St. Paul Fire & Marine Ins. Co. v. Allstate Ins. Co.

• Decision Date: 19 February 1993
• Docket Number: No. 91-564,91-564
• Citation: 847 P.2d 705,257 Mont. 47
• Court: Montana Supreme Court
• Parties: ST. PAUL FIRE & MARINE INSURANCE COMPANY, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY and Gary Glassing, Defendants and Respondents.

Page 705

847 P.2d 705

257 Mont. 47

ST. PAUL FIRE & MARINE INSURANCE COMPANY, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY and Gary Glassing, Defendants and Respondents.

No. 91-564.

Supreme Court of Montana.

Submitted May 12, 1992.

Decided Feb. 19, 1993.

Gary M. Zadick, Mark F. Higgins, Ugrin, Alexander, Zadick & Slovak, Great Falls, for plaintiff and appellant.

Susan P. Roy, Garlington, Lohn and Robinson, Missoula, for defendants and respondents.

TRIEWEILER, Justice.

Plaintiff St. Paul Fire and Marine Insurance Company filed its complaint in the District Court for the Eighth Judicial District in Cascade County to recover amounts paid to its insured pursuant to the underinsured motorist coverage provided by its policy. St. Paul's claim against defendant Gary Glassing was dismissed by the District Court based on that court's conclusion that it lacked personal jurisdiction over Glassing. St. Paul's claim against Allstate Insurance Company was dismissed because of its failure to state an actionable claim against Allstate. From this judgment, St. Paul appeals. We reverse in part and affirm in part.

The issues are:

1. Did the District Court have personal jurisdiction over Gary Glassing pursuant to Rule 4B(1)(b), M.R.Civ.P.?

2. Is an insurer which provides underinsured motorist coverage a third party entitled to bring a direct claim under Secs. 33-18-201 and 33-18-242, MCA, when a primary insurer fails to effectuate prompt and reasonable settlement?

FACTUAL BACKGROUND

St. Paul's insured, Ellen Lynn, and Glassing were involved in a motor vehicle collision in Bozeman on June 12, 1985. A personal injury action was filed by Lynn against Glassing in Gallatin County District Court, and on November 17, 1989, judgment was entered in favor of Lynn in the net amount of $95,377.92.

At the time of the underlying motor vehicle collision, St. Paul insured Lynn with a policy which provided coverage in the event that Lynn was injured by an underinsured motorist. At the same time, Allstate insured Glassing against liability resulting from the operation of his motor vehicle. However, the limit of Glassing's liability coverage was $50,000.

In the complaint which gave rise to this action, St. Paul alleged that pursuant to its policy of insurance with Lynn, it paid to her the amount of her judgment against Glassing that exceeded Allstate's policy limits. It alleged that the amount of that payment was $51,461.16. St. Paul also alleged two separate claims based upon its payment to Lynn.

In its first cause of action, St. Paul alleged that by virtue of its payment to its insured, it became subrogated both by law and by the terms of its policy with Lynn to her claim against Glassing to the extent of its payment. It sought recovery from Glassing in that amount.

In its second cause of action, St. Paul alleged that on several occasions prior to entry of judgment in favor of Lynn, Allstate refused to settle her claim against Glassing by payment of its policy limits to her. St. Paul alleged that by refusal to pay the policy limits before judgment was entered against Glassing for a greater amount, Allstate breached its obligation to its own insured and to St. Paul, and that as a result, St. Paul was required to pay $51,461.16 to its insured. It sought recovery of that amount, plus interest, from Glassing and from Allstate.

Although the record is vague regarding dates and specific procedures, it appears that prior to the time this claim was filed in State District Court, a similar or identical claim was filed in the United States District Court for the District of Montana. Before that claim was removed to the State District Court, the Federal District Court dismissed St. Paul's claim against Allstate for the reason that it did not state a claim for which relief could be granted. The parties subsequently stipulated in this case that the prior ruling by the Federal District Court would be the law of the case for purposes of the State Court proceeding, and that dismissal of that case could be appealed to the Montana Supreme Court when final judgment was entered in the State District Court.

After being served with the State Court complaint, Glassing moved to dismiss the claim against him for the reason that the District Court lacked personal jurisdiction over him. In support of that motion, Glassing submitted an affidavit in which he stated that he moved to Minnesota on July 1, 1990, had been working and living there since, and had no plans to return to Montana.

On October 10, 1991, the District Court entered its order granting the motion to dismiss Glassing based on lack of personal jurisdiction. The court noted that Glassing moved from Montana to Minnesota on about July 1, 1990, after graduating from Montana State University and that this action was not filed until June 17, 1991. The court concluded that St. Paul's subrogation claim against Glassing arose from the terms of its insurance contract with Lynn and that the claim was not based on any act of the defendant which occurred in Montana. Therefore, the District Court concluded that since the defendant could not be found in Montana for the purpose of establishing general jurisdiction, and did not come within any of the subsections of Rule 4B(1), M.R.Civ.P., there was no basis for asserting personal jurisdiction over him.

St. Paul appeals the dismissal of Glassing in the State District Court and the dismissal of Allstate by the Federal District Court, which by stipulation became part of the final judgment entered in the State District Court.

I

Did the District Court have personal jurisdiction over Gary Glassing pursuant to Rule 4B(1)(b), M.R.Civ.P.?

On appeal, St. Paul contends that Montana courts have personal jurisdiction over Glassing pursuant to the Montana long-arm statute found in Rule 4B(1)(b), M.R.Civ.P., since its claim is based upon the defendant's tortious conduct committed within this state.

Glassing denies that this state has personal jurisdiction over him for two reasons. First, he contends that St. Paul's suit is not based on his tortious conduct, but is based upon a contractual relationship between St. Paul and its insured which permitted St. Paul to pursue a claim for subrogation. Second, Glassing contends that even if his conduct comes within Montana's long-arm statute, it is unreasonable for this state's courts to exercise jurisdiction over him, and plaintiff's claim should be dismissed pursuant to our decision in Simmons v. State (1983), 206 Mont. 264, 670 P.2d 1372.

We conclude that St. Paul's claim against Glassing is based solely upon defendant's commission of acts within the State of Montana which resulted in the accrual of a tort action. While the defendant is correct that St. Paul has a contractual agreement with its insured allowing it to pursue subrogation, the contractual authorization is neither necessary nor the basis for St. Paul's suit against Glassing.

We have previously held that:

Subrogation is a device of equity which is designed to compel the ultimate payment of a debt by the one who in justice, equity and good conscience should pay it. Bower v. Tebbs, 132 Mont. 146, 314 P.2d 731.... The theory behind this principle is that absent repayment of the insurer the insured would be unjustly enriched by virtue of recovery from both the insurer and the wrongdoer, or in absence of such double recovery by the insured, the third party would go free despite his legal obligation in connection with [the] loss. [Emphasis added.]

Skauge v. Mountain States Tel. & Tel. Co. (1977), 172 Mont. 521, 524-25, 565 P.2d 628, 630.

We have also held that a right to subrogation, such as the one exercised by the plaintiff in this case, is not dependent on the terms of a contract.

Subrogation in a legal sense arises upon the fact of payment by the insurer, rather than by contract between the parties. Skauge, 565 P.2d at 630. It is the substitution of another person in place of the creditor, so that the person substituted will succeed to the rights of the creditor in relation to the debt or claim. Skauge, 565 P.2d at 630.

McDonald v. Grassle (1987), 228 Mont. 25, 29, 740 P.2d 1122, 1125.

In this case, St. Paul became substituted for its insured as a matter of law when it paid Ellen Lynn pursuant to its insurance policy with her and is entitled to pursue her right to collect the amount of her judgment against the defendant. However, St. Paul's right to subrogation arises from the judgment entered in favor of its insured against the defendant, and that judgment is a result of the defendant's tortious conduct within the State of Montana.

Since the allegations in Count I of St. Paul's complaint are based upon Glassing's tortious conduct committed within the State of Montana, we hold that Rule 4B(1)(b), M.R.Civ.P., permits the exercise of personal jurisdiction over Glassing by the District Court for the conduct complained of in the plaintiff's complaint.

In Simmons, we held that where a nonresident defendant is not "present" within the state for purposes of establishing general jurisdiction, each of the following criteria must be met before personal jurisdiction can be exercised without violating due process:

(1) The nonresident defendant must do...