United States District Court, D. Montana, Missoula Division
W. MOLLOY, DISTRICT JUDGE
to Rule 15(3) of the Montana Rules of Appellate Procedure, I
respectfully request that the Montana Supreme Court exercise
its discretion to adjudicate the following question of
Where liability is reasonable clear, is it a breach of an
insurer's duty to its insured to pay policy limits to a
third party in a motor vehicle accident without a release of
its insured where claimed special damages are below policy
limits but total damages (including general damages) exceed
See Mont. R. App. P. 15(6)(a)(i). The answer to this
certified question will be determinative of Count I of the
Amended Complaint. (See Doc. 21.) I acknowledge that
your Court may decide to reformulate the question and my
phrasing of the question is not intended to restrict your
Court's consideration of this request. See Mont.
R. App. P. 15(4), (6)(a)(iii).
appears to be an unresolved tension in Montana law between an
insurer's duty to a third-party claimant, see
Mont. Code Ann. § 33-18-201(6); Gibson v. W. Fire
Ins. Co., 682 P.2d 725, 730 (Mont. 1984), and its duty
to its own insured, see Fowler v. State Farm Mut. Auto.
Ins. Co., 454 P.2d 76, 78-79 (Mont. 1969); Draggin Y
Cattle Co., Inc. v. Junkermier, Clark, Campanella, Stevens,
P.C., ___P.3d___, 2019 WL 1782165, at * 12 (Mont Apr.
24, 2019) (Sandefur, J., concurring). This tension places
Defendant United Fire and Casualty Company between a rock and
a hard place. On one hand, United Fire has a statutory duty
to accept a third-party's reasonable settlement offer
within policy limits unless there is a reasonable basis for
contesting the claim or the amount. State Farm Mut. Auto.
Ins. Co. v. Freyer, 312 P.3d 403, 418 (Mont. 2013).
Otherwise, United Fire could be subject to a third-party bad
faith claim or waive its policy limits. Goettel v. Estate
of Ballard, 234 P.3d 99, 102 (Mont. 2010). On the other
hand, United Fire has a duty to give the interests of its
insured, Plaintiff High Country Paving, "as much
consideration as it gives its own," Gibson, 682
P.2d at 730, which arguably means obtaining a release of all
future claims. The failure to do so resulted in the present
litigation. Thus, this case presents a "carrier's
dilemma" that is far from illusory. See Watters v.
Guar. Nat'l Ins. Co., 3 P.3d 626, 635-36 (Mont.
2000) (minimizing the risk an insurer faces).
Fire takes the position that where, as here, liability for
damages in excess of policy limits is reasonably clear, it
could not condition the payment of policy limits on a release
of all claims against its insured. In support of that
argument, United Fire relies on two distinct lines of Montana
cases. The first has gradually limited the circumstances
under which a release can be demanded. See Id. at
638 (addressing mandatory minimum coverage under Mont. Code
Ann. § 61-6-103); Shilhanekv. D-2 Trucking,
Inc., 70 P.3d 721, 725 (Mont. 2003) (extending
Watters beyond minimum statutory coverage to policy
limits). The second has expanded the types of damages that
must be paid prior to final settlement, see Ridley v.
Guar. Nat'l Ins. Co., 951 P.2d 987, 992 (Mont. 1997)
(requiring the payment of medical expenses); DuBray v.
Farmers Ins. Exch., 36 P.3d 897, 900 (Mont. 2001)
("Nothing in Ridley suggests that its scope
should be categorically limited to medical expenses.");
Lorang v. Fortis Ins. Co., 192 P.3d 186, 218 n.25
(Mont. 2008) (same), where liability is reasonably clear,
see Peterson v. St. Paul Fire & Marine Ins. Co.,
239 P.3d 904, 913 (Mont. 2010) (declaring standard);
Teeter v. Mid-Century Ins. Co., 406 P.3d 464, 468
(Mont. 2017) (applying Peterson standard to
liability for special damages).
other hand, High Country argues that where, as here, the
undisputed special damages are less than the available
coverage, an insurer may breach its duty to its insured by
paying policy limits without obtaining a release. High
Country emphasizes Montana's distinction between damages
that are plainly ascertainable and immediately payable, such
as medical expenses and lost wages, and disputed general
damages that can await final adjudication of the case,
"such as compensation for pain, discomfort, mental
distress, and punitive damages." See Hop v. Safeco
Ins. Co. of III., 261 P.3d 981, 983-84 (Mont. 2011).
Where public policy supports the prompt payment of the prior,
the latter generally "will not financially overwhelm an
accident victim" and are "wholly subjective in
nature and not plainly ascertainable in amount."
Id. at 984. However, High Country notes that certain
Montana decisions have obfuscated certainty as to liability
(i.e., the Peterson standard), and certainty as to
the amount of damages (i.e., Ridley payments). Even
if liability is reasonably clear, an insurer can dispute a
damage amount. Teeter, 406 P.3d at 468. According to
High Country, this case did not present a situation where
liability for damages in excess of the policy limits could be
easily ascertained. Further, High Country argues a brightline
rule that insurers do not need to negotiate for a release
will cause an "insured defendant [to] face the daunting
prospect of his insurer settling an otherwise defensible
claim, in order to avoid bad faith litigation." (Doc. 25
the Montana Supreme Court's recent decision in
Draggin Y Cattle Co., Inc. highlights the
complicated nature of an insurer's duties to its insured,
it does not provide guidance necessary for the resolution of
this case. See 2019 WL 1782165. Accordingly, an
answer to the certified question (or some formulation
thereof) is requested.
to Rule 15(6)(a)(ii), the following facts, which have been
stipulated to by the parties, outline the nature of the
controversy from which this question arose. (See
Sched. Or., Doc. 22 at ¶ 3.)
Country is an asphalt paving company located in Bozeman,
Montana. It purchased a liability insurance policy from
United Fire which includes three types of coverage: (1)
commercial general liability coverage in the amount of $2
million aggregate, with a $1 million per-occurrence limit
("CGL"); (2) commercial auto liability coverage in
the amount of $1 million; and (3) commercial umbrella
coverage in the amount of $2 million. In August 2016, while
the policy was in effect, one of High Country's employees
was involved in an accident while operating an insured
vehicle. While the vehicle was under way, a loaded equipment
trailer came unhitched and collided with another vehicle,
killing its driver and seriously injuring the passenger. High
Country notified United Fire of the incident. United Fire
hired Nick Pagnotta of the Williams Law Firm to represent
High Country. High Country separately retained Jeffrey Tiemey
and Trent Gardner of Goetz, Baldwin & Geddes PC.
October 31, 2017, Chris Edwards, of the law firm Edwards
Frickle & Culver, issued a demand letter on behalf of the
injured parties, demanding payment of "High Country
Paving's Policy Limits of $3, 000, 000.00 . .."
without release for High Country. Edwards's letter
included a ...