Dempsey v. Allstate Insurance Company, 04-032

Citation104 P.3d 483,2004 MT 391
Decision Date30 December 2004
Docket NumberNo. 04-032,04-032
PartiesTYLER DEMPSEY, Individually and on behalf of all others similarly situated, Plaintiff, v. ALLSTATE INSURANCE COMPANY, an Illinois corporation, Defendant.
CourtUnited States State Supreme Court of Montana

2004 MT 391
104 P.3d 483

TYLER DEMPSEY, Individually and on behalf of all others similarly situated, Plaintiff,
v.
ALLSTATE INSURANCE COMPANY, an Illinois corporation, Defendant.

No. 04-032

Supreme Court of Montana.

Argued: July 14, 2004

Submitted: August 31, 2004

Decided: December 30, 2004


For Plaintiff: Brian Fay (argued) and Christopher Angel, Angel, Coil and Bartlett, Bozeman, Montana.

For Defendant: Peter Habein (argued), Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Montana.

For Amici Curiae: Randall G. Nelson, Nelson & Dahle, Billings, Montana (MDTLA) Roger M. Sullivan (argued), McGarvey, Heberling, Sullivan & McGarvey, Kalispell, Montana (MTLA), Jon Metropoulos and Dana Hupp, Gough, Shanahan, Johnson & Waterman, Helena, Montana (Property Casualty Insurers).

Justice W. William Leaphart delivered the Opinion of the Court.

¶1 The Plaintiffs, Tyler Dempsey and those similarly situated, brought this class action in the United States District Court for the District of Montana to recover damages from Allstate Insurance Company pursuant to insurance policies Allstate had issued. The Class alleges that the retroactive application of our decision in Hardy v. Progressive Specialty Insurance Co., 2003 MT 85, 315 Mont. 107, 67 P.3d 892, entitles them to additional payments from past insurance claims that were not previously allowed because their automobile insurance policies did not allow for stacking. Allstate moved to dismiss, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The District Court certified a question and six relevant facts to this Court and denied Allstate's motion without prejudice pending our answer.

¶2 We accepted the certified question, which is stated as:

¶3 Does the Montana Supreme Court's decision in Hardy v. Progressive Specialty Insurance Co., 2003 MT 85, 315 Mont. 107, 67 P.3d 892, apply prospectively only, or does it apply retroactively to require payment of stacked uninsured, underinsured motorist and medical payment insurance coverages in qualifying circumstances on claims arising before the date of the Hardy decision?

¶4 Our answer is that the Hardy decision applies retroactively to cases pending on direct review or not yet final.

FACTUAL AND PROCEDURAL BACKGROUND

¶5 The District Court certification included the following four agreed upon facts:1

¶6 1. On January 1, 2000, Dempsey was injured in a motor vehicle accident in Gallatin County, Montana. He was a named insured under an Allstate policy which had medical payment coverage limits of $2,000 applicable to each of four vehicles listed in the policy.

¶7 2. Although Dempsey's medical expenses exceeded $10,000, Allstate only paid the single limit of liability, $2,000, and declined to stack limits, relying on anti-stacking language in the policy and Montana's anti-stacking statute, § 33-23-203, MCA, which was in effect at the time of Dempsey's accident.

¶8 3. On April 18, 2003, the Montana Supreme Court decided Hardy v. Progressive Specialty Insurance Co., which determined Montana's anti-stacking statute to be unconstitutional and the anti-stacking language in Progressive's insurance policy to be void and unenforceable and further held that Progressive had to "stack" and pay underinsured motorist benefits for each coverage for which the insured had paid a separate premium.

¶9 4. Allstate has maintained that the Hardy decision applies prospectively only. On that basis, Allstate has declined to stack uninsured motorist, underinsured motorist, or medical payment benefits in claims arising before the April 18, 2003, decision in Hardy. Dempsey accordingly brought a class action to force Allstate to stack medical payment, uninsured, and underinsured policy limits on all claims arising prior to the Hardy decision.

¶10 In sum, the claims of Dempsey and of many other Montana automobile insurance consumers ride on our determination of whether the Hardy decision applies retroactively or whether it only applies to claims that arose on or after April 18, 2003. In addressing this issue, we invited the Montana Trial Lawyers Association (MTLA) and the Montana Defense Trial Lawyers Association (MDLTA) to appear as amicus curiae. We held oral argument en banc on July 14, 2004.

DISCUSSION

¶11 Does the Montana Supreme Court's decision in Hardy v. Progressive Specialty Insurance Co. apply prospectively only, or does it apply retroactively to require payment of stacked uninsured, underinsured motorist and medical payment insurance coverages in qualifying circumstances on claims arising before the date of the Hardy decision?

I. The Rule of Retroactivity in Montana

¶12 In 1971 the United States Supreme Court announced Chevron Oil Co. v. Huson (1971), 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296. Chevron laid-out a flexible three-factored test for whether a decision applies prospectively only. We adopted the Chevron test for questions of Montana law in LaRoque v. State (1978), 178 Mont. 315, 318-19, 583 P.2d 1059, 1061, and subsequently applied it several times. See, e.g., Poppleton v. Rollins, Inc. (1987), 226 Mont. 267, 271, 735 P.2d 286, 289; Nehring v. LaCounte (1986), 219 Mont. 462, 471, 712 P.2d 1329, 1335; Jensen v. State, Dep't of Labor & Indus. (1984), 213 Mont. 84, 88, 689 P.2d 1231, 1233. In the meantime, the United States Supreme Court revisited the question of prospective application several times and eventually overruled Chevron in Harper v. Virginia Dep't of Taxation (1993), 509 U.S. 86, 113 S.Ct. 2510, 125 L.Ed.2d 74.

¶13 Then, in Porter v. Galarneau (1996), 275 Mont. 174, 185, 911 P.2d 1143, 1150, and without analyzing Harper, we strayed from our reliance on Chevron. Although Porter involved statutory retroactivity, we remarked in dicta that "we will continue to give retroactive effect to judicial decisions, which is in accord with the U.S. Supreme Court's holding in Harper v. Virginia Dep't of Taxation." Subsequently, this time as a general rule of law, we cited Porter in support of retroactivity. See Kleinhesselink v. Chevron, U.S.A. (1996), 277 Mont. 158, 162, 920 P.2d 108, 111 (holding that "we give retroactive effect to judicial decisions" and therefore a decision of ours "is applicable to this case even though it was not available to the District Court. . . ."); Haugen v. Blaine Bank of Montana (1996), 279 Mont. 1, 8, 926 P.2d 1364, 1368; State v. Steinmetz, 1998 MT 114, ¶ 10, 288 Mont. 527, ¶ 10, 961 P.2d 95, ¶ 10 (criminal case).

¶14 Following Steinmetz it appeared that we would follow the rule of the United States Supreme Court's Harper decision. However, subsequent decisions did not bear that out. In Ereth v. Cascade County, 2003 MT 328, 318 Mont. 355, 81 P.3d 463, Seubert v. Seubert, 2000 MT 241, 301 Mont. 382, 13 P.3d 365, and Benson v. Heritage Inn, Inc., 1998 MT 330, 292 Mont. 268, 971 P.2d 1227, without reference to the Porter line of cases, we applied the Chevron test to determine whether prospective application was appropriate. The Class argues that we did not expressly adopt a new approach to retroactivity in Ereth, Seubert, and Benson, that only pre-Harper cases were cited by the parties in those cases, and that the decisions were therefore aberrations where this Court inadvertently reverted to old discredited precedent. Given our long history of applying decisions prospectively we cannot ignore these recent decisions applying the Chevron test. However, we also cannot ignore our holdings in Kleinhesselink and Haugen. As we explain later in this opinion, the two lines of cases may be comfortably merged into a rule of retroactivity in keeping with the last seventy years of this Court's jurisprudence.

¶15 The question of whether we should follow the philosophy espoused by Chevron or by Harper does not produce a simple or binary answer. In settling what rule of retroactivity this Court follows we must look to the history surrounding the retroactivity of judicial decisions and what other states have fashioned for themselves in the wake of the United States Supreme Court's repudiation of the Chevron rule. We will conclude by adopting the best elements of the Harper and Chevron rules, thus adhering to our precedents and extending a measure of flexibility not available under an outright adoption of Harper. In terms of the instant case, Allstate does not overcome our strong presumption in favor of retroactivity.

A. A Brief History of Retroactivity

¶16 The retroactive/prospective distinction is relatively new to our common law tradition. In the days of Blackstone the law was understood as something that the courts applied, not something that they made. Accordingly, it made no sense for a court to comment on whether its ruling applied retroactively or not. Its ruling was simply the law as it is and always was. See Kermit Roosevelt III, A Little Theory Is a Dangerous Thing: The Myth of Adjudicative Retroactivity, 31 Conn. L. Rev. 1075, 1083 (1999) ("The Blackstonian model takes law as a timeless constant, always (optimistically) assuming the correctness of the current decision. Prior inconsistent decisions are and always were incorrect.").

¶17 This view, of course, is no longer even remotely fashionable in today's climate of legal realism and aversion to castles in the clouds. Justice Holmes, the great realist of his time, was one of the first to see past Blackstone and spy the retroactive/prospective distinction. In endorsing what we now call "retroactivity" he characterized common law adjudication not as a search for an entity separate from the courts, but as an act of creation, stating "the law of a State does not become something outside of the state court and independent of it by being called the common law. Whatever it is called it is the law as declared by the state judges and nothing else." Kuhn v. Fairmont Coal Co. (1910), 215 U.S. 349, 372, 30 S.Ct. 140, 148, 54 L.Ed. 228, 239 (Holmes, J., dissenting).

¶18 After flirting with the issue of prospective decisions in a...

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