Opinion ID: 2613183
Heading Depth: 1
Heading Rank: 4

Heading: liability of terry falcon

Text: Did the District Court err when it held that Terry Falcon, the claims adjuster employed by Farmers Insurance Exchange, was individually liable for bad faith adjustment of plaintiffs' claim pursuant to § 33-18-201, MCA? In addition to the reasons set forth above, Falcon moved the District Court to dismiss the complaint against him on the basis that he was not an insurer under the provisions of the Unfair Trade Practices Act, and therefore, not subject to liability for violation of its terms. However, in its opinion and order dated September 13, 1991, the District Court concluded that the definitions in the Unfair Trade Practices Act were broad enough to bring Falcon under the provisions of both § 33-18-242 and § 33-18-201, MCA ... and held that Count II is a valid claim against that defendant. Falcon cross-appeals from that conclusion. Section 33-18-201, MCA, provides that no person may engage in the prohibited conduct. Person is defined in § 33-1-202(3), MCA, as an individual, insurer, company ... or any other legal entity. [Emphasis added.] In Klaudt v. Flink (1983), 202 Mont. 247, 658 P.2d 1065, we held that § 33-18-201, MCA, did confer an obligation on those covered by the Act to deal reasonably with claimants and that a civil action could be maintained for breach of that obligation. It is clear from the language of § 33-18-201, MCA, that not just insurers, but also claims adjusters, are prohibited from engaging in the acts that are prohibited. It is clear from our decision in Klaudt that a common law cause of action exists to redress violations of the Act's provisions set forth in § 201. That part of the Klaudt decision has never been reversed nor modified by any subsequent decision of this Court. In the 1987 session of the Legislature, Representative Fred Thomas introduced House Bill No. 240 which was subsequently passed and codified as § 33-18-242, MCA. As amended and voted upon, House Bill No. 240 was entitled: AN ACT PROVIDING A CAUSE OF ACTION FOR AND THE SUSPENSION OF LEGAL PROCEEDINGS IN CERTAIN INSURANCE CLAIMS SETTLEMENT CASES; INCREASING THE FINE THAT MAY BE IMPOSED FOR VIOLATION OF THE INSURANCE CODE; AMENDING SECTION 33-18-317, MCA; REPEALING SECTION 33-18-241, MCA; AND PROVIDING AN APPLICABILITY DATE AND AN EFFECTIVE DATE. The substance of House Bill No. 240 provided a direct cause of action against insurers who violate certain parts of § 33-18-201, MCA, and provided that contrary to our decision in Klaudt, an action brought pursuant to this statutory cause of action would not require that violations of the code were of such frequency as to indicate a general business practice. The bill also limited the types of claims that could be brought based on claim settlement practices, defined with greater particularity the conduct which would form the basis for this statutory claim, required that a third-party complaint not be filed until the underlying claim was resolved, and established a statute of limitations for the newly created statutory claim. However, nothing in the title of the bill, nor in the text of the newly created statute, suggested that the bill would limit the parties against whom the common law claim established by Klaudt could be brought. Neither is there anything in the bill's legislative history to suggest that that was the Legislature's intent. When testifying in support of his bill, Representative Thomas stated that its purposes were to limit the types of claims that could be brought against insurers, to protect insurers where they had a reasonable basis for denying a claim, to postpone third-party claims under the statute until the underlying claim had been resolved, and to increase the fine that could be assessed against companies that violate provisions of the Act. No other purpose was articulated. Neither did any of the supporters of House Bill No. 240 suggest that its purpose was to in any way limit the persons against whom the common law cause of action provided for in Klaudt could be brought. All of the testimony in support of House Bill No. 240 related to the bill's provision to increase the statutory penalty, its provision for separate trials, and its limits on the type of violations for which third-party actions could be brought. When the common law, as established by the decisions of this Court, is not in conflict with the statutes, the common law shall be the law. Section 1-1-108, MCA. We conclude that our decision in Klaudt, which authorized a direct cause of action against persons who violate § 33-18-201, MCA, is not in conflict with § 33-18-242, MCA, which provides for a statutory cause of action against insurers, but does not otherwise limit previously created common law causes of action. Based on the foregoing history, we conclude that individuals, as well as insurers, are prohibited from engaging in the unfair trade practices set forth in § 33-18-201, MCA, and that 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. However, the statutory cause of action provided for in § 33-18-242, MCA, and the different standard of proof which that statute provides for, apply only to insurers as defined in § 33-18-201(6), MCA. For these reasons, we affirm the District Court's conclusion that Falcon is subject to liability for any personal violations of § 33-18-201, MCA. However, we conclude that the burden of proof in the action against Falcon is the burden set forth in Klaudt, while the burden of proof in plaintiffs' claim against Farmers Insurance Exchange is governed by the terms of § 33-18-242, MCA. This case is reversed in part, affirmed in part, and remanded to the District Court for resolution of the factual issues raised by the pleadings in this case. TURNAGE, C.J. and HARRISON, HUNT, GRAY, NELSON and WEBER, JJ., concur.