NO. 93-130
IN THE SUPREME COURT OF THE STATE OF MONTANA
1994
MARK DeBRUYCKER and
TAMMY DeBRUYCKER GILL,
Plaintiffs and Appellants,
-vs-
GUARANTY NATIONAL INSURANCE COMPANY, SEP 12 1994
a Colorado corporation, and
CROP HAIL MANAGEMENT,
a Montana corporation,
Defendants, Respondents and
Cross-Appellants.
APPEAL FROM: District Court of the Ninth Judicial District,
In and for the County of Teton,
The Honorable R. D. McPhillips, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Dennis Patrick Conner, Attorney at Law, Great
Falls, Montana (argued)
Michael J. Best: Best Law Offices, Great Falls
Montana
For Respondents and Cross-Appellants:
Kevin Meek (argued): Alexander, Baucus & Linnell,
Great Falls, Montana
Submitted: March 24, 1994
Decided: September 12, 1994
Filed:
Justice John Conway Harrison delivered the Opinion of the Court.
This is an appeal and cross-appeal from the Ninth Judicial
District Court involving a hail insurance dispute over a barley
crop. The jury awarded brother and sister Mark DeBruycker and
Tammy DeBruycker Gill (DeBruyckers) hail insurance contract damages
of $70,676.41 and punitive damages of $500,000 against Guaranty
National Insurance (Guaranty) and $40,000 punitive damages against
Crop Hail Management (Crop Hail) for violating the Montana Unfair
Trade Practices Act (UTPA). The District Court, pursuant to § 27-
1-221(7)(c), MCA, subsequently reduced the punitive damage award
against Guaranty from $500,000 to $50,000 and set aside the
punitive damage award against Crop Hail.
We reorganize and restate the issues as follows:
1. Did the District Court err by denying Guaranty and Crop
Hail's motions for summary judgment and a directed verdict on the
issue of punitive damages?
2 . Did the District Court violate the applicable standard of
review when the court reduced the jury's punitive damages award
against Guaranty and Crop Hail by basing that decision on its own
factual findings which were contrary to the jury's special verdict
form?
3 . Did the District Court err by finding that Crop Hail was
not an "insurer" subject to punitive damages under the UTPA?
The DeBruyckers own 1,470 acres of land near Bynum, Montana.
In 1988, Guaranty sold the DeBruyckers an insurance policy insuring
1,389.g acres of barley against hail loss. The remaining 90 acres
were insured by Glenn Falls Insurance Company (Glenn Falls).
Guaranty charged the DeBruyckers a total premium of $33,627.
The crop hail insurance policy provided coverage for crop damage
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caused by hail which reduced "crop yield." The policy defined
"crop yield" as:
The production per acre that the insured crop would
reasonably be expected to produce at harvest. The
production per acre is usually expressed in terms of
bushels, pounds, tonnage, etc.
Barley yield is measured by weight. Under the policy, a payable
loss existed if the barley suffered a reduction in yield (weight)
exceeding 5 percent as a result of hail.
Two hail storms hit the DeBruyckers' insured acres during the
summer of 1988. After the first hail storm, Crop Hail sent an
adjuster to examine the loss. The adjuster looked at a go-acre
field and decided to defer its loss adjustment until the crops
matured. The adjuster assured Mark that the boot-tied barley would
be calculated in the loss. Among other things, hail can cause
boot-tied damage if hail hits the barley while the barley is still
growing. The hail causes the head to deform, resulting in missing
and underdeveloped kernels. Normally, boot-tied kernels will weigh
less than normal kernels.
After the second hail storm, two Crop Hail adjusters were sent
by their managing general agent, Guaranty, to the DeBruycker farm
to adjust the loss. The adjusters met Mark and his father Lloyd
DeBruycker at the go-acre field. One of the adjusters started a
loss count and the DeBruyckers were satisfied with the process he
was instituting. However, the second adjuster then took over the
adjustment, contending that boot-tied heads actually resulted in
larger barley kernels. Lloyd disagreed and showed both adjusters
the smaller and missing kernels on the boot-tied heads. The
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adjustment was then terminated.
The second adjuster wrote in his report that: "[dIepending on
the count I feel [the DeBruyckers] may have a loss, but . . . [I]
would like to have dropped [Lloyd] in his tracks. He's a real O-
hole." The foliowing week, Guaranty through Crop Hail claimed that
the parties were "so far apart" on the adjustment that they were
enacting the arbitration provision of the contract.
To represent their interests, Guaranty appointed a
representative, and the DeBruyckers appointed friend and fellow
farmer, David Van Horn (Van Horn). The two representatives then
appointed an umpire. At the arbitration adjustment, Guaranty's
representative apparently mentioned to Van Horn that boot-tied hail
damage was not covered as a loss by the "book." Van Horn later
testified in court that he had never formally adjusted a hail loss
and believed Guaranty's representative, not realizing until just
before trial that no "book" ever existed.
Guaranty and Van Horn agreed that the DeBruyckers suffered an
8.6 percent loss on 316 acres. The payable loss amounted to
$3,418. After the arbitration, Guaranty's representative forwarded
to Crop Hail a bill for his services, including a line item
entitled "Peace of Mind ???.??'I which requested an unspecified
amount.
Subsequently, the DeBruyckers discovered that the loss was
actually on 90 acres--not 316 acres--and the 90 acres were actually
insured by Glenn Falls instead of Guaranty. When the adjuster from
Glenn Falls adjusted the go-acre field, he found a 28.7 percent
4
reduction in yield, but unlike Guaranty and Crop Hail, he credited
the DeBruyckers for hail damaged boot-ties.
A few days later, Mark wrote to Crop Hail and requested the
arbitration counts and results. Crop Hail only sent an arbitration
proof of loss form because the counts were not documented.
One month later Mark and Lloyd met with Crop Hail's branch
manager. They presented photographs and other evidence that the
adjustments to the fields were unfair and requested that the matter
be reopened. Crop Hail denied their request and denied their claim
on November 29, 1988. In December 1988, Crop Hail sent the
DeBruyckers a check for $3,418 with a restrictive endorsement which
stated:
PROPER ENDORSEMENT HEREOF CONSTITUTES FULL SATISFACTION,
COMPROMISE AND INDEMNITY FOR ALL CLAIMS AND DEMANDS FOR
LOSS AND DAMAGE UP TO AND INCLUDING THE TIME OF
ADJUSTMENT ON 8/26/88 TO CROPS INSURED UNDER POLICY NO.
25-884-12511-88.
The cover letter with the check stated that the check was a showing
of good faith. The DeBruyckers refused to sign the check.
The DeBruyckers subsequently hired legal counsel who twice
wrote to Crop Hail about the inconsistencies between Crop Hail's
8.6 percent adjustment, and the Glenn Falls adjustment of 28.7
percent, and Crop Hail's failure to find a payable loss on the
other fields. Crop Hail refused to reopen the case.
The DeBruyckers ultimately brought suit against Crop Hail and
Guaranty on the contract claim and also under a separate UTPA claim
for punitive damages. The District Court denied Crop Hail and
Guaranty's motions for summary judgment on the unfair practices and
5
punitive damages issues. The case went to trial on January 14,
1991, and the court denied Crop Hail and Guaranty's motions for a
directed verdict on the issues of unfair practices and punitive
damages.
The jury found for the DeBruyckers on all counts on the
special verdict form and assessed contract damages of $70,676.41,
as well as punitive damages of $500,000 against Guaranty and
$40,000 against Crop Hail. Later, the District Court, pursuant to
§ 27-1-221(7)(c), MCA, reduced the punitive damage award against
Guaranty to $50,000 and set aside the punitive damage award against
Crop Hail.
Crop Hail and Guaranty cross-appeal the court's denial of
their motions for summary judgment and a directed verdict. The
DeBruyckers appeal the court's reduction and setting aside of the
jury's punitive damage awards.
I
Did the District Court err by denying Guaranty and Crop Hail's
motions for summary judgment and a directed verdict on the issue of
punitive damages?
Guaranty and Crop Hail argue that since the District Court
found, after trial, as a matter of law, that a "reasonable basis
for contesting the [DeBruyckers'] claim" existed, the District
Court previously erred by not granting Guaranty and Crop Hail
summary judgment or--in the alternative--a directed verdict on the
issue of punitive damages. Guaranty and Crop Hail correctly allege
that if they had a "reasonable basis" to contest the claim, then
the DeBruyckers had no independent cause of action for punitive
6
damages under § 33-18-242, MCA.
"The 'reasonable basis' for denying a claim is a defense to
liability under § 33-18-242, MCA." Dean v. Austin Mutual (Mont.
1994), 869 P.2d 256, 258, 51 St-Rep. 102, 103. We recently
concluded that
reasonableness is generally a question of fact;
therefore, it is for the trier of fact to weigh the
evidence and judge the credibility of the witnesses in
determining whether the insurer had a "reasonable basis"
for denying a claim. This is not a determination that
can be made "as a matter of law" . . . .
Dean
-I 869 P.2d at 258.
In this case, the District Court properly denied Guaranty and
Crop Hail's motions for summary judgment and directed verdict. The
court properly allowed the jury to decide whether Guaranty and Crop
Hail had a "reasonable basis 'I to deny the DeBruyckersl claim.
II
Did the District Court violate the applicable standard of
review when the court reduced the jury's punitive damages award
against Guaranty and Crop Hail by basing that decision on its own
factual findings which were contrary to the jury's special verdict
form?
The jury, by special verdict, found that Guaranty and Crop
Hail violated UTPA provisions found at § 33-18-201, MCA, and that
Guaranty and Crop Hail had no reasonable basis in law or fact for
contesting the DeBruyckers' claim. Section 27-1-221, MCA, provides
that reasonable punitive damages may be awarded when the defendant
has been found guilty, by clear and convincing evidence, of actual
fraud or actual malice. Here, the jury further found that there
was clear and convincing evidence that both Guaranty and Crop Hail
were guilty of actual malice and that punitive damages should be
7
assessed against both of them. The jury awarded the DeBruyckers
$500,000 in punitive damages against Guaranty and $40,000 in
punitive damages against Crop Hail.
Section 27-1-221(7)(c), MCA, requires a district court to
review a jury's award of punitive damages, giving consideration to
each of the following matters set forth at 5 27-1-221(7)(b), MCA:
(i) the nature and reprehensibility of the defendant's
wrongdoing;
(ii) the extent of the defendant's wrongdoing;
(iii) the intent of the defendant in committing the
wrong;
(iv) the profitability of the defendant's wrongdoing, if
applicable:
(v) the amount of actual damages awarded by the jury:
(vi) the defendant's net worth:
(vii) previous awards of punitive or exemplary damages
against the defendant based upon the same wrongful act;
(viii) potential or prior criminal sanctions against the
defendant based upon the same wrongful act; and
(ix) any other circumstances that may operate to increase
or reduce, without wholly defeating, punitive damages.
The court must "clearly state [its] reasons for increasing,
decreasing, or not increasing or decreasing the punitive damages
award . . . in findings of fact and conclusions of law,
demonstrating consideration of each of the factors listed in
subsection (7)(b)." Section 27-1-221(7)(c), MCA.
In its review of the jury's punitive damages award pursuant to
5 27-1-221(7)(c), MCA, the District Court concluded that Guaranty
and Crop Hail had not violated the provisions of § 33-18-201, MCA,
on which the jury received instructions. The court further
concluded that Guaranty and Crop Hail had a reasonable basis to
deny the DeBruyckers' claim. These conclusions directly
contradicted the findings of the jury described above. Based upon
8
its findings and conclusions, the District Court reduced the jury's
award of punitive damages against Guaranty to $50,000 and struck
the award of punitive damages against Crop Hail.
Section 27-l-221(6), MCA, provides that "[lliability for
punitive damages must be determined by the trier of fact, whether
judge or jury." Here, the District Court, under what the court
perceived to be authorized under 5 27-1-221(7)(c), MCA, overturned
several findings of the trier of fact. We conclude that this
exceeded the scope of review allowed to the court under the
statute.
The DeBruyckers invoked their right to demand a jury trial
pursuant to Rule 38(b), M.R.Civ.P. To interpret 5 27-1-221(7)(b),
MCA, as allowing the court to reverse issues of underlying
liability previously submitted to and decided by the jury would
interfere with the jury as trier of fact deciding such issues.
Although the list enumerated at § 27-1-221(7)(b), MCA, may, as
in this case, appear to include some of the same or similar issues
as those put to a jury in the case, we conclude that the court's
review pursuant to subsection (7)(c) must be conducted without
contradicting findings of fact made by the jury. In other words,
we conclude that the District Court was bound by the jury's
determination of facts on all issues which had been presented to
the jury. Section 27-1-221(7)(c), MCA, only empowers the court to
evaluate the amount of the award of punitive damages in light of
the factors enumerated under subsection (7)(b), and to make
findings of fact and conclusions of law as to its reasons for
9
increasing, decreasing, or letting stand the amount of the punitive
damages award. It does not open the door for reversal of jury
findings on underlying issues of liability.
We hold that the District Court committed reversible error
when it overturned the above-described jury findings on liability.
We therefore remand so that the District Court may conduct a proper
review of the amount of punitive damages pursuant to § 27-l-
221(7)(c), MCA.
III
Did the District Court err by finding that Crop Hail was not
an "insurer" subject to punitive damages under the UTPA?
The District Court struck the punitive damages award against
Crop Hail because it found that Crop Hail was not an "insurer"
subject to punitive damages under the UTPA. This Court in O'Fallon
v. Farmers Ins. Exchange (Mont. 1993), 859 P.2d 1008, 1015, 50
St.Rep. 1022, 1027, held that:
individuals, as well as insurers! are prohibited from
engaging in the unfair trade practices set forth in § 33-
18-201, MCA and . . . when an individual breaches the
obligations imposed by that statute, the claimant who is
damaged by that breach has a common law cause of action
against that individual.
We further stated:
It is clear from the language of § 33-18-201, MCA, that
not just insurers, but also claims adjusters, are
prohibited from engaging in acts that are prohibited [by
this statute].
O'Fallon, 859 P.2d at 1014.
Crop Hail recognizes that a common law claim may be brought
against claims adjusters and their companies. However, Crop Hail
correctly contends that the common law cause of action against an
10
individual requires a different standard of proof. See Klaudt v.
Flink (1983), 202 Mont. 247, 253-54, 658 P.2d 1065, 1068. Since
the DeBruyckers did not submit proof on the common law standard,
Crop Hail argues that no cause of action existed against Crop Hail.
In spite of Crop Hail's argument, we note that Crop Hail never
claimed that it was not an insurer. Crop Hail did not raise the
issue in its pretrial pleadings, nor did it raise the issue in the
pretrial order. Crop Hail also failed to object to the jury
instructions and the special verdict form based on the argument
that it was not an "insurer" under the UTPA. Moreover, Crop Hail
did not argue that the common law standard of Klaudt applied in
this case.
We have "long adhered to the rule that an instruction given
without an objection becomes the 'law of the case."' Nicholson v.
United Pacific Ins. Co. (1985), 219 Mont. 32, 38, 710 P.2d 1342,
1346. Since Crop Hail acquiesced to the jury instructions, the
instructions became the law of the case. Crop Hail's consent to
the instructions precludes it from arguing that it was not an
"insurer" to avoid an assessment of punitive damages. On that
basis, we determine that the District Court erred by concluding
that Crop Hail was not an insurer.
We affirm on Issue I, reverse on Issue III, and reverse and
remand on Issue II. On remand, we direct the District Court to
conduct a review pursuant to § 27-1-221(7)(c), MCA, consistent with
this opinion, to determine the amount of punitive damages. If the
judge who decided this case does not hear the remand, then the
11
succeeding judge must, after reviewing the record, decide the
amounts of the punitive damage awards.
We concur:
Justices
12
Justice Terry N. Trieweiler specially concurring.
I concur with the result of the majority opinion. However, I
conclude that the analysis of issues set forth in that opinion is
deficient in several respects.
The issues raised by the parties on appeal were:
1. Was there sufficient evidence in support of the
plaintiffs' claims to withstand the defendants' motions for summary
judgment and a directed verdict, and to affirm the jury's findings
in favor of the plaintiffs?
2. If the answer to the preceding question is in the
affirmative, could the jury's findings be set aside under the guise
of statutory review provided for in 5 27-l-220, MCA?
The issues raised by the parties require an analysis of our
standard of review from denial of motions for summary relief, and
our standard of review of a jury's findings. However, there is no
such analysis in the majority opinion. Resolution of the first
issue also requires some discussion of what evidence was presented
to support the jury's findings and to justify denial of defendants'
motions. Neither does the majority's opinion include any
discussion of that nature. Although the opinion necessarily infers
that the jury's findings were supported by substantial evidence,
nowhere does it say so.
In response to Issue I, the majority infers that whether there
is a l'reasonable basis 'I for denying a claim is generally a question
of fact, and therefore, that issue was properly submitted to the
13
jury. However, there is no explanation why that general rule
applies to the facts in this case.
In its consideration of Issue II, the majority concludes that
the District Court erred by entering findings inconsistent with the
jury's findings. However, that is not always true. The majority
opinion fails to distinguish when it is appropriate for a district
court to enter judgment notwithstanding the verdict.
I conclude, after review of the record, that there was
substantial evidence to support the jury's findings that defendants
violated the Unfair Trade Practices Act found at § 33-18-201
through -242, MCA, and were guilty of actual malice in violation of
§ 27-1-221, MCA. Therefore, I concur with the majority's
conclusion that the District Court correctly denied defendants'
motions for summary judgment and a directed verdict, and that the
District Court erred by entering findings of fact inconsistent with
those of the jury.
I also concur with the majority's conclusion that Crop Hail
Management waived any objection to suit under g 33-18-242, MCA, by
raising that issue for the first time on appeal.
Justice William E. Hunt, Sr., joins in the foregoing special
concurrence.
Justice
14
September 12, 1994
CERTIFICATFJ OF
I hereby certify that the following certified order was sent by United States mail, prepaid, to the
following named:
Dennis Patrick Conner
Attorney at Law
P.O. Box 3028
Great Falls, MT 59403-3028
Michael J. Best
Best Law Offices
P.O. Box 2114
Great Falls, MT 59403
Norman L. Newhall & Kevin C. Meek
Alexander, Baucus & Liiefl, P.C.
P.O. Box 2629
Great Falls, MT 59403
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA
-