Penn v. National Interstate Ins. and Cincinnati Ins.

INSURANCE BAD FAITH: Insurers had reasonable basis in law to present intervening causation defense that rollover of bus that hit deer caused by defect of bumper that pressed against tire despite ruling that driver was negligent per se for going into the median… dispute was legal, not factual, for the Court, not a jury… insurers’ motions for summary judgment on affirmative defenses addressed before Plaintiff’s motion, recommended granted to insurers… Ostby.

Trucker Transportation bus driver Robert Kingsbury struck a deer on I-90 11/16/07. The deer hit the left corner of the bumper, which bent and impacted the tire. The bus swerved into the median and rolled. Gerald Penn was injured. Tucker was insured by Cincinnati Ins. and National Interstate Ins. NII retained Marshall Mickelson, who opined 1/14/06, cautioning that a court could reach a different conclusion, that

We do not believe liability in this case is reasonably clear. Based upon what we know at this time, we believe a court would allow the case to proceed to trial because there are issues of fact as to whether our driver was negligent.

He wrote to Penn’s lawyer 3/12/08 replying to the contention that liability was reasonably clear. They disagreed as to case law including Craig (Mont. 1990) andSchuff (Mont. 2002). Penn sued Tucker in State Court in 4/08 alleging negligence and negligence per se. Tucker asserted intervening, superseding cause. CI agreed to share in Tucker’s defense with NII 50/50 and share indemnity pro-rata. Penn moved for summary judgment on negligence per se in 7/08. Tucker filed Harry Townes’s opinion that the “cause of this accident is that the deer collision caused the left front bumper to turn and jam the left front steer tire” and that “had the bumper of the bus not contacted the left front tire, the bus would not have gone out of control.” Judge Dayton granted summary judgment for Penn on negligence per se in 12/08. An NII adjuster wrote 1/8/09: “Now that the court has ruled on the liability, we have outstanding requests to make advance payments pursuant to Montana law.” Another wrote on 11/11: “Believed we had liability/cause arguments until the court ruled as a matter of law we were negligent which turned this into a damages only case.” It is clear, however, that all were aware of issues as to claims that Diamond Coach defectively manufactured and/or designed the bus. Mickelson remained of the opinion that causation had not been established and that Tucker continued to have the intervening, superseding cause defense. Penn’s counsel claimed in 9/09 that Tucker was responsible for all of his damages, but acknowledged that “obviously, there is an issue as to whether the front bumper was defectively manufactured and/or designed.” Tucker filed a 3rd-party complaint against Diamond alleging defective design which caused the accident. Mickelson reported to NII and CI that Don Friedman of Xperts would testify that “the bumper was defectively designed and unreasonably dangerous” and that “it is also obvious that the bumper’s deflection into the tire caused the loss of control.” Penn moved for summary judgment 11/25/09, arguing that superseding cause was not available to Tucker because negligence per se had been established by the Court and Tucker had admitted that its negligence per se was a cause-in-fact of his injuries. Tucker responded that where there is an allegation of intervening cause the plaintiff must establish both cause-in-fact and proximate cause, and that material fact issues as to alleged defective design or manufacture precluded summary judgment. Dayton denied Penn’s motion, finding that “the alleged poor manufacture of the bus, though set in motion prior to the accident, could be an unforeseeable intervening cause of Penn’s injuries for which Tucker Transportation is not responsible.” Penn sought supervisory control. The MSC denied it 4-3. Justice Leaphart, concurring, citing Olson (Mont. 2008), explained that “a finding of negligence per se does not establish causation” and that

Penn’s injuries were not necessarily caused by the fact that the bus illegally entered the median. Rather, he suffered injuries because the bus rolled over — a fact which would have occurred totally irrespective of whether it crossed into the median.

He concluded that intervening, superseding cause was properly left for the trier of fact. Justice Wheat, joined by Justice Cotter, reached a different conclusion:

It makes little sense, in my mind for the law to allow Tucker Transportation to admit certain facts that led the District Court to conclude that Tucker Transportation was negligent per se, and, at the same time, allege that its liability was severed — ultimately shifting the burden to Penn to prove otherwise.

Penn amended to assert claims against Diamond for negligence and strict liability, asserting that he “fully intends to incorporate and rely upon” Tucker’s allegations and expert opinions, testimony and other proof which it develops in its 3rd-party claims against Diamond. Tucker disclosed that Friedman was prepared to testify that the bus was defective and unreasonably dangerous because of the design of the bumper system and that the bumper defect and other defects in design were the sole cause of the rollover. Tucker also disclosed biomechanical engineer Jacqueline Paver to opine that “Penn’s injuries were the direct result of the defective and unreasonably dangerous bus.” Tucker, Diamond, and component manufacturer DAK Plastics settled all claims among them relating to the passengers in 10/11, and Penn and Tucker settled in 12/11. Penn then filed this 3rd-party bad faith action against NII and CI in State Court under MCA 33-18-206(6), 201(4), and common law. Defendants removed to this Court. They assert that they had a reasonable basis in fact or law under MCA 33-18-242 for contesting Penn’s claims.

CI asserts that it was reasonable to defend against Penn’s negligence per se claim by arguing that Kingsbury was not “driving” or “operating” the bus after it hit the deer, he did not “react” to the deer and thus did not bring the case within Craig (Mont. 1999), and the case falls under the limited exception in Craig because the bumper malfunction caused the accident. It also asserts that it was reasonable to argue that an intervening, superseding cause — a manufacturing defect in the bumper — cut off Tucker’s liability. NII maintains a similar position and maintains that throughout the underlying litigation it and Tucker asserted that manufacturing & design defects were the cause of the accident. It argues that the question is not whether the deer was reasonably foreseeable, but whether the negligent & defective nature of the bus was reasonably foreseeable to the driver, and that it was not wholly unreasonable to assert intervening, superseding cause. It asserts that fact issues preclude summary judgment for Penn on negligence per se, also adopting CI’s position that it was reasonable to defend against negligence per se.

Penn seeks a ruling that liability was reasonably clear. He argues that it was unreasonable for Defendants to defend against negligence per se because Craigestablishes that certain objects on the road, such as a deer, are as a matter of law foreseeable to Montana motorists. He argues that the Court should first grant his motion for summary judgment, finding that Tucker was negligent per se and that intervening, superseding cause was unavailable, and that reasonableness of Defendants’ arguments should be resolved by the jury. The Court is unconvinced that it must first determine whether Tucker was negligent per se and whether intervening, superseding cause was unavailable. Even if it were to rule for Penn on these issues, the need to then consider whether Defendants had a reasonable basis in law for disputing liability would remain. Their reasonable basis defense is an affirmative defense and available even if liability is eventually established by a judge or jury. Judge Cebull explained in EOTT (D.Mont. 1999):

If an insurer can establish a reasonable basis for contesting the claim, the insurer has an affirmative defense — even if violations have been proven by the insured, even if actual fraud or malice have been shown. It is a complete defense. (citing Dees (Mont. 1993) (Gray, concurring)).

Accordingly, the court will first address Defendants’ motions on their affirmative defenses.

The Court finds no fact issues raised by Penn. He relied below on legal arguments. Defendants disclosed extensive expert testimony as to the alleged design defects. At no time did Penn disclose any experts to rebut Tucker’s expert opinions that the accident was caused by defects in the bus. After Dayton denied his motions on intervening, superseding cause and bifurcation, and after the MSC denied supervisory control, he amended to add claims against Diamond, indicating an intent to rely on Tucker’s design defect experts. This legal dispute was whether Montana law permitted Tucker to assert its causation defenses, particularly after Dayton found it negligent per se. Penn argues that “as a matter of law, [Tucker’s] negligence per se caused Penn’s injuries,” and that it was a “legal impossibility” for Diamond’s negligence to be an intervening, superseding cause that severed Tucker’s negligence per se, and that “as a matter of law, the insurers never had the defense of intervening, superseding cause because hitting a deer on a Montana highway was, as a matter of law, foreseeable.” Even his counsel’s affidavit makes clear that the dispute was legal, not factual: “At no time did Penn ever agree that Tucker Transportation had the defense of intervening, superseding cause, but only that Tucker Transportation had the right to bring a contribution claim against Diamond Coach.” Thus, the question is whether Tucker had a reasonable basis “in law” for asserting this causation defense. To answer this, one must interpret Montana law, a task for the Court, not a jury. Redies (Mont. 2007).

The determinative question is whether, at the time of the insurer’s proffered defense, the case law has reached a point at which its defense no longer constitutes a reasonable basis in law. Redies. Legal concepts such as “proximate cause” and “foreseeability” are “best left to arguments between attorneys for consideration by judges or justices; they are not terms which are properly submitted to a lay jury.” Busta (Mont. 1996). And:

When the defendant alleges that the chain of causation has been severed by an independent, intervening cause we must undertake a two-tired analysis. First we consider whether the defendant’s negligent act was a cause-in-fact of the plaintiff’s injury. Second, we consider whether the defendant’s act was a proximate cause of the plaintiff’s injury. To establish proximate cause, the plaintiff must show that it was the defendant’s breach which foreseeably and substantially caused his injury.Fisher (Mont. 2008).

Tucker relied on these and related authorities in responding to Penn’s motion for summary judgment on its affirmative defense of intervening, superseding cause. Even before he filed his case against Tucker, counsel for Tucker had written to Penn’s counsel raising this causation defense: “It appears that after the collision, the damage to the bus caused a loss of control which led to the rollover of the bus. We believe there are legitimate good-faith arguments in this case that even if the Tucker driver violated the statutes you cite, the violation was not the cause of the injuries to the passengers.” Tucker alleged throughout that the defective bumper design was an unforeseeable independent intervening cause that severed its liability. Without deciding on the merits of that dispute, and on the facts of the case, the Court concludes that there was a reasonable basis in law for the insurers to contest liability on these causation grounds.

Both a Montana district judge and an MSC justice interpreted Montana law as permitting Tucker to present its causation defense. Other justices concluded that the causation defense should not proceed, one even calling for a change in Montana law that would be largely consistent with Penn’s position. This Court, after reviewing these opinions and cases cited therein, and after reviewing the parties’ briefs here and in the underlying case, concludes that there was a reasonable basis in Montana law for the insurers to present the intervening causation defense. Thus no bad faith may lie. §33-18-242. Recommended, Defendants’ motions be granted.

Penn v. National Interstate Ins. and Cincinnati Ins., 40 MFR 388, 5/8/13.

Zander Blewett & Andrew Blewett (Hoyt & Blewett), Great Falls, for Penn; Robert James & Jordan Crosby (Ugrin, Alexander, Zadick & Higgins), Great Falls, for NII; Todd Hammer & Angela Jacobs (Hammer, Hewitt, Jacobs & Quinn), Kalispell, for CI.