Opinion ID: 889317
Heading Depth: 1
Heading Rank: 3

Heading: Issue One: Did the jury instructions covering the issue of reasonably clear liability fully and fairly inform the jury of the applicable law?

Text: ¶ 25 Peterson contends the District Court abused its discretion when it refused his proposed instruction on the issue of reasonably clear liability. Peterson argues that 50-50 negligence constitutes reasonably clear liability as a matter of law under the UTPA and Montana's law on comparative negligence. If a defendant is 50% or more negligent, then the plaintiff is entitled to recover damages from him with the amount reduced in direct proportion to the plaintiffs own negligence pursuant to § 27-1-702, MCA. See Marry v. Missoula Co. Sheriff's Dept., 263 Mont. 152, 866 P.2d 1129 (1993). Peterson argues that the District Court's failure to legally define reasonably clear liability for the jury and give a corresponding instruction constitutes reversible error. ¶ 26 Peterson contends that he presented evidence demonstrating that St. Paul determined Lindberg to be at a minimum 50% responsible for the accident. Peterson argues he presented evidence demonstrating that Lindberg admitted to being distracted by his cell phone just prior to the accident in violation of Omimex's company policy. Peterson also argued that Lindberg's speed, which he placed between 40 and 55 m.p.h. at the time of the accident, was too fast for the blind curve where the accident happened. Peterson also questioned the credibility of St. Paul's accident reconstruction expert, Dr. Lee, claiming that his analysis yielded four conflicting scenarios. In one of them, Lindberg was approximately 20 inches into Peterson's lane at the time of the accident, while in the other three Dr. Lee concluded that Lindberg was properly in his lane. Peterson also argued that St. Paul knew that an accident reconstruction was of dubious value in determining liability, given that the accident was caused by Lindberg either reaching for or being distracted by his cell phone at the time of the accident. ¶ 27 Peterson also presented evidence from St. Paul's claims file, and examined both Allums and Reed about the findings contained therein. Peterson pointed to portions of St. Paul's liability evaluations which he argued demonstrated that St. Paul determined Lindberg to be at least 50% liable for the accident. Further, Peterson examined Gregoire at trial, and argued that his defense of Omimex demonstrated that Gregoire also concluded that Lindberg's liability was at least 50%. Based on this evidence and argument, Peterson contends the District Court abused its discretion in failing to instruct the jury as he requested. ¶ 28 St. Paul argues the District Court correctly instructed the jury and did not err when it denied Peterson's motion for a preliminary ruling on the issue of reasonably clear liability. St. Paul notes there was never an actual finding of negligence in the underlying action, and that the issue of actual responsibility for the accident is separate and distinct from whether it violated its duties to Peterson under the UTPA. St. Paul disputes Peterson's version of its claim adjusting process and the results of its liability evaluations, contending that it always considered Peterson primarily responsible for the accident. St. Paul asserts that while Allums initially suggested to St. Paul that it either settle the claim by accepting 50% liability, or obtain the assistance of an accident reconstruction expert, the results of the accident reconstruction and further investigation by Allums demonstrated that Peterson was in fact primarily responsible for the accident. ¶ 29 In sum, St. Paul contends that there was always a genuine dispute about liability. St. Paul explains that its decision to settle the case was not based on its conclusion that Lindberg was liable for the accident, but on other factors, such as the extent of Peterson's injuries and the fact that Omimex, as a foreign corporation, was a target defendant. St. Paul claims that Gregoire always maintained he could win a defense verdict at trial, but suggested a settlement in view of these other considerations. ¶ 30 Additionally, St. Paul argues that the question of what constitutes reasonably clear liability under Montana law was already addressed in Giambra v. Travelers Indemnity Co., 2003 MT 289, 318 Mont. 73, 78 P.3d 880. Under Giambra, St. Paul contends that liability is not reasonably clear when there exist genuine issues of material fact regarding negligence and liability, and that the issue of the reasonableness of its handling of Peterson's claim is a question of fact for the jury. In this connection, St. Paul argues that the jury instructions given by the District Court in this case fully and fairly informed the jury of the applicable law and do not provide grounds for reversal. ¶ 31 The UTPA provides in part that an insurer may not neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. . . . Section 33-18-201(6), MCA. The ultimate question for the jury was whether St. Paul violated the UTPA in its handling of Peterson's claim. In resolving this question, the jury is not asked to determine whether Lindberg or Peterson was actually liable for the underlying automobile accident. As we stated in Graf v. Continental Western Ins. Co., 2004 MT 105, 321 Mont. 65, 89 P.3d 22, [t]he issues in a UTPA claim are separate from the issues in the underlying claim. Graf, ¶ 12 (citing Klaudt v. Flink, 202 Mont. 247, 252-53, 658 P.2d 1065, 1067-68 (1983)). At the same time, there is an intimate connection between the facts of the underlying accident and the decisions made by St. Paul in the handling of the claim. Indeed, the operative facts of the accident, their legal consequences, the results of St. Paul's investigation into the accident, and St. Paul's conduct in handling Peterson's claim are indelibly intertwined with the question of whether liability was reasonably clear in this case. ¶ 32 Our caselaw under the UTPA has established that an insurer has a duty to provide coverage for an injured third party when liability for the underlying accident is reasonably clear. See Ridley v. Guaranty Nat. Ins. Co., 286 Mont. 325, 334, 951 P.2d 987, 992 (1997). Furthermore, our UTPA caselaw also makes it clear that the operative facts of the underlying accident, and the information available to the insurer during the adjusting process, are probative as to the merits of the UTPA claim. See Lorang v. Fortis Ins. Co., 2008 MT 252, ¶¶ 87-89, 345 Mont. 12, 192 P.3d 186. However, our caselaw has heretofore not provided a legal definition of reasonably clear liability in a manner applicable to the present circumstances. [2] While the issue of reasonably clear liability for the underlying accident was the linchpin of the entire case here, there is genuine uncertainty about the legal effect which the jury should attribute to the operative facts of the underlying accident as regards reasonably clear liability, and whether it should make a determination regarding negligence for the underlying accident and then compare its findings to those arrived at by St. Paul. The District Court was understandably concerned that the jury not re-litigate the underlying negligence suit in the UTPA case, and carefully crafted instructions which it believed appropriately instructed the jury as to reasonably clear liability. At the same time, the instructions given by the District Court, and the evidence allowed at trial, demonstrate that the facts of the accident and general principles of negligence law were necessary for the jury to make its determination regarding reasonably clear liability. ¶ 33 Jury instructions must fully and fairly inform the jury of the law applicable to the case. Tarlton, ¶ 19. [T]he only purpose which is properly served by the instructions to the jury is `to assure a decision consistent with the evidence and the law' and . . . this can only be accomplished `when the instructions are as plain, clear, concise, and as brief as possible.' McAlpine v. Rhone-Poulenc AG Co., 2000 MT 383, ¶ 24, 304 Mont. 31, 16 P.3d 1054 (quoting Busta v. Columbus Hosp. Corp., 276 Mont. 342, 373, 916 P.2d 122, 140 (1996)). Given that there necessarily exists some relationship between the underlying accident and the question of reasonably clear liability in this case, without a plain, clear and concise instruction explaining how these factors must be reconciled, the jury cannot make an informed determination of liability with respect Peterson's UTPA claim. See Billings Leasing Co. v. Payne, 176 Mont. 217, 225, 577 P.2d 386, 391 (1978) (stating that [j]ury instructions are crucial to a jury's understanding of the case. . . .). Accordingly, this Court must determine what legal standard should guide a jury's determination of reasonably clear liability. For guidance on this question, we turn to other jurisdictions which have directly considered this issue. ¶ 34 Like § 33-18-201(6), MCA, Massachusetts' unfair trade practices act prohibits insurers from failing to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear. . . . Mass. Ann. Laws ch. 176D, § 3(9)(f) (LEXIS 2010). In Demeo v. State Farm Mut. Auto. Ins. Co., 38 Mass.App.Ct. 955, 649 N.E.2d 803 (1995), the Appeals Court of Massachusetts held that a determination of whether liability is reasonably clear is an objective test [which] calls upon the fact finder to determine whether a reasonable person, with knowledge of the relevant facts and law, would probably have concluded, for good reason, that the insurer was liable to the plaintiff. Demeo, 649 N.E.2d at 804. Subsequent courts in both Massachusetts and the First Circuit adopted this as the applicable legal standard in the context of unfair trade practices claims under Massachusetts law. See e.g. Bolden v. O'Connor Cafe of Worcester, Inc., 50 Mass.App.Ct. 56, 734 N.E.2d 726, 732 n. 12 (2000); Foisy v. Royal Maccabees Life Ins. Co., 241 F.Supp.2d 65, 68 (D.Mass. 2002); Fed. Ins. Co. v. HPSC, Inc., 480 F.3d 26, 36 (1st Cir.2007). ¶ 35 Subsequently, in Jackson v. State Farm Mut. Auto. Ins. Co., 215 W.Va. 634, 600 S.E.2d 346 (2004), the West Virginia Supreme Court of Appeals applied the Massachusetts approach to its unfair trade practices act. West Virginia's unfair trade practices act requires insurers to attempt[] in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability ha[s] become reasonably clear. . . . W. Va.Code, § 33-11-4(9)(f) (2004). In Jackson, plaintiff Jackson had pulled his car off to the side of the road and was subsequently struck by Teri Smoot, an insured of State Farm. Jackson submitted a claim to State Farm. State Farm denied the claim after conducting an investigation of the accident, initially concluding that Jackson was 100% liable, while Smoot's liability was 0%. Jackson, 600 S.E.2d at 350. Jackson filed a personal injury claim against Smoot, and an unfair trade practices act claim against State Farm. After the suits were filed, State Farm revised its evaluation of the accident, concluding that Smoot's fault was as high as 49%. In the personal injury action, a jury ultimately assessed Smoot's liability at 90% and Jackson's at 10%. Jackson, 600 S.E.2d at 351. ¶ 36 After the jury verdict in the personal injury suit, State Farm and Jackson moved for summary judgment in the unfair trade practices suit, which was still pending at that time. The lower court granted Jackson's motion, concluding that as a matter of law State Farm did not attempt in good faith to effectuate a prompt, fair, and equitable settlement of his claim after liability had become reasonably clear. Jackson, 600 S.E.2d at 351. After the court's ruling, the jury ultimately returned a large verdict in Jackson's favor. State Farm appealed several aspects of the lower court's ruling, including its determination that State Farm had violated W. Va.Code, § 33-11-4(9)(f) as a matter of law. Jackson, 600 S.E.2d at 352. ¶ 37 In its conclusions of law, the lower court had concluded that liability is reasonably clear when a reasonable person with knowledge of the relevant facts and law would have concluded[,] that it was more likely than not that the insured . . . was more than 50% at fault for the accident. Jackson, 600 S.E.2d at 352. The West Virginia Supreme Court of Appeals rejected this interpretation of reasonably clear liability. The Supreme Court of Appeals concluded that the lower court impermissibly equated reasonably clear liability with a preponderance of the evidence standard, and had concluded in essence that a claimant would only have to establish that liability for the accident was more likely or more probable than not. Jackson, 600 S.E.2d at 352. The Supreme Court of Appeals determined that reasonably clear liability required a greater degree of certainty than a preponderance of the evidence. It concluded that the burden of proof required for reasonably clear liability was more akin to the clear and convincing evidence standard, meaning that `the thing to be proved is highly probable or reasonably certain. This is a greater burden than preponderance of the evidence[.]' Jackson, 600 S.E.2d at 352 (quoting Black's Law Dictionary 457 (5th ed.1979)). ¶ 38 Additionally, the Supreme Court of Appeals cited with approval a Massachusetts lower court case for the proposition that [l]iability need not be absolutely certain, or beyond reasonable doubt, but it must be `clear' enough that reasonable people would agree about it. Put conversely, if there is room for objectively reasonable debate about whether liability exists, then it is not `reasonably clear.' Jackson, 600 S.E.2d at 352 (quoting Am. Universal Ins. Co. v. Med. Malpractice Joint Underwriting Assn. of Mass., 1993 WL 818614, , 1993 Mass.Super. LEXIS 149, -63 (Mass.Super.1993)). Based on this analysis, the West Virginia Supreme Court of Appeals expressly adopted the objective reasonably clear liability standard from Demeo noted above. Jackson, 600 S.E.2d at 352-53. ¶ 39 We agree with the courts of Massachusetts and West Virginia, and join them in adopting this standard. Accordingly, we hold that liability is reasonably clear when a reasonable person, with knowledge of the relevant facts and law, would conclude, for good reason, that the defendant is liable to the plaintiff. This is an objective test in which a trier of fact judges the reasonableness of the insurer's conduct under the facts and circumstances as presented. In addition to taking account of the relevant facts, the trier of fact is also to take account of the relevant legal principles to be considered by the insurer when evaluating liability. A finding of liability by a trier of fact under the preponderance of evidence standard in the negligence action does not necessarily imply that liability was reasonably clear when the insurer was adjusting the claim. Instead, reasonably clear liability is established when it is clear enough that reasonable people assessing the claim would agree on the issue of liability, and that the facts, circumstances, and applicable law leave little room for objectively reasonable debate about whether liability exists. ¶ 40 With these legal standards in mind, we turn to the jury instructions given in this case to determine whether they fully and fairly informed the jury of the applicable law. See Opinion, ¶ 11. Instruction No. 8 informed the jury of St. Paul's duty under the UTPA to pay claims and medical expenses when liability is reasonably clear. Instruction No. 9 informed the jury that liability does not need to be certain in order to be reasonably clear. Instruction No. 12 provided the jury with relevant principles of negligence law, including an instruction patterned on § 27-1-702, MCA. However, the instructions did not instruct the jury on critical legal aspects of the reasonably clear liability determination. It is unclear from these instructions whether the jury was charged to vicariously determine negligence for the underlying accident and then determine whether liability was reasonably clear, or whether the jury was simply supposed to evaluate the insurer's conduct from an objective, reasonable person standard, without necessarily arriving at a determination of who was ultimately negligent under the preponderance of the evidence standard. While the general principles of negligence law provided in Instruction No. 12 are important to guide the jury's evaluation of St. Paul's conduct, without another instruction defining reasonably clear liability and focusing the jury on an objective evaluation of the reasonableness of St. Paul's conduct, we simply cannot conclude that the jury was fully and fairly informed of the applicable law. ¶ 41 The issue of reasonably clear liability was the linchpin of Peterson's entire case, and the lack of clarity in these instructions regarding the reasonableness of St. Paul's conduct in its handling of Peterson's claim left the jury without guidance on how to determine whether liability was reasonably clear. Without a jury instruction reflecting the legal standards as set forth in Demeo and Jackson, we conclude the jury instructions, taken as a whole, did not fully and fairly instruct the jury that it must evaluate St. Paul's conduct under an objective standard of reasonableness and determine whether liability was reasonably clear to St. Paul when it handled Peterson's claim. This question is so fundamental to a case of this nature that without an instruction patterned on this legal standard a jury is simply not in a position to make its determination on the ultimate question of law presented by this case. ¶ 42 We fully realize that the District Court did not have the benefit of the foregoing legal analysis. However, the district court has an overriding duty to ensure the jury is properly instructed, even in cases where failure to properly instruct the jury is arguably the fault of the parties themselves. See Billings Leasing Co., 176 Mont. at 225, 577 P.2d at 391 (emphasis in original, quotation omitted) (It is the inescapable duty of the trial judge to instruct the jurors, fully and correctly, on the applicable law of the case, and to guide, direct, and assist them toward an intelligent understanding of the legal and factual issues involved in their search for truth. The court must instruct the jury properly on the controlling issues in the case. . . .); Schuff v. Jackson, 2002 MT 215, ¶¶ 38-39, 311 Mont. 312, 55 P.3d 387; State Bank of Townsend v. Maryann's, Inc., 204 Mont. 21, 30-31, 664 P.2d 295, 299-300 (1983). Furthermore, the discretion of the district court to give or refuse jury instructions is always subject to the overriding requirement that they fully and fairly instruct the jury on the applicable law. State v. Kramp, 200 Mont. 383, 396, 651 P.2d 614, 621 (1982); Dale v. Three Rivers Telephone Cooperatives, Inc., 2004 MT 74, ¶¶ 15-16, 320 Mont. 401, 87 P.3d 489; McAlpine, ¶¶ 25-26; Tarlton, ¶¶ 24, 28-30. ¶ 43 We conclude that the jury instructions given here as a whole did not fully and fairly inform the jury of the applicable law. Although the District Court made an earnest attempt to formulate jury instructions which would adequately instruct the jury on the question of reasonably clear liability, its formulation was ultimately incomplete. Because the error in the jury instructions affects the jury's ability to make the ultimate determination at issue of whether St. Paul violated the UTPA as alleged by Peterson, we conclude that this error has prejudiced Peterson's substantial right to a fair trial. Tarlton, ¶ 19. Accordingly, the jury's verdict must be reversed and this matter remanded for a new trial. See Williams v. Union Fidelity Life Ins. Co., 2005 MT 273, ¶ 46, 329 Mont. 158, 123 P.3d 213; Fillinger v. Northwestern Agency, Inc., of Great Falls, 283 Mont. 71, 76, 938 P.2d 1347, 1350-51 (1997). ¶ 44 Furthermore, we offer the following jury instruction for use by the District Court in this case, and in any other insurance bad faith case where the jury is being asked to decide whether liability is reasonably clear: You must decide whether [insurance company] engaged in an unfair trade practice by not making a good faith attempt to bring about a prompt, fair, and equitable settlement of a claim in which liability was reasonably clear. To determine if liability was reasonably clear, you must decide whether a reasonable person, with knowledge of the relevant facts and law, would have concluded for good reason that [defendant] was liable to [plaintiff]. In doing so, you should take into account that, under Montana law, if [defendant] was 50% or more negligent, then [plaintiff] would be entitled to recover damages from [defendant], even if [plaintiff] was partially negligent. So, you must determine in this case whether a person, with knowledge of the relevant facts and law, would have concluded for good reason that [defendant] was 50% or more negligent. ¶ 45 Before concluding, one last observation about jury instructions is in order. When a district court decides to give or refuse jury instructions, it bears two sets of considerations in mind. First, it must consider whether the instructions as a whole fully and fairly inform the jury of the applicable law. Second, it must exercise its discretion and decide whether the requested instruction is warranted under the circumstances. The first determination undoubtedly presents the reviewing court with a legal determination made by the lower court. Such legal determinations are reviewed either for correctness or de novo. See Citizens Awareness Network v. Mont. Bd. of Envtl. Rev., 2010 MT 10, ¶ 13, 355 Mont. 60, 227 P.3d 583 (quotation omitted, alteration in original) ([N]o discretion is involved when a tribunal arrives at a conclusion of lawthe tribunal either correctly or incorrectly applies the law.); State v. Derbyshire, 2009 MT 27, ¶ 19, 349 Mont. 114, 201 P.3d 811 (citations omitted) (A trial court has broad discretion in determining the relevance and admissibility of evidence. Thus, as a general rule, we review a trial court's evidentiary rulings for abuse of discretion.. . . In exercising its discretion, however, the trial court is bound by the Rules of Evidence or applicable statutes. Thus, to the extent the court's ruling is based on an interpretation of an evidentiary rule or statute, our review is de novo.). The second determination, on the other hand, is discretionary in nature and separate and distinct from the legal conclusions expressed by the lower court in its instructions. This discretionary determination is based on a number of considerations including, but not limited to, whether the party requesting the instruction has presented sufficient evidence to receive the instruction, whether the instruction is relevant in light of the theory of the case, or whether the instruction will unduly confuse the jury. In this case, the District Court clearly had before it sufficient evidence to submit the reasonably clear liability question to the jury, and the instructions on this issue were both relevant and required. Therefore, the District Court was acting within its sound discretion when it decided to instruct the jury on this issue. However, the instructions which it ultimately gave were simply not correct or complete on the issue of reasonably clear liability as a matter of law. ¶ 46 Although we are reversing and remanding based on our analysis of the jury instructions, we will now address the other issues raised by the parties in order to assist the District Court in the event of a retrial. [3]