Court Opinion

ID: 8031008
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:11:58.087326+00
Date Added: 2024-06-11T16:36:58.433350
License: Public Domain

JUSTICE WHEAT,
concurring in part and dissenting in part.
¶35 I concur with the Court’s disposition of Issues 2 and 3. However, I disagree with the Court’s conclusion on Issue 1 that this case should be remanded for a second reasonableness hearing. In my opinion the Court is improperly interjecting its judgment in the place of the District Court by requesting the District Court repeat what has already been accomplished.
¶36 In Tidyman’s I we directed the District Court to conduct a “hearing focused on the reasonableness of the settlement amount,” with the burden of establishing unreasonableness of the judgment on NUFI. Tidyman’s I, ¶¶ 44, 50. We directed the court to set the parameters of the hearing at its discretion as to the need for the further discovery of pertinent information related to the limited scope of the remand. Tidyman’s I, ¶ 44. The directive we gave to the District Court was to follow the mandate of § 27-1-302, MCA, that settlement amounts in civil cases must be reasonable. We were explicit and clear that in this case, where the insurer elected to deny coverage and breached its duty to defend its insureds, no further analysis of whether there was coverage under the policy was necessary or acceptable under the law. Tidyman’s 7, ¶¶ 28, 30, 33. (“If we were to hold the District Court in error for failing to analyze coverage ... we would be providing insurers with an avenue to circumvent the clear requirement imposed by our precedent that where the insurer believes a policy exclusion applies, it should defend under a reservation of rights and seek a determination of coverage through a declaratory judgment action.” Tidyman’s I, ¶ 28.) We determined that the District Court was obligated under the law to determine only the substantive reasonableness of the stipulated settlement amount without evaluating the underlying policy coverage or any inquiry into potential collusion, as we determined it did not exist in this case. Tidyman’s I, ¶¶ 28, 50.
¶37 The Court how articulates a standard borrowed from the *349Minnesota Supreme Court to be used in this case to determine whether a settlement amount is reasonable. Opinion, ¶ 15. This standard includes the consideration of the liability and damage aspects of the Plaintiffs’ case, including the risks of going to trial, and in this case, a consideration of the insurer’s breach of its duty to defend its insureds. Opinion, ¶ 15. Yet, we have already determined that the settlement should be given the presumption of reasonableness, and the burden is on defendant NUFI to show unreasonableness. Tidyman’s I, ¶ 41. The Court now asks the District Court to inquire into NUFI’s questions of unreasonableness, which are almost exclusively based on issues involving the valuation of the corporation, under what it calls an objective standard when the court already conducted a three-day. hearing and listened to testimony on those very issues.
¶38 We have often repeated the maxim that district courts have broad discretion to make determinations related to evidence, which we rightfully review only for the abuse of this discretion. Watkins v. Williams, 265 Mont. 306, 311, 877 P.2d 19, 21-22 (1994). The abuse of discretion inquiry is “not whether this Court would have reached the same decision, but, whether the district court acted arbitrarily without conscientious judgment or exceeded the bounds of reason.” Chipman v. Northwest Healthcare Corp., 2012 MT 242, ¶ 17, 366 Mont. 450, 288 P.3d 193 (quoting Newman v. Lichfield, 2012 MT 47, ¶ 22, 364 Mont. 243, 272 P.3d 625) (emphasis added).
¶39 Even if an insurer breaches its duty to its insured, it is still entitled to have a district court make a determination of the reasonableness of a settlement; however the settlement is presumed to be reasonable unless the insurer is able to show evidence of the lack of reasonableness. Abbey/Land LLC, ¶ 17; Tidyman’s I, ¶ 41. In this case, the District Court conducted a three-day hearing, and heard and evaluated the evidence presented by both sides. The evidence included testimony from various experts offered by both sides regarding the valuation of the company. NUFI has consistently argued that without a buyer the settlement amount in this case is a pie-in-the-sky scenario and therefore unreasonable. However, the court heard testimony that the existence of a buyer is not the determinative factor in the valuation of a company. The Plaintiffs presented evidence, NUFI presented evidence, and the court then evaluated the evidence to determine that NUFI did not meet its burden to overcome the presumption of reasonableness. But this Court is now asking the District Court to go back once again, sift through the same evidence and apply a new standard, which in my opinion in this case, is only a slight degree of separation from what the court has already done pursuant to our *350direction upon initial remand. Because this is a stipulated settlement the court has one of two options: accept or reject the settlement amount. Opinion, ¶ 15. We have already determined that there is no proof of collusion between the Plaintiffs and Maxwell and Davis, and the record shows that the settlement amount was derived from the conservative end of an independent valuation of the company — the assessment that was available to defendants Maxwell and Davis at the time of the settlement negotiations.
¶40 The Court now requires the District Court to employ a new objective standard — whether a reasonably prudent person in the position of the defendant would have settled, taking into consideration the liability and damage aspects of the claims, the risks of going to trial, and the lack of insurance coverage — but to what end? Not to conduct a trial on the merits of Plaintiffs’ claims and allow NUFI to reach back and interject itself into the litigation it chose to avoid when it left its insureds on their own to challenge the litigation, in direct contravention of our case law. Farmers Union Mut. Ins. Co. v. Staples, 2004 MT 108, ¶ 28, 321 Mont. 99, 90 P.3d 381. Nor to make a determination of fraud or collusion, in direct contravention of our findings in Tidyman’s I Nor to independently monetize each individual aspect of the considerations included in the objective standard, which would be an absurd and untenable exercise. NUFI was given the opportunity to provide its best evidence of the unreasonableness of the stipulated judgment and it simply failed to meet its burden. In my view the Court is in error by effectively interjecting its judgment into this case and allowing NUFI a second bite at the apple to attempt to substantiate the arguments it has already failed to adequately substantiate. I believe the Court has improperly lost sight of the settlement’s presumption of reasonableness.
¶41 The Court also indicates using the proposed objective standard will avoid further punishing the insurer for its failure to defend its insureds because the “insurer has already suffered the consequences of its failure to defend by having lost the right to invoke insurance contract defenses as well as the right to assert its policy limits.” Opinion, ¶ 14. While I agree that the District Court should not seek to further punish NUFI, an additional consequence of its failure to defend Maxwell and Davis is the loss of its ability to negotiate the settlement at the time its insureds entered into a settlement agreement with the Plaintiffs. There is little doubt that if NUFI would have chosen differently and opted to defend Maxwell and Davis that the settlement negotiations would have ended with a different result. To that I reiterate the sentiment we noted in Tidyman’s I: so what? Without *351collusive wrongdoing, the result is a consequence of NUFI’s failure to defend its insureds. Tidyman’s I, ¶ 48.1 believe with this Opinion the Court is now allowing NUFI too great an opportunity to meddle in the settlement negotiations it was excluded from by its own choice. In my opinion, the District Court followed our directive in Tidyman’s I to allow NUFI an opportunity to rebut the presumption of reasonableness of the stipulated judgment, where we explicitly allowed it to set the parameters of the hearing including conducting further discovery, and reached a conclusion that was neither arbitrary, nor exceeded the bounds of reason, and should be affirmed. Tidyman’s I, ¶ 44. It is the District Court’s duty, not this Court’s, to determine the facts, and weigh the credibility of the evidence presented before it to make reasoned findings and we should not supplant its judgment with our own. If the Court desires to adopt a new objective standard for district courts to apply in cases such as these, at most we should do so in this Opinion and find any error that occurred on remand to be harmless because the court did what we asked of it in Tidyman’s I and the result did not create reversible error.
¶42 For the foregoing reasons, I respectfully dissent from the Court’s disposition of Issue 1 regarding the remand of this case for a second reasonableness hearing. I concur with the majority on Issues 2 and 3 of this Opinion. Therefore, I would affirm the District Court’s order as to Issues 1 and 2.