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Reservation Operations Center LLC v. Scottsdale Insurance Co.

Supreme Court of Montana

May 29, 2018

RESERVATION OPERATIONS CENTER LLC, A Montana Limited Liability Company, d/b/a NATIONAL PARKS RESERVATIONS, Plaintiff and Appellee,
SCOTTSDALE INSURANCE COMPANY, a Foreign Corporation; PAYNE FINANCIAL GROUP, INC., a Montana Corporation; PAYNEWEST INSURANCE, INC., a Montana Corporation; and DOES 1-10, Defendants and Appellants.

          Submitted on Briefs: March 28, 2018

          APPEAL FROM: District Court of the Eleventh Judicial District, In and For the County of Flathead, Cause No. DV-15-1028 Honorable James A. Manley, Presiding Judge

          For Appellants: Dale R. Cockrell, Moore, Cockrell, Goicoechea & Johnson, PC, Kalispell, Montana

          For Appellee: David C. Berkoff, Berkoff Law Firm, P.C., Missoula, Montana


          Jim Rice, Justice

         ¶1 Scottsdale Insurance Company (Scottsdale) appeals from the deemed denial of its motion to set aside the default judgment entered against it by the Eleventh Judicial District Court, Flathead County. We reverse the entry of the default judgment and remand for further proceedings, addressing the following issue:

         Did the District Court err in denying, by operation of law, Scottsdale's M. R. Civ. P. 60(b)(4) motion to set aside the default judgment?


         ¶2 This action arises out of an insurance coverage dispute between Scottsdale, the Payne Defendants (Payne) and Reservation Operations Center, LLC, d/b/a National Parks Reservations (NPR). In 2011, Payne served as NPR's procuring agent to secure commercial insurance coverage from Scottsdale. It is alleged that Payne also attempted to procure for NPR an Employment Practices Liability Policy (EPL) from Scottsdale. NPR believed Payne had obtained EPL coverage from Scottsdale, but apparently it was not secured. In 2015, NPR notified Scottsdale of a pregnancy discrimination claim brought by an NPR employee and sought coverage for the claim under the EPL policy, which Scottsdale denied. NPR filed a grievance against Scottsdale with the Office of the Montana State Auditor, Commissioner of Securities and Insurance (Commissioner). Scottsdale offered to provide retroactive EPL coverage upon several conditions, but later withdrew the offer. On October 26, 2015, NPR delivered a demand letter to Scottsdale, indicating that NPR would initiate litigation for refusal to provide coverage and including a courtesy copy of NPR's proposed complaint.

         ¶3 On November 6, NPR filed a Complaint and Demand for Jury Trial (Complaint), naming Scottsdale and Payne. Because Scottsdale is a foreign insurer, [1] NPR was statutorily required to serve Scottsdale through the Commissioner's office by providing the Commissioner duplicate copies of the Summons and Complaint, along with a $10 filing fee. On April 5, 2016, the Commissioner signed an acknowledgment of service of documents received from NPR. In turn, the Commissioner was statutorily required to forward the Complaint and Summons to Scottsdale. Further facts regarding NPR's and the Commissioner's compliance with the statutory requirements governing the service of process will be discussed herein.

         ¶4 Scottsdale failed to appear and, upon NPR's request, the clerk of court entered a default on May 18, 2016. On January 12, 2017, the District Court entered a partial default judgment against Scottsdale, holding that Scottsdale breached its duty to defend NPR in the pregnancy discrimination claim, and was liable for all fees, costs, settlements, and consequential damages. After an initial damages hearing, the District Court concluded that NPR was entitled to $515, 758.02 in compensatory damages, and after a separate punitive damages hearing, awarded NPR $4, 641, 822.18 in punitive damages, with accruing interest at 10% per annum, entering a final judgment on May 9, 2017.

         ¶5 On July 7, Scottsdale appeared and moved to set aside the default judgment. Scottsdale argued that both NPR and the Commissioner had failed to strictly comply with foreign insurer service requirements under § 33-1-603(1), MCA, and, thus, the default judgment was void pursuant to M. R. Civ. P. 60(b)(4). Scottsdale asserted NPR failed to serve duplicate copies of both the Summons and Complaint upon the Commissioner, and that the Commissioner failed to include a copy of the Complaint in its mailing to Scottsdale. In support of its motion, Scottsdale submitted affidavits from the employee who opened the mailing from the Commissioner, as well as record retention employees. NPR opposed the motion and countered with affidavits from NPR's attorney and the Commissioner's Chief Legal Counsel.

         ¶6 After 60 days passed without a ruling on the motion by the District Court, on September 7, 2017, Scottsdale's motion to set aside the default judgment was deemed denied under M. R. Civ. P. 60(c)(1).[2] Scottsdale appeals.


         ¶7 "Our standard of review of a district court's ruling on a motion pursuant to M. R. Civ. P. 60(b) depends on the nature of the final judgment, order, or proceeding from which relief is sought and the specific basis of the Rule 60(b) motion." Essex Ins. Co. v. Moose's Saloon, Inc., 2007 MT 202, ¶ 16, 338 Mont. 423, 166 P.3d 451. "Where the movant seeks relief under Rule 60(b)(4), on the ground the judgment is void, we review the district court's ruling de novo, as the determination that a judgment is or is not void is a conclusion of law." ...

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