No. 82-247 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

NEIL L. KLAUDT, Personal Rep. of 

the Estate of SCOTT A. KLAUDT, et al., 

Plaintiffs and Appellants, 

<j+&VI- STATE FARM MUTUAL 

AUTOMOBILE INSURANCE CO., 

Defendants and Respondents. 

Appeal from: District Court of the Fourth Judicial District, 

In and for the County of Missoula 

Honorable John Henson, Judge presiding. 

Counsel of Record: 

For Appellants: 

Boone, Karlberg & Haddon, b~issoula, Montana 

Sam Haddon argued, Missoula, Montana 

For Respondents: 

Hughes, Kellner, Sullivan and Alke, Helena, Montana 

Stuart L. Kellner argued, Helena, Montana 

!-arm. 

Submitted: November 16, 1982 

Decided: January 28, 1983 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

This is an appeal from a final judgment entered in the 

District Court of the Fourth Judicial District, Missoula County. 

State Farm Mutual filed a motion to dismiss Count I11 of the 

complaint, which named it as defendant, for failure to state a 

claim on which relief could be granted. The District Court 

granted this motion and entered final judgment on May 25, 1982, 

pursuant to Rule 54(b) M.R.Civ.P. The court used the language 

contained in the rule in its judgment and stated. "the Court, 

pursuant to Rule 54 (b) M.R.Civ.P., having expressly determined 

that thee is no just reason for delay in entering final judgment 

on said Count 111," Thus, correctly certifying the issue to this 

Court. The failure of the District Court to provide its reasons 

for certification until after the notice of appeal was filed does 

not render the certification defective as long as the guidelines 

in rule 54(b) M.R.Civ.P. have been complied with. Therefore, our 

previous contrary holding in Churchill v. Holly Sugar Corp. 1981, 

-- Mont . , 629 P.2d 758, 38 St.Rep. 860, that no supplemental findings can be considered af ter notice of appeal is filed is 

overruled. 

As both sides have aptly stated in their briefs, when considering a motion to dismiss, the material allegations of the 

pleading attacked are taken as true. Pelton v. Markegard (1978) 

179 Mont. 102, 586 P.2d 306. Based on this rule the facts of 

this case seem to be: 

1. That Neil Klaudt is the personal representative of the 

decedent, Scott A. Klaudt, and Niel and Caryl Klaudt are the 

parents of the decedent. 

2. That the defendant, insured, Calvin Flink, was driving 

his car in which the decedent was a passenger, at a high rate of 

speed and rolled it on Mullen Road west of Missoula. 

3. That the decedent was thrown from the vehicle and suffered injuries causing his death. 

4. That the decedent was eighteen at the time of his death. 
5. That following the accident defendant, Flink, admitted 

responsibility for his acts in operating the vehicle. 

6. That State Farm was defendant Flink's, insurer at the 

time of the accident. 

7. That Flink was intoxicated at the time of said accident, 

and later pleaded guilty to a reckless driving charge arising out 

of the accident. 

8. That State Farm has denied liability and has refused to 

negotiate. 

The sole issue presented by this appeal is whether the 

Montana Unfair Trade Practices section of the Insurance Code, 

specifically section 33-18-201(6), MCA, gives the plaintiffs a 

cause of action against a defendant's insurer, which can be prosecuted jointly with an action against the defendant insured? 

This is a case of first impression in our jurisdiction, and 

centers around whether section 33-18-201, MCA, of the Unfair 

Trade Practices Section of the Montana Insurance Code confers a 

private cause of action against the insurer, upon third party 

claimants. In the present case the claimant is alleging a 

failure of the duty to settle under subsection (6) of section 

33-18-201, MCA. 

Under Montana law the duty to settle has always been a fiduciary duty running from the insurer to the insured, by virtue of 

the insurance policy. Thompson v. State Farm Mutual Automobile 

Ins. Co. (1973), 161 Mont. 207, 505 P.2d 423, (and cases cited 

therein) . However, we now must look to see if a cause of action 

is conferred upon third parties by this statute. 

There are no decisions interpreting this code section and its 

effect in Montana. But, this issue has arisen in other jurisdictions with similar statutes. There is a split of authority in 

those jurisdictions as to whether such statutes do indeed con£ er 

a private right of action on third party claimants for breach of 

duty to settle; see Royal Globe Insurance Co. v. Superior Court 

of Butte County (1979)r 153 Cal.Rptr. 842, 592 P.2d 329. 
Kranzush v. Badger State Mutual Casualty Co. (1981), 103 Wis.2d 

56, 307 N.W.2d 256; Scroggins v. Allstate Insurance Co. (1979), 

74 Ill.App.3d 1027, 30 I11.Dec. 682, 393 N.E.2d 718, Jenkins v. 

J .C. Penney Casualty Insurance Co. (1981), W.Va. , 280 

S.E.2d 2522 Tufts v. Madesco Investment Corp. (E.D.,Mo. 1981), 

We must now view our statute and construe it according to our 

rules of statutory interpretation. These are best summarized in 

Montana Power v. Cremer (1979), 182 Mont. 277, 596 P.2d 483, 

where this Court stated: 

" [t] he development of the case law of Montana 

with respect to the rules of statutory 

construction may be summarized by the 

following analysis. (1) Is the interpretation consistent with the statute as a whole? 

(2) Does the interpretation reflect the 

intent of the legislature considering the 

plain meaning of the language of the statute? 

(3) Is the interpretation reasonable so as to 

avoid absurd results? and (4) Has the agency 

charged with the interpretation of the statute 

placed a construction on the Statute? 

(citations omitted) ." 596 P.2d 484. 

Looking at section 33-18-201, MCA, as a whole, as is required 

when interpreting statutes, it seems relatively clear that third 

party claimants are protected. Although all the subsections 

don't specifically refer to claimants, certain of them do. It 

would be absurd to assume that the legislature would insert these 

words into the statute without them having some meaning, as the 

legislature is presumed not to pass useless or meaningless 

legislation. State ex rel. Dick Irvin Inc. v. Anderson (1974), 

164 Mont. 513, 525 P.2d 564, 570. 

The insertion of the word "claimant" in the statute evidences 

that such parties are owed an obligation or duty under that statute. When that obligation is viewed in conjunction with 

section 33-10-1004, MCA, which is the remedies provision of the 

Unfair Trade Practices Section of the Insurance Code, it is clear 

that a private cause of action can be maintained. Sect ion 

33-18-1004(5), MCA, provides: 

"This section shall not be deemed to affect or 

prevent - tKe %r@osiition -- of - any penalty - - -- provided -. 
by this code or by other law for violation of 

any other provision of this chapter, whether 

or not any such hearing is called or held or 

such desist order issued. " (Emphasis added. ) 

Based on the above subsection, it is evident that the insurance 

commissioner's action is not the exclusive remedy for an unfair 

trade practice violation. Therefore, a civil action may be maintained, because as section 27-1-104(1), MCA, aptly points out a 

civil action arises out of breach of an obligation. The intent 

of the legislature is clear; under section 33-18-201, MCA, an 

insurer has an obligation to claimants as well as insureds where 

unfair trade practices are concerned. 

The third criteria of statutory interpretation is easily 

satisfied as no absurd result is arrived at by allowing a 

claimant to sue under the statute. Indeed the statute would have 

little effect on settlement of large claims if a contrary conclusion were reached. 

The final step in interpreting the statute is to see if the 

agency in charge of administering the statute has placed any 

interpretation on it. Neither side in this case has called our 

attention to any such interpretation, nor has our research 

revealed any. 

We therefore hold that section 33-18-201(6), MCA, does create 

an obligation running from the insurer to the claimant. When 

such an obligation is breached the claimant has the basis for a 

civil action. 

However, at this point, we must differ with the position 

adopted by the other jurisdictions which allow an action such as 

this to be prosecuted only after the insureds liability has been 

adjudicated. We believe that the action may be filed and tried 

before, concurrent with, or after liability has been determined. 

We see no problems with the possibility of contrary findings in 

the two actions, the doctrine of res judicata, collateral estoppel or the like because different issues are involved in the two 

cases. The issue in the action against the insurer for violation 

of the insurance code is simply an action to determine whether or 
not the insurer violated its duty of fair dealing in settlement 

negotiations with the claimant, while the action to determine the 

ultimate liability of the driver rests on considerations of 

negligence and comparative negligence . 

The obligation to negotiate in good faith and to promptly 

settle claims does not mean that liability has been determined. 

Section 33-18-203(6) states that the insurer's obligation arises 

when liability has become "reasonably clear." In evaluating the 

insurance case, the jury must determine whether the insurer negotiated in good faith given the facts it then had. This consideration is separate and apart from the jury's ultimate 

consideration of the merits of any given action. 

We have considered whether the result here reached contravenes the purpose of Rule 411, M.R.Evid., on the admissibility of 

insurance. The rule only prohibits the introduction of insurance 

where it is offered for the purpose of showing negligence or 

liability. Here, the issues to be tried are separate and the 

rule is not violated. 

We realize that many will view this result as harsh. 

However, the legislature has reacted to what it perceives to be 

an important problem. Insurance companies have, and are able to 

exert, leverage against individual claimants because of the 

disparity in resource base. Justice delayed is often justice 

denied. Public policy calls for a meaningful solution. The 

legislature has spoken and we, by this decision, breath life into 

the legislative product. 

We must note, however, that the statute itself imposes 

limitations on the pursuit of any such action. We cannot ignore 

the ordinary plain meaning of the words in the statute; they are 

presumed to have their ordinary meaning. In Re Woodburns Estate 

(1954), 128 Mont. 145, 153, 273 P.2d 391. Therefore, the initial 

requirement, set out in the opening clause of section 33-18-201, 

MCA, of showing the lack of good faith in settlement negotiations 

or other unfair trade practices, to be general business practices 
of that particular company, must be met before an action may be 

successfully maintained. As was stated by the Court in Jenkins 

v. J .C. Penney Casualty Co., supra, it is possible that multiple 

violations occurring in the same claim could be sufficient to 

show a frequent business practice, as would violations by the 

same company in different cases. 280 S.E.2d at 260. Proof of 

violations evidencing a general business practice, by the same 

company in different cases, can be obtained from other attorneys, 

claimants, or people having knowledge of the company's general 

practice; Jenkins v. J.C. Penney Casualty Insurance Co., 280 

The judgment of the District Court is reversed and the cause 

is remanded for trial . 

Justice 

<, R 

Chief Justice - 

Justices 
Mr. Justice Frank B. Morrison, Jr., concurs and dissents as 

follows: 

I concur in the majority's holding that the statutes in 

question create an independent action on behalf of a tort victim 

against the tort feasor's insurer. I dissent from the holding 

in the majority opinion which permits the action against the 

insurer to be consolidated with the action against the tort 

f easor . 

The failure of insurance companies to expeditiously settle 

claims gave rise to passage of the legislation now before this 

Court. The majority holding in this case will certainly cause a 

much more expeditious handling of claims. 

I am concerned a.bout the prejudice which can result from 

consolidating the two actions. Additionally, lay jurors will 

have a very difficult time separating evidence which relates to 

the case against the insurer from evidence which bears upon the 

issues in the principle action against the tort feasor. The 

likely confusion and potential prejudice lead me to oppose 

consolidation. 

I would reverse and remand allowing the action against the 

insurance company to be brought at any time but would hold that 

the action against the insurer cannot be consolidated with the 

action aqainst the tort feasor. 
Mr. Justice Fred J. Weber dissents as follows: 

I respectfully dissent from the holding of the 

majority that section 33-18-201 (6) , MCA, creates an obligation running from the insurer to the noninsured claimant 

(the claimant normally described as a third party claimant, 

as distinguished from an insured claimant), the breach of 

which may be the basis of a civil action. I further respectfully dissent from the majority conclusion that such an 

action may be filed and tried, before, concurrent with, or 

after liability has been determined. 

I agree with the conclusion of the majority that the 

rules of statutory interpretation to be applied are 

correctly summarized in Montana Power v. Cremer (1979), 182 

Mont. 277, 596 P.2d 483. However, the majority opinion has 

failed to properly apply the first two rules of the Cremer 

summary: 

"(1) Is the interpretation consistent 

with the statute as a whole? (2) Does 

the interpretation reflect the intent of 

the legislature considering the plain 

meaning of the language of the statute?" 

We are required to consider the statute as a whole and 

the plain meaning of the language. The provisions in 

question are contained in the Unfair Trade Practices chapter 

of the Montana Insurance Code. The general purposes of this 

particular chapter are described in section 33-18-101, MCA: 

"The purpose of this chapter is to regulate trade practices in the business of 

insurance . . . by defining . . . all 

such practices in this state which constitute unfair methods of competition or 

unfair or deceptive acts or practices and 

by prohibiting the trade practices so 

defined or determined." 

The prohibition against unfair methods is described in 

section 33-18-102, MCA: 
"(1) No person shall engage . . . in any 

trade practice which is defined in this 

chapter as or determined pursuant to this 

chapter to be an unfair method of competition or an unfair or deceptive act or 

practice in the business of insurance." 

The "person" referred to in the preceding section is 

defined by section 33-1-202, MCA, to include an insurer, 

company, reciprocal or interinsurance exchange, corporation, 

or other legal entity. The defendant insurance company 

therefore fits the definition of a "person" in that section. 

I fail to see how the statutory language of section 

33-18-201, MCA, can be construed to create an obligation 

running from the insurance company to a third party 

claimant. It states: 

"Unfair claim settlement practices prohibited. No person may, with such 

--- frequency ....................... as to indicate a general ------ business practice, do any of the 

following: 

"(6) neglect to attempt in good faith to 

effectuate prompt, fair, and equitable 

settlement of claims in which liability 

has become reasonably clear;" (Underscoring added.) 

In substance this provides that an insurance company 

cannot engage in a general business practice of denying liability where such liability is reasonably clear. 

Section 33-18-201, MCA, contains fourteen paragraphs 

which set forth unfair claims settlement practices. Other 

sections in the chapter set forth prohibitions against 

misrepresentation, false advertising, twisting, publishing 

false financial statements, unfair discrimination as to 

rates, preferred rates as to fictitious groups, no rebates, 

illegal dealings in premiums, extension of credit to policy 

holders, defaming an insurer, boycott, coercion or intimi- 
dation, false applications, restrictions on solicitation, 

and a number of other activities. See sections 33-18-202 to 

33-18-501, MCA. This is a very comprehensive list of unfair 

trade practices in the business of .insurance. 

Nowhere in this extensive statutory framework of 

unfair trade practices is there a specific provision 

granting to either insureds or third party claimants the 

right to bring an action to enforce any of the provisions of 

this chapter. Sections 33-18-1001 to 1005, IJICU, set forth 

enforcement provisions which essentially grant to the 

insurance commissioner the power to examine the actions of 

insurance companies and to seek cease and desist orders. 

The ultimate penalties for violation of a cease and desist 

order include fines of up to $1,000 for each day with a 

total penalty not to exceed $10,000. In addition, section 

33-1-104, MCA, provides that each violation of the Insurance 

Code "in addition to any administrative penalty" upon 

conviction shall be punishable by a fine of not less than 

$50 or more than $1,000 or in by imprisonment in the county 

jail for not less than thirty days or more than ninety days 

or by both fine and imprisonment. 

The purpose of the chapter is to regulate trade 

practices. The prohibition is against an insurance company 

engaging in trade practices which are unfair or deceptive as 

described. Of particular significance is the prohibition 

against an insurance company neglecting to effectuate 

settlement of claims "with such frequency as to indicate a 

general business practice." When followed by enforcement 

sections which require action by the commissioner of 

insurance only, I must conclude that the interpretation of 
the majority is not consistent with the statute as a whole 

as is required under Cremer. I further conclude that the 

majority opinion does not reflect the intention of the 

legislature when we study the plain meaning of the statutory 

language. The majority opinion ignores the absence of any 

provision in the legislation granting a right of suit by 

either the insureds or third party claimants. This readily 

could have been inserted by the legislature had that been 

its intent. 

The majority has disregarded the rule contained in our 

recent opinion of State of Montana ex rel. Palmer & Conrad 

v. Hart (1982), Nont. 1 - I?. 2d , 39 St.Rep. 

2277, in which we stated: 

"This Court must ascertain and declare 

the substance of the statute it construes. We may not insert what has been 

omitted. Section 1-2-101, MCA. 

Chennault v. Sager (1988), Mon t . , 610 P.26 173, 176, 37 St.Rep. 857, 

861." 

The majority opinion has inserted into the statute 

elements which had been omitted by the legislature. Regardless of our viewpoints on the equities of enabling third 

party claimants to sue insurance companies, we should not 

presume to insert into a statute that which has been 

omitted. Such action is for the legislature, not this 

Court. 

In the interest of brevity, I will not attempt to 

analyze the various cases on the question of the private 

rlght of action by third party claimants for breach of duty 

to settle, as cited in the majority opinion. I do note that 

the leading case in California, Royal Globe Insurance Co. v. 

Superior Court of Butte County (1979), 153 Ca1.Rptr. 842, 
592 P.2d 329, is based upon a statute with significant 

differences from our Montana code sections, none of which 

have been analyzed or consi~ered in the majority opinion. 

The dissent in Royal Globe Insurance Co. contains many of 

tne arguments which I believe to be persuasive. This is 

summarized in the following quotation from 592 P.2d at 340: 

"If, as the majority asserts, the Legislature had intended to change the course 

of California law 180 degrees and thereafter to impose upon carriers civil liability to injured third persons for 

failing to settle claims against their 

insured, then surely much more direct and 

precise language would have been select- 

- ed." (Underscoring added.) 

The last paragraph of the majority opinion holds that 

proof of violations evidencing a general business practice 

is required before an action can be successfully maintained. 

This recognizes the statutory prohibitions, including that 

in section 33-18-201(6), MCA, which prohibit an insurance 

company from engaging in the prohibited claim settlement 

practices "with such frequency as to indicate a general 

business practice." The further result of the majority 

holding is that the first person to be so mistreated by an 

insurance company would be unable to recover because he 

could not prove a general business practice. Presumably the 

first "few" persons so mistreated by an insurance company 

could not recover until the mistreatment had become so 

consistent as to become a general business practice. Had it 

been the intention of the legislature to grant a right of 

action to the plaintiff, it seems absurd to suggest that the 

first few mistreated persons have no cause of action because 

of the absence of a general busines practice. I suggest 

this interpretation violates the third rule of statutory 
construction in Cremer: 

"(3) Is the interpretation reasonable so 

as to avoid absurd results?" 

In addition, I join in the dissent of Justice Morrison 

in which he would not permit an action against the insurer 

to be consolidated with the action against the tort feasor. 

This would also be consistent with Rule 411, Mont.R.Evid., 

as stated in DIHoodge v. McCann (1968), 151 Mont. 353, 433 

P.2d 477, where this Court stated: 

"Ordinarily injection of the fact that 

the defendant is protected by liability 

insurance into such a case, directly or 

indirectly, by evidence, arguments, or 

remarks constitutes reversible error." 

I would affirm the District Court. 

Mr. Justice Daniel J. Shea dissents as follows: 

I join in the dissent of Justice Weber. I further 

agree with Justices Morrison and Weber that the claims of 

the third party should not be permitted to be joined with 

and tried with the action against the claimed tort feasor. 

By interpreting the statutes as permitting third party 

claims against insurance companies who insure an alleged 

tort feasor, we have ignored the plain woraing of the Unfair 

Trade Practices chapter of the Montana Insurance Code. In 

resorting to the so-called rules of statutory construction 

to reach this result, the majority has further ignored and 

tortured the rules of statutory construction. The result is 

judicial legislation run rampant. 

A