Bailey v. State Farm Mut. Auto. Ins. Co.
| Decision Date | 02 May 2013 |
| Docket Number | No. DA 12–0247.,DA 12–0247. |
| Citation | 300 P.3d 1149,370 Mont. 73 |
| Parties | Brenda BAILEY and J. Stanley Bailey, Jr., Plaintiffs and Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Mark Olson and Does 1–3, Defendants and Appellees. |
| Court | Montana Supreme Court |
OPINION TEXT STARTS HERE
For Appellant: Michael J. George, Lucero & George, L.L.P., Great Falls, Montana.
For Appellee: Robert F. James, Jordan Y. Crosby, Ugrin, Alexander, Zadick & Higgins, P.C., Great Falls, Montana.
[370 Mont. 74]¶ 1 Brenda Bailey and J. Stanley Bailey, Jr. (the Baileys) appeal from an order of the Ninth Judicial District Court, Glacier County, granting summary judgment to State Farm and Mark Olson (Olson) on the Baileys' claims that State Farm and Olson negligently failed to secure underinsured motorist (UIM) coverage for the Baileys. We reverse the District Court's entry of summary judgment in favor of State Farm and Olson, and remand for further proceedings.
¶ 2 The Baileys raise the following two issues on appeal:
¶ 3 1. Did the District Court err in granting summary judgment when it found no genuine issues of material fact with respect to the duty of State Farm and Olson to procure UIM coverage for the Baileys?
¶ 4 2. Did the District Court err in granting summary judgment by failing to recognize and impose a duty arising in negligence beyond a duty to procure requested coverage?
¶ 5 On October 19, 2006, a drunk driver crossed the highway centerline and collided head-on with the Baileys' vehicle. The Baileys sustained very serious injuries in the accident. Stan was flown to Harborview Medical Center in Seattle and remained a patient there for five months. Brenda spent a significant amount of time hospitalized in Kalispell and Cut Bank. Brenda remains wheelchair bound as a result of her injuries. The Baileys incurred medical expenses in excess of $1,000,000.
¶ 6 The Baileys moved from Oregon to East Glacier, Montana, in March 1998. The Baileys had been State Farm customers for many years. On April 3, 1998, the Baileys went to the Mark Olson State Farm Agency in Cut Bank, Montana, to transfer their Oregon State Farm policy to Montana. Insurance agent Nola Peterson Softich (Softich) assisted the Baileys. The Baileys specifically recalled presenting their Oregon State Farm insurance cards to Softich and requesting that the same coverage they carried in Oregon be transferred to Montana. The Baileys also maintain that they requested full coverage.
¶ 7 Softich completed a computerized insurance application for each of the Baileys' two vehicles. Each application listed twelve types of coverage and displayed a “Yes” or “No” next to each coverage to indicate whether that coverage was selected. The State Farm policies sold to the Baileys in Montana contained liability coverage limits of $250,000 per person and $500,000 per occurrence for bodily injury, $100,000 for property damage liability, $5,000 in medical payments coverage, and uninsured motorist (UM) coverage limits of $100,000 per person and $300,000 per occurrence. On both applications, Softich entered a “No” next to the UIM coverage. After Softich filled out the applications, Stan signed both applications. The application contained the following language directly above the signature line:
I apply for the insurance indicated and state that (1) I have read this application, (2) my statements on this application are correct, (3) statements made on any other applications on this date for automobile insurance with this company are correct and are made part of this application, (4) I am the sole owner of the described vehicle except as otherwise stated, and (5) the limits and coverages were selected by me.
¶ 8 Stan testified in his deposition that he typically did not read any insurance documents because he relied on his agent to provide him with the important information. Brenda recalled receiving insurance cards from State Farm, but did not recall reviewing any policies or other information from State Farm. State Farm and Olson maintained that the Baileys received new insurance cards and renewal notices listing the various coverages twice every year.
¶ 9 Although Softich had no independent recollection of her initial interaction with the Baileys, she testified that it was her habit and practice to always review the “ACHUW” coverages with new customers. “ACHUW” stands for: A—liability; C—medical payment; H—emergency towing; U—uninsured motorist; and W—underinsured motorist. Softich claimed that UIM coverage must have been offered to the Baileys. Softich also testified that she never advised customers to lower their UM or UIM coverage. Olson admitted that he did not know whether the Baileys were offered UIM coverage, but his staff is supposed to go through every coverage. The Baileys had no specific recollectionof whether the “ACHUW” coverages were discussed when they met with Softich.
¶ 10 It is undisputed that the Baileys' State Farm automobile insurance policy obtained in Montana did not match their previous policy from Oregon. The Baileys' Oregon policies provided the following coverages: (1) bodily injury liability, $300,000 per person/$500,000 per occurrence; (2) property damage, $100,000; (3) personal injury protection (analogous to medical payments coverage) $100,000; (4) UM, $300,000 per person/$500,000 per occurrence; and (5) UIM, $300,000 per person/$500,000 per occurrence. Notably, Oregon law mandates the UM coverage must include UIM protection. SeeOr.Rev.Stat. § 742.502(2)(a). In Oregon, State Farm combines the UM and UIM coverages and denotes both as a single “U” coverage. Olson and his staff admitted that before becoming involved in this litigation, they were unaware that “U” was used in Oregon to represent both UM and UIM coverage.
¶ 11 In May 2005, Stan called an employee of Olson, Jeannie Fetters (Fetters), on the telephone to discuss his State Farm policy. Fetters made note of the conversation in her records and recalled that Stan was interested in changing the deductibles on his collision coverage and removing his emergency road service coverage. During their conversation, Fetters reviewed his policy and mentioned to Stan that he did not have UIM coverage. Fetters admitted that the portion of the phone conversation dealing with UIM coverage lasted “maybe 30, 45 seconds, or a minute” and she did not discuss what UIM coverage entailed. Fetters testified that Stan told her that he was not interested and he only wanted to make the requested changes.
[370 Mont. 77]¶ 12 Following the automobile accident that occurred on October 19, 2006, the Baileys learned that they had only $5,000 in medical payments coverage and did not have any UIM coverage. In fact, the Baileys testified that they were unaware what UIM coverage was until after the accident. The drunk driver who caused the accident carried the statutory minimum automobile liability insurance limits. The Baileys' medical expenses and other damages far exceeded the liability coverage of the drunk driver.
¶ 13 On May 20, 2009, the Baileys filed their complaint against State Farm and Olson alleging that Olson was negligent in failing to obtain the appropriate insurance coverages. The Baileys requested declaratory relief and asked the District Court to reform the insurance policy to include UIM coverage in the same amount as their liability coverage. The Baileys also alleged that Olson breached his fiduciary duty by failing to secure UIM coverage and failing to advise them of the need to obtain UIM coverage. Lastly, the Baileys alleged that Olson's actions constituted actual malice sufficient to support an award of punitive damages.
¶ 14 State Farm and Olson filed an answer to the complaint, in which they posited various defenses. However, they did not initially raise the affirmative defense of comparative fault. See M.R.C.P. 8(c). State Farm and Olson later sought to amend their answer to interpose the defense of “contributory negligence” on the part of the Baileys. However, in light of the court's subsequent entry of summary judgment for State Farm and Olson, it never addressed the merits of the motion to amend.
¶ 15 On January 13, 2012, State Farm and Olson filed a motion for summary judgment on all of the Baileys' claims. State Farm and Olson argued they were entitled to judgment as a matter of law because the Baileys declined UIM coverage in their insurance application and signed the application that listed the coverage limits. State Farm and Olson contended that Stan also declined UIM coverage when Fetters pointed out to him that he did not have UIM coverage during a phone conversation in May 2005. Furthermore, State Farm and Olson maintained that they only owed the Baileys a duty to obtain coverage that was requested, and they did not breach this duty. State Farm and Olson also argued that they did not owe the Baileys a fiduciary duty.
¶ 16 In response, the Baileys countered that summary judgment would be inappropriate because genuine issues of material fact remained regarding whether the Baileys were advised about UIM coverage. The Baileysargued that the extent of an insured's obligation to read an insurance policy depends on what is reasonable under the circumstances of each case and therefore cannot be decided as a matter of law. The Baileys asserted that their request for the same coverage as they had in Oregon qualifies as a request for specific insurance, so Olson's failure to obtain the requested insurance constitutes a breach of his duty. Though they acknowledge that this Court has not yet recognized a fiduciary relationship between an insurance agent and a client, the Baileys contend that the facts of their case support recognition of such a relationship.
¶ 17 On February 8, 2012, the District Court held oral argument on the motion for summary judgment. The District Court issued...
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