Trustees of Indiana University v. Buxbaum, No. 01-723.

• Docket Nº: No. 01-723.
• Citation: 2003 MT 97, 69 P.3d 663, 315 Mont. 210
• Case Date: April 24, 2003
• Court: United States State Supreme Court of Montana

69 P.3d 663
2003 MT 97
315 Mont. 210

TRUSTEES OF INDIANA UNIVERSITY, Plaintiff and Respondent,
v.
Douglas A. BUXBAUM, as Personal Representative of the Estate of Christopher D. Jones; Bruce M. Bittner, Co-Personal Representative of the Estate of Derek T. Krueger; Otto Krueger, Individually and as Co-Personal Representative of the Estate of Derek T. Krueger; and Jill J. Krueger, Individually, Defendants and Appellants

No. 01-723.

Supreme Court of Montana.

Orally Argued and Submitted September 10, 2002.

Decided April 24, 2003.

69 P.3d 664

Monte D. Beck, John J. Richardson (argued), Beck, Richardson & Amsden, PLLC, Bozeman, Montana, For Appellants

Tom W. Stonecipher (argued), John H. Tarlow, Tarlow & Stonecipher, Bozeman, Montana, Michael R. Fruehwald, Barnes & Thornburg, Indianapolis, Indiana, For Respondent.

Dane J. Durham, Attorney at Law, Missoula, Montana, For Amicus Montana Trial Lawyers Association.

James A. Donahue, Davis, Hatley, Haffeman & Tighe, Great Falls, Montana, For Amicus Montana Defense Trial Lawyers, Inc.

Justice JIM REGNIER delivered the Opinion of the Court.

¶ 1 In the summer of 1998, three Indiana University students traveled to Montana to assist an Indiana University professor with an instructional project devoted to forest habitat. While in Montana, the three students and a fourth Indiana resident were involved in a single vehicle accident on Interstate 90 between Cardwell and Three Forks, Montana. The accident resulted in the deaths of Christopher Jones, Michael Bowling, and Derek Krueger. Multiple lawsuits ensued, including a suit filed by the Krueger Estate against the Respondent Indiana University and the Appellant Jones Estate. The Jones Estate demanded that the University, a self-insured entity which purported to insure the vehicle in question, defend it against the negligence suit filed by the Krueger Estate.

¶ 2 The University subsequently filed a declaratory judgment action in the First Judicial District Court, Lewis and Clark County, to ascertain whether it had a duty to

69 P.3d 665

indemnify the Jones Estate. The District Court concluded that the University owed a duty to the Jones Estate to indemnify it of any liability arising out of the automobile accident. However, the District Court denied the Jones Estate's request for attorney fees incurred in the declaratory judgment action. The Jones Estate appeals from the District Court's judgment with regard to the denial of attorney fees. We reverse and remand

¶ 3 The sole issue on appeal is whether the District Court erred when it denied the Jones Estate's request for attorney fees incurred in the declaratory judgment action.

BACKGROUND

¶ 4 Since the 1940s, Indiana University has owned and operated a geological field station near Cardwell, Montana. The University utilizes the field station to further its geology students' studies during the summer months. Each spring, geology students from the University drive a fleet of vehicles to the field station. At the end of each summer, the students return the vehicles to the University motor pool in Bloomington, Indiana. In 1994, the University permanently transferred a University-owned 1989 Chevrolet Suburban ("Old No. 3"), a vehicle licensed and registered in the state of Indiana, to the field station.

¶ 5 In the summer of 1998, Dr. Raymond Russo, a biology professor from the University, visited the field station while on sabbatical to conduct a research project, called the Virtual Forest Project. The Virtual Forest Project was administered by the University and grant funded by the Indiana Forestry Education Foundation. Dr. Russo conducted the Virtual Forest Project to create an instructional CD-ROM program devoted to forest habitat. To aid with the project development, Dr. Russo recruited three project assistants from Indiana, Christopher Jones, Michael Bowling, and Anicca Brumbaugh. When Dr. Russo recruited the assistants, they were all undergraduate or graduate students at the University. The assistants traveled from Indiana to the field station in their own vehicles. However, the field station director, Professor James Brophy, permitted Dr. Russo and the assistants to use Old No. 3 while residing at the field station.

¶ 6 On July 12, 1998, Jones, Bowling, Brumbaugh, and Brumbaugh's visiting boyfriend, Derek Krueger, departed the field station in Old No. 3 for a white water rafting trip. While en route, the driver, Jones, lost control of the vehicle when the tread allegedly separated from one of the vehicle's tires on Interstate 90 between Cardwell and Three Forks, Montana. The single vehicle accident resulted in the deaths of Jones, Bowling, and Krueger. Brumbaugh survived the accident but sustained significant injuries.

¶ 7 At the time of the accident, Old No. 3 was not covered by a traditional automobile insurance policy. However, in 1987, the University established a self-insurance program to assume the risk of liability, up to $1 million, for certain kinds of incidents, including the type of accident that occurred on July 12, 1998. The University also purchased a $15 million excess liability policy from TIG Insurance Company which was in effect at the time of the accident. The University never filed a certificate of self-insurance with the state of Indiana or Montana.

¶ 8 In November 1999, several parties ("Krueger Estate"), individually and as personal representatives of the estate of Derek Krueger, filed suit against multiple defendants, including the University and the Jones Estate.¹ On December 30, 1999, the Jones Estate demanded that the University defend it against the negligence claim brought by the Krueger Estate. The University, under a reservation of rights, retained independent counsel to defend the Jones Estate against the allegations. On May 8, 2000, the University

69 P.3d 666

filed a declaratory judgment action against the Jones Estate and the Krueger Estate. The University argued that it maintained no obligation to defend or indemnify the Jones Estate

¶ 9 On December 4, 2000, all three parties, the University, the Jones Estate, and the Krueger Estate, filed motions for summary judgment. The Jones Estate argued that the University must defend and indemnify it based on the doctrine of equitable estoppel and because insurance coverage existed pursuant to (1) a resolution passed by the Trustees of Indiana University in 1971, (2) the University's Self-Insurance Fund Document, and (3) the University's Self-Insurance Fund Policy on Auto Coverage. The Krueger Estate also argued that the University should indemnify the Jones Estate, under similar theories. The University claimed that, under the circumstances presented, no contractual, common law, or statutory authority existed which obligated it to defend and indemnify the Jones Estate against the claims filed by the Krueger Estate.

¶ 10 On February 8, 2001, the District Court denied all of the motions for summary judgment. In so doing, the District Court concluded that: the University was under no common law duty to indemnify the Jones Estate, i.e., neither promissory nor equitable estoppel apply; the 1971 resolution does not impose a duty on the University to indemnify the Jones Estate; the University does not constitute an insurance company, therefore, the statutory obligations imposed upon insurance companies have no application here; Jones was not a third-party beneficiary of the University's risk management policy; Jones was a University employee during his time at the field station; the University is self-insured but the "guidelines" developed by the director of the Risk Management Office, Larry Stephens, are "ambiguous, confusing, and frequently contradictory"; a factual due process question remains regarding whether the University appropriately applied its risk management practices to this case in denying coverage; and a factual question remains as to whether Jones waived any right to indemnity in the Assumption of Risk form. The case proceeded to a non-jury trial on March 19, 2001.

¶ 11 Following the non-jury trial, the District Court entered its Findings of Fact, Conclusions of Law, and Order on May 17, 2001. The District Court concluded that the University's self-insurance documents intended to provide coverage for permissive users of University vehicles, such as Jones. The court concluded that Jones did not waive the right to indemnification when he signed the Assumption of Risk form. Therefore, the Jones Estate maintained a property interest in the indemnification. The court found that the University relied upon "[un]ascertainable, ambiguous, and confusing" standards in administering its self-insurance program. In handling the Jones Estate's demand for coverage, the District Court found the University's "application of the `standards' to be arbitrary and capricious." Accordingly, the District Court concluded that the University had to "provide self-insurance coverage and indemnification to the Jones Estate as a result of the July 12, 1998, automobile accident...." The District Court also initially awarded the Jones Estate costs, expenses, and attorney fees incurred in defending the declaratory judgment action.

¶ 12 On July 27, 2001, pursuant to Rule 59(g), M.R.Civ.P., the University moved the District Court to alter its judgment to strike the award of attorney fees and expenses. The University argued that no statutory or contractual basis existed to support such an award. Further, the University insisted that none of the common law doctrines authorizing an award of attorney fees applied to this case.

¶ 13 The District Court agreed with the University that no statutory or contractual provisions existed to support an award of attorney fees and expenses. The court noted a court's equitable power to enter such an award pursuant to Foy v. Anderson (1978), 176 Mont. 507, 580 P.2d 114. However, the District Court also recognized the "frivolous or malicious action" caveat placed upon...