Ternes v. State Farm Fire

Citation257 P.3d 352,361 Mont. 129,2011 MT 156
Decision Date28 June 2011
Docket NumberNo. DA 10–0518.,DA 10–0518.
PartiesGregory TERNES, Plaintiff and Appellant,v.STATE FARM FIRE AND CASUALTY COMPANY, Keith Eberhard, Sue Eberhard, Defendants and Appellees.
CourtUnited States State Supreme Court of Montana

361 Mont. 129
257 P.3d 352
2011 MT 156

Gregory TERNES, Plaintiff and Appellant,
STATE FARM FIRE AND CASUALTY COMPANY, Keith Eberhard, Sue Eberhard, Defendants and Appellees.

No. DA 10–0518.

Supreme Court of Montana.

Submitted on Briefs May 25, 2011.Decided June 28, 2011.

[257 P.3d 352]

For Appellant: Kathleen O'Rourke Mullins, Robert Terrazas, Terrazas Law Offices, Missoula, Montana.For Appellee State Farm Fire and Casualty Company: Bradley J. Luck, Kathleen L. DeSoto, Garlington, Lohn & Robinson, PLLP, Missoula, Montana.For Appellees Keith Eberhard and Sue Eberhard: Quentin M. Rhoades, Liesel Shoquist, Sullivan, Tabaracci & Rhoades, P.C., Missoula, Montana.Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 Gregory Ternes (Ternes) appeals the orders of the Fourth Judicial District Court, Missoula County, granting separate summary judgments for defendants State Farm Fire and Casualty Company (State Farm) and Keith and Sue Eberhard (Eberhards). We affirm.


¶ 2 A restatement of Ternes' issues on appeal is:

¶ 3 1. Whether the District Court abused its discretion when it declined to indefinitely stay all pretrial proceedings after Ternes filed motions for leave to join defendants Eberhards and to amend his complaint.

¶ 4 2. Whether the District Court erred in concluding there were no genuine issues of material fact as to the reason Peter and Elizabeth Giardino (Giardinos) unilaterally terminated the Buy–Sell Agreement to purchase Ternes' Missoula Residence.

¶ 5 3. Whether the District Court erred in concluding there were no genuine issues of material fact precluding summary judgment

[257 P.3d 353]

on Ternes' claim that he suffered damages as a result of either State Farm's or the Eberhards' conduct.

¶ 6 4. Whether the District Court erred in concluding, as a matter of law, that Ternes was not a consumer as defined by the Montana Consumer Protection Act (MCPA) and, therefore, that the MCPA did not apply.


¶ 7 The dispute in this case surrounds Ternes' residential property located on Skyview Drive in Missoula, Montana (Residence). The Eberhards owned the Residence from 2004 until they sold it to Ternes in July 2007, and they insured it through State Farm. On June 10, 2006, Susan Eberhard placed a call to a State Farm claims reporting office to discuss water damage. The initial claims handler recorded the conversation with Susan Eberhard as “water in the basement.” Later the same day, a second State Farm claims handler, Heather Derenski, called Susan Eberhard to discuss the prior call. Derenski's activity log notes in the claim file indicate that Susan described heavy rains, saturated ground, and water seeping in through the foundation. Derenski's notes also indicate that she advised Susan that the Eberhards' policy did not provide coverage for water seepage.

¶ 8 Derenski stated in deposition that at the time of the call, she understood Eberhard to be reporting a claim of water damage to the basement of the Residence and, accordingly, she coded the call as a “cause of loss” that was “closed without payment” (CWP) since the Eberhards' policy did not cover water seepage. In her deposition, Susan Eberhard maintained that the purpose of the call was not to report a claim, but to inquire as to the extent of her coverage because she had recently overheard neighbors discussing water seepage problems in their South Hills homes due to the heavy rains. She took no further action after Derenski informed her water damage was not covered under her policy. Between June 10, 2006, and the date they sold the property to Ternes in July 2007, the Eberhards did not perform any maintenance or repair work in the Residence's basement for water damage. In July 2008, at the behest of Ternes' counsel, the Eberhards executed a separate disclosure statement stating “[d]uring our ownership of [the Residence], we did not experience water inundation or water damage to the daylight basement of the residence that would have adversely or materially affected the value, condition, or habitability of the residence.”

¶ 9 The June 10, 2006 phone call from Sue Eberhard was coded as a claim by State Farm and reported on the “Comprehensive Loss Underwriting Exchange” (C.L.U.E.). C.L.U.E. is a claims history database operated by a third party company, ChoicePoint, who generates reports containing consumer claim information provided by insurance companies that subscribe to the database. Relevant to this case is the C.L.U.E. Report generated for the Residence that discloses the June 10, 2006 claim by Sue Eberhard discussed above (hereinafter “the C.L.U.E. Report”).

¶ 10 On July 18, 2007, Ternes purchased the Residence from the Eberhards for $230,000. Prior to the purchase, Ternes had the home inspected by Thomas Barkley, a professional home inspector whose report was filed in this case pursuant to a District Court order. Germane to this case, it stated under the section titled “Basement Floor and Drainage” that there were “symptoms of water entry in the basement.”

¶ 11 Ternes insured the Residence through Farmers Insurance Exchange. His Farmers agent, David Clarke, testified that he noted the C.L.U.E. Report when placing homeowner's insurance on the Residence, as was the normal course of business for Farmers when insuring a new property. Clarke stated that he did not inform Ternes of the existence of the C.L.U.E. Report on the Residence because it had no bearing on Ternes' ability to secure homeowner's insurance, nor did it affect the amount of the premium.

¶ 12 On May 27, 2008, less than a year after he purchased the Residence, Ternes listed it for sale at $249,900—almost $20,000 above what he paid for it. On May 28, 2008, the Giardinos signed a Buy–Sell Agreement (Buy–Sell) to purchase the Residence that

[257 P.3d 354]

contained, among others, a contingency clause allowing the Giardinos to unilaterally terminate the agreement if they were not satisfied with the financing they received. The Giardinos initially offered Ternes $240,000 and Ternes countered at $245,000. The Giardinos agreed to the counter-offer. That same day, the Giardinos met with their banker to discuss financing based on the purchase price of $245,000. As a result of that meeting, the Giardinos felt they could not afford to purchase the Residence.

¶ 13 On June 2, 2008, the Giardinos notified Scott Tempel, their realtor, of their decision not to go forward with the purchase. They signed a Termination of Buy–Sell, which Tempel immediately faxed to Diane Beck, Ternes' realtor. The Giardinos later testified that at some point after they decided not to purchase the Residence, they learned of the C.L.U.E. Report through Tempel, but they also stated that it had no bearing on their decision to terminate the Buy–Sell. The Giardinos never sought a quote for homeowners insurance, an appraisal, or a home inspection on the Residence. On June 16, 2008, the Giardinos made an offer on another home, which they also terminated because they were not able to secure satisfactory financing.

¶ 14 On June 19, 2008, at Beck's request, Tempel prepared an Addendum to the Buy–Sell Termination (Addendum) which stated the purchase agreement was terminated based on the Giardinos “inability to get hazard insurance at a rate and terms that are acceptable to [them].” When deposed, Tempel and the Giardinos stated that the Addendum was prepared entirely by Tempel and the Giardinos signed it only because Tempel asked them to; Elizabeth Giardino did not recall signing the Addendum because she was still in the hospital having recently given birth to her son. Notably, it is undisputed that the Giardinos were under no obligation to provide the Addendum because, pursuant to the terms of the Buy–Sell, the purchase agreement was terminated on June 2, 2008, when the Giardinos signed the Termination of Buy–Sell.

¶ 15 In the meantime, on June 4, 2008, Ternes contacted State Farm and Susan Eberhard after learning of the C.L.U.E. Report from Beck. On June 10, 2008, after speaking with Susan Eberhard, State Farm recoded the claim from CWP to “opened in error” (OIE) and explained the steps necessary for the Eberhards to...

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