Henning, Keedy & Lee, P.L.L.C., Insurance Defense in Montana

Lee Henning and his associates have over 30 years collective experience working for numerous insurance companies. Since his relocation, Lee has maintained a practice of insurance defense work in Montana and the firm is interested in expanding its defense work on a select basis.

The firm's strategy in litigating insurance defense cases is to perform an early evaluation of the case and then aggressively pursue settlement on reasonable terms. If an appropriate settlement cannot be reached, we strive to vigorously provide a top quality defense for our clients, while maintaining a focus on cost effectiveness. We believe that our broad range of experience and practice gives us the ability to provide top quality defense of virtually all insurance defense cases. Due to the unique nature of practice in Montana (i.e., a huge geographical area with a small population), it is often necessary to search outside the confines of the state for expert witnesses and other expertise, and the attorneys' substantial experience in major markets is invaluable in accessing the necessary expertise.

The following is a summary of Montana insurance law which was recently compiled for some of our insurance clients. Insurance professionals are welcome to review this information for general reference, however, they should remember that statutes and case law change, and such general information should not be relied upon for specific decision-making in any case. Insurance professionals are welcome to call the firm to discuss individual cases or issues.

General Overview Of Montana Tort Law

Updated July 14, 2006
Introduction Statute of Limitations Comparative Negligence Products Liability Damages Bad Faith Financial Responsibility	Advance Payments No Fault Inter-Family Immunity Offer of Judgment Arbitration Interests and Costs Jurisdiction

Introduction

The following is a general overview of Montana tort law intended for use by insurance professionals for general reference only. Often there will be exceptions to the general rules stated herein as well as changes in the law through court and legislative action from time to time. As a result, a competent Montana attorney should be consulted before charting a course of legal action. Nevertheless, it is believed that this general overview may be a helpful reference for insurance and other case professionals.

Statute of Limitations

1. Personal Injury

The general statute of limitations for personal injury, including wrongful death, in the state of Montana is three years. M.C.A. §27-2-204(2)

2. Libel and Slander

The general statute of limitations for libel and slander is two years. M.C.A. §27-2-204(3)

3. Property Damage

The general statute of limitations for property damage in the state of Montana is two years.; M.C.A. §27-2-207 Semenza v. Bowman, 268 Mont. 118, 885 P.2d 452 (1994) .M.C.A. §33-18-242(7)(a). A third party claimant must bring their Unfair Trade Practices Act claim within one year from the settlement or entry of judgment in the underlying action. M.C.A. §33-18-242(7)(b). A third party claimant must bring their common law bad faith claim within the general three year statute of limitations for torts. Brewington v. Employers Fire Insurance Co., 1999 MT 312, 992 P.2d 237 (1999).

6. Conflicting Statute of Limitations

When there is a substantial question as to which of two statutes of limitations should apply, Montana courts must apply the longer of the statutes. Royal Insurance v. Roadamel, 2000 MT 259, 11 P.3d 105 (2000).

Service of Summons and Complaint

In Montana, a plaintiff has three years to serve process on a defendant. If service is not accomplished after three years, and the complaint was filed after January 1, 2000, the court must dismiss the action without prejudice. If the complaint was filed before January 1, 2000, and service was not effected within three years, the action must be dismissed with prejudice. Mont.R.Civ.P., Rule 4E(1); Former Mont.R.Civ.P., Rule 41(e); Hartford v. Credit Bureau, Inc., 1998 Mont. 179, 962 P.2d 1198 (1998).

II. Comparative Negligence

1. Plaintiff's Comparative Negligence

Montana is a comparative negligence jurisdiction. A plaintiff will be denied recovery if her negligence is greater than the negligence of the defendant, or the combined negligence of all persons against whom recovery is sought. If recovery is allowed, a plaintiff's damages will be reduced by the percentage of negligence attributable to her. M.C.A. §27-1-702.

For example, assume Plaintiff and Defendant are involved in an automobile accident. The jury determines Plaintiff has suffered $10,000 in damages and was 40% negligent. Defendant meanwhile was found to be 60% negligence. Plaintiff will be able to recover from Defendant because Plaintiff's negligence is less than Defendant's negligence. Plaintiff's total recovery, however, will be reduced by 40%. Therefore, Defendant's total liability will be $6,000.

It is unclear whether a defense of comparative negligence is available in an intentional tort case. Boyken v. Steele, 256 Mont. 419, 847 P.2d 282 (1993). It is well established, however, that comparative negligence is not a defense when recovery is based on a theory of strict liability. M.C.A. §27-1-719(5); Lutz v. National Crane Corp., 267 Mont. 368, 884 P.2d 455 (1994).

2. Joint and Several Liability

By statute, a defendant is jointly and severally liable for all of Plaintiff's damages if the defendant is more than 50% negligent when the Defendant's negligence is compared to the negligence of the Plaintiff, injured person, other defendants, third party defendants, and parties released from liability by the Plaintiff. M.C.A. §27-1-703(1), (2), (4).

Caution: The Montana Supreme Court has declared previous joint and several liability statutes unconstitutional to the extent they permitted a defendant's negligence to be compared with the negligence of parties released from the action by Plaintiff. The remaining defendants, however, are entitled to a dollar for dollar set-off equal to the settlement amount. The Court has also prohibited the comparison of a Defendant's negligence with parties who have not been brought into the action. Cusenbary v. Mortensen, 987 P.2d 351 (Mont. 1999); Plumb v District Court, 279 Mont. 363, 927 P.2d 1011 (1996).

Here is an example of how these rules may play out: Plaintiff A is involved in an automobile accident with B, C and D. Plaintiff files suit against B, C and D. Shortly thereafter, A enters into a good faith settlement with B for $1,000. At trial, it is determined that A suffered $11,000 in damages. The court also determined C was 51% negligent, A was 0% negligent, and D was 49% negligent. Based on the settlement, the total damages A can collect is $10,000. (The total verdict of $11,000 less the $1,000 already paid by B). D is only liable for $4,900. C, meanwhile, is liable for the entire $10,000 because C's negligence is more than 50% when compared to the negligence of A and D. Any effort made by C to avoid joint and several liability by comparing his negligence to B, may be declared unconstitutional. C is allowed to try to put blame on A and D because A and D were at trial.

3. Contribution

Contribution is allowed under limited circumstances. A defendant who is found to be jointly and severally liable may recover any amounts he paid to the plaintiff in excess of his pro-rata share of fault. This recovery may be sought from any other person whose negligence may have proximately caused the plaintiff's injury, but only up to that party's share of the fault. M.C.A. §27-1-703(1). No contribution is allowed however against a co-defendant who has entered into a settlement with the plaintiff. Deere v. District Court, 224 Mont. 384, 730 P.2d 396 (1986).

Again, an example is helpful to illustrate these points. A brings suit against B, C, and D. Shortly thereafter, A settles with B for $1,000. At trial, it is determined that A suffered $11,000 in damages. The jury also determined A was 0% negligent, C was 70% negligent, and D was 30% negligent. Subsequently, C paid $10,000 to A to satisfy the judgment. C would receive a dollar for dollar credit for the monies paid by B. Under the statute, C is entitled to file a claim for contribution against D for $3,000. C, however, is not entitled to seek contribution against B.

III. Products Liability

Under statute, a manufacturer, wholesaler, or retailer who sells a product in a defective condition unreasonably dangerous is liable for the physical harm caused by the product. M.C.A. §27-1-719(1). A plaintiff, however, is not required to prove the product is both defective and unreasonably dangerous. McAlpine v. Rhone-Poulenc, 2000 MT 383, 304 Mont. 31, 16P3d 1054. Instead, a product that is unreasonably dangerous will be considered defective. As a result, a plaintiff establishes a products liability claim if they prove the product is capable of causing injury to the user beyond that which would be expected by the ordinary user.

A defendant has a limited number of defenses available in a products liability case. As already pointed out, contributory or comparative negligence is not a defense. A defendant also cannot avoid liability by claiming it exercised all possible care in the preparation and sale of the product M.C.A. §27-1-719(3)(a). The defendant can seek to reduce or bar a plaintiff's recovery to the extent plaintiff's injuries are attributable to her own unreasonable misuse of the product, or her conscious assumption of a known risk. M.C.A. §27-1-719(5)(a)&(b). However, the Montana State Court has held that reasonably foreseeable misuse is reasonable misuse; thus product misuse, which is foreseeable, does not support a defense to products liability under Montana law. Lutz v. National Crane Corp., 267 Mont. 368, 884 P.2d 455, 460 (1994).

IV. Damages

Montana law allows compensatory and future damages for an injured plaintiff. M.C.A. §27-1-202, 203. These include past lost wages, diminished earning capacity, future lost wages, past medical expenses, and future medical expenses. Montana also allows recovery for a plaintiff's diminished ability to pursue an established course of life. Johnson v. United States, 510 F.Supp. 1039 (D.C. Mont. 1981), Montague v. Hanson, 38 Mont. 376, 99 P. 1063 (1909). Montana law also generally allows plaintiffs to argue for damages on a per diem (amount per day) basis.

1. Punitive Damages

A defendant may be liable for punitive damages if he acted with actual fraud or actual malice. M.C.A. §27-1-221(1). Actual malice is found when the defendant has knowledge of, and proceeds with deliberate indifference to facts that indicate plaintiff is likely to suffer injury. M.C.A. §27-1-221(1). Actual fraud is found when defendant knowingly makes a false statement, or conceals a material fact with the purpose of depriving plaintiff of property or legal rights. M.C.A. §27-1-221(3).

Punitive damages awarded by juries must be reviewed by the judge. M.C.A. 27-1-221(7)(c). The judge has discretion to either increase or decrease the award, and the judge must clearly state his/her rational for exercising such discretion.

A. Statutory Bad Faith

Both third party claimants and insureds are permitted to bring claims against insurers who violate Montana's Unfair Trade Practices Act (UTPA). See M.C.A. §33-18-242(1). Under the UTPA insurers have several enumerated obligations which include making prompt settlement offers when liability is reasonably clear. M.C.A. §33-18-201(6). Insurers must also advance pay medical expenses when liability is reasonably clear. See Ridley v. Guaranty National, 286 Mont. 325, 951 P.2d 987 (1997), interpreting M.C.A. §33-18-201(6) & (13). In addition, insurers are required to reasonably investigate all available information related to claims before refusing payment. M.C.A. §33-18-201(4). Punitive damages may be awarded against insurers who violate the UTPA. M.C.A. §33-18-242(4). An insured can bring his action under the UTPA in conjunction with any other action he may have against the insurer M.C.A. §33-18-242(6)(a). Meanwhile, a third party claimant cannot bring his UTPA claim until judgment or settlement is reached in the underlying action. M.C.A. §33-18-242(6)(b).

22. Common Law Bad Faith

By statute, the UTPA prevents an insured from bringing a common law bad faith claim in connection with the handling of an insurance claim. M.C.A. §33-18-242(3); Watters v. Guaranty National, 2000 MT 150, 3 P.3d 626 (2000). The UTPA, however, does not pre-empt a third party claimant's common law bad faith claims. Brewington v. Employers Fire Insurance Co., 1999 MT 312, 992 P.2d 237 (1999). There does not appear to be any case law or statutory authority that requires a third party claimant to wait until judgment or settlement is reached in the underlying action before they can bring their common law bad faith claim, however the liability of the underlying tort feasor must be established before action can be taken against their insurer. Ulrigg v. Jones, 274 Mont. 215, 907 P.2d 937 (1995).

VI. Financial Responsibility

Generally, the owner and operator of a motor vehicle registered in Montana must maintain insurance against loss. M.C.A. §61-6-301(1). Insurance may not be less than $25,000 per person, $ 50,000 per accident, and $10,000 for property damage. M.C.A. §61-6-103(2)(b).

VII. Advance Payment of Medical Expenses and Others

When liability is reasonably clear, an insurer has an obligation to pay a third party claimant's medical expenses in advance of final settlement or judgment. See Ridley v. Guaranty National, 286 Mont. 325, 951 P.2d 987 (1997), interpreting UTPA M.C.A. §33-18-201 (6) & (13). Such medical expenses, however, must be causally related to the accident.

The Montana Supreme Court has recently handed down a decision which bears extensively on an insurer's duty in a personal injury claim. In DuBray v. Farmers Insurance Exchange (307 Mont. 134; 36 P.3d 897 (2001)), the Montana Supreme Court ruled that an automobile insurer's duty to advance pay expenses where liability and causation are reasonably clear extends not only to medical expenses, as had been previously established in Ridley v. Guarantee National Insurance Co. (286 Mont. 325, 951 P.2d 987), but also extends to lost wages. The Montana Supreme Court further implied that other kinds of expenses which will ultimately be included is still open an open question. However, it is now clear under Montana law that an automobile insurance carrier has a duty to advance pay both medical expenses and lost wages in cases where liability and causation are reasonably clear.

VIII. No Fault

Preliminary research indicates that Montana does not have case or statutory law addressing no fault insurance coverage.

IX. Inter-family Immunity

In Montana, household exclusion clauses are unenforceable. American Family Mutual v. Livengood, 1998 MT 329; 970 P.2d 1054 (1998), distinguishing Transamerica v. Royal, 202 Mont. 173, 656 P.2d 820 (1983). As a result, insurance coverage is available for a child who sues his parents for torts arising out of the operation of a motor vehicle. See Royal. Montana has also abolished the defense of inter spousal immunity. Miller v. Fallon County, 222 Mont. 214, 721 P.2d 342 (1986).

X. Offer of Judgment

At any time more than 10 days before trial a party defending against a claim may make an offer of judgment. Mont. Rule. of Civ. P., Rule 68. If an offer is not accepted and judgment is subsequently entered against the offeree that is not as favorable as the offer, the offeree must pay costs incurred after the making of the offer.

XI. Arbitration

Generally a written agreement to submit an existing controversy to arbitration is valid. M.C.A. §27-5-114(1). Similarly, a written arbitration agreement entered into before the controversy arose will be considered valid and enforceable. M.C.A. §27-5-114(2). Contracts requiring arbitration of personal injury claims, however, are not valid under Montana law. M.C.A. § 27-5-114(2)(a).

Caution: Montana's prohibition against personal injury arbitration clauses may be pre-empted by federal law. In Lombardi v. Casarotto, 517 U.S. 681, 1996 U.S. Lexis 3244 (1996), the United States Supreme Court recognized that the Federal Arbitration Act ("FAA") requires states to place arbitration agreements on the same footing as other contracts. As a result, arbitration clauses are subject to traditional contract defenses such as duress, fraud and lack of consideration. States cannot however, give parties additional defenses that are applicable only to arbitration clauses. Casorotto did not address whether state statutes governing personal injury arbitration are pre-empted although arguments can be made that Montana's prohibition places personal injury arbitration clauses on unequal footing and is therefore pre-empted.

XII. Interest and Costs

1. Prejudgment Interest

An award of prejudgment interest is allowed when damages are capable of being made certain by calculation. The Plaintiff must also make a prior demand for payment of the amounts. When allowed, prejudgment interest is awarded at a rate of 10% per annum. M.C.A. §27-1-210(1).

B. Post-judgment Interest

Post-judgment interest is allowed from the date of entry of judgment at a rate of 10% per annum. M.C.A. §25-9-204, 205(1).

3.Costs

Only limited costs are generally awardable under Montana law. In addition to filing fees, deposition expenses and costs of exhibits are awardable, but only if those items are actually used at trial. M.C.A. §25-10-101.

3. District Court

Montana has 21 judicial districts. M.C.A. §3-5-101. Generally, district courts have jurisdiction over all civil and probate matters. M.C.A. §3-5-302(1)(b). There is no minimum or maximum amount in controversy, so as a result most substantial civil litigation takes place in the district courts. Service of process of the district courts is limited only by the state's long arm provisions and due process concerns. Montana Rule of Civil Procedure, Rule 1 and Rule 4B.

D. Federal Court

Montana's federal district court has jurisdiction to hear cases arising under the laws of the United States. 28 U.S.C. 1331. The court can also hear state causes of action if the parties are of diverse citizenship and the amount in controversy exceeds $75,000. 28 U.S.C. 1332.

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