excess carriers to sue primary carriers for unreasonable
refusal to settle claims have allowed them to do so by holding that
the excess insurer is equitably subrogated to the rights of the
insured against the primary insurer. See Windt, Insurance Claims
and D ~ S D U ~ ~ 411
at S & n. 92 (2d ed. 1988). Therefore, even if we
were to allow equitable subrogation for an underinsurance carrier
against a primary carrier who unreasonably refused to settle a
claim within policy limits and thereby exposed the underinsurance
carrier to liability for the excess amount of the judgment, the
underinsurance carrier has no greater rights than can be asserted
by its insured. As we held in McDonald, subrogation is:
[Tlhe substitution of another person in place of the
creditor, so that the person substituted will succeed to
the rights of the creditor in relation to the debt or
claim.
McDonald, 7 4 0 P.2d at 1125.
Pursuant to Rule 202 (b)( 6 ) , M.R.Evid., we take judicial notice
that Lynn sued Allstate for unreasonable refusal to settle her
claim against its insured in Cause No. CV-91-12-BU-PGH in the
United States ~istrictCourt for the District of Montana in the
Butte Division. Although the particulars of that claim are unknown
to this Court, the claim was resolved by stipulation between the
parties and Lynn's claim against Allstate was dismissed with
prejudice on July 29, 1991. Pursuant to that dismissal, Lynn has
no further claim against Allstate, and therefore, there is no claim
to which St. Paul can be equitably subrogated.
Even though Lynn's claim against Allstate had not been
dismissed with prejudice at the time the Federal District Court
dismissed St. Paul's claim against Allstate, nor at the time St.
Paul subsequently refiled its claim against Allstate in the State
District Court, Lynn's subsequent stipulation renders St. Paul's
appeal moot.
There is no indication that St. Paul's claim against Allstate
is based upon an assignment of any first-party claim that Glassing
might have pursuant to Gibson v. Western Fire Insurance Company (1984), 210
Mont. 267, 682 P.2d 725. Therefore, by this decision, we do not
determine the merits of any such claim.
For these reasons, we affirm the judgment of the ~istrict
Court dismissing St. Paul's claim against Allstate in Count I1 of
the plaintiff's complaint. We reverse the ~istrict Court's
judgment dismissing Count I o f t h e plaintiff's complaint and remand
this case to the District Court for further proceedings consistent
with this opinion.
Chief Justice