Opinion ID: 888679
Heading Depth: 1
Heading Rank: 4

Heading: Did Farmers breach its duty to defend Johnson by sending an adjuster rather than an attorney to the pre-litigation mediation conference?

Text: ¶ 9 Johnson's appeal states a narrow issuewhether by sending an insurance adjuster instead of an attorney to defend the insured at the mediation, Farmers breached its duty to defend Johnson under the policy. [1] Johnson offers that the mediation comes within the policy's definition of suit for purposes of the provision requiring Farmers to defend the insured against any suit because suit is defined by the policy as including any alternative dispute resolution proceeding in which damages are claimed. Thus, because the mediation conference was an alternative dispute resolution proceeding, the duty to defend was triggered under the policy and Farmers breached its duty by failing to send an attorney to defend Johnson at the mediation. Johnson argues that Farmers is therefore estopped from denying any obligation to indemnify Johnson for all of their settlement and defense costs. ¶ 10 Farmers does not resist Johnson's interpretation of the above-mentioned policy provisions and, in fact, interprets them even more expansively than Johnson does. Farmers explains that  [a]ll efforts to compromise a claim, beginning with the initial settlement offer, can be characterized as `alternative dispute resolution.' (Emphasis added.) Farmers explains that insurers have an affirmative obligation to seek early settlements, citing § 33-18-201(6), MCA, and offers that pre-suit meetings and mediation sessions between claimants, their attorneys, and insurance adjusters are commonplace efforts to do so. ¶ 11 Farmers' essential concession that it had a duty to defend during the mediation narrows the analysis to whether it fulfilled that duty by sending an adjuster to the conference. Johnson argues that once the duty to defend arises, the insurer can only satisfy it by providing an attorney. Johnson cites to several cases from other jurisdictions for the general proposition that [i]n order to discharge their duty to defend, insurers hire counsel to conduct the defense of their insureds. CHI of Alaska, Inc. v. Employers Reinsurance Corp., 844 P.2d 1113, 1115 (Alaska 1993). Farmers counters that there is no legal authority whatsoever for the assertion that an insurance company must have counsel present at a mediation held prior to the filing of litigation. It adds that, from a practical perspective, conducting such conferences would necessarily be hindered or delayed if counsel was required to represent the insured, and urges that the pre-litigation context be considered in applying the duty to defend in this case. ¶ 12 The duty to defend certainly encompasses functions which can only be fulfilled by a licensed attorney, such as appearing on behalf of an insured before a court of law and representing the insured throughout the legal proceeding. However, pursuant to authority provided by statute, insurance adjusters play a vital role in the resolution of claims prior to the initiation of litigation. [O]n behalf of an insurer, an adjuster investigates and negotiates the settlement of claims arising under insurance contracts.... Section 33-17-102(1)(a), MCA. This is what Adjuster Stevens did. He investigated Ogden's claims against Johnson, conveyed offers of settlement to Ogden's counsel, and agreed to and attended a mediation conference. The mediation occurred prior to the initiation of litigation and was not part of any judicial proceeding. Rather, it was an informal, voluntary meeting. Stevens ultimately obtained a release of Ogden's claims against Johnson in exchange for a settlement payment from Farmers, thereby resolving the matter. Under these circumstances, we conclude that Stevens' actions fulfilled Farmers' duty under the policies to defend Johnson against Ogden's claims. ¶ 13 This conclusion is consistent with the public policy of encouraging settlements and avoiding unnecessary litigation. See Miller v. State Farm Mut. Automobile Ins. Co., 2007 MT 85, ¶ 14, 337 Mont. 67, 155 P.3d 1278. Requiring that counsel be retained for informal settlement conferences could hinder the negotiation process and contravene the policy of encouraging out-of-court settlements. ¶ 14 Because Farmers did not violate its duty to defend, it is not liable for the settlement and defense costs claimed by Johnson. ¶ 15 Affirmed. We concur: MIKE McGRATH, C.J., JAMES C. NELSON, W. WILLIAM LEAPHART and BRIAN MORRIS, JJ.