NO. 89-222
IN THE SUPREME COURT OF THE STATE OF MONTANA
1990
MARTIN DUNN and BETTY DUNN,
plaintiffs and Appellants,
-vs-
JOHN WAY and IOWA MUTUAL INSURANCE COMPANY,
Defendants and Respondents.
'
I . i
rri I;
I
i',
L' I-->
C Cri
7J
-1
APPEAL FROM: ~ i s t r i c tCourt of the Third ~udicial~istrlct,
In and for the County of Deer Lodge,
The Honorable Ted I,. ~ i z n e , Judge presi-d-ing.
r
COUNSEL OF RECORD:
For Appellant:
Greg J. Skakles; Johnson, Skakles & Kebe; Anaconda,
Montana
For Respondent:
Thomas M. Welsch; Poore, Roth & ~obinson,Butte,
Montana
submitted on ~riefs: Nov. 21, 1989
~ecided: February 5, 1990
Filed:
Justice John C. Sheehy, delivered the Opinion of the Court.
plaintiffs Martin and Betty Dunn brought suit in the District
Court, Third Judicial District, Deer Lodge County, alleging breach
of contract and bad faith against defendants Iowa Mutual Insurance
Company and its claims adjuster John Way for failure to promptly
settle a claim for damage to a camping trailer and its contents.
Upon motion, the District Court entered a stay of proceeding as to
the bad faith claims pending resolution of the contract dispute.
Defendants subsequently made a motion for summary judgment,
on the basis that they had invoked the appraisal process required
under the contract, which plaintiffs failed to comply with prior
to filing suit. The District Court granted the motion for summary
judgment. The Dunns appeal the stay of proceedings and grant of
summary judgment. We affirm the ~istrictCourt.
The issues raised by the Dunns are:
1. Whether Iowa Mutual properly invoked the policy's
appraisal process.
2. Whether interest loss and storage fee claims are material
to summary judgment.
3. Whether personal property valuations were at issue,
thereby precluding summary judgment.
4. Whether the ~istrictCourt erred by staying plaintiffs1
bad faith claims.
On November 8, 1985, the insured, Martin Dunn, was involved
in a single-vehicle accident, which damaged his pickup truck,
camping trailer and its contents. The truck and trailer were
insured by Iowa Mutual under an auto policy; the trailer's contents
were insured under a homeowners1 policy. Agreement was reached on
the damage claim for the truck, but efforts to reach agreement as
to the trailer and its contents were unsuccessful.
Dunn alerted Iowa Mutual Branch Claims Manager John Way of all
claims after the accident, and sent an inventory list of the
trailer's contents. In a reply letter dated February 11, 1986, Way
informed Dunn that it was necessary for Dunn to choose which items
he wished to replace and which he wished to depreciate. Way also
informed Dunn that his trailer had been appraised at somewhere
between $5,000 to $6,000. Way also requested Dunn to forward the
trailer's title so it could be sold for salvage.
On March 7, 1986, Way responded to a letter from the Dunns,
asking the Dunns to forward the names of the appraisers who had
given quotes ranging from $8,000 to $9,000 for the trailer. Way
again requested the title to the trailer so that salvage could
occur and storage costs ended.
In correspondence from Way to the Dunns dated April 2, 1986,
Way offered a $7,000 settlement for the trailer. No correspondence
from Dunn is contained in the record, but it is apparent that that
settlement offer was refused. An April 23 letter from Way to Dunn
stated:
since we seem to be at a stalemate on the settlement of
this matter since you do not agree with our evaluation,
we feel that our only alternative is to go the appraisal
route under the conditions of the policy.
If you will let us know who you want to represent you
will have our appraiser get in contact with him.
Way again wrote Dunn on June 11, 1986, seeking a reply, and
reiterating that an appraisal of the trailer's value was in order.
Way also reminded Dunn that storage fees for the trailer continued
to accrue.
The Dunns subsequently retained counsel, and on July 16, 1986,
their attorney sent a letter to Way, contending that Iowa Mutual's
position was "totally unreasonable and you have continued to
procrastinate and have refused to attempt to negotiate a fair and
equitable offer. In addition, the Dunnsl counsel stated that
Way's representation as to replacement costs or depreciation of the
personal property was "totally repugnant to the terms and
conditions of [the] policy as well as 5 33-23-202, MCA." Further,
the Dunnsl counsel maintained that Iowa Mutual's insistence that
!'the matter be resolved pursuant to the arbitration conditions of
the policy1' was in violation of 5 27-5-111, MCA, et seq. which
specifically excepts insurance contracts from mandatory arbitration
procedures. Demand was made of Iowa Mutual for the value of the
trailer, personal effects, storage fees, loss of use and interest
in the amount of $13,997.46.
In reply, Way stated that the replacement cost option referred
only to the lost personal property; that 5 33-23-202, MCA, speaks
to reimbursement of loss of a motor vehicle. Further, Way pointed
out that Iowa Mutual sought an appraisal, not arbitration, to
settle the matter. Way concluded by offering the Dunns $7,500 for
the trailer, $2,500 for the personal property, and again stated the
company was not obligated to pay all of the storage fees for the
trailer.
The Dunns did not reply to the last letter, but initiated suit
on October 15, 1986, alleging violation of the covenant of good
faith and fair dealing and unfair claim settlement practices.
Defendants filed a Motion for Stay of Proceedings and for
Protective Order on January 20, 1987, in order to suspend
plaintiffs1 bad faith claim and discovery related to it until the
underlying breach of contract claim was resolved. A hearing was
conducted on March 11, 1987, and the motion was subsequently
granted.
The Dunns filed a motion for reconsideration on September 23,
1988. Iowa Mutual filed its brief in opposition on October 12,
1988 and a motion for summary judgment on October 20, 1988. Iowa
Mutual based the motion for summary judgment on the fact that the
Dunns had "failed and refused to submit to the appraisal procedure
under their insurance policy, which appraisal procedure is binding
and enforceable as a matter of law."
A hearing on the motion for reconsideration and the motion for
summary judgment was held on March 8, 1989. The District Court
issued its opinion and order on April 12, 1989, finding that: 1)
Iowa Mutual Is motion for summary judgment should be granted; 2)
Iowa Mutual need not amend its answer to affirmatively plead the
defense of appraisal, as the appraisal requirements were mandatory
under the contract and were already before the court; and 3)
plaintiffst motion to reconsider was denied. This appeal resulted.
Plaintiffs1 first issue is based on the premise that Iowa
Mutual did not invoke the appraisal procedure contained in the
policy of insurance. This contention is plainly incorrect.
Correspondence within the record clearly shows that Branch Claims
Manager John Way, in a letter dated April 23, 1986, specifically
notified Martin Dunn that the appraisal procedure was being
invoked. Way again notified the Dunns in correspondence dated June
11, 1986. In it, Way inquired of the Dunns why neither he nor his
designated appraiser had yet to contact the company. On June 29,
1986, Way once again notified the Dunns through his attorney that
appraisal, and not arbitration, as the Dunnsl counsel had termed
it in correspondence, had been sought.
The appraisal provision in the policy issued to the Dunns
reads in part:
If we and you do not agree on the amount of loss, either
may demand an appraisal of the loss. In this event, each
party will select a competent appraiser. The two
appraisers will select an umpire. The appraisers will
state separately the actual cash value and the amount of
loss. If they fail to agree, they will submit their
differences to the umpire. A decision agreed to by any
two will be binding.
Iowa Mutual clearly and specifically asked for an appraisal.
The Dunns did not comply. A policy provision regarding legal
action against the company reads in part:
No legal action may be brought against us until there has
been full compliance with all terms of this policy.
The case at bar is on all fours with Garretson v. Mountain
West Farm Bureau Mutual Insurance Co. (Mont. 1988), 761 P.2d 1288.
The policy provisions in Garretson are virtually identical to those
contained in the Dunnsl policy. In Garretson, this Court
determined that summary judgment was proper where an appraisal had
been invoked but the insured did not comply before filing a
complaint.
The Dunns maintain that Iowa Mutual failed to raise appraisal
as an affirmative defense in their answer, and are therefore
precluded from raising it later as a basis for summary judgment.
Here, the appraisal provision was contained within the contract
which is central to the dispute. An affirmative defense, under
Rule 8(c), M.R.Civ.P., concerns the pleading of matters not within
the claimant's prima facie case. Sterret v. Milk ~ i v e rproduction
Credit Association (Mont. 1988), 764 P.2d 467. We agree with
Iowa's contention that lack of appraisal constitutes a negative
defense here, and, as such, was raised by Iowa's general denial in
accordance with Rule 8(b), M.R.Civ.P.
Plaintiffst second issue concerns whether a storage fee claim
and an "interest loss1'claim are material to the summary judgment.
The Dunns contend that Iowa is responsible, under the terms
of the policy, for storage fees. Iowa denies this. A reading of
the policy discloses no provision which mandates either party to
pay storage fees. However, the Dunns did not seek payment of
storage fees in their complaint. The District Court correctly
disregarded this issue.
The Dunns also contend that they made a valid claim for
interest, which is not subject to appraisal, and would thereby
preclude summary judgment. However, the very nature of the Dunns'
complaint precludes a right to interest. Section 27-1-211, MCA,
allows recovery of interest if damages are certain or capable of
being made certain. Had the Dunns properly followed the appraisal
procedure, their damages would likely have been made certain. The
trailer's value was not liquidated, and interest recovery is
therefore not at issue. No interest may run until a fixed amount
of damages has been arrived at by agreement, appraisal or judgment.
Carriger v. Ballenger (Mont. 1981), 628 P.2d 1106.
Plaintiffs1 third issue is whether personal property
valuations are in dispute, thereby precluding summary judgment.
The Dunns complaint asks for $2,800 to compensate for personal
property lost in the accident. There is no question as to
coverage. Iowa made an offer of $2,500 to the Dunns. While there
is a difference of opinion as to worth, the Dunns have again failed
to follow the procedures of the insurance contract. Agent Way
requested the Dunns make an election in February, 1986, as to
whether they wished to replace the destroyed items or seek
reimbursement on the basis of depreciated cost. It is
uncontroverted that the Dunns did not provide replacement receipts
as requested or make an election. Because the Dunns did not comply
with the policy procedures, their claim of a dispute as to the
value of personal property has no more merit than that involving
the trailer. The District Court correctly determined that the
personal property valuations were not material to a breach of
contract claim.
Plaintiffst final issue is whether the District Court erred
in staying their bad faith claim.
The ~istrict Court originally entered an order staying
proceedings and protecting defendants from discovery in matters
directed to the Dunnst bad faith claim until resolution of the
claim for breach of contract. The court declined to modify the
order upon subsequent motion for reconsideration. We agree with
the courtts logic.
The District Court stated:
The court declines to modify the Order Staying proceeding
and protecting the Defendants from further Discovery
previously entered . . .. The likelihood of prejudice
to Defendants by proceeding with the bad faith claim
before the appraisal process is complete is probable.
The conclusion that the appraisal procedure must be
followed and the resolution of the value issue may well
affect the resolution of the bad faith issues.
The ~istrictCourt was acting within the bounds of discretion
authorized by Rule 42(b), M.R.Civ.P.
Affirmed.
,,
We Concur: ,
Chief Justice