Dempsey v. Allstate Insurance Co. , 325 Mont. 207 ( 2004 )

No. 04-032
IN THE SUPREME COURT OF THE STATE OF MONTANA
2004 MT 391
TYLER DEMPSEY, Individually and
on behalf of all others similarly situated,
Plaintiff,
v.
ALLSTATE INSURANCE COMPANY,
an Illinois corporation,
Defendant.
CERTIFIED QUESTION FROM:
The United States District Court, District of Montana, Butte Division,
Honorable Sam E. Haddon, Presiding Judge
COUNSEL OF RECORD:
For Plaintiff:
Brian Fay (argued) and Christopher Angel, Angel, Coil and Bartlett,
Bozeman, Montana
For Defendant:
Peter Habein (argued), Crowley, Haughey, Hanson, Toole & Dietrich,
Billings, Montana
For Amici Curiae:
Randall G. Nelson, Nelson & Dahle, Billings, Montana (MDTLA)
Roger M. Sullivan (argued), McGarvey, Heberling, Sullivan & McGarvey,
Kalispell, Montana (MTLA)
Jon Metropoulos and Dana Hupp, Gough, Shanahan, Johnson & Waterman,
Helena, Montana (Property Casualty Insurers)
Argued: July 14, 2004
Submitted: August 31, 2004
Decided: December 30, 2004
Filed:
__________________________________________
Clerk
Justice W. William Leaphart delivered the Opinion of the Court.
¶1 The Plaintiffs, Tyler Dempsey and those similarly situated, brought this class action in the
United States District Court for the District of Montana to recover damages from Allstate Insurance
Company pursuant to insurance policies Allstate had issued. The Class alleges that the retroactive
application of our decision in Hardy v. Progressive Specialty Insurance Co., 2003 MT 85, 315
Mont. 107, 67 P.3d 892, entitles them to additional payments from past insurance claims that were
not previously allowed because their automobile insurance policies did not allow for stacking.
Allstate moved to dismiss, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The
District Court certified a question and six relevant facts to this Court and denied Allstate’s motion
without prejudice pending our answer.
¶2 We accepted the certified question, which is stated as:
¶3 Does the Montana Supreme Court’s decision in Hardy v. Progressive Specialty Insurance
Co., 2003 MT 85, 315 Mont. 107, 67 P.3d 892, apply prospectively only, or does it apply
retroactively to require payment of stacked uninsured, underinsured motorist and medical payment
insurance coverages in qualifying circumstances on claims arising before the date of the Hardy
decision?
¶4 Our answer is that the Hardy decision applies retroactively to cases pending on direct review
or not yet final.
FACTUAL AND PROCEDURAL BACKGROUND
¶5 The District Court certification included the following four agreed upon facts: 1
¶6 1. On January 1, 2000, Dempsey was injured in a motor vehicle accident in Gallatin County,
Montana. He was a named insured under an Allstate policy which had medical payment coverage
limits of $2,000 applicable to each of four vehicles listed in the policy.
¶7 2. Although Dempsey’s medical expenses exceeded $10,000, Allstate only paid the single
limit of liability, $2,000, and declined to stack limits, relying on anti-stacking language in the policy
and Montana’s anti-stacking statute, § 33-23-203, MCA, which was in effect at the time of
Dempsey’s accident.
¶8 3. On April 18, 2003, the Montana Supreme Court decided Hardy v. Progressive Specialty
Insurance Co., which determined Montana’s anti-stacking statute to be unconstitutional and the anti-
stacking language in Progressive’s insurance policy to be void and unenforceable and further held
that Progressive had to “stack” and pay underinsured motorist benefits for each coverage for which
the insured had paid a separate premium.
¶9 4. Allstate has maintained that the Hardy decision applies prospectively only. On that basis,
Allstate has declined to stack uninsured motorist, underinsured motorist, or medical payment
benefits in claims arising before the April 18, 2003, decision in Hardy. Dempsey accordingly
brought a class action to force Allstate to stack medical payment, uninsured, and underinsured
policy limits on all claims arising prior to the Hardy decision.
¶10 In sum, the claims of Dempsey and of many other Montana automobile insurance consumers
ride on our determination of whether the Hardy decision applies retroactively or whether it only
1
Facts 5 and 6 were disputed by the Class. However, we do not include them as
we determine that they are not material to our decision.
applies to claims that arose on or after April 18, 2003. In addressing this issue, we invited the
Montana Trial Lawyers Association (MTLA) and the Montana Defense Trial Lawyers Association
(MDLTA) to appear as amicus curiae. We held oral argument en banc on July 14, 2004.
DISCUSSION
¶11 Does the Montana Supreme Court’s decision in Hardy v. Progressive Specialty Insurance
Co. apply prospectively only, or does it apply retroactively to require payment of stacked uninsured,
underinsured motorist and medical payment insurance coverages in qualifying circumstances on
claims arising before the date of the Hardy decision?
I. The Rule of Retroactivity in Montana
¶12 In 1971 the United States Supreme Court announced Chevron Oil Co. v. Huson (1971), 404
U.S. 97, 92 S. Ct. 349, 30 L. Ed. 2d 296. Chevron laid-out a flexible three-factored test for whether
a decision applies prospectively only. We adopted the Chevron test for questions of Montana law
in LaRoque v. State (1978), 178 Mont. 315, 318-19, 583 P.2d 1059, 1061, and subsequently applied
it several times. See, e.g., Poppleton v. Rollins, Inc. (1987), 226 Mont. 267, 271, 735 P.2d 286, 289;
Nehring v. LaCounte (1986), 219 Mont. 462, 471, 712 P.2d 1329, 1335; Jensen v. State, Dep’t of
Labor & Indus. (1984), 213 Mont. 84, 88, 689 P.2d 1231, 1233. In the meantime, the United States
Supreme Court revisited the question of prospective application several times and eventually
overruled Chevron in Harper v. Virginia Dep’t of Taxation (1993), 509 U.S. 86, 113 S. Ct. 2510,
125 L. Ed. 2d 74.
¶13 Then, in Porter v. Galarneau (1996), 275 Mont. 174, 185, 911 P.2d 1143, 1150, and without
analyzing Harper, we strayed from our reliance on Chevron. Although Porter involved statutory
retroactivity, we remarked in dicta that “[w]e will continue to give retroactive effect to judicial
decisions, which is in accord with the U.S. Supreme Court’s holding in Harper v. Virginia Dep’t of
Taxation.” Subsequently, this time as a general rule of law, we cited Porter in support of
retroactivity. See Kleinhesselink v. Chevron, U.S.A. (1996), 277 Mont. 158, 162, 920 P.2d 108, 111
(holding that “[w]e give retroactive effect to judicial decisions” and therefore a decision of ours “is
applicable to this case even though it was not available to the District Court . . . .”); Haugen v.
Blaine Bank of Montana (1996), 279 Mont. 1, 8, 926 P.2d 1364, 1368; State v. Steinmetz, 1998 MT
114, ¶ 10, 288 Mont. 527, ¶ 10, 961 P.2d 95, ¶ 10 (criminal case).
¶14 Following Steinmetz it appeared that we would follow the rule of the United States Supreme
Court’s Harper decision. However, subsequent decisions did not bear that out. In Ereth v. Cascade
County, 2003 MT 328, 318 Mont. 355, 81 P.3d 463, Seubert v. Seubert, 2000 MT 241, 301 Mont.
382, 13 P.3d 365, and Benson v. Heritage Inn, Inc., 1998 MT 330, 292 Mont. 268, 971 P.2d 1227,
without reference to the Porter line of cases, we applied the Chevron test to determine whether
prospective application was appropriate. The Class argues that we did not expressly adopt a new
approach to retroactivity in Ereth, Seubert, and Benson, that only pre-Harper cases were cited by the
parties in those cases, and that the decisions were therefore aberrations where this Court inadvertently
reverted to old discredited precedent. Given our long history of applying decisions prospectively we
cannot ignore these recent decisions applying the Chevron test. However, we also cannot ignore our
holdings in Kleinhesselink and Haugen. As we explain later in this opinion, the two lines of cases
may be comfortably merged into a rule of retroactivity in keeping with the last seventy years of this
Court’s jurisprudence.
¶15 The question of whether we should follow the philosophy espoused by Chevron or by Harper
does not produce a simple or binary answer. In settling what rule of retroactivity this Court follows
we must look to the history surrounding the retroactivity of judicial decisions and what other states
have fashioned for themselves in the wake of the United States Supreme Court’s repudiation of the
Chevron rule. We will conclude by adopting the best elements of the Harper and Chevron rules, thus
adhering to our precedents and extending a measure of flexibility not available under an outright
adoption of Harper. In terms of the instant case, Allstate does not overcome our strong presumption
in favor of retroactivity.
A. A Brief History of Retroactivity
¶16 The retroactive/prospective distinction is relatively new to our common law tradition. In the
days of Blackstone the law was understood as something that the courts applied, not something that
they made. Accordingly, it made no sense for a court to comment on whether its ruling applied
retroactively or not. Its ruling was simply the law as it is and always was. See Kermit Roosevelt III,
A Little Theory Is a Dangerous Thing: The Myth of Adjudicative Retroactivity, 31 Conn. L. Rev.
1075, 1083 (1999) (“[T]he Blackstonian model takes law as a timeless constant, always
(optimistically) assuming the correctness of the current decision. Prior inconsistent decisions are and
always were incorrect.”).
¶17 This view, of course, is no longer even remotely fashionable in today’s climate of legal realism
and aversion to castles in the clouds. Justice Holmes, the great realist of his time, was one of the first
to see past Blackstone and spy the retroactive/prospective distinction. In endorsing what we now
call “retroactivity” he characterized common law adjudication not as a search for an entity separate
from the courts, but as an act of creation, stating “[t]he law of a State does not become something
outside of the state court and independent of it by being called the common law. Whatever it is called
it is the law as declared by the state judges and nothing else.” Kuhn v. Fairmont Coal Co. (1910),
215 U.S. 349, 372, 30 S. Ct. 140, 148, 54 L. Ed. 228, 239 (Holmes, J., dissenting).
¶18 After flirting with the issue of prospective decisions in a handful of now defunct pre-Erie
common law cases, see, e.g., Kuhn, 215 U.S. at 360, 30 S.Ct. at 143, 54 L. Ed. at 234; Gelpcke v.
City of Dubuque (1863), 1 Wall. 175, 206, 68 U.S. 175, 206, 17 L. Ed. 520, 525, the Court ruled in
1932 that a state supreme court does not violate the United States Constitution by giving a decision
mere prospective effect. Great N. Ry. Co. v. Sunburst Oil & Ref. Co. (1932), 287 U.S. 358, 364, 53
S. Ct. 145, 148, 77 L. Ed. 360, 366 (“A state in defining the limits of adherence to precedent may
make a choice for itself between the principle of forward operations and that of relation backward.”).
Great Northern merely recognized a practice which had been gathering strength in the state courts
for some time. Significantly for our purposes, however, the opinion affirmed two consolidated cases
of this Court. In the rates case of Montana Horse Products Co. v. Great Northern Railway Co.
(1932), 91 Mont. 194, 7 P.2d 919, we explicitly overruled portions of Doney v. Northern Pacific
Railway Co. (1921), 60 Mont. 209, 199 P. 432. However, in the interests of fairness, we made our
holding prospective only and gave the parties before us the benefit of the overruled rule of law. We
explained that, retroactivity notwithstanding, “It would be manifestly unjust and improper” to penalize
the losing party for relying on Doney even though we judged that case to have been in error. See
Montana Horse Products Co., 91 Mont. at 211, 7 P.2d at 925. We did the same in the companion
case. Sunburst Oil & Ref. Co. v. Great N. Ry. Co. (1932), 91 Mont. 216, 220-21, 7 P.2d 927, 929.
¶19 After receiving the United States Supreme Court’s blessing in Great Northern this Court used
its power to prospectively apply its decisions when it saw fit. See e.g., Graham v. Rolandson (1967),
150 Mont. 270, 290-91, 435 P.2d 263, 274; Hayward v. Richardson Const. Co. (1959), 136 Mont.
241, 250-51, 347 P.2d 475, 480; State ex. rel. Mueller v. Todd (1945), 117 Mont. 80, 86, 158 P.2d
299, 302. The United States Supreme Court fully endorsed and justified its own use of prospective
application in 1965 with Linkletter v. Walker (1965), 381 U.S. 618, 85 S. Ct. 1731, 14 L. Ed. 2d 601.
In Linkletter the Warren Court was faced with an extraordinarily explosive issue. Four years before,
in Mapp v. Ohio (1961), 367 U.S. 643, 81 S. Ct. 1684, 6 L. Ed. 2d 1081, the Court had ruled that the
exclusionary rule applies against the states. Linkletter argued that his conviction was obtained
through evidence that should have been inadmissible under the exclusionary rule. Even though he
was convicted and his case became final before the Mapp ruling, he reasoned that because the
decisions of the United States Supreme Court apply retroactively he must be granted habeas corpus
relief. Linkletter, 381 U.S. at 621, 85 S.Ct. at 1733, 14 L. Ed. 2d at 604.
¶20 If the Court had granted Linkletter’s request, thousands of otherwise properly obtained
convictions would have immediately become suspect. The Court found such retroactive application
too great a disruption of the criminal justice system. Linkletter, 381 U.S. at 637-38, 85 S.Ct. at
1742, 14 L. Ed. 2d at 613. Also, applying Mapp to cases closed before its issuance would do nothing
to further the policy behind the exclusionary rule–deterrence of unconstitutional police actions.
Linkletter, 381 U.S. at 636-37, 85 S.Ct. at 1741-42, 14 L. Ed. 2d at 612-13. Therefore, after weighing
these factors and others, the Court concluded it was prudent to rule that cases final before the Mapp
decision were unaffected by it.
¶21 In 1971 the Court extended this flexible approach to civil cases in Chevron Oil Co. v. Huson
(1971), 404 U.S. 97, 92 S. Ct. 349, 30 L. Ed. 2d 296. In applying a prior decision that had greatly
changed the operation of statutes of limitations under the Outer Continental Shelf Lands Act, the
Court adopted a version of the nonretroactivity test used in its criminal cases. In the context of
criminal appeals, the three factors of the test were as follows:
First, the decision to be applied nonretroactively must establish a new principle of law,
either by overruling clear past precedent on which litigants may have relied or by
deciding an issue of first impression whose resolution was not clearly foreshadowed.
Second, it has been stressed that “we must . . . weigh the merits and demerits in each
case by looking to the prior history of the rule in question, its purpose and effect, and
whether retrospective operation will further or retard its operation.” Finally, we have
weighed the inequity imposed by retroactive application, for “[w]here a decision of
this Court could produce substantial inequitable results if applied retroactively, there
is ample basis in our cases for avoiding the ‘injustice or hardship’ by a holding of
nonretroactivity.”
Chevron, 404 U.S. at 106-07, 92 S.Ct. at 355, 30 L. Ed. 2d at 306 (citations omitted). With this test
in place the federal courts had flexibility to grant nonretroactive relief to litigants who had justifiably
relied on old rules of law when there was no indication that the rule would change. Gone was any
pretense that the law that the courts announce is the law as it has always been.
B. The Decline and Fall of Chevron
¶22 The United States Supreme Court’s tolerance of prospective decisions did not last long. After
indicating several times that it was not satisfied with current doctrine, the Court finally overruled itself
in 1987, jettisoning the Linkletter approach. Griffith v. Kentucky (1987), 479 U.S. 314, 107 S. Ct.
708, 93 L. Ed. 2d 649. The Court announced a new rule requiring that all criminal decisions apply
retroactively to all cases “pending on direct review or not yet final.” Griffith, 479 U.S. at 328, 107
S.Ct. at 716, 93 L. Ed. 2d at 661. It reasoned that it was unfair to announce a new rule that would
affect some defendants and not others merely because of the timing of their prosecutions. See
Griffith, 479 U.S. at 327-28, 107 S.Ct. at 715-16, 93 L. Ed. 2d at 661.
¶23 It was only a matter of time before this approach to retroactivity in criminal cases found its
way into the Court’s civil jurisprudence. Relying on Griffith and the split opinion of James B. Beam
Distilling Co. v. Georgia (1991), 501 U.S. 529, 111 S. Ct. 2439, 115 L. Ed. 2d 481, the Court
announced that due to the inequities inherent in a flexible Chevron approach, federal rules of law may
not be selectively applied prospectively. The Court stated:
When this Court applies a rule of federal law to the parties before it, that rule is the
controlling interpretation of federal law and must be given full retroactive effect in all
cases still open on direct review and as to all events, regardless of whether such
events predate or postdate our announcement of the rule. The rule extends Griffith’s
ban against “selective application of new rules.” Mindful of the “basic norms of
constitutional adjudication” that animated our view of retroactivity in the criminal
context, we now prohibit the erection of selective temporal barriers to the application
of federal law in noncriminal cases.
Harper v. Virginia Dep’t of Taxation (1993), 509 U.S. 86, 97, 113 S. Ct. 2510, 2517, 125 L. Ed. 2d
74, 86 (citations omitted). After Harper, the Chevron test no longer had any applicability to
interpretations of federal law, whether in federal or state court. The Harper decision is grounded in
fairness and the arbitrariness of “temporal barriers,” rather than a renewed embrace of Blackstone’s
theory of law “existing” independently of a court’s decisions.
C. Revolt in the Provinces: Chevron is Alive and Well in the State Courts
¶24 Chevron concerned a federal question, and thus only governed issues of federal law.
Therefore, although the United States Supreme Court has rejected Chevron, the states are free to
continue employing the Chevron criteria in deciding questions of retroactivity of state law. Prior to
Harper, the Chevron approach proved popular in state courts. See, e.g., Schreiner v. Fruit (Alaska
1974), 519 P.2d 462, 466-67; Peagler v. Phoenix Newspapers, Inc. (Ariz. 1977), 560 P.2d 1216,
1220; Hoff v. Kempton (Minn. 1982), 317 N.W.2d 361, 363; First of McAlester Corp. v. Oklahoma
Tax Com’n (Okla. 1985), 709 P.2d 1026, 1034; Taskett v. KING Broad. Co. (Wash. 1976), 546 P.2d
81, 86-87. As stated earlier, we followed the trend by adopting the Chevron approach for ourselves
in LaRoque v. State (1978), 178 Mont. 315, 318-19, 583 P.2d 1059, 1061.
¶25 The state courts’ reactions to Harper have been decidedly mixed, with many expressing
disagreement, if not open hostility. For example, the Supreme Court of New Hampshire voiced
support for the rejection of Chevron. See Ireland v. Worcester Ins. Co. (N.H. 2003), 826 A.2d 577,
581. However, inspired by Justice O’Connor’s dissent in Harper, the court reserved for itself the
authority to give new rules prospective effect, but that if a rule is applied retroactively to the parties
before the court, it must be given uniform retroactive effect. Ireland, 826 A.2d at 581. In contrast,
the New Mexico Supreme Court took great issue with much of Harper, especially Justice Scalia’s
concurrence. Beavers v. Johnson Controls World Servs., Inc. (1994), 881 P.2d 1376, 1380-81
(criticizing Justice Scalia’s seeming embrace of the Blackstonian view of judicial discovery). Stating
that its jurisprudence “is more nearly consistent with the views of the Harper minority,” the court
employed Harper’s equality rationale to construct a presumption in favor of retroactivity “in lieu of
the hard-and-fast rule prescribed for federal cases in Harper.” Beavers, 881 P.2d at 1383. See also
McCullar v. Universal Underwriters Life Ins. Co. (Ala. 1996), 687 So. 2d 156, 184 (“A long line of
Alabama precedent favors prospective application . . . when vested contractual rights are pervasive,
and when retroactive application will create staggering losses . . . .”).
¶26 Some state courts have welcomed Harper as being consistent with the court’s own approach
to retroactivity. See e.g., State v. Styles (Vt. 1997), 693 A.2d 734, 735. The more common
approach, however, has been to decline Harper’s invitation to rethink Chevron, and merely to note
that Harper is only applicable to federal law. See, e.g., Citicorp v. Franchise Tax Bd. (Cal. App.
2000), 100 Cal. Rptr. 2d 509, 525 (briefly stating that “[a]lthough Harper cast doubt on the three-part
test set out in Chevron Oil” it was not controlling on issues of state law); Aleckson v. Vill. of Round
Lake Park (Ill. 1997), 679 N.E.2d 1224, 1227 (limiting Harper to questions of federal law and
analyzing it no further); Wenke v. Gehl Co. (Wis. 2004), 682 N.W.2d 405, 430 n.43. Many states
are uncomfortable with the harsh results that might follow if they abandon Chevron and completely
disallow prospective decisions.
D. Reserving Chevron as an Exception
¶27 Our precedent allows for a compromise between the powerful arguments of the Harper court
and the compelling need for prospective application in limited circumstances. As explained earlier,
our adoption of Chevron did not represent a break with a history of consistently applying universal
retroactivity. Chevron merely gave us the criteria by which to judge the merits of prospectively
applying a decision. As it happens, Chevron has not been very helpful to Montana litigants seeking
prospective application. Although we have applied the Chevron test numerous times, the test has
resulted in a prospective application on only four occasions. See Ereth v. Cascade County, 2003 MT
328, 318 Mont. 355, 81 P.3d 463; Seubert v. Seubert, 2000 MT 241, 301 Mont. 382, 13 P.3d 365;
Sheehy v. State (1991), 250 Mont. 437, 820 P.2d 1257; Montana Bank of Roundup v. Musselshell
County Bd. of Com’rs (1991), 248 Mont. 199, 810 P.2d 1192. The last two of these cases concerned
questions of federal law, and thus were abrogated by Harper. Sheehy, 250 Mont. at 441-42, 820
P.2d at 1259 (interpreting Davis v. Michigan Dep’t of the Treasury (1989), 489 U.S. 803, 109 S. Ct.
1500, 103 L. Ed. 2d 891, as not applying retroactively--the exact view later overruled in Harper);
Montana Bank of Roundup, 248 Mont. at 206, 810 P.2d at 1196 (prospectively applying Montana
Bankers Ass’n v. Montana Dep’t of Revenue (1978), 117 Mont. 112, 580 P.2d 909, where we
interpreted 31 U.S.C. § 742). That leaves only two cases where we have given a decision
nonretroactive effect under the Chevron test.
¶28 We agree with the Harper court that limiting a rule of law to its prospective application
creates an arbitrary distinction between litigants based merely on the timing of their claims. Interests
of fairness are not served by drawing such a line, nor are interests of finality. In the interests of
finality, the line should be drawn between claims that are final and those that are not (the line drawn
in Harper). “New legal principles, even when applied retroactively, do not apply to cases already
closed.” Reynoldsville Casket Co. v. Hyde (1995), 514 U.S. 749, 758, 115 S. Ct. 1745, 1751, 131
L. Ed. 2d 820, 830. We have already recognized the arbitrary nature of prospective decisions in the
criminal context in State v. Waters, 1999 MT 229, 296 Mont. 101, 987 P.2d 1142. There, in keeping
with the United States Supreme Court’s opinion in Griffith, we overruled all of our prior decisions
which limited a new judicial rule of criminal procedure to prospective application. Waters, ¶ 20.
¶29 We also understand, however, that what follows from civil litigation is different in kind from
the consequences inherent in a criminal prosecution and conviction. On many occasions we have
noted the disruption that a new rule of law can bring to existing contracts and to other legal
relationships. Therefore today we reaffirm our general rule that “[w]e give retroactive effect to
judicial decisions,” Kleinhesselink v. Chevron, U.S.A. (1996), 277 Mont. 158, 162, 920 P.2d 108,
111. We will, however, allow for an exception to that rule when faced with a truly compelling case
for applying a new rule of law prospectively only.
¶30 The Chevron test is still viable as an exception to the rule of retroactivity. However, given
that we wish prospective applications to be the exception, we will only invoke the Chevron exception
when a party has satisfied all three of the Chevron factors. This is in keeping with our prior holdings.
In the only two relevant decisions–that is, state law decisions where we prospectively applied a rule
of law under the Chevron test–we concluded that all three of the factors weighed in favor of
prospective application. See Ereth, ¶ 29 (“All three of these factors weigh in favor of nonretroactive
application of this new rule in our jurisprudence.”); Seubert, Order Clarifying Decision on Grant of
Rehearing, 301 Mont. at 400, 13 P.3d at 375 (quoting Holmberg v. Holmberg (Minn. 1999), 588
N.W.2d 720, 726-27). Admittedly, we noted in Poppleton v. Rollins (1987), 226 Mont. 267, 271,
735 P.2d 286, 289, that only one factor need be met. However, that statement was dicta, since we
determined that none of the Chevron factors were satisfied and thus that the decision in question
should have retroactive effect. Poppleton, 226 Mont. at 271-72, 735 P.2d at 289-90.
¶31 Therefore, we conclude that, in keeping with our prior cases, all civil decisions of this court
apply retroactively to cases pending on direct review or not yet final, unless all three of the Chevron
factors are satisfied. For reasons of finality we also conclude that the retroactive effect of a decision
does not apply ab initio, that is, it does not apply to cases that became final or were settled prior to
a decision’s issuance.
II. Hardy Does not Pass the Chevron Test
¶32 Having determined our rule of retroactivity, we must now ask whether our decision in Hardy
satisfies all three Chevron factors. We conclude that it does not.
¶33 Since we conclude that Hardy does not satisfy the first Chevron factor, we need not address
the other two. That factor is, again, that “the decision to be applied nonretroactively must establish
a new principle of law, either by overruling clear past precedent on which litigants may have relied
or by deciding an issue of first impression whose resolution was not clearly foreshadowed.” We
dispose of this factor by citing Hardy itself. In Hardy we ruled that § 33-23-303, MCA, violated
Article II, Section 17, of the Montana Constitution, and that it also violated the public policy of this
state. We relied on Bennett v. State Farm Mutual Auto Insurance Co. (1993), 261 Mont. 386, 389-
90, 862 P.2d 1146, 1148-49, where “we concluded that a provision that defeats coverage for which
valuable consideration has been received violates Montana public policy. We held that UIM
[underinsured motorist] coverage, by definition, is personal and portable. Therefore, a Montanan
could reasonably expect coverage up to the aggregate limit of the separate policies when a separate
premium for UIM coverage was charged for each.” Hardy, ¶ 40 (citations omitted).
¶34 Bennett, along with the earlier case of Chaffee v. U.S. Fidelity & Guaranty Co. (1979), 181
Mont. 1, 591 P.2d 1102, indicated that anti-stacking policies were discouraged by this Court and
contrary to public policy. These cases, coupled with others where we allowed stacking, see, e.g.,
Farmers Alliance Mut. Ins. Co. v. Holeman (1996), 278 Mont. 274, 280-81, 924 P.2d 1315, 1319
(limiting the application of § 33-23-203, MCA), gave notice to the insured and insurers of this state
that the statute was of questionable validity. We did not have to “overrule clear past precedent” in
order to declare that statute unconstitutional and against public policy.
¶35 Allstate argues that Christensen v. Mountain West Farm Bureau Mutual Insurance Co., 2000
MT 378, 303 Mont. 493, 22 P.3d 624, and Guiberson v. Hartford Casualty Insurance Co. (1985),
217 Mont. 279, 704 P.2d 68, recognized the validity of § 33-23-303, MCA, and therefore muddied
the legal waters, making the unconstitutionality of the statue not clearly foreseeable. The Class aptly
points out, however, that the language in Guiberson cited by Allstate merely noted that the anti-
stacking statute was not in effect when the action at issue arose. It said nothing regarding the
statute’s legality. Also, Christensen involved liability coverage, as opposed to personal and portable
coverages–the class of coverage at issue in Hardy. We conclude that Hardy did not establish a new
principle of law or decide an issue of first impression whose resolution was not clearly foreshadowed.
¶36 Amici in support of Allstate also argue that applying Hardy retroactively violates the
Contracts Clause of the United States and Montana Constitutions. This issue, however, was not
raised by the parties before the Court. An amicus cannot raise separate issues not raised by the
parties. Dep’t of Health v. Lasorte (1979), 182 Mont. 267, 596 P.2d 477. Accordingly, we decline
to address this question.
CONCLUSION
¶37 For the foregoing reasons we conclude that Hardy applies retroactively to require payment
of stacked uninsured, underinsured motorist and medical payment insurance coverages in qualifying
circumstances on open claims arising before its issuance. However, in the interests of finality, as
discussed above, we limit this retroactivity to cases pending on direct review or not yet final.
/S/ W. WILLIAM LEAPHART
We concur:
/S/ KARLA M. GRAY
/S/ PATRICIA O. COTTER
/S/ JIM REGNIER
/S/ JAMES C. NELSON
/S/ JOHN WARNER
Justice Jim Rice dissenting.
¶38 I respectfully dissent.
¶39 Leaving for another day some of the Court’s philosophical musings about the source
of the law, in particular, that the law is that which is declared by judges, I nonetheless
appreciate the Court’s effort to meld our conflicting precedent into a practical rule.
However, I cannot agree with the new rule because it is inconsistent with additional
precedent which the Court neither overrules nor reconciles. Further, I believe this Court will
need, as demonstrated recently in Ereth, the flexibility of the Chevron test on questions
concerning the prospective application of our holdings. I would retain this test, which, as
the Court notes, the United States Supreme Court specifically allows states to do.
¶40 Taking up the first prong of the Chevron test, which the Court today re-casts as the
exception to its new rule of presumptive retroactive application, the Court rejects Allstate’s
argument that Hardy established a new principle of law, relying on our cases which
“indicated that anti-stacking policies were discouraged by this Court and contrary to public
policy” and which the Court asserts had given “notice to the insured and insurers of this state
that the statute was of questionable validity.” See ¶ 34. The Court fails to mention,
however, that all of the cases it cites were decided prior to the enactment of the anti-stacking
statute by the Legislature in 1997. Therefore, these prior holdings, including the “notice”
the Court had provided about this state’s public policy, had, by the time of the Hardy
decision, been superseded by legislative enactment. Thus, the statutory prohibition on
19
stacking was the public policy of the state when Allstate issued the insurance policy herein,
and we indeed overruled that public policy by declaring the statute unconstitutional.
¶41 The Court then faults Allstate’s reliance on Guiberson’s application of the anti-
stacking statute because that case “said nothing regarding the statute’s legality.” See ¶ 35.
However, it did not need to. “Statutes are presumed to be constitutional.” Lafournaise v.
Montana Developmental Center, 2003 MT 240, ¶ 26, 317 Mont. 283, ¶ 26, 77 P.3d 202, ¶
26, citing Romero v. J & J Tire (1989), 238 Mont. 146, 149, 777 P.2d 292, 294. Allstate was
therefore justified in its reliance on a statute which had legislatively established this state’s
public policy with regard to stacking and which was presumptively constitutional.
¶42 Consequently, the new principle of law thus established in Hardy should, according
to our precedent, be applied prospectively. See Poppleton v. Rollins, Inc. (1987), 226 Mont.
267, 271, 735 P.2d 286, 289 (“[A] rule of law will not be applied retroactively if any of the
[Chevron factors] are present.” (emphasis added)). That being so, it is unnecessary for
purposes of this dissent to discuss the other two Chevron factors. The Court cites no
authority in support of its new requirement that all three Chevron factors be met in order to
apply a holding prospectively, and further, fails to acknowledge or overrule the contrary rule
of Poppleton. Poppleton is, of course, implicitly overruled by the Court’s holding herein,
along with our other cases which, wisely in my view, applied the Chevron test.
/S/ JIM RICE
20