Fillinger v. Northwestern Agency, Inc., of Great Falls

• Decision Date: 03 June 1997
• Docket Number: No. 96-255,96-255
• Parties: , 60 A.L.R.5th 845 Steve FILLINGER and Rhonda Fillinger, Steve Fillinger Outfitter & Guide Service, Inc., a/k/a Steven Fillinger Outfitters, Inc., a/k/a Steve Fillinger Outfitters, a/k/a Fillinger Outfitters, Plaintiffs, Respondents and Cross Appellants, v. NORTHWESTERN AGENCY, INC., OF GREAT FALLS, Defendant and Appellant.
• Court: Montana Supreme Court

Page 1347

938 P.2d 1347

283 Mont. 71, 60 A.L.R.5th 845

Steve FILLINGER and Rhonda Fillinger, Steve Fillinger

Outfitter & Guide Service, Inc., a/k/a Steven Fillinger

Outfitters, Inc., a/k/a Steve Fillinger Outfitters, a/k/a

Fillinger Outfitters, Plaintiffs, Respondents and Cross Appellants, v. NORTHWESTERN AGENCY, INC., OF GREAT FALLS, Defendant and Appellant.

No. 96-255.

Supreme Court of Montana.

Submitted on Briefs April 17, 1997.

Decided June 3, 1997.

Charles R. Johnson and Kirk D. Evenson; Marra, Wenz, Johnson & Hopkins; Great Falls, for Appellant.

Robert B. Pfennigs and Jack L. Lewis; Jardine, Stephenson, Blewett & Weaver; Great Falls, for Respondents.

REGNIER, Justice.

Northwestern Agency, Inc., hereinafter "Northwestern," appeals from the judgment and jury verdict of the Eighth Judicial District Court, Cascade County. The Respondents, collectively referred to herein as the "Fillingers," filed a cross-appeal but have elected only to respond to the issues raised by Northwestern and do not pursue their cross-appeal. The Fillingers filed a complaint against Northwestern seeking to recover alleged economic losses incurred as a consequence of Northwestern's procurement of an insurance policy which did not afford the coverage allegedly requested by the Fillingers,and which coverage they believed Northwestern had procured for them. Western Heritage, the insurer, was originally joined as a defendant in this action, but settled with the Fillingers prior to trial. The Fillingers dropped their separate individual claims. The case was submitted to the jury on a Special Verdict with eighteen questions pertaining to five separate legal theories including: negligent failure to procure the insurance coverage requested; negligent failure to inform the Fillingers that the requested coverage was not procured; negligent misrepresentation; breach of oral contract; and breach of §§ 33-18-201, MCA, et seq. The jury returned a verdict which found Northwestern liable on all five theories and assessed $125,000 in damages. We affirm.

The issues on appeal are:

1. Did the District Court err in instructing the jury that an insurance policyholder has no duty to read the policy unless under the circumstances it is unreasonable not to read it?

2. Did the District Court err by allowing evidence of the oral negotiations between the Fillingers and Northwestern regarding their agreement to procure a specified insurance coverage?

3. Did the District Court err in failing to instruct the jury on the applicable law in regard to the necessity of expert testimony to establish the standard of care of an insurance agent in a negligence action by a client for failure to procure the coverage requested by the client?

4. Did the District Court err in submitting the Fillingers' claim to the jury under an Unfair Trade Practices Act theory, specifically § 33-18-201(1), MCA, as it applied to Northwestern?

FACTUAL BACKGROUND

The Fillingers own and operate a guide and outfitting business near Stockett, Montana. From 1983 to 1994, with the exception of one year, the Fillingers contracted with Burlington Northern Railroad ("BN") to provide outfitting services, including guided hunting and floating trips, for customers and employees of BN. During the negotiations for the contract, the BN representative made it clear that a prerequisite for the Fillingers being awarded the contract was that they obtain insurance which would cover the outfitting business for any accident, including an accident involving a horse. Steve Fillinger, therefore, contacted Joyce Jenkins, the president of Northwestern, concerning his insurance requirements. An insurance policy was procured by Jenkins and renewed annually by the Fillingers.

In November 1989, during a hunting trip sponsored by BN and guided by the Fillingers, a BN employee, Mike O'Shaughnessy, was injured in a horse-related accident. The medical expenses were submitted by the Fillingers to Northwestern; however, the payment of the medical expenses was not immediately rendered. On July 25, 1990, prior to a planned BN float trip, BN held a meeting with Steve Fillinger and Jenkins to discuss the O'Shaughnessy claim. BN was placated by the outcome of the meeting and did not cancel its float trip with the Fillingers.

In 1991, the O'Shaughnessy claim still had not been paid, inducing BN to cancel its 1991 contract with the Filingers. In 1992, BN and the Fillingers renewed their contract negotiations. A new contract was agreed upon which reduced the amount BN would pay to the Fillingers for outfitting services. The new contract also eliminated the use of horses and required only "liability insurance as required by the State of Montana for outfitters."

At trial, the parties presented conflicting factual accounts surrounding the procurement of the policy, the representations made by Jenkins, and the coverage the policy entailed. Steve Fillinger testified he told Jenkins he "needed insurance that would cover everything, especially if anybody got hurt on a horse." Jenkins procured an insurance policy for the Fillingers. Steve testified that she assured him that the policy would cover anything that happens, especially on a horse. Steve explained that he did not read the policies word for word, but confirmed with Jenkins that the policies contained the coverage he had requested. Steve testified Jenkins represented that a specific clause in the policy covered his concerns regarding the horses and referred to this clause as the "horse rider." Steve stated that he looked through the policy each year to see if the "horse rider" clause was attached because that was where BN's concerns seemed to be focused.

In 1991, the Fillingers continued to use Jenkins to procure their insurance, even though BN was not one of their clients that year. Without BN as a client, Steve no longer needed the special insurance coverage and all he requested from Jenkins was a"regular outfitter's policy." Jenkins maintained throughout the trial that this regular outfitter's policy was all that Steve ever requested. Steve testified, however, that Jenkins explained to him in 1991 for the first time that she could not provide the type of policy he had previously requested which would cover any accident, and that his current insurance policy was only a liability policy which provides coverage only for negligent acts. During the trial, Steve asserted that if Jenkins had informed him of this fact earlier there would have been a number of options available to the Fillingers to satisfy BN's insurance concerns, including elimination of the risk itself by discontinuing the use of horses.

At trial, the Fillingers sought recovery of damages for the concessions made for the 1992 contract which were allegedly necessary in order to get BN back as a client and for the loss of income during 1991 in which year BN did not renew its contract with the Fillingers. The jury found Northwestern liable on all five theories and assessed $125,000 in damages. Northwestern appeals.

ISSUE 1

Did the District Court err in instructing the jury that an insurance policy holder has no duty to read the policy unless under the circumstances it is unreasonable not to read it?

It is well within the district court's discretion to decide how to instruct a jury, taking into account theories of contending parties, and this Court will not overturn the district court except for abuse of discretion. Hall v. Big Sky Lumber & Supply, Inc. (1993), 261 Mont. 328, 863 P.2d 389; Cline v. Durden (1990), 246 Mont. 154, 803 P.2d 1077. In Hall, we explained that on review by this Court

all jury instructions must be read as a whole and the party assigning error to the court's instructions must show prejudice in order to prevail. Walden v. State (1991), 250 Mont. 132, 818 P.2d 1190. Such prejudice will not be found if the jury instructions in their entirety state the applicable law of the case. Walden, 250 Mont. at 137, 818 P.2d at 1193.

Hall, 863 P.2d at 392.

Northwestern argues that the District Court erred in giving its Instruction No. 24 which provides:

In connection with your deliberations as to whether any reliance on Joyce Jenkins was justified, I instruct you that, an insurance policyholder has no duty to read the policy unless under the circumstances it is unreasonable not to read it.

Nor does it mean that an officer or employee of Fillinger Outfitters had a duty to read the policy every time a new policy was issued.

You should, therefore, consider whether the officers and employees of Fillinger Outfitters acted reasonably in relying upon any representations made by Joyce Jenkins or any other officer or employee of Northwestern Agency rather than reading the policy. This will depend upon the Plaintiff's relationship with Joyce Jenkins and the officers and employees of Northwestern Agency and the nature of the situation. You should consider whether the representations of Joyce Jenkins, as an insurance agent and given her expertise, as well as the representations of the other Northwestern Agency officers and employees, naturally tended to induce Fillinger Outfitters to reasonably believe that reading the policy would be superfluous.

(Emphasis added.) This instruction was derived essentially verbatim from Fiorentino v. Travelers Ins. Co. (E.D.Pa.1978), 448 F.Supp. 1364. The court in Fiorentino held that this instruction accurately reflected Pennsylvania law on the subject of negligent misrepresentation and therefore determined that the lower court was correct in giving such instruction.

The issue which Northwestern raises in regard to Instruction No. 24 is whether an insured has an absolute duty to read their insurance policy. This Court has not previously addressed the issue of whether an insured has an absolute duty to read their insurance policy.

Northwestern asserts that the line of authority, including Fiorentino, which holds that an insured does not have an absolute duty to...