No. 85-498

INTHE SUPREME COURTOF THE STATEOF MONTANA
1987

LINDAM. HART-ANDERSON, Plaintiffand Respondent,-vsGERALDINE C. HAUCK and STATEFARM INSURANCECOMPANY,
DefendantsandAppellants.

APPEAL FROM: District Courtof the Thirteenth JudicialDistrict, Inand for theCounty ofYellowstone, TheHonorable William J. Speare, Judgepresiding.

COUNSEL OF RECORD:

ForAppellants: Christopher P. Thimsenargued for Hauck, Billings, Montana Dzivi,Conklin & Nybo;William Conklin argued for StateFarm,Great Falls,Montana For Respondent: CrowleyLaw Firm;Ronald D. Lodders argued, Billings, Montana

1P6j

# -3- Filed: submitted: November 24, 1957 Decided: January 8,1988


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ClerkMr. Justice L. C. Gulbrandson delivered the Opinion of the Court.Defendants Geraldine Hauck and her insurer, State Farm Insurance Company (State Farm), appeal a Yellowstone County District Court jury verdict and judgment which; (1) found Hauck negligent and 100% liable for an automobile accident involving the respondent/plaintiff Linda Hart-Anderson, (2) found that State Fa.rm had breached its statutory obligations to respondent under Montana.'~ Unfair Claims Settlement Practices Act (theAct), and (3) awarded $687 to respondent for property damages to her car, (4) awarded $25,000 to respondent as compensatory damages for emotional distress,and (5) awarded $687,000 to respondentaspunitive damages against StateFarm. A decisionwas entered by thisCourt onMarch 17, 1987. Hart-Anderson v. Hauck (Mont. 1987), 44 St.Rep. 508. Hart-Anderson petitioned this Court for partial reconsideration under Rule 34, M.R.Civ.P. The petition was briefed by the parties and we granted oral argument. We now withdraw the original opinion and issue this opinion in its place.Appellant State Farm raises the following issues on appeal: (1) whether the District Court erred in instructing the jury that S 33-18-201(7), MCA, applies to third party claimants; (2) whether the District Court erred in allowing respondent's expert witness to state legal opinions that State Farmviolated the Act; (3) whether the District Court erred in prohibiting respondent from cross-examining plaintiff's expertwitness on his knowledge and interpretation of case law on negligence and rear-end collisions; (4) whether the District Court erred in instructing the jury that a violation of the Act may be considered as evidence ofpresumedmalice;(5) whether the District Court committed prejudicial

error by refusing to bifurcate the trial into a negligence action and abad faith action; (6) whether the evidence is sufficient to support the jury's verdict that State Farm breached obligations imposed by theAct; (7) whether the evidence is sufficient to support the award of $25,000 for emotional distress; (8) whether the District Court erred in submitting the issue of punitive damages to the jury and whether the punitive damages award of $687,000 is supported by the evidence; (9) whether the punitive damages award violates State Farm's rights under the excessive fine clause and the due process clause of both the United States and the Montana Constitutions. AppellantHauck raises two issues:

(1) whether the District Court erred in instructing the jury that therewas no preexisting damage to plaintiff's

car; (2) whether the District Court erred in instructing the jury that, as a matter of law, the actions of another driverhad nobearing upon this case. Because of instructional and evidentiary errors, we reverse the judgment and remand this cause for a new trial. On the morning of December 6, 1982, plaintiff was driving her car east on Broadwater Avenue in Billings, Montana. Geraldine Hauck was some distance behind the plaintiff also driving east on Broadwater. The streets were very icy that morning. Plaintiff planned to turn right at the corner ofBroadwater and Tenth Street. As sheapproached the corner, a large delivery truck entered the intersection fromher right. Plaintiffappliedher brakes causingher car to slide to the right. Her carhit the curb and bounced back into her lane of traffic. Plaintiff proceeded very slowly around the corner. Appellant Hauck saw that the plaintiff'svehicle was having trouble on the icy street. Appellant Hauck also planned to turn right on Tenth Street and she attempted to brake her vehicle to avoid the plaintiff's vehicle in front of her. Hauck testified that she could not avoid plaintiff's vehicle by passing it on the left because of the delivery truck, which was blocking the road on that side. Hauck was unable to slow her car enough to avoid striking t.he plaintiff' s vehicle from the rear. Hauck's vehicle struck the plaintiff's vehicle and pushed it across Tenth Street and into a car driven by Agnes Heald. No one suffered physical injuries. At the time of the accident, Hauck had an automobile insurance policy with State Farm. Hauck promptly reported the accident to State Farm. On December 1.7, 1982, the plaintiff submitted her accident report and claim for $687 to State Farm. Plaintiff's initialwritten accident report did not mention that she had slid into the curb. However, shortly after she filed her report, the plaintiffadmitted to State Farm's adjuster, Doyle Hailey, that she did slide into the curb. Hailey told plaintiff that he would only pay 50% of the cost ofrepairing her carbecause he believed that she

was also negligent. Prior to this offer, Hailey did not interview witness Heald or the police officer who investigated the accident. In late December 1982, Heald filed her accident report and claim with State Farm. Heald did not see the plaintiff's vehicle strike the curb and her report made nomention of that fact. Plaintiff believed that State Farm should pay 100% of her claim. An attorney called Hailey onbehalf of plaintiff and stated that plaintiff was not negligent, that it was clear thatHauckwas 100% liable, that the refusal topay all of plaintiff's damages was unjustified, and that plaintiff would accept a settlementpayment of 90% of her damages. InJanuary 1983, Hailey telephoned the attorney, stated that plaintiff was 50% negligent and refused to pay plaintiff 90% of her damages. Plaintiff secured counsel and filed this action alleging that Hauck had been negligent and that State Farmhad violated theUnfair Claims Settlement PracticesAct. The District Courtheld the jury trial in this case in May 1985. Plaintiff's counsel read an agreed statement of facts into the record in the jury's presence. Among other things,the statementsaid, Defendant State Farm Insurance Company has offered to pay 50 percent of plaintiff

### 's damage. This offer was communicated at the time of State Farm's first contact with the plaintiff and has never been increased or decreased.

State Farm's counsel moved to amend the second sentence quoted above. He claimedhe had informedplaintiff's counsel that he did not agree to that sentence but that his partner signed the statement (apparentlynotknowingof the dispute). The plaintiff filed a trial brief which admits that State Farm offered to settle both the bad faith action and the negligence action for a total of $5,000. Therefore,we find that the second sentence quoted above, pertaining to the increase or decrease of the offer,wasmisleading and should be stricken from the agreed statementof facts upon retrial. Appellant Hauck introduced evidence at trial. of two repair estimates submitted by plaintiff. One estimate was dated October 8, 1982, approximately two months before the accidentoccurred. Thatestimatewas for $687. Themechanic who prepared that estimate testified that he believed the date on the estimatewasmistaken. He also testified that he had previously said, in a statement given to Hailey, that as far as he could remember the estimatewas written in October and not inDecember. The date of plaintiff's other estimatewas September 15, 1982, almost three months before the accident occurred. The estimatewas for $750. Themechanic whoprepared that estimate testified thathe did not remember making the estimate but admitted, at his deposition, that as far ashe knew the dateon the estimatewas correct. Theplaintiff called two expert witnesses to testify at trial. Albert Benoit,now retired but previously thebranch claims manager for Farmers Insurance Group for 25 years, testified that Hauck was 100% at fault in the accident and that plaintiff was not negligent at all. Benoit testified, without objection, that State Farm 1. violated subsection

(4) of the Act by refusing to pay the claim without conducting a reasonable investigation based upon all the available information, 2. violated subsection (6)of theAct 

### by neglecting to attempt in good faith to effectuate prompt, fair and equitable settlement of the claim where liability

was reasonably clear, and 3. violated subsection (7)of the Act by compelling plaintiff to institute litigation to recover amounts due by offering substantially less than the amount recovered. Earl Hanson, an experienced Billings attorney, also testified as an expert witness. Hanson testified that Hauck was clearly 100%negligent and that the plaintiff was not negligent in the accident. He further testified, over objection, that State Farm agents violated subsections (6), (7)and possibly (4)of the Act in the way they handled plaintiff's claim. Counsel for Sta-te Farm attempted to cross-examine Hanson as to case law involving negligence and rear-end collisions. After plaintiff's objection,the District Court refused to allow this cross-examination. Counsel for State Farm made an offer ofproof citing twoMontana SupremeCourt cases, cases from Texas, Tennessee, and California, and severalMontanaDistrict Court cases.Plaintiff also called Thomas Poindexter, an eye witness, to testify at trial. He testified that thedelivery truck was a contributing factor to plaintiff hitting her brakes and sliding into the curb. He also testified that if plaintiff had not applied her brakes because of the truck, causing her to slide into the curb and come almost to a stop, that the accident would nothave occurred. The District Court instructed the jury, over State Farm's objection, that subsection (7)of the Act applied to and protected any person, rather than only insureds. The DistrictCourtalso instructed the jury,over objection,that the jury could consideraviolationof the Act as evidence of presumed malice. The jury returned the verdict described above. Thisappeal followed. The first issue concerns the court's instructionto the jury relative to subsection (7) of the Act. Section 33-18-201,MCA (the Act), states inpertinentpart: No person may,with such frequency as to indicate a general business practice, do any of the following:

(4) refuse to pay claims without conducting a reasonable investigation based upon all available information;

(6) neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims inwhich liability hasbecome reasonablyclear;

(7) compel insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;(9) attempt to settle claims on the basis of an applicationwhichwas altered without notice to or knowledge or consent of the insured;

(10) make claimspayments to insureds or beneficiaries not accompanied by statements setting forth the coverage under which the payments are being made;

(11) make known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

(12) delay the investigation or payment of claims by requiring an insured, claimant, or physician of either to submit a preliminary claim report and then requiring the subsequent submission of formalproof of loss of forms,both of which submissions contain substantially t.hesame information;

Regarding subsection 

### (7) of the Act and over appellant's objection, the trial court instructed the jury that: [N] o insurance company may, with such frequency as to indicate a general business practice, do any of the following: 

# ...Compel 

### any person to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in such actions.

(Emphasisadded.)

We set out the above subsections of the Act to demonstrate that the Act,by its own terms,provides certain protections to insureds, others to claimants and insureds,and another to insureds and beneficiaries. See Royal Globe Ins. Co. 

### v. Superior Court, etc. (Cal. 1979), 592 P.2d 329, 334. Using the analysis for statutory constructioncited by this Court in Klaudt v. Flink (Mont. 1983), 658 P.2d 1065, 1067, 40 St.Rep. 64, 66,we find that subsection (7)of the Act does not protect third party claimants. The first step of the analysis is whether our interpretation is consistent with the statute as awhole. As stated, the statute extends some protections to insureds,some to insureds and claimants, and another to insureds and beneficiaries. Our interpretation is consistentwith these distinctions clearly made in the statute. The second step is whether our interpretation reflects the legislature's intent considering theplain meaning of the statutory language. The language of subsection (7) protects "insureds" and plainly that term does not include third party claimantswho are not insuredby the defendant insurance companv. The third step is whether the interpretation is reasonable so as to avoid absurd results. The statute here distinguishes between claimants, insureds and beneficiaries. Our interpretation here recognizes and defers to that distinction. As this Court stated in Klaudt, 658 P.2d at 1067, in holding that subsection (6) of the statute does protect third party claimants, It would be absurd to assume that the legislature would insert thesewords into the statute without them having some meaning, as the legislature is presumed not to pass useless or meaningless legislation.
Plaintiff incorrectly asserts that the Klaudt Court held that 5 33-18-201,MCA, in its entirety, applies to, and protects third party claimants. The Klaudt Court addressedonly subsection (6) of the statute. We hold that the District Court committed reversible error in instructing the jury that subsection (7) of the statute applied to any person. Our interpretationof subsection (7)of the statute is supported by Green v. Holm (Wash.App. 1981), 622 P.2d 869. In Green, the court addressed a Washington administrative regulation on unfair insurance practice which was almost identical to S 33-18-201(7), MCA. The court found that the plaintiffs could not successfully state a claim under the regulation because they were third party claimants, not insureds. TheWashington Supreme Courthas sinceheld that a third party claimant has no cause of action against an insura.ncecompany for unfair claims settlement practices. Tank v. State Farm Fire & Cas. Co. (Wash. 1986), 715 P.2d 1133. The second issue is the propriety of the expert witness testimony. Appellants objected to attorney Hanson's opinion testimony that State Farm violated various subdivisions of the statute. RelevantMontana Rules ofEvidenceare: Rule 702. If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or todeterminea fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education may testify thereto in the formof an opinionorotherwise.

Rule 704. Testimony in the form of an opinion or inference otherwiseadmissible is not objectionable because it embraces an ultimate issue to be decided by the trier of fact.
TheCommission Comment to Rule 704,M.R.Evid., provides that:[Tlhe Commission intends this rule to follow the existj-ngMontana practice of not allowing the witness to give a legal conclusion or to apply the law to the facts in his answer. Additionally, § 25-7-102,MCA,provides that: [A111 questions of law, including

# .

# .. the construction of statutes and other writings,

# . . .are to be decided by the court 

# . ..and all discussions of law are tobe addressed to the court. With this statutory framework inmind,we examine case law bearing on the issue presented. In Safeco Ins. Co. v. Ellinghouse (Mont. 1986), 725 P.2d 217, 43 St.Rep. 1689,this Court recently addressed the plaintiff's use of expert legal testimony in an insurance bad faith case. In Safeco, Ellinghouse was originally sued in a negligence action. Safeco, his insurer,initially accepted coverageof the claim and retained counsel to represent him. Over a year later, Safeco determined that an insurancepolicy exclusion applied to the claim and that therewas no coverage under thepolicy. Safeco secured Ellinghouse's signature on a "non-waiver" agreement and, a month later, formally denied coverage to Ellinghouse. Ellinghouse later secured his own counsel and settled thenegligence claimoutof court. Meanwhile, Safeco had filed a declaratory judgment action to determine whether Ellinghouse had liability coverage under the policy. Ellinghouse counterclaimed against Safeco for, among other things, bad faith. Ellinghouse introduced expert legal testimony that: [Iltwas a general principle of law that prejudice was always presumed to exist whenever a representationof coveragehad been made and a defense provided, that the "courts arequiteunanimous in saying that insurance companiesmust eitherdeny coverage immediately or thereafter beestopped from doing so," and that the "completed operations" exclusion had "no application"to this case. Safeco, 725 P.2d at 224. There was also apparently expert legal testimony on what Safeco's legal duties were in the case, on what the legal effect of the non-waiver agreement was, and that Safeco wrongfullydenied coverage. This Court held that such testimony was not reversible error under the unique facts of that case, given that the trial court held there was coverage as a matter of law. However, this Court said, "[als a general rule, an attorney cannot advise the jury as to the law of the case." Safeco, 725 P.2d at 225. The Second CircuitCourtofAppeals inMarx & Co., Inc.

v. Diners' Club, Inc. (2d. Cir. 1977), 550 F.2d 505, stated reasons which help explain the general rule later cited in Safeco. In Marx, the court held that the federal district court erred in permitting an expert witness to give his opinion as to the parties' legal obligation under a contract for registration of stock. Among other things, the expert opined (1) that the defendant had no legal excuses for nonperformance and (2) as to what was required of the defendant under the "best efforts" obligation under the contract. In condemning the testimony, the federal court stated: [Sluchtestimony "amounts tonomore than an expression of the [witness'] general belief as to how the case should be decided." McCormick on Evidence, S 12 at 26-27. The admission of such testimony would give the appearance that the court was shifting to witnesses the responsibility to decide the case. McCormick on Evidence,S 12 at 27. It is for the jury to evaluate the facts in the light of the applicable rules of law,and it is therefore erroneous for a witnessto state his opinion on the law of the forum. (Citationomitted.)

Marx & Co., Inc., 550 F.2d at 510. The court further cautioned that, [Wlemust be especially careful not to allow trials before juries to become battles of paid advocates posing as experts on the respective sides concerning matters ofdomestic law.

Marx & Co., Inc., 550 F.2d at 511. Here, the jurors had the ability a.ndthe competence, based upon their common experiences and knowledge,to decide whether (1) State Farm refused to pay plaintiffIs claim without conducting a reasonable investigationbased upon all available information; and (2) State Farm neglected to attempt in good faith to effectuate a prompt, fair and equitable settlementof a claim in which liabilityhad become reasonably clear. Hanson's challenged testimony, opining that State Farmviolated subsections (41, (6) and (7)of the Act invaded the province of the jury and simply instructed the jury how to decide the case. That testimony was highly prejudicial to State Farm and, therefore, we hold that the District Court committed reversible error in admitting Hanson's legal opinions. Appellants did not object to the respondent soliciting legal. opinions from Benoit and we do not here address the propriety of that testimony. For a further discussion of expert legal testimony, see Kulak 

### v. Nationwide Mutual InsuranceCompany (N.Y. 1976), 351N.E.2d 735. The third issue concerns the District Court's ruling restricting State Farm's cross-examination of attorney Hanson. By way of qualifying Hanson as an expert legal witness, plaintiff elicited Hanson's testimony that he has practiced law for almost twenty years, that he has givenspeeches to professional organizations on topics including bad faith and insurancebad faith, that he had worked in the insurance business and that he was generally familiar with the principles of evaluating liability in rear-end car crashes. On cross-examination,Hanson agreed that he tries to read this Court's decisions soon after they are decided and that the law in most states is similar to Montana law with regard to rear-end collisionand liability. State Farm's counsel then attempted to cross-examine Hanson about an Idaho case reported in the Pacific Reporter and about a Texas Court of Civil Appeals case. Counsel sought to show through these cases that the following driver in rear-end collision cases is not always 100% liable. The District Court sustained plaintiff's objection to this line of questioning. State Farm thenmade an offer ofproof that various cases demonstrated that in rear-end collisions similarto the instant case the followingdriverwas not 100% liable. The cases included reported cases from Montana, California, Idaho, Texas and Tennessee, Montana District Court decisions, and cases where Hanson's law firm took positions allegedly inconsistent with his testimony on negligence. The courtrefused to allow State Farm touse any of these cases in cross-examination. The record demonstrates that State Farm's attempted use of case lawwas designed,at least in part, to testattorneyHanson's expertise. This Court has zealously guarded the right of cross-examination. In this regard,we have stated: Rule 705,Mont.R.Evid., mandates that the opinion of a qualified expert is admissible, and if opposing counsel believe the opinion is not founded on sufficientdata,cross-examinationis the shield to guard against unwarranted opinions.Stewart v. Casey (1979), 182Mont. 185, 193, 595 P.2d 1176,

The rightof cross-examinationmay not be unduly restrictedandmay extend not only to facts stated by the witness in his direct examination, but to all other facts connected with them which tends to enlighten the jury upon the question in controversy.
State Highway Commission v. Bennett (1973), 163 Mont. 386,

We hold that the DistrictCourt erred in precluding the cross-examination of Hanson on the Montana decisions, both Supreme Court and District Court,and on the cases involving Hanson's law firm. Appellants were entitled to test the knowledge, competency and qualifications of the expert witness. We do not rule on the use of foreign decisionsas a District Courtmay properly exclude theiruse if they present evidence only repetitive or cumulative to evidence abducted from Montana cases. In sum, we find that Montana cases are preferred in cross-examination of thiskind,especiallywhere the expert witness has conceded his familiaritywith Montana law. The fourth issue concerns the District Court's instructions on presumed malice. The court gave instruction number 27 stating: You are instructed that when a person knows or has reason to know of facts which create a high degree of risk of harm to the substantial interests of another,and eitherdeliberately proceeds to act in conscious disregard of or indifference to that risk, or recklessly proceeds in unreasonable disregard of or indifference to that risk, his conduct meets the standard of willful, wanton, and/or reckless to which the law of thisState will allow imposition of punitive damages on the basis of presumed malice.
That standard is a correct statement of the law under Owens

v. ParkerDrilling Co. (Mont. 1984), 676P.2d 162, 41St.Rep. 66. The controversyhere arises from the court's instruction number 29,which states: If you find that State Farm Insurance Company has violated the Unfair Claims Settlement Practices Act, then such violation may be considered by you as evidenceofpresumedmalice,as that term is defined in these instructions.

State Farm argues that this instruction allows the jury to disregard the Owens standard and predicate a finding of presumed malice upon a statutoryviolation alone. We agree. Conceivably, a jury could use the challenged instruction to perform an "end-run" around the Owens standard for presumed malice. Moreover, the Owens Court addressed the newly formulated standard for presumed malice and stated: The standard is equally applicable to statutory violations and other wrongful conduct. Thus, where a statute is designed to protect the substantial interests of a person from a high degree of risk, and the statute is violated either intentionally or recklessly, a jury question of punitive damages is raised. (~mphasis in original.) Owens, 676 P.2d at 165. Owens requires an intentional or reckless statutory violation for the issue of punitive damages to go to the jury. The instruction here allows the jury to consider a statutory violation as evidence of presumed malice. Thus, the jury could find that State Farm had negligently violated the Unfair Claims Settlement Practices Act and they could further consider that negligent violation as evidence of presumed malice. That is not thelaw under Owens. We hold that the District Court erred in giving instruction number 29. The fifth issue is whether the District Court should have bifurcated this trial into a negligence action and abad faith action. Given our holding today,we need not address the propriety of the District Court's refusal to bifurcate. Upon retrial, this action will be bifurcated and tried in accordancewith ourdecision inFode

### v. Farmers Ins. Exchange

(Mont. 1986), 719 P.2d 414, 43 St.Rep. 814. Because we remand this cause for a new trial on all issues, we decline to address issues six, seven, eight and nine listed above and the two issues raised by appellant Hauck.Reversed and remanded. 

# pi? 

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\ Justice/

We concur:

JusticesMr. JusticeJohnC. Sheehy,dissenting:

This reversal is a follow-up from the unfortunate decision of this Court in Safeco Ins. Co. v. Ellinghouse

(1986),725 P.2d 217, 43 St.Rep. 1689. Thisreversalevinces growing elitist philosophy this Court, distrust juries which bodes no good for insurance claimants in this state. We begin with the flat statement that GeraldineC. Hauck

was 100% negligent in causing the accident. The jury said

so. A. G. Benoit, a top flight adjuster for one of the largest underwriting concerns in Billings said so. Earl Hanson,an attorney representing both insurance companiesand both insurance claimants, said so. This Court said so in McDonoughv. Smith under factsnearly identical: Defendant contends, however, that his evidence tended to show that the damage to plaintiff's car was caused by plaintiff's own negligence. True, the answer of the defendant contained such a charge, but there is an entire absence of any evidence to support such allegation. Under the recordpresented here, the jurywould nothave been warranted in finding for the defendant on any theory, except that his car did not strike that of plaintiff. There was no evidence from which the jury could have determined that the damage to plaintiff's car resulted from any other cause than that itwas struckby the defendant. If they could have found that the cars did not collide, then the reason why plaintiff's car struck the fence resulting in the damage complained of would have rested in conjectureand speculation. McDonough v. Smith (1930), 86 Mont. 545, 551, 284 P. 542,

The juryverdict answered the followingquestions: 1. Do you find that Defendant Mrs. Hauck was negligent and that her negligence was a proximatecause of the property damage suffered by the Plaintiff,Linda Hart-Anderson? Yes X 2. Doyou find that Plaintiff Linda Hart-Anderson, was negligent, and that her negligence was a proximate cause of the property damage she suffered? No X
3. If your answer to both 1 and 2was "yes" then assign a percentage to each of them apportioning the negligence which proximately caused the accident between them in the following blanks:

Mrs. Hauck 100%

Mrs. Hart-Anderson 0%
4. What is the amount in dollars ofdamage toMrs. Hart-Anderson's car which was caused by this accident? $687.00

5. Did State Farm Insurance Company breach the obligations imposedby the Unfair Claims Settlement Act ofMontana asgiven toyou in the instructions? Yes X
6. Did such breach proximately cause damage to Linda Hart-Anderson? Yes X
7. What is the dollar amount of damages suffered by Linda Hart-Anderson for emotional distress as defined in these instructions, if any? $25,000.00
8. Is Linda Hart-Anderson entitled to receive punitive or exemplary damages from State Farm Insurance Company under the instructions given you on punitive or exemplary damages? Yes X If "yes" then in what amount? $687,000.00 Under 33-18-201, MCA, it is an unfair claims settlement practice for an insurance company to fail to acknowledge and act reasonably promptly upon communications with respect to claims under insurancepolicies; to refuse to pay claims without conducting a reasonable investigation based upon all available information; to neglect to attempt in good faith to effectuate prompt, fair and equitablesettlements of claims in which liability has become reasonably clear; and to compel insureds to institute litigation and recover amounts due by offering substantially less than the amountsultimately recovered in actions brought by such insureds. The majority opinion takes umbrage in finding that the District Court instructed the jury that an insurance company should not compel 

### any person, and not just insureds, to institute litigation in order to recover what is justly due thatperson. Themajority finds that the legislaturedid not "intend" to so protect third party claimants, but only intended toprotect "insureds." I submit that such intent is not what is tobe deduced from thewhole ofS 33-18-201,MCA, which in broad and repetitive language steps out to protect Montana persons dealing with insurance companies, both insureds and third party claimants. What legislative intent can be distinguished as different when the legislature provides that it isnot good faith if the insurerneglects to effectuate prompt, fair and equitable settlements and also provides that insureds should not be forced to go to court to collect their due claims? If an insurance company neglects to effectuateprompt, fair and equitable settlementof claims where liabilityhasbecome reasonablyclear, is itnot simply an extension of that neglect to compel third party claimants to go to court or else accept less than is due them? The ignominious result of the majority opinion is that now the District Court cannot instruct the jury that it isbad faith for an insurerto forcea third party claimant to go to court to collect his claim, even though by so doing, the insurer "neglects to attempt in good faith to effectuateprompt, fair and equitable settlements" and fails "to acknowledgeand act reasonably promptly upon communications with respect to claims." The kind of nitpicking indulged by the majority indetermining the legislative intent of S 33-18-201(7), MCA, confounds the intentandpurpose of the statute. The majority objects to the statement of the District Court,read to the jury that: Defendant State Farm Insurance Company has offered to pay 50% of plaintiff's damage. This offer was conununicated at the time of State Farm's first contact with the plaintiff and has never been increased ordecreased.
The statement read by the District Court is absolutely true. It was the refusal of the insurance company to recognize its 100% obligation for the plaintiff's damages that brought about the lawsuit. That is what the District Court was informing the jury. Itwould have been improper for the District Court to read to the jury a statement that later the insurer tried to settle both the bad faith action and the negligence action for a total of $5,000. The latter figure was simply an offer of compromise which would be inadmissible inany event. Two things may be said with respect to the majority opinion and its treatment of the Earl Hanson testimony. First, all of the things towhich Hanson testified were also testified toby the lay insurance adjuster,A. G. Benoit. No objection was made on appeal to the testimony of A. G. Benoit. Yet, this Court reverses on the testimony given by Earl Hanson, which is clearly compatible with the unobjected-to testimony ofA. G. Eenoit. Second,the cross-examinationofEarl Hansonasproposed by the insurer's attorneywasproperly denied by the District Court. Allowance of such cross-examination would havemeant that the jurywould be tryingnot only the factsof this case but the facts in otherreported cases in this state and other stateswhich were not relevant to the issuespresented here. The DistrictCourt should be sustained in its statementwhichin essence told the insurer's attorney that the jury in this

case was going to try one set of facts and one set of facts only.The majority objection to the giving of court's instruction no. 29, set forth in the majority opinion, is only furtherquibbling. Instructionno. 29 has to be read in conjunction with instruction no. 27. Instruction no. 29 merely told the jury that violations of the Unfair Claims Settlement Practice Act could be considered by them as evidence of presumed malice, "as that term is defined in 

### ---- 

### - these instructions.

### " (Emphasisadded.) Instruction no. 27 told the jury that 

### if the defendant "recklessly proceeds in unreasonable disregard or indifference to [the] risk [of harm]

## , his conduct meets the standard of willful, wanton and/or reckless to which the law of this State will allow imposition of punitive damages on the basis of presumed malice." The two instructions read together state the law. There is no question that the insurer in this case proceeded deliberately and intentionally to refuse to pay the full damages to which Linda Hart-Anderson was entitled. The majority would require the jury to attempt to determine punitive damages in a vacuum without consideration of the violations of the Unfair Claims Settlement Practice Act. That requirement is absurd. The majority have withdrawn from their original opinion their conm~ent on instructionno. 30. The court in this case properly instructed the jury, in instructionno. 30: More than onepersonmay be responsible for causing injury. If you find that the defendant,Geraldine Hauck, was negligent and that her negligence proximately caused the plaintiff

### 's property damage it isnot adefense that some thirdpersonmay also have been negligent.

Itwas following instructionno. 30,that the courtgave instructionno. 31,which stated:You are instructed that the actions of the driver of the Consolidated Freightways truck have no bearing upon this case as amatter of law. That is to say, the liability, if any, of Geraldine Hauck for the damage to Linda Hart-Anderson's car is not reduced or eliminated by the fact that the driver of theConsolidated Freightways truckmay also have been at fault.
Those instructions, read together properly state the law of this case. Consolidated Freightwayswas not a party to this action. Under the theory of joint and several liability, Geraldine Hauck, if liable, was liable for all of that portion ofnegligencethat the jury assigned to her. In that light, jury instruction no. 30 was perfectly proper and should be given again on retrial with instruction no. 31. More than ever, this case points up the necessity of this Court examining the duty of insurance companies toward third party claimants in the light of themandatory insurance law. Section 61-6-301,MCA. As Ipointed out in my dissent in Fode v. Farmers InsuranceExchange (Mont. 1986), 719 P.2d 414, 419, 43 St.Rep. 814, 820, the purpose of the mandatory insurance law is to protect third party motorists on our highways. The duty of the insurer to protect third party claimants and not harass them or refuse to pay their just claims is of greater import under mandatory insurance laws. The rights of the third party claimant now in automobile accident cases arise not merely through the insurance contract between the other motorist and his company hut through the determinationof the legislature that thegeneral traveling public is to be protected. It isworth repeating the statement in Fergusonv. En~ployers Mutual Cas. Co. (S.C. 1970), 174 S.E.2d 768, 771: The primary purpose of a compulsory motor vehicle liability insurance is to compensate innocent victims who have been injured by the negligence of financially irresponsible motorists. Its purpose is not like that of ordinary liability insurance tosave harmless the tort feasor himself. The injured person's rights against the insurer are not derived through the insured as in the case of voluntary insurance. They are statutory and become absolute on the occurrence of an injury covered by the policy. (Citationomitted.)

In the absence of federal regulation of insurance companies' settlement practices, and the incomplete and limited statutory reachof state regulation,this Courthas a duty to protect motorists fromthe unfairpractice that was exhibited by State Farm in this case. Damages of $687 may not loom large in the state's economy,but are importantto theperson involved. If the person involved has a choice of either 50% ofhis damagesor going to court,it ismore than likely that going to court will be out of the question because of the upfront costs that are necessary. The protection of Linda Hart-Anderson for one-half of $687 may not seem terribly important, but the multiplication of Linda Hart-Andersonsby several hundred throughout the State of Montana every year has substantial importance. The jury decided not to condone this business practice of StateFarmMutual. The jury took a proper course in awarding punitive damages. It is a regrettable action for thisCourt to setaside that award for the flimsy reasonsgiven.

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, t, ,&*JW] ,c$a-7/.. " Justice

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Mr. JusticeWilliam E. Hunt, Sr.: I concur in the foregoing dissentofMr. Justice Sheehy.