### No. 

### 82-247 INTHE SUPREMECOURTOF THE STATEOF MONTANA

NEIL L. KLAUDT, PersonalRep. of the Estate of SCOTTA. KLAUDT, et al., Plaintiffs andAppellants,

<j+&VI- 

### STATE FARMMUTUAL

AUTOMOBILE INSURANCECO.,Defendants and Respondents.

Appeal from: District Court of the Fourth Judicial District, In and for the County of Missoula Honorable JohnHenson,Judgepresiding. Counselof Record: ForAppellants: Boone,Karlberg & 

### Haddon,b~issoula, Montana SamHaddon argued, Missoula,Montana ForRespondents: Hughes, Kellner, SullivanandAlke,Helena,Montana StuartL. Kellner argued, Helena,Montana !-arm.



### Submitted: November 16,1982 Decided: January 28, 

### 1983Mr. JusticeGene B. Daly delivered theOpinion 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 I11of 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 saidCount 111," Thus, correctlycertifying the issue 

### to this Court. The failure of the 

### District Court to provide 

### its reasons forcertificationuntil afterthe notice of appeal 

### was filed does not render the certification defective 

### as long 

### as the guidelines inrule 54(b)M.R.Civ.P. have been complied with. Therefore, our previous contraryholding inChurchill v. Holly Sugar Corp. 1981,

-- Mont

# . ,629 P.2d 758, 38 St.Rep. 860, that no supplemen

### tal findingscan 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 thiscase seem tobe: 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 inwhich the decedent 

### was a passenger, 

### at 

### a high 

### rate of speed and rolled 

### it on Mullen Road 

### westof Missoula. 3. That the decedent 

### was thrown from the vehicle and suffered injuries causing hisdeath. 4. That the decedent 

### was eighteen 

### at the 

### time of hisdeath.

### 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 guiltyto

### a recklessdriving 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 

### lawthe duty to 

### settle has always been 

### a fiduciaryduty running from the insurer to the insured, by virtue of the insurance policy. Thompson v. State Farm Mutual Automobile Ins. Co. (1973), 161Mont. 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 areno decisions interpreting thiscode section and 

### its effectinMontana. But, this issue has arisen inotherjurisdictions with similar statutes. There is a split of authority in those jurisdictions as 

### to whether such statutesdo 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), 103Wis.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),

Wemust now view our statuteand 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 thisCourt 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? (citationsomitted)

# ." 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 thatthe legislaturewould 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), 164Mont. 513, 525 P.2d 564, 570. The insertion of the word "claimant" inthe 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 UnfairTradePractices Section of the Insurance Code, it 

### is 

### clear that 

### a private cause of action can be maintained. Section 33-18-1004(5), MCA, provides: "This section shallnotbe deemed 

### toaffect

### or prevent - 

### tKe %r@osiition -- of - anypenalty -- --provided -.

### by thiscodeorbyotherlawforviolation of any other provision of this chapter, whether or not any such hearing is 

### called 

### or held or suchdesistorder 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 practiceviolation. Therefore, a 

### civilactionmay be 

### maintained, because as 

### section 27-1-104(1), MCA, 

### aptlypoints 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 insuredswhere 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 statutewould have little

### effecton settlementof large claims if a contraryconclusion

### 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 section33-18-201(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 civilaction. However, at this point, 

### we must differ with the position adopted by the otherjurisdictions which allow 

### an action such as 

### this to 

### be prosecuted only afterthe insureds liability has been adjudicated. We 

### believe that the action may be filed and tried before, concurrent with, 

### or after liabilityhas 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 likebecause different issues are involved in the 

### two

cases. The issue in the action against the insurer forviolation of the insurance code is 

### simplyan actionto determinewhether or

### not the insurer violated 

### its duty of fair dealing in settlement negotiationswith 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 liabilityhas been determined. Section 33-18-203(6) 

### states that the insurer's obligation arises when liabilityhas become "reasonablyclear." In 

### evaluating the insurance case, 

### the jurymust determinewhether the insurernegotiated in good faith given the facts it 

### then had. This consideration is 

### separate and apart from the jury's ultimate considerationof the merits of anygiven action. We 

### have considered whether the result here reached contravenes thepurpose 

### of Rule 411, M.R.Evid., on the admissibility of insurance. The rule onlyprohibits the introductionof 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 

### notviolated. 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 legislaturehas spoken and 

### we, by thisdecision,breath life into the legislativeproduct. We 

### must note, however, that the statute itself imposes 

### limitationson the pursuit of any such action. We

### cannot ignore the ordinaryplainmeaning of the words in the statute; they are presumed to have their ordinarymeaning. In Re

### Woodburns Estate 

### (1954),128Mont. 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 lackof good faith in settlement negotiations



### or other unfair tradepractices, tobe general business practices

### of that particular company, must be 

### met before an action may be 

### successfully maintained. As 

### was stated by the Court inJenkins

v. J.C. 

### Penney Casualty Co., supra, it 

### is 

### possible thatmultiple 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 indifferent cases, 

### canbe obtained from otherattorneys, 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 fortrial

# .

<,

# R Justice

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 onbehalf of a tortvictim 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. Themajority holding in this casewill certainly causea much more expeditioushandling of claims. I 

### am concerned a.boutthe prejudice which can result from consolidating the two actions. Additionally, lay jurors will have a 

### very difficult time separating evidencewhich 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 dissentsasfollows: 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 (theclaimant normally described as a third party claimant,

as distinguished from an insured claimant), the breach of which may be thebasisof 

### a civilaction. I further respectfully dissent from the majority conclusion that such an actionmay be filed and tried, before, concurrent with, or after liabilityhasbeen determined. I agree with the conclusion of the majority that the rules of statutory interpretation to be applied are correctly summarized inMontana Power v. Cremer (1979), 182 Mont. 277, 596 P.2d 483. However, themajority opinionhas failed toproperly 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 arerequired toconsider the statuteasa whole and the plain meaning of the language. The provisions in question are contained intheUnfair TradePracticeschapter of theMontana Insurance Code. The generalpurposes of this particular chapter aredescribed insection33-18-101, MCA: "The purpose of this chapter 

### is toregulate trade practices in the business of insurance 

# .

# . . by defining 

# .

# . . all such practices in this statewhich constituteunfair methods of competition or unfair or deceptive actsor practicesand by prohibiting the trade practices so defined ordetermined." The prohibition againstunfair methods 

### isdescribed in section33-18-102, 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 avery comprehensive list of unfair tradepractices 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 theprovisions 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 tradepractices 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 ofthe 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 legislaturewhen we studytheplainmeaning 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 

### itsintent. Themajorityhasdisregarded therulecontained inour recent opinion of State of Montana ex rel. Palmer & Conrad



### v. Hart (1982), Nont. 1 

### -I?. 2d 

## , 39 St.Rep. 2277, inwhich

### we stated: "This Court must ascertain and declare the substance of the statute 

### it construes. 

### We may not insertwhat 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 omittedby the legislature. Regard

### less 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 thirdparty claimants for breach of duty to 

### settle, ascited inthemajorityopinion. I donote that the leading case inCalifornia, Royal Globe InsuranceCo. 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~eredin the majority opinion. The dissent in Royal Globe InsuranceCo. contains many of tne arguments which I believe to be persuasive. This 

### is summarized inthe following quotationfrom 592P.2d at340: "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 surelymuch more directand precise languagewould have been 

### select- ed." (Underscoringadded.) - The lastparagraph of the majority opinionholds that proof 

### of violations evidencing a general business practice is required before an actioncan be successfullymaintained. 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 firstperson to be somistreated 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 astobecome a general business practice. Had it been the intention of the legislature to grant a right of actiontotheplaintiff, it seems absurd tosuggest thatthe firstfewmistreated persons have no causeof actionbecause of the absence of a general busines practice. I suggest this interpretation violates the third rule of statutoryconstruction inCremer: "(3)Is the interpretation reasonable so astoavoid absurd results?" In addition, I join inthedissentof JusticeMorrison in which he would not permit an action against the insurer tobe consolidated with the action against the tort feasor. This would also be consistent with Rule 411, Mont.R.Evid.,

as stated inDIHoodge v. McCann (1968), 151Mont. 353, 433 P.2d 477, where thisCourt 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 constitutesreversible error." I would affirm theDistrictCourt.

Mr. JusticeDaniel J. Shea dissentsasfollows: 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 tortfeasor, 

### we have ignored theplainworaing of theUnfair 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 statutoryconstruction. The result 

### is judicial legislation run rampant. A