Miller v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 27 March 2007
• Docket Number: No. DA 06-0295.,DA 06-0295.
• Parties: Bruce A. MILLER, Plaintiff and Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Respondent.
• Court: Montana Supreme Court

155 P.3d 1278

2007 MT 85

Bruce A. MILLER, Plaintiff and Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Respondent.

No. DA 06-0295.

Supreme Court of Montana.

Submitted on Briefs February 14, 2007.

Decided March 27, 2007.

Rehearing Denied April 25, 2007.

For Appellant: Daniel P. Buckley; Foust Buckley Law Office, Bozeman, Montana.

For Respondent: William Conklin; Conklin, Nybo & Lanning, Great Falls, Montana.

Justice W. WILLIAM LEAPHARTdelivered the Opinion of the Court.

¶ 1 Bruce A. Miller appeals from an order of the Eighteenth Judicial District Court, Gallatin County, granting a motion for summary judgment in favor of State Farm Mutual Automobile Insurance (State Farm) and denying Miller's cross motion for summary judgment. We affirm.

¶ 2 The issue on appeal is whether the District Court erred when it determined that no justiciable controversy existed.

BACKGROUND

¶ 3 This case arises out of an automobile collision between Miller and Emma Rosh. Miller was injured as a result. Rosh's liability was not disputed. Miller and Rosh were both insured by State Farm under separate policies. Miller's policy with State Farm provided up to $25,000 in medical payment coverage. State Farm paid medical coverage to Miller in the amount of $24,195.04. Rosh's State Farm policy provided up to $100,000 per person in liability coverage. Miller brought suit against Rosh in the Eighteenth Judicial District Court, Gallatin County, for negligence.

¶ 4 State Farm offered to settle the claim with Miller for $70,000. To arrive at the $70,000 offer, State Farm evaluated the claim then reduced that number by $24,195.04, the amount of medical payment coverage Miller received under his policy. State Farm based the reduction on the collateral source rule. Miller filed an action for declaratory judgment arguing that the collateral source rule is not applicable during settlement negotiations, and that it can only be applied after a judgment or verdict is reached. State Farm moved for summary judgment, arguing that Miller failed to present a justiciable controversy and Miller filed a cross motion for summary judgment. The District Court granted State Farm's motion and denied Miller's. Miller appeals.

STANDARD OF REVIEW

¶ 5 We will not disturb a district court's determination that declaratory relief is not necessary or proper unless the court abused its discretion. Northfield Ins. v. Ass'n of Counties, 2000 MT 256, ¶ 8, 301 Mont. 472, ¶ 8, 10 P.3d 813, ¶ 8 (citations omitted). However, we review the court's interpretations of law to determine whether they are correct. Northfield Ins., ¶ 8 (citations omitted).

DISCUSSION

¶ 6 ISSUE: Did the District Court err when it determined that no justiciable controversy existed?

¶ 7 The purpose of the Uniform Declaratory Judgments Act (Act) is "to settle and to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations. . . ." Section 27-8-102, MCA. The Act provides a district court with the "power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." Section 27-8-201, MCA. "Any person . . . whose rights, status, or other legal relations are affected by a statute . . . may have determined any question of construction or validity arising under the . . . statute . . . and obtain a declaration of rights, status, or other legal relations thereunder." Section 27-8-202, MCA. The court has discretion and therefore "may refuse to render or enter a declaratory judgment or decree where such judgment or decree, if rendered or entered, would not terminate the uncertainty or controversy giving rise to the proceeding." Section 27-8-206, MCA; Brisendine v. State, Dept. of Commerce, 253 Mont. 361, 364, 833 P.2d 1019, 1020 (1992) (citations omitted). It is necessary for a justiciable controversy to exist before a court may exercise jurisdiction under the Act. Northfield Ins., ¶ 10.

¶ 8 The test to determine whether a justiciable controversy exists contains three elements:

First, a justiciable controversy requires that parties have existing and genuine, as distinguished from theoretical, rights or interests. Second, the controversy must be one upon which the judgment of the court may effectively operate, as distinguished from a debate or argument invoking a purely political, administrative, philosophical or academic conclusion. Third, [it] must be a controversy the judicial determination of which will have the effect of a final judgment in law or decree in equity upon the rights, status or legal relationships of one or more of the real parties in interest, or lacking these qualities be of such overriding public moment as to constitute the legal equivalent of all of them.

We apply the justiciable controversy test to actions for declaratory judgment to prevent courts from determining purely speculative or academic matters, entering anticipatory judgments, providing for contingencies which may arise later, declaring social status, dealing with theoretical problems, answering moot questions, or giving abstract or advisory opinions.

Northfield Ins., ¶ 12 (citations omitted).

¶ 9 Seeking a declaratory judgment too early in the proceedings, when other remedies are still available, may amount to an advisory opinion. Brisendine, 253 Mont. at 365, 833 P.2d at 1021. In Brisendine, a denturist sought a declaration from the district court as to his rights under statutes regarding business associations with dentists. Brisendine, 253 Mont. at 363, 833 P.2d at 1020. Brisendine, however, had not exhausted the administrative remedies available to him. Brisendine, 253 Mont. at 364, 833 P.2d at 1021. This Court determined that granting his request would amount to giving an advisory opinion, and it would be an unwarranted intrusion into the Board of Dentistry's regulatory authority. Brisendine, 253 Mont. at 365, 833 P.2d at 1021. Thus, we held Brisendine failed to present a justiciable controversy. Brisendine, 253 Mont. at 365, 833 P.2d at 1021.

¶ 10 Similarly, in Northfield Ins., we determined that no justiciable controversy existed in an action where the parties sought a declaration of their rights under a contract. Northfield Ins., ¶ 28. The insurers in that case were seeking a declaratory judgment as to their duty to indemnify, even though no formal request for indemnification had been made. Northfield Ins., ¶ 16. The determination of the dispute would have resulted in speculative advice and would not act as a final adjudication on the indemnification issue. Northfield Ins., ¶ 28.

¶ 11 In this appeal, Miller is seeking a declaration that § 27-1-308, MCA, cannot be applied by insurance companies when evaluating cases and making settlement offers. Section 27-1-308(1), MCA, provides:

In an action arising from bodily injury or death when the total award against all defendants is in excess of $50,000 and the plaintiff will be fully compensated for his damages, exclusive of court costs and attorney fees, a plaintiff's recovery must be reduced by any amount paid or payable from a collateral source that does not have a subrogation right.

Miller argues that he has presented a justiciable controversy because a judicial decision would settle the question of whether this statute has application to settlement offers; it would affect the rights of the parties who would then be able to act upon the judgment. He further argues that if insurers are allowed to use collateral source reduction during settlement negotiations, the reduction would discourage settlement, violate the prohibition against medical pay subrogation, and violate the made whole doctrine.

¶ 12 In support of his justiciability argument, Miller relies on Ridley v. Guaranty Nat. Ins. Co., 286 Mont. 325, 951 P.2d 987 (1997). In Ridley, the plaintiff was seeking payment of his medical expenses pursuant to § 33-18-201, MCA, of the Unfair Trade Practices Act (UTPA). Ridley, 286 Mont. at 332, 951 P.2d at 991. The case had not reached a final verdict or settlement, thus the insurer argued that it did not yet have a legal obligation to pay medical expenses. Ridley, 286 Mont. at 331, 951 P.2d at 991. Relying on two Montana federal district court decisions, Guaranty National argued that it had a legal basis for its refusal to pay medical expenses. Ridley, 286 Mont. at 331-32, 951 P.2d at 991. The district court concluded that the question of whether an insurer has an obligation to pay medical expenses prior to settlement of the claim when liability is reasonably clear did not present a justiciable controversy. Ridley, 286 Mont. at 332, 951 P.2d at 991. We reversed, holding that this presented a justiciable controversy because a judgment would determine the respective rights and obligations of the parties under the UTPA. Ridley, 286 Mont. at 332, 951 P.2d at 991.

¶ 13 Miller's claim is distinguishable from Ridley. Unlike Ridley, Miller is not litigating a claim under existing rights or interests provided for in the UTPA. Rather, Miller is requesting the court to interject its opinion regarding what factors and circumstances parties may consider in negotiating a settlement.

¶ 14 Settlement is a process that belongs to the parties. The declared public policy of this State is to encourage settlement and avoid unnecessary litigation. Augustine v. Simonson, 283 Mont. 259, 266, 940 P.2d 116, 120 (1997) (citing Holmberg v. Strong, 272 Mont. 101, 106, 899 P.2d 1097, 1100 (1995)). The reasons for encouraging settlement are numerous. Settlement...