INSURANCE: Contract and declaratory claims against Iowa UM/UIM reinsurer relating to shooting death in Montana of South Dakota resident driving vehicle with business policy and shooter driving uninsured or underinsured vehicle dismissed for lack of personal jurisdiction… Cavan.

FNB Sioux Falls as PR for the Estate of Travis Carlson sued the Estate of Eric Carlson and Grinnell Mutual Reinsurance in relation to the death of Travis Carlson. Its 2nd Amended Complaint alleges breach of contract (Count 5) and declaratory relief (Count 6). Grinnell moves to dismiss under Rule 12(b)(2) for lack of personal jurisdiction. For purposes of this motion, the Court accepts as true the uncontroverted facts from the 2nd Amended Complaint and also considers relevant declarations and discovery materials submitted by the parties.

Travis, 39, a resident of South Dakota, was in the fencing business and frequently traveled to Montana. On 10/19/17 he was building a fence on a ranch in Carter Co. which borders South Dakota. His twin Eric drove onto the property and confronted Travis. Travis attempted to flee in his vehicle but was overtaken by Eric who shot into Travis’s truck at least 6 times during the chase. They collided and came to a stop and Eric then shot and killed Travis. (Eric was found the next day dead from a self-inflicted gunshot. The Complaint does not indicate what the dispute was about.) Travis had a business auto policy with Grinnell which provided $1 million in UM and UIM. FNB alleges that Travis’s estate is entitled to receive benefits under the policy because his injuries arose out of Eric’s use of an uninsured or underinsured vehicle.

To exercise personal jurisdiction over a non-resident in a diversity case, a federal court must determine whether a state rule or statute confers personal jurisdiction and whether assertion of jurisdiction comports with constitutional principles of due process. Data Disc (9th Cir. 1977).

FNB argues that general personal jurisdiction exists because Grinnell has expressly consented to it through Montana’s reinsurance statutory scheme and because it gave implied consent through significant contacts with Montana, and that it also exists due to its continuous and systematic contacts with the State.

Grinnell states that it is headquartered and incorporated in Iowa and thus is not “at home” in Montana. FNB does not advance any contrary argument that thus concedes that general jurisdiction is not established by Grinnell’s place of incorporation and principal place of business, but nevertheless argues that Grinnell’s affiliations with Montana are so continuous and systematic that it is essentially at home in the State. It emphasizes that Grinnell is an accredited reinsurer in Montana, which gives rise to multiple statutory obligations to the Montana Insurance Commissioner. It also points out that 9 insurers in Montana sell Grinnell insurance and that its website represents that it is a “valued member of the Montana business community” and “We Live Where You Live” as a “local ‘neighbor.’” Grinnell responds with the affidavit its Reinsurance VP Kevin Farrell to show that it is not “essentially at home” in Montana. He states that it did not employ anyone in Montana until 2018 when only a single employee was hired and constituted .0012% of its company workforce, its gross written premiums in Montana never exceeded 1% of its total gross written premiums, and it did not issue a single direct policy (like Travis’s policy) to customers in Montana, instead only issuing reinsurance.

Comparing the extensive contacts in Daimler (US 2014) and DeLeon (Mont. 2018) with the forum states in those cases with Grinnell’s contacts with Montana, it is clear that it is not “essentially at home” in Montana. None of its contacts advanced by FNB approach the level necessary to establish general jurisdiction. The statutes relative to its obligations to Montana pertain to reinsurance and are specific to that business. MCA 33-2-1216. As Daimler and Tyrrell (US 2017) demonstrate, simply conducting in-state business is not sufficient to permit the assertion of general jurisdiction. Nor do FNB’s assertions that Grinnell “holds itself out as being located in Montana” and “sells insurance directly” from at least 9 offices support its general jurisdiction argument. A closer look at its citations shows Grinnell’s 2015 Annual Report announcement that it was a “tremendously successful year for the Reinsurance marketing team” by welcoming 6 new Montana mutuals into “the Grinnell Mutual Family” which “marks the beginning of our entrance into the state of Montana.” Its intent to do business in Montana is indisputable, but FNB has not shown that it bought, owns, opened, or franchised the 6 new offices or otherwise was establishing substantial, continuous, and systematic activities to the extent of being at home.

Nor is FNB’s reliance on Grinnell’s web-based representations that they “live where you live” and function as a “neighbor” sufficient. Its website states:

Having neighbors you can rely on is invaluable. We work with 250 local mutual and more than 1,600 local independent agencies in Illinois, Indiana, Iowa, Minnesota, Missouri, Montana, Nebraska, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, and Wisconsin.

FNB fails to differentiate Montana from the other 13 states, and Grinnell obviously cannot be considered at home in each of these jurisdictions.

FNB has not advanced evidence showing that Grinnell’s entrance into Montana resulted in it being “essentially at home” in the State, and therefore it is not subject to general personal jurisdiction under MRCivP 4(b)(1).

FNB argues that Grinnell’s transaction of business in Montana subjects it to specific personal jurisdiction under MRCivP 4(b)(1)(A and that it also subject to jurisdiction under 4(b)(1)(D) by contracting to insure property or risk located within Montana at the time of contracting. Grinnell responds that since this action does not arise out of its reinsurance activities, FNB’s breach of contract claim does not arise from or relate to any of its Montana-related conduct.

Even though Grinnell may be viewed as “doing business” in Montana. the 4(b)(1)(A) analysis requires that “the defendant’s suit-related conduct create a substantial connection with the forum State.” Milky Whey (Mont. 2015); Walden (US 2014). Grinnell’s alleged breach of contract has no connection with Montana. Its activities in the State were limited to reinsurance, which are unrelated to the policy at issue. FNB’s claim arises from the transaction of business within South Dakota: a policy between a South Dakota resident and a South Dakota insurance agency (Parsons) who sold a policy on behalf of an Iowa insurer, Grinnell.

FNB argues that 4(b)(D) is implicated because “Grinnell insured persons, property and risks in Montana when the Policy was issued.” It asserts that “Grinnell knew vehicles insured under the Policy would be driven in Montana because Eric Carlson was a resident of Montana with a Montana driver’s license and was listed as a driver of insured vehicles.” Grinnell responds by pointing to representations by Travis Carlson at the time of contracting that he was a South Dakota resident and the vehicles were garaged there, and proffers the underwriting file and affidavit of Melanie Parsons who obtained commercial insurance for Travis from Grinnell. The original application dated 6/6/16 shows the “longest hauling distance” to be 400 miles, Eric as a licensed driver in Montana, and garaging addresses for all vehicles at Canton, SD. She attests that her files do not show any notations relating to Montana other than that “one or more employees had a Montana driver’s license.” She further relates that Travis requested a change in the rating of his commercial vehicles in 8/16 to “intermediate status” which is defined as 51-200 miles from Canton, which is over 400 miles from Montana.

While there is a conflict as to whether Parsons Ins. Agency knew that the vehicles may be used in Montana for business, there is nothing offered to establish that Travis or the vehicle ultimately involved in this incident were in Montana at the time of contracting. This case is similar in many respects to Carter (Mont. 2005), which involved an MVA in Montana, Carter lived in Mississippi, and the property to be insured was garaged in Mississippi and thus there was no basis for finding jurisdiction under 4(B)(1)(d).

Having determined that there is no basis for jurisdiction under Montana’s long-arm statute, the Court need not determine whether exercise of jurisdiction comports with due process. Nevertheless, FNB relies heavily on FIE (9th Cir. 1990), which involved a Canadian insurer, Portage, that insured a vehicle involved in an MVA in Montana whose driver was insured by Farmers. Portage refused to defend, so Farmers defended and settled for policy limits, then sued Portage. Judge Hatfield dismissed for want of personal jurisdiction, but the 9th Circuit reversed, finding that exercise of jurisdiction would be reasonable — that “automobile liability insurers contract to indemnify and defend the insured for claims that will foreseeably result in litigation in foreign states.” However, FNB acknowledges that Carter declined to apply FIE, finding that “Portage arguably had an obligation to appear and defend the driver who had been sued in Montana as a result of an accident, while here, MFBCIC had no similar obligation to appear and defend because neither its insured or an omnibus insured was sued in this state.” The Court explained that it is important to differentiate between a case in which an insured is sued in a foreign state as the result of an MVA and where the insured is suing its insurer in a foreign state for breach of contract. The former involves a question of indemnity, while the latter involves 1st-party coverage, which “are distinguishable on multiple levels.” In an indemnity situation, “the insurer is obligated by the terms of the policy to appear for and defend its insured, wherever an accident and resulting lawsuit occurs.” In the case of 1st-party coverage, “the place of the accident is immaterial for purposes of jurisdiction, as the action is one to enforce a contract.” In a 1st-party coverage case, “the question of whether the forum has personal jurisdiction of the other contracting party is a question that must be answered before — and separate and apart from — the inquiry into whether the contract is enforceable.” King (9th Cir. 2011) recognized that FIE involved an indemnity dispute and does not apply where an insured is suing its insurer in a foreign state for breach of contract.

Therefore, this Court declines to exercise specific personal jurisdiction over Grinnell.

Because personal jurisdiction is an individual right, a defendant can waive due process protections by express or implied consent to it. DeLeon; Ins. Corp. of Ir. (US 1982). FNB argues that Grinnell expressly consented as an accredited reinsurer under MCA 33-2-1216(5)(e)(ii)(C):

To be eligible for certification … an assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction … and shall … agree to the jurisdiction of this state.

FNB also asserts that Grinnell impliedly consented to personal jurisdiction because of its status as an accredited reinsurer, which requires significant contact with Montana, pointing to its $2.5 million reinsurance business in Montana as well as MCA 33-2-126 requirements.

Grinnell responds by emphasizing language in MCA 33-2-1218 which limits application of 33-2-1216 & 1217 “to all cessions … under reinsurance agreements,” and to Montana’s Form AR-1: “I … the assuming insurer under a reinsurance agreement(s) … hereby certify that [name of assuming insurer] 1. Submits to the jurisdiction of any court of competent jurisdiction in Montana for the adjudication of any issues arising out of the reinsurance agreement(s)….”

The Court agrees with Grinnell that it did not consent to general jurisdiction in Montana, but for different reasons. MCA 33-2-1201(1) provides that “an insurer may not retain any risk on any one subject of insurance … in an amount exceeding 10% of its surplus to policyholders.” (3) further provides that “reinsurance as authorized by this part must be deducted in determining risk retained.” The purpose of 33-2-1216 is to establish the circumstances in which a domestic insurer will be allowed credit for reinsurance ceded in determining risk retained. To receive any credit, reinsurance must be ceded to an assuming insurer who is accredited by the Insurance Commissioner as a reinsurer in Montana, and to be accredited, the reinsurer must “agree to the jurisdiction of this state.” Thus §33-2-1216 only pertains to the issue of credit for reinsurance ceded to another insurer. To receive credit, it ensures that the reinsurer will be subject to a Montana court’s jurisdiction. Interpreting it as suggested by FNB would require the reinsurer to subject itself to jurisdiction for any suit brought by any party relative to any dispute that occurs anywhere in the US, plainly beyond the Legislature’s purpose & intent.

For many of the same reasons, it cannot be found that Grinnell impliedly consented to general jurisdiction in Montana. “The implication must be predicable and fair.” Deleon; Worldcare (D.Conn. 2011). Given the limited scope and purpose of the reinsurance statute, Grinnell would not have understood that it was waiving its due process protections and consenting to general jurisdiction in Montana, particularly in light of Form AR-1 which limits the consent to “the adjudication of any issues arising out of the reinsurance agreements.”

FNB argues that dismissal cannot be granted without allowing additional discovery because Grinnell attached “material extraneous to the pleadings” that converts its motion into one for summary judgment, relying on Rule 12(d):

If, on a motion under Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.

However, Grinnell’s motion was brought under 12(b)(2) which allows for consideration of extrinsic evidence including affidavits. Stewart (N.D. Cal. 2015). Therefore the Court will convert this motion to summary judgment.

FNB also requests the opportunity to conduct jurisdictional discovery to establish a basis for personal jurisdiction. Where material jurisdictional facts are disputed, the court has discretion to permit discovery to resolve factual issues. Bunch (Mont. 2009). Material jurisdictional facts relative to the jurisdictional issues are not disputed here. There are disputed facts concerning whether Parsons Ins. Agency had knowledge of the use of the insured vehicles in Montana and whether and to what extent they may have been used in Montana, but these facts were not material to the Court’s decision. Nor has FNB explained what it expects discovery might reveal or how it might result in facts that would establish personal jurisdiction. Chapman (D. Haw. 2009).

Grinnell’s motion to dismiss for lack of personal jurisdiction is granted. Counts 5 and 6 are dismissed without prejudice.

FNB Sioux Falls as PR of Travis Carlson v. Estate of Eric Carlson and Grinnell Mutual Reinsurance, 44 MFR 218, 3/24/20.

John Amsden & Justin Stalpes (Beck, Amsden & Stalpes), Bozeman, for FNB; Calvin Stacey (Stacey & Funyak), Billings, and Gerry Fagan & Stephanie Baucus (Moulton Bellingham), Billings, for Estate of Eric Carlson; Nicholas Pagnotta & Alexander Tsomaya (Williams Law Firm), Missoula, and Katherine Huso (Matovich, Keller & Huso), Billings, for Grinnell.

INSURANCE: Pretrial rulings in condo building wind damage UTPA case… Johnston.

Park Plaza Condo Association consists of people who own 35 units in The Park Plaza in Great Falls. Travelers insured Park Plaza under annual policies providing replacement cost of $13,549,116 for direct physical loss or damage to the building caused by wind-driven rain, high winds, and wind storms with the following limitations:

a. We will not pay for loss of or damage to:

(1) The “interior of any building or structure” or to personal property in the building or structure, caused by rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:

(a) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters; or

(b) The loss or damage is caused by or results from thawing of snow, sleet or ice on the building or structure.

Park Plaza alleges that since 2009 “wind and rain, driven by wind, first caused damage to the building’s walls, through which the rain then entered and caused damage to interior structures,” and that “once the wind-driven rain damaged the outside walls of the structure and the rain was driven through the damaged walls, the rain intermittently froze and thawed, causing further damages,” and that the limitations therefore are inapplicable. It contends that Travelers is liable for $4,317,181 in damages plus attorney fees and costs plus punitives for violation of the UTPA. Travelers has refused to admit coverage and has counterclaimed against Park Plaza. Trial is set for 9/16/19.

– – –Travelers requests summary judgment on Park Plaza’s UTPA claims under §33-18-201(4), (5), and (6). Park Plaza concedes that summary judgment should be granted in favor of Travelers on the claim under (6) because liability is not reasonably clear but opposes the motion as to (4) and (5) which provide that an insurer may be liable if it:

(4) refused to pay claims without conducting a reasonable investigation based upon all available information; or

(5) failed to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed.

§33-18-242(4) provides that an insured may recover punitives based on violation of (4) or (5) if it can show actual fraud or actual malice.

Travelers argues that Park Plaza has made no claim for actual damages under (4) or (5) and that §242 prohibits an insured from recovering punitives based on a violation of these subsections absent a showing that the violation also resulted in actual damages. However, Gleason (Mont. 2015) held that an insured may recover punitives without proving that he incurred actual damages as a result of the UTPA violations — that he need only show that he incurred actual damages “arising out of the breach of the insurance contract which gave rise to the UTPA [violation].”

Travelers argues that it conducted a reasonable investigation before denying Park Plaza’s claim, and that it denied coverage within a reasonable time after receiving its proof of loss. Park Plaza responds that the investigation was deficient because it neglected to obtain and consider “wind velocity records for Great Falls,” given that Park Plaza had claimed that wind was the dominant cause of the damage, and that a jury question exists as to whether it was reasonable for Travelers to wait 17 months to deny coverage.

“Reasonableness is generally a question of fact” for the jury. Lorang (Mont. 2008); Dean (Mont. 1994). The jury must decide whether Travelers conducted a reasonable investigation and whether it denied coverage within a reasonable time.

Travelers argues that it had a reasonable basis in law and fact for contesting Park Plaza’s claim and the amount of the claim. The Court may decide as a matter of law whether the insurer had a reasonable basis for denying a claim where the insurer’s basis in law for contesting the claim or the amount “was grounded on a legal conclusion” and no issues of material fact are in dispute. Marshall (Mont. 2018). The Court reviews the proffered evidence and legal precedent and determines whether the precedent provides an “absolute defense as a matter of law.” Redies (Mont. 2007); Jarvis (D.Mont. 2012). None of Travelers’ defenses is grounded solely on legal conclusions. Its primary defense presents a mixed question of fact and law. The facts supporting its primary defense are in dispute. Travelers argues that no coverage exists because wind was not the efficient proximate cause of the damage. It relies on testimony of its expert Richard Dethlefs, who has opined that wind played no role in causing the damage. Park Plaza’s expert John Bolton has opined that wind-caused story drift was the dominant cause of the damage.

– – –Park Plaza’s expert John Bolton has opined that the building would experience “story drift” in winds of 30 mph or greater and that it was the dominant cause of the panel cracks on the exterior. Travelers seeks to preclude him from presenting any evidence of story drift, arguing that it is inadmissible under Rule 702 and Daubert (US 1993).

Bolton’s opinions are relevant. Evidence of story drift may assist the jury in determining the dominant cause of the cracks in the concrete rib panels. Travelers’ expert Richard Dethlefs has testified that story drift is a scientifically established phenomenon that occurs when a lateral load is applied to a high rise causing the building to lean. Park Plaza is an 8-story building. He has testified that wind may cause story drift. NOAA wind records show high wind events (30-74 mph) in Great Falls on 1,310 days 1/09-12/16.

Bolton’s opinions regarding story drift are sufficiently reliable to be admissible. He has specialized training as an architect and has worked as an architect for a number of years. He has examined the cracks and reviewed the NOAA wind records. Although he has not attempted to measure the amount of lateral displacement experienced by the building during high winds, he bases his opinions regarding story drift on his knowledge, training, and experience as an architect. He has testified that he personally experienced story drift while standing on the roof of the Park Plaza 10/12/16 and 10/13/16. NOAA data reveals that gusts of 27-29 mph occurred on those days. His opinions satisfy the Daubert relevance and reliability standards.

Travelers argues that his opinions fail to pass the reliability prong because he did not identify story drift as the dominant cause of the panel cracks in his reports of 2/1/17 or 4/17/17, he did not attempt to measure the actual amount of story drift during a high wind event, and his 12/17/18 Declaration contains statements that contradict statements in his deposition. All of these challenges go to weight of his testimony, not admissibility. Travelers may raise its challenges during cross of Bolton. The jury will decide how much weight his testimony deserves.

– – –Rulings at a hearing on all pending motions 2/20/19 include:

Wind and wind-driven rain would qualify as a fortuitous occurrence if Park Plaza can show that it did not know in 4/09 that the wind or wind-driven rain would cause the type of loss for which it now seeks to recover damages.

The Court will instruct on the efficient proximate cause rule as defined under Montana law.

The phrase “events occurring during the policy period” is ambiguous when applied to the progressive and incremental loss that occurred and must be construed broadly in favor of coverage. When wind or wind-driven precipitation causes a continuing and progressive loss that continues through multiple policy periods, the wind or wind-driven precipitation would qualify as an “event occurring” during the policy period.

Park Plaza is not required to prove the monetary loss attributable to a particular wind or wind-driven precipitation event or policy period, but only that wind or wind-driven precipitation caused a monetary loss in excess of the $2,500 deductible during a particular policy period.

The breach of contract claim and bad faith claim shall be presented to the same jury sequentially. Park Plaza may not present evidence of alleged bad faith during the contract phase.

Park Plaza may not present evidence that Travelers poached business from its prior insurer.

Park Plaza may not present evidence that Travelers’ loss control inspector acted negligently when he inspected the building.

Park Plaza may not exaggerate the amount and type of wind that the building experienced.

An expert may comment on an opposing expert’s methodology but may not make personal attacks on an opposing expert.

Travelers may not argue that its claim is barred for failure to comply with the notice provision in the policy until it presents evidence that it has suffered prejudice.

Travelers may not discuss the relationship between Park Plaza’s lawyers and any resident at Park Plaza.

Speaking objections are prohibited.

Travelers may not comment on “attorney advertising.”

Counsel must address each other at trial through formal titles..

– – –Park Plaza Condo Association v. Travelers Companies, 44 MFR 201 a, b, c, 3/25/19.

Zander Blewett & Anders Blewett (Hoyt & Blewett), Great Falls, for Park Plaza; Guy Rogers & Jon Wilson (Brown Law Firm), Billings, and James Derrig, Seattle, for Travelers.

EXPERT DISCLOSURE: Inadequate disclosure precludes expert testimony at trial, but she is permitted to testify as a fact witness… Molloy.

Apex Abrasives alleges that following construction of a commercial-grade garnet processing facility in Glen it was forced to cease operations and liquidate its inventory because WGI Heavy Minerals violated their purchase agreement. WGI objects to Apex’s expert disclosure for Julie Fagenstrom and seeks to exclude her from offering expert testimony at trial. Argument was heard 3/28/19.

Fagenstrom was disclosed as a non-retained expert under Rule 26(a)(2)(C). While WGI does not dispute that the disclosure adequately states the subject of her testimony, Rule 26(a)(2)(C) (i), it argues that the disclosure fails to provide a summary of the facts and her opinions, Rule 26(a)(2)(C)(ii). Her disclosure states:

Ms. Fagenstrom provided bookkeeping and accounting services for Apex Abrasives. She is a Nelson family member and is not receiving compensation for participating as a witness in this case.

A. The Subject Matter on Which Ms. Julie Fagenstrom Is Expected to Present Evidence under Federal Rule of Evidence 702, 703, or 705

1. Apex Accounting and Ledger Entries.

B. Summary of the Facts and Opinions to which [Ms. Julie Fagenstrom] Is Expected to Testify

1. Ms Fagenstrom will rely on her experience and knowledge as an accountant; and her personal knowledge of Apex’ financial and production records and related exhibits.

2. Based on the foregoing, Ms. Fagenstrom will testify regarding funds Apex was forced to borrow to sustain operations during the contract period when WGI did not purchase the minimum specified tonnages, which borrowed funds are due and owing to the private lender.

3. Based on the foregoing, Ms. Fagenstrom will testify regarding the expenditure and loss of invested capital to design, construct, and permit the mill. In connection with this testimony she will opine regarding the value of the company and the effect Apex’s breach of contract had on that value.

4. Based on the foregoing, Ms. Fagenstrom will offer opinion testimony regarding the profit Apex could have expected to make on the sale of minimum tonnages specified in the parties’ marketing agreement based upon conservative production costs of four cents per pound.

5. Based on the foregoing, Ms. Fagenstrom will testify regarding revenue generated from the sale of tungsten as a by-product of garnet production and offer opinion testimony regarding the amount of revenue Apex lost because WGI failed to purchase the specified amount of garnet in the parties marketing agreement.

Apex’s disclosure is not sufficient under 26(a)(2)(C)(ii). The “disclosure advises the reader that the witness will have opinions in certain areas, but fails to state what the opinions are, and the factual basis for those opinions.” Cooke (D.Ariz. 2013). “An opposing party should be able (and is entitled) to read an expert disclosure, determine what, if any, adverse opinions are being proffered and make an informed decision as to whether it is necessary to take a deposition and whether a responding expert is needed.” Id. While it is clear what topic areas Fagenstrom will cover, her opinions and the underlying facts remain unknown. For example, while she is anticipated to testify to revenue from tungsten sales, the disclosure does not state what the expected revenue was or what her calculation of that revenue is based on.

Because Apex’s expert disclosure of Fagenstrom is not sufficient under the rules it must be excluded unless Apex can show that its failure was substantially justified or harmless. Rule 37(c)(1). Its only response has been to maintain the sufficiency of its present disclosure. Counsel for Apex stated during argument that the proffered calculations walk a fine line between fact and opinion. While he is correct, once it decided to notice her as an expert it was required to meet the requirements of Rule 26(a)(2)(C)(ii), which requires disclosure of both the opinion and a summary of the facts upon which it is based. Counsel also argued that all the underlying data & calculations have been previously disclosed in the course of this proceeding. This ignores Rule 26(a)(2)(C)’s requirement that the disclosure link evidence to opinions. Counsel also argued that the record contained sufficient information for WGI to decide whether or not to depose Fagenstrom. But “without information as to the opinions [Apex’s] non-retained expert witnesses are expected to testify to and the main facts on which these opinions are based, [WGI]’s ability to meaningfully depose or cross-examine these witnesses is undermined.” Pineda (ND Calif. 2012). As argued by WGI, the inadequate disclosure has not given it a meaningful choice of whether to depose Fagenstrom, but rather mandates a deposition. Id.

Fagenstrom is excluded from offering expert testimony at trial; however, this Order does not prevent her from offering fact testimony at trial.

Apex Abrasives v. WGI Heavy Minerals, 44 MFR 200, 3/28/19.

Peter Scott (Scott Law Offices), Bozeman, for Apex; Marshall Mickelson (Corette Black Carlson & Mickelson), Butte, for WGI.

INSURANCE: Fall from Heights exclusion precludes coverage for ladder fall regardless of whether the person fell from or with the ladder or whether 10-15 foot fall measured from head or foot qualifies as “from heights”… no duty to defend roofing contractor vis-à-vis $4.7 million consent judgment… Cavan.

Roofing & Restoration Services of America and Rambur Const. entered into a Marketing Agreement in 5/14 by which they acted together to solicit sales of roofing jobs in the Billings area following a significant hail storm. RRSA contracted with Kelly Porch to sell roofing contracts on several residential buildings. It chose to treat him as a direct seller as defined in 26 USC 3508 and did not elect work comp for him. RRSA and Rambur hired Ochoa’s Const. to tear off and reapply materials to a roof. Porch arrived at the job site with a project manager from RSSA 7/10/14. They went onto the roof to show Ochoa’s foreman how they wanted the materials applied. Porch used a ladder provided by Ochoa’s. While he was on the roof, an Ochoa’s employee moved the ladder and placed it against the rain gutter. As Porch was climbing down the ladder, the gutter broke, causing the ladder and Porch to fall 10-15 feet. He was knocked unconscious and alleges that he injured his right foot, kidneys, lungs, nose, back, right elbow, and right leg. Preferred Contractors Ins. Co. insured Ochoa’s under a CGL policy. Porch and his wife sued Ochoa’s and RRSA in Yellowstone Co. State Court 11/24/14 alleging that he sustained damages “from a fall resulting from a negligently placed ladder on the job site. Neither PCIC, Golden State Claims Adjuster, nor Safebuilt Insurance Services was named. PCIC was notified of the complaint 4/23/15. Golden State responded on its behalf and informed Ochoa’s that no coverage existed for the allegations in the complaint and PCIC would be denying coverage for defense and indemnity. On 2/24/16 Ochoa’s entered into a consent judgment & covenant to execute and assigned to Porches all of its rights against Defendants. Porches then dismissed all Defendants except Ochoa’s.

Judge Gustafson held a reasonableness hearing 3/2/17. Porches presented evidence. Ochoa’s did not appear. On 3/30, Gustafson entered $4.7 million judgment in favor of Porches and against Ochoa’s. Porches subsequently were granted leave to file a 2nd amended complaint adding PCIC and Golden State and asserting claims against them based on their coverage decisions. Defendants removed to this Court and sought dismissal on grounds that Gustafson erred in permitting Porches to amend their complaint after judgment had been entered. The action was ultimately dismissed on procedural grounds with leave to amend, and Porches filed this action against PCIC, RGG, Golden State, and SIS asserting claims for declaratory relief, breach of contract, breach of the implied covenant of good faith & fair dealing, violation of the Montana UTPA, common law bad faith, breach of fiduciary duty, negligence, and punitives. They request partial summary judgment that Defendants breached their duty to defend Ochoa’s and are therefore liable for the $4.7 million judgment, and that Defendants cannot unequivocally demonstrate that there was no coverage. Defendants counter that their claims are explicitly excluded from coverage and thus they had no duty to defend.

Defendants do not dispute that Porches’ underlying claims fall within the scope of the policy’s general coverage provision, but argue that the claims are excluded under the Employer’s Liability, Independent Contractors/Subcontractors, and Fall from Heights exclusions. Defendants correctly conclude that there is no coverage under the Fall from Heights exclusion:

“Bodily injury” sustained by any person at the location of the incident, whether working or not, arising out of, resulting from, caused by, contributed to by, or in any way related to, in whole or in part, from a fall from heights. For purposes of this exclusion, a fall from heights shall include, but not be limited to, a fall from scaffolding, hoists, stays, ladders, slings, hangers, blocks, or any temporary or moveable platform where there is a height differential to the ground.

Even when liberally construing the allegations and resolving all doubts in favor of a finding that the obligation to defend was triggered, it is clear that Porch’s injuries were excluded by this provision.

Focusing on the 2nd sentence, Porches argue that he did not fall from the ladder, but with the ladder. The Court need not even reach the 2nd sentence. His injuries were clearly excluded under the plain language of the 1st sentence. Regardless of whether he rode the ladder to the ground or was separated from the ladder during the fall, the Complaint alleged that his injuries resulted from a fall from a height of 10-15 feet, which is “a fall from heights.”

Even considering the 2nd sentence, there is no ambiguity. Porches’ argument that he sustained an injury in a fall with a ladder rather than from a ladder presents a distinction without any discernable difference. To interpret the exclusion as excluding coverage for a fall where the injured party loses contact with the ladder, but providing coverage if he is able to hang on to the ladder throughout the fall, would plainly distort the contractual language to create an ambiguity where none exists.

Moreover, the 2nd sentence states that a fall from heights “shall include, but not be limited to” falls from various objects. “Include, but not limited to” are terms of enlargement, not limitation. Burgess (US 2008). Thus a fall with a ladder is excluded, just as a fall from a ladder, as long as the fall is “from heights.”

Navarro (ND Tex 2018) reached a similar conclusion as to the same Fall from Heights exclusion in a PCIC policy. Navarro alleged that he suffered severe injuries as a result of falling through an attic floor to the ground 18 feet below and that the exclusion did not prevent coverage because the 2nd sentence limited “fall from heights” to only falls from the objects specifically listed. The court held that:

There is no indication that the second sentence limits the plain meaning of “fall from heights.” The second sentence does not purport to change the generally accepted definition of “fall from heights” or specify from where or how a person must fall to come within the exclusion.

It concluded that the exclusion could be given a clear & definite legal meaning and was therefore unambiguous, and PCIC therefore did not have a duty to defend. Navarro is persuasive. Reading the policy as a whole, and giving its terms their plain meaning, the Fall from Heights exclusion unambiguously applies to more than just falls from the listed objects.

Porches also argue that “from heights” is ambiguous. They assert that it is uncertain whether a 10-15 foot vertical distance is high enough to qualify as “from heights.” However, the exclusion provides that there only has to be a “height differential to the ground.” Porches again strain to create ambiguity by focusing on “a height potential,” implying that “a” is ambiguous and asserting that Defendants could have used “any” to avoid confusion. The Court does not find “a” unclear, and again declines to create an ambiguity where one does not exist. The Complaint alleged that Porch fell 10-15 feet. As such, it alleged that there was a height differential. Further, it is irrelevant whether the 10-15 feet was measured from the top of his head or the bottom of his feet because if there is a height differential to the ground, the exclusion is triggered.

Defendants were justified in relying on the Fall from Heights exclusion. They have unequivocally demonstrated that Porches’ claims did not fall within the policy’s coverage and therefore they had no duty to defend Ochoa’s. Porches’ motion for partial summary judgment is denied.

Because the policy expressly provides that “this insurance does not apply” if an exclusion is applicable, the policy provides no coverage to Porches as to the issues raised in this litigation. Thus it is unclear whether any avenue remains for them to recover against Defendants. It also appears that the motions to dismiss may be moot. However, because Defendants did not cross move for partial summary judgment, it is unclear how the case should proceed. The Court will hold a status conference 3/26 to discuss further proceedings.

Porch v. Preferred Contractors Ins. Co., Golden State Claims Adjusters, and Safebuilt Insurance Services, 44 MFR 199, 3/11/19.

John Morrison (Morrison Sherwood Wilson & Deola), Helena, and Haley Kemmick (Plath Law), Billings, for Porches; Christopher Sweeney & Adam Warren (Moulton Bellingham), Billings, for Defendants.

CRIMINAL DEFAMATION: Montana statute unconstitutionally overbroad for lack of specific “actual malice” mens rea, contrary to Lynch’s implied reading… sua sponte summary judgment for disbarred attorney charged with criminal defamation of judicial election opponent… Molloy.

Magistrate Lynch’s Findings & Recommendation.

Robert Myers ran against Judge Langton in 2016. He claimed that Langton was unfit for office and ran several ads accusing him of abusing his power, purchasing and using illegal drugs, and drinking with minors. ODC filed misconduct complaints against Myers based on the ads, and the Montana Supreme Court disbarred him in 12/17. After learning in 5/17 that the Missoula Co. Sheriff’s Dept. was investigating a criminal defamation complaint filed against him by Langton, Myers commenced this action challenging constitutionality of Montana’s criminal defamation statute, §45-8-212. The State requests summary judgment that the statute is constitutional on its face and as applied to Myers.

Myers claims the statute is unconstitutionally overbroad & vague because it does not have an actual malice requirement, does not require the State to show falsity, and shifts the burden to the defendant by making truth an affirmative defense. He claims it is unconstitutional as applied to him because he is inhibited from continuing to speak out against Langton even if his statements are true and without actual malice.

It is well-established that “true communications are constitutionally protected” and not actionable as defamation in a civil suit or criminal prosecution. Helfrich (Mont. 1996); Sullivan (US 1964); Garrison (US 1964). Consistent with this principle, §45-8-212(3) recognizes that truth is a justification that precludes criminal liability for defamation. However, Myers contends that because of the way the statute is structured it does not require the State to prove falsity and improperly makes truth an affirmative defense that a defendant must allege and prove to avoid conviction. While this may be one plausible reading, the State offers an equally plausible reading pursuant to which it bears the burden of proving falsity. §212(3) can reasonably be read as setting forth exceptions to criminal defamation, rather than affirmative defenses. Under this reading, if defamatory matter is true, it is not punishable as criminal defamation and the State would have the burden of proving falsity as an element of the offense to obtain a conviction.

Where a statute is susceptible to different constructions, one of which raises constitutional concerns and the other does not, the Court must read it so as to avoid the constitutional problem. The State’s construction is the more reasonable because it avoids any constitutional problems raised by relieving it of having to prove falsity and construing truth as an affirmative defense that must be proven by the defendant.

Further, as the State points out, when the Montana Legislature intends to establish an affirmative defense to a criminal offense, it has done so expressly. See MCA 45-3-115 (“A person charged with prostitution [and related offenses] … may assert an affirmative defense that the person is a victim of human trafficking.”); MCA 80-18-11 (affirmative defense for possession or cultivation of marijuana). Unlike these statutes, MCA 45-8-212 says nothing about truth being an affirmative defense to criminal defamation or placing the burden of proof on the defendant. Had the Legislature intended for truth to be an affirmative defense to criminal defamation it could have explicitly designated it as such. Instead, it drafted §212(3) to effectively preclude criminal liability for true statements, thereby leaving it to the State to prove falsity.

Finally, construing the statute to require proof of falsity is consistent with the rule of lenity, which provides that when a criminal statute is subject to more than one reasonable but conflicting interpretation it should be construed in favor of the defendant. Stoner (Mont. 2012).

Sullivan held that in a civil defamation action by a public official seeking damages for a false statement regarding his official conduct, he must prove that “the statement was made with ‘actual malice’ — that is, with knowledge that it was false or with reckless disregard of whether it was false or not.” Garrison extended that holding to criminal defamations and declared Louisiana’s criminal libel statute unconstitutional because it did not establish truth as an absolute defense and punished false statements concerning public officials without requiring proof of actual malice.

The State agrees that Montana’s statute does not expressly include the actual malice standard, but argues that the Court should interpret it as incorporating the requirement. 1st, it relies on the principle that the Legislature is presumed to be aware of case law when it enacts or amends a statute. Swanson (Mont. 2002). The Legislature enacted §45-8-212 in 1973 and has amended it several times. Because Sullivan and Garrison had been decided several years earlier, the Court presumes that the Legislature intended to comply with them when it enacted 45-8-212 in its present form. 2nd, he State relies on the principle that the Montana Supreme Court presumes that statutes are constitutional and will adopt an interpretation that renders one constitutional rather than one that renders it invalid. Because 45-8-212 does not contain any intent element on its face, it is susceptible to different interpretations, one of which requires proof of actual malice and one which does not. If the Court were to accept Myers’s interpretation and read it as allowing for criminal liability without proof of actual malice, it would be unconstitutional under Sullivan and Garrison. The Court can avoid this problem by interpreting it more narrowly as requiring actual malice in cases involving public matters. The latter is consistent with Montana’s principles of statutory construction and is supported by the Montana Supreme Court’s application of the actual malice standard in civil defamation cases. Roots(Mont. 1996). Like its criminal counterpart, the civil statute, §27-1-802, does not expressly incorporate the actual malice standard. The Montana Supreme Court has nevertheless applied the Sullivan standard and held that a “public figure cannot recover damages upon a claim for defamation without a showing of actual malice.” Roots. This suggests that it would do the same in the criminal context where the rule of lenity applies.

Recommended, the State’s motion for summary judgment be granted.

– – –Judge Molloy’s Opinion & Order.

Robert Myers argues that it was error for Judge Lynch to judicially construe MCA 45-8-212 to include an actual malice standard; conclude that there was not an intent element, which made the statute ambiguous; apply Montana’s reasonable doubt burden of proof; ignore Myers’s vagueness argument; assume that the statute as written does not conflict with 1st Amendment precedent; and fail to address the constitutionality of the claims presented in his Response to Summary Judgment. He is a disbarred lawyer proceeding pro se. Despite his legal background, his pro se status requires his filings to be construed liberally, Bernhardt (9th Cir. 2003), complicating review of his objections. In light of his status, his objections are considered specific enough to elicit de novo review in those areas identified. Ultimately, §45-8-212 is substantially overbroad because it does not include an actual malice requirement, Sullivan (US 1964), Garrison (US 1964), and its overbreadth cannot be cured by a narrowing interpretation.

A defamatory statement must be “made with ‘actual malice’ — that is, with knowledge that it was false or with reckless disregard of whether it was false or not.” Sullivan. Myers argues that 45-8-212 is facially invalid because it does not include an “actual malice” requirement. It “should not be deemed facially invalid unless it is not readily subject to a narrowing construction by the state courts and its deterrent effect on legitimate expression is both real and substantial.” Erznoznik (US 1975); Broadrick (US 1973). In the 1st Amendment context, “a law may be invalidated as overbroad if a substantial number of its applications are unconstitutional, judged in relation to the state’s plainly legitimate sweep.” Stevens (US 2010). Substantial overbreadth does not exist if the statute’s application can “be cured through case-by-case analysis of the fact situations to which its sanctions may not be applied,” Broadrick, and “there must be a realistic danger that the statute itself will significantly compromise recognized First Amendment protections of parties not before the Court,” Jews for Jesus (US 1987); Taxpayers for Vincent (US 1984).

Because Myers challenges a state statute, Montana’s rules of statutory construction apply. Harris (9th Cir. 2013). First, the Court must presume that when the Montana Legislature enacts or amends a statute it is aware of existing law, including decisions interpreting statutes. Swanson (Mont. 2002). Thus when Montana enacted 45-8-212 in 1973 it is presumed to have been aware of Sullivan and Garrison. However, the 1973 statute was based on the 1962 version of the Minnesota Criminal Code, which did not consider Sullivan or Garrison. Moreover,Helfrich (Mont. 1996) held that the statute was unconstitutionally overbroad for including language that prevented truth from being an absolute defense. The 1997 Legislature was forced to amend it to remove the offending language. As a result, the Legislature’s omnipotence as to the state of the law has been enervated in this context. (While Myers did not object to Lynch’s determination that the statute does not improperly make truth an affirmative defense, Shumway (Mont. 2019) may raise a question whether §45-8-212(3)(a) remains appropriately drafted (where an exception to a criminal statute is separate from the enacting clause, the exception is to be proven by the defense).)

2nd, statutes are presumed constitutional and courts must “construe statutes narrowly to avoid an unconstitutional interpretation if feasible.” Morris (Mont. 2006). In doing so, they must be read “as a whole, without isolating specific terms from the context in which they are used by the Legislature.” Id. Nevertheless, criminal regulation of 1st Amendment expression is subject to exacting review. Ytterdahl (Mont. 1986); Gooding (US 1972). Courts must look no further if the plain meaning clearly conveys the intent behind the statute. Holeman (Mont. 1996). Moreover, Supreme Court precedent does not “authorize a court in interpreting a statute to depart from its clear meaning.” US v. Sullivan (US 1948). The explicit terms of 45-8-212 do not include an actual malice requirement. Recognizing the indefensibility of such broad language, the State argues for a narrowing interpretation that includes the requisite mental state. The question then is whether “actual malice” is contained “in substance” in the statute. Montana has never specifically held that 45-8-212 is limited to situations involving “actual malice.” The next question is whether it could do so. It has read constitutional standards into criminal cases involving “fighting words” under the 1st Amendment. O’Shaughnessy (Mont. 1985) (narrowly construing a Whitefish City ordinance to apply only “to words that have a direct tendency to violence”); Lance (Mont. 1986) (narrowly construing intimidation statute to require “true threat”). However, those statutes included the basic element or phrase at issue, providing an arguably ambiguous starting point from which the Court could apply a narrowing construction, while 45-8-212 does not mention “actual malice” or falsity. As was the case in Helfrich, Turner (Minn. 2015) struck the part of its defamation statute that prevented truth from being an absolute defense, but it went a step further, holding that it was unconstitutional and could not be narrowly interpreted to include the absent mental state because that “would constitute a serious invasion of the legislative domain.” (quoting Stevens). The Minnesota Legislature responded by amending its criminal defamation statute to add a scienter requirement based on a matter’s “false” character. Such legislative amendment is necessary here.

There is an argument that a general mens rea statute could provide the necessary scienter. Phelps (10th Cir. 1995); Osborne (US 1990) (an absent mens rea requirement may be “cured by another law that plainly satisfies the element of scienter”). MCA 45-2-103(1) states that for most offenses (excluding deliberate homicide), “a person acts while having one of the mental states of knowingly, negligently, or purposely.” This is not a saving grace for 45-8-212, because “actual malice” is a unique mental state that could not be achieved by reading a “knowingly, negligently, or purposefully” requirement into it. “No recognition is given the reckless disregard and knowing falsity standard mandated by” Sullivan and Garrison. Armao (Penn. 1972). To read such a requirement into it goes beyond mere judicial activity to “judicial legislation.” Id. The Court cannot “rewrite a law to conform it to constitutional requirements,” and to read 45-8-212 as the State desires “requires rewriting, not just reinterpretation.” Stevens. See also Lenio (11th Judicial Dist.) (Judge Ulbricht holding that reading “actual malice” into the statute “would constitute a serious invasion of the legislative domain” and ultimately finding 45-8-212 overbroad) (quoting Stevens)).

I reluctantly disagree with Judge Lynch’s view. Because §45-8-212 is unconstitutionally overbroad, I do not address Myers’s remaining arguments including his alleged vagueness claim. That said, as the line between knowledge and ignorance becomes even more nuanced in the age of electronic communications and social media, specific statutory guidance is imperative. O’Shaughnessy, Smith (US 1974), Stevens.

Summary judgment is granted in favor of Myers. Rule 56(f)(1); Gospel Missions (9th Cir. 2003) (upholding sua sponte grant of summary judgment in favor of nonmovant where the movant’s filing of its own summary judgment motion addressed the issues on which summary judgment was granted).

Myers v. Ravalli Co. Atty. Fulbright and AG Fox, 44 MFR 197 (Lynch), 198 (Molloy).

Robert Myers, Hamilton, pro se; Asst. AGs Stuart Segrest & Matthew Cochenour.