McNeil v. Currie

• Decision Date: 09 April 1992
• Docket Number: No. 90-436,90-436
• Citation: 253 Mont. 9,830 P.2d 1241
• Parties: Linda McNEIL, Plaintiff and Appellant v. Thomas CURRIE and Farmers Insurance Group, Farmers Insurance Group of Companies, and the Truck Insurance Exchange, Defendants and Respondents.
• Court: Montana Supreme Court

Page 1241

830 P.2d 1241

253 Mont. 9

Linda McNEIL, Plaintiff and Appellant v. Thomas CURRIE and Farmers Insurance Group, Farmers Insurance Group of Companies, and the Truck Insurance Exchange, Defendants and Respondents.

No. 90-436.

Supreme Court of Montana.

Submitted on Briefs Sept. 24, 1991.

Decided April 9, 1992.

Michael J. McKeon, Anaconda, for plaintiff and appellant.

Steven S. Carey, Garlington, Lohn & Robinson, Missoula, Robert C. Brown, Poore, Roth & Robinson, Butte, for defendants and respondents.

McDONOUGH, Justice.

Linda McNeil appeals from an order of summary judgment granted by the District Court of the Third Judicial District, Deer Lodge County, in favor of defendants Thomas Currie, Farmers Insurance Group, Farmers Insurance Group of Companies and The Truck Insurance Exchange. The District Court held that there were no genuine issues of material fact and the applicable law supported defendants' motions for summary judgment. We affirm in part and reverse in part.

The issues on appeal are:

1. Whether the District Court erred in determining that McNeil did not have a claim for a breach of the implied covenant of good faith and fair dealing.

2. Whether the District Court erred in determining that McNeil did not have a claim for fraud.

3. Whether the District Court erred in finding that McNeil did not have a claim under the Unfair Claim Settlement Practices Act.

4. Whether the District Court erred in determining McNeil did not have a claim for intentional infliction of emotional distress.

A review of the somewhat complex factual background is necessary. Appellant Linda McNeil (McNeil) has owned a clothing store, Calico & Company, in Anaconda, Montana, since 1983. Respondent, Thomas Currie (Currie), was an independent insurance agent during the time in question. Currie sold products of both Farmers Insurance Group (Farmers) and Truck Insurance Exchange (TIE), a member of Farmers Insurance Group. Currie's business, "Thomas Currie Insurance" was located next door to McNeil's clothing store in Anaconda.

In June of 1984, McNeil approached Currie about purchasing insurance coverage for her business. Currie filled out an application for a special Sentinel package policy from TIE. McNeil signed the application and gave Currie a check for $113.00 as a down payment. The balance of $113.00 was due within 60 days if TIE accepted the risk of insuring McNeil's store.

On June 28, 1984, Currie submitted the application along with the check to TIE. TIE sent Currie a notice on July 9, 1984, stating that Calico & Company was ineligible for a special Sentinel policy, but that TIE would consider the business for a regular Sentinel policy, and that a completed application should be sent. Currie testified he mistakenly thought TIE would consider Calico & Company for the regular Sentinel policy from the original application already submitted. Thus, no application for a regular Sentinel policy was submitted by Currie. Consequently, TIE did not issue McNeil a policy. TIE provided binder coverage to McNeil from July 1, 1984 through September 4, 1984. Currie testified he led McNeil to believe she was going to receive a policy.

TIE did not accept the application for the special Sentinel policy because Calico & Company did not meet the policy requirements of being in business for at least three years and did not have the requisite Dun & Bradstreet (D & B) Credit Rating. On July 31, 1984, TIE sent a notice of cancellation, along with a refund, to Linda McNeil's correct address at her store in Anaconda. On August 1, 1984, McNeil unaware of the cancellation, sent in the balance of $113.00 for the premium. McNeil testified she did not receive the notice of cancellation, but recalled seeing it in her files.

The refund check of $74.10 less $38.90 from the first $113.00 installment, covered the amount for the binder coverage provided between July 31, 1984 and September 4, 1984. TIE refunded the second check in September of 1984. This check went to Currie's office payable to McNeil. McNeil testified that no discussions between herself and Currie regarding the insurance occurred again until after the first of the year. However, Currie testified he told McNeil to ignore a cancellation notice if she received one.

On December 24, 1984, William Jarvi, who is not a party to this lawsuit, drove his automobile into the building which housed Calico & Company and Thomas Currie Insurance, causing damage to both businesses. Jarvi was, coincidentally insured by Farmers. John Gillespie, a Farmers claim adjuster, adjusted and settled McNeil's claim under Jarvi's policy. McNeil did not submit a claim under her policy.

During the time the claim was being adjusted under Jarvi's insurance, attorney Greg Skakles represented McNeil. Skakles settled the claim with Farmers on behalf of McNeil for $5,006.95 on April 19, 1985. The settlement included payment for emotional distress and lost profits for the two days the store was closed after Christmas.

McNeil testified she found out she didn't have a policy sometime in February of 1985. McNeil testified on deposition that she repeatedly requested a copy of her insurance policy from Currie. Attorney Skakles also requested a copy of the policy from Currie. Currie testified that when he realized his mistake that an application for the regular Sentinel policy was necessary, he informed Skakles. Skakles demanded Currie obtain immediate insurance coverage for McNeil's store.

Subsequently, on May 3, 1985, Currie sent an application with McNeil's file signature, to TIE, this time for a regular Sentinel policy along with the two refund checks TIE had returned in August and September of 1984. Currie testified that he obtained the refund checks from McNeil. McNeil testified she was unaware of this second May 1985 application, even though her attorney demanded Currie obtain coverage for her. Representatives of TIE testified that McNeil received binder coverage from March 14, 1985 to September 1, 1985, and if McNeil had sustained a loss during that period, she would have been covered.

This second policy application was denied by TIE on May 24, 1985. Currie notified Skakles of the denial. Farmers applied the two refund checks to the binder coverage for McNeil's store from March 14, 1985 until September 1, 1985. However, McNeil still owed $242.00 for the binder coverage. TIE sent notices for the premium to McNeil on July 1, 1985, and July 25, 1985. These documents advised McNeil to inform TIE if she had obtained other coverage for the same time period, and if so, the premium charge would be dropped. McNeil testified she did not receive these notices.

McNeil applied for business insurance with Yeoman Insurance of Anaconda and received a policy effective June 3, 1985. Neither McNeil or Skakles informed TIE she obtained this coverage. After two more premium notices were sent to McNeil, TIE turned the account over to D & B for collection. McNeil received a collection notice from D & B to which she replied on August 22, 1985, informing TIE that she never received a policy and did not owe them any money. After D & B failed to collect the amount from McNeil, they sent the account back to Farmers. Farmers halted any efforts to collect the amount.

McNeil filed a lawsuit alleging that the defendants breached the covenant of good faith and fair dealing, committed fraud, violated the Unfair Trade Practices Act, and the defendants' conduct constituted an intentional infliction of emotional distress. The District Court granted summary judgment in favor of TIE. McNeil appeals.

The scope of review is the same as the trial court. Summary judgment under Rule 56(c), M.R.Civ.P., is proper only if the record discloses no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Beaverhead Bar Supply v. Harrington (1991), 247 Mont. 117, 120, 805 P.2d 560, 562.

I

Whether the District Court erred in determining that McNeil did not have a claim for breach of the implied covenant of good faith and fair dealing.

McNeil maintains that the District Court erred when it held that she failed to claim a breach of contract, and therefore, could not sustain a recovery under the breach of the implied covenant of good faith and fair dealing. However, a precedent breach of the underlying contract is no longer a requirement. Recently, we said: "In order to recover ... on a theory of breach of the implied covenant, there must be an enforceable contract to which the covenant attends." Beaverhead Bar Supply v. Harrington, (1991), 247 Mont. 117, 124, 805 P.2d 560, 564, citing Story v. City of Bozeman (1990), 242 Mont. 436, 450, 791 P.2d 767, 775.

Story was decided on May 3, 1990. The District Court rendered its opinion and order on June 27, 1990. The general rule is that "A change in the law between a nisi prius (here the ruling in the district court) and an appellate decision requires the appellate court to apply the changed law." Thorpe v. Housing Authority of the City of Durham (1969), 393 U.S. 268, 281, 89 S.Ct. 518, 525-26, 21 L.Ed.2d 474 citing Ziffrin, Inc. v. United States (1943), 318 U.S. 73, 78, 63 S.Ct. 465, 468-69, 87 L.Ed. 621. This Court, citing Thorpe, has provided that "generally an appellate court must apply the law in effect at the time it renders its decision." Lee v. Flathead County (1985), 217 Mont. 370, 373, 704 P.2d 1060, 1063. Story says in applying the covenant to a contract, the honesty in fact standard applies. Story v. City of Bozeman (1990), 242 Mont. 436, 791 P.2d 767.

The honesty in fact standard, therefore, must be met for a breach of the covenant of good faith and fair dealing, which results in the breach of the contract itself. That is,

Each party to the contract has a justified expectation that the other will act in a reasonable manner in its performance or efficient breach. When one party uses discretion conferred by the contract to act dishonestly or to act...