Kyriss v. Aetna Life and Cas. Co., CV 84-115-M-CCL.

• Decision Date: 09 January 1986
• Docket Number: No. CV 84-115-M-CCL.,CV 84-115-M-CCL.
• Citation: 624 F. Supp. 1130
• Parties: Joanne KYRISS, in her capacity as Conservator for Frank Templin, Plaintiff, v. The AETNA LIFE AND CASUALTY COMPANY, a Connecticut corporation, Defendant.
• Court: U.S. District Court — District of Montana

624 F. Supp. 1130

Joanne KYRISS, in her capacity as Conservator for Frank Templin, Plaintiff, v. The AETNA LIFE AND CASUALTY COMPANY, a Connecticut corporation, Defendant.

No. CV 84-115-M-CCL.

United States District Court, D. Montana, Missoula Division.

January 9, 1986.

Terry Trieweiler, Whitefish, Mont., Sharon Morrison, Helena, Mont., for plaintiff.

Douglas Buxbaum, Poore, Roth & Robinson, Butte, Mont., for defendant.

OPINION AND ORDER

LOVELL, District Judge.

On October 3, 1985, the Supreme Court of Montana upheld a damage award in the amount of $225,000 in favor of the above-named plaintiff against the State of Montana and two physicians, Roger A. Ganfield and Leonard M. Benjamin, who treated Frank Templin at the Montana State Prison. Kyriss v. State of Montana, et al., 42 St.Rep. 1487, 707 P.2d 5 (Mont.1985). Frank Templin was incarcerated for forging a check in the amount of $30.00. While imprisoned, Templin's right great toe became infected. Over a period of time his condition worsened, eventually resulting in gangrene, and doctors were forced to amputate his right leg. Plaintiff instituted a medical malpractice action in state district court, and by the time the jury verdict was affirmed by the state supreme court Frank Templin had died.

During the pendency of the appeal, plaintiff filed this action against Aetna Life and Casualty Company ("Aetna"), the professional liability insurer of Doctors Ganfield and Benjamin. Plaintiff's complaint alleges that Aetna breached its statutory obligation to negotiate in good faith with Frank Templin or his Conservator and to expeditiously settle his claim.

Aetna has moved to strike three paragraphs from the complaint which allege that Aetna acted in bad faith and solely for the purpose of delay in appealing the state court verdict and judgment to the Supreme Court of Montana. Because Aetna's motion was filed more than 20 days after the complaint was served, it will be treated as a motion for judgment on the pleadings. See Rule 12(c), (f), Fed.R.Civ.P.

Aetna's motion is based on three primary arguments. First, Aetna maintains that Rule 32 of the Montana Rules of Appellate Procedure grants the Montana Supreme Court exclusive jurisdiction to determine the merit of an appeal. Aetna takes the position that this court has no jurisdiction to entertain the question of whether an appeal was taken for delay, for the reason that inconsistent rulings could result in an interference with the province of the state supreme court. Second, Aetna argues that allowing bad faith actions to be premised on the filing of an appeal impinges on a party's constitutional right of unfettered access to the courts. Finally, Aetna asserts that plaintiff's claims are without statutory basis because the Montana Unfair Claims Settlement Act, § 33-18-201, M.C.A., does not apply to post-judgment proceedings.

Plaintiff contends in response that the motive behind Aetna's decision to appeal is but one factor in plaintiff's bad-faith action, and would merely be presented to the jury as evidence of Aetna's continuing bad faith throughout the pendency of plaintiff's claim. Plaintiff further asserts that appellate review is limited to the facts on the trial record and the parties' arguments within their briefs, whereas a bad-faith action allows the plaintiff to conduct discovery and to inquire into the reasons for the decision to appeal, which reasons are relevant to the good faith or bad faith of Aetna's actions.

The statutory basis for plaintiff's action is § 33-18-201, M.C.A., known as the Unfair Claims Settlement Act, which has been part of the Montana Insurance Code since 1977. In pertinent part, § 33-18-201 provides:

No person may, with such frequency as to indicate a general business practice, do any of the following:

* * * * * *

(6) neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;

* * * * * *

(11) make known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

* * * * * *

This section has been construed as creating a private cause of action for insureds and claimants alike; the Supreme Court of Montana has held that under § 33-18-201, "an insurer has an obligation to claimants as well as insureds where unfair trade practices are concerned," and that when such an obligation is breached the claimant has the basis for a civil action. Klaudt v. Flink, ___ Mont. ___, 658 P.2d 1065, 1067 (1983). The court further held that such an action may be filed and tried before, concurrent with, or after the insured's liability to the claimant has been determined. Id. The court noted that an action against the insurer for violation of the insurance code is simply an action to determine whether or not the insurer violated its duty of fair dealing in settlement negotiations, and involves different issues than those raised in the underlying tort action.

Klaudt v. Flink represents one step in the development in Montana law of an "implied covenant of good faith and fair dealing." This duty to deal in good faith has been applied not only to the insurance arena, see Lipinski v. Title Ins. Co., 202 Mont. 1, 655 P.2d 970 (1982), but also to employer-employee relations, Gates v. Life of Montana, ___ Mont. ___, 668 P.2d 213 (1983), Dare v. Montana Petroleum Marketing Co., ___ Mont. ___, 687 P.2d 1015 (1984); to banking institutions dealing with customers, First National Bank of Libby v. Twombly, ___ Mont. ___, 689 P.2d 1226 (1984), Tribby v. Northwest Bank of Great Falls, ___ Mont. ___, 704 P.2d 409 (1985); to a health service corporation's dealings with its members, Weber v. Blue Cross of Montana, 196 Mont. 454, 643 P.2d 198 (1982); and to fee arrangements between a lawyer and his client, Morse v. Espeland, ___ Mont. ___, 696 P.2d 428 (1985). In the most recent development, the Montana Supreme Court upheld the application of the implied covenant to a breach of contract between two parties of substantially equal bargaining power, although the court declined to extend the breach of implied covenant to all contract breaches as a matter of law. Nicholson v. United Pacific Ins. Co., ___ Mont. ___, 710 P.2d 1342 (1985).

The court stated in Nicholson that the implied covenant of good faith and fair dealing is not an obligation arising from a contract, but rather gives rise to a tort resulting from its breach which "depends on some impermissible activity." Id., at ___. The court held that "the nature and extent of an implied covenant of good faith and fair dealing is measured in a particular contract by the justifiable expectations of the parties." Id., at ___. Nicholson, while not directly applicable to the present case, demonstrates the broad view which the Montana Supreme Court has taken of the tort of bad faith.

Aetna argues that bad faith in the insurance context consists exclusively of the actions enumerated in § 33-18-201, M.C.A., and that no other claims may be stated against the insurer. One division of this court has so held. Marzolf v. Hoover, 596 F.Supp. 596 (D.Mont.1984). The Supreme Court of Montana, in first-party situations, has held that insurance companies have a duty of good faith...