United States District Court, D. Montana, Missoula Division
W. MOLLOY, DISTRICT JUDGE UNITED STATES DISTRICT COURT.
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.
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.)
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.)
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,
Harts' Motions for Partial Summary Judgment
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).
Restoration Damages (Doc. 47)
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.
Bad Faith (Doc. 51)
Harts seek summary judgment that Mountain West violated
subsections (4) and (7) of the UTPA, Mont. Code Ann. §
33-18-201. The relevant provisions of the UTPA
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).
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.
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.
Mountain West's Motion to Bifurcate (Doc. 40)
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.
Harts' Motions in Limine
Post-Denial Evidence (Doc. 18)
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