Williams v. Union Fidelity Life Ins. Co.

• Decision Date: 01 November 2005
• Docket Number: No. 02-608.,02-608.
• Citation: 329 Mont. 158,2005 MT 273,123 P.3d 213
• Court: Montana Supreme Court
• Parties: Barbara WILLIAMS, Plaintiff and Appellant, v. UNION FIDELITY LIFE INSURANCE COMPANY, Defendant, Respondent and Cross-Appellant.

Page 213

123 P.3d 213

2005 MT 273

329 Mont. 158

Barbara WILLIAMS, Plaintiff and Appellant, v. UNION FIDELITY LIFE INSURANCE COMPANY, Defendant, Respondent and Cross-Appellant.

No. 02-608.

Supreme Court of Montana.

Submitted on Briefs March 20, 2003.

Decided November 1, 2005.

COPYRIGHT MATERIAL OMITTED

For Appellant: L. Randall Bishop, Jarussi & Bishop, Billings, Montana.

For Respondent: W. Anderson Forsythe, Nancy Bennett, Moulton, Bellingham, Longo & Mather, P.C., Billings, Montana.

For Amicus Curiae: John Morrison, Montana State Auditor, Karen Powell, Special Assistant Attorney General, Helena, Montana.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Barbara Williams (Barbara) appeals a jury verdict in the District Court for the Thirteenth Judicial District, Yellowstone County, finding that Union Fidelity Life Insurance Company (Union Fidelity) did not breach its contract with Barbara and her husband, Clarence Williams (Clarence). Barbara also appeals the District Court's denial of her motions for summary judgment and for judgment as a matter of law.¹ Union Fidelity cross-appeals. We affirm in part, reverse in part and remand for further proceedings consistent with this Opinion.

¶ 2 For purposes of clarity, we have separated the two issues Barbara raised on appeal into the following three issues:

¶ 3 1. Whether the District Court erred in denying Barbara's motions for summary judgment and for judgment as a matter of law upon her claim that Union Fidelity breached its insuring agreement by rejecting her claim for benefits and rescinding her Certificate of Insurance.

¶ 4 2. Whether the District Court erred in admitting into evidence at trial Clarence's medical records acquired by Union Fidelity after Barbara's claim had been denied and her certificate of insurance rescinded.

¶ 5 3. Whether the District Court erred in instructing the jury that Clarence's opinion as to the condition of his health was to be determined under both subjective and objective tests.

¶ 6 In addition, Union Fidelity raised the following three issues on cross-appeal:

¶ 7 4. Whether the District Court erred by denying Union Fidelity's motions for summary judgment and for judgment as a matter of law on Barbara's claims of fraud and bad faith.

¶ 8 5. Whether the District Court erred by granting Barbara's motion in limine precluding Union Fidelity from presenting evidence about Barbara's and Clarence's bankruptcy.

¶ 9 6. Whether the District Court erred by failing to give Union Fidelity's instruction setting forth its defense theory.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 10 On December 7, 1996, Barbara and Clarence purchased a new pickup from Archie Cochrane Motors in Billings. As part of the deal, Barbara and Clarence purchased credit life insurance. The application for credit life coverage was incorporated into the Certificate of Insurance sold by Archie Cochrane Motors on behalf of Union Fidelity. It provided as follows:

I hereby certify that I am in good health and am not under treatment for, or receiving medical advice for any illness, disease, or physical or mental impairment. In addition, I have not been diagnosed as having Acquired Immune Deficiency Syndrome (AIDS), AIDS Related Complex, or tested positive for antibodies to the AIDS virus....

....

I make the above certifications with the intent of inducing Union Fidelity Life Insurance Company to issue this certificate of insurance. I understand that: ... (b) any untruthful answer or misrepresentation may be a basis for a denial of benefits or the voiding of this certificate of insurance.

¶ 11 While the application does not define "good health," Union Fidelity's Credit Insurance Manual states:

Quite often, the question, "WHAT IS GOOD HEALTH?" is asked of the home office. Although opinions vary slightly, it is generally agreed that a person in good health is:

. Free from serious disease that could be expected to cause health problems in the foreseeable future . Able to perform the usual activities of a person of like age and build.

. Capable of working at least 30 hours per week.

There is no place on Union Fidelity's form to include detailed medical information. In addition, no additional forms, health questions, medical examinations, medical tests, medical screenings or authorizations for release of medical information are part of the application process. Once the Certificate of Insurance is signed by the applicant, credit life insurance coverage is issued, on the spot, by the dealership. Both Clarence and Barbara signed the application on December 7, 1996.

¶ 12 Clarence died on September 20, 1997, and Barbara submitted a claim for death benefits to Union Fidelity totaling $34,000. The file was assigned to a claims analyst who requested copies of Clarence's past medical records. The death certificate had identified, as an underlying cause of death, "renal cell carcinoma with metastasis" which had existed for "years." On December 16, 1997, Union Fidelity denied the claim for benefits and rescinded the Certificate of Insurance on the basis that Clarence had misrepresented his health.

¶ 13 On June 21, 1999, Barbara filed a civil action against Union Fidelity and Archie Cochrane Motors, as an agent of Union Fidelity, alleging breach of contract; fraud; breach of the implied covenant of good faith and fair dealing; and breach of Union Fidelity's statutory obligations under the Montana Insurance Code and the Montana Unfair Claim Settlement Practices Act, § 33-18-201, MCA. The parties subsequently stipulated to dismiss Archie Cochrane Motors from this action with prejudice and the court so ordered.

¶ 14 Upon completion of discovery, Union Fidelity moved for summary judgment on the grounds that Clarence provided false information that was material to Union Fidelity's decision to issue the insurance certificate, hence Union Fidelity rescinded the certificate. Union Fidelity argued that because it rescinded, there is no insurance contract and all of Barbara's claims against Union Fidelity fail as a matter of law. Thereafter, Barbara filed a Cross Motion for Partial Summary Judgment on her breach of contract claim. Barbara also alleged that Union Fidelity engaged in postclaim underwriting, an unfair trade practice prohibited by § 33-18-215, MCA.

¶ 15 After a hearing, the District Court denied Union Fidelity's Motion for Summary Judgment as well as Barbara's Cross Motion for Partial Summary Judgment. The court determined that there were several genuine issues of material fact, including whether Clarence's signature on the credit application signifying that he was in good health was a material misrepresentation.

¶ 16 The parties proceeded to trial on May 20, 2002. At the close of the evidence, Barbara moved for judgment as a matter of law in her favor on her breach of contract claim and Union Fidelity moved for judgment as a matter of law in its favor on Barbara's fraud and bad faith claims. The District Court denied both motions and submitted the case to the jury. The jury's verdict form instructed it to first determine whether Union Fidelity breached its contract with Barbara; if the jury found no breach, it was to sign and return the verdict form without reaching Barbara's other claims. The jury returned a verdict in favor of Union Fidelity on the breach of contract claim. Barbara now appeals and Union Fidelity cross-appeals.

Issue 1.

¶ 17 Whether the District Court erred in denying Barbara's motions for summary judgment and for judgment as a matter of law upon her claim that Union Fidelity breached its insuring agreement by rejecting her claim for benefits and rescinding her Certificate of Insurance.

¶ 18 Our standard of review in appeals from summary judgment rulings is de novo. Wendell v. State Farm Mut. Auto. Ins. Co., 1999 MT 17, ¶ 9, 293 Mont. 140, ¶ 9, 974 P.2d 623, ¶ 9 (citing Ruckdaschel v. State Farm Mut. Auto. Ins. (1997), 285 Mont. 395, 398, 948 P.2d 700, 702). We apply the same criteria applied by the district court pursuant to Rule 56(c), M.R.Civ.P. The moving party must establish both the absence of genuine issues of material fact and entitlement to judgment as a matter of law. Once the moving party has met its burden, the opposing party must present material and substantial evidence, rather than mere conclusory or speculative statements, to raise a genuine issue of material fact. Hanson v. Water Ski Mania Estates, 2005 MT 47, ¶ 11, 326 Mont. 154, ¶ 11, 108 P.3d 481, ¶ 11 (citing Fair Play Missoula v. City of Missoula, 2002 MT 179, ¶ 12, 311 Mont. 22, ¶ 12, 52 P.3d 926, ¶ 12; Enger v. City of Missoula, 2001 MT 142, ¶ 10, 306 Mont. 28, ¶ 10, 29 P.3d 514, ¶ 10).

¶ 19 This Court's standard of review of appeals from district court orders granting or denying motions for judgment as a matter of law is identical to that of the district court. Marie Deonier & Assoc. v. Paul Revere Life Ins. Co., 2004 MT 297, ¶ 18, 323 Mont. 387, ¶ 18, 101 P.3d 742, ¶ 18 (citing Durden v. Hydro Flame Corp., 1998 MT 47, ¶ 22, 288 Mont. 1, ¶ 22, 955 P.2d 160, ¶ 22; Ryan v. City of Bozeman (1996), 279 Mont. 507, 510, 928 P.2d 228, 229-30). Judgment as a matter of law is properly granted only when there is a complete absence of any evidence which would justify submitting an issue to a jury and all such evidence and any legitimate inferences that might be drawn from that evidence must be considered in the light most favorable to the party opposing the motion. Marie Deonier, ¶ 18 (citing Bevacqua v. Union Pac. R.R. Co., 1998 MT 120, ¶ 46, 289 Mont. 36, ¶ 46, 960 P.2d 273, ¶ 46; Durden, ¶ 21).

¶ 20 Barbara argues on appeal that the District Court erred in failing to hold Union Fidelity liable as a matter of law on her breach of contract claim because Union Fidelity engaged in postclaim underwriting which is statutorily prohibited as an unfair trade practice in Montana. Barbara maintains that during the application process, an insurer must require...