Sampson v. National Farmers Union Property

• Decision Date: 26 September 2006
• Docket Number: No. 05-211.,05-211.
• Citation: 144 P.3d 797,333 Mont. 541,2006 MT 241
• Parties: Delores SAMPSON and Beverly Cybulski, Plaintiffs and Appellants, v. NATIONAL FARMERS UNION PROPERTY AND CASUALTY COMPANY, National Farmers Union Standard Insurance Company, and John Does I and II, Defendants and Respondents.
• Court: Montana Supreme Court

144 P.3d 797

2006 MT 241

333 Mont. 541

Delores SAMPSON and Beverly Cybulski, Plaintiffs and Appellants, v. NATIONAL FARMERS UNION PROPERTY AND CASUALTY COMPANY, National Farmers Union Standard Insurance Company, and John Does I and II, Defendants and Respondents.

No. 05-211.

Supreme Court of Montana.

Heard on Oral Argument February 22, 2006.

Decided September 26, 2006.

Rehearing Denied October 23, 2006.

For Appellants: Shane D. Colton, Edminston, Schermerhorn & Colton, Billings, Montana.

For Respondents: Jon T. Dyre, Steven W. Jennings, Crowley, Haughey, Hanson, Toole & Dietrich, PLLP, Billings, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Dolores Sampson and Beverly Cybulski (a/k/a Claimants) were injured when their car was struck by a car driven by an insured of the National Farmers Union Property and Casualty Company (NFU). Sampson and Cybulski offered to settle their respective bodily injury claims for the total sum of $125,000.00. NFU rejected the offer. Subsequently, Claimants retained an attorney. After Sampson and Cybulski had incurred approximately $43,500.00 in attorney fee and costs, NFU settled for the previously-demanded sum of $125,000.00. Sampson and Cybulski brought this action in the Thirteenth Judicial District of Yellowstone County, claiming that NFU's delayed settlement constituted a violation of the Montana Unfair Trade Practices Act (UTPA). They sought recovery of their attorney fees. The District Court granted NFU's motion for summary judgment. Claimants appeal. We affirm.

ISSUE

¶ 2 The issue on appeal is whether attorney's fees are recoverable as damages in an action brought under Montana's Unfair Trade Practices Act, §§ 33-18-201 and 33-18-242, MCA.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 3 As this case involves a question of law only, a short factual summary is sufficient to provide a foundation for our analysis. In December 1996, Sampson and Cybulski were injured when the car in which they were traveling was struck by Milo Langberg, an insured of NFU. In 2001, an attorney, acting pro bono, presented Claimants' offer to NFU to settle their claims for $125,000.00. NFU rejected the offer. The pro bono attorney suggested that Sampson and Cybulski retain an attorney with personal injury expertise to represent them in their claim against NFU. Sampson and Cybulski did so. Approximately fourteen months later in May 2002, NFU settled the personal injury claim with the women for $125,000.00. By that time, Claimants had incurred approximately $43,500.00 in attorney fees.

¶ 4 In April 2003, Sampson and Cybulski brought this action under the UTPA to recover their attorney fees. Relying upon § 33-18-242, MCA, Claimants alleged that NFU violated § 33-18-201(6), MCA, by neglecting "to attempt in good faith to effectuate a prompt, fair, and equitable settlement of [Sampson's and Cybulski's] claims on which [NFU's] liability was reasonably clear." Sampson and Cybulski also claimed NFU failed to promptly settle Sampson's claim for property damage for which NFU's insured's liability also was reasonably clear in order to influence settlement of the women's claim for personal injury damages.

¶ 5 NFU moved for summary judgment, arguing that attorney fees are not recoverable as "damages" unless expressly provided by contract or statute, and that there was no such express provision in this case. In February 2005, the District Court agreed, holding that "attorney fees are not recoverable as an element of damage under the [UTPA]." The court granted NFU's motion for summary judgment and dismissed Sampson's and Cybulski's complaint.

¶ 6 Sampson and Cybulski filed a timely appeal.

STANDARD OF REVIEW

¶ 7 We review a district court's grant of summary judgment de novo, and apply the same criteria applied by the district court pursuant to Rule 56(c), M.R. Civ. P. A district court properly grants summary judgment only when no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law. Oster v. Valley County, 2006 MT 180, ¶ 9, 333 Mont. 76, ¶ 9, 140 P.3d 1079, ¶ 9 (citations omitted).

RELEVANT STATUTES

¶ 8 Section 33-18-201, MCA, provides that unfair claim settlement practices are prohibited. In relevant part, it requires that:

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;

. . .

(13) fail to promptly settle claims, if liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; or

. . .

¶ 9 Section 33-18-242, MCA, states:

(1) An insured or a third-party claimant has an independent cause of action against an insurer for actual damages caused by the insurer's violation of subsection (1), (4), (5), (6), (9), or (13) of 33-18-201.

. . .

(4) In an action under this section, the court or jury may award such damages as were proximately caused by the violation of subsection (1), (4), (5), (6), (9), or (13) of 33-18-201. Exemplary damages may also be assessed in accordance with 27-1-221.

DISCUSSION

¶ 10 Are attorney's fees recoverable as damages in an action brought under Montana's Unfair Trade Practices Act, §§ 33-18-201 and 33-18-242, MCA?

¶ 11 Sampson and Cybulski assert that NFU unreasonably rejected their reasonable settlement demand when NFU's liability was not in dispute. They maintain that such unreasonable action was done in bad faith and was a violation of the UTPA, and that as a result of NFU's action, NFU forced them to obtain counsel to resolve the matter. They argue that § 33-18-242, MCA, statutorily entitles them to damages proximately caused by NFU's bad faith refusal to resolve their claim in a timely, fair and reasonable manner in accordance with § 33-18-201, MCA. They assert that the sole damages they suffered as a result of NFU's bad faith actions were the attorney fees incurred during the fourteen months between their settlement demand of $125,000.00 and NFU's eventual agreement to settle for the same amount.

¶ 12 Sampson and Cybulski acknowledge that Montana generally follows the American Rule, under which each party to litigation pays his or her own attorney's fees, even if he or she prevails in the lawsuit. They assert, however, that the American Rule does not bar recovery of attorney fees as a damage for breach of § 33-18-201, MCA. They maintain that the Legislature did not limit the type of damages recoverable under §§ 33-18-242(1) and (4), MCA; rather, it drafted an open definition of damages and provided that all damages proximately caused by violations of the Act are recoverable. As a result, Claimants argue that § 33-18-242, MCA, statutorily authorizes an award of attorney fees providing this Court determines that such fees constitute "damages."

¶ 13 NFU counters that the American Rule does apply and prohibits awarding attorney fees in this case. It argues generally that without express statutory or contractual authority or the application of one of the four recognized exceptions to the American Rule, none of which are present in this case, the Rule prohibits awards of attorney fees. Specifically, NFU contends that when the Legislature enacted § 33-18-242, MCA, in 1987, it did not mention or authorize attorney fees and that this Court should not add to the statute that which the Legislature omitted.

¶ 14 In granting summary judgment, the District Court provided the following analysis: 1) Montana follows the American Rule; therefore, unless there is a contractual provision or a statutory provision for attorney fees or a case falls within one of the four exceptions to the Rule, attorney fees will not be awarded (Goodover v. Lindey's Inc., 255 Mont. 430, 445, 843 P.2d 765, 774 (1993)); 2) there is no contractual or statutory authority allowing attorney fees as an element of damages under the UTPA; 3) one of the exceptions to the American Rule is the "equitable" exception available in situations in which a party is forced into a frivolous lawsuit (Goodover, 255 Mont. at 447, 843 P.2d at 775); 4) the Montana Supreme Court has refused to apply the equitable exception to malicious or bad faith claims (Goodover, 255 Mont. at 448, 843 P.2d at 777) or to injured third-party beneficiaries of an insurance contract (Mountain West v. Brewer, 2003 MT 98, ¶ 40, 315 Mont. 231, ¶ 40, 69 P.3d 652, ¶ 40); 5) the Montana Supreme Court has allowed attorney fees to be awarded to third-party claimants in declaratory judgments under certain circumstances (Brewer, ¶ 41); and 6) but the case before us is not a declaratory judgment. The District Court therefore determined that there was no authority under which it could award Claimants' attorney fees as damages under the UTPA.

¶ 15 As acknowledged by both parties, it is the general rule in Montana that a party is not entitled to attorney's fees absent a specific contractual provision or statutory grant. Martin v. Crown Life Ins. Co., 202 Mont. 461, 469, 658 P.2d 1099, 1104, (1983). In the case before us, it is undisputed that no contractual arrangement existed between Sampson and Cybulski and NFU. NFU insured Langberg, not Claimants. We also need not address the four exceptions to the American Rule, as Claimants do not argue for the application of any of the established exceptions. Therefore, we turn our attention to Claimants' argument that § 33-18-242, MCA, authorizes an award of all damages proximately caused by an insurer that violates the UTPA, and that attorney fees constitute such damages.

¶ 16 Claimants rely in part upon our decision in Morris v. Nationwide Ins. Co., 222 Mont. 399, 722 P.2d 628 (1986), contending it supports their contention that attorney fees qualify as damages in bad faith actions. However, it is important to note that this...