No. 94-549
IN THE SUPREME COURT OF THE STATE OF MONTANA
1995
BRUCE WATTS,
Plaintiff and Appellant,
v.
WESTLAND FARM MUTUAL
INSURANCE COMPANY and
SEITZ INSURANCE AGENCY,
Defendants and Respondents.
APPEAL FROM: District Court of the Seventh Judicial District,
In and for the County of Richland,
The Honorable Roy C. Rodeghiero, Judge presiding
COUNSEL OF RECORD:
For Appellant:
Arnie A. Hove, Attorney at Law, Circle, Montana
For Respondents:
L. D. Nybo, Attorney at Law, Great Falls,
Montana
Katherine M. Irigoin, Attorney at Law, Sidney,
Montana
Submitted on Briefs: April 6, 1995
Decided: May 23, 1995
Filed:
Clerk
Chief Justice J. A. Turnage delivered the Opinion of the Court.
Bruce Watts (Watts) appeals the decision of the Seventh
Judicial District Court, Richland County, granting summary judgment
in favor Of Westland Farm Mutual Insurance Company (Westland) and
Seitz Insurance Company (Seitz). We affirm.
The issues are:
1. Did the District Court err in granting summary judgment in
favor of Westland and Seitz on Watts's breach of contract claim?
2. Did the District Court err in granting summary judgment in
favor of Seitz on Watts's negligent misrepresentation claim?
3. Did the District Court err in granting summary judgment in
favor of Westland and Seitz on Watts's unfair trade practices
claim?
Watts operates a farm in Richland County, Montana. In 1992 he
obtained hail insurance for his cantaloupe crop from Westland
through a local independent insurance agency, Seitz. Watts dealt
directly with John Seitz, who then procured the insurance from
Westland. Watts applied for insurance on his cantaloupe crop by
signing a binder in May 1992. Seitz informed Watts that his crops
would be insured at 12:Ol a.m. the morning following his signing of
the binder. Westland subsequently sent Watts a copy of the
insurance policy which included the binder as the declaration page
of the policy as well as additional policy terms. Watts was not
required to pay his premium until October. Watts paid his premium
in full and made no claims for hail damage in 1992.
2
In 1993 Watts applied with Seitz for crop insurance for his
cantaloupe and grain crops. Seitz informed Watts that Seitz needed
to verify the insurability of the cantaloupe crops with Westland.
Watts applied for insurance by signing a binder on June 28, 1993,
that went into effect on June 29, 1993, at 12:Ol a.m. Despite
Seitz's admonishment concerning the insurability of cantaloupe, the
binder signed on June 28, 1993, included the cantaloupe crop.
Watts claims he received a message on his answering machine the
evening of June 28 from Seitz confirming the insurance of the
cantaloupe crop. Seitz disputes this allegation. Watts's farm
suffered a hail storm the evening of June 28, 1993, but the parties
dispute whether the cantaloupe was damaged at that time.
Seitz sent the binder to Westland for processing. On July 1
or 2, 1993, Westland informed Seitz that it could not insure the
cantaloupe because Westland was dealing with a new reinsurer and
did not have an insurance adjuster capable of adjusting cantaloupe
losses. Seitz relayed this message to Watts the same day. On July
12, 1993, Watts received a copy of his insurance policy from
Westland. The policy again included the binder as the declaration
page of the policy as well as additional policy terms. The
reference to coverage of Watts's cantaloupe crop on the declaration
page had been crossed out with the word "delete" written in the
margin. The premium was reduced to reflect the coverage of Watts's
grain crop alone.
On July 18, 1993, Watts's farm suffered another hail storm.
Watts made an insurance claim and Westland sent an adjuster to
3
Watts's farm to ascertain the amount of damage sustained. The
adjuster determined that a portion of Watts's grain crop was
damaged approximately 5 percent. The adjuster did not examine the
cantaloupe crop for damage.
Watts filed a complaint on December 2, 1993, claiming that
Westland and Seitz were liable for damage to his cantaloupe crop
suffered on July 18. The complaint alleged breach of contract,
negligent misrepresentation and unfair trade practices pursuant to
5 33-18-201, MCA. All parties moved for summary judgment.
Following a hearing, the District Court denied Watts's motion and
granted Westland's and Seitz's motions for summary judgment. Watts
appeals the decision of the District Court.
We review summary judgment rulings de nova. Cooper v. Sisters
of Charity (1994), 265 Mont. 205, 207, 875 P.2d 352, 353. Summary
judgment is proper only when there exists no genuine issue of
material fact and the moving party is entitled to a judgment as a
matter of law. Rule 56(c), M.R.Civ.P.; Spain-Morrow Ranch, Inc. v.
West (1994), 264 Mont. 441, 444, 872 P.2d 330, 331-32.
Issue 1
Did the District Court err in granting summary judgment in
favor of Westland and Seitz on Watts's breach of contract claim?
Watts argues that his signing of the binder on June 28, 1993,
resulted in his cantaloupe crop being insured as of 12:Ol a.m. on
June 29, 1993. Watts claims Westland could only cancel this policy
after ten days written notice. Watts contends that the cantaloupe
hail insurance described in the binder was in effect at the time of
4
the July 18, 1993, hail storm because he had not received suffi-
cient written notice of cancellation. He maintains that neither
the oral notification by Seitz on July 2 or his July 12, 1993,
receipt of the insurance policy with the cantaloupe coverage
provision deleted was sufficient to cancel the insurance coverage
of his cantaloupe crop.
Westland and Seitz argue that a binder never went into effect.
By its own terms, the binder does not go into effect if the crop to
be insured suffers any damage before the effective hour of the
insurance. Westland and Seitz claim that the hail storm on the
evening of June 28, 1993, voided the binder before it became
effective. Watts insists that while a hail storm took place on his
farm on June 28, his cantaloupe did not suffer any damage at that
time. Because there exists a disputed issue of fact as to whether
the cantaloupe crop was damaged on June 28, we cannot affirm the
District Court's granting of summary judgment on these grounds.
Westland and Seitz also argue that even if the binder went
into effect on June 29, the binder was not in effect at the time of
the July 18 hail storm. They maintain that, unlike an insurance
policy, a binder is a form of temporary insurance coverage that is
in effect only from the time the applicant signs the binder until
the insurance carrier either accepts or rejects the application for
insurance. They contend that the ten-day written notice require-
ment does not apply to temporary binders.
Section 33-15-1103, MCA, requires ten days written notice for
midterm cancellation of an insurance policy. The ten-day written
5
notice requirement of § 33-15-1103, MCA, was incorporated into the
crop insurance policy issued to Watts by Westland. This provision
reads, in part:
We may cancel all or any part of the insurance provided
by us at any time during the first 60 days during which
the policy is in effect by notifying you in writing &
least 10 davs before the date and hour cancellation takes
effect. Notices of cancellation will be mailed 1st class
or delivered to you at your address shown in the declara-
tion. Proof of mailing will be sufficient proof of
notice. [Emphasis added].
The ten-day notice applies only to midterm cancellation of
insurance coverage. Cancellation, as used in this section, means
"the decision by the insurer to terminate an insurance policy prior
to the expiration of its terms.” Section 33-15-1102(Z), MCA.
Section 33-15-411, MCA, defines a binder as follows:
Binders for temporary insurance. (1) Binders or other
contracts for temporary insurance may be made orally or
in writing and shall be deemed to include all the usual
terms of the policy as to which the binder was given,
together with such applicable endorsements as are
designated in the binder, except as superseded by the
clear and express terms of the binder.
(2) No binder shall be valid bevond the issuance of
the oolicv with respect to which it was given or beyond
90 days from its effective date, whichever period is
shorter. [Emphasis added.]
By the express language of 5 33-15-411(Z), MCA, the term of a
binder expires when the policy for which the binder applies is
issued.
This interpretation of Montana's statutory scheme is supported
by other authority.
Generally a contract of temporary present insurance is
terminated by the issuance, delivery, and acceptance of
a policy, or by a rejection of the application, but if no
policy is issued, delivered, and accepted, and the
6
contract is not otherwise terminated, it continues until
the time fixed thereby for its termination or a reason-
able time has expired.
2 Couch on Insurance 2d § 14:3. Watts applied for insurance by
signing a binder on June 28, 1993. The policy that related to this
binder was issued on July 12, 1993. The policy included coverage
of Watts's grain crop but did not include coverage of his canta-
loupe crop. Pursuant to § 33-15-411(Z), MCA, the binder was
automatically void upon the issuance of the policy. No notice
other than the issuance of the policy was required.
We conclude as a matter of law that the expiration of a binder
upon the issuance of the insurance policy is not a "cancellation"
within the meaning of Title 33 and therefore the ten-day notifica-
tion provision is inapplicable. Therefore the District Court did
not err in granting summary judgment in favor of Westland and Seitz
on the breach of contract claim.
Issue 2
Did the District Court err in granting summary judgment in
favor of Seitz on Watts's negligent misrepresentation claim?
Watts alleged Seitz committed two acts of negligent misrepre-
sentation. First, Watts claims that in May 1992 Seitz represented
that he was a qualified and experienced insurance salesman and that
he could obtain insurance for specialty crops such as cantaloupe.
Second, Watts claims that Seitz refused or neglected to provide
ten-day written notice that his cantaloupe crop was not covered
7
In Barrett v. Holland & Hart (1992), 256 Mont. 101, 845 P.2d
714, we set out the elements of a negligent misrepresentation
claim:
1. the defendant made a representation as to a
past or existing material fact;
2. the representation must have been untrue;
3. regardless of its actual belief, the defendant
must have made the representation without any
reasonable ground for believing it to be true;
4. the representation must have been made with
the intent to induce the plaintiff to rely on
it;
5. the plaintiff must have been unaware of the
falsity of the representation and he must have
been justified in relying upon the representa-
tion;
6. the plaintiff, as a result of his reliance,
must sustain damage.
Barrett, 845 P.2d at 718-19 (citing Kitchen Krafters, Inc. v.
Eastside Bank of Montana (1990), 242 Mont. 155, 165, 789 P.2d 567,
573) (emphasis in original).
A review of the record reveals Watts has not presented any
evidence that Seitz's statements concerning his experience and
expertise as an insurance salesman were misrepresentations.
Nothing in the record indicates that Seitz was anything but an
experienced and successful insurance agent. Seitz's alleged
statements concerning his ability to procure insurance for Watts's
cantaloupe crop in 1992 were likewise not misrepresentations,
because Seitz successfully procured insurance for Watts's canta-
loupe crop in 1992. In 1993, Watts was no longer justified in
relying on representations made in 1992, because he was informed on
July 2 and again on July 12 that his cantaloupe crops were not
8
insured. Watts's reliance on previous representations made by
Seitz was therefore unjustified.
Neither has Watts presented evidence that Seitz's failure or
refusal to comply with the ten-day written notice requirement
amounted to a negligent misrepresentation. As previously dis-
cussed, the ten-day written notice requirement is not applicable to
the natural expiration of a temporary binder. More importantly for
disposition of this issue, Seitz's failure to comply with the ten-
day notice requirement was not a representation. By failing to
give ten days written notice, Seitz did not make any "representa-
tion" as to a past or existing fact.
We conclude that Watts has failed to present evidence creating
material issues of fact concerning negligent misrepresentation and
that the District Court properly granted Seitz's motion for summary
judgment as to this issue.
Issue 3
Did the District Court err in granting summary judgment in
favor of Westland and Seitz on Watts's unfair trade practices
claim?
Watts contends that Westland and Seitz violated Montana's
Unfair Trade Practices Act. Watts's complaint alleged violations
of the following provisions of 5 33-18-201, MCA:
Unfair claim settlement practices prohibited. No person
may, with such frequency as to indicate a general
business practice, do any of the following:
(1) misrepresent pertinent facts or insurance
policy provisions relating to coverages at issue;
.
9
(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;
i9i . attempt to settle claims on the basis of an
application which was altered without notice to or
knowledge or consent of the insured
Watts argues that Westland and Seitz violated these provisions of
5 33-18-201, MCA, and are therefore liable for damages.
Section 33-l&242(5), MCA, states:
An insurer may not be held liable under this section
if the insurer has a reasonable basis in law or in fact
for contesting the claim or the amount of the claim,
whichever is in issue.
We have previously determined that whether a "reasonable basis
in law or in fact" exists is generally a question of fact reserved
for the trier of fact. In Dean v. Austin Mutual Insurance Co.
(1994), 263 Mont. 386, 869 P.2d 256, we stated "whether the insurer
had a 'reasonable basis in law or in fact' is an issue properly
presented for determination to the trier of fact." ~, 869 P.2d
Dean
at 258. We reiterated this position in DeBruycker v. Guaranty
National Ins. Co. (1994), 266 Mont. 294, 298, 880 P.2d 819, 821
However, both Dean and DeBruvcker are distinguishable from the
case at bar. In Dean and DeBruvcker there was no question that the
plaintiffs maintained insurance policies with the insurers.
Rather, the contested issues involved the applicability and amount
of coverage under the specific facts and circumstances presented.
DeanI
- 869 P.2d at 257-59; DeBruvcker, 880 P.2d at 820-21.
10
In the instant case, the District Court determined, as a
matter of law, that the binder that temporarily insured the
cantaloupe was not in effect at the time of the July 18, 1993
hailstorm. Therefore, there can be no genuine issues of material
fact concerning Westland's and Seitz's obligations for damage to
the cantaloupe crop.
Because there was no policy insuring the cantaloupe in effect
at the time of the July 18, 1993 hailstorm, we conclude as a matter
of law that Westland and Seitz had a reasonable basis in law and in
fact for contesting Watts's claim which acts as a complete defense
to a claim under 5 33-18-201, MCA. By this opinion, we do not
comment on whether Seitz, as an insurance agent or "producer," is
subject to the provisions of § 33-18-201, MCA.
Because Watts has not established issues of material fact as
to any of his substantive claims, we need not address the issue of
punitive damages. We hold that the District Court did not err in
granting summary judgment in favor of Westland and Seitz because
there are no genuine issues of material fact and the defendants are
entitled to judgment as a matter of law.
11
we concur:
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May 23, 1995
CERTIFWATE OF SERVICE
,I hereby certify that tbe following certified order was sent by United States mail, prepaid, to the
following named:
Arnie A. Hove
Attorney At Law
Box 184
Circle MT 59215-0184
L.D. Nybo
Attorney At Law
Box 2049
Great Falls MT 59403-2049
Katherine M. Irigoin
Attorney At Law
Box 1650
Sidney MT 59270-1650
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA