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New York Marine and General Insurance Co. v. Junkermier, Clark, Campanella, Stevens, P.C.

United States District Court, D. Montana, Great Falls Division

October 11, 2019

NEW YORK MARINE AND GENERAL INSURANCE COMPANY, Plaintiff,
v.
JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C., DRAGGIN' Y CATTLE COMPANY INC., and ROGER and CARRIE PETERS, individuals, Defendants. DRAGGIN' Y CATTLE COMPANY, INC., and ROGER and CARRIE PETERS, individuals, Plaintiffs,
v.
JUNKERMIER, CLARK, CAMPANELLA, STEVENS, P.C., Defendant/Third-Party Plaintiff
v.
NEW YORK MARINE AND GENERAL INSURANCE COMPANY, Intervenor/Third- Party Defendant

          ORDER

          BRIAN MORRIS UNITED STATES DISTRICT COURT JUDGE

         INTRODUCTION

         After five-years, two different courts, twice as many judges, and a number of summary judgment motions, this Court and the parties remain well-acquainted with the facts of this case. Here's a brief recap: Junkermier, Clark, Campanella, Stevens, P.C. (“JCCS”) took out an insurance policy with New York Marine and General Insurance Company (“NYM”). (Doc. 366 ¶ 5; Doc. 372 ¶ 1.) Draggin' Y Cattle Company, Inc. sued Larry Addink and JCCS in Montana state court. (See Doc. 389 ¶ 4.) NYM defended JCCS in that action. (Id. ¶ 5.)

         The parties disagreed over the best way to proceed on that action. Draggin' Y and JCCS, without NYM's consent, agreed to a stipulated settlement for $10 million. Draggin'Y signed a covenant not to execute, and, JCCS, in turn, assigned its rights under its insurance policy with NYM to Draggin' Y. In response, NYM filed a declaratory action and breach of contract claim against JCCS in this Court. (Doc. 1).

         NYM asked this Court (1) for a declaratory judgment that NYM would not be liable for the stipulated judgment; (2) for a declaratory judgment that NYM did not owe any continuing duties to JCCS under the insurance contract; and (3) damages that arose from JCCS's breach of its contractual duties. (Doc. 1 at 11-15.) JCCS filed a number of counterclaims, and after four years of litigating those counterclaims in this Court, voluntarily dismissed them on May 16, 2019. (Doc. 306.)

         Contemporaneous with this litigation, the state court proceeding moved forward with JCCS and Draggin' Y as plaintiff and defendants. NYM intervened initially to contest whether the $10 million stipulated settlement proved reasonable. After JCCS voluntarily had dismissed its claims in this Court, it filed nearly identical claims against NYM in the state court proceeding. (Compare Doc. 48 at 15-19 with Doc. 340-15 at 2-5.) JCCS's action in bringing claims in the state court case transformed NYM from intervenor to a party. NYM used this new-found party status to remove the state court proceeding to federal court. (Doc. 340-17, 18, 19.) This Court consolidated the removed action with NYM's declaratory judgment and breach of contract action. (Doc. 376.) Both parties have moved for summary judgment. (Doc. 364 (JCCS) and Doc. 370 (NYM).) The parties fully briefed the motions and the claims stand ripe for review.

         DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

         Collusion

         Defendants JCCS, Draggin' Y, and Roger and Carrie Peters (collectively “Defendants”) have moved for summary judgment on the issue of collusion. (Doc. 365 at 3.) They argue that the doctrines of collateral estoppel and res judicata preclude NYM from arguing whether JCCS and Draggin' Y improperly colluded in deciding to enter the stipulated judgment. Defendants argue that NYM could have raised alleged collusion in the state court's reasonableness hearings. (Id.)

         As NYM points out, however, collusion does not stand alone as an issue or claim of defense made by any party. Neither of NYM's claims for relief require it to prove collusion. (See Doc. 1.) None of Defendants' affirmative defenses require them to prove that collusion did not exist. (See Doc. 258.) It appears that Defendants move for summary judgment to prevent NYM from presenting evidence of collusion. Defendants more properly should raise that issue in a motion in limine, rather than in a motion for summary judgment. Defendants' motion for summary judgment regarding alleged collusion is denied.

         Breach of Contract Claim

         Defendants also move for summary judgment on the issue of damages that NYM alleges may have arisen from the breach of contract claim. NYM's Chief Claims Officer Paul Kush explained at a deposition that NYM seeks damages only for expenses that stem from NYM's defense of JCCS. Defendants argue that NYM cannot recoup those costs as damages in light of NYM's duty to defend and incur those costs. Defendants contend that allowing NYM to recoup those costs as damages would “retroactively eliminate or nullify [NYM's] duty to defend” JCCS. (Doc. 365 at 12.) And generally, under Montana law, insurers cannot recoup defense costs except in limited circumstances, none of which Defendants argue are present here. (Id. at 13-14.)

         Defendants' arguments attempt to cast a standard breach of contract claim for damages into something it is not. NYM has not made a claim to recoup attorney's fees. It instead asserts a claim for damages suffered from a breach of contract. Montana Code Ann. § 27-1-311 governs damages under a breach of contract claim. Section 27-1-311 provides that “the amount which will compensate the party aggrieved for all the detriment which was proximately caused” generally will represent the measure of damage for a breach of contract. Id. NYM's claim falls squarely within this framework and § 27-1-311 entitles NYM to bring a claim for damages.

         Defendants make one counterargument. Defendants contend that NYM's damages claim falls outside the statute because the stipulated judgment did not “proximately cause” the damages. (Doc. 391 at 8-9.) Defendants claim that NYM would have incurred costs ...


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