AMENDMENT: Untimely motion to add punitives component fails Rule 16(b)(4) good cause… Molloy.

Robert Ferrell requests leave to amend his complaint to add tortious & negligent entrustment by Nelson Trucking based on its knowledge of its employee’s poor driving record. Pursuant to the Rule 16 scheduling order, the amended pleading deadline was 10/9/13. Ferrell contends that he was unaware of the facts giving rise to this cause until after he received discovery from Nelson. It is unclear when he received that discovery and how much time elapsed before the present motion was filed. Further, his complaint includes a claim for “liability for negligently and tortiously hiring, retaining, and entrusting its employee to drive a tractor trailer rig, when he was a reckless, dangerous, and incompetent driver, unfit for operation of a tractor trailer rig in interstate transportation.” Even though he now asks to add a punitives component to this claim, the presence of this claim indicates that he was aware of the facts & theories that supported this cause as early as 5/13 and actually pled

them. Thus his motion fails to meet Rule 16(b)(4) good cause and is denied.

Ferrell’s motion also fails to comply with a number of Local Rules such as contacting the other party and including that information in his motion, LR 7.1(c)1), filing his motion & brief separately, LR 7.1(d)(1)(A), and including a certificate of compliance, LR 7.1(d)(2)(E).

Ferrell v. Nelson Trucking v. SK Const., 41 MFR 339, 2/14/14.

Frederick Overby (Overby Law Office), Bozeman, and Matthew Dodd (Dodd Law Firm), Bozeman, for Ferrell; Lee Henning, Samantha Travis, and Rebecca Henning-Rutz (Henning Keedy), Kalispell, for Nelson; Calvin Stacey & Kevin Funyak (Stacey & Funyak), Billings, for SK.

INSURANCE: Insurer had no duty to indemnify $210,000 sex discrimination stipulated judgment prior to exhaustion of $25,000 retention, but under NY law “exhausted” is ambiguous, construed against insurer to include settlement by compromise… retention was exhausted and insurer’s duty to indemnify was triggered upon entry of the stipulated judgment… further briefing ordered on reasonableness of stipulated judgment as required by NY, but summary judgment for nonmovant Plaintiff likely on claim that insurer breached duty to indemnify but not duty to defend… Molloy.

Samantha Lasorte filed a sex discrimination/retaliation suit against Real Estate Client Referrals in litigation before Judges Deschamps and Townsend. RECR was insured under a Lloyds Employment Practices policy which contained a $25,000 Self Insured Retention. RECR notified Lloyds and retained Malin Johnson. Lloyds acknowledged that the claim was covered and expressed approval of the choice of counsel, then advised that the $25,000 retention had to be satisfied before it would be on the hook for any loss or defense cost payments. RECR entered into a stipulated judgment for $210,000, assignment of claims, and covenant not to execute. It agreed to pay Lasorte $2,000, but it is not clear whether it actually paid those amounts; according to Johnson it did not pay anything toward defense counsel’s fees. Lloyds refuses to indemnify RECR for the judgment, claiming its duty to pay any loss was never triggered because RECR, by failing to pay $25,000 toward the judgment or for defense costs, failed to exhaust the retention. Prior to execution of the stipulated judgment Johnson gave Lloyds the opportunity to exercise its right to assume defense of the discrimination claim but it chose not to do so. Lasorte then sued Lloyds in State Court asserting breach of contract. Lloyds removed to this Court and moved for summary judgment that its duties to defend or indemnify were not triggered because RECR failed to pay the entire retention. Lasorte insists that because Lloyds refused to defend RECR in the discrimination suit it is estopped from denying coverage and is liable for the judgment. Almost as an afterthought she concludes her response brief by arguing that the Court should grant summary judgment for the requested amount as the undisputed material facts demonstrate that Lloyds violated its duty to defend. Lloyds retorts that she has not moved for dispositive relief and that even if summary judgment is granted for her a trial is still necessary to quantify reasonableness of the stipulated judgment.

Both parties based their initial arguments on the assumption that Montana law governs. However, the policy states that NY law shall govern policy interpretation. Supplemental briefing was ordered as to application of NY law. A secondary issue was RECR’s solvency. Under NY law, an insurer must defend & indemnify an insolvent insured even if the insured has not exhausted any retention. According to Johnson, RECR told him that it was “selling off all its assets” and it would not compensate Lasorte for time & expenses. This created the appearance that it was insolvent, triggering the request for supplemental briefing on the issue. Lasorte claims RECR was insolvent, but offers only emails indicating that it was unwilling or unable to pay defense costs to support the claim. Lloyds argues that it was not insolvent, relying on the affidavit of its GM that as of 3/10 it was solvent and able to pay several $25,000 retentions. It is clear that it was not insolvent.

Lloyds’ motion for summary judgment is denied because the policy language requires it to indemnify once the retention is exhausted, and the retention was exhausted by the underlying judgments. Under NY law, “exhausted” — as used in analogous policies — is ambiguous and therefore construed against the insurer to include settlement by compromise. Thus the $25,000 retention was exhausted when Lasorte agreed to the $210,000 judgment after tendering to Lloyds the right to defend and control disposition of the case.

On the other hand, Lasorte’s argument that Lloyds breached its duty to defend fails. Under NY law, unless the insured is bankrupt, the insurer has no duty to defend before the retention was exhausted. RECR was not insolvent. Consequently, Lloyds had no duty to defend, nor is it liable for defense costs incurred prior to the stipulated judgment.

By refusing to indemnify the claims, Lloyds breached the policy. However, NY law requires insurers to pay only reasonable amounts entered into by an insured after an insurer breaches its duties. Lasorte is not entitled to summary judgment on damages because determining reasonableness of the stipulated judgment involves disputed material facts. There is very little evidence in the record on which a fact-finder could determine reasonableness. It is not clear what other evidence the parties shared in discovery that would address reasonableness. Prudential (SD NY 1994) allowed further discovery so the insurer could determine the reasonable value of the plaintiff’s claims. The parties shall brief the question of summary judgment, but based on the existing record, they are given notice that summary judgment for Lasorte is likely under Rule 56(f)(1) (after notice and reasonable time to respond, summary judgment may be granted for a nonmovant) on the claim that Lloyds breached its duty to indemnify but not its duty to defend.

Lasorte v. Lloyds, 41 MFR 309, 2/5/14.

Torrance Coburn (Tipp & Buley), Missoula, for Lasorte; Benjamin Cory & Peter Habein (Crowley Fleck), Billings, and Matthew Baldassin (Crowley Fleck), Missoula, for Lloyds.

ERISA: Big HIPAA does not prohibit rating employers in purchasing consortium, preempts identical Montana statute, method of rating consortiums does not violate Montana’s little HIPAA… UTPA anti-discrimination statute cannot be used to challenge discriminatory rating… breach of contract claim cannot be maintained when it requires adjudication of matters for which there is no private right… Plaintiffs fail to state claim in complaint under SEHIAA, which in any event does not provide private right of action to directly challenge rating practices… Montana insurance code places primary enforcement duty with Commissioner… class/common fund claims moot… Plaintiffs suffered no actual damages, no basis for restitution of premiums… analysis of non-preempted state claim on remand from affirmance of other rulings… 2nd request for remand to State Court or certification to MSC denied… Lovell.

This Court granted summary judgment for BCBS that a group health premium calculation which considers health status factors when rating employer plans separately is permissible under an ERISA provision identical to a Montana provision prohibiting requiring an individual to pay more than similarly situated individuals based on health status. (38 MFR 80). Plaintiffs appealed. Fossen (9th Cir. 2011) affirmed this Court’s finding that MCA 33-22-526(2)(a) was preempted by the identical 29 USC 1182(b)(1) and that AMI/MCCT met the federal definition of a multiple employer welfare association for purposes of the federal statute. Because this Court did not analyze Plaintiffs’ non-preempted state claim, the Panel remanded for further proceedings.

The Court must first consider Plaintiffs’ 2nd motion for remand and alternative motion for certification to the Montana Supreme Court. It is the Court’s belief that the state claims are not unclear and do not raise complex issues of state law. Because this Court has delved deeply into the federal claim upon which summary judgment was granted and invested considerable resources in this litigation, and because the state law claims are fundamentally dependent on and/or restricted by that federal claim, it would be a waste of judicial resources to remand for litigation beginning anew. The Court remains dubious of Plaintiffs’ assertion that state insurance law is unclear, and therefore will hold the question of certification pending analysis of the state claims.

While the UTPA is generally & specifically enforceable by the Montana Insurance Commissioner, the 1987 Legislature carved out 6 UTPA claims-handling complaints that may be brought as independent causes for actual damages in state court — §§ 33-18-242(1), 33-18-201(1), (4), (5), (6), (13) — none of which is pertinent here or has been pled by Plaintiffs. Their UTPA claim (Count 3) rests on §33-18-206(2):

No person shall make or permit any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of the premium, policy fees, or rates charged for any policy or contract of disability insurance or in the benefits payable thereunder or in any of the terms or conditions of such contract or in any other manner whatever.

Originally, the basis of Count 3 was the Count 2 allegations that Caring for Montanans (fna BCBS of Montana) discriminated against them in violation of an insurance code provision outside of the UTPA, §33-22-526(2):

A group health plan and a health insurance issuer offering health insurance coverage in connection with a group health plan may not require an individual, as a condition of enrollment or continued enrollment under the group health plan, to pay a premium or contribution that is greater than the premium or contribution for a similarly situated individual enrolled in the group health plan on the basis of any health statute-related factor of the individual or of an individual enrolled under the plan as a dependent of the individual.

Thus their original theory was that because CFM raised the premium on their group health policy on the basis of the health status of one individual in their group, they had been discriminated against in violation of 526(2). They originally asserted that their group was an association of 600 employers, and their employer health plan was an “individual.” They concluded that all employer groups in the association should pay the same premium and that no employer group should be singled out to pay a higher premium based on the health status of one individual in the group. This Court found that 526(2) was preempted by the identical 29 USC 1182(b)(1). The 9th Circuit affirmed this and upheld determination that under federal law pertaining to 1182 (b)(1), the association of 600 employers was not a bona fide association, but merely a purchasing consortium, compelling the conclusion that the “group” was the Fossen Bros. Farms’ employer group, and thus because no single individual within Plaintiffs’ employer group was singled out to pay higher premiums based on health, 1182(b)(1) could not be violated by CFM.

Plaintiffs assert that there is a long line of cases that provide an independent basis for their claims under state law. However, in Larson (Mont. 1967) and Goddard(Mont. 1979), which they cite, the insured’s independent cause was breach of a contract, and the pertinent issue was whether the insurer was correctly allowed to recover punitives for an act that constituted breach of the contract and an unlawful act under Montana statutes, such as the statute requiring disability insurers to immediately pay claims. In neither case was there a separate, independent cause permitted under state law, but merely punitives made available for the breach of contract claim when it alleged an unlawful act as the breach. Notably, both are claims handling cases. Here we have the breach of contract claim but no evidence of an unlawful act under Montana insurance statutes, and certainly not under the only private right of action afforded by the UTPA, §33-18-242. Plaintiffs also point to Klaudt (Mont. 1983), which allowed a 3rd-party claimant to file an independent action under the UTPA for violation of the duty to settle claims. The 1987 Legislature then enacted §33-18-242 to place limitations on such common law claims. This statute does provide an independent cause in claims handling cases, butonly “for breach of the insurance contract, for fraud, or pursuant to this section, but not under any other theory or cause of action.” §242(3). It also added a proviso that “exemplary damages may also be assessed in accordance with 27-1-221.” §242(4). Thus the Legislature preserved the common law punitives permitted by Larson and Goddard for violation of the duty to settle. O’Fallon (Mont. 1993) expanded the common law arising from 242 by allowing plaintiffs to bring claims-handling suits against adjusters in addition to insurers. What is apparent from Plaintiffs’ cases is that common law state causes in Montana insurance cases are confined to claims handling and settlement disputes and would not under any circumstances extend to a rate discrimination dispute.

The real problem with Plaintiffs’ continuing reliance on the UTPA’s anti-discrimination statute, §206, as pled in Count 3, is that there is no such statutory private right of action under the UTPA (but for the claims-handling exceptions itemized in 33-18-242). Thus, not only has this Court found that there has been no discrimination under 33-22-526(2) that can be pled as a violation of UTPA anti-discrimination statute 33-18-206, it now finds that there is no private right of action provided by 33-18-206 itself. To the extent that Plaintiffs belatedly attempt to support this 206(2) discrimination claim by means of an alleged violation of SEHIAA (33-22-1809), the Court finds that SEHIAA likewise provides no private right of action. Indeed, both as to the UTPA (with the statutory and common law exceptions as noted) and to the SEHIAA, it is the Insurance Commissioner who has been tasked with enforcement of these provisions, not Plaintiffs’ counsel and not the state courts except on appeal from the Commissioner’s decision. The Court has received an affidavit on behalf of Commissioner Lindeen. Plaintiff’s counsel John Morrison previously was Commissioner. Both urge an expansive interpretation of Montana insurance law. However, the Legislature did not envision expansion or interpretation of the insurance code except by legislative enactments, administrative rules, or administrative enforcement actions reviewable by the court. Neither commissioner chose to utilize their powers on Plaintiffs’ behalf when they had the opportunity, and there is no authority under Montana law to create a new cause to do what they would not.

Plaintiffs assert that their Count 4 breach of contract claim — which, as pled, is grounded in a violation of 33-22-526(2) — should now be viewed as stating a claim for breach of contract by violation of §§ 33-18-206(2) and 33-22-1809. §1809 is not mentioned in Count 4, the linchpin of which is alleged violation of Montana’s “little HIPAA,” §33-22-526(2). However, the UTPA’s general anti-discrimination statute, 33-18-206(2), cannot forbid conduct that is expressly permitted by the more particular 33-22-526(2) (b): “this subsection (2) does not: (1) restrict the amount that an employer may be charged for coverage under a group health plan….” Plaintiffs now assert that a violation of SEHIAA forms the basis for Count 4 by reference to 33-18-206(2):

44. BCBSM breached its contracts with the Plaintiffs by violating the terms of §§ 33-18-206(2) and 33-22-526(2), which are incorporated in the contracts. BCBSM unfairly discriminated between the Plaintiffs and other individuals of the same class and of essentially the same hazard in the amount of premiums and rates charged for their policies of disability insurance. BCBSM required Plaintiffs to pay premiums greater than the premiums for similarly situated individuals enrolled in the group health plan, on the basis of health status-related factors of the individual Plaintiffs or of their individual dependents enrolled under the plan.

45. BCBSM breached its contracts with the Plaintiffs by violating the implied covenant of good faith and fair dealing in its actions described above.

46. As a result of BCBSM’s breaches of contract, Plaintiffs have suffered damages.

Their newest theory is that a violation of SEHIAA is a type of discrimination encompassed by the UTPA’s anti-discrimination statute. It bears repeating that the Count 4 breach of contract claim is based on alleged violation of Montana’s little HIPAA, which is preempted by the ERISA big HIPAA, which this Court found was not violated, which was affirmed on appeal. Even if the Court were to overlook Plaintiffs’ failure to plead properly an alleged violation of SEHIAA, the problems they encountered as to Count 3 would still continue to beset them in Count 4. There is no private right of action to bring a claim of violation of UTPA’s anti-discrimination statute. There is also no private right of action to bring a claim of violation of SEHIAA. Plaintiffs’ breach of contract claim is merely another backdoor method of presenting an alleged violation of a statute that they have no right to enforce. The Legislature explicitly reserved enforcement of SEHIAA to the Commissioner pursuant to MAPA. Any final decision of the Commissioner is to be appealed to state district court. The statute of limitations for an enforcement action is 2 years from discovery of the violation, 2 years after the violation ought to have been discovered, and up to 5 years from the date of the violation. §33-1-707. Dale Fossen’s complaint to the Dept. of Insurance was dated 4/6/06. The Department took no action. Plaintiffs now claim that Montana common law permits them to bring a breach of contract claim on the basis of any alleged violation of the insurance code, including statutes for which no private right has been granted by the Legislature. This is not supported by the cases cited, which are all claims handling and settlement cases. Further, after the MSC extended the private right to 3rd-party claimants, the 1987 Legislature codified that extension, but expressed its intent that the extension go no further. To permit Plaintiffs to utilize the claims handling/settlement private right cases to charge any violation of any provision of the insurance code would intrude on the Commissioner’s duty of enforcing the code and violate the Legislature’s explicit intent to provide in the UTPA a private right only for claims handling/settlement actions, fraud, or breach of contract. The other possible basis for the breach of contract claim in Count 4 is the alleged violation of the implied covenant of good faith & fair dealing, which is preempted by ERISA. Dytrt (9th Cir. 1990); Jabour (CD Cal. 2001). Defendant is entitled to summary judgment on Count 4. Without any substantive surviving claims, Plaintiffs’ claims for class action and common fund also fail.

As previously noted, Fossens have no actual damages because when they filed a complaint with the Commissioner objecting to Defendant’s notice of impending increase in their premiums for 2006 by 21%, allegedly due at least in part to the health status of one of their employees or dependents. Defendant agreed not to raise the premium for that plan year as a gesture of good will, only because Fossens seemed to have a misunderstanding about the plan. It made clear in 2006 that if they chose to renew their policy for the next year the premium increase would then be imposed. Even though Fossens continued to believe that Defendant had no right to increase their premium, they continued to renew the policy every ensuing year. Thus they suffered no actual damages for 2006, when they arguably may have had a genuine misunderstanding as to Defendant’s method of rating and setting premiums, but in the following years when they could have had no such misunderstanding, they chose to renew and pay the higher premium. There is also a question as to whether Plaintiffs’ request for restitution by return of their premiums from 2006 is proper. ERISA permits relief only in the form of injunctions or “other appropriate equitable relief.” 29 USC 1132(a)(3)(B). Clearly, “appropriate equitable relief” excludes compensatory and punitive damages. Mertens (US 1993). It does include equitable restitution, but “not all relief falling under the rubric of restitution is available in equity.” Knudson (US 2002). A plaintiff can “seek restitution in equity, ordinarily in the form of a constructive trust or an equitable lien, where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession.” Id. Such an equitable lien applies “only to `particular funds or property in the defendant’s possession.”’ Bilyeu (9th Cir. 2012);CIGNA (US 2011). Thus the funds sought to be recovered in equity must be the specifically identified funds at issue and not payable from the general assets of the defendant. Sereboff (US 2006). Plaintiffs ask the Court to “order that Defendant return to its insureds the excess premiums it has charged in excess of those allowed by §33-22-5262).” It is settled that Defendant did not violate 33-22-526(2), but that is beside the point, which is that Defendant no longer has Plaintiffs’ premiums in its “possession and control,” and that Plaintiffs are seeking to “impose personal liability” on Defendant rather than “enforcement of an equitable lien on particular property.” Bilyeu; Sereboff. “This is quintessentially legal, rather than equitable, relief.” Id. There is really no doubt that the premiums here have not been segregated in a separate fund or dissipated, and that Plaintiffs seek “restitution” by payment from Defendant’s general funds.

The complaint is dismissed and all relief is denied to Plaintiffs.

Fossen et al v. Caring For Montanans, 41 MFR 279, 1/24/14.

Lawrence Anderson, Great Falls, and John Morrison (Morrison, Motl & Sherwood), Helena, for Fossens; Michael McMahon & Bernard Hubley (McMahon Law Firm), Helena, for BCBS.

INSURANCE: Only “false conflict” between Utah and Montana law as to “arising out of” in context of duty to defend, Montana law applied to CGL/umbrella policies covering Utah entity that provided services to Montana residential youth program… complaint drew causal connection between services provided from Utah and suffering/suicide of teen in Montana, insurer breached duty to defend, liable for $3 million consent judgment… Christensen.

Karlye Newman, 16, committed suicide 10/4/04 at Spring Creek Lodge in Sanders Co., a “tough love” behavior modification residential program for youth. Her mother Judith sued multiple defendants including National Contract Services in State Court for, inter alia, wrongful death/survivorship, alleging that National was one of a large web of interlocking companies run by Robert Lichfield. She alleged that National purported to provide services to Spring Creek including marketing, promotion, admissions, support, academic course routine, curriculum, manuals, and training outlines. She alleged that many of National’s services including misleading marketing, wrongful admission, poor educational services, and negligent training contributed to Karlye’s suffering and death. National was an insured under United Fire & Casualty CGL and Commercial Umbrella policies. United asserted that under the CGL Designated Premises Endorsement there was no coverage and no duty to defend. It declined to attend a mediation where National settled with Newman. The settlement awarded judgment for $3 million policy limits and assigned all of National’s 1st-party claims it might have against United to Newman. Newman, as 3rd-party beneficiary — a 1st-party insured under the assignments — sued United for breach of contract for refusing to defend and for declaratory judgment. The parties request summary judgment.

United contends that under Tucker (Mont. 2009), Utah law applies for determining liability as to breach of the duty to defend. Newman counters that the applicable general principles of insurance law are the same in Montana and therefore the Court should apply the law of the forum state. Modroo (Mont. 2008). If the laws and interests of the concerned states are not in conflict, there is a “false conflict” or no conflict at all. 15A CJS Conflict of Laws. If the laws of both states are the same or would produce the same decision, there is no real conflict. Shutts (US 1985). A false conflict exists where application of either state’s law is substantially the same. Mowrer (Mont. 1999); Modroo. United’s sole basis for asserting that there is conflict of law relates to “arising out of” in both policies. Newman contends that, absent a policy definition, the phrase is inherently ambiguous in an insurance contract under Montana law. Pablo (Mont. 2000). United contends that it is unambiguous in the insurance context under Utah law, NFU (Utah 1978). The problem is that even under United’s preferred Utah version, “arising out of” has a “very broad, general and comprehensive” meaning. Id. It is “commonly understood to mean originating from, growing out of, or flowing from,” and sufficient to show that something arises out of something else if one thing is in any way “linked to” another. Id. Under both Utah and Montana law, the exclusion must be strictly construed and in favor of the insured. The Court concludes under either interpretation of “arising out of,” the result is the same. There is only a false conflict, and the Court will apply Montana law.

United based its decision to decline to defend or indemnify National on the CGL endorsement which limited coverage to “bodily injury, property damage, and advertising injury arising out of the ownership, maintenance or use of the premises [at 158 W. 1600 S. #15, St. George, UT 84770] and operations necessary or incidental to those premises.” It provided no analysis in its letter declining a defense as to why National was not entitled to a defense under the umbrella. It continues to base its defense on the endorsement. It contends that the endorsement — “Limitation of Coverage to Designated Premises” — is not an exclusion, but “pertains to coverage.” It provides no citation for this, and the Court rejects it. It clearly serves to limit coverage, and thus constitutes an exclusion that must be strictly construed against the insurer. Leibrand (Mont. 1995). The Court must decide whether United has unequivocally demonstrated that the claim against National did not fall within the policy’s coverage, when liberally construing the allegations so that all doubt about the meaning of the allegations are resolved in favor of finding that the obligation to defend was activated, Staples (Mont. 2004), and when strictly construing all exclusions and words of limitations against the insurer regardless of whether they are ambiguous, Leibrand.

United has failed to show that it did not have a duty to defend and that it breached its duty. The complaint drew a causal connection between National’s services to Spring Creek and the damages suffered by Karlye. Even under United’s favored interpretation of “arising out of,” the complaint clearly alleged that her injuries were causally related to its “ownership, maintenance or use” of the St. George premises or “any operations necessary or incidental to” its use of the premises. For instance, its admission and promotional services provided at St. George conceivably resulted in Karlye’s admission, and its negligent training provided at St. George conceivably and indeed allegedly led to her suffering and death. Any factual disputes as to what services National actually provided to Spring Creek are immaterial at this point and at any rate must be resolved in favor of coverage. United’s contention that the policy clearly limited coverage and the duty to defend to incidents that occurred directly on the St. George premises is meritless. If, as alleged, National and Spring Creek were acting in concert for the purpose of facilitating a scheme to defraud parents and “operated, in effect, as a single business enterprise,” NFU, the allegedly tortious operations at Spring Creek were at least “incidental to” the operations in St. George. Its duty to defend under the CGL policy was triggered when the complaint alleged facts which if proven would result in coverage. When it refused to provide a defense, it breached its duty to defend. The Court need not address whether it breached its duty to defend under the umbrella, but notes that its arguments as to the umbrella are merely the same as set forth as to the CGL policy and that it fails to adequately address how its duty to defend was not triggered when the umbrella clearly provides that it had “a duty to defend any claims or suits not covered by any underlying insurance.”

Under both Utah and Montana law, the consequences of failure to defend are the same: the insurer is responsible for any judgments entered below. Speros (Utah 2004); Staples. Thus Newman is entitled to judgment in the amount of the $3 million judgment entered by the Sanders Co. Court. She is also entitled to post-judgment interest pursuant to §§ 25-9-205 & 27-1-211. (Although not raised by the parties, the Court concludes that there is no actual conflict of law as to interest, even though the post-judgment interest rate is different in Utah and Montana. Utah does not have a materially greater interest than Montana in seeking its post-judgment interest rate applied to a Montana Federal Court judgment against an Iowa corporation in favor of a Montana citizen who was injured in Montana.) Newman may file her motion for attorney fees & costs pursuant to Rule 54(d)(2).

(Newman (Mont. 2013) similarly affirmed Judge Christopher’s ruling that related entity Teen Help’s insurers Scottsdale (CGL) and National Union Fire (excess) wrongfully refused to defend Teen Help and were severally liable for the $3 million consent judgment plus $568,767 interest and attorney fees, but that she improperly awarded $1,188,399 fees based on a contingency in the underlying case since the contingency in the bad faith part did not transfer to the declaratory part, and remanded for recalculation of fees based on what Newman, as Teen Help’s assignee, would have been able to recover for her attorneys’ time & expenses in pursuing coverage. That case settled following remand. Newman does have a contingency in this case.)

Newman v. United Fire & Casualty, 41 MFR 263, 1/15/ 14.

Ann Moderie (Moderie Law Firm), Polson, Elizabeth Best (Best Law Offices), Great Falls, Lawrence Anderson, Great Falls, and Thomas Beers (Beers Law Offices), Missoula, for Newman; Dennis Clarke & Stephanie Hollar (Smith, Walsh, Clarke & Gregoire), Great Falls, for United.

INSURANCE: Reserve information relevant to bad faith claim, insurer not entitled to protective order excluding all information related to reserves in discovery, may seek to ameliorate any prejudice by in limine motion or cautionary instruction… Christensen.

Barnard Pipeline tendered a claim to Travelers for losses associated with construction of a pipeline in Utah. It allegedly tendered the claim 12/6/11. Travelers allegedly had 1 year to complete its investigation, but had not provided a decision when Barnard filed its complaint 1/2/13. Barnard alleges that Travelers acted in bad faith in its investigation and adjustments. It requested the entire claim file. Parts of the file concerning reserves placed on the claim were redacted. It also requested deposition of a Travelers rep about “establishment and maintenance of reserves prior to suit” regarding its claim and its “policies and procedures for establishing and maintaining reserves on property insurance claims.” Travelers objected that information as to reserves is irrelevant and not reasonably calculated to lead to discoverable information. The parties conferred and failed to resolve the issue. Travelers requests a protective order.

Travelers contends that its reserve information is simply a number arrived at pursuant to its statutory duty and has no bearing on its assessment or evaluation of coverage, and that Barnard would use it in a manner that will unfairly prejudice it. Barnard asserts that the reserve information is central to its bad faith claims and provides circumstantial evidence of Travelers’ internal investigation process and whether that and its claim handling was in good faith, and that Travelers cannot show any specific harm without a protective order. It suggests that Travelers’ claim of prejudice is more appropriately in an in limine motion or jury instruction.

While Travelers has been able to find 2 cases from other jurisdictions that support its position, the better case law supports Barnard. Almost all the cases Travelers cites in which discovery into reserve information was denied involved only a declaratory action rather and are inapposite as to what evidence is relevant or reasonably calculated to lead to admissible evidence in a bad faith case. Barnard alleges that Travelers acted in bad faith by repeatedly seeking unnecessary information as to its claim in an effort to delay payment and coerce Barnard into settling for less than Barnard believed the claim to be worth. It is clear that Barnard’s claim may implicate one or more of MCA 33-18-201 provisions. It brought its claim for declaratory judgment and bad faith in response to its perception that Travelers was unduly delaying resolution, treating the claims process in an adversarial manner, and unjustifiably seeking information in a bad faith attempt to coerce a low settlement contrary to Travelers’ actual view of the value. While maintaining reserve information is required by MCA 33-2-518, reserve information is not entirely divorced from the insurer’s view of the value of a claim. Indeed, “the reserves for all outstanding losses and loss expenses must include the estimated liability on any notice received by the insurer of the occurrence of any event that may result in a loss.” §33-2-518(2)(a) click to investigate. Thus the reserve reflects at least in part the insurer’s estimation of potential liability. This internal assessment is relevant because it sheds light on the insurer’s state of mind as it went about investigating and processing the claim. To the extent that reserve information reveals what Travelers thought or knew about Barnard’s claim at various stages of its investigation, it is relevant and at least reasonably calculated to lead to admissible evidence. Bernstein v. Travelers (ND Cal. 2006).

A protective order is denied. Travelers remains free to attack the weight & probative value of any evidence as to reserves at other stages. It may seek to exclude it through a motion in limine or a cautionary instruction. However, to assess its claim of prejudice, the reserve information must first be subject to discovery.

Barnard Pipeline v. Travelers Property Casualty, 41 MFR 253, 1/10/14.

Christian Nygren & Patrick Brown (Barnard Pipeline), Bozeman, and Richard Beal (Ashbaugh Beal), Seattle, for Barnard; Marshal Mickelson & Annie Harris (Corette Black Carlson & Mickelson), Butte, and Daniel Bentson, Seattle, and Ronald Clark, Portland (Bullivant Houser Bailey), for Travelers.