DeTienne Associates Ltd. Partnership v. Montana Rail Link, Inc., 93-349

• Decision Date: 17 February 1994
• Docket Number: No. 93-349,93-349
• Parties: DeTIENNE ASSOCIATES LIMITED PARTNERSHIP and Park Plaza Hotel, Inc., Plaintiffs and Respondents, v. MONTANA RAIL LINK, INC., Defendant and Appellant.
• Court: Montana Supreme Court

Page 258

869 P.2d 258

264 Mont. 16

DeTIENNE ASSOCIATES LIMITED PARTNERSHIP and Park Plaza Hotel, Inc., Plaintiffs and Respondents, v. MONTANA RAIL LINK, INC., Defendant and Appellant.

No. 93-349.

Supreme Court of Montana.

Submitted on Briefs Nov. 10, 1993.

Decided Feb. 17, 1994.

Edward A. Murphy, Datsopoulos, MacDonald & Lind, Missoula, for defendant and appellant.

Patrick E. Melby, Luxan & Murfitt, Helena, for plaintiffs and respondents.

HUNT, Justice.

Appellant, Montana Rail Link, Inc., appeals from that portion of a judgment of the First Judicial District Court, Lewis and Clark County, awarding damages to respondents, DeTienne Associates and Park Plaza Hotel, Inc., for business interruption losses in excess of reimbursed insurance proceeds which were caused by a prolonged power outage after an explosion caused by a collision between Montana Rail Link trains.

Affirmed.

The issues are as follows:

1. Did the District Court err when it disregarded several of Montana Rail Link's proposed exhibits in determining Park Plaza's business interruption losses?

2. Was the District Court's finding that Park Plaza suffered $405,000 in business interruption losses clearly erroneous?

Respondent, DeTienne Associates (DeTienne), is a Montana limited partnership with its principal place of business in Helena. Respondent, Park Plaza Hotel, Inc. (Park Plaza), is a Montana corporation also with its principal place of business and hotel in Helena. DeTienne owns the hotel and Park Plaza operates it. Farmers Union Mutual Insurance Company (FUMI) is a Montana insurance company operating out of Great Falls, which insured Park Plaza under a special multi-peril policy of insurance. Montana Rail Link, Inc. (MRL), operates a railroad with tracks and a rail yard in Helena.

On February 2, 1989, MRL's rail cars, stopped on a mountain grade west of Helena, became uncoupled from the engine and rolled back toward Helena, colliding with MRL's yard engines. An explosion resulted which caused an extensive power outage in the Helena area. The power outage lasted four or more hours during extremely cold weather. During the power outage, Park Plaza's hot water heating system and reheat coils froze and broke. After heat was restored, water leaked from the broken pipes causing considerable damage to the hotel's ceilings, carpet, drywall, paneling, and a domestic hot water heater and tank.

In November 1989, Park Plaza started a remodeling project on some previously planned additions which delayed the demolition and reconstruction processes of some of the hotel's damaged areas.

On November 19, 1990, FUMI brought suit against MRL in Cascade County. On February 2, 1991, Park Plaza brought suit in Lewis and Clark County to recover damages. On May 31, 1991, FUMI intervened to assert its right of subrogation against MRL, and on October 22, 1991, its suit against MRL was transferred to Lewis and Clark County. On November 7, 1991, the First Judicial District Court consolidated the two suits and dismissed FUMI's separate complaint in intervention. On August 11, 1992, the parties stipulated that the issue of negligence would not be tried and that trial would be limited to the issue of proximate cause and damages. On August 27, 1992, the court granted partial summary judgment against MRL and in favor of Park Plaza and FUMI for damages caused by the power outage.

Park Plaza and FUMI could not agree on the amount of the personal property and business interruption losses. Therefore, Park Plaza invoked the appraisal clause contained in its insurance policy with FUMI to determine the losses. Pursuant to the appraisal clause under the insurance policy, each party selected an appraiser, and those appraisers selected a third appraiser to serve as an umpire in the evaluation of claims at settlement negotiations. The appraisers found that Park Plaza's personal property loss was $24,006. But because the business interruption losses exceeded the $300,000 policy limit, FUMI's appraiser did not calculate the loss because FUMI was not obligated to pay Park Plaza any excess. FUMI's appraiser determined a reasonable indemnity period to be February 2, 1989, through September 18, 1989.

By order on October 15, 1992, the court granted Park Plaza and FUMI's motion to exclude MRL from calling any witnesses at the trial on October 19 and 20, 1992. At trial, Park Plaza sought $491,111 in business interruption losses for the period February 2, 1989, through December 31, 1989. Park Plaza based this claim on 1989 operating losses of $89,060, 1989 extraordinary income losses of $59,002, 1989 projected lost profits of $329,866, and 1990 bus tour losses of $13,183.

On March 26, 1993, the court found that Park Plaza's total business interruption losses reasonably related to the power outage were $405,000, and awarded $105,000 to Park Plaza and $300,000 to FUMI. The court also found that the time period for purposes of determining the business interruption losses was February 2, 1989, through November 1, 1989.

At trial, the court did not rule on the admissibility of the MRL's proposed Exhibits H and I at issue on appeal. However, the court effectively denied their admission when, in its conclusions of law, it stated that it had not used the exhibits in determining the amount of Park Plaza's business interruption losses.

On April 23, 1993, MRL filed motions for a new trial or alternatively to amend the court's findings of fact. The court denied the motions. On July 2, 1993, MRL filed this appeal of the judgment for both Park Plaza and FUMI.

Subsequently, Park Plaza and FUMI each filed cross-appeals against MRL asserting that the record supported a much higher award of damages for the loss of business than that found by the District Court. However, after MRL satisfied FUMI's judgment, both MRL and FUMI dismissed appeals against each other on August 16, 1993. Similarly, on appeal, after Park Plaza considered this Court's applicable standard of review, it withdrew its cross-appeal against MRL. Of the total damages of $533,596.49 found by the District Court, MRL appeals that part of the award related to business interruption losses, $405,000, and specifically that portion Park Plaza claims to be in excess of the insurance reimbursement, $105,000.

ISSUE 1

Did the District Court err when it disregarded several of Montana Rail Link's proposed exhibits in determining Park Plaza's business interruption losses?

During cross-examination of FUMI's appraiser, MRL attempted to introduce two exhibits over the objections of Park Plaza and FUMI. MRL's proposed Exhibits H and I were a spreadsheet and an attached cover letter which had been prepared by Park Plaza's appointed appraiser and sent to FUMI's appointed appraiser during their settlement negotiations. The spreadsheet purported to show FUMI's subrogation claim against MRL from the period February through December, 1989. The cover letter revised that claim figure and also indicated that it was part of settlement negotiations in resolving the claim between Park Plaza and FUMI. FUMI's appraiser testified that he had not relied on either document when he determined Park Plaza's business interruption losses. Park Plaza and FUMI objected to admission of both exhibits on three grounds: (1) that FUMI's appraiser did not rely on the documents when he determined Park Plaza's business interruption losses; (2) that they were inadmissible as hearsay under Rule 802 of the Montana Rules of Evidence; and (3) that they were inadmissible as part of attempts to negotiate a compromise under Rule 408, M.R.Evid.

MRL asserts that the exhibits support its analysis of Park Plaza's business interruption losses. FUMI's expert put the letter and spreadsheet into his report submitted to MRL's attorney in an attempt to generate some settlement discussions with MRL and to give the attorney an...