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Hart v. Mountain West Farm Bureau Mutual Insurance Co.

United States District Court, D. Montana, Missoula Division

December 20, 2019

ROBERT and KERRYELLEN HART, Plaintiffs,
v.
MOUNTAIN WEST FARM BUREAU MUTUAL INSURANCE COMPANY and DOES 1-10, Defendants.

          ORDER

          DONALD W. MOLLOY, DISTRICT JUDGE UNITED STATES DISTRICT COURT.

         This case involves an insurance dispute arising out of damage the 2016 Roaring Lion wildfire caused to a residence in Hamilton, Montana. Homeowners Dr. Robert and Kerryellen Hart are suing their insurer Mountain West Farm Bureau Mutual Insurance Company. There are twelve pretrial motions pending. After oral argument on December 19, 2019, the Harts' motions for partial summary judgment are denied, Mountain West's motion to bifurcate is granted, and the various motions in limine are granted in part and denied in part.

         Background

         The Roaring Lion wildfire began in July 2016 after a small campfire started by teenagers was left unattended while smoldering. (Am. Stip. Facts, Doc. 16 at ¶ 4.) The Harts' residence is located at 1071 Judd Creek Hollow in Hamilton, Montana, which borders the Bitterroot National Forest. (Id. at ¶ 5.) Their property includes a 5, 842 square-foot home on 13.55 acres. (Id.) On July 31, 2016, the Harts were away on a day trip when they learned of the wildfire. (Id. at ¶ 6.) They were unable to return home due to evacuations ordered by the Forest Service. (Id.)

         After the Roaring Lion fire, the Harts timely tendered an insurance claim to Mountain West, which insured them under a Country Home homeowners insurance policy. (Id. at ¶¶ 7, 9.) Mountain West paid $335, 535.11 under the policy for trees, shrubs, and other plants, personal property, rental expenses, and cleaning services to remediate the smoke damage. (Doc. 16 at ¶¶ 10, 12; Doc. 16-1.) On June 22, 2017, Mountain West attorney Randall Nelson sent the Harts a letter denying further claims for compensation. (Doc. 29-5.) The parties dispute the nature and extent of the covered damage and whether the cleaning and remediation performed under the policy was sufficient. (Doc. 16 at ¶¶ 11-12.)

         In December 2018, the Harts sued Mountain West in state court in Ravalli County for bad faith under Montana's Unfair Trade Practices Act ("UTPA") (Count I), breach of contract (Count II), breach of the implied covenant of good faith and fair dealing (Count III), punitive damages (Count IV), and a declaratory judgment regarding the scope of coverage (Count V). (Compl., Doc. 3; Am. Compl., Doc. 4.) Mountain West removed to this Court on January 8, 2019. (Doc. 1.) Count III was later voluntarily dismissed. (Docs. 42, 43.)

         Analysis

         I. Harts' Motions for Partial Summary Judgment

         The Harts seek summary judgment that they are entitled to restoration damages and that Mountain West acted in bad faith. A "court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The court must view all evidence and draw all inferences in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477U.S. 242, 255 (1986).

         A. Restoration Damages (Doc. 47)

         The Harts argue that they are entitled to restoration damages to return their home to its pre-fire condition. Generally, diminution in value is the appropriate measure of damages for injury to property. Sunburst Sch. Dist. No. 2 v. Texaco, Inc., 165 P.3d 1079, 1086 (Mont. 2007). However, a landowner may recover the cost to restore the property where the injury is temporary, meaning restoration is possible, and the owner has "reasons personal" to prefer restoration, such as a need to continue using the property. Lampi v. Speed, 261 P.3d 1000, 1005-06 (Mont. 2011). While Montana's allowance of restoration damages is grounded in tort law, restoration damages may be appropriate in breach of contract cases if (1) they are reasonably foreseeable to the parties, as shown by the terms of the contract, and (2) the conduct underlying the breach caused the property damage. McEwan v. MCR, LLC, 291 P.3d 1253, 1265-68 (Mont. 2012). Here, Mountain West's alleged conduct did not cause damage to the Harts' residence; the Roaring Lion wildfire did. Further, the Harts have not argued that the insurance contract contemplates an award of restoration damages after a breach. Accordingly, the motion for partial summary judgment on restoration damages is denied.

         B. Bad Faith (Doc. 51)

         The Harts seek summary judgment that Mountain West violated subsections (4) and (7) of the UTPA, Mont. Code Ann. § 33-18-201.[1] The relevant provisions of the UTPA provide,

A person may not, with such frequency as to indicate a general business practice, do any of the following:
(4) refuse to pay claims without conducting a reasonable investigation based upon all available information;
(7) compel insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds.

Id. However, an insurer is not liable if it "had a reasonable basis in law or in fact for contesting the claim or the amount of the claim, whichever is in issue." Mont. Code Ann. §33-18-242(5).

         Reasonableness is generally a fact question for the jury. Estate of Gleason v. Cent. United Life Ins. Co., 350 P.3d 349, 359 (Mont. 2015). Nonetheless, Montana law recognizes two exceptions to that general rule: (1) where no insurance policy was in effect at the time of the injury and (2) where the insurer had a reasonable basis in law and no issues of fact are in dispute. Id. Regarding the second exception, "reasonableness is a question of law for the court to determine when it depends entirely on interpreting relevant legal precedents and evaluating the insurer's proffered defense under those precedents." Id. (quoting Redies v. Att'ys Liab. Prot. Soc'y, 150 P.3d 930, 938 (Mont. 2007)). Neither exception applies here. The Harts' argument is that, in denying their claims, Mountain West failed to consider the conclusions of certified industrial hygienist Keith Cron and Dr. Dana Headapohl, M.D., M.P.H. regarding the condition of the residence after the Roaring Lion wildfire. But Mountain West has proffered evidence that it reviewed Cron and Headapohl's reports. (See Doc. 68 at ¶¶ 17, 43, 45.) Whether that review was reasonable is a fact question for the jury.

         The Harts make two evidentiary arguments in their summary judgment briefing: (1) information learned by Mountain West after the claim was denied on June 22, 2017, is irrelevant, and (2) conversations attorney Randall Nelson had with experts regarding Cron and Headapohl's reports should be excluded as hearsay. However, Mountain West agrees with the June 22, 2017 cutoff date. Further, disputed facts remain even if Nelson's conversations are disregarded, though it is not clear those statements are hearsay. See Fed. R. Evid. 801(c) (defining "hearsay"). Because the evidentiary arguments do not alter the analysis, the motion for summary judgment on the bad faith claim is denied.

         II. Mountain West's Motion to Bifurcate (Doc. 40)

         Mountain West moves under Federal Rule of Civil Procedure 42(b) to bifurcate the bad faith claim from the breach of contract claim and hold sequential trials before the same jury. As demonstrated by the numerous pending motions in limine, limiting instructions will not suffice to advise the jury of the evidence that is relevant to the bad faith claim but not the breach of contract claim, and vice versa. Accordingly, the motion to bifurcate is granted.

         III. Harts' Motions in Limine

         A. Post-Denial Evidence (Doc. 18)

         The Harts' motion to preclude Mountain West from using information obtained after June 22, 2017, to establish that the denial of their claim was reasonable is granted. See EOTT Energy Operating Ltd. P'ship v. Certain Underwriters at Lloyd's of London,59 F.Supp.2d 1072, 1076 (D. Mont. 1999). Based on the Harts' representations in their briefs and at oral argument, the basis of their bad faith claim is Mountain West's June 22, 2017 denial. That cut-off ...


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