United States: Montana Supreme Court Review - Part 1

In Pablo v. Moore, the Montana Supreme Court has joined the minority of jurisdictions that require vehicle use exclusions to expressly exclude claims for negligent supervision, hiring, or training. Accordingly, insurers that have issued policies with vehicle use exclusions in Montana may find themselves facing unexpected exposure if the claimant alleges something more than negligence in the use of a vehicle.

The claim in Pablo arose from an accident in which a truck struck the rear end of an automobile and forced it into an oncoming vehicle. At the time of the accident, the driver of the truck was transporting a landscaping tractor for his employer, K.G. Paving, Inc. The drivers of both the automobile that was rear-ended and the oncoming vehicle sued K.G. Paving and its principal owner and operator, Gabe Lorentz. They alleged that the Lorentz was negligent in his hiring, training, and supervision of the truck driver. They also alleged that Lorentz was negligent because he had seen a large cloud of dust created by a broom truck at the accident scene approximately ten minutes before the accident, but failed to use his cellular phone to notify the truck driver of the hazardous condition.

K.G. Paving and Lorentz were insured under a commercial general liability policy that included an "Aircraft, Auto, or Watercraft" exclusion. This provision excluded coverage for

"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading."(See ISO Form No. CG 00 01 10 93 (emphasis added).) Based upon this exclusion, the insurer denied the claim.

The plaintiffs brought a declaratory judgment action against the insurer and moved for summary judgment. They argued that their claims for negligent hiring, negligent training, negligent supervision, and negligent failure to warn were not excluded. Alternatively, they argued that the term "arising out of" was ambiguous and must be construed in their favor. The District Court granted the plaintiffs’ motion based on its conclusion that the language "arising out of" was ambiguous.

The Montana Supreme Court agreed that "arising out of" was ambiguous and affirmed the judgment finding coverage. The Court relied upon its rationale in Wendell v. State Farm Mut. Auto. Ins. Co., 1999 MT 17, 293 Mont. 140, 974 P.2d 623, in which it determined that the language "arising out of" was subject to more than one reasonable interpretation. To support its conclusion that the "arising out of" language was ambiguous, the Court observed that there is a split of authority among courts attempting to construe this phrase.

By finding that vehicle use exclusions must expressly exclude claims for negligent supervision, hiring, or training, the Montana Supreme Court has aligned itself with the minority jurisdictions, which include Kansas, Iowa, and North Carolina. These courts have focussed on the plaintiff’s specific theory of liability in construing vehicle exclusions. In contrast, the overwhelming majority of courts that have construed vehicle exclusions have focussed instead on the predominant actual cause of the injury rather than the plaintiff’s theory of recovery. According to the majority viewpoint, negligent entrustment or supervision claims cannot be separated from the use of the vehicle. Jurisdictions that follow the majority rule include Alabama, Alaska, California, Colorado, Georgia, Indiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New York, Oklahoma, Pennsylvania, South Carolina, Utah, and Wisconsin.

Wendell v. State Farm Mutual Insurance Company, 1999 MT 17, 974 P.2d 623 (February 4, 1999)

The Montana Supreme Court has held that the language "arising out of" and the term "accident" in an uninsured motorist policy are ambiguous.

The insurance claim that was the subject of Wendell arose from an assault. The assault was perpetrated by four men who were driving through Butte, Montana attempting to pick fights at random. The driver pulled behind the car being driven by the plaintiff, flashed his lights, and honked his horn. Believing the other driver to be an acquaintance, the plaintiff pulled over and stopped his vehicle. He was pulled from his car and beaten. The four men were later apprehended and charged with violating various criminal laws.

Both the plaintiff and the driver of the other car were insured by State Farm. The plaintiff asserted a claim against the other driver’s liability policy, which State Farm denied on the grounds that his injuries were not caused by an accident arising out of the ownership, maintenance, or use of the other driver’s vehicle. The plaintiff then made a claim under his own policy, which included uninsured motorist ("UM") coverage for bodily injury "caused by an accident arising out of the operation, maintenance or use of an uninsured motor vehicle." State Farm denied this claim on the same grounds. The plaintiff sued State Farm to recover UM benefits. State Farm moved for and was granted summary judgment. The plaintiff appealed.

The Montana Supreme Court reversed and remanded for further proceedings. The Court first addressed the issue of whether the plaintiff’s injuries were "caused by an accident." The Court held that an intentional act may be an accident for purposes of UM coverage. The Court reasoned that the term "accident" was ambiguous. The Court observed that the term was not defined either in the policy or in the UM statute, Mont. Code Ann. § 33-23-201. According to the Court, this term is subject to more than one reasonable interpretation depending upon whether it is construed from the standpoint of the victim or the tortfeasor. From the standpoint of the victim, an intentional act by a tortfeasor may be fortuitous and unexpected.

State Farm argued that the purpose of the UM statute was to allow people to protect themselves in the event that they are injured by drivers that lack any insurance, not to put them in a better position than they would be under the ordinary provisions of an existing liability insurance policy. The Court rejected this argument. The Court reasoned that UM coverage is more akin to accident or reparation insurance than liability insurance. The Court also pointed out that the innocent victim has paid the premium for the UM coverage.

The Court then addressed the issue of whether the plaintiff’s injuries arose "out of the operation, maintenance or use of an uninsured motor vehicle." The Court found the language "arising out of" to be ambiguous. According to the Court, the average policyholder would think that an injury would have arisen out of the use of a vehicle even if it was not the instrumentality of the injury, so long as the vehicle was a prime accessory, without which the incident or the severity of the injuries would not have occurred. The Court stated that this expansive interpretation of the language "arising out of" would not result in UM coverage functioning as general crime insurance, because courts would be able to distinguish those cases where the facts suggest a remote or tenuous causal relationship between the injuries and the use of the vehicle, as opposed to circumstances where the injuries and the use of the vehicle are inextricably linked. The ramifications of the Court’s conclusion that the language "arising out of" is ambiguous may be far-reaching, and has already been applied in the context of a vehicle use exclusion. See Pablo v. Moore, 2000 MT 48, 995 P.2d 460 (discussed elsewhere in this article).

Babcock v. Farmers Insurance Exchange, 2000 MT 114, 999 P.2d 347 (May 4, 2000)

The Montana Supreme Court has affirmed a summary judgment in favor of an insurer on the grounds that exclusions for "property . . . being transported" or "property . . . in the charge of" the insured were not ambiguous.

The claim in Babcock arose when a trailer separated from the truck that was towing it. The plaintiff had borrowed a neighbor’s horse trailer. She attached it to her own truck, but the truck’s trailerball was too small. While the plaintiff was attempting to tow the trailer, it came unhooked, left the road, and struck a fence. The damages to the trailer were estimated at $4,500.

The plaintiff’s truck was insured by Farmers Insurance Exchange. Farmers paid the full cost for the fence repair and the $500 policy limits for collision and comprehensive coverage. The plaintiff sued Farmers to obtain payment for the remaining repairs to the trailer under her liability coverage. The District Court entered summary judgment for Farmers.

On appeal, the plaintiff argued that her liability coverage applied to the damages to the trailer because the following exclusions were ambiguous:

This coverage does not apply to:

7. Damage to property owned or being transported by an insured person.
8. Damage to property owned, or in the charge of, an insured person. . . .

According to the plaintiff, the "damage to property owned or being transported" exclusion was ambiguous for two reasons: (1) the policy failed to define "property" to expressly exclude trailers, and (2) "being transported" could be interpreted to refer to items inside the insured vehicle rather than the vehicle itself. The plaintiff asserted that the "damage to property owned, or in the charge of, an insured" exclusion was ambiguous because (1) the term "in the charge of" was equivocal, and (2) the language does not indicate whether the exclusion refers to real or personal property.

The Court rejected these arguments. The Court agreed with Farmers that its policy, like liability policies in general, was written to exclude damage to the insured’s own property or to property within the insured’s control. The Court found that the exclusions were not ambiguous on their own terms, nor were they ambiguous in light of the policy as a whole.

The plaintiff also argued that, based on the doctrine of reasonable expectations, a consumer of average intelligence would have believed that the policy exclusions only applied when a trailer was "being transported." According to the plaintiff, the damage to the trailer did not occur while it was being transported, because it had separated from her truck. The Court rejected this argument as well. The Court accepted Farmers’ argument that, according to the plaintiff’s reasoning, a passenger that was ejected from a car would have no claim for damages because the passenger did not occupy the vehicle at the time of injury.

Federated Mutual Insurance Co. v. Anderson, 1999 MT 288, 991 P.2d 915 ("Federated II") (Nov. 23, 1999)

For the first time, the Montana Supreme Court has held that specific litigation conduct, an insurer’s decision to pursue an appeal, was admissible to prove a violation of the Montana Unfair Trade Practices Act ("UTPA"). The Court also invoked the law of the case doctrine to preclude the insurer from presenting evidence to counter the plaintiff’s allegations that the insurer’s denial of the plaintiff’s claim was unreasonable. Thus, the Court effectively found that the insurer was liable for punitive damages as a matter of law.

The underlying claim in Federated II concerned whether Conifer Logging (a logging business owned by Brent Anderson) had given its liability insurer timely notice of a claim after a piece of leased logging equipment burned up while in the possession of the business. The equipment was a feller buncher, which is a vehicle that cuts and stacks standing timber. The lease agreement provided for a one-week free trial period. During the one-week free trial period, Conifer had no contractual obligations and did not assume the risk of loss. The dealer delivered the feller buncher on June 17, 1991. Conifer kept the feller buncher and made its first lease payment one week later on June 24, 1991. Conifer then discovered serious problems with the feller buncher and decided to terminated the lease. On July 17, 1991, however, the feller buncher caught fire and was destroyed before it had been returned to the dealer.

On July 18, 1991, Conifer notified its insurer, John Deere Insurance Company, of the loss. The equipment dealer’s insurer, Federated Mutual Insurance Company, paid the dealer and then sued Conifer for indemnification. Conifer in turn filed a third party complaint for indemnification against John Deere, which had denied coverage.

Conifer argued that coverage existed for the loss of the feller buncher under the "newly acquired property" provision in its contractor’s Inland Marine policy with John Deere. This provision provided automatic coverage for certain property acquired by Conifer during the term of the policy, so long as Conifer reported the acquisition of the new property and paid a premium within thirty days from the date on which the property was acquired.

John Deere denied coverage on the grounds that the thirty-day automatic coverage period began on June 17, 1991, the date the feller buncher was delivered. Therefore, the automatic coverage period would have expired on July 17, 1991, the day the loss occurred. According to John Deere’s reasoning, the loss was not covered because John Deere did not receive notice of the newly acquired property until July 18, the day after the automatic coverage period expired.

Conifer argued that the automatic coverage period began on June 18, the day after the feller buncher was delivered, and would not have expired until July 18. Therefore, the loss occurred during the automatic coverage period, and, under Montana law, the loss would be covered regardless of when notice was given to John Deere. Alternatively, Conifer argued that the automatic coverage period began on June 24, 1991, the day the lease began and Conifer assumed the risk of loss. This would have extended the automatic coverage period until July 24.

The district court granted summary judgment in favor of Conifer. John Deere appealed. In Federated I, 277 Mont. 134, 920 P.2d 97 (1996), the Montana Supreme Court affirmed. The Court reasoned that Conifer acquired the feller buncher on June 24, 1991, the date it accepted the lease. Therefore, the thirty-day notification period did not expire until July 24, 1991, well after the loss occurred and Conifer notified John Deere. The Court also found that John Deere’s appeal was without merit, and assessed sanctions pursuant to Rule 32 of the Montana Rules of Appellate Procedure.

On remand, Conifer moved to amend its complaint to include a statutory bad faith claim under the Montana Unfair Trade Practices Act ("UTPA"). Conifer alleged that both pre-litigation and post-filing conduct by John Deere, including its decision to pursue the appeal, had violated UTPA. The trial court granted Conifer’s motion to amend the complaint, but only with respect to John Deere’s pre-litigation actions.

Conifer then moved for summary judgment. The trial court found that John Deere’s conduct was unreasonable as a matter of law and granted summary judgment in favor of Conifer on liability. Before trial, the trial court determined that Conifer had no claim for compensatory damages, because John Deere had paid for the loss of the feller buncher, plus interest, after the appeal. The only issue presented to the jury was whether John Deere had acted with actual malice so as to entitle Conifer to punitive damages. The jury rendered a verdict for John Deere.

Conifer appealed the verdict, and John Deere cross-appealed the district court’s summary judgment against it on liability. The Montana Supreme Court found in favor of Conifer on all but one issue and remanded for a new trial. Specifically, the Court found that the district court abused its discretion when it refused to allow Conifer to present evidence of John Deere’s meritless appeal to prove malice. The Court also found that John Deere should not have been allowed to present evidence indicating that it had acted reasonably in denying Conifer’s claim.

To support its finding that evidence of John Deere’s meritless appeal was admissible, the Court explained that an insurer’s duty of good faith continues after the filing of a lawsuit, and that conduct by the insurer’s attorneys could breach this duty. The Court acknowledged that litigation conduct generally is not admissible in a bad faith case because of the risk of impeding an insurer’s fundamental right to defend itself. According to the Court’s reasoning, however, the policy in favor of excluding litigation conduct did not extend to John Deere’s frivolous appeal, because it was not "legitimate litigation conduct." The Court remanded for a new trial so that a jury could make a determination as to whether John Deere’s decision to appeal was part of a continuing course of conduct designed to avoid a prompt, fair, and equitable settlement of Conifer’s claim.

The Court distinguished its holding in Palmer v. Farmers Insurance Exchange, 261 Mont. 91, 861 P.2d 895 (1993), in which it had found that evidence of litigation conduct had been improperly admitted. The Court reasoned that the defense attorneys in Palmer had done nothing more than zealously and ethically represent the interests of the client. In contrast, the meritless appeal in Federated I was not deemed to be "legitimate litigation conduct."

The Court also found that a new trial was necessary on the separate ground that John Deere had presented improper evidence and argument that contradicted the law of the case. The law of the case doctrine applies where the controlling appellate court has stated a principle or rule of law necessary to its decision in a specific case. This statement must be adhered to in any subsequent proceedings in that case, both in the trial court and on any subsequent appeal. The Court’s ruling in Federated I that John Deere had no reasonable basis for disputing the length of the coverage period had become the law of the case.

To counter Conifer’s charges that it had acted with actual malice, John Deere presented evidence and argument to the effect that its claims handlers had a reasonable basis for calculating the thirty-day notification period beginning on the date the feller buncher was delivered, rather than the day after it was delivered or the day the lease commenced. The Court found that this evidence and argument prejudiced Conifer’s right to a fair trial. Because of this prejudicial effect, the Court found that the jury should have been instructed on the specific facts upon which its conclusions were based in Federated I, rather than being given the standard law of the case instruction, which stated only the Court’s conclusion.

Federated II represents the first time that the Montana Supreme Court has found that specific litigation conduct--the filing of a meritless appeal--was admissible to prove that an insurer had violated UTPA. The standard for finding that an appeal is frivolous and thus subject to sanctions under Rule 32 of the Montana Rules of Appellate Procedure is the same as the standard for imposing Rule 11 sanctions. Thus, according to the Court’s reasoning, the imposition of Rule 11 sanctions during the course of litigation may be admissible in a subsequent bad faith action. What about discovery sanctions? Or the statutory penalty for an unreasonable defense in a workers’ compensation case? Evidence of these sanctions is not admissible under Federated II, because they may be imposed under a lesser standard than is necessary for the imposition of Rule 11 or Rule 32 sanctions. Insurers and their counsel should resist arguments by plaintiffs that Federated II applies in these situations.

A more troubling aspect of Federated II is that the Court, for all practical purposes, foreclosed John Deere from offering a defense against Conifer’s claim for punitive damages. The Court found that John Deere had no right to present any evidence contradicting its prior rulings on coverage and liability. Thus, John Deere was precluded from presenting evidence at the new trial that its method of calculating the notification cutoff date had some basis in actual practice by insurance companies. John Deere was also precluded from arguing that its method of calculating the notification cutoff date would have been beneficial to the insured if the equipment had been damaged the same day it was delivered. The Court effectively prevented John Deere from offering any evidence to rebut Conifer’s allegations that it had acted with actual malice. Thus, the Court made a punitive damages verdict virtually inevitable.

One problem with the Court’s approach is that it ignores the fact that a different standard of proof is required to prove actual malice than is required to prove the reasonable basis defense under section 242(5) of UTPA. To establish actual malice, a plaintiff must prove, by clear and convincing evidence, that the defendant knew or intentionally disregarded facts that created a high probability of injury to the plaintiff. To establish the reasonable basis defense, an insurer need only prove, by a preponderance of the evidence, that it had a reasonable basis for contesting a claim. Once the Court in Federated II found that John Deere’s actions fell below its standard of reasonableness, however, the Court also removed any ability John Deere might have had to rebut Conifer’s allegations that it had acted knowingly or with intentional disregard.

The Court then made the almost overwhelming obstacle facing John Deere even more imposing, by permitting the jury to consider the fact that it had found John Deere’s appeal to be meritless. Moreover, the Court left open the possibility that the jury could be told that sanctions had been imposed upon John Deere. Even if John Deere were permitted to reintroduce all of the evidence from the first trial, it would be virtually impossible to counter the prejudicial effect of these pronouncements by the highest court in the state. Judicial findings "present a rare case where, by virtue of their having been made by a judge, they would likely be given undue weight by the jury, thus creating a serious danger of unfair prejudice." Nipper v. Snipes, 7 F.3d 415, 418 (4th Cir. 1993). Taken to its logical extreme, Federated II could be interpreted to mean that, if an insurer has been sanctioned, it has essentially forfeited its fundamental right to defend itself.

Federated II has important implications for the relationship between insurers and counsel. Assume that an insurer appeals an adverse verdict based upon its counsel’s advice that it has a chance, although slim, of prevailing. Assume that the Montana Supreme Court then finds that the appeal was frivolous. Under Federated II, the insurer would be precluded from introducing evidence to justify its legal position on appeal. The insurer should still be permitted, however, to offer evidence that it had acted on the advice of counsel. Although the Montana Supreme Court has never directly addressed the issue of whether the advice of counsel defense may be asserted in an insurance bad faith case, it indicated in Palmer that this defense would be available. If an insurer, acting upon advice of counsel, is found liable for damages based upon post-filing conduct, the insurer may also have an indemnity or malpractice claim against its counsel.

In Federated II, the Court did not directly discuss the issue of whether John Deere would be able to defend itself against Conifer’s claim for punitive damages. Thus, it appears that the Court may not have been made aware of the possible implications of its decision. If the Court has the opportunity to revisit these issues, it should limit the application of Federated II to the unique circumstances of that case, and should not undermine the fundamental right of defense.

Brewington v. Employers Fire Insurance Co., 1999 MT 312, 992 P.2d 237 (Jan. 13, 2000)

The Montana Supreme Court has held that the Montana Unfair Trade Practices Act ("UTPA") does not preempt a common law insurance bad faith claim by a third party, even though it does preempt first-party bad faith claims. Therefore, a third party claimant may take advantage of the three-year tort statute of limitations rather than the one-year statute of limitations for UTPA claims.

In Brewington, the plaintiff’s decedent had been injured in a workplace accident in 1974. After litigation in the workers’ compensation court, the Montana Supreme Court determined that the insurer had unreasonably reduced the claimant’s benefits. On remand, the workers’ compensation court awarded the claimant attorney fees in the amount of 40 percent of the claimant’s biweekly benefits, to be paid as the claimant received them.

The insurer began paying biweekly benefits on June 4, 1987, but did not pay any attorney fees until February 22, 1996. On February 17, 1998, the claimant filed a complaint in which he alleged that the insurer’s failure to pay attorney fees constituted a breach of the insurer’s duty of good faith and fair dealing. The claimant subsequently died, and his personal representative was substituted as plaintiff. On a motion by the insurer, the district court dismissed the complaint on the grounds that (1) the Unfair Trade Practices Act preempted the plaintiff’s common law bad faith claim, and (2) the plaintiff’s claim was barred by the one-year UTPA statute of limitations.

The Montana Supreme Court reversed. First, the Court found that the Unfair Trade Practices Act did not preempt the plaintiff’s common law bad faith claim. The Court observed that subsection 33-18-242(1) provides both an insured and a third-party claimant with an independent cause of action for a violation of UTPA. The Court then observed that subsection 33-18-242(3) of UTPA prohibits an insured but not a third party claimant from maintaining a common law bad faith claim. The Court found that the plaintiff was not prohibited from pleading the common law tort of bad faith, because such a claim would not be in conflict with UTPA.

Having found that plaintiff had the right to assert a claim for common law bad faith, the Court held that the three-year tort statute of limitations would apply rather than the one-year UTPA statute. In applying the three-year statute of limitations, the Court employed the rule that a third-party statutory or common law bad faith claim may not be brought until settlement or judgment of the underlying claim. Upon settlement or judgment of the underlying claim, the bad faith claim accrues for purposes of the statute of limitations. The Court found that even the three-year statute of limitations barred the plaintiff’s bad faith claim based upon the alleged wrongful reduction in workers’ compensation benefits, because this claim accrued in 1987 when the Workers’ Compensation Court entered judgment in favor of the decedent. With respect to the claim based on delay in paying attorney fees, however, the Court held that the complaint was timely. The Court determined that this claim did not accrue until February 22, 1996, the date the insurer paid the attorney fees.

Safeco Insurance Company Of Illinois V. Montana Eighth Judicial District Court,

2000 MT 153, 2 P.3d 834 (June 8, 2000)

The Montana Supreme Court has held that a third party claimant may bring a declaratory judgment action against an insurer for advance payment of medical benefits without waiting for judgment or settlement of the underlying claim.

The underlying claim in Safeco involved a collision between a vehicle being driven by Safeco’s insured Judith Bennett and a vehicle in which plaintiff Pete Hill was a passenger. Bennett admitted negligence. Safeco paid some of Hill’s medical claims but refused to pay any medical bills that were incurred after December 1, 1998. Hill sued Bennett and Safeco. In addition to his negligence claim against Bennett, Hill sought a declaratory judgment that, under the Montana Supreme Court’s decision in Ridley v. Guaranty National Insurance Company, 286 Mont. 325, 951 P.2d 987 (1997), he was entitled to immediate payment of medical expenses.

Hill moved for summary judgment. To support his motion, he relied upon the affidavit of his primary treating physician, Dr. Ronald Peterson. Dr. Peterson’s affidavit included the opinion that, to a reasonable degree of medical certainty, Hill’s claimed injuries were sustained in, and were related to, the accident with Bennett.

In opposing Hill’s motion for summary judgment, Safeco filed an affidavit by a hired consultant, Dr. A. Craig Eddy. Dr. Eddy offered the opinion that he could not make a causal connection, to a reasonable degree of medical certainty, between the accident and Hill’s continuing medical complaints. Dr. Craig based his opinion upon a review of Hill’s medical records. Hill was never asked to submit to an independent medical examination.

In addition to opposing Hill’s motion for summary judgment on substantive grounds, Safeco argued that the Montana Unfair Trade Practices Act ("UTPA") prohibited the district court from adjudicating Hill’s right to medical expenses before settlement or judgment in the underlying action between Hill and Safeco’s insured.

The district court granted Hill’s motion for summary judgment. The court found that "nowhere in his affidavit does Dr. Eddy contradict the affidavits of Plaintiff or Dr. Peterson," and concluded that the material facts were thus not in dispute. The court also concluded that the statutory prohibition of actions before settlement or judgment of the underlying claim did not apply, because Hill’s declaratory judgment action did not directly seek damages for a violation of UTPA. The court ordered Safeco to advance Hill’s medical expenses for treatment rendered through November 1, 1999, but provided that Safeco might raise reasonable defenses to the validity of any expenses incurred after that date.

Safeco petitioned for a writ of supervisory control on the grounds that the district court’s order would require it to pay medical expenses for which a jury might ultimately find that it had no duty to pay. Safeco characterized this situation as a "procedural paradox" resulting from the district court’s legal error in refusing to stay Hill’s declaratory judgment until settlement or judgment in the underlying claim against Bennett.

The Montana Supreme Court granted Safeco’s application for supervisory control, but affirmed the summary judgment in favor of Hill. The Court agreed with the District Court that UTPA does not preclude a declaratory judgment requiring the advance payment of medical expenses until settlement or judgment in the underlying claim. Observing that Safeco’s insured had admitted negligence and that the district court had found no material facts at issue with respect to causation, the Court rejected Safeco’s argument that its insured’s liability was still in issue.

The Court recognized that section 33-18-242(6)(b) of UTPA prohibits a third-party claimant from bringing an independent action under UTPA until after the underlying claim has been settled or judgment is entered in the claimant’s favor. The Court found that this statute does not apply, however, because Hill’s declaratory judgment action did not constitute a bad faith claim under UTPA. The Court reasoned that the district court had limited its order to instructing Safeco to pay those medical damages that were no longer in dispute and that it had a duty to pay under Ridley. The Court also observed that Hill had brought separate UTPA and common law bad faith claims against Safeco, but that the parties had dismissed these pursuant to stipulation.

According to the Court, the declaratory judgment statute was intended to be used in this situation, where both the insurer as well as the third-party claimant stand to benefit by resolving what amounts to a question of law in an efficient manner. The Court emphasized that the district court had not determined that Safeco had violated UTPA or acted in bad faith, that the order directing Safeco to pay advance medical expenses was not a money judgment for damages, and that the district court had merely removed all uncertainty and controversy over the issue of when the inevitable policy proceeds were due.

Because of the procedural posture of Safeco’s application for supervisory control, Safeco narrowed its argument to the issue of whether it could be required to pay Hill’s medical expenses before settlement or final judgment. Thus, the parties did not specifically address one of the key issues upon which the Montana Supreme Court relied for its decision: The district court’s finding that the affidavit of Safeco’s expert Dr. Eddy failed to controvert the affidavit of Hill’s treating physician as to causation. Dr. Eddy stated that he could not make a causal connection, to a reasonable degree of medical certainty, between the accident and Hill’s continuing medical complaints. The district court never explained why it found that this testimony failed to contradict the affidavit testimony of Hill’s treating physician. It is impossible to tell from the record whether the district court relied upon the fact that Dr. Eddy used the term "medical certainty" rather than "medical probability", the fact that Dr. Eddy did not refute Dr. Peterson’s affidavit point by point, or some other consideration. On the other hand, the district court found that there was a question of fact as to whether Hill’s condition after November 11, 1999 was related to the accident. Because of the lack of clarity concerning these issues, Safeco v. Eighth Judicial District does not support an argument that an insurer must always obtain an independent medical examination before contesting a claim for medical benefits.

Under Safeco, a plaintiff arguably may enforce rights, in addition to the right under Ridley to advance medical payments, via a declaratory judgment action, so long as the plaintiff does not seek an adjudication of damages under UTPA. The Montana Supreme Court has already expanded the application of Ridley to require an insurer to pay policy limits without obtaining a release of its insured. See Watters v. Guaranty National Insurance Company, 2000 MT 150, 3 P.3d 626 (discussed elsewhere in this article). Accordingly, insurers may encounter more examples of plaintiffs employing declaratory judgment actions to seek monetary relief prior to a settlement or judgment in the underlying claim.