Lorang v. Fortis Ins. Co.

Decision Date17 July 2008
Docket NumberNo. 04-489.,04-489.
Citation345 Mont. 12,192 P.3d 186,2008 MT 252
PartiesJohn and Bonnie LORANG, Plaintiffs, Appellants and Cross-Appellees, v. FORTIS INSURANCE COMPANY, Defendant, Appellee and Cross-Appellant.
CourtMontana Supreme Court

For Appellant: L.B. Cozzens, Donald L. Harris, Cozzens, Warren & Harris, PLLP, Billings, Montana.

For Appellee: James L. Jones, Michelle Sullivan, Holland & Hart, LLP, Billings, Montana.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 John and Bonnie Lorang ("Lorangs"), husband and wife, filed suit against their health insurance provider, Fortis Insurance Company ("Fortis"), in the District Court for the Thirteenth Judicial District, Yellowstone County. The Lorangs alleged breach of the insurance contract by non-performance, breach by anticipatory repudiation, and three violations of the Unfair Trade Practices Act ("UTPA").

¶ 2 Fortis moved for dismissal, arguing that the District Court lacks subject-matter jurisdiction. The court denied this motion. Additionally, the parties filed cross-motions for summary judgment. In considering these motions, the court first granted partial summary judgment on liability in favor of the Lorangs with respect to their claim that Fortis breached the insurance contract by non-performance. Second, the court granted summary judgment in favor of Fortis on the Lorangs' claim of breach by anticipatory repudiation. Finally, the court granted summary judgment in favor of Fortis on each of the Lorangs' three UTPA claims. The Lorangs filed an appeal with this Court, and Fortis filed a cross-appeal.

¶ 3 We address the following issues:

¶ 4 (1) Did the District Court err in concluding that it has subject-matter jurisdiction over this case?

¶ 5 (2) Did the District Court err in precluding evidence of the parties' prior dealings from consideration on summary judgment?

¶ 6 (3) Did the District Court err in ruling on the cross-motions for summary judgment regarding the Lorangs' claim for anticipatory breach of contract?

¶ 7 (4) Did the District Court err in ruling on the cross-motions for summary judgment regarding the Lorangs' three UTPA claims?

¶ 8 We affirm in part, reverse in part, and remand for further proceedings.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 9 The Lorangs, who have been married since 1983, purchased an individual health insurance policy from Fortis in June of 1991.1 The policy has been in effect continuously since that time. In October of 1992, doctors discovered bone cancer in Bonnie's right leg. Consequently, her leg was amputated above the knee in February of 1993. Thereafter, Bonnie received a prosthetic leg device, for which Fortis provided coverage.

¶ 10 A prosthetic leg device attaches to an amputee by way of a separate item, a "socket," which must be professionally molded to fit the contours of the amputee's residual limb. An ill-fitting socket can cause sores and infection in the residual limb, as well as a distorted gait pattern and even a loss of ambulation. Thus, because an amputee experiences gradual changes in the volume and shape of his or her residual limb due to atrophy, weight fluctuation, and other factors, it becomes medically necessary to replace the socket on a periodic basis.

¶ 11 In Bonnie's case, the gradual changes in her residual limb require that she obtain a replacement socket approximately once every two to three years. She has received these replacement sockets from two care providers, Billings Orthopedic, Inc., and Hanger Prosthetics & Orthotics, Inc. Through these care providers, Bonnie has submitted claims to Fortis for the cost of her replacement sockets and associated materials and professional service.

¶ 12 As noted, the Lorangs' insurance policy with Fortis has been in effect continually since 1991. While the policy has changed during that time in some respects through an "upgrade" process which Fortis offered, it is undisputed that the policy has always provided coverage for the cost of medically-necessary replacement sockets, as well as the associated cost of the materials and professional service necessary to mold the socket to fit Bonnie's residual limb and to ensure proper alignment.

¶ 13 Although Fortis willingly provided coverage for Bonnie's first socket in 1993, when she received her prosthetic leg device, Fortis has repeatedly resisted providing coverage for the cost of Bonnie's medically-necessary replacement sockets. Fortis' conduct in this regard has prompted the Montana State Auditor's Office ("Insurance Commissioner") to intervene on Bonnie's behalf on two occasions. Fortis' conduct also led to a prior lawsuit between the parties, as well as the current action.

¶ 14 The Insurance Commissioner initially became involved in this case after Bonnie received her first replacement socket in 1994. By July of that year, the natural process of atrophy had caused changes in the volume and shape of Bonnie's residual limb, such that the socket of her prosthesis no longer fit properly. As a result, she developed sores in the distal end of her leg, at points of contact with the socket, and she had difficulty walking with her prosthesis. Accordingly, Dr. Whitney Robinson prescribed a replacement socket. The socket itself cost $2,650.00, while the materials and service necessary to mold it to Bonnie's leg and assure proper alignment cost $5,420.00, for a total of $8,070.00.

¶ 15 Bonnie submitted a claim to Fortis requesting coverage for all these costs, together with a letter from her care provider explaining the medical necessity of a replacement socket. Fortis denied the claim and issued a letter stating that the cost of a replacement socket is not covered by the Lorangs' policy. Consequently, Bonnie sent a letter to the Insurance Commissioner, requesting assistance in compelling Fortis to comply with its contractual obligation. The Insurance Commissioner intervened and ultimately sent a letter asking Fortis to honor Bonnie's claim. Fortis complied with this request, issued a letter admitting its obligation to provide coverage, and ultimately rendered payment for Bonnie's incurred expenses.

¶ 16 By the summer of 1996, Bonnie again experienced changes in the volume and shape of her residual limb, such that the socket of her prosthesis no longer fit properly. Accordingly, Dr. Whitney Robinson prescribed a replacement socket. This time the socket itself cost $2,782.50, while the materials and service necessary to mold it to Bonnie's leg and assure proper alignment cost $9,010.30, for a total of $11,792.80.

¶ 17 Bonnie submitted a claim to Fortis requesting coverage for all of these costs, together with a letter of medical necessity from Dr. Robinson.2 Fortis responded with a letter in which it agreed to provide benefits for the cost of the replacement socket itself. However, Fortis also asserted, for the first time, that the Lorangs' policy does not provide coverage for the cost of the materials and service associated with a replacement socket. As noted, these associated costs constituted the bulk of Bonnie's claim.

¶ 18 Bonnie's care provider, Billings Orthopedic, Inc., then sent a letter reminding Fortis that it had provided coverage for these associated costs which Bonnie incurred in replacing her previous socket. Nonetheless, Fortis maintained that these costs are not covered by the Lorangs' policy. Moreover, Fortis failed to provide payment for the replacement socket itself, despite having acknowledged its obligation to do so. Thus, the Insurance Commissioner intervened again, and sent a letter to Fortis stating, in part, "I respectfully request you process for immediate payment on these incurred expenses." Fortis eventually complied with this request, issued a letter admitting its obligation to provide coverage for the replacement socket as well as the associated costs, and ultimately rendered payment for Bonnie's incurred expenses.

¶ 19 Previously, in the summer of 1996, Fortis had notified its agents that it would be offering an upgraded version of the "Form 502" medical policy in Montana—the policy under which Bonnie was insured. With this notice, Fortis recommended that Montana insureds should elect the upgrade, which purportedly provided broader coverage at a reduced price. Thus, one of Fortis' local agents, Joan Nelson, talked with Bonnie about the option of upgrading. Given Bonnie's ongoing need for replacement sockets, Mrs. Nelson contacted Fortis' General Agent for Montana, Marie Deonier, to determine whether the upgraded policy would provide the same prosthetics coverage which the Lorangs' policy already provided. Mrs. Deonier recommended that the Lorangs take the opportunity to upgrade, and stated that the upgraded policy would provide coverage for Bonnie's future replacement sockets. Accordingly, the Lorangs elected to upgrade their policy. They notified Fortis of their decision, and the upgrade went into effect in December of 1996. The upgraded policy was thereafter identified as a "Form 100" medical policy, while the Lorangs maintained the same policy number they received in 1991. Nearly two months later, under the circumstances explained above, Fortis issued payment for Bonnie's second replacement socket.

¶ 20 By October of 1998, Bonnie again experienced changes in the volume and shape of her residual limb, such that the socket of her prosthesis no longer fit properly. Accordingly, Dr. Whitney Robinson prescribed a replacement socket. This time the socket itself cost $2,800.00, while the associated materials and service cost $9,010.30, for a total of $11,810.30.

¶ 21 Bonnie submitted a claim to Fortis requesting coverage for all of these costs, together with a letter of medical necessity from Dr. Robinson. Fortis responded with a letter in which it denied the claim, stating that the Lorangs' policy does not provide coverage for the cost of replacement sockets. This time,...

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