NO. 89-222 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1990 

MARTIN DUNN and BETTY DUNN, 

plaintiffs and Appellants, 

-vsJOHN WAY and IOWA MUTUAL INSURANCE COMPANY, 

Defendants and Respondents. 

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APPEAL FROM: ~istrict Court of the Third ~udicial ~istrlct, 

In and for the County of Deer Lodge, 

The Honorable Ted I,. ~izner , Judge presi-d-ing. 

COUNSEL OF RECORD: 

For Appellant: 

Greg J. Skakles; Johnson, Skakles & Kebe; Anaconda, 

Montana 

For Respondent: 

Thomas M. Welsch; Poore, Roth & ~obinson, Butte, 

Montana 

Filed: 

submitted on ~riefs: Nov. 21, 1989 

~ecided: February 5, 1990 
Justice John C. Sheehy, delivered the Opinion of the Court. 

plaintiffs Martin and Betty Dunn brought suit in the District 

Court, Third Judicial District, Deer Lodge County, alleging breach 

of contract and bad faith against defendants Iowa Mutual Insurance 

Company and its claims adjuster John Way for failure to promptly 

settle a claim for damage to a camping trailer and its contents. 

Upon motion, the District Court entered a stay of proceeding as to 

the bad faith claims pending resolution of the contract dispute. 

Defendants subsequently made a motion for summary judgment, 

on the basis that they had invoked the appraisal process required 

under the contract, which plaintiffs failed to comply with prior 

to filing suit. The District Court granted the motion for summary 

judgment. The Dunns appeal the stay of proceedings and grant of 

summary judgment. We affirm the ~istrict Court. 

The issues raised by the Dunns are: 

1. Whether Iowa Mutual properly invoked the policy's 

appraisal process. 

2. Whether interest loss and storage fee claims are material 

to summary judgment. 

3. Whether personal property valuations were at issue, 

thereby precluding summary judgment. 

4. Whether the ~istrict Court erred by staying plaintiffs1 

bad faith claims. 

On November 8, 1985, the insured, Martin Dunn, was involved 

in a single-vehicle accident, which damaged his pickup truck, 

camping trailer and its contents. The truck and trailer were 

insured by Iowa Mutual under an auto policy; the trailer's contents 

were insured under a homeowners1 policy. Agreement was reached on 

the damage claim for the truck, but efforts to reach agreement as 

to the trailer and its contents were unsuccessful. 

Dunn alerted Iowa Mutual Branch Claims Manager John Way of all 
claims after the accident, and sent an inventory list of the 

trailer's contents. In a reply letter dated February 11, 1986, Way 

informed Dunn that it was necessary for Dunn to choose which items 

he wished to replace and which he wished to depreciate. Way also 

informed Dunn that his trailer had been appraised at somewhere 

between $5,000 to $6,000. Way also requested Dunn to forward the 

trailer's title so it could be sold for salvage. 

On March 7, 1986, Way responded to a letter from the Dunns, 

asking the Dunns to forward the names of the appraisers who had 

given quotes ranging from $8,000 to $9,000 for the trailer. Way 

again requested the title to the trailer so that salvage could 

occur and storage costs ended. 

In correspondence from Way to the Dunns dated April 2, 1986, 

Way offered a $7,000 settlement for the trailer. No correspondence 

from Dunn is contained in the record, but it is apparent that that 

settlement offer was refused. An April 23 letter from Way to Dunn 

stated: 

since we seem to be at a stalemate on the settlement of 

this matter since you do not agree with our evaluation, 

we feel that our only alternative is to go the appraisal 

route under the conditions of the policy. 

If you will let us know who you want to represent you 

will have our appraiser get in contact with him. 

Way again wrote Dunn on June 11, 1986, seeking a reply, and 

reiterating that an appraisal of the trailer's value was in order. 

Way also reminded Dunn that storage fees for the trailer continued 

to accrue. 

The Dunns subsequently retained counsel, and on July 16, 1986, 

their attorney sent a letter to Way, contending that Iowa Mutual's 

position was "totally unreasonable and you have continued to 

procrastinate and have refused to attempt to negotiate a fair and 
equitable offer. In addition, the Dunnsl counsel stated that 

Way's representation as to replacement costs or depreciation of the 

personal property was "totally repugnant to the terms and 

conditions of [the] policy as well as 5 33-23-202, MCA." Further, 

the Dunnsl counsel maintained that Iowa Mutual's insistence that 

!'the matter be resolved pursuant to the arbitration conditions of 

the policy1' was in violation of 5 27-5-111, MCA, et seq. which 

specifically excepts insurance contracts from mandatory arbitration 

procedures. Demand was made of Iowa Mutual for the value of the 

trailer, personal effects, storage fees, loss of use and interest 

in the amount of $13,997.46. 

In reply, Way stated that the replacement cost option referred 

only to the lost personal property; that 5 33-23-202, MCA, speaks 

to reimbursement of loss of a motor vehicle. Further, Way pointed 

out that Iowa Mutual sought an appraisal, not arbitration, to 

settle the matter. Way concluded by offering the Dunns $7,500 for 

the trailer, $2,500 for the personal property, and again stated the 

company was not obligated to pay all of the storage fees for the 

trailer. 

The Dunns did not reply to the last letter, but initiated suit 

on October 15, 1986, alleging violation of the covenant of good 

faith and fair dealing and unfair claim settlement practices. 

Defendants filed a Motion for Stay of Proceedings and for 

Protective Order on January 20, 1987, in order to suspend 

plaintiffs1 bad faith claim and discovery related to it until the 

underlying breach of contract claim was resolved. A hearing was 
conducted on March 11, 1987, and the motion was subsequently 

granted. 

The Dunns filed a motion for reconsideration on September 23, 

1988. Iowa Mutual filed its brief in opposition on October 12, 

1988 and a motion for summary judgment on October 20, 1988. Iowa 

Mutual based the motion for summary judgment on the fact that the 

Dunns had "failed and refused to submit to the appraisal procedure 

under their insurance policy, which appraisal procedure is binding 

and enforceable as a matter of law." 

A hearing on the motion for reconsideration and the motion for 

summary judgment was held on March 8, 1989. The District Court 

issued its opinion and order on April 12, 1989, finding that: 1) 

Iowa Mutual Is motion for summary judgment should be granted; 2) 

Iowa Mutual need not amend its answer to affirmatively plead the 

defense of appraisal, as the appraisal requirements were mandatory 

under the contract and were already before the court; and 3) 

plaintiffst motion to reconsider was denied. This appeal resulted. 

Plaintiffs1 first issue is based on the premise that Iowa 

Mutual did not invoke the appraisal procedure contained in the 

policy of insurance. This contention is plainly incorrect. 

Correspondence within the record clearly shows that Branch Claims 

Manager John Way, in a letter dated April 23, 1986, specifically 

notified Martin Dunn that the appraisal procedure was being 

invoked. Way again notified the Dunns in correspondence dated June 

11, 1986. In it, Way inquired of the Dunns why neither he nor his 

designated appraiser had yet to contact the company. On June 29, 
1986, Way once again notified the Dunns through his attorney that 

appraisal, and not arbitration, as the Dunnsl counsel had termed 

it in correspondence, had been sought. 

The appraisal provision in the policy issued to the Dunns 

reads in part: 

If we and you do not agree on the amount of loss, either 

may demand an appraisal of the loss. In this event, each 

party will select a competent appraiser. The two 

appraisers will select an umpire. The appraisers will 

state separately the actual cash value and the amount of 

loss. If they fail to agree, they will submit their 

differences to the umpire. A decision agreed to by any 

two will be binding. 

Iowa Mutual clearly and specifically asked for an appraisal. 

The Dunns did not comply. A policy provision regarding legal 

action against the company reads in part: 

No legal action may be brought against us until there has 

been full compliance with all terms of this policy. 

The case at bar is on all fours with Garretson v. Mountain 

West Farm Bureau Mutual Insurance Co. (Mont. 1988), 761 P.2d 1288. 

The policy provisions in Garretson are virtually identical to those 

contained in the Dunnsl policy. In Garretson, this Court 

determined that summary judgment was proper where an appraisal had 

been invoked but the insured did not comply before filing a 

complaint. 

The Dunns maintain that Iowa Mutual failed to raise appraisal 

as an affirmative defense in their answer, and are therefore 

precluded from raising it later as a basis for summary judgment. 

Here, the appraisal provision was contained within the contract 

which is central to the dispute. An affirmative defense, under 
Rule 8(c), M.R.Civ.P., concerns the pleading of matters not within 

the claimant's prima facie case. Sterret v. Milk ~iver production 

Credit Association (Mont. 1988), 764 P.2d 467. We agree with 

Iowa's contention that lack of appraisal constitutes a negative 

defense here, and, as such, was raised by Iowa's general denial in 

accordance with Rule 8(b), M.R.Civ.P. 

Plaintiffst second issue concerns whether a storage fee claim 

and an "interest loss1' claim are material to the summary judgment. 

The Dunns contend that Iowa is responsible, under the terms 

of the policy, for storage fees. Iowa denies this. A reading of 

the policy discloses no provision which mandates either party to 

pay storage fees. However, the Dunns did not seek payment of 

storage fees in their complaint. The District Court correctly 

disregarded this issue. 

The Dunns also contend that they made a valid claim for 

interest, which is not subject to appraisal, and would thereby 

preclude summary judgment. However, the very nature of the Dunns' 

complaint precludes a right to interest. Section 27-1-211, MCA, 

allows recovery of interest if damages are certain or capable of 

being made certain. Had the Dunns properly followed the appraisal 

procedure, their damages would likely have been made certain. The 

trailer's value was not liquidated, and interest recovery is 

therefore not at issue. No interest may run until a fixed amount 

of damages has been arrived at by agreement, appraisal or judgment. 

Carriger v. Ballenger (Mont. 1981), 628 P.2d 1106. 

Plaintiffs1 third issue is whether personal property 
valuations are in dispute, thereby precluding summary judgment. 

The Dunns complaint asks for $2,800 to compensate for personal 

property lost in the accident. There is no question as to 

coverage. Iowa made an offer of $2,500 to the Dunns. While there 

is a difference of opinion as to worth, the Dunns have again failed 

to follow the procedures of the insurance contract. Agent Way 

requested the Dunns make an election in February, 1986, as to 

whether they wished to replace the destroyed items or seek 

reimbursement on the basis of depreciated cost. It is 

uncontroverted that the Dunns did not provide replacement receipts 

as requested or make an election. Because the Dunns did not comply 

with the policy procedures, their claim of a dispute as to the 

value of personal property has no more merit than that involving 

the trailer. The District Court correctly determined that the 

personal property valuations were not material to a breach of 

contract claim. 

Plaintiffst final issue is whether the District Court erred 

in staying their bad faith claim. 

The ~istrict Court originally entered an order staying 

proceedings and protecting defendants from discovery in matters 

directed to the Dunnst bad faith claim until resolution of the 

claim for breach of contract. The court declined to modify the 

order upon subsequent motion for reconsideration. We agree with 

the courtts logic. 

The District Court stated: 

The court declines to modify the Order Staying proceeding 

and protecting the Defendants from further Discovery 
previously entered . . . . The likelihood of prejudice 

to Defendants by proceeding with the bad faith claim 

before the appraisal process is complete is probable. 

The conclusion that the appraisal procedure must be 

followed and the resolution of the value issue may well 

affect the resolution of the bad faith issues. 

The ~istrict Court was acting within the bounds of discretion 

authorized by Rule 42(b), M.R.Civ.P. 

Affirmed. 

, , We Concur: , 

Chief Justice