Ayotte v. American Economy Insurance Company
ORDER AND FINDINGS AND RECOMMENDATIONS re 3 MOTION for Summary Judgment filed by American Economy Insurance Company. (1) Pla Rule 56(f) Request (#7) is MOOT. (2) Pla Obj and Motion to Strike Dfts Rply Brf and Supporting Evidence (#13) is DENIED. (3) Dft's Mot for Lv to File (#16) is GRANTED. Objections to F&R due by 1/25/2010. Signed by Magistrate Carolyn S Ostby on 1/8/2010. (ELL, )
IN THE UNITED STATES DISTRICT COURT F O R THE DISTRICT OF MONTANA B U T T E DIVISION S C O T T AYOTTE, Plaintiff, vs. A M E R I C A N ECONOMY I N S U R A N C E COMPANY, Defendant. P la in t iff Scott Ayotte ("Ayotte") filed this action against A m e r ic a n Economy Insurance Company ("AEIC") for "Declaratory R e lie f and Bad Faith Damages." Pl.'s Compl. (Court Doc. 1). Currently pending before the Court are the following: (1) Defendant's Motion for Summary Judgment (Court Doc. 3); (2) Plaintiff's Rule 56(f) Affidavit Requesting Postponement of Briefing on Plaintiff's Claim for Declaratory Relief ("Plaintiff's Rule 56(f) Request") (Court Doc. 7); (3) Plaintiff's Motion to Strike (Court Doc. 13); and (4) Defendant's Motion for Leave to File Pertinent Factual M a t e r ia ls and Overlength Reply Brief (Court Doc. 16). C V -0 9 -5 7 -B U -R F C -C S O ORDER AND F I N D I N G S AND R E C O M M E N D A T IO N S OF U.S. MAGISTRATE JUDGE
O n August 18, 2007, Ayotte was traveling west on Highway 287, t h ro u g h Nevada City, Montana. Def.'s Statement of Uncontroverted F a c t s ("Def.'s Statement") (Court Doc. 5) at ¶ 3; Pl.'s Statement of G e n u in e Issues in Opposition to Defendant American Economy's M o t io n for Summary Judgment ("Pl.'s Statement") (Court Doc. 9) at 3. As he drove past the River of Gold Museum and Gift Shop, a strong w in d blew the museum's sign from its support posts. A piece of p ly w o o d from the sign penetrated the windshield of Ayotte's vehicle a n d struck him in the face. He suffered injuries including the loss of h is right eye. Id. J o h n and Carma Sinerius lease and operate the River of Gold M u s e u m and Gift Shop ("River of Gold") located in Nevada City, M o n t a n a . The Sineriuses maintained liability insurance coverage for t h e River of Gold business through AEIC. The insureds listed on the p o lic y are John and Carma Sinerius, d/b/a River of Gold Museum and G ift Shop. Court Doc. 5 at ¶ 4. In Count I of his Complaint, Ayotte "contends that his claims are c o v e r e d under the American Economy policy, that liability is
reasonably clear, that he is entitled to policy limits, and at a minimum is due and owed Ridley payments for his ongoing expenses and lost w a g e s . Court Doc. 1 at 6. As a third party claimant under the AEIC lia b ilit y policy, he requests a declaration of his rights under the in s u ra n ce policy and applicable law, including Ridley v. Guar. Natl. I n s . Co., 951 P.2d 987 (Mont. 1997), and Watters v. Guar. Natl. Ins. C o ., 3 P.3d 626 (Mont. 2000). Id. at 8. In Count II, Ayotte alleges that A E I C 's conduct "as described herein violates both Montana statute and M o n t a n a common law...." Id. at 6. In Count III, he seeks punitive d a m a g e s pursuant to § 27-1-221, M.C.A. II. P A R T I E S ' ARGUMENTS A. A E I C 's Arguments
A E I C contends that Ayotte's claims for declaratory relief and bad fa it h insurance practices are precluded because the underlying liability a c tio n in state court remains unresolved. Def.'s Br. In Support of Mot. fo r Summary Judgment ("Def.'s Br. in Support") (Court Doc. 4) at 2. AEIC claims that it is entitled to summary judgment with respect to A y o t t e 's request for declaratory judgment because the liability of A E I C 's insureds is not reasonably clear. Court Doc. 4 at 4. AEIC
argues that when genuine issues of material fact exist regarding n e g lig e n c e and liability, liability is not reasonably clear and an insurer h a s no obligation to advance payment of medical expenses under R id le y v. Guar. Natl. Ins. Co., 951 P.2d 987 (Mont. 1997). Court Doc. 4 a t 4-5. Thus, because the facts underlying Ayotte's request for d e c la r a to r y judgment are still in dispute, AEIC argues it is entitled to s u m m a r y judgment on Ayotte's claim for declaratory judgment. Id. at 9. AEIC further argues that even if it is not entitled to summary ju d g m e n t with respect to Ayotte's request for declaratory judgment, t h e Court should refrain from exercising jurisdiction because Ayotte d o e s not present a justiciable controversy. AEIC asserts that a threep a r t test governs justiciability: F irs t , a justiciable controversy requires that parties have existing a n d genuine, as distinguished from theoretical, rights or interest. Second, the controversy must be one upon which the judgment of t h e court may effectively operate, as distinguished from a debate o r argument invoking a purely political, administrative, p h ilo s o p h ica l or academic conclusion. Third, [it] must be a c o n t r o v e r s y the judicial determination of which will have the e ffe c t of a final judgment in law or decree in equity upon the r ig h ts , status or legal relationships of one or more of the real p a r t ie s in interest, or lacking these qualities be of such o v e r r id in g public moment as to constitute the legal equivalent of
all of them. I d . at 6 (citing Northfield Ins. Co. v. Mont. Ass'n. of Counties, 10 P.3d 8 1 3 , 815 (Mont. 2000)). AEIC contends that because the issues Ayotte s e e k s to have resolved via declaratory judgment are dependent upon t h e issues awaiting adjudication in Ayotte's state court action, it is not n o w appropriate for this Court to entertain this action. Id. at 8-9. W it h respect to Ayotte's common law bad faith claim, AEIC a r g u e s that it is subject to summary judgment because it is premature u n d e r Montana law. Id. at 9. AEIC contends that a claim for bad faith in s u ra n ce practices only accrues when the underlying dispute giving r is e to the allegations of bad faith has been determined by judgment or s e t t le m e n t . Id. at 9-10 (citing O'Connor v. Nat'l Union Fire Ins. Co., 87 P .3 d 454, 457 (Mont. 2004)). Because there has been no judgment or s e t t le m e n t of Ayotte's underlying tort action, AEIC argues that there is no actionable bad faith claim, and summary judgment should be e n t e r e d . Id. at 10. B. A y o t t e 's Arguments
Ayotte contends that his claims are not subject to summary ju d g m e n t because he is entitled to advance payment for damages
incurred prior to final determination or settlement of the underlying a c tio n when, as here, liability is reasonably clear pursuant to Ridley. Pl.'s Response Br. to Defendant American Economy Insurance C o m p a n y 's Motion for Summary Judgment ("Pl.'s Response") (Court D o c . 8) at 2. Ayotte argues that AEIC has failed to establish that there e x is t s no genuine issue of material fact surrounding whether liability fo r Ayotte's injuries is reasonably clear. Id. at 2. Ayotte contends that A E I C 's insureds' liability is reasonably clear. Id. at 2. Ayotte argues t h a t the fact that there is an underlying state court case where AEIC's in s u re d s are defending and seeking contribution from other defendants is insufficient to establish that there is no genuine issue of material fa c t regarding liability. Id. at 11. Ayotte further argues that the in fo r m a t io n necessary to determine whether liability was reasonably c le a r to AEIC at the time it denied the his demand is not presently in t h e record. Id. at 13. Ayotte argues that the Court needs access to A E I C 's claims file before it can make a determination regarding the p ro p r ie t y of AEIC's refusal to make advance Ridley payments. Id. at 1 3 -1 6 . A y o t t e also argues that where liability is reasonably clear, Ridley
has already settled that a justiciable controversy exists. Id. at 15. Thus, Ayotte argues that because liability is reasonably clear here, the c o n t ro v e r s y is justiciable. Id. A y o t t e further argues that his common law bad faith claim is not p re m a t u r e . Id. at 21-22. He claims that only statutory bad faith must a w a it resolution of the underlying personal injury action and he has n o t stated a statutory bad faith claim. Id. Ayotte contends that AEIC h a s not only failed to establish the absence of genuine issues of m a t e r ia l fact surrounding its handling of his claim, but also failed to a lle g e that it handled his claim in good faith. Id. As a result, Ayotte a r g u e s that AEIC is not entitled to summary judgment on his common la w bad faith claim. III. S U M M A R Y JUDGMENT STANDARD S u m m a r y judgment "should be rendered if the pleadings, the d is co v e r y and disclosure materials on file, and any affidavits show that t h e r e is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). Material facts are those which may affect the outcome of the case. Wilderness Development, LLC v. Hash, 606 F. Supp. 2d 1275, 1279 (D.
Mont. 2009) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1 9 8 6 )). A dispute as to a material fact is genuine if there is sufficient e v id e n c e for a reasonable fact finder to return a verdict for the n o n m o v in g party. Id. The party moving for summary judgment bears the initial burden o f identifying those portions of the pleadings, discovery, and affidavits t h a t demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Cattrett, 477 U.S. 317, 323 (1986) (cited in Wilderness D e v e lo p m e n t , 606 F. Supp. 2d at 1279). Where the moving party will h a v e the burden of proof on an issue at trial, it must affirmatively d e m o n s t r a t e that no reasonable trier of fact could find other than for t h e moving party. Id. But on an issue for which the opposing party w ill have the burden of proof at trial, the moving party need only point o u t "that there is an absence of evidence to support the nonmoving p a r t y 's case." Id. O n c e the moving party meets its initial burden, the nonmoving p a r t y must go beyond the pleadings and, by its own affidavits or d is co v e r y , "set out specific facts showing a genuine issue for trial." Fed. R. Civ. P. 56(e). If the nonmoving party fails to make this
showing "the moving party is entitled to judgment as a matter of law." Celotex Corp., 477 U.S. at 323. "In considering a motion for summary ju d g m e n t , the court may not weigh the evidence or make credibility d e t e r m in a t io n s , and is required to draw all inferences in a light most fa v o r a b le to the non-moving party." Wilderness Development, 606 F. S u p p . 2d at 1279 (citing Freeman v. Arpaio, 125 F.3d 732, 735 (9 th Cir. 1 9 9 7 ) (abrogated on other grounds as noted in Shakur v. Schriro, 514 F .3 d 878, 884-85 (9th Cir. 2008)). While summary judgment is not p e r c e iv e d as a disfavored procedural shortcut, Celotex Corp., 477 U.S. a t 323, it should never be used "as a substitute for trial on the facts a n d law" Cox v. English-American Underwriters, 245 F.2d 330, 333 (9 th C ir . 1957). IV . D IS C U S S IO N A. Summary Judgment 1. D e c la r a t o r y Judgment
As noted above, Ayotte's complaint seeks a declaratory judgment r e g a r d in g his rights under the insurance policy and is not limited to c la im in g a right to Ridley payments. In opposing AEIC's motion for s u m m a r y judgment, however, Ayotte relies entirely on authorities
related to his Ridley claims; he does not argue that he now has a ju s t ic ia b le claim in this Court for payment from the Sineriuses' in s u re r , other than Ridley payments. See Court Doc. 8 at 7-21. In Northfield Ins. Co. v. Montana Ass'n. of Counties, 10 P.3d 813 (M o n t . 2000), the Montana Supreme Court considered claims for d e c la r a to r y relief brought by secondary insurers who sought a ruling t h a t they had no duty to indemnify their insured in connection with c la im s pending in federal court. The court there held that, where the u n d e r ly in g facts were disputed and the underlying litigation had not y e t been finally adjudicated or settled, any relief granted would be m e r e speculation, and possibly a nullity. Id. at 817-18. Thus, the s u p r e m e court affirmed a ruling that the claim was not justiciable. In Miller v. State Farm Mutual Auto. Ins. Co., 155 P.3d 1278, 1 2 8 0 -8 1 (Mont. 2007), the supreme court cited Northfield with a p p r o v a l and cautioned: "Seeking a declaratory judgment too early in t h e proceedings, when other remedies are still available, may amount t o an advisory opinion." Similar concerns attend claims for declaratory judgment in fe d e ra l court. See Fed.R.Civ.P. 57; 28 U.S.C. § 2201. The advisory
committee note to Rule 57 states: "When declaratory relief will not be e ffe ct iv e in settling the controversy, the court may decline to grant it." The Ninth Circuit, citing Brillhart v. Excess Ins. Co., 316 U.S. 491, 4 9 5 -9 8 (1942), has made clear that jurisdiction under 28 U.S.C. § 2 2 0 1 (a ) is discretionary, and the district courts should avoid d u p lic a t iv e litigation. Government Employees Ins. Co. v. Dizol, 133 F .3 d 1220, 1225 (9th Cir. 1998). In Dizol, the court noted that the c o u r t should consider, among other factors, whether the declaratory a c tio n will settle all aspects of the controversy, and whether the use of a declaratory action will result in entanglement between the federal a n d state court systems. Id. at n. 5. See also Great American Assur. C o . v. Bartell, 2008 WL 1927333 *3 (D.Ariz. 2008) (dismissing in s u ra n ce coverage dispute where underlying liability action was p e n d in g in state court). Based on these authorities, the Court c o n c lu d e s that this declaratory judgment action with respect to AEIC's d u t y to indemnify the Sineriuses' should be dismissed. T h e Court reaches a different conclusion with respect to the c la im for Ridley payments, however. "Pursuant to Ridley, insurers are o b lig a t e d to pay an injured third party's medical expenses prior to final
settlement when liability for such expenses is reasonably clear." Shilhanek v. D-2 Trucking, Inc., 70 P.3d 721, 724 (Mont. 2003). Liability is reasonably clear, triggering an insurer's obligation to a d v a n c e Ridley payments, when it is more likely than not that the in s u re d was negligent. See Etter v. Safeco Ins. Co. of Ill., 192 F. Supp. 2 d 1071, 1076 (D. Mont. 2002) (fact that insured violated motor vehicle s t a t u t e indicated it was more likely than not that insured was n e g lig e n t and triggered the insurer's duty to advance medical p a y m e n t s incurred as a result of the insured's negligence). This n a r r o w issue is not before the state court in the underlying action and is not premature under Montana law. H e r e , AEIC has failed to present summary-judgment-type e v id e n c e demonstrating that liability is not reasonably clear. AEIC a r g u e s that liability is not reasonably clear because, for example, its in s u re d s were not responsible for maintaining the sign pursuant to t h e ir lease agreement with the state. Court Doc. 4 at 5. But AEIC fa ils to provide summary-judgment-type evidence to support its a lle g a t io n s . It only provides the following documents in support of its m o t io n : the complaint and answer from the underlying state action; a
third party complaint against Williams Plumbing, Heating and U tilit ie s , Inc., from the underlying state action; letters between c o u n s e l for the parties; and incomplete discovery responses. See Court D o c . 4 at Exs. A & B; Def. American Economy Insurance Company's R e p ly Brief in Support of Def.'s Mot. for Summary Judgment ("Def.'s R e p ly " ) (Court Doc. 11) at Exs. A-E.1 These materials are not s u ffic ie n t to support AEIC's arguments for summary judgment. The record before the Court does not provide an adequate e v id e n t ia r y basis for concluding that liability for Ayotte's injuries is n o t reasonably clear. No discovery has been undertaken here; no a ffid a v its are submitted by AEIC. Consequently, AEIC has failed to d e m o n s t r a t e the absence of any genuine issues of material fact r e g a r d in g whether liability for the Ayotte's injuries is reasonably clear.
None of these documents is authenticated. The Ninth Circuit has r e p e a te d ly held that documents which have not had a proper foundation la id to authenticate them cannot support a motion for summary ju d g m e n t . See, e.g., Orr v. Bank of America, 285 F.3d 764, 773 (9th Cir. 2 0 0 2 ); Beyene v. Coleman Sec. Services, Inc., 854 F.2d 1179, 1182 (9th C ir . 1988). Furthermore, the unauthenticated discovery responses A E I C attached to its reply brief are not signed by John or Carma S in e r iu s , the persons making them, as required by Mont.R.Civ.P. 33(a), b u t are signed only by their attorney.
B a d Faith
A lt h o u g h , as set forth above, Ayotte's bad faith count alleges v io la t io n of "Montana statute", he acknowledges in his brief that a bad fa it h claim under the Unfair Trade Practices Act, MCA § 33-18-301 et s e q ., "has not yet accrued and is not asserted herein...." Court Doc. 8 a t 24. Accordingly, the Court considers here whether summary ju d g m e n t is appropriate on Ayotte's common law bad faith claim. A lt h o u g h earlier cases held otherwise,2 the Montana Supreme C o u rt now recognizes a third-party action for common law bad faith in s u ra n ce practices. Brewington v. Employers Fire Ins. Co., 992 P.2d 2 3 7 , 248 (Mont. 1999) (recognizing rights of third-party claimants to b r in g common law bad faith action); see also Jacobson v. Allstate, 215 P .3 d 649, 662-63 n.3 (Mont. 2009). The question AEIC raises here is
S e e Fode v. Farmers Insurance Exchange, 719 P.2d 414, 415-16 (M o n t . 1986) (citing Marzolf v. Hoover, 596 F.Supp. 596, 599 (D.Mont. 1 9 8 4 )). Marzolf held that "the only duty running from an insurer to a t h ir d -p a r t y claimant is that imposed upon the insurer by § 33-18-201." Fode, identifying the Marzolf holding as the general rule, held only that d u t ie s running from an insurer to a tort victim "have been recognized by t h e Legislature in enacting § 33-18-201, MCA. The Legislature has s u ffic ie n t ly articulated the obligations and this Court will not interfere."
whether this common law bad faith claim is premature because the u n d e r ly in g negligence action remains pending. Although the Montana Supreme Court has not yet had occasion t o shape the contours of a third-party common law bad faith claim, it h a s held that the claim accrues "`when all elements of the claim or c a u s e exist or have occurred, the right to maintain an action on the c la im or cause is complete, and a court or other agency is authorized to a c ce p t jurisdiction of the action.'" See O'Connor v. Nat'l Union Fire I n s . Co. of Pittsburgh, 87 P.3d 454,456 (citing § 27-2-102(1)(a), M.C.A.) C o n s is t e n t with the conclusions reached above, the Court finds t h a t the claim of bad faith with respect to AEIC's handling of Ridley c la im s is not premature and is now justiciable. AEIC provides no M o n t a n a authority holding that, in a third-party common law bad fa it h action outside of the worker's compensation arena, a claimant m u s t await final resolution of the underlying claim before bringing a b a d faith action. O'Connor's requirement that the underlying claim be s e t t le d or adjudicated in part prior to the filing of a common law bad fa it h action has apparently been applied only in the context of worker's
compensation claims.3 Ayotte's third-party bad faith claim with r e s p e c t to the Ridley payments arose when AEIC refused his Ridley d e m a n d s . Judgment or settlement of the underlying case has not been h e ld to be a prerequisite in this context. Consequently, Ayotte's c o m m o n law bad faith is not premature and AEIC is not entitled to s u m m a r y judgment.4 B. A y o t t e 's Rule 56(f) Request
T h e Court has reviewed the parties' submissions on Ayotte's Rule 5 6 (f) Request. In light of the Court's recommendations herein, t h e Court finds that his request for postponement is moot.
In an unpublished decision considering a Montana case not in v o lv in g worker's compensation, the Ninth Circuit held that a claimant n e e d not await resolution of the underlying claim before bringing a c o m m o n law bad faith claim. The court held that because the claimant k n o w s he has a third-party claim when an insurer refuses to accept his d e m a n d , he need not wait for settlement or judgment of the underlying c a s e . Burton v. State Farm Mut. Auto, Ins. Co., 105 Fed. Appx. 154, 1 5 7 (9th Cir. 2004). Because of the complex issues that may arise with respect to the h a n d lin g of the bad faith action, given the pendency of the underlying c a s e , it may be appropriate to stay proceedings on the bad faith claim.
M o t io n to Strike and Motion to File Overlength Brief and F a c t u a l Materials
T h e Court has considered AEIC's Reply Brief and has reviewed t h e attached materials. Accordingly, the Court will deny Ayotte's M o t io n to Strike Defendant's Reply Brief and attached factual m a t e r ia ls and grant the Defendant's Motion for Leave to File Pertinent F a c t u a l Materials and Over-Length Reply Brief . In the future, c o u n s e l should endeavor to comply with both the Federal Rules of Civil P r o c e d u r e and the Local Rules when filing briefs and factual materials w it h the Court. Generally speaking, concise briefs are persuasive b r ie f s . V. C O N C L U S IO N B a s e d on the foregoing, I T IS ORDERED that: (1 ) (2 ) P la in t iff's Rule 56(f) Request (Court Doc. 7) is MOOT. P la in t iff's Objection and Motion to Strike Defendant's Reply B r ie f and Supporting Evidence (Court Doc. 13) is DENIED. (3 ) D e fe n d a n t 's Motion for Leave to File Pertinent Factual M a t e r ia ls and Overlength Reply Brief (Court Doc. 16) is
GRANTED. I T IS RECOMMENDED that Defendant's Motion for Summary J u d g m e n t (Court Doc. 3) be DENIED, but that Plaintiff's claim for d e c la r a to r y relief related to AEIC's conduct other than its failure to m a k e Ridley payments be dismissed without prejudice. If this r e c o m m e n d a t io n is adopted, Defendant should be given 14 days to file a responsive pleading, pursuant to Fed. R. Civ. P. 12(a)(4)(A). N O W , THEREFORE, IT IS FURTHER ORDERED that the C le r k shall serve a copy of the Findings and Recommendation of U.S. M a g is t r a te Judge upon the parties. The parties are advised that p u r s u a n t to 28 U.S.C. § 636, any objections to the findings and r e c o m m e n d a t io n must be filed with the Clerk of Court and copies s e r v e d on opposing counsel within fourteen (14) days after receipt h e r e o f, or objection is waived. D A T E D this 8 th day of January, 2010. /s / Carolyn S. Ostby United States Magistrate Judge
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