Williams v. Union Fidelity Life Insurance

No. 02-608

IN THE SUPREME COURT OF THE STATE OF MONTANA

2005 MT 273

BARBARA WILLIAMS,

Plaintiff and Appellant,

v.

UNION FIDELITY LIFE INSURANCE COMPANY,

Defendant, Respondent and Cross-Appellant.

APPEAL FROM: District Court of the Thirteenth Judicial District,
In and for the County of Yellowstone, Cause No. DV 99-501
The Honorable Russell C. Fagg, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

L. Randall Bishop, Jarussi & Bishop, Billings, Montana

For Respondent:

W. Anderson Forsythe, Nancy Bennett, Moulton, Bellingham, Longo &
Mather, P.C., Billings, Montana

For Amicus Curiae:

John Morrison, Montana State Auditor, Karen Powell, Special Assistant
Attorney General, Helena, Montana

Submitted on Briefs: March 20, 2003

Decided: November 1, 2005
Filed:

__________________________________________
Clerk
Justice James C. Nelson delivered the Opinion of the Court.

¶1 Barbara Williams (Barbara) appeals a jury verdict in the District Court for the

Thirteenth Judicial District, Yellowstone County, finding that Union Fidelity Life Insurance

Company (Union Fidelity) did not breach its contract with Barbara and her husband,

Clarence Williams (Clarence). Barbara also appeals the District Court’s denial of her

motions for summary judgment and for judgment as a matter of law.1 Union Fidelity cross-

appeals. We affirm in part, reverse in part and remand for further proceedings consistent

with this Opinion.

¶2 For purposes of clarity, we have separated the two issues Barbara raised on appeal

into the following three issues:

¶3 1. Whether the District Court erred in denying Barbara’s motions for summary

judgment and for judgment as a matter of law upon her claim that Union Fidelity breached

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Throughout their briefs, the parties use the terms “directed verdict” and
“judgment as a matter of law” interchangeably. However, in March 1993, this Court
amended Rule 50(a), M.R.Civ.P., to refer to the particular motion provided by that Rule
as a “Motion for Judgment as a Matter of Law” rather than a “Motion for a Directed
Verdict.” This change followed the 1991 amendment to the federal rule. The Advisory
Committee Notes to the 1991 amendment to Rule 50, Fed.R.Civ.P., state that the rule was
amended because the term “directed verdict” is “misleading as a description of the
relationship between judge and jury.” The Advisory Committee Notes also state that
“[i]f a motion is denominated a motion for directed verdict . . . the party’s error is merely
formal. Such a motion should be treated as a motion for judgment as a matter of
law. . . .” Hence, we will refer to such motions throughout this Opinion as “Motions for
Judgment as a Matter of Law” even though the parties may have termed them otherwise.

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its insuring agreement by rejecting her claim for benefits and rescinding her Certificate of

Insurance.

¶4 2. Whether the District Court erred in admitting into evidence at trial Clarence’s

medical records acquired by Union Fidelity after Barbara’s claim had been denied and her

certificate of insurance rescinded.

¶5 3. Whether the District Court erred in instructing the jury that Clarence’s opinion as

to the condition of his health was to be determined under both subjective and objective tests.

¶6 In addition, Union Fidelity raised the following three issues on cross-appeal:

¶7 4. Whether the District Court erred by denying Union Fidelity’s motions for summary

judgment and for judgment as a matter of law on Barbara’s claims of fraud and bad faith.

¶8 5. Whether the District Court erred by granting Barbara’s motion in limine precluding

Union Fidelity from presenting evidence about Barbara’s and Clarence’s bankruptcy.

¶9 6. Whether the District Court erred by failing to give Union Fidelity’s instruction

setting forth its defense theory.

FACTUAL AND PROCEDURAL BACKGROUND

¶10 On December 7, 1996, Barbara and Clarence purchased a new pickup from Archie

Cochrane Motors in Billings. As part of the deal, Barbara and Clarence purchased credit life

insurance. The application for credit life coverage was incorporated into the Certificate of

Insurance sold by Archie Cochrane Motors on behalf of Union Fidelity. It provided as

follows:

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 I hereby certify that I am in good health and am not under treatment for, or
receiving medical advice for any illness, disease, or physical or mental
impairment. In addition, I have not been diagnosed as having Acquired
Immune Deficiency Syndrome (AIDS), AIDS Related Complex, or tested
positive for antibodies to the AIDS virus. . . .
....
I make the above certifications with the intent of inducing Union Fidelity Life
Insurance Company to issue this certificate of insurance. I understand that:
. . . (b) any untruthful answer or misrepresentation may be a basis for a denial
of benefits or the voiding of this certificate of insurance.

¶11 While the application does not define “good health,” Union Fidelity’s Credit

Insurance Manual states:

Quite often, the question, “WHAT IS GOOD HEALTH?” is asked of the home
office. Although opinions vary slightly, it is generally agreed that a person in
good health is:
• Free from serious disease that could be expected to cause health problems
in the foreseeable future.
• Able to perform the usual activities of a person of like age and build.
• Capable of working at least 30 hours per week.

There is no place on Union Fidelity’s form to include detailed medical information. In

addition, no additional forms, health questions, medical examinations, medical tests, medical

screenings or authorizations for release of medical information are part of the application

process. Once the Certificate of Insurance is signed by the applicant, credit life insurance

coverage is issued, on the spot, by the dealership. Both Clarence and Barbara signed the

application on December 7, 1996.

¶12 Clarence died on September 20, 1997, and Barbara submitted a claim for death

benefits to Union Fidelity totaling $34,000. The file was assigned to a claims analyst who

requested copies of Clarence’s past medical records. The death certificate had identified, as

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an underlying cause of death, “renal cell carcinoma with metastasis” which had existed for

“years.” On December 16, 1997, Union Fidelity denied the claim for benefits and rescinded

the Certificate of Insurance on the basis that Clarence had misrepresented his health.

¶13 On June 21, 1999, Barbara filed a civil action against Union Fidelity and Archie

Cochrane Motors, as an agent of Union Fidelity, alleging breach of contract; fraud; breach

of the implied covenant of good faith and fair dealing; and breach of Union Fidelity’s

statutory obligations under the Montana Insurance Code and the Montana Unfair Claim

Settlement Practices Act, § 33-18-201, MCA. The parties subsequently stipulated to dismiss

Archie Cochrane Motors from this action with prejudice and the court so ordered.

¶14 Upon completion of discovery, Union Fidelity moved for summary judgment on the

grounds that Clarence provided false information that was material to Union Fidelity’s

decision to issue the insurance certificate, hence Union Fidelity rescinded the certificate.

Union Fidelity argued that because it rescinded, there is no insurance contract and all of

Barbara’s claims against Union Fidelity fail as a matter of law. Thereafter, Barbara filed a

Cross Motion for Partial Summary Judgment on her breach of contract claim. Barbara also

alleged that Union Fidelity engaged in postclaim underwriting, an unfair trade practice

prohibited by § 33-18-215, MCA.

¶15 After a hearing, the District Court denied Union Fidelity’s Motion for Summary

Judgment as well as Barbara’s Cross Motion for Partial Summary Judgment. The court

determined that there were several genuine issues of material fact, including whether

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Clarence’s signature on the credit application signifying that he was in good health was a

material misrepresentation.

¶16 The parties proceeded to trial on May 20, 2002. At the close of the evidence, Barbara

moved for judgment as a matter of law in her favor on her breach of contract claim and

Union Fidelity moved for judgment as a matter of law in its favor on Barbara’s fraud and bad

faith claims. The District Court denied both motions and submitted the case to the jury. The

jury’s verdict form instructed it to first determine whether Union Fidelity breached its

contract with Barbara; if the jury found no breach, it was to sign and return the verdict form

without reaching Barbara’s other claims. The jury returned a verdict in favor of Union

Fidelity on the breach of contract claim. Barbara now appeals and Union Fidelity cross-

appeals.

Issue 1.

¶17 Whether the District Court erred in denying Barbara’s motions for summary
judgment and for judgment as a matter of law upon her claim that Union Fidelity breached
its insuring agreement by rejecting her claim for benefits and rescinding her Certificate of
Insurance.

¶18 Our standard of review in appeals from summary judgment rulings is de novo.

Wendell v. State Farm Mut. Auto Ins. Co., 1999 MT 17, ¶ 9, 293 Mont. 140, ¶ 9, 974 P.2d

623, ¶ 9 (citing Ruckdaschel v. State Farm Mut. Auto Ins. (1997), 285 Mont. 395, 398, 948

P.2d 700, 702). We apply the same criteria applied by the district court pursuant to Rule

56(c), M.R.Civ.P. The moving party must establish both the absence of genuine issues of

material fact and entitlement to judgment as a matter of law. Once the moving party has met

6
its burden, the opposing party must present material and substantial evidence, rather than

mere conclusory or speculative statements, to raise a genuine issue of material fact. Hanson

v. Water Ski Mania Estates, 2005 MT 47, ¶ 11, 326 Mont. 154, ¶ 11, 108 P.3d 481, ¶ 11

(citing Fair Play Missoula v. City of Missoula, 2002 MT 179, ¶ 12, 311 Mont. 22, ¶ 12, 52

P.3d 926, ¶ 12; Enger v. City of Missoula, 2001 MT 142, ¶ 10, 306 Mont. 28, ¶ 10, 29 P.3d

514, ¶ 10).

¶19 This Court’s standard of review of appeals from district court orders granting or

denying motions for judgment as a matter of law is identical to that of the district court.

Marie Deonier & Assoc. v. Paul Revere Life Ins. Co., 2004 MT 297, ¶ 18, 323 Mont. 387,

¶ 18, 101 P.3d 742, ¶ 18 (citing Durden v. Hydro Flame Corp., 1998 MT 47, ¶ 22, 288

Mont. 1, ¶ 22, 955 P.2d 160, ¶ 22; Ryan v. City of Bozeman (1996), 279 Mont. 507, 510, 928

P.2d 228, 229-30). Judgment as a matter of law is properly granted only when there is a

complete absence of any evidence which would justify submitting an issue to a jury and all

such evidence and any legitimate inferences that might be drawn from that evidence must be

considered in the light most favorable to the party opposing the motion. Marie Deonier, ¶ 18

(citing Bevacqua v. Union Pac. R.R. Co., 1998 MT 120, ¶ 46, 289 Mont. 36, ¶ 46, 960 P.2d

273, ¶ 46; Durden, ¶ 21).

¶20 Barbara argues on appeal that the District Court erred in failing to hold Union Fidelity

liable as a matter of law on her breach of contract claim because Union Fidelity engaged in

postclaim underwriting which is statutorily prohibited as an unfair trade practice in Montana.

Barbara maintains that during the application process, an insurer must require fact-specific

7
information regarding the applicant’s medical history that the insurer considers to be material

and absent such rudimentary “underwriting,” a material misrepresentation cannot occur as

a matter of law. Barbara points out that Union Fidelity’s application form did not require

any fact-specific information regarding past medical history.

¶21 Union Fidelity argues that postclaim underwriting is not an independent claim in

Montana and that even if Barbara could assert an independent postclaim underwriting claim,

§ 33-18-215, MCA, does not support her argument that she was entitled to judgment as a

matter of law based solely on Union Fidelity’s application form. Union Fidelity maintains

that because Clarence made a material representation on the application form, Union Fidelity

was entitled to rescind the policy.

¶22 In 1997, the Montana Legislature amended Montana’s Unfair Trade Practices Act

(UTPA) and expressly prohibited postclaim underwriting.

Postclaim underwriting prohibited -- condition. An insurer, health
service corporation, or health maintenance organization may not place an
elimination rider on or rescind coverage provided by a disability policy,
certificate, or subscriber contract after a policy, certificate, or contract has
been issued unless the insured has made a material misrepresentation or
fraudulent misstatement on the application or has failed to pay the premium
when due.

Section 33-18-215, MCA (emphasis added).

¶23 Moreover, § 33-15-403, MCA, allows an insurer to deny coverage when an applicant

fails to provide truthful and accurate information:

Representations in applications -- recovery precluded if fraudulent
or material. (1) All statements and descriptions in any application for an
insurance policy or annuity contract or in negotiations for an insurance policy

8
 or annuity contract by or on behalf of the insured or annuitant are considered
representations and not warranties.
(2) Misrepresentations, omissions, concealment of facts, and incorrect
statements do not prevent a recovery under the policy or contract unless:
(a) fraudulent;
(b) material either to the acceptance of the risk or to the hazard
assumed by the insurer; or
(c) the insurer in good faith would either not have issued the policy or
contract or would not have issued a policy or contract in as large an amount
or at the same premium or rate or would not have provided coverage with
respect to the hazard resulting in the loss if the true facts had been made
known to the insurer as required either by the application for the policy or
contract or otherwise. [Emphasis added.]

¶24 In this case, Barbara contends that Union Fidelity’s application was ambiguous

because it did not define “good health,” nor did it require information on past medical

treatment. Union Fidelity argues that credit life insurance applications typically don’t

require as much information as other types of insurance. Moreover, Union Fidelity contends

that its rates and contract terms are regulated and any ruling that Barbara was entitled to

judgment as a matter of law based solely on Union Fidelity’s application form would violate

the “filed rate doctrine.”

¶25 The filed rate doctrine arose from a concern that a deviation from a rate filed with a

federal regulatory agency can result in the imposition of civil or criminal sanctions by a court

of law without sufficient knowledge or expertise of the rate-setting process of a regulatory

agency. The purpose of the filed rate doctrine is to ensure that rates are both reasonable and

evenly applied. It initially applied to common carriers, but was expanded to include

telephone services, utilities and insurance.

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¶26 The filed rate doctrine originated in Keogh v. Chicago & N.W. RY. Co. (1922), 260

U.S. 156, 43 S.Ct. 47, 67 L.Ed. 183, wherein the United States Supreme Court held that a

private shipper could not recover treble damages against railway companies that had set rates

that were filed with and approved by the Interstate Commerce Commission (ICC). The

Supreme Court set forth two rationales for its holding. First, the regulatory scheme already

allowed for the recovery of damages for illegal rates in proceedings before the ICC and,

second, carrier rate regulation was primarily intended to prevent the charging of

discriminatory rates. “Where damages are sought under a state law, [the filed rate doctrine]

may apply if the challenged rates or prices were set by a federal regulatory authority. See,

e.g., Knevelbaard Dairies v. Kraft Foods Inc. (9th Cir. 2000), 232 F.3d 979, 992 (emphasis

added) (citations omitted). Furthermore, the filed rate doctrine bars both state and federal

claims that attempt to challenge a rate that a federal agency has reviewed and filed. County

of Stanislaus v. Pacific Gas & Elec. Co. (9th Cir. 1997), 114 F.3d 858, 866 (emphasis added),

cert. denied, 522 U.S. 1076, 118 S.Ct. 854, 139 L.Ed.2d 754 (1998).

¶27 In an amicus brief filed in the case sub judice, the Office of the Montana State Auditor

acting as Commissioner of Insurance for the State of Montana (the Commissioner), argued

that the filed rate doctrine is not applicable in this case because the rate charged for the

insurance is not contested. The Commissioner maintained that the filed rate doctrine has not

been extended to include insurance forms approved by a state agency and that the

Commissioner’s regulatory authority does not, and should not, immunize or otherwise

preclude a claim against an insurance company for a violation of state law.

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¶28 In this case, there is no evidence that Union Fidelity’s rates for credit life insurance

were set, reviewed or filed by a federal regulatory authority. Hence, Union Fidelity is not

immunized under the filed rate doctrine for a claim for violation of state law. Based on the

foregoing, we hold that the filed rate doctrine is not applicable in this case and we reject

Union Fidelity’s argument in that regard.

¶29 Union Fidelity also argues that the Montana Legislature limited the claims that an

insured may bring against an insurer when it enacted § 33-18-242, MCA, and under that

statute, postclaim underwriting is not an independent claim. Section 33-18-242(3), MCA,

provides:

An insured who has suffered damages as a result of the handling of an
insurance claim may bring an action against the insurer for breach of the
insurance contract, for fraud, or pursuant to this section, but not under any
other theory or cause of action. An insured may not bring an action for bad
faith in connection with the handling of an insurance claim. [Emphasis
added.]

¶30 Contrary to Union Fidelity’s contentions, Barbara points out that she is not asserting

that postclaim underwriting is an independent claim, only that it has bearing upon the facts

of this case because the Legislature has seen fit to define and prohibit postclaim underwriting

in § 33-18-215, MCA. Barbara contends that while this prohibition is relevant to her claims

of bad faith, fraud and malice, it bears most directly on her breach of contract claim and

Union Fidelity’s defense of rescission. Barbara maintains that absent such rudimentary

underwriting as requiring fact-specific information regarding an applicant’s medical history,

11
a material misrepresentation cannot occur, hence Union Fidelity’s rescission of Clarence’s

application was improper as a matter of law.

¶31 Relying on Schneider v. Minn. Mut. Life Ins. Co. (1991), 247 Mont. 334, 806 P.2d

1032, the District Court denied Barbara’s motion for summary judgment on the basis that

“the bottom line question is a question of fact for a jury to determine.” In that case, Jock

Schneider (Jock) had purchased group life insurance through Minnesota Mutual Life

Insurance Company (Mutual). In completing the application, Jock represented that he had

not been hospitalized or consulted a physician during the last three years and that he had not

been treated for the various health problems listed in the application. Sixteen days later,

Jock died of an accidental gunshot wound to the head. During its investigation, Mutual

learned that Jock had been under a physician’s care for alcoholism and depression. Mutual

rescinded the policy. Schneider, 247 Mont. at 336-37, 806 P.2d at 1034.

¶32 Jock’s wife, Darlene, sued Mutual alleging breach of contract and seeking punitive

damages. Mutual argued that recission was appropriate because the misrepresentation was

material and that Mutual in good faith would not have issued the policy if Mutual had known

about the doctor visits. Mutual appealed the district court’s judgment in favor of Darlene.

On appeal, this Court expressly stated that questions of materiality and of good faith are both

questions of fact. Schneider, 247 Mont. at 339-40, 806 P.2d at 1036.

¶33 Therefore, we hold that the District Court did not err in denying Barbara’s motion for

summary judgment as there still remained genuine issues of material fact as to whether there

was a misrepresentation on Clarence’s part and, if so, whether that misrepresentation was

12
material. We also hold that the District Court did not err in denying Barbara’s motion for

judgment as a matter of law because there was sufficient evidence to justify submitting those

issues to the jury.

¶34 Accordingly, we hold that the District Court did not err in denying Barbara’s motion

for summary judgment and motion for judgment as a matter of law.

Issue 2.

¶35 Whether the District Court erred in admitting into evidence at trial Clarence’s
medical records acquired by Union Fidelity after Barbara’s claim had been denied and her
Certificate of Insurance rescinded.

¶36 The District Court admitted Clarence’s medical records at trial on the basis that it was

for the jury to decide whether there was a material misrepresentation made by Clarence such

that Union Fidelity could rescind the insurance contract and that type of review would

necessitate reviewing the medical records.

¶37 Barbara argues on appeal that these records were allowed into evidence absent any

foundation establishing that they existed at the time Clarence purchased credit life insurance

from Union Fidelity, or that they had been seen, read, or relied upon by Clarence, Barbara,

or anyone at Union Fidelity.

¶38 Union Fidelity argues that the medical records for the time period prior to the

insurance purchase were introduced as evidence of what Clarence knew. Union Fidelity

further argues that the medical records for the time period after the insurance purchase were

introduced as evidence that Clarence had not been successfully treated for cancer and that

the cancer he was diagnosed with in 1996 caused his death in 1997.

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¶39 We review a district court’s ruling on evidentiary issues for an abuse of discretion.

Lopez v. Josephson, 2001 MT 133, ¶ 14, 305 Mont. 446, ¶ 14, 30 P.3d 326, ¶ 14 (citing

Simmons Oil Corp. v. Wells Fargo Bank, 1998 MT 129, ¶ 17, 289 Mont. 119, ¶ 17, 960 P.2d

291, ¶ 17). A district court has broad discretion to determine whether evidence is relevant

and admissible. Lopez, ¶ 14. The question is not whether this Court would have reached the

same decision, but, whether the district court acted arbitrarily without conscientious

judgment or exceeded the bounds of reason. Lopez, ¶ 14.

¶40 In the case sub judice, we conclude that the District Court did not act arbitrarily

without conscientious judgment or exceed the bounds of reason when it admitted Clarence’s

medical records into evidence at trial. In her brief on appeal, Barbara failed to identify any

allegedly prejudicial information contained in Clarence’s medical records, or show how the

introduction of those records harmed the case. On the contrary, the District Court was acting

within its discretion by allowing the members of the jury to view the medical records for

themselves and make their own determinations as to Clarence’s condition at the time he

signed the Certificate of Insurance. Barbara was then free to call Clarence’s doctors to

explain how much of the information contained in the records had been revealed to Clarence

and when.

¶41 Accordingly, we hold that the District Court did not err in admitting Clarence’s

medical records into evidence at trial.

Issue 3.

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¶42 Whether the District Court erred in instructing the jury that Clarence’s opinion as
to the condition of his health was to be determined under both subjective and objective tests.

¶43 The District Court gave the following instruction to the jury requiring that they use

a subjective test in evaluating Clarence’s opinion as to the condition of his health:

Where an applicant for life insurance certifies he is in good health, and
he had reason to believe, and did believe, he was in good health, recovery may
be had although it subsequently develops that this was not the case.

Instruction No. 18. However, over objection, the court also gave the following instruction

to the jury requiring the use of an objective test:

In determining whether Clarence Williams made a material
misrepresentation, an omission, or concealed relevant facts in signing the
insurance application at issue in this case, you must consider whether, based
on the evidence presented, a reasonably prudent person, who knew what
Clarence Williams knew at that time he signed the insurance application,
would have understood that he was not in “good health.”

Instruction No. 21.

¶44 During deliberations, the jury sent out the following question:

Re: Instructions No. 18 & 21
How do we balance these two instructions – What Clarence thought vs. what
a reasonably prudent person would say.

After conferring with counsel, the Judge responded that the jury should simply follow all of

the instructions the best they could.

¶45 Barbara argues on appeal that the jury was “gravely misdirected” by Instruction

No. 21. She contends that the District Court erred in instructing the jury to apply the

objective test of the “reasonably prudent person” because Montana long ago adopted a

subjective standard for evaluating an applicant’s “certification” as to his “good health.”

15
¶46 A district court has discretion regarding the instructions it gives or refuses to give to

a jury and we will not reverse a district court on the basis of its instructions absent an abuse

of discretion. Christofferson v. City of Great Falls, 2003 MT 189, ¶ 9, 316 Mont. 469, ¶ 9,

74 P.3d 1021, ¶ 9 (citing Kiely Const. L.L.C. v. City of Red Lodge, 2002 MT 241, ¶ 62, 312

Mont. 52, ¶ 62, 57 P.3d 836, ¶ 62). In reviewing whether a particular jury instruction was

properly given or refused, we consider the instruction in its entirety, as well as in connection

with the other instructions given and with the evidence introduced at trial. Christofferson,

¶ 9. The party assigning error to a district court’s instruction must show prejudice in order

to prevail, and prejudice will not be found if the jury instructions in their entirety state the

applicable law of the case. Christofferson, ¶ 9.

¶47 The case before us on appeal involves an insurance application that sought only the

best of the applicant’s knowledge and belief as to his health. It did not request the disclosure

of any facts. The law in Montana is to use a subjective standard for evaluating an applicant’s

“certification” as to his “good health.” Hence, we agree with Barbara that the District Court

erred in giving Instruction No. 21 requiring an objective test.

¶48 In Lentz v. Prudential Ins. Co. (1974), 164 Mont. 197, 520 P.2d 769, this Court held

that an insurance applicant’s signature upon a form attesting to his good health constitutes

a statement of personal opinion, not a representation of fact. Lentz had signed an insurance

application declaring that “to the best of my knowledge and belief I am now in good health.”

As the insurer later discovered, Lentz had been hospitalized just weeks before buying his

insurance due to high blood pressure, back pain, abdominal aneurysm and because “his

16
kidneys weren’t doing their full work.” The insurer also learned that Lentz’s doctor knew

he was in terrible shape, but reassured Lentz that his health was improving in order to avoid

frightening him to death. Lentz, 164 Mont. at 199-200, 520 P.2d at 770.

¶49 This Court refused to find that Lentz had misrepresented his health and stated instead:

[W]here the applicant for life insurance certifies that his health is good
according to the best of his knowledge and belief, a recovery may be had, on
the death of the insured, if it appears that he had reason to believe and did
believe, that at the time he was in good health, although it subsequently
develops that this was not in fact his condition, for his statement was not
unqualified, but only to the extent of his knowledge and belief.

Lentz, 164 Mont. at 203, 520 P.2d at 772 (emphasis added) (quoting Couch on Insurance 2d,

§ 35:150).

¶50 In this case, the jury instructions did not, in their entirety, state the applicable law of

the case. As Barbara pointed out in her brief on appeal, it is small wonder that the jury sent

out a question evidencing their total confusion as to how they were supposed to balance these

patently contradictory instructions.

¶51 Accordingly, we hold that the District Court erred in instructing the jury that

Clarence’s opinion as to the condition of his health was to be determined under both

subjective and objective tests.

¶52 In addition, the Certificate of Insurance that Clarence signed stated that all statements

made in the Application for Insurance are considered to have been made “to the best of [his]

knowledge and belief.” Hence, we hold that any instruction on retrial of this matter should

reflect Clarence’s subjective knowledge--i.e., what he knew and what he believed. While

17
we do not intend to draft a specific instruction for the trial court, whatever instruction the

parties and the trial court decide to use should reflect Clarence’s subjective knowledge--i.e.,

what he knew and what he believed, without attempting to balance either as a matter of law.

In other words, it would be up to the fact finder on retrial to decide what Clarence knew

versus what he believed.

Issue 4.

¶53 Whether the District Court erred by denying Union Fidelity’s motions for summary
judgment and for judgment as a matter of law on Barbara’s claims of fraud and bad faith.

¶54 Union Fidelity cross-appealed the District Court’s denial of its motions for summary

judgment and for judgment as a matter of law on Barbara’s fraud and bad faith claims

arguing that because Barbara failed to establish all nine elements of fraud, Union Fidelity

was entitled to judgment as a matter of law on this issue and that § 33-18-242(3), MCA,

expressly bars Barbara’s bad faith claim.

¶55 Barbara argues that her fraud and bad faith claims were well supported as she and

Clarence relied upon Union Fidelity’s selling agent’s promise of coverage and Union

Fidelity’s bad faith occurred prior to the application process when it failed to include fact-

specific health questions on its application. Hence, she contends that § 33-18-242(3), MCA,

which refers to the handling of an insurance claim, does not bar her bad faith claim. We

agree.

¶56 As we noted previously in this Opinion, our standard of review in appeals from

summary judgment rulings is de novo. Wendell, ¶ 9. We apply the same criteria applied by

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the district court pursuant to Rule 56(c), M.R.Civ.P. The moving party must establish both

the absence of genuine issues of material fact and entitlement to judgment as a matter of law.

Once the moving party has met its burden, the opposing party must present material and

substantial evidence, rather than mere conclusory or speculative statements, to raise a

genuine issue of material fact. Hanson, ¶ 11.

¶57 We also stated that this Court’s standard of review of appeals from district court

orders granting or denying motions for judgment as a matter of law is identical to that of the

district court. Marie Deonier, ¶ 18. Judgment as a matter of law is properly granted only

when there is a complete absence of any evidence which would justify submitting an issue

to a jury and all such evidence and any legitimate inferences that might be drawn from that

evidence must be considered in the light most favorable to the party opposing the motion.

Marie Deonier, ¶ 18.

¶58 We hold that the District Court did not err in denying Union Fidelity’s motion for

summary judgment as there still remained genuine issues of material fact. We also hold that

the District Court did not err in denying Union Fidelity’s motion for judgment as a matter

of law because there was sufficient evidence to justify submitting those issues to the jury.

Finally, we hold that § 33-18-242(3), MCA, does not bar Barbara from bringing her bad faith

claim on retrial.

¶59 In her concurring and dissenting Opinion, Chief Justice Gray faults the Court for not

performing an in-depth analysis of Barbara’s fraud and bad faith claims. Chief Justice Gray

fails to recognize, however, that this Court’s job is to determine whether the District Court

19
erred by denying Union Fidelity’s motion for summary judgment and for judgment as a

matter of law on Barbara’s claims of fraud and bad faith. As previously stated, to prevail on

a motion for summary judgment, the moving party must first establish the absence of genuine

issues of material fact. In like manner, judgment as a matter of law is properly granted only

when there is a complete absence of any evidence which would justify submitting an issue

to a jury. Union Fidelity has not met either burden in this case and, contrary to Chief Justice

Gray’s position, it is not our job to try to resolve the underlying issues--that is what trials are

for.

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 Issue 5.

¶60 Whether the District Court erred by granting Barbara’s motion in limine precluding
Union Fidelity from presenting evidence about Barbara’s and Clarence’s bankruptcy.

¶61 Union Fidelity argues that evidence of Barbara’s and Clarence’s bankruptcy was

relevant to the issue of damages as well as to Clarence’s credibility and state of mind. Union

Fidelity asserts that the bankruptcy evidence establishes that both Barbara and Clarence

knew they could not pay for the truck on the day they purchased it--evidence that they were

not acting in good faith. Union Fidelity also argues that because Barbara’s and Clarence’s

credibility was a central issue in this case, the evidence of bankruptcy was essential to Union

Fidelity’s defense.

¶62 Barbara argues, on the other hand, that the District Court properly prohibited Union

Fidelity from offering evidence related to the bankruptcy because the quality of Barbara’s

and Clarence’s financial planning is not relevant to their purchase of credit life insurance.

And, as to Union Fidelity’s claim that Barbara and Clarence were not acting in good faith

when they purchased the truck, Barbara responds that “comparative bad faith” is not a

defense to her claims. See Stephens v. Safeco Ins. Co. (1993), 258 Mont. 142, 852 P.2d 565.

¶63 We stated in Issue 2 of this Opinion that a district court has broad discretion to

determine whether evidence is relevant and admissible. Lopez, ¶ 14. We further stated that

the question is not whether this Court would have reached the same decision, but, whether

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the district court acted arbitrarily without conscientious judgment or exceeded the bounds

of reason. Lopez, ¶ 14.

¶64 We see no evidence here that the District Court acted arbitrarily without conscientious

judgment or exceeded the bounds of reason. Accordingly, we hold that the District Court

did not err by granting Barbara’s motion in limine precluding Union Fidelity from presenting

evidence about Barbara’s and Clarence’s bankruptcy.

Issue 6.

¶65 Whether the District Court erred by failing to give Union Fidelity’s instruction setting
forth its defense theory.

¶66 Union Fidelity maintains that although both parties proposed an instruction on Union

Fidelity’s statutory defense to Barbara’s UTPA claims, the District Court failed to instruct

the jury on the available defense. In short, the jury was never given the opportunity to

consider Union Fidelity’s defense.

¶67 Section 33-18-242(5), MCA, provides insurers with a defense against claims brought

under the UTPA: “An insurer may not be held liable under this section if the insurer had a

reasonable basis in law or in fact for contesting the claim or the amount of the claim,

whichever is in issue.”

¶68 The District Court neglected to give either Barbara’s or Union Fidelity’s jury

instruction on this issue. Because the jury found in Union Fidelity’s favor, the failure to give

that jury instruction would be harmless error were we to affirm the District Court in all

respects in this case. However, because we are reversing and remanding for a new trial on

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Barbara’s claim of error in the jury instructions as determined in Issue 3, we also hold that

the District Court erred by failing to give any instruction setting forth Union Fidelity’s

defense theory under the UTPA.

¶69 Accordingly, we hold that on remand the District Court is directed to give the jury an

appropriate instruction setting forth Union Fidelity’s defense theory under the UTPA.

CONCLUSION

¶70 We affirm the District Court’s denial of both parties motions for summary judgment

and for judgment as a matter of law. We also affirm the District Court’s denial of Barbara’s

motion to exclude Clarence’s medical records and the granting of Barbara’s motion to

exclude evidence about Barbara’s and Clarence’s bankruptcy.

¶71 However, we hold that the District Court erred in instructing the jury that Clarence’s

opinion as to the condition of his health was to be determined under both subjective and

objective tests. Therefore, we reverse and remand for a new trial at which instructions on

Union Fidelity’s defense theory must be given.

¶72 Affirmed in part, reversed in part and remanded for further proceedings consistent

with this Opinion.

/S/ JAMES C. NELSON

We Concur:

/S/ W. WILLIAM LEAPHART
/S/ PATRICIA O. COTTER

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/S/ JIM RICE

Chief Justice Karla M. Gray, concurring and dissenting.

¶73 I concur in the Court’s opinion on all issues except Issue 4. With regard to Issue 4,

I concur to a limited extent with the result as applied to the bad faith cause of action, and

write separately to provide a basis for that result, which strikes me as somewhat lacking in

the Court’s opinion. I dissent from the Court’s conclusion in Issue 4 that the District Court

did not err in denying Union Fidelity’s motion for summary judgment on Barbara’s fraud

claim. I would reverse the District Court on that claim and remand for entry of judgment in

Union Fidelity’s favor.

¶74 Both parties advance Thomas v. Northwestern Nat. Ins. Co., 1998 MT 343, 292 Mont.

357, 973 P.2d 804, in support of their positions regarding bad faith. The Court does not

discuss Thomas, but it is my view that Thomas supports Barbara’s position that § 33-18-

242(3), MCA, does not bar her bad faith cause of action insofar as it pertains to alleged pre-

claim conduct by Union Fidelity.

¶75 In Thomas, a business and its owners (collectively, the business) purchased a

commercial insurance policy in 1989 and renewed it annually through 1993. Thomas, ¶ 7.

In 1990, the policy was amended to exclude coverage for pollution. Thomas, ¶ 10. A

customer sued the business over a fuel oil spill that occurred in 1992, and the insurer refused

to defend or indemnify the business. After the customer received judgment, the business

sued for indemnification. Thomas, ¶ 8. The business alleged that, by failing to provide

adequate notice of the amendment, the insurer acted negligently, breached an implied

covenant of good faith and fair dealing and breached its fiduciary duty. Thomas, ¶ 11. The

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district court granted summary judgment to the insurer. It reasoned in part that § 33-18-

242(3), MCA--which delineates certain actions which an insured may bring as a result of an

insurer’s handling of an insurance claim and prohibits common law bad faith claims vis-a-vis

the handling of a claim--precluded the business from pursuing common law theories.

Thomas, ¶¶ 12-13, 31.

¶76 On appeal, we determined that “the [UTPA] addresses the relationship between an

insured and an insurance company once a claim has been filed,” and stated the business’

causes of action “pertain to events that occurred prior to the handling of the claim.” Thomas,

¶ 33. Noting the insurer’s argument that “suit was filed by appellants only after their

demand for insurance coverage was denied,” we reasoned § 33-18-201, MCA--which

generally prohibits unfair claim settlement practices--did not address the tort allegations

raised in the complaint. Thomas, ¶ 34. Distinguishing cases involving “actual handling” of

claims, we noted that “[h]ere, appellants allege pure common law claims without adding

violations of the [UTPA].” Thomas, ¶ 36. We concluded that § 33-18-242(3), MCA, did

not bar the common law causes of action. Thomas, ¶ 37.

¶77 Since Thomas, we have recognized that “§ 33-18-242(3), MCA, ‘explicitly prohibits

bringing an action for bad faith in connection with the handling of an insurance claim.’”

Watters v. Guaranty Nat. Ins. Co., 2000 MT 150, ¶ 51, 300 Mont. 91, ¶ 51, 3 P.3d 626, ¶ 51

(citation omitted), overruled on other grounds, Shilhanek v. D-2 Trucking, Inc., 2003 MT

122, ¶ 21, 315 Mont. 519, ¶ 21, 70 P.3d 721, ¶ 21. The distinction between pre-claim events

in Thomas and claim handling in Watters is entirely consistent with the statutes and I would

expressly apply it here.

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¶78 In her complaint, Barbara asserted Union Fidelity “tortiously breached the implied

covenant of good faith and fair dealing in connection with the application process and

underwriting[.]” On appeal, Barbara contends Union Fidelity committed bad faith during

the application and pre-claim underwriting process by failing to define terms such as “good

health,” failing to include health-specific questions on the application, and “ma[king] certain

that neither rescission nor claim denial was discussed at the point of sale.” These allegations

refer to conduct before the claim, not to the handling of the claim once made. Therefore, I

would apply Thomas and conclude that Barbara may proceed with her bad faith action only

in relation to Union Fidelity’s pre-claim application process and pre-claim underwriting.

¶79 Union Fidelity asserts, however, that “[t]here can be no dispute that [Barbara’s]

claims arise from the denial of the insurance claim.” As mentioned above, we noted a

similar argument in Thomas, ¶ 34, and stated the alleged torts at issue there were not

contemplated in § 33-18-201, MCA. In my view, we improperly shifted the focus in Thomas

from the insurer’s argument about when the tort accrued to an analysis of whether the

alleged tort was covered by the UTPA. I would not follow Thomas in that regard.

¶80 The first sentence of § 33-18-242(3), MCA, limits causes of action available to “[a]n

insured who has suffered damages as a result of the handling of an insurance claim[.]” Our

recognition of non-UTPA tort actions involving pre-claim conduct in Thomas indicates the

“as a result of” language refers to the relationship between the insurer’s conduct and the

damages, rather than merely whether the damages arose before or after the claim. Indeed,

as in Thomas, the insured’s damages in nearly every case involving pre-claim conduct will

not arise until the insurer handles the claim. Pursuant to Thomas, therefore, it is my view

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that Barbara’s bad faith action may proceed to trial on the theory that the alleged damages

occurred “as a result of” Union Fidelity’s alleged pre-claim conduct.

¶81 Union Fidelity also asserts, however, that the UTPA “precluded” Barbara from

alleging both UTPA violations and bad faith in her complaint, and it supports this assertion

with our reference to “pure common law claims” in Thomas, ¶ 36. In my view, our

observation of the “pure common law claims” in Thomas did not establish a rule that a

plaintiff must choose between asserting UTPA violations and common law torts. Indeed,

Thomas did not involve alleged UTPA violations. Moreover, we recognized in Thomas, ¶

35, that the UTPA is not an insured’s exclusive remedy. Finally, of course, Rule 8(e)(2),

M.R.Civ.P., specifically allows a plaintiff to plead alternatively. Here, Barbara has alleged

various causes of action, some with respect to different factual assertions. I would conclude

the UTPA does not prevent her from doing so.

¶82 In summary, I concur in the Court’s conclusion that § 33-18-242(3), MCA, does not

bar Barbara’s bad faith cause of action, but I would limit the scope of that action to Union

Fidelity’s pre-claim conduct. Consequently, I disagree with the Court’s apparent adoption

in ¶ 30 of Barbara’s argument that the prohibition against post-claim underwriting in § 33-

18-215, MCA, relates to her bad faith allegation. I would conclude that, while she may

assert post-claim underwriting in relation to some allegations, she may not do so in relation

to the alleged pre-claim bad faith.

¶83 With respect to Barbara’s fraud cause of action, the Court notes in ¶ 55 that Barbara

argues her fraud allegation is “well supported as she and Clarence relied upon Union

Fidelity’s selling agent’s promise of coverage[.]” On appeal, Barbara points to the selling

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agent’s deposition testimony that he promised “peace of mind.”

¶84 A prima facie case of fraud consists of the following nine elements: (1) a

representation; (2) the falsity of that representation; (3) the materiality of the representation;

(4) the speaker’s knowledge of the representation’s falsity or ignorance of its truth; (5) the

speaker’s intent that the representation should be acted upon by the person and in the manner

reasonably contemplated; (6) the hearer’s ignorance of the representation’s falsity; (7) the

hearer’s reliance on the truth of the representation; (8) the hearer’s right to rely on the

representation; and (9) the hearer’s consequent and proximate injury or damages caused by

relying on the representation. See In re Estate of Kindsfather, 2005 MT 51, ¶ 17, 326 Mont.

192, ¶ 17, 108 P.3d 487, ¶ 17 (citations omitted). I imagine insurance agents generally

promise coverage at the time of sale, and I do not believe a reference to “peace of mind”

constitutes a guarantee of coverage in all circumstances. I would not permit this fraud claim

to proceed to trial solely because a selling agent generally promised coverage and the insurer

later denied a specific claim.

¶85 More importantly, the Court does not address Union Fidelity’s reliance on Barbara’s

deposition testimony that the salesperson did not talk her and Clarence into buying insurance

and did not make any misrepresentations or misleading statements. Thus, through Barbara’s

deposition, Union Fidelity established the absence of any genuine issue of material fact

regarding, at least, the “falsity” and “reliance” elements of Barbara’s fraud claim.

¶86 The burden then shifts to Barbara to present material and substantial evidence, rather

than mere conclusory or speculative statements, to raise a genuine issue of material fact. See

Hanson v. Water Ski Mania Estates, 2005 MT 47, ¶ 11, 326 Mont. 154, ¶ 11, 108 P.3d 481,

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¶ 11 (citations omitted). From my perspective, Barbara’s reference to the agent’s “peace of

mind” statement and the general promise of coverage relied on by the Court do not constitute

material and substantial evidence raising a genuine issue of material fact with respect to the

“falsity” and “reliance” elements of the fraud claim. Therefore, in light of Barbara’s

deposition testimony and the generic nature of the allegedly fraudulent representations, I

dissent from the Court’s conclusion that Barbara may proceed with her fraud claim.

¶87 The Court’s response to this concurring and dissenting opinion relating to Barbara's

bad faith and fraud claims consists primarily of sweeping statements about my inability to

recognize our standards of review of a district court's granting of summary judgment and

judgment as a matter of law. There is no question that I understand those standards. Nor

is the Court correct that I have faulted it for not performing an in-depth analysis of the fraud

and bad faith claims or “resolved” the underlying issues which ought to be tried.

¶88 With regard to the bad faith claim, I state clearly above that I concur in the result, but

do not believe the Court presents an adequate analysis of whether the District Court erred

in denying Union Fidelity's motion for summary judgment in that regard. Yes, we determine

on appeal whether the moving party met its burden and was entitled to judgment as a matter

of law. That standard generally requires us, however, to actually make determinations based

on the record and the law. The Court’s opinion on this portion of Issue 4 does neither.

¶89 The Court presents Union Fidelity’s arguments in one paragraph, followed by

Barbara's arguments in the next; the third paragraph properly sets forth the standards relating

to summary judgment; and the fourth paragraph sets out the standards relating to judgment

as a matter of law. The Court then immediately “holds” that the District Court did not err

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in denying the motion for summary judgment on bad faith or the motion for judgment as a

matter of law because “there still remained genuine issues of material fact[,]” and “there was

sufficient evidence to justify submitting those issues to the jury.” It further holds that § 33-

18-242(3), MCA, does not bar Barbara’s bad faith claim. My concern with the Court’s

opinion is that it sets forth nothing of record or of law in these regards.

¶90 What genuine issues of material fact or evidence sufficient to go to the jury has the

Court located? What of the legal arguments and authorities advanced by the parties? Why

does § 38-18-242(3), MCA, not bar the bad faith claim? These questions--and my attempt

to provide legal analysis--are not failures on my part to recognize the standards relating to

summary judgment and judgment as a matter of law; nor do I resolve in any way underlying

issues which should go to the jury. The Court's opinion--in my view--is simply devoid of

the substantive analysis we generally include to give appropriate guidance to the parties and

the trial court in this case, and practitioners and trial courts in future cases.

¶91 On the off chance that the Court truly is missing the point of my concurring and

dissenting opinion--especially with regard to providing an analysis to serve as a basis for its

holdings--it is appropriate to look to recent opinions by this Court on summary judgment

issues. Since the end of February this year, we have issued more than a dozen published

opinions addressing summary judgment issues. See, e.g., Hi-Tech Motors, Inc. v.

Bombardier Motor Corp. of Am., 2005 MT 187, 328 Mont. 66, ___ P.3d ___; Bonilla v.

Univ. of Mont., 2005 MT 183, 328 Mont. 41, ___ P.3d ___; Eves v. Anaconda-Deer Lodge

County, 2005 MT 157, 327 Mont. 437, 114 P.3d 1037; Seven Up Pete Venture v. State, 2005

MT 146, 327 Mont. 306, 114 P.3d 1009; Richards v. Knuchel, 2005 MT 133, 327 Mont.

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249, 115 P.3d 189; Cole v. Valley Ice Garden, L.L.C., 2005 MT 115, 327 Mont. 99, 113 P.3d

275; In re Dorothy W. Stevens Revocable Trust, 2005 MT 106, 327 Mont. 39, 112 P.3d 972;

Gullett v. Van Dyke Const. Co., 2005 MT 105, 327 Mont. 30, 111 P.3d 220; Montana

Mountain Products v. Curl, 2005 MT 102, 327 Mont. 7, 112 P.3d 979; Rolison v.

Deaconess, 2005 MT 95, 326 Mont. 491, 111 P.3d 202; Carter v. Mississippi Farm Bureau

Cas., 2005 MT 74, 326 Mont. 350, 109 P.3d 735; Valley Victory Church v. Sandon, 2005

MT 72, 326 Mont. 340, 109 P.3d 273; GRB Farm v. Christman Ranch, Inc., 2005 MT 59,

326 Mont. 236, 108 P.3d 507; Travelers Cas. v. Ribi Immunochem Research, 2005 MT 50,

326 Mont. 174, 108 P.3d 469. None of those opinions addresses summary

judgment/judgment as a matter of law issues without either factual or legal analysis or both.

¶92 For these reasons, I cannot join the Court’s opinion on Issue 4.

/S/ KARLA M. GRAY

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