No. DA 06-0214 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

2007 MT 132 

 ____________________________________ 

JOLENE SHELTON, 

 Plaintiff and Appellant, 

 v. 

STATE FARM MUTUAL AUTOMOBILE INS. CO., 

 Defendant and Respondent. 

 ____________________________________ 

APPEAL FROM: District Court of the Fourth Judicial District, 

 In and for the County of Missoula, Cause No. DV-99-87979, 

 The Honorable John S. Henson, Presiding Judge. 

COUNSEL OF RECORD: 

 For Appellant: 

Rex Palmer, Attorney at Law, Missoula, Montana 

For Respondent: 

Bradley J. Luck and Kathleen L. DeSoto, Garlington, Lohn & Robinson, 

Missoula, Montana 

 ____________________________________ 

Submitted on Briefs: April 18, 2007 

Decided: June 5, 2007 

Filed: 

_____________________________________________ 

Clerk 
Justice Brian Morris delivered the Opinion of the Court. 

¶1 Jolene Shelton (Shelton) appeals from the order of the Fourth Judicial District 

Court, Missoula County, granting State Farm Mutual Automobile Insurance Company’s 

(State Farm) motion for summary judgment and denying Shelton’s motion to compel 

discovery. We reverse and remand. 

¶2 We review whether the District Court erred in granting State Farm’s motion for 

summary judgment?

FACTUAL AND PROCEDURAL HISTORY 

¶3 Shelton and her husband, Kenneth Shelton, were injured in an automobile accident 

in Missoula in early April of 1995. Tim Hazelbaker (Hazelbaker) “rear-ended” their car 

with his pickup. Hazelbaker conceded liability, and his insurer paid $25,000.00 each to 

Shelton and her husband in August of 1996. 

¶4 Shelton and her husband also made claims on several State Farm policies under 

which they were insured for medical payments and underinsured motorist (UIM) 

coverage. Shelton’s husband settled his UIM claim for $60,000.00 in April of 1998. 

Shelton and State Farm would not settle her UIM claim for another three years. 

¶5 Shelton first offered to settle her UIM claim with State Farm in May of 1998 for 

$90,000.00 in excess of advances that she already had received for her medical costs. 

Her offer exceeded what State Farm thought she was entitled under her UIM coverage. 

State Farm hired Attorney Terry J. MacDonald (MacDonald) to “evaluate the claim 

process to date and handle future negotiations with Mrs. Shelton.” State Farm rejected 

Shelton’s settlement offer after consulting with MacDonald. State Farm chose instead to 

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“proceed with additional discovery in the claim.” 

¶6 Shelton filed a complaint against State Farm on April 29, 1999, seeking to recover 

UIM benefits in an amount equal to the special and general damages that she had 

sustained in the accident. The parties attempted unsuccessfully to mediate Shelton’s 

claim in “early summer of 1999.” 

¶7 Shelton amended her complaint on August 13, 1999, to add claims for punitive 

damages and bad faith. Shelton alleged in her bad faith claim that State Farm had 

violated two provisions of the Montana Unfair Trade Practices Act (MUTPA) when it (1) 

refused to pay her claims without conducting a reasonable investigation as required by § 

33-18-201(4), MCA, and (2) neglected to attempt in good faith to effectuate a prompt, 

fair, and equitable settlement of her claim even though liability had become reasonably 

clear, as required by § 33-18-201(6), MCA. 

¶8 Shelton sent her “First Discovery Requests” regarding her MUTPA, UIM 

coverage, and punitive damages claims to State Farm in August of 1999. State Farm 

responded on August 16, 1999, with an “Offer of Judgment,” pursuant to M. R. Civ. P. 

68. State Farm’s offer stated that it would allow “judgment to be taken against it on all of 

the claims” if Shelton would accept a payment of $57,038.28. Shelton refused State 

Farm’s offer. State Farm then sent her a check on September 8, 1999, for $57,038.28 

with no demand that she release State Farm from liability. 

¶9 The parties stipulated to bifurcate Shelton’s UIM coverage claim from her 

punitive damages and MUTPA claims. They also agreed to hold in abeyance Shelton’s 

discovery requests on her punitive damages and MUTPA claims pending a resolution of 

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Shelton’s UIM claim. The parties settled the UIM claim on May 7, 2001, for $23,000.00 

in addition to what State Farm already had paid. 

¶10 Thereafter Shelton and State Farm engaged in a protracted discovery dispute 

regarding Shelton’s MUTPA and punitive damages claims. State Farm stated in its 

response to Shelton’s discovery requests that it “objected to providing information it 

considered confidential, proprietary business materials, and suggested the parties agree to 

a protective order which would allow [Shelton] to use the materials while maintaining the 

confidential nature of the documents.” Shelton argues that she “declined to stipulate to 

what she saw as an unwarranted protective order.” Shelton points out that State Farm 

admitted that it had the materials that she requested and State Farm never moved for a 

protective order. 

¶11 State Farm filed an answer to Shelton’s amended complaint on March 11, 2002. It 

asserted, pursuant to § 33-18-242(5), MCA, that “[a]n insurer may not be held liable 

under this section if the insurer had a reasonable basis in law or in fact for contesting the 

claim or the amount of the claim, whichever is in issue.” State Farm then filed a motion 

for summary judgment on March 12, 2004, regarding Shelton’s MUTPA and punitive 

damages claims. Shelton filed a motion to compel on October 25, 2004, for various 

interrogatories and requests for production of documents to which, she claimed, State 

Farm had responded only “fractionally.” 

¶12 The court held a hearing regarding both motions on July 5, 2005. The court 

adopted State Farm’s proposed twenty-seven-page order “in toto” on January 23, 2006, 

granting State Farm’s motion for summary judgment as to all Shelton’s claims and 

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denying Shelton’s motion to compel discovery. The court’s order stated, with respect to 

Shelton’s MUTPA claims, that she had “not met her burden to come forward with proper 

verification of the existence of any material fact which would preclude granting State 

Farm’s motion.” It noted with respect to her punitive damages claims that “Shelton[] 

admitted that [she] had no factual basis for a claim of actual malice, and there is 

absolutely no evidence of any fraudulent behavior of any type by State Farm . . . .” The 

court also denied her motion to compel discovery. It determined that Shelton’s “[m]otion 

is more accurately described as a Rule 56(f) motion . . . . to hold a summary judgment 

motion in abeyance because she cannot overcome summary judgment without conducting 

further discovery.” The court concluded that “[n]one of the documentation sought by 

[Shelton] through her Motion to Compel would preclude entry of summary judgment, 

and so it is not well-taken.” Shelton appeals. 

STANDARD OF REVIEW 

¶13 We review de novo a district court’s decision to grant summary judgment, using 

the same criteria applied by the district court under M. R. Civ. P. 56. GRB Farm v. 

Christman Ranch, Inc., 2005 MT 59, ¶ 7, 326 Mont. 236, ¶ 7, 108 P.3d 507, ¶ 7. 

Summary judgment is appropriate when “the pleadings, depositions, answers to 

interrogatories, and admissions on file, together with the affidavits, if any, show that 

there is no genuine issue as to any material fact and that the moving party is entitled to a 

judgment as a matter of law.” M. R. Civ. P. 56(c). We draw all reasonable inferences in 

favor of the party opposing summary judgment. Watkins Trust v. Lacosta, 2004 MT 144, 

¶ 16, 321 Mont. 432, ¶ 16, 92 P.3d 620, ¶ 16. 

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DISCUSSION 

¶14 Did the district court err in granting State Farm’s motion for summary judgment? 

¶15 Shelton argues first that she has established a genuine issue of material fact as to 

whether State Farm conducted a “reasonable investigation” pursuant to § 33-18-201(4), 

MCA. She points out that her answers to State Farm’s interrogatories provide that (1) 

State Farm failed to collect several years of Shelton’s pre-injury medical records, even 

though State Farm admitted that it reasonably needed these records in order to investigate 

her claim properly; (2) State Farm failed to pursue reports from a medical doctor and a 

physicist until 1999, even though State Farm admitted that it reasonably would require 

these reports in order to evaluate Shelton’s claim; and (3) State Farm “tainted the physics 

aspect of its investigation” when it “delayed providing its own doctor’s findings and 

conclusions” to the physicist that State Farm hired to testify about the cause of Shelton’s 

injuries. 

¶16 State Farm argues that Shelton has failed to establish any issue of fact as to 

whether there was a “reasonable investigation” in light of the fact that (1) Shelton 

admitted in a deposition that she was “unclear on what investigations she believes State 

Farm should have undertaken;” and (2) State Farm’s outside counsel stated that he found 

State Farm’s investigation to be “thorough and appropriate.” 

¶17 Shelton’s inability to advise State Farm on its claims handling practices does not 

change the fact that she has offered evidence tending to show that State Farm failed to 

collect records and reports and failed to share important information among its own 

experts. MacDonald’s contrary assertions that the investigation was “thorough and 

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appropriate” tend to establish only that he disagrees with Shelton. Moreover, State Farm 

confirms Shelton’s evidence—to some extent—when it admits that there was a “delay (of 

a few weeks)” in the seeking of her medical records. State Farm has failed to establish an 

absence of genuine issues of material fact as to whether State Farm “reasonably 

investigated” her claim pursuant to § 33-18-201(4), MCA. M. R. Civ. P. 56(c). 

¶18 Shelton argues next that she has created an issue of fact with regard to whether 

State Farm neglected “to attempt in good faith to effectuate [a] prompt, fair, and equitable 

settlement[] of claims in which liability has become reasonably clear,” pursuant to § 33-

18-201(6), MCA. She contends that her evidence that State Farm failed to perform a 

“reasonable investigation,” as described above at ¶ 15, also tends to establish that State 

Farm acted in bad faith during the settlement negotiations. She also offers evidence that 

State Farm neglected for years to offer even the bottom end of its own evaluation range. 

¶19 Shelton admits that she was unwilling to settle before the spring of 1998 in light of 

her pending shoulder surgery, but claims that State Farm failed to make a good faith 

effort thereafter. She states in her interrogatory that “[a]lthough [State Farm’s] claims 

adjuster requested $72,500 of settlement authority [sometime near May of 1998], [State 

Farm’s] claims manager in charge of the claims adjuster authorized only $40,000 of 

settlement authority.” Shelton also asserts that State Farm “withheld important medical 

information from [her] . . . .” She states in her interrogatory that State Farm failed to 

forward to her a “letter dated December 12, 1997 from [her] physical therapist . . . 

[opining] that [Shelton] had [a] permanent disability.” 

¶20 State Farm offers some conflicting evidence, but fails to establish the absence of a 

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genuine issue as to any material fact regarding Shelton’s claim under § 33-18-201(6), 

MCA. State Farm instead attacks Shelton’s proffered evidence as being based almost 

exclusively on her own answers to State Farm’s interrogatories. State Farm’s argument 

lacks merit as M. R. Civ. P. 56(c) specifically provides for the court’s use of “answers to 

interrogatories” when considering a motion for summary judgment. Shelton’s reliance on 

her own answers to State Farm’s interrogatory is no less valid than State Farm’s reliance 

on the affidavits that it submitted from its own attorney and claims adjusters. See M. R. 

Civ. P. 56(c). 

¶21 State Farm also argues that “virtually all of the concerns raised by Shelton in 

regard to the claim handling occurred during the litigation of the underlying matter.” It 

cites Palmer by Diacon v. Farmers Ins., 261 Mont. 91, 121-22, 861 P.2d 895, 914-15 

(1993), for the proposition that an insurer’s litigation conduct should not be considered as 

evidence of bad faith. State Farm overstates this Court’s holding in Palmer. 

¶22 This Court in Palmer reversed a trial court’s decision to allow evidence of an 

insurer’s litigation conduct from a trial on whether the insurer had breached the covenant 

of good faith and fair dealing. Palmer, 261 Mont. at 125, 861 P.2d at 916. The Court 

determined that the prejudicial nature of the insurer’s litigation conduct outweighed its 

relevance at a trial. Palmer, 261 Mont. at 124, 861 P.2d at 916. This Court specifically 

noted that “we do not impose a blanket prohibition” on an insurer’s post-filing conduct. 

Palmer, 261 Mont. at 123, 861 P.2d at 915. The Court held that the correct approach 

would be to weigh the prejudicial effect of such evidence against its probative value 

pursuant to M. R. Evid. 403. Palmer, 261 Mont. at 123, 861 P.2d at 915. 

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¶23 Moreover, Shelton did not file suit against State Farm until April of 1999, 

approximately one year after her first demand for settlement. State Farm’s conduct 

within this period would be admissible even under State Farm’s broad interpretation of 

this Court’s holding in Palmer. State Farm fails to establish an absence of a genuine 

issue as to whether it made a “good faith” attempt at a settlement with Shelton during the 

three years between Shelton’s first demand for settlement in May of 1998 and the parties’ 

final settlement of Shelton’s UIM claims in May of 2001. M. R. Civ. P. 56(c). 

¶24 Shelton contests finally the court’s determination that no genuine issues of 

material fact exist with respect to whether “any State Farm employee or agent acted with 

actual malice in the handling of Shelton’s claim.” Shelton’s claim of actual malice 

requires her to offer evidence tending to show that State Farm had knowledge of facts or 

intentionally disregarded facts that created a high probability of injury to Shelton. 

Section 27-1-221(2), MCA. She offers evidence that State Farm knew “for years [that] it 

held funds rightly belonging to Shelton.” Shelton points out that she had a high 

probability of injury in light of the fact that § 27-1-106, MCA, defines an “injury to 

property” as “depriving its owner of the benefit of it, which is done by . . . withholding . . 

. it . . . .” She also must offer facts tending to show that State Farm proceeded with 

conscious, intentional disregard, or indifference to a high probability of injury to Shelton. 

Section 27-1-221(2), MCA. She recounts in her interrogatory that State Farm refused to 

pay her UIM benefits less than or equal to the minimum amount that State Farm’s 

internal evaluations showed that she deserved. 

¶25 State Farm responds that Shelton has admitted that State Farm acted without 

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malice. It points to statements in her deposition testimony where it alleges that Shelton 

admits that she and State Farm had an “honest disagreement on the value of [her] 

personal injury case.” State Farm also points to Shelton’s testimony where it alleges she 

failed to “articulate any reason for her claims.” State Farm asked Shelton, for example, if 

she thought that “anyone working for or on behalf of State Farm set out purposely to hurt 

you or recklessly to cause you damage, or was this an honest disagreement?” Shelton 

responded: “I don’t know. I would hope they wouldn’t.” 

¶26 Shelton’s alleged admission that she and State Farm had an “honest disagreement” 

on the total value of the settlement fails to show that she offered no genuine issue of fact 

as to whether State Farm acted with malice. An issue could exist as to whether State 

Farm acted with malice in failing to pay Shelton the minimum amount of money it had 

determined that she deserved, even if State Farm could prove that the parties “honestly 

disagreed” over the total value of the settlement. State Farm’s remaining citations to her 

deposition testimony represent either unresponsive or irrelevant answers to the issue of 

whether State Farm acted with actual malice. 

¶27 The District Court also determined that Shelton had failed to establish an issue of 

fact with respect to State Farm’s affirmative defense under the MUTPA that it had a 

reasonable basis for contesting the value of her claim. Section 33-18-242(5), MCA, 

provides that “[a]n insurer may not be held liable under this section if the insurer had a 

reasonable basis in law or in fact for contesting the claim or the amount of the claim, 

whichever is in issue.” The record indicates, however, as we discussed above at ¶ 26, 

that Shelton has offered interrogatory answers tending to show that State Farm had no 

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reasonable basis for refusing to pay “even the bottom end of its own under-evaluation.” 

State Farm makes no showing that this issue of fact is either absent or irrelevant to its 

defense. 

¶28 We conclude that the District Court erred in determining that Shelton has failed to 

present genuine issues of material fact with respect to her MUTPA and punitive damages 

claims. Our decision on the court’s summary judgment motion renders our consideration 

of Shelton’s motion to compel unnecessary in light of the fact that the court analyzed her 

motion to compel discovery as an M. R. Civ. P. 56(f) motion to postpone summary 

judgment so that Shelton could seek discovery on “facts essential to justify [her] 

opposition . . .” to summary judgment. Shelton no longer needs to postpone summary 

judgment. The court should reconsider her motion on remand as a motion to compel 

discovery pursuant to M. R. Civ. P. 37. 

¶29 We REVERSE the District Court’s order for summary judgment and REMAND 

for proceedings consistent with this opinion. 

 /S/ BRIAN MORRIS 

We Concur: 

/S/ KARLA M. GRAY 

/S/ W. WILLIAM LEAPHART 

/S/ JOHN WARNER 

/S/ JIM RICE 

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