NO. 93-130

IN THE SUPREME COURT OF THE STATE OF MONTANA

1994

MARK DeBRUYCKER and

TAMMY DeBRUYCKER GILL,

Plaintiffs and Appellants,

-vsGUARANTY NATIONAL INSURANCE COMPANY, SEP 12 1994

a Colorado corporation, and

CROP HAIL MANAGEMENT,

a Montana corporation,

Defendants, Respondents and

Cross-Appellants.

APPEAL FROM: District Court of the Ninth Judicial District,

In and for the County of Teton,

The Honorable R. D. McPhillips, Judge presiding.

COUNSEL OF RECORD:

For Appellants:

Dennis Patrick Conner, Attorney at Law, Great

Falls, Montana (argued)

Michael J. Best: Best Law Offices, Great Falls

Montana

For Respondents and Cross-Appellants:

Kevin Meek (argued): Alexander, Baucus & Linnell,

Great Falls, Montana

Filed:

Submitted: March 24, 1994

Decided: September 12, 1994
Justice John Conway Harrison delivered the Opinion of the Court.

This is an appeal and cross-appeal from the Ninth Judicial

District Court involving a hail insurance dispute over a barley

crop. The jury awarded brother and sister Mark DeBruycker and

Tammy DeBruycker Gill (DeBruyckers) hail insurance contract damages

of $70,676.41 and punitive damages of $500,000 against Guaranty

National Insurance (Guaranty) and $40,000 punitive damages against

Crop Hail Management (Crop Hail) for violating the Montana Unfair

Trade Practices Act (UTPA). The District Court, pursuant to § 27-

1-221(7)(c), MCA, subsequently reduced the punitive damage award

against Guaranty from $500,000 to $50,000 and set aside the

punitive damage award against Crop Hail.

We reorganize and restate the issues as follows:

1 . Did the District Court err by denying Guaranty and Crop

Hail's motions for summary judgment and a directed verdict on the

issue of punitive damages?

2 . Did the District Court violate the applicable standard of

review when the court reduced the jury's punitive damages award

against Guaranty and Crop Hail by basing that decision on its own

factual findings which were contrary to the jury's special verdict

form?

3 . Did the District Court err by finding that Crop Hail was

not an "insurer" subject to punitive damages under the UTPA?

The DeBruyckers own 1,470 acres of land near Bynum, Montana.

In 1988, Guaranty sold the DeBruyckers an insurance policy insuring

1,389.g acres of barley against hail loss. The remaining 90 acres

were insured by Glenn Falls Insurance Company (Glenn Falls).

Guaranty charged the DeBruyckers a total premium of $33,627.

The crop hail insurance policy provided coverage for crop damage

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caused by hail which reduced "crop yield." The policy defined

"crop yield" as:

The production per acre that the insured crop would

reasonably be expected to produce at harvest. The

production per acre is usually expressed in terms of

bushels, pounds, tonnage, etc.

Barley yield is measured by weight. Under the policy, a payable

loss existed if the barley suffered a reduction in yield (weight)

exceeding 5 percent as a result of hail.

Two hail storms hit the DeBruyckers' insured acres during the

summer of 1988. After the first hail storm, Crop Hail sent an

adjuster to examine the loss. The adjuster looked at a go-acre

field and decided to defer its loss adjustment until the crops

matured. The adjuster assured Mark that the boot-tied barley would

be calculated in the loss. Among other things, hail can cause

boot-tied damage if hail hits the barley while the barley is still

growing. The hail causes the head to deform, resulting in missing

and underdeveloped kernels. Normally, boot-tied kernels will weigh

less than normal kernels.

After the second hail storm, two Crop Hail adjusters were sent

by their managing general agent, Guaranty, to the DeBruycker farm

to adjust the loss. The adjusters met Mark and his father Lloyd

DeBruycker at the go-acre field. One of the adjusters started a

loss count and the DeBruyckers were satisfied with the process he

was instituting. However, the second adjuster then took over the

adjustment, contending that boot-tied heads actually resulted in

larger barley kernels. Lloyd disagreed and showed both adjusters

the smaller and missing kernels on the boot-tied heads. The

3
adjustment was then terminated.

The second adjuster wrote in his report that: "[dIepending on

the count I feel [the DeBruyckers] may have a loss, but . . . [I]

would like to have dropped [Lloyd] in his tracks. He's a real Ohole." The foliowing week, Guaranty through Crop Hail claimed that

the parties were "so far apart" on the adjustment that they were

enacting the arbitration provision of the contract.

T o represent their interests, Guaranty appointed a

representative, and the DeBruyckers appointed friend and fellow

farmer, David Van Horn (Van Horn). The two representatives then

appointed an umpire. At the arbitration adjustment, Guaranty's

representative apparently mentioned to Van Horn that boot-tied hail

damage was not covered as a loss by the "book." Van Horn later

testified in court that he had never formally adjusted a hail loss

and believed Guaranty's representative, not realizing until just

before trial that no "book" ever existed.

Guaranty and Van Horn agreed that the DeBruyckers suffered an

8.6 percent loss on 316 acres. The payable loss amounted to

$3,418. After the arbitration, Guaranty's representative forwarded

to Crop Hail a bill for his services, including a line item

entitled "Peace of Mind ???.??'I which requested an unspecified

amount.

Subsequently, the DeBruyckers discovered that the loss was

actually on 90 acres--not 316 acres--and the 90 acres were actually

insured by Glenn Falls instead of Guaranty. When the adjuster from

Glenn Falls adjusted the go-acre field, he found a 28.7 percent

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reduction in yield, but unlike Guaranty and Crop Hail, he credited

the DeBruyckers for hail damaged boot-ties.

A few days later, Mark wrote to Crop Hail and requested the

arbitration counts and results. Crop Hail only sent an arbitration

proof of loss form because the counts were not documented.

One month later Mark and Lloyd met with Crop Hail's branch

manager. They presented photographs and other evidence that the

adjustments to the fields were unfair and requested that the matter

be reopened. Crop Hail denied their request and denied their claim

on November 29, 1988. In December 1988, Crop Hail sent the

DeBruyckers a check for $3,418 with a restrictive endorsement which

stated:

PROPER ENDORSEMENT HEREOF CONSTITUTES FULL SATISFACTION,

COMPROMISE AND INDEMNITY FOR ALL CLAIMS AND DEMANDS FOR

LOSS AND DAMAGE UP TO AND INCLUDING THE TIME OF

ADJUSTMENT ON 8/26/88 TO CROPS INSURED UNDER POLICY NO.

25-884-12511-88.

The cover letter with the check stated that the check was a showing

of good faith. The DeBruyckers refused to sign the check.

The DeBruyckers subsequently hired legal counsel who twice

wrote to Crop Hail about the inconsistencies between Crop Hail's

8.6 percent adjustment, and the Glenn Falls adjustment of 28.7

percent, and Crop Hail's failure to find a payable loss on the

other fields. Crop Hail refused to reopen the case.

The DeBruyckers ultimately brought suit against Crop Hail and

Guaranty on the contract claim and also under a separate UTPA claim

for punitive damages. The District Court denied Crop Hail and

Guaranty's motions for summary judgment on the unfair practices and

5
punitive damages issues. The case went to trial on January 14,

1991, and the court denied Crop Hail and Guaranty's motions for a

directed verdict on the issues of unfair practices and punitive

damages.

The jury found for the DeBruyckers on all counts on the

special verdict form and assessed contract damages of $70,676.41,

as well as punitive damages of $500,000 against Guaranty and

$40,000 against Crop Hail. Later, the District Court, pursuant to

§ 27-1-221(7)(c), MCA, reduced the punitive damage award against

Guaranty to $50,000 and set aside the punitive damage award against

Crop Hail.

Crop Hail and Guaranty cross-appeal the court's denial of

their motions for summary judgment and a directed verdict. The

DeBruyckers appeal the court's reduction and setting aside of the

jury's punitive damage awards.

I

Did the District Court err by denying Guaranty and Crop Hail's

motions for summary judgment and a directed verdict on the issue of

punitive damages?

Guaranty and Crop Hail argue that since the District Court

found, after trial, as a matter of law, that a "reasonable basis

for contesting the [DeBruyckers'] claim" existed, the District

Court previously erred by not granting Guaranty and Crop Hail

summary judgment or--in the alternative--a directed verdict on the

issue of punitive damages. Guaranty and Crop Hail correctly allege

that if they had a "reasonable basis" to contest the claim, then

the DeBruyckers had no independent cause of action for punitive

6
damages under § 33-18-242, MCA.

"The 'reasonable basis' for denying a claim is a defense to

liability under § 33-18-242, MCA." Dean v. Austin Mutual (Mont.

1994), 869 P.2d 256, 258, 51 St-Rep. 102, 103. We recently

concluded that

reasonableness is generally a question of fact;

therefore, it is for the trier of fact to weigh the

evidence and judge the credibility of the witnesses in

determining whether the insurer had a "reasonable basis"

for denying a claim. This is not a determination that

can be made "as a matter of law" . . . .

-IDean 869 P.2d at 258.

In this case, the District Court properly denied Guaranty and

Crop Hail's motions for summary judgment and directed verdict. The

court properly allowed the jury to decide whether Guaranty and Crop

Hail had a "reasonable basis 'I to deny the DeBruyckersl claim.

II

Did the District Court violate the applicable standard of

review when the court reduced the jury's punitive damages award

against Guaranty and Crop Hail by basing that decision on its own

factual findings which were contrary to the jury's special verdict

form?

The jury, by special verdict, found that Guaranty and Crop

Hail violated UTPA provisions found at § 33-18-201, MCA, and that

Guaranty and Crop Hail had no reasonable basis in law or fact for

contesting the DeBruyckers' claim. Section 27-1-221, MCA, provides

that reasonable punitive damages may be awarded when the defendant

has been found guilty, by clear and convincing evidence, of actual

fraud or actual malice. Here, the jury further found that there

was clear and convincing evidence that both Guaranty and Crop Hail

were guilty of actual malice and that punitive damages should be

7
assessed against both of them. The jury awarded the DeBruyckers

$500,000 in punitive damages against Guaranty and $40,000 in

punitive damages against Crop Hail.

Section 27-1-221(7)(c), MCA, requires a district court to

review a jury's award of punitive damages, giving consideration to

each of the following matters set forth at 5 27-1-221(7)(b), MCA:

(i) the nature and reprehensibility of the defendant's

wrongdoing;

(ii) the extent of the defendant's wrongdoing;

(iii) the intent of the defendant in committing the

wrong;

(iv) the profitability of the defendant's wrongdoing, if

applicable:

(v) the amount of actual damages awarded by the jury:

(vi) the defendant's net worth:

(vii) previous awards of punitive or exemplary damages

against the defendant based upon the same wrongful act;

(viii) potential or prior criminal sanctions against the

defendant based upon the same wrongful act; and

(ix) any other circumstances that may operate to increase

or reduce, without wholly defeating, punitive damages.

The court must "clearly state [its] reasons for increasing,

decreasing, or not increasing or decreasing the punitive damages

award . . . in findings of fact and conclusions of law,

demonstrating consideration of each of the factors listed in

subsection (7)(b)." Section 27-1-221(7)(c), MCA.

In its review of the jury's punitive damages award pursuant to

5 27-1-221(7)(c), MCA, the District Court concluded that Guaranty

and Crop Hail had not violated the provisions of § 33-18-201, MCA,

on which the jury received instructions. The court further

concluded that Guaranty and Crop Hail had a reasonable basis to

deny the DeBruyckers' claim. These conclusions directly

contradicted the findings of the jury described above. Based upon

8
its findings and conclusions, the District Court reduced the jury's

award of punitive damages against Guaranty to $50,000 and struck

the award of punitive damages against Crop Hail.

Section 27-l-221(6), MCA, provides that "[lliability for

punitive damages must be determined by the trier of fact, whether

judge or jury." Here, the District Court, under what the court

perceived to be authorized under 5 27-1-221(7)(c), MCA, overturned

several findings of the trier of fact. We conclude that this

exceeded the scope of review allowed to the court under the

statute.

The DeBruyckers invoked their right to demand a jury trial

pursuant to Rule 38(b), M.R.Civ.P. To interpret 5 27-1-221(7)(b),

MCA, as allowing the court to reverse issues of underlying

liability previously submitted to and decided by the jury would

interfere with the jury as trier of fact deciding such issues.

Although the list enumerated at § 27-1-221(7)(b), MCA, may, as

in this case, appear to include some of the same or similar issues

as those put to a jury in the case, we conclude that the court's

review pursuant to subsection (7)(c) must be conducted without

contradicting findings of fact made by the jury. In other words,

we conclude that the District Court was bound by the jury's

determination of facts on all issues which had been presented to

the jury. Section 27-1-221(7)(c), MCA, only empowers the court to

evaluate the amount of the award of punitive damages in light of

the factors enumerated under subsection (7)(b), and to make

findings of fact and conclusions of law as to its reasons for

9
increasing, decreasing, or letting stand the amount of the punitive

damages award. It does not open the door for reversal of jury

findings on underlying issues of liability.

We hold that the District Court committed reversible error

when it overturned the above-described jury findings on liability.

We therefore remand so that the District Court may conduct a proper

review of the amount of punitive damages pursuant to § 27-l221(7)(c), MCA.

III

Did the District Court err by finding that Crop Hail was not

an "insurer" subject to punitive damages under the UTPA?

The District Court struck the punitive damages award against

Crop Hail because it found that Crop Hail was not an "insurer"

subject to punitive damages under the UTPA. This Court in O'Fallon

v. Farmers Ins. Exchange (Mont. 1993), 859 P.2d 1008, 1015, 50

St.Rep. 1022, 1027, held that:

individuals, as well as insurers! are prohibited from

engaging in the unfair trade practices set forth in § 33-

18-201, MCA and . . . when an individual breaches the

obligations imposed by that statute, the claimant who is

damaged by that breach has a common law cause of action

against that individual.

We further stated:

It is clear from the language of § 33-18-201, MCA, that

not just insurers, but also claims adjusters, are

prohibited from engaging in acts that are prohibited [by

this statute].

O'Fallon, 859 P.2d at 1014.

Crop Hail recognizes that a common law claim may be brought

against claims adjusters and their companies. However, Crop Hail

correctly contends that the common law cause of action against an

10
individual requires a different standard of proof. See Klaudt v.

Flink (1983), 202 Mont. 247, 253-54, 658 P.2d 1065, 1068. Since

the DeBruyckers did not submit proof on the common law standard,

Crop Hail argues that no cause of action existed against Crop Hail.

In spite of Crop Hail's argument, we note that Crop Hail never

claimed that it was not an insurer. Crop Hail did not raise the

issue in its pretrial pleadings, nor did it raise the issue in the

pretrial order. Crop Hail also failed to object to the jury

instructions and the special verdict form based on the argument

that it was not an "insurer" under the UTPA. Moreover, Crop Hail

did not argue that the common law standard of Klaudt applied in

this case.

We have "long adhered to the rule that an instruction given

without an objection becomes the 'law of the case."' Nicholson v.

United Pacific Ins. Co. (1985), 219 Mont. 32, 38, 710 P.2d 1342,

1346. Since Crop Hail acquiesced to the jury instructions, the

instructions became the law of the case. Crop Hail's consent to

the instructions precludes it from arguing that it was not an

"insurer" to avoid an assessment of punitive damages. On that

basis, we determine that the District Court erred by concluding

that Crop Hail was not an insurer.

We affirm on Issue I, reverse on Issue III, and reverse and

remand on Issue II. On remand, we direct the District Court to

conduct a review pursuant to § 27-1-221(7)(c), MCA, consistent with

this opinion, to determine the amount of punitive damages. If the

judge who decided this case does not hear the remand, then the

11
succeeding judge must, after reviewing the record, decide the

amounts of the punitive damage awards.

We concur:

Justices

12
Justice Terry N. Trieweiler specially concurring.

I concur with the result of the majority opinion. However, I

conclude that the analysis of issues set forth in that opinion is

deficient in several respects.

The issues raised by the parties on appeal were:

1 . Was there sufficient evidence in support of the

plaintiffs' claims to withstand the defendants' motions for summary

judgment and a directed verdict, and to affirm the jury's findings

in favor of the plaintiffs?

2 . If the answer to the preceding question is in the

affirmative, could the jury's findings be set aside under the guise

of statutory review provided for in 5 27-l-220, MCA?

The issues raised by the parties require an analysis of our

standard of review from denial of motions for summary relief, and

our standard of review of a jury's findings. However, there is no

such analysis in the majority opinion. Resolution of the first

issue also requires some discussion of what evidence was presented

to support the jury's findings and to justify denial of defendants'

motions. Neither does the majority's opinion include any

discussion of that nature. Although the opinion necessarily infers

that the jury's findings were supported by substantial evidence,

nowhere does it say so.

In response to Issue I, the majority infers that whether there

is a l'reasonable basis 'I for denying a claim is generally a question

of fact, and therefore, that issue was properly submitted to the

13
jury. However, there is no explanation why that general rule

applies to the facts in this case.

In its consideration of Issue II, the majority concludes that

the District Court erred by entering findings inconsistent with the

jury's findings. However, that is not always true. The majority

opinion fails to distinguish when it is appropriate for a district

court to enter judgment notwithstanding the verdict.

I conclude, after review of the record, that there was

substantial evidence to support the jury's findings that defendants

violated the Unfair Trade Practices Act found at § 33-18-201

through -242, MCA, and were guilty of actual malice in violation of

§ 27-1-221, MCA. Therefore, I concur with the majority's

conclusion that the District Court correctly denied defendants'

motions for summary judgment and a directed verdict, and that the

District Court erred by entering findings of fact inconsistent with

those of the jury.

I also concur with the majority's conclusion that Crop Hail

Management waived any objection to suit under g 33-18-242, MCA, by

raising that issue for the first time on appeal.

Justice William E. Hunt, Sr., joins in the foregoing special

concurrence.

Justice

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September 12, 1994

CERTIFICATFJ OF

I hereby certify that the following certified order was sent by United States mail, prepaid,

following named:

Dennis Patrick Conner

Attorney at Law

P.O. Box 3028

Great Falls, MT 59403-3028

Michael J. Best

Best Law Offices

P.O. Box 2114

Great Falls, MT 59403

Norman L. Newhall & Kevin C. Meek

Alexander, Baucus & Liiefl, P.C.

P.O. Box 2629

Great Falls, MT 59403

ED SMITH

CLERK OF THE SUPREME

STATE OF MONTANA

COURT

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