Boettcher v. Montana Guar. Fund

• Decision Date: 13 March 2007
• Docket Number: No. DA 06-0011.,DA 06-0011.
• Citation: 2007 MT 69,154 P.3d 629
• Parties: William Brian BOETTCHER and Carol Boettcher, Plaintiffs and Appellants, v. MONTANA GUARANTY FUND, Western Guaranty Fund Services, James Reed, and Steve Kaste d/b/a Steve's Sports Center, Defendants and Respondents.
• Court: Montana Supreme Court

154 P.3d 629

2007 MT 69

William Brian BOETTCHER and Carol Boettcher, Plaintiffs and Appellants, v. MONTANA GUARANTY FUND, Western Guaranty Fund Services, James Reed, and Steve Kaste d/b/a Steve's Sports Center, Defendants and Respondents.

No. DA 06-0011.

Supreme Court of Montana.

Submitted on Briefs October 3, 2006.

Decided March 13, 2007.

For Appellants: Gary M. Zadick and Mark F. Higgins, Ugrin, Alexander, Zadick & Higgins, Great Falls, Montana.

For Respondents: Kelly J.C. Gallinger and Lisa A. Speare, Brown Law Firm, P.C., Billings, Montana.

Justice BRIAN MORRIS delivered the Opinion of the Court.

¶ 1 William Brian Boettcher and Carol Boettcher (collectively the Boettchers) appeal from an order of the Eighth Judicial District, Cascade County, granting summary judgment in favor of Montana Insurance Guaranty Association (MIGA), Western Guaranty Fund Services (Western Guaranty), and James Reed (Reed). Defendant Steve Kaste (Kaste) does not join this appeal. We affirm in part and reverse in part.

¶ 2 The Boettchers present the following issues for appeal:

¶ 3 1. Whether § 33-10-110, MCA, grants MIGA immunity from liability arising out of statutory and common law claims of bad faith.

¶ 4 2. Whether § 33-10-110, MCA, extends immunity to Western Guaranty and Reed for statutory and common law claims of bad faith.

¶ 5 3. Whether § 33-10-110, MCA, violates substantive due process.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 6 William Brian Boettcher fell from a loft and shattered both heels while painting Kaste's commercial building on July 26, 2001. Legion Insurance Company (Legion) insured Kaste at the time of the accident with a $1 million policy for commercial auto and property coverage. The Boettchers filed claims against the Legion policy seeking compensation for their injuries. Legion became insolvent before resolving the Boettchers' claims.

¶ 7 The Boettchers' claims transferred to MIGA upon Legion's insolvency. The Boettchers improperly refer to MIGA as the Montana Guaranty Fund in the caption of their appeal. MIGA is the nonprofit association of insurance companies statutorily created to provide a mechanism for payment of covered claims to avoid financial loss to claimants or policyholders because of the insolvency of an insurer. Western Guaranty is a nonprofit organization that performs claims handling for MIGA. Reed worked for Western Guaranty and handled the Boettchers' claims.

¶ 8 The Boettchers filed a complaint for declaratory relief in the Eighth Judicial District, Cascade County on January 10, 2005. The Boettchers allege that MIGA, Western Guaranty, and Reed failed to settle their claims in a reasonable manner. The Boettchers requested that the District Court issue a declaratory ruling that: 1) MIGA has all the rights, duties, and obligations of the insolvent insurer including statutory and common law obligations of good faith owed to an insured and to a third party under the Montana Insurance Guaranty Association Act (the Act); 2) the limitation of liability afforded MIGA under the Act applies only to its obligations within the policy limits of the insolvent insurer and not to the "extra-contractual" liability involving violations of statutory and common law principles of good faith and fair dealing; 3) statutory or common law limitations of liability do not extend to any entity or person hired to administer claims on behalf of MIGA; and 4) any immunity from any "extra-contractual" liability granted to MIGA violates equal protection and due process under the state and federal constitutions. MIGA, Western Guaranty, and Reed denied the Boettchers' claims for declaratory relief in an answer filed on February 25, 2005.

¶ 9 The Boettchers filed a motion for summary judgment on July 22, 2005, specifically challenging § 33-10-110, MCA, the statute that insulates MIGA from any liability relating to acts performed within its duties. MIGA, Western Guaranty, and Reed also filed a motion for summary judgment on July 25, 2005. The Boettchers acknowledged that they had received the statutory maximum claim of $300,000 allowed under MIGA. They argued, however, that Montana law entitled them to pursue recovery of the expenses that they incurred in forcing MIGA, Western Guaranty, and Reed to pay the $300,000. The Boettchers asserted that MIGA, Western Guaranty, and Reed withheld payment and caused a two-year delay and unnecessary litigation in settling their claims.

¶ 10 The District Court granted summary judgment in favor of MIGA, Western Guaranty, and Reed. The court concluded that MIGA's rights, duties, and responsibilities extend only to "covered claims," not including statutory and common law obligations of good faith owed to an insured and a third-party claimant. The court determined that the 2001 version of § 33-10-110, MCA, protected MIGA from statutory and common law good faith and fair dealing claims and that such immunity extended to Western Guaranty and Reed for acts performed on behalf of MIGA. The court concluded that the immunity statute does not violate substantive due process rights under the Fourteenth Amendment of the United States Constitution or Article II, Section 4, of the Montana Constitution. The Boettchers appeal.

STANDARD OF REVIEW

¶ 11 We review de novo the district court's grant of summary judgment. Petroleum Tank Release v. Capitol Indem., 2006 MT 133, ¶ 12, 332 Mont. 352, ¶ 12, 137 P.3d 522, ¶ 12. If no genuine issue of material fact exists, we determine whether the moving party is entitled to judgment as a matter of law. Petroleum Tank Release, ¶ 12. Accordingly, we review the district court's legal determinations to establish whether the conclusions were correct. Petroleum Tank Release, ¶ 12.

DISCUSSION

¶ 12 Whether § 33-10-110, MCA, grants MIGA immunity from liability arising out of statutory and common law claims of bad faith.

¶ 13 The Boettchers concede that § 33-10-110, MCA, cloaks MIGA with immunity from liability arising out of actions taken in the performance of its powers and duties. The Boettchers argue that MIGA acted outside of its statutory duty in failing to reasonably settle their claims, and thus the immunity provision cannot protect MIGA from liability arising out of bad faith claims. The Boettchers contend that § 33-10-105(1)(b), MCA, implicitly requires MIGA to settle claims reasonably under the Unfair Trade Practices Act (UTPA), embodied in Title 33, Chapter 18, MCA. The Boettchers argue that any breach of that duty gives rise to both a common law cause of action for bad faith and a statutory cause of action under § 33-18-242, MCA.

The Act (2001) versus the Act (2005)

¶ 14 As a preliminary matter, we must determine whether to apply the 2001 version of the Act or the amended 2005 version. We determine the substantive rights between the parties according to the law in effect at the date of injury. Anderson v. Werner Enterprises, Inc., 1998 MT 333, ¶ 28, 292 Mont. 284, ¶ 28, 972 P.2d 806, ¶ 28. The Boettchers urge us to apply the 2001 version of the Act, because the claims handling practices in question occurred before the Legislature amended the Act on March 18, 2005.

¶ 15 MIGA concedes that the 2001 version of the Act constituted the law at the time of Boettcher's underlying injury related to his fall from the loft. MIGA argues nevertheless that the 2005 version of the Act should govern any potential third party claims that the Boettchers may have against MIGA. MIGA bases its contention on the fact that the underlying claim settled on October 6, 2005, when the parties executed an assignment of claims document. MIGA contends that the October settlement signified the proper time for filing a third party action under § 33-18-242(6), MCA, and, therefore, the law in effect at the time that the claims could be filed under the UTPA should control which version of the Act applies to the Boettchers' claims.

¶ 16 MIGA's position disregards our longstanding rule, however, to apply the law in effect at the date of the injury. Anderson, ¶ 28. For purposes of the Boettchers' potential common law bad faith claim, the alleged tortious conduct began when MIGA, Western Guaranty, and Reed handled and supposedly unreasonably rejected the Boettchers' first demand for payment. All elements of the tort existed upon the alleged unreasonable refusal to pay. Brewington v. Employers Fire Insurance Co., 1999 MT 312, ¶ 29, 297 Mont. 243, ¶ 29, 992 P.2d 237, ¶ 29.

¶ 17 Similar reasoning applies to the Boettchers' potential statutory bad faith claim pursuant to the UTPA. The injuries in this case, if any, took place when MIGA, Western Guaranty, and Reed failed to handle the Boettchers' claims in a reasonable manner. Section 33-18-242(1), MCA. This first alleged failure took place when the Boettchers made a demand for payment from MIGA before the Legislature amended the Act in 2005. Any claim processing restrictions imposed under § 33-18-242(6)(b), MCA, do not alter the fact that the Boettchers' alleged injuries in this case occurred when MIGA, Western Guaranty, and Reed handled and allegedly unreasonably rejected the Boettchers' demands for payment. These alleged injuries occurred when the 2001 Act controlled.

¶ 18 The Boettchers further contend that § 33-10-110, MCA, as amended in 2005, contains no express provision on retroactivity and, therefore, the amended statute can be applied only prospectively. We will not apply a statute retroactively unless the Legislature clearly expresses its intention of such retroactive application. Anderson, ¶ 28. Nothing in the face of the 2005 version of § 33-10-110, MCA, indicates that the Legislature intended for the amended statute to be applied retroactively. We apply the 2001 version of the Act in light of the fact that the Boettchers' alleged injuries occurred before the Legislature enacted the 2005 amendments.

Application of the Act (2001)

¶ 19 We consider whether § 33-10-110, MCA (2001), grants MIGA immunity from bad faith claims....