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Watters v. Guaranty National Insurance Company6/6/2000
APPEAL FROM: District Court of the Eighteenth Judicial District, In and for the County of Gallatin, The Honorable Thomas A. Olson, Judge presiding.
Heard: October 14, 1999
Submitted: November 18, 1999
Justice James C. Nelson Clerk
Guaranty National Insurance Company (Guaranty) appeals from an order issued by the Eighteenth Judicial District Court, Gallatin County, granting summary judgment in favor of Charles K. Watters and Janet M. Watters (Watters), and denying its cross-motion for summary judgment.
We affirm in part, reverse in part, and remand for further proceedings.
Guaranty has raised two issues which we restate as follows:
1. Once clear liability was established and damages undisputedly exceeded policy limits, did Guaranty violate Montana's Unfair Trade Practices Act by conditioning the payment of policy limits on the Watters' agreement to provide a full and final release of all liability in favor of its insured?
2. Did Guaranty have a reasonable basis in law or in fact for contesting the Watters' claim, and therefore may not be found liable for violating Montana's Unfair Trade Practices Act?
Factual and Procedural Background
Generally, the underlying facts are not in dispute and have been stipulated to pursuant to a November 2, 1998 judgment issued by the District Court.
On October 31, 1993, the Watters suffered serious physical injuries following a collision between their car and one driven by Robert O. Moore (Moore), near Bozeman, Montana. At the time, Moore was insured by Guaranty for the statutory mandatory minimum amounts of $25,000 for bodily injury per person, $50,000 for bodily injury per accident, and $10,000 for property damage.
Guaranty investigated the accident and determined that Moore was at fault and that the Watters' personal injury claims entitled them to Moore's policy limits of $50,000. By January 4, 1994, medical bills for the Watters had reached approximately $90,000. Ultimately, the Watters incurred in excess of $100,000 in medical bills.
Within one week of the accident, on November 5, 1993, Guaranty informed Moore that "should the claimant pursue recovery through a lawsuit, the possibility does exist that a judgment could be awarded against you in excess of your insurance coverage." Guaranty further informed Moore that he could obtain an attorney at his own expense to represent him regarding "any excess exposure which now exists or may exist in the future." Guaranty emphasized its insurance policy provision that "settlement of any claim or suit remains within the discretion of our company." This notice to Moore was followed up in a letter, dated February 17, 1994, in which Guaranty again advised Moore that Guaranty would not be liable for a judgment in excess of policy limits, and that Moore may wish to retain counsel at his expense, recognizing that "you or your attorney may disagree with the approach taken by Guaranty National."
With liability and entitlement to the policy limits clearly established, the Watters, in a December 23, 1993 letter, demanded payment of Moore's bodily injury policy limits of $50,000. The Watters would not, however, agree to execute a full and final release of all liability in favor of Moore. Counsel for Watters also notified counsel for Guaranty that "any attempt to withhold payment to force a release would be an Unfair Claims Settlement Practice." Guaranty refused to pay the policy limits without a full and final liability release.
On January 5, 1994, the Watters filed suit for personal injuries against Moore in the Eighteenth Judicial
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