High Country Paving, Inc. v. United Fire & Cas. Co.

• Decision Date: 31 December 2019
• Docket Number: OP 19-0283
• Parties: HIGH COUNTRY PAVING, INC., Plaintiff, v. UNITED FIRE & CASUALTY CO., Defendant.
• Court: Montana Supreme Court

398 Mont. 191

454 P.3d 1210

2019 MT 297

HIGH COUNTRY PAVING, INC., Plaintiff,

v.UNITED FIRE & CASUALTY CO., Defendant.

OP 19-0283

Supreme Court of Montana.

Submitted on Briefs: October 9, 2019

Decided: December 31, 2019

For Plaintiff: Robert K. Baldwin, Trent M. Gardner, Jeffrey J. Tierney, Goetz, Baldwin & Geddes, P.C., Bozeman, Montana

For Defendant: Jon T. Dyre, Crowley Fleck PLLP, Billings, Montana

For Amicus Montana Defense Trial Lawyers: Mikel L. Moore, Moore, Cockrell, Goicoechea & Johnson, P.C., Kalispell, Montana

For Amicus Montana Trial Lawyers: Colin Gerstner, Gerstner Law PLLC, Billings, Montana

Justice Ingrid Gustafson delivered the Opinion of the Court.

¶1 Pursuant to M. R. App. P. 15, the United States District Court for the District of Montana, Missoula Division, the Honorable Donald W. Molloy presiding, certified the following question of law to this Court:

Where liability is reasonabl[y] clear, is it a breach of an insurer’s duty to its insured to pay policy limits to a third party in a motor vehicle accident without a release of its insured where claimed special damages are below policy limits but total damages (including general damages) exceed policy limits?

¶2 We accepted the certified question as written, and now conclude the answer to the question is no, with certain qualifications.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 In accordance with M. R. App. P. 15(6)(a)(ii), the U.S. District Court set forth the relevant factual background to the certified question in its Certification Order, which we restate here.

¶4 High Country Paving, Inc. (High Country), is an asphalt paving company located in Bozeman. High Country purchased a liability insurance policy from United Fire & Casualty Co. (United Fire) which included three types of coverage: (1) commercial general liability (CGL) coverage in the aggregate amount of $2 million, with a $1 million per-occurrence limit; (2) commercial auto liability coverage in the amount of $1 million; and (3) commercial umbrella coverage in the amount of $2 million. In August 2016, during the policy period, one of High Country’s employees was involved in an accident while operating an insured vehicle. In the accident, a loaded equipment trailer came unhitched while the vehicle was under way and collided with another vehicle. The driver of the other vehicle was killed, and a passenger was seriously injured. High Country then notified United Fire of the accident.

¶5 United Fire hired attorney Nick Pagnotta of the Williams Law Firm to represent High Country. High Country separately retained attorneys Jeffrey Tierney and Trent Gardner of Goetz, Baldwin & Geddes, P.C. On October 31, 2017, attorney Chris Edwards of Edwards, Frickle & Culver, issued a demand letter on behalf of the parties injured in the accident, demanding payment of "High Country Paving’s Policy Limits of $3,000,000.00 ..." without a release for High Country. The demand letter included a description of the following claimed economic damages:

Projected lost future income: $609,486.36

Medical expenses, as of the demand date: $283,991.09

Assisted living expenses, as of the demand date: $61,060.89

Projected future assisted living expenses: $595,342.91

The total of the claimed economic damages was $1,549,881.25. Edwards’s demand letter further explained that his clients would also be seeking compensation for general damages like pain and suffering and punitive damages.

¶6 On November 9, 2017, Tierney wrote to Pagnotta and United Fire, stating that High Country objected to any settlement that did not include a release for High Country. On November 14, Pagnotta responded to Edwards with a counteroffer to resolve the claims for $3 million, including a release for High Country. On November 27, Edwards refused Pagnotta’s counteroffer and renewed his original demand for payment of $3 million without a release for High Country. Also on November 27, Edwards wrote to Tierney and demanded an additional $2.5 million from High Country.

¶7 On December 1, 2017, attorney Katherine Huso of Matovich, Keller & Murphy P.C., who had been retained by United Fire, wrote to Tierney, denying High Country’s request for CGL coverage. Huso’s letter further stated that United Fire was considering accepting Edwards’s demand for payment of $3 million without a release for High Country. Huso advised Tierney that United Fire would continue to provide High Country defense if it decided to pay policy limits without a release. On December 5, Tierney replied to Huso, objecting to United Fire accepting Edwards’s settlement offer unless it included a release for High Country. On December 8, Huso informed Tierney that United Fire was planning to accept Edwards’s settlement offer and Tierney again reiterated High Country’s objection. On December 8, 2017, United Fire accepted Edwards’s demand for payment of $3 million without a release for High Country.

¶8 After United Fire’s settlement, High Country continued to negotiate a separate settlement with Edwards in exchange for a release. Tierney wrote to United Fire on December 27, advising it that High Country had an opportunity to settle and secure a release in exchange for $1.275 million and the assignment of certain potential legal claims. High Country offered to either let United Fire fund the $1.275 million cash component of the settlement or reject the settlement and proceed with litigation if United Fire would agree to defend and indemnify High Country without reservation. On December 28, Huso responded to Tierney, again explaining why United Fire believed there was no CGL coverage and advising that United Fire was not willing to pay the proposed $1.275 million settlement or defend and indemnify High Country without any reservation. But, United Fire offered to defend High Country. On February 5, 2018, High Country settled with Edwards’s clients for $1.275 million and the assignment of certain potential legal claims, in exchange for a release.

¶9 High Country’s liability for causing the accident was reasonably clear and, prior to its final settlement, United Fire had made all Ridley payments.¹

STANDARD OF REVIEW

¶10 This Court may answer a question of law certified to it by another qualifying court. M. R. App. P. 15(3). This Court’s review of a certified question is "purely an interpretation of the law as applied to the agreed facts underlying the action." U.S. Specialty Ins. Co. v. Estate of Ward , 2019 MT 72, ¶ 6, 395 Mont. 199, 444 P.3d 381 (quoting N. Pac. Ins. Co. v. Stucky , 2014 MT 299, ¶ 18, 377 Mont. 25, 338 P.3d 56 ).

DISCUSSION

¶11 "It is not the job of this Court to determine questions of fact or to apply the law to the facts presented to us." BNSF Ry. Co. v. Feit , 2012 MT 147, ¶ 7, 365 Mont. 359, 281 P.3d 225. In answering a certified question of law, we interpret the law "as applied to the agreed facts underlying the action." U.S. Specialty Ins. Co. , ¶ 6 (citation omitted). In its brief, High Country argues this Court should reformulate the certified question because the question "demands an unequivocal answer to an inherently factual question." High Country asserts the certified question must be rewritten because the question assumes total damages, including general damages, in this case exceed policy limits. High Country disputes that is the case; however, based on the agreed facts as presented by the U.S. District Court we may assume for purposes of the certified question that total damages exceeded High Country’s $3 million policy limit. After United Fire settled for the $3 million policy limit, without obtaining a release for High Country, High Country continued to negotiate with counsel for the injured parties, who was asking for an additional $2.5 million from High Country. Eventually, High Country was able to obtain a release after paying another $1.275 million, along with the assignment of some potentially valuable legal claims. Though M. R. App. P. 15(4) allows this Court to reformulate a certified question, we decline to do so here.

¶12 High Country further asks this Court to consider facts beyond those certified by the U.S. District Court in its Certification Order. In its briefing, High Country repeatedly refers to facts not presented by the U.S. District Court. Though High Country appears to believe the factual background as presented to this Court is insufficient, we note that Judge Molloy’s Certification Order presented the relevant facts to the controversy from which the question arose, "which have been stipulated by the parties[.]" It is therefore unnecessary to go beyond the facts as certified by the U.S. District Court.

¶13 As a preliminary matter, and as set forth in the U.S. District Court’s factual background, we note it is undisputed that High Country’s liability for causing the underlying accident in this case was reasonably clear. As a result of that accident, one person died and another was critically injured. Pursuant to its duties as outlined by this Court in Ridley , United Fire advance-paid the medical expenses of the injured parties prior to its final settlement. Ridley , 286 Mont. at 334, 951 P.2d at 992. High Country argues that any further payments to the injured parties beyond the required Ridley payments without obtaining a release for High Country would violate United Fire’s duties to High Country as its insured, as general damages are not a type of damages which are required to be advance-paid to an injured third party under Ridley . United Fire argues it was required by this Court’s case law to tender a payment of policy limits to the injured parties, without a release for High Country, as it was reasonably clear that total damages exceeded policy limits. The U.S. District Court noted the apparently unresolved tension in our case law between an insurer’s duty to a third-party claimant and its duty to its insured, and presented this Court with the foregoing certified question.

¶14 In answering the certified question as presented, it is important to note our...