IN THE SUPREME COURT OF THE STATE OF MONTANA

DONALD J. TIGART, Plaintiff and Respondent,-vsRICHARD J. THOMPSON, Defendant and Appellant. and DOUGLAS C. BROOKINGS, Plaintiff and Respondent,-vsDICK THOMPSON, Defendant and Appellant, CLtn!: OF SLI:',:EE;C COURT LiA-\S'Etli" P,rcr~ rikl"JA RICHARD J. THOMPSON, Third-Party Plaintiff and Appellant,-vsDONALD J. TIGART, Third-Party Defendant and Respondent.

APPEAL FROM: District Court of the Ninth Judicial District, In and for the County of Pondera, The Honorable R.D. McPhillips, Judgepresiding.

COUNSEL OF RECORD: For Appellant: Lon T. Holden, Jardine, Stephenson, Blewett & Weaver, 

### , Great Falls, Montana For Respondent: Philip J. OIConnell,Thueson Law Office, Helena, Montana ~atriciaOtBrienCotter, Cotter & Cotter, Great Falls, Montana

Filed: submitted: July 13, 1990 Decided: August 20, 1990Justice John C. Sheehy delivered the Opinion of the Court.
Richard J. Thompson appeals from the judgment of the District Court, Ninth Judicial District, Pondera County, awarding respondentsattorney feesand costs. We affirm theDistrictCourt. The sole issue is the award of attorney fees and costs under the authority of 5 37-61-421, MCA. The issue of attorney fees and costs was before this Court originally in Tigart v. Thompson (1989), 237 Mont. 468, 774 P.2d 401. That portion of the appeal was dismissed without prejudice for being premature, as the award was not yet in the form of a final order. Rule 1,M.R.App.P. We set out here only those facts necessary for the review of this issue. Suit was initiated by respondents Donald Tigart and Douglas Brookings as the result of a truck accident in Conrad,Montana, on January 4, 1985. Respondents alleged that Richard Thompson negligently entered ahighway when theconditions were icy,causing the pickup driver Tigart to slide into a ditch to avoid a collision. Thompson was unaware of any accident until contacted by investigating officers. Thompson maintained throughout discovery and pretrial proceedings that he knew nothing of the accident,had no knowledge of any actions or circumstances of the day in questionand had no independent recollection of being in the vicinity of the accident that day. Thompson furtherdenied giving statementstoanyone other than the investigating officer. Counsel for Thompson stated that her client would not refute any of Tigartlscontention ofwhat transpired on the day of the accident. 2However, at trial, counsel for Thompson took issue in opening statement with Tigart's contentionsas towhere and with what care Thompson entered the highway, the road conditions that day, and asserted as a defense that Tigart was driving too fast for conditions. It came to light after the first week of trial that Thompson had in fact given a statement to his insurance carrier, Safeco Insurance Company, eleven days after the accident. The statement

was revealed when counsel for Tigart subpoenaed the insurance adjuster and his records. Defense counsel notified the court and counsel of the statement's existence just prior to the adjuster's testimony. The statementcontained several inconsistencieswhen compared to the contentions made in defendant's opening statement. As a result, plaintiffsmoved for a new trial based on surprise and for personal sanctions against defense counsel for concealment of evidence. No sanctionwas imposed;however,when averdict for the defense was returned by the jury, the lower court granted plaintiffs'motion fora new trial. Inaddition,the courtawarded plaintiffs attorney feesand costsassociatedwith the firsttrial. The lower court's award of attorney fees and costs, pursuant to 

### 3 37-61-421, MCA, in the amount of $31,275.97 is the subject of this appeal. In its order of April 24, 1988, the District Court stated:

It is hereby ordered that the motion to award monetary sanctions against Safeco Insurance Company in favor of Douglas Brookings and Donald Tigart is denied. It isordered, however, that Safeco Insurance Company is ordered to pay the plaintiffs1reasonable attorney fees and costs incurred during the first trial, including attorney fees and costs incurred between the close of discovery and the commencement of trial (which would be spentprimarily in trialpreparation), and attorney fees and costs incurred in obtaining a new trial. The court based its award on 5 37-61-421, MCA, which states:

An attorney orparty to any courtproceeding who, in the determination of the court, multiplies the proceedings in any caseunreasonably and vexatiouslymay be required by the court to satisfy personally the excess costs, expenses, and attorney fees reasonably incurred because of such conduct. The District Court went on to state that:

Here, the failure of Safeco InsuranceCompany toproduce thetape-recorded statementofThompson,despite multiple requests by the plaintiffs to do so, prevented the plaintiffs from having a fair trial, required the posttrial motions, and necessitated this second trial. The court is convinced had the tape been produced prior to trial,plaintiff may well have altered the presentation of his case with perhaps substantial expectation of different results. Safeco1sconductwas I1unreasonable" and therefore, under the statute, it should pay these expenses. Appellant contends that such an award,under § 37-61-421,MCA, is improper for a number of reasons: (1) No sanctions were imposed by the ~istrict Court; (2) Safeco is not a I1party"under themeaning of 5 37-61-421,MCA; and, (3) an award of attorney fees is improper where plaintiff is represented on a contingency fee basis. Appellant asserts that, as the court specifically determined

no sanctions to be in order, 5 37-61-421 is misapplied in this instance. Appellant states that, as the statute requires an attorney orparty tohave "unreasonablyandvexatiouslyumultipliedthe proceedings, the court's order is inconsistent. The District Court, states Thompson, neither found that Safeco intentionally withheld the statement nor that it failed to produce it in the proper manner once it was discovered. Therefore, Safecols inadvertance cannot be considered tohavemet the standard of being "vexatious. We disagree with appellant's contention. The District Court, in its order of April 29, 1988, stated that "the defendant has prevented the plaintiffs from receiving a fair trial and created unfair surprise at trial by withholdins a major item of evidence



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# . .I1 The District Court further stated that I1SafecoInsurance Company'stacticof concealins the Thompsonstatement1' violated the principle of pretrial discovery. The District Court's order does not speakof "inad~ertence'~ asappellantmaintains, but of tactical conduct at odds with the letter and spirit of pretrial discovery. Suchwithholding is certainlyboth unreasonable and vexatious. It

was within the District Court's discretion to award costs and attorney fees under 3 37-61-421, MCA. We find no abuse of that discretion here. Appellant next contends that Safeco is not a "party1'as envisioned by 9 37-61-421, and cannot be held responsible for the attorney fees and costs. Again,we must disagree with appellant's contention. In Jessen v. OIDaniel (D.Mont. 1962), 210 F.Supp. 317, 331, Judge William Jameson held that insurance contracts "have the effect of placing absolute and exclusive control over thelitigation in the insurance carrier." This Court followed that reasoning in Safeco InsuranceCo. v. Ellinghouse (1986), 223 Mont. 239, 725 P.2d 217, holding that the insurance carrier has "the correlative duty to exercise diligence, intelligence, good faith, honest and conscientious fidelity to the common interest of the parties.'' If an insurermay be held liable for the actions of its attorney,aswas the case in Ellinshouse,under a theory of agency, it is axiomatic that the insurer may be responsible for costs, expenses and attorney fees when the insurer llmultipliesthe proceedings in any caseunreasonablyandvexati~usly.~~ Safecowas inpossession of Thompson's statement from twoweeks following the accident until the trial,and itwas easilydiscoverableby Safeco. Appellant next contends that an award of attorney fees was inappropriate in this instance. Appellant states that an award of attorney fees under 5 37-61-421, MCA, is required to satisfy "attorney fees reasonably incurred." As counsel for both of the respondents were working on a contingency fee basis, and the trial resulted in a defense verdict, appellantmaintainsthatno attorney fees resulted. We disagree with appellant's reasoning. The District Court held that the respondents were denied a fair trial due to appellant's conduct. The attorney fees and costs were unnecessarily multiplied by that conduct, a situation expressly addressed in the statute. The liability of Safeco for attorney fees arises not from the feecontract between theother parties and their attorneys, but from a liability imposed by statute. It isthe multiplication of proceedings unnecessarily that 5 37-61-421, MCA, was meant to curb. We affirm the District Court.

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