Dees v. American National Fire Insurance

No. 92-339

IN THE SUPREME COURT OF THE STATE OF MONTANA

Plaintiff, Respondent and
Cross-Appellant,
vs.
AMERICAN NATIONAL FIRE INSURANCE
COMPANY, a New York corporation,
CLERK OF SUPREME COURT
Defendant, Appellant and STATE OF MONTANA
Cross-Respondent.

APPEAL FROM: District Court of the Twelfth Judicial District,
In and for the County of Hill,
The Honorable Leonard H. Langen, Judge presiding.

COUNSEL OF RECORD:
For Appellant:
Robert F. James; James, Gray & McCafferty
Great Falls, Montana
F o r Respondent:

Mort Goldstein; Goldstein Law Firm, Havre, Montana

submitted on ~riefs: July 15, 1993
Decided: September 14, 1 9 9 3
Filed:
Justice John Conway Harrison delivered the Opinion of the Court.

American National Fire Insurance Company (American National)
appeals from a judgment entered on a jury verdict in the Twelfth
Judicial District Court, Hill County, awarding respondent Charles
Dees (Dees) compensatory and punitive damages. We affirm in part
and reverse in part.
American National raises the following issues on appeal:
1. Whether the District Court erred in denying
American National's motions for summary judgment and
directed verdict on the issue of its alleged violations
of the Unfair Trade Practices Act.
2. Whether the District Court erred in denying
American National's motion for mistrial based on Dees'
testimony about his costs and attorney's fees.
3 . Whether the District Court erred in not striking
the jury award of punitive damages.
4. Whether the District Court erred in awarding
pre-judgment interest on the punitive damages award.
Dees' cross-appeal raises the following issue:
5. Whether the District Court erred in reducing the jury
award of punitive damages.
This case originated as an action on a promissory note, filed
by the Solem Insurance Agency (Solem) of Havre, Montana, in March
1990. Dees was the defendant. The note represented the $5,772
premium for "companion plan" hail insurance, issued to Dees by
American National and covering 1,310.8 acres planted in wheat and
barley. The insurer's liability was limited to $50 per acre, but
an endorsement on the policy included a multiplier that would
triple Dees' recovery in the event of loss. Dees purchased the
policy on June 26, 1989, to cover the 1989 crop year.
On July 10, 1989, a hail storm passed over Deesl wheat fields
near Kremlin, Montana. Dees was working with his father at the
farm shop, about four miles from the fields for which he eventually
filed a claim for hail damage. After the storm he and his father
inspected his fields and noticed that numerous plants had been
knocked over in two adjoining fields, each about 160 acres in size.
Be testified that it "looked like a third of my crop was knocked
over." For purposes of litigation, the two fields are designated
by their location in Township 31 North, Range 13 East, Section 3,
and Township 32 North, Range 13 East, Section 34 (Sections 3 and
34).

Evidence of hail damage in these fields was provided at trial
through the testimony of Arnold Berg, a neighbor, who said that he
had observed hail in Deesl fields immediately after the storm, and
Marty Ritterhouse, the custom cutter who harvested Deesl wheat
during the first week of August 1989.
Ritterhouse testified that he had been harvesting wheat in the
Hi-Line area since the early sixties; that he had often observed
the effects of hail on spring wheat in the area; and that in August
1989 the effects of hail were "plumb obviousu in Deesl fields in

Sections 3 and 34. In particular, he mentioned broken plants,
heads of wheat lying on the ground, and the typical hail storm
pattern of downed plants in a relatively narrow strip, curving from
southeast to northwest. We agreed that one-third of the crop was
a reasonable estimate of Deess loss in the two fields.
 Photographs taken by Dees on August 7, 1989, which were
entered in evidence at the trial, showed rows of standing wheat
with numerous stems lying on the ground between the rows,
Dees' wheat was a special type called vtNewana.la
~ccardingto
Donald Baldridge, a Montana State University agronomist who
testified for Dees, Newana wheat was developed as a short-stemmed,
semi-dwarf variety of spring wheat. It has very strong stems that
resist tllodgingtt falling over, and shatter-resistant heads.
or
Looking at the fallen wheat in Dees' photographs, Baldridqe
testified that he had never observed that kind of breakage in
Newana spring wheat from wind alone, and that it "looks like hail
damage to me."
On the evening of July 10, the day of the storm, Dees
telephoned his insurance agent and reported that his spring wheat
had been damaged by hail. He expected representatives of the
insurance company to inspect his wheat soon afterward, but no one
came until August 1, 1989. By that time the field in Section 3 had
been cut, with patches left uncut for inspection, but the field in
Section 34 had not been cut because the custom cutter considered it
too green.
Victor Velk, the agent who had sold Dees the companion hail
policy, arrived at Deesl farm late on August 1 with James Schaible,
an American National adjuster. Schaible had not intended to
ftadjustlg
Deesl claim that day, because he had already worked a full
day on another c l a i m and w a s t i r e d . To accommodate D e e s , however,
he made some informal observations in Section 3. According to his
testimony at the trial, he told Dees that he had probably lost
twenty to twenty-five percent of his crop, but not because of hail.
He observed that the wheat stems were bent over, not broken, and
were all bent over at one point; therefore, Schaible testified, the
damage appeared to be due to wind, not hail.
Dees testified that he had seen Schaible counting wheat stems
in an uncut portion of Section 3 and that Schaible had told him
that his loss was approximately twenty-three percent. While they
were still in the field, Dees testified, he asked Velk, the agent,
what he would recover under his companion hail policy. Velk told
him that under his particular policy the "pay out" would be roughly
sixty to eighty percent. According to Dees, "that's when Mr.
Schaible changed [his] mind about finishing an adjustment."
Two days later, Velk returned with a second adjuster, Sam
McCormick. McCormick had been adjusting hail insurance since 1975;
he estimated at the trial that he had made over one thousand hail
adjustments during his career. On August 3, McCormick inspected
uncut patches of wheat in Section 3 as well as the uncut wheat in
Section 34. He testified that he observed some crop damage, but "I
just could not find the type of thing that indicated that we had
had a hail loss." He said that he had explained to Dees that if
it were hail damage, the stems of the wheat would be broken in a
variety of places, not uniformly bent over near the ground; he also
said that at the time, Dees did not disagree with this explanation.
Dees testified, however, that McCormick told him the wheat had been
damaged by wind, and that he "couldnltbelieve it. . . . I was in
shock . ... II

After McConnick inspected the fields, he asked Dees to sign a
"withdrawal of claim1@form acknowledging that he had not sustained
a loss that would entitle him to payment under his American
National hail insurance policy. Dees refused to sign this form.
On November 28, 1989, Dees attorney, Mort Goldstein, wrote to
American National, stating that Dees had lost 25 percent of his
crop, due to hail, and that the loss payable by American National
under its companion hail policy exceeded the amount of the unpaid
premium. d old stein's letter demanded payment of the cash balance
or, in the alternative, joint appraisal of Deesl loss using the
procedures outlined in the policy, and included the name and
telephone number of the custom cutter who had observed the damage
to Dees' crop in August. American ~ationaldid not respond to this
letter. In March 1990, the insurance agency initiated its
collection action against Dees.
Dees asserted in his answer that the promissory note was
"contingent, not intended to be enforced until after American
National had paid his claim for h a i l damage, which Daas then
estimated at $9,462. He relied on Solem's representation, he said,
that Solem and ~mericanNational:
would at all times pay for hail damage, and that Charles
Dees would not be required to pay the face value on the
alleged glpromissory if
notetg, there was an amaunt due to
Charles Dees for hail damage ... that equaled ... or
was greater than the face value of the contingent note.

Deesl answer included a counterclaim against American National for
the damage to his crop, plus interest, costs, attorney's fees, and
exemplary damages.
After hearing oral argument on March 5, 1991, the court
granted Solem's motion for summary judgment, on the grounds that
Dees was precluded from admitting oral evidence "to prove that the
Promissory Note had terms and conditions other than those set forth
in the written document." Dees subsequently paid the full amount
due on the promissory note. At a second hearing on March 7, 1991,
the court denied American National's motion for partial summary
judgment on Deest counterclaim.
A jury trial on Deesl counterclaim began on April 1, 1991, and

ended on April 5, 1991, with a verdict for Dees. The special
verdict form is reproduced below, with the jury's response to each
question.
QUESTION NO. 1: Did any of the Plaintiff's acres,
insured under the companion hail insurance policy in
evidence in this case, suffer a reduction in crop yield
directly caused by hail in excess of five percent (5%)?
ANSWER: Yes
QUESTION NO. 2: If so, how many of the acres ...?
ANSWER: 315.4
QUESTION NO. 3: What is the percent overall reduction in
crop yield directly caused by hail to the acres
identified in your answer to Question No. 2?
ANSWER: 31.8%

QUESTION NO. 4: Did defendant, under the instructions
given to you, violate the Montana Unfair Claims
Settlement Practices Act?
ANSWER: Yes
QUESTION NO. 5: Did defendant have a reasonable basis
either under the law as given to you in the instructions
or in fact for denying payment on the hail claim?
 ANSWER: No
QUESTION NO. 6: Do you find by clear and convincing
evidence that defendant was guilty of actual malice, as
defined by the Court's instructions?
ANSWER: Yes
QUESTION NO. 7: Do you find by clear and convincing
evidence that punitive damages should be assessed against
the defendant?
ANSWER: Yes
Based on these responses, the court calculated Dees' actual
damages as $12,679. The jury retired a second time to determine
the amount of punitive damages, having first been given, as a new
exhibit, a copy of American National's 1990 Annual Statement. This
statement had been filed with the Montana Insurance Commissioner,
pursuant to law. It showed that in 1990 American National had
assets of $79 million and a surplus of $14 million.
The jury deliberated for approximately one hour before
delivering the following verdict:
QUESTION NO. 1 What amount of punitive damages do you
:
assess against the defendant American National Fire
Insurance Company?
ANSWER: $575,000
On April 24, 1991, American National moved for judgment
notwithstanding the verdict, pointing out that three insurance
adjusters and American National's expert witness, an agronomist
consultant from Fairfield, Montana, all testified that Dees had not
sustained a compensable hail loss. Therefore, American National
argued, it had a reasonable basis for denying Dees' claim and could
not be held liable for unfair claims practices.
 The District Court denied this motion in an order entered on
April 22, 1992. On the same day it filed its findings of fact and

conclusions of law relating to punitive damages, as required by 5
27-1-221(7), MCA, approving the jury verdict but concluding that
the punitive damages award was excessive. The accompanying order
required American National to pay Dees the sum of $12,679 in actual
damages, plus $300,000 in punitive damages, "together with interest
on said sums at the rate of 10 percent per annum from April 5, 1991
to April 21, 1992, . . .I1 or $32,643.90. The total judgment,
including $499.20 in costs, was $345,822.10, to bear interest from
April 21, 1992, at the rate of ten percent per annum.
American National filed a supersedeas bond and moved for a
stay of execution pending appeal; the court approved the bond and
stayed execution. Dees cross-appealed the courttsreduction of the
jury's punitive damages award.
I
Did the District Court err in denying American National's
motions f o r summary judgment and directed verdict on the issue of
its alleged Unfair Trade Practices Act violations?
Summary Judment
In his counterclaim, Dees asserted that American National had
violated the Montana Unfair Trade Practices Act, § 33-18-101 et

seq., MCA, by misrepresenting his coverage under the companion hail
policy; by failing to conduct a reasonable investigation of his
claim; and by making no attempt to settle the claim after its
liability had become reasonably clear. The relevant subsections of
the A c t follow.
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;

( 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;
...
Section 33-18-201, MCA.
Dees also requested exemplary or punitive damages pursuant to
S 33-18-242, MCA, which provides an independent cause of action for

damages caused by a violation of certain subsections of 5 33-18-
201, MCA, including those cited in Dees' counterclaim. Section 3 3 -

18-242, MCA, also provides for exemplary damages assessed in
accordance with 5 27-1-221, MCA. In an action under 5 33-18-242,
MCA, a plaintiff is not required to prove that the violations were
of such frequency as to indicate a general business practice.
Section 33-18-242 (2), MCA. An insurer, however, may not be held
liable under f 33-18-242, MCA, if it had ' a reasonable basis in law
l

or in factu for contesting the plaintiff's claim. Section 33-18-
242(5), MCA.
In February 1991, American National moved for partial summary
judgment on the issue of unfair trade practices only. Summary
judgment on that issue was appropriate, American ~ationalargued,
10
because Dees' deposition indicated Ifat worst" a difference of
opinion between the hail adjusters and himself concerning the
amount of hail damage to his crop, and because Dees had presented
no evidence of fraudulent, unfair, or bad faith acts or omissions
on the part of American National. The District Court, however,
found that Dees had raised factual issues. In particular, it found
a jury question as to whether American National's three-week delay
in adjusting Deesq claim was to Dees' advantage, as American
National claimed, or whether it indicated negligent handling of
Deesg claim.
American National argues on appeal that the District Court
should have granted partial summary judgment because it had a
reasonable basis for denying Dees' claim. It relies on Britton v.
Farmers Ins. Group (1986), 221 Mont. 67, 71-72, 721 P.2d 303, 306,
for the proposition that "an insurance contract must include a
broad freedom in the insurer to evaluate claims under the policy
and to reject nonmeritorious claims.gq Our primary holding in
Britton, however, was that an insurer does not act reasonably if it
declines to pay an insured's claim merely upon inadmissible
evidence or testimony. Here, conflicting evidence was presented as
to whether American National reasonably denied Deesg claim.
Summary judgment is appropriate when there is no genuine issue
of material fact and the moving party is entitled to judgment as a
matter of law. Rule 56(c), M.R.Civ.P. The initial burden of
demonstrating the absence of a genuine issue of material fact lies
with the moving party; once the moving party has met that burden,
the party opposing summary judgment must establish that genuine
issues of material fact exist. Peschel v. Jones (1988), 232 Mont.
516, 521, 760 P.2d 51, 54. Conclusory or speculative statements
are insufficient to raise a genuine issue of material fact.
Simmons v. Jenkins (1988), 230 Mont. 429, 432, 750 P.2d 1067, 1069.
Here, Dees submitted an affidavit stating that he had agreed
to pay an unusually high premium for American National's companion
hail policy because he had been led to believe by its agent, Velk,
that he would not be subjected to delay and inequitable denial of
his claim, and stating further that he had notified American
National that the custom cutter, Marty Ritterhouse, was available
as a witness who had observed the effects of the hail storm before
the wheat was cut. Ritterhouse submitted a supporting affidavit,
stating that he had observed hail damage greater than 23 percent in
Dees' fields and that no American National representative had ever
contacted him concerning his observations. American National
admittedly limited its investigation to a routine visit by its
adjuster.
We hold that Dees met his burden of establishing a genuine
issue of material fact as to whether American National had denied
his claim without reasonable investigation, and that American
National was not entitled to summary judgment on the issue of
unfair trade practices. See Walker v. St. Paul Fire & Marine Ins.
Co. (IggO), 241 Mont. 256, 786 P.2d 1157, in which we reversed
summary judgment for the insurance company because the plaintiff
had set forth sufficient facts to establish an issue as to whether
a reasonable investigation had been made, as required by 5 33-18-
2Ol(4), MCA.
Directed Verdict
On the fourth day of the trial, after the adjuster McCormick
testified that he had found no evidence of hail damage in Dees'
wheat fields, American National moved for a directed verdict on all
claims. The court heard oral argument in chambers and denied the
motion without comment.
"A motion for directed verdict is properly granted only in the
complete absence of any evidence to warrant submission to the jury,
and all inferences of fact must be considered in the light most
favorable to the opposing party.H Britton, 721 P.2d at 317. If
the evidence, viewed in a light most favorable to the opposing
party, indicates that reasonable people could differ as to
conclusions drawn from the evidence, a directed verdict is not
proper. Weber v. Blue Cross of Montana (1982), 196 Mont. 454, 462-
463, 643 P.2d 198, 202.
Here, Dees presented evidence in the form of documents, expert
and lay testimony, and photographs to support his contention that
American National had denied his claim without conducting a
reasonable investigation. This evidence was sufficient to warrant
submitting the issue of unfair trade practices to the jury. The
District Court properly denied American National's motion for
directed verdict.

Did the District Court err in denying American National's
motion for mistrial based on Dees* testimony about his costs and
attorney's fees?
During direct examination at the trial, Dees stated, in
response to a question asking him to state the amount of damages he
was requesting, that "1 have got way more money stuck in this thing
than I will ever recover ... .Ir Goldstein responded, "By stuck
in this thing, what do you mean stuck in this thing?" Counsel for
American National objected on grounds of relevance, and the judge
said to Goldstein, "Ask a question. I am used to sustaining or
refusing objection^.^' Goldstein asked:
Have you incurred fees for bringing witnesses to this
case and attorney fees in order to try and collect [the]
hail proceeds?
Dees answered, "Yes. I have. Quite substantial. Goldstein
continued, "Approximately how much?" Counsel for American National
objected again. The court sustained the objection and recessed for
a discussion in chambers. American National then moved for a
mistrial, on the grounds that the jury had been influenced before
counsel had a chance to object. After extended discussion with
counsel, the court denied this motion.
American National argues that evidence of the costs Dees
incurred in pursuing his claim was irrelevant to the issues of
whether Dees should recover for hail damage and whether American
National had acted in bad faith. American National infers from the
unusually large punitive damage award that this evidence was
prejudicial.
Our standard of review in determining whether a mistrial was
appropriately denied is whether the district court abused its
discretion. Kuhnke v. Fisher (1987), 227 Mont. 62, 68, 740 P.2d
625, 628. As we observed in Kuhnke, the district court judge hears
the entire trial and is in the best position to determine the
prejudicial effect of attorney misconduct on the jury.
Here, Judge Langen denied American National's motion for a
mistrial on the grounds that he already had sustained its objection
to Goldstein's questions. Later, in his findings of fact and
conclusions of law, he attributedthe jury's punitive damages award
to American National's 'Idogmatic stand that there was no hail
damage" and to the "arrogance and haughtinesst8of its witnesses
during the trial. As the jury was exposed to American National's
witnesses and their testimony repeatedly throughout the five-day
trial, it is reasonable to infer, as Judge Langen presumably did,
that Deesu single brief reference to costs was comparatively
insignificant. We conclude that the court did not abuse its
discretion in denying American National's motion for a mistrial.

Did the District Court err in not striking the jury award of
punitive damages?
In an action brought under the Montana Unfair Trade Practices
Act, punitive damages may be assessed, pursuant to 5 27-1-221, MCA,
for a violation of subsections (I), (4), (5), ( 6 ) , (9), or (13) of
5 33-18-201, MCA. Section 33-18-242(4), MCA. Here, the jury
found that American National had violated subsections (I), (4), and
(6).
This Court will not overturn a jury verdict as long as the
verdict is supported by substantial, credible evidence, viewed in
a light most favorable to the prevailing party. Thayer v Hicks
.
(1990), 243 Mont. 138, 156, 793 P.2d 784, 795. We cannot reweigh
the evidence or disturb the findings of the jury unless the
evidence is so inherently improbable as not to be entitled to
belief. Sizemore v. Montana Power Co. (1990), 246 Mont. 37, 48,
803 P.2d 629, 636.
Here, Dees presented expert and eyewitness testimony,
photographs, and documents supporting his contention that he had
sustained a substantial loss as a result of the hail storm of July
10, 1989, and that he was entitled to compensation for that loss.
Even though experienced adjusters and another expert witness
offered credible evidence and expert testimony indicating that
Dees* loss was not a result of the hail storm and therefore was not
compensable, Dees' evidence was sufficient to support the jury
verdict in his favor.
The remaining question is whether Dees met the statutory
standard for a punitive damages award. Under 5 27-1-221, MCA,
reasonable punitive damages may be awarded when a defendant has
been found guilty of actual malice. Section 27-1-221(2), MCA,
provides:
A defendant is guilty of actual malice if he has
knowledge of facts or intentionally disregards facts that
create a high probability of injury to the plaintiff and:
(a) deliberately proceeds to act in conscious or
intentional disregard of the high probability of injury
 to the plaintiff: or

(b) deliberately proceeds to act with indifference
to the high probability of injury to the plaintiff.
"All elements of the claim for punitive damages must be proved by
clear and convincing evidence, . . . [which] is more than a
preponderance of evidence but less than beyond a reasonable doubt."
section 27-1-221(5), MCA.
A jury award of punitive damages must be reviewed by the
district court judge. Section 27-1-221(7)(c), MCA. ~ccordingly,
Judge Langen reviewed the award and concluded that the jury
correctly assessed punitive damages against American National,
based on clear and convincing evidence that American National had
been guilty of actual malice toward Dees and had violated the
Montana Unfair Trade Practices Act.
Among the twenty-three findings of fact listed by the judge,
the following best support his conclusion that American National
intentionally disregarded facts that created a high probability of
injury to Dees and deliberately acted with indifference to the high
probability of injury to Dees:
1. Had the adjuster taken the time to examine
adjoining fields, where no damage had occurred, he would
have determined that the damage in Dees* fields could not
have been caused by wind, because wind typically has a
more generalized effect than hail does.
2. Had the adjuster taken the time to consult
knowledgeable sources, he would have learned that Newana
wheat had been developed as a short-stemmed, anti-lodging
strain and that hail damage to Newana wheat differs from
hail damage to ordinary long-stemmed wheat.
The court's statement that hail damage to Newana wheat differs
from hail damage to other wheat should be characterized as
inference rather than fact, but it is consistent with the testimony
of Donald Baldridge, the Montana State University agronomist who
testified for Dees.
Goldstein asked Baldridge whether hail would necessarily cause
breakage at random points on the stems of Newana wheat, as the
adjusters had testified, and then changed his question without
waiting for an answer. He asked whether anything in Dees' August
1989 photographs indicated to Baldridge that the Newana spring
wheat in the photographs was not knocked over by hail. The
photographs show that the fallen wheat was bent over or broken off
uniformly, near the ground, and not at random points on the stems.
Baldridge replied, "Well, this looks like hail damage to m . '
e'
It was evident from the adjusters' testimony that they had not
considered the specific characteristics of Newana wheat, nor had
they looked for wind damage in the adjoining fields. In these
omissions, and considering Baldridge's testimony about the
characteristics of Newana wheat and other testimony comparing wind
damage with hail damage, the jury could have found clear and
convincing evidence that American National was guilty of actual
malice as defined in 5 27-1-221(2), MCA.
In his conclusions of law, Judge Langen addressed each of the
nine factors that § 27-1-221(7), MCA, requires him to consider in
reviewing a jury award of punitive damages. American National
takes exception to the judge's conclusion regarding the first
factor, which is "the nature and reprehensibility of the
defendant's ~rongdoing.'~Judge Langen stated that he was shocked
by the 'Iarrogance and haughtiness1' displayed by the adjusters
during the trial, and by American National executive James Damronqs
responses to the following questions, asked by Goldstein during the
punitive damages hearing:
Q: Do you think your company did anything wrong in the
matter of handling the claim that is involved in this
case regarding Charles Dees?
A: No.
Q: Would you do it the same way again, all over again?
If it happened again, let's say in 1991?
A: No.

Q: What do you do differently?

A: Respond to the letter of arbitration [referring to
Goldstein's November 1989 letter requesting arbitration].
American National argues that Damron could not have answered the
first question affirmatively without admitting guilt, but Judge
Langen took Damronfsresponses as evidence that something must be
done to "get the attention of these peoplegf
and convey to them that
"some changes in their investigative procedures are in order."
A district court judge, having heard the evidence and observed
the witnesses, is in the best position to determine whether the
requirements of proof of punitive damages have been met. Maddux v.
Bunch (LggO), 241 Mont. 61, 65, 784 P.2d 936, 939. Judge Langenls
interpretation of Damronbstestimony is consistent with the primary
purpose of punitive damages, which is to punish a wrongdoer and
deter further unlawful conduct, and we will not overrule it absent
an abuse of discretion. Safeco Ins. Co. v. Ellinghouse (1986), 223
Mont. 239, 254, 725 P.2d 217, 227.
 We conclude that the District Court did not err in not
striking the jury award of punitive damages.
IV
Did the District Court err in awarding prejudgment interest on
the punitive damages award?
In its final judgment, signed on April 21, 1992, the District
Court ordered American National to pay interest at the rate of ten
percent per annum on the compensatory and punitive damages assessed
against it, from April 5, 1991--the date of the jury verdict--to
the date of the final judgment.
Prejudgment interest on damages is controlled by § 27-1-211,
MCA, which provides that:
Every person who is entitled to recover damages certain
or capable of being made certain by calculation and the
right to recover which is vested in him upon a particular
day is entitled also to recover interest thereon from
that day ....
Because punitive damages must be reviewed by the trial court, they
neither vest nor are capable of being made certain until the trial
court completes its review and issues a final judgment.
Prejudgment interest, therefore, is not available on a punitive
damages award. See Maddux, 784 P.2d at 940, in which we upheld the
district court's reduction of the jury award of damages and
concluded that because the amount of damages was not clearly
ascertainable until determined by the district court, prejudgment
interest was not appropriate.
We reverse the District Court's award of prejudgment interest
on $300,000 in punitive damages, at ten percent per annum from
April 5, 1991 to April 21, 1992.
v
Did the District Court err in reducing the jury award of
punitive damages?
On cross-appeal, Dees urges this Court to reinstate the jury's
punitive damages award of $575,000, which the District Court
reduced to $300,000.
We have described punitive damages as "an extraordinary
remedy, . . . [which] should be applied with caution, lest gendered
by passion and prejudice because of the defendant's wrongdoing, the
award becomes unrealistic or unrea~onable.~'Ellinahouse, 725 P.2d
at 226-227. Here, Judge Langen observed that l1[t]he passion and
prejudice can be particularly strong when the wrong is committed by
a company with considerable financial power against a small farmer
trying to make ends meet." He reduced the jury's punitive damages
award from $575,000 to $300,000 because 8*[t]hewrong committed by
the Defendant in this case certainly does not justify that [Dees]
should receive a half million dollar windfall," though he said
that the award should be "large enough to get the company's
attention."
We established a standard for punitive damages in Ellinahouse,
725 P.2d at 227 (citation omitted), holding that l'[p]unitive
damages cannot be 'in excess of the amount necessary adequately to
punish the defendant and serve as an example to it and others.'It
We also imposed on the district court a duty to act when the award
appears excessive or I l h recovery is so grossly disproportionate
'te
as to raise a presumption that it is the result of passion or
prejudice.'" Ellinahouse, 725 P.2d at 227 (citation omitted).
Here, the District Court performed its duty: finding evidence of
passion and prejudice, it reduced the jury's award.
Dees asks us to consider seven criteria set forth by the
United States Supreme Court, in Pacific Mut. Life Ins. Co. v.
Haslip (19911, 499 U.S. 1, -, 111 S.Ct. 1032, 1045, 113 L.Ed.2d

1, 22, for determining whether a punitive damages award is
reasonably related to the policy goals of deterrence and
retribution. These criteria actually were established by the
Alabama Supreme Court, whose ruling was upheld by the United States
Supreme Court in Hasliv because the seven criteria impose a
Rtsufficiently
definite and meaningful constraint on the discretion
of Alabama fact finders in awarding punitive damages." Haslip, 111
S.Ct. at 1045.
Although the Haslip criteria correspond in many respects to
the nine factors a Montana court must consider in reviewing a jury
award of punitive damages under 9 27-1-221(7), MCA, they are not
identical. Dees urges us to adopt the Haslip criteria because they
require the fact finder to consider the costs of litigation, a
factor not included in 5 27-1-221 (7), MCA. Recalling that the
District Court sustained American National's objection to evidence
on Deesv costs and attorney's fees, Dees argues on appeal that:
if the jury and the Trial Judge would have considered the
fact of the cost of litigation not for the number of
dollars, per s e t involved, but for t h e showing of intent,
malice and bullying by American National of its insured,
then the amount of the jury award for punitive damages
could very well have been reasonably higher ....
 We are not persuaded by this argument. Montana's statutory
criteria meet the due process requirements set forth in Hasliw:
they impose a definite and meaningful constraint on the fact
finder's discretion in awarding punitive damages. Moreover, 5 27-
1-221 (7)(b), MCA, permits the jury, or the court, to consider "any
other circumstances that may operate to increase or reduce, without
wholly defeating, punitive damages.''
We hold that the District Court met the standard imposed by
§ 27-1-221(7) (c), MCA, by clearly stating its reasons for
decreasing the jury award of punitive damages and demonstrating its
consideration of each of the factors listed in 5 27-1-221(7) (b),
MCA .
We reverse the District Court's award of prejudgment interest
on punitive damages and remand for an order consistent with this
opinion. The District Court's order is affirmed in all other

w
respects.

Jus ice
We concur:

Chief Justice

Justices
23
Justice Karla M. Gray, specially concurring.

I concur in the Court's opinion, but feel compelled to address
certain arguments advanced by American ~ational (AN) in hopes of
offering guidance or additional clarity in these difficult cases
involving both a coverage question and questions of violations of
5 33-18-242, MCA, of Montana's Unfair Trade Practices Act (the

Act).
I begin by stating my view that Dees presented sufficient
evidence in the form of documents, other witnesses not interviewed
by AN and photographs to establish a violation of 5 33-18-201(4),
MCA, which forms the basis for this independent action brought
pursuant to 33-18-242, MCA, Such a violation must be established
by proof that an insurer refused to pay a claim flwithout conducting
a reasonable investigation based upon all available information."
generally is a question of fact in Montana, and
lfReasonablenessl*
a jury could conclude, on the basis oS Deesf evidence, that AN'S

investigation was not reasonable based upon all available
information.
AN argues that no violation of the investigation requirement
was established because D e e s d i d not present any expert testimony
that general adjustment procedures and practices were not followed
and/or that industry standards relating to claims investigation and
adjustment were not met. At least implicitly, it urges us to adopt
a reguirement that a plaintiff offer expert testimony in these
regards to establish a violation. We have not done so previously,
and ANIS arguments do not persuade us to do so here. This is not
to say, however, that an insurer cannot introduce appropriate
testimony or other evidence in attempting to negate proof of a
violation of the Act based on denial of a claim without a
"reasonable investigation based on all available information."
Particularly where, as here, an insurer is faced with the
possibility of punitive damages, it might well wish to do so.
P note, in this regard, that any such testimony or evidence
would necessarily have to be relevant to the statutory language at
issue. For example, if the industry standard required only that an
adjuster consult a reference manual of some kind in order to
determine whether hail damage occurred to a particular field, such
an industry standard likely would be irrelevant under the
"reasonable investigation based on all available informationtt
standard required by 5 33-18-201(4), MCA.
In addition to its arguments surrounding the figreasonable
investigationt*issue, AN presents arguments and cases seeking a
more objective standard for the 'Ireasonable basis in law or in
factn defense to liability under the Act. To clarify an initial
point, I note that AN states several times that if it had a
reasonable basis for contesting the claim, it cannot be found to
have violated the Act. I disagree with this interpretation. As I
read 5 33-18-242, MCA, a jury could find violations of the Act and
still determine that an insurer was not liable under the Act (for
actual or punitive damages) on the basis that the insurer had
established the "reasonable basisM defense, ÿ his distinction,
which may seem hypertechnical, is important to the following
discussion.
AN urges us to adopt a more objective standard of
Hreasonablenesswthan currently exists. Specifically, it urges a
return to the Britton standard of "unwarranted, unreasonable, and
without justification.It See Britton v. Farmers Ins. Group (1986),
221 Mont. 67, 721 P.2d 303. As AN concedes, however, Britton was
a pre-8 33-18-242, MCA, case. The case before us is a statutory
claim. Furthermore, Britton was a "bad faithn case and 8 33-18-
242(3), MCA, explicitly prohibits bringing an action for bad faith
in connection with the handling of an insurance claim. Thus,
Britton has no application here.
Similarly, AN urges us to apply the "Duttonttor "Andersontg
rule to the "reasonable basisu8 language contained in 33-18-

242(5), MCA. In National Sav. Life Ins. Co. v. Dutton (Ala. 1982),
419 So.2d 357, the Alabama Supreme Court required t h a t a p l a i n t i f f

bringing a '@bad faith refusalt1claim must prove a company had no
legal or factual defense. The Wisconsin Supreme Court applies a
similar standard to bad faith refusal to pay claims: among other
things, a plaintiff must show the absence of a reasonable basis for
denying benefits of a policy. See Anderson v, Continental Ins. Co.
(Wis. 1978), 271 N.W.2d 368.
The first problem in adopting the I'Dutt~n~~ 9fAndersont1
or rule
is the same as that noted above regarding Britton: Dutton and
Anderson were bad faith cases. The case before us is a statutory
claim which does not necessarily correspond in all respects to bad
faith cases.
Even more important, however, to adopt the "DuttonW or
"Anderson" rule would require this Court to ignore the structure
and language of g 33-18-242, MCA, in its entirety, and subsection
(5) thereof in particular. The *reasonable basis' for denying a
claim is a defense to liability under 5 33-18-242, MCA. Therefore,
the 'Ireasonable basis" defense contains no burden of proof to be
met by a plaintiff; as is the case with defenses generally, the
party asserting the defense has the burden of establishing it by a
preponderance of the evidence. Application of the "Dutton" or
"Anderson" rule would impose an affirmative duty on the plaintiff
to dis~rovethe existence of a "reasonable basis" to deny the
claim. We cannot insert such a nonexistent burden into the
statute; nor should we, given that the "reasonable basis" position
is a defense to liability. The positions advanced by AN are
legislative matters, not matters appropriate for judicial grafting
onto existing statutes.
A plaintiff who brings an action under 5 33-18-242, MCA, may
seek actual and punitive damages; both kinds of damages available
in such an action are different from damages which may be awarded
in a breach of contract claim for policy coverage. Actual damages
may be awarded to the extent they "were proximately caused by the
violation of subsection (I), (4), (5), (6), (9), or (13) of § 33-

18-201. Section 33-18-242 (4), MCA.
A plaintiff can recover punitive damages under 5 33-18-242,
MCA, only upon several proofs: (1) a plaintiff must establish by a
preponderance of the evidence that the insurer violated one or more
specified subsections of 5 33-18-201, MCA; (2) a plaintiff must
establish by clear and convincing evidence that the insurer acted
with actual malice or actual fraud as defined in 5 27-1-221, MCA.
If a plaintiff meets these burdens, she or he may be awarded
punitive damages.
An insurer can avoid an award of actual, or proximately
caused, damages under 5 33-18-242, MCA, by establishing that its
conduct did not violate any of the specified subsections of 5 33-
18-201, MCA. Because imposition of punitive damages requires the
two proofs set forth above, an insurer may avoid the imposition of
punitive damages by establishing either that it did not violate the
specified subsections or that it did not act with actual fraud or
malice.
Finally, even if violations and actual fraud or malice are
established, an insurer still may assert that it had a reasonable
basis for contesting the claim made under the insurance policy. If
an insurer can establish such a reasonable basis, it mav not be
held liable under 6 33-18-242, MCA, at all. In other words,
provided an insurer can prove to the satisfaction of the finder of
fact that it had a reasonable basis for denying the claim, 5 33-18-
242(5), MCA, provides a complete defense to both actual and
punitive damages under the Act.
Because reasonableness is a question of fact, 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 F1reasonable
basisu for denying a claim. Thus, such determinations generally
must be based on the facts and circumstances of each case.

Chief Justice J.A. Turnage and Justice James C. Nelson join in
the foregoing special concurrence of Justice Karla M. Gray.