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Hillerich & Bradsby Co v. Ace American Insurance Company

September 20, 2012

HILLERICH & BRADSBY CO.,
PLAINTIFF,
v.
ACE AMERICAN INSURANCE COMPANY, DEFENDANT.



ORDER

Hillerich & Bradsby Co. moves for a declaration of applicable law. The Court heard the parties at a hearing on the motion on September 20, 2012. Hillerich & Bradsby argues that Montana law applies, and ACE American Insurance Company argues that New York law applies. The Court's application of either Montana law or New York law, though, would produce substantially the same result. Since there is a "false conflict" between Montana and New York law, Montana law applies.

BACKGROUND

This case arises out of the Patch case that was tried and appealed in state court. Brandon Patch played baseball in Miles City, and that is where the underlying accident occurred. He was hit and killed by a ball batted from an aluminum bat manufactured by Hillerich & Bradsby, whose principal place of business is Kentucky.

Prior to Patch's accident, ACE American had issued an insurance policy to Hillerich & Bradsby. ACE American argues that (1) the policy was negotiated in New York and (2) the policy does not cover the appeal fees and post-judgment interest that Hillerich & Bradsby incurred in the Patch case.

Hillerich & Bradsby filed this case against ACE American, alleging breach of contract and violations of Montana's Unfair Trade Practices Act. It argues that the policy covers its appeal fees and post-judgment interest. Hillerich & Bradsby now moves for a declaration that Montana law governs its claims.

ANALYSIS

A person seeking to have foreign law applied must show that a true conflict exists. Modroo v. Nationwide Mut. Fire Ins. Co., 191 P.3d 389, 395 (Mont. 2000). If there is only a "false conflict," because the laws of Montana and the foreign law are "substantially the same and would produce the same results," then Montana law applies. Id. (quoting In re Guardianship of Mowrer, 979 P.2d 151, 161 (Mont. 1999)).

Hillerich & Bradsby claims that Montana and New York law are substantially the same and would produce the same results. So, they argue, Montana law should apply. ACE American, on the other hand, claims that Montana and New York law differ in two material respects: (1) the states interpret contract ambiguities differently and (2) the states treat bad faith claims and punitive damages differently. The states' laws, though, do not differ substantially.

I. Contract interpretation

At an abstract level, Hillerich & Bradsby and ACE American agree that both Montana and New York construe insurance contract ambiguities against the insurer. ACE American, though, argues that the states' laws differ because, unlike Montana courts, New York courts do not consider extrinsic evidence to first determine whether a contractual ambiguity exists. Instead, ACE American claims, New York courts look to only the four corners of the contract to determine if there is an ambiguity. If there is an ambiguity, only then do New York courts look to extrinsic evidence to resolve the ambiguity. If that evidence is not helpful, then New York courts construe the ambiguity against the insurer. ACE American argues that, in Montana, on the other hand, courts look to extrinsic evidence to determine whether an ambiguity exists, but not to resolve it. If there is an ambiguity, then Montana courts resolve it against the insurer without looking to extrinsic material as evidence of intent. Hillerich & Bradsby counters that ACE American is trying to create a conflict of law where none exists-both states analyze ambiguities in a similar way. Hillerich & Bradsby is correct.

A. Montana law governing contract interpretation

Like all other courts, Montana courts apply the plain language of a contract, unless the contractual language is ambiguous. Anaconda Pub. Schs., Bd. of Trustees of Anaconda Sch. Dist. No. 10 v. Whealon, 268 P.3d 1258 (Mont. 2012).

Montana courts may look to extrinsic evidence both to determine whether an ambiguity actually exists and then to resolve that ambiguity. Id. at 1262 (citing Mont. Code Ann. § 28--2--905; Baker Revocable Trust, 164 P.3d at 857); Richards v. JTL Group, Inc., 212 P.3d 264, 274 (Mont. 2009) (citing Baker Revocable Trust, 164 P.3d at 866, 869--70).

"An ambiguity exists where the language of a contract, as a whole, reasonably is subject to two different interpretations." Id. (citations and internal quotation marks omitted). "If the court determines that the instrument contains no ambiguity, then the extrinsic evidence may not be considered further." Baker Revocable Trust, 164 P.3d at 866. "If the court finds that contract language is ambiguous, it may consider extrinsic or parol evidence to resolve the ambiguity." ...


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