Bailey v. State Farm Mutual Automobile Insurance , 370 Mont. 73 ( 2013 )

May 2 2013
DA 12-0247
IN THE SUPREME COURT OF THE STATE OF MONTANA
2013 MT 119BRENDA BAILEY AND J. STANLEY BAILEY, JR.,
Plaintiffs and Appellants,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE
COMPANY, MARK OLSON AND DOES 1-3,
Defendants and Appellees.
APPEAL FROM: District Court of the Ninth Judicial District,
In and For the County of Glacier, Cause No. DV-09-18
Honorable Laurie McKinnon, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Michael J. George, Lucero & George, L.L.P., Great Falls, Montana
For Appellee:
Robert F. James, Jordan Y. Crosby, Ugrin, Alexander, Zadick
& Higgins, P.C., Great Falls, Montana
Submitted on Briefs: February 27, 2013
Decided: May 2, 2013
Filed:
__________________________________________
Clerk
Justice Patricia O. Cotter delivered the Opinion of the Court.
¶1 Brenda Bailey and J. Stanley Bailey, Jr. (the Baileys) appeal from an order of the
Ninth Judicial District Court, Glacier County, granting summary judgment to State Farm
and Mark Olson (Olson) on the Baileys’ claims that State Farm and Olson negligently
failed to secure underinsured motorist (UIM) coverage for the Baileys. We reverse the
District Court’s entry of summary judgment in favor of State Farm and Olson, and
remand for further proceedings.
ISSUES
¶2 The Baileys raise the following two issues on appeal:
¶3 1. Did the District Court err in granting summary judgment when it found no
genuine issues of material fact with respect to the duty of State Farm and Olson to
procure UIM coverage for the Baileys?
¶4 2. Did the District Court err in granting summary judgment by failing to
recognize and impose a duty arising in negligence beyond a duty to procure requested
coverage?
FACTUAL AND PROCEDURAL BACKGROUND
¶5 On October 19, 2006, a drunk driver crossed the highway centerline and collided
head-on with the Baileys’ vehicle. The Baileys sustained very serious injuries in the
accident. Stan was flown to Harborview Medical Center in Seattle and remained a
patient there for five months. Brenda spent a significant amount of time hospitalized in
Kalispell and Cut Bank. Brenda remains wheelchair bound as a result of her injuries.
The Baileys incurred medical expenses in excess of $1,000,000.
2
¶6 The Baileys moved from Oregon to East Glacier, Montana, in March 1998. The
Baileys had been State Farm customers for many years. On April 3, 1998, the Baileys
went to the Mark Olson State Farm Agency in Cut Bank, Montana, to transfer their
Oregon State Farm policy to Montana. Insurance agent Nola Peterson Softich (Softich)
assisted the Baileys. The Baileys specifically recalled presenting their Oregon State
Farm insurance cards to Softich and requesting that the same coverage they carried in
Oregon be transferred to Montana. The Baileys also maintain that they requested full
coverage.
¶7 Softich completed a computerized insurance application for each of the Baileys’
two vehicles. Each application listed twelve types of coverage and displayed a “Yes” or
“No” next to each coverage to indicate whether that coverage was selected. The State
Farm policies sold to the Baileys in Montana contained liability coverage limits of
$250,000 per person and $500,000 per occurrence for bodily injury, $100,000 for
property damage liability, $5,000 in medical payments coverage, and uninsured motorist
(UM) coverage limits of $100,000 per person and $300,000 per occurrence. On both
applications, Softich entered a “No” next to the UIM coverage. After Softich filled out
the applications, Stan signed both applications. The application contained the following
language directly above the signature line:
I apply for the insurance indicated and state that (1) I have read this
application, (2) my statements on this application are correct, (3) statements
made on any other applications on this date for automobile insurance with
this company are correct and are made part of this application, (4) I am the
sole owner of the described vehicle except as otherwise stated, and (5) the
limits and coverages were selected by me.
3
¶8 Stan testified in his deposition that he typically did not read any insurance
documents because he relied on his agent to provide him with the important information.
Brenda recalled receiving insurance cards from State Farm, but did not recall reviewing
any policies or other information from State Farm. State Farm and Olson maintained that
the Baileys received new insurance cards and renewal notices listing the various
coverages twice every year.
¶9 Although Softich had no independent recollection of her initial interaction with the
Baileys, she testified that it was her habit and practice to always review the “ACHUW”
coverages with new customers. “ACHUW” stands for: A – liability; C – medical
payment; H – emergency towing; U – uninsured motorist; and W – underinsured
motorist. Softich claimed that UIM coverage must have been offered to the Baileys.
Softich also testified that she never advised customers to lower their UM or UIM
coverage. Olson admitted that he did not know whether the Baileys were offered UIM
coverage, but his staff is supposed to go through every coverage. The Baileys had no
specific recollection of whether the “ACHUW” coverages were discussed when they met
with Softich.
¶10 It is undisputed that the Baileys’ State Farm automobile insurance policy obtained
in Montana did not match their previous policy from Oregon. The Baileys’ Oregon
policies provided the following coverages: (1) bodily injury liability, $300,000 per
person/$500,000 per occurrence; (2) property damage, $100,000; (3) personal injury
protection (analogous to medical payments coverage) $100,000; (4) UM, $300,000 per
person/$500,000 per occurrence; and (5) UIM, $300,000 per person/$500,000 per
4
occurrence. Notably, Oregon law mandates the UM coverage must include UIM
protection. See Or. Rev. Stat. § 742.502(2)(a). In Oregon, State Farm combines the UM
and UIM coverages and denotes both as a single “U” coverage. Olson and his staff
admitted that before becoming involved in this litigation, they were unaware that “U”
was used in Oregon to represent both UM and UIM coverage.
¶11 In May 2005, Stan called an employee of Olson, Jeannie Fetters (Fetters), on the
telephone to discuss his State Farm policy. Fetters made note of the conversation in her
records and recalled that Stan was interested in changing the deductibles on his collision
coverage and removing his emergency road service coverage. During their conversation,
Fetters reviewed his policy and mentioned to Stan that he did not have UIM coverage.
Fetters admitted that the portion of the phone conversation dealing with UIM coverage
lasted “maybe 30, 45 seconds, or a minute” and she did not discuss what UIM coverage
entailed. Fetters testified that Stan told her that he was not interested and he only wanted
to make the requested changes.
¶12 Following the automobile accident that occurred on October 19, 2006, the Baileys
learned that they had only $5,000 in medical payments coverage and did not have any
UIM coverage. In fact, the Baileys testified that they were unaware what UIM coverage
was until after the accident. The drunk driver who caused the accident carried the
statutory minimum automobile liability insurance limits. The Baileys’ medical expenses
and other damages far exceeded the liability coverage of the drunk driver.
¶13 On May 20, 2009, the Baileys filed their complaint against State Farm and Olson
alleging that Olson was negligent in failing to obtain the appropriate insurance coverages.
5
The Baileys requested declaratory relief and asked the District Court to reform the
insurance policy to include UIM coverage in the same amount as their liability coverage.
The Baileys also alleged that Olson breached his fiduciary duty by failing to secure UIM
coverage and failing to advise them of the need to obtain UIM coverage. Lastly, the
Baileys alleged that Olson’s actions constituted actual malice sufficient to support an
award of punitive damages.
¶14 State Farm and Olson filed an answer to the complaint, in which they posited
various defenses. However, they did not initially raise the affirmative defense of
comparative fault. See M. R. C. P. 8(c). State Farm and Olson later sought to amend
their answer to interpose the defense of “contributory negligence” on the part of the
Baileys. However, in light of the court’s subsequent entry of summary judgment for
State Farm and Olson, it never addressed the merits of the motion to amend.
¶15 On January 13, 2012, State Farm and Olson filed a motion for summary judgment
on all of the Baileys’ claims. State Farm and Olson argued they were entitled to
judgment as a matter of law because the Baileys declined UIM coverage in their
insurance application and signed the application that listed the coverage limits. State
Farm and Olson contended that Stan also declined UIM coverage when Fetters pointed
out to him that he did not have UIM coverage during a phone conversation in May 2005.
Furthermore, State Farm and Olson maintained that they only owed the Baileys a duty to
obtain coverage that was requested, and they did not breach this duty. State Farm and
Olson also argued that they did not owe the Baileys a fiduciary duty.
6
¶16 In response, the Baileys countered that summary judgment would be inappropriate
because genuine issues of material fact remained regarding whether the Baileys were
advised about UIM coverage. The Baileys argued that the extent of an insured’s
obligation to read an insurance policy depends on what is reasonable under the
circumstances of each case and therefore cannot be decided as a matter of law. The
Baileys asserted that their request for the same coverage as they had in Oregon qualifies
as a request for specific insurance, so Olson’s failure to obtain the requested insurance
constitutes a breach of his duty. Though they acknowledge that this Court has not yet
recognized a fiduciary relationship between an insurance agent and a client, the Baileys
contend that the facts of their case support recognition of such a relationship.
¶17 On February 8, 2012, the District Court held oral argument on the motion for
summary judgment. The District Court issued its order on March 19, 2012, granting
summary judgment to State Farm and Olson. The District Court framed the issue in
terms of whether the Baileys’ statements, which were not contained within the
application for insurance, could vary or alter the insurer’s obligation to procure specific
insurance. The District Court determined that the undisputed facts established that State
Farm and Olson provided the specific insurance requested by the Baileys in the insurance
application that Stan signed. The District Court reasoned that the Baileys’ request for the
same insurance as they had in Oregon cannot be construed as a specific request for UIM
coverage or medical payments coverage in excess of $5,000 because the written
application for insurance contained different terms. After determining that existing
Montana law does not impose a heightened duty on an insurance agent, the District Court
7
concluded that no fiduciary relationship existed. The Baileys appeal from the District
Court’s entry of summary judgment in favor of State Farm and Olson.
STANDARDS OF REVIEW
¶18 We review a district court’s ruling on a motion for summary judgment de novo,
applying the same criteria of M. R. Civ. P. 56 as the district court. Steichen v. Talcott
Props., LLC, 2013 MT 2, ¶ 7, 368 Mont. 169, 292 P.3d 458; Dubiel v. Mont. DOT, 2012
MT 35, ¶ 10, 364 Mont. 175, 272 P.3d 66. Summary judgment “should be rendered if the
pleadings, the discovery and disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that the movant is entitled to
judgment as a matter of law.” M. R. Civ. P. 56(c)(3).
DISCUSSION
¶19 Did the District Court err in granting summary judgment when it found no
genuine issues of material fact with respect to the duty of State Farm and Olson to
procure UIM coverage for the Baileys?
¶20 Under Montana law, it is “well established that an insurance agent owes an
absolute duty to obtain the insurance coverage which an insured directs the agent to
procure.” Monroe v. Cogswell Agency, 2010 MT 134, ¶ 32, 356 Mont. 417, 234 P.3d 79;
Fillinger v. Northwestern Agency, 283 Mont. 71, 83, 938 P.2d 1347, 1355 (1997); Lee v.
Andrews, 204 Mont. 527, 532, 667 P.2d 919, 921 (1983); Gay v. Lavina State Bank, 61
Mont. 449, 458, 202 P. 753, 755 (1921). If an insurance agent is instructed to procure
specific insurance and fails to do so, he is liable for damages suffered due to the absence
of such insurance. Fillinger, 283 Mont. at 83, 938 P.2d at 1355; Lee, 204 Mont. at 532,
667 P.2d at 921; Gay, 61 Mont. at 458, 202 P. at 755.
8
¶21 We have previously recognized that an insurance policy is a contract and is
therefore subject to the applicable contract law of Montana. Fillinger, 283 Mont. at 77,
938 P.2d at 1351 (citing Universal Underwriters Ins. Co. v. State Farm Mut. Auto. Ins.
Co., 166 Mont. 128, 135, 531 P.2d 668, 673 (1975)). “Every insurance contract shall be
construed according to the entirety of its terms and conditions as set forth in the policy
and as amplified, extended, or modified by any rider, endorsement, or application which
is a part of the policy.” Section 33-15-316, MCA.
¶22 While it is generally presumed that a person who executes a written contract
knows its contents and assents to them, an insured does not have an absolute duty to read
an insurance policy. Robertus v. Farmers Union Mut. Ins. Co., 2008 MT 207, ¶ 42, 344
Mont. 157, 189 P.3d 582; Thomas v. Northwestern Nat’l Ins. Co., 1998 MT 343, ¶ 28,
292 Mont. 357, 973 P.2d 804 (citing Fillinger, 283 Mont. at 78, 938 P.2d at 1352).
Instead, “the extent of an insured’s obligation to read the policy depends upon what is
reasonable under the facts and circumstances of each case.” Robertus, ¶ 42 (quoting
Thomas, ¶ 27). The relationship between the insured and the insurance agent is an
important factor to consider when examining the insured’s duty to read the insurance
contract. Fillinger, 283 Mont. at 77-78, 938 P.2d at 1352-53. Once an insured informs
an insurance agent of his insurance needs and the agent’s conduct permits a reasonable
inference that the agent is highly skilled in this area, an insured is justified in relying on
an insurance agent to obtain the coverage that the agent has represented he will obtain.
Fillinger, 283 Mont. at 78, 938 P.2d at 1352 (citing Fiorentino v. Travelers Ins. Co., 448
F. Supp. 1364, 1369 (E.D. Pa. 1978)). The insured’s failure to read an insurance policy
9
does not operate as a bar to relief as a matter of law, but it may constitute comparative
negligence. See Fillinger, 283 Mont. at 78, 938 P.2d at 1352 (citations omitted).
¶23 The District Court determined that State Farm and Olson met their initial burden
of establishing that they provided the specific insurance requested by the Baileys in their
application for insurance. The District Court relied on the fact that the insurance
coverage requested in the insurance application was actually provided to the Baileys.
Since Stan signed the application for insurance, the District Court reasoned that the
Baileys’ request for the same insurance they had in Oregon could not be construed as a
specific request for UIM coverage and medical payments coverage in excess of $5,000.
The District Court applied the parol evidence rule and concluded that it was arguable
whether the Baileys’ oral request for the same insurance they carried in Oregon would be
admissible to alter the terms of a clear and unambiguous application and policy. The
District Court also emphasized Softich’s uncontroverted testimony that it was her normal
practice to explain the coverages to clients, and Fetter’s testimony that she later informed
Stan that he lacked UIM coverage before the accident occurred. Ultimately, the District
Court concluded that negligence could be decided as a matter of law and entered
judgment in favor of State Farm and Olson.
¶24 In Featherston by & ex rel. Featherston v. Allstate Ins. Co., 875 P.2d 937 (Idaho
1994), the Idaho Supreme Court addressed the duty owed by an insurer to an insured
when the insured transfers a policy and requests that the insurer procure the same
coverage. The insured in Featherston contacted an Allstate agent, provided the agent
with the declarations page of his Farmers Insurance policy, and requested a price quote
10
for the same coverage with Allstate. Featherston, 875 P.2d at 938. After receiving a
price quote, the insured transferred his insurance policy to Allstate. Featherston, 875
P.2d at 938. The insured admitted that he never read the Allstate policy. Featherston,
875 P.2d at 938. More than five years after transferring to Allstate, a member of the
insured’s family was injured in an accident with an underinsured driver and the insured
learned that he had no UIM coverage. Featherston, 875 P.2d at 938-39. The Court
determined that “[t]he scope of Allstate’s duty depends on what the agent was asked to
provide.” Featherston, 875 P.2d at 940. It reversed the trial court’s entry of summary
judgment in favor of the insurer, concluding that a genuine issue of material fact existed
as to what coverage was requested and the consequent duty that arose as a result of that
request. Featherston, 875 P.2d at 940-41.
¶25 Our review of the record here similarly demonstrates that genuine issues of
material fact exist as to whether State Farm and Olson acted negligently in transferring
the Baileys’ Oregon policy to Montana. It is undisputed that the Baileys directed Olson’s
agent, Softich, to procure the same insurance coverage as they had in Oregon. It is also
undisputed that the Baileys’ Montana State Farm policy that they obtained through Olson
did not contain the same coverages and limits as their Oregon policy. The Montana
policy contained very high liability and UM limits, but very low medical payment
coverage and no UIM protection. Notably, none of the agents at Olson knew that Oregon
combined UM and UIM coverage and designated such coverages using different letters.
The Baileys posit that these differences between coverages caused Softich to mistakenly
11
omit UIM coverage, when, given her expertise, she should have known the states handled
such coverages differently.
¶26 Softich had no specific recollection of what she discussed with the Baileys, but
testified that it was her usual practice to go through and explain each coverage with a new
client. However, Softich also testified that she would not advise clients to decrease their
coverage limits. Absent some specific recollection about what was discussed and why
the Baileys did not receive the same coverages and limits as they had in Oregon, a
genuine issue of material fact exists as to why the discrepancies in coverage occurred
when the Baileys transferred their State Farm policy to Montana.
¶27 We next turn to the District Court’s conclusion that evidence of the Baileys’ oral
statements during the meeting with Softich are arguably barred by the parol evidence
rule. Contrary to the District Court’s assertion, the Baileys’ oral request for matching
coverage in Montana is not barred by the parol evidence rule. Extrinsic evidence may be
considered “when a mistake or imperfection of the writing is put in issue by the
pleadings” or “when the validity of the agreement is the fact in dispute.” Section
28-2-905(1)(a)-(b), MCA. The Baileys have put the validity of the insurance application
at issue by representing that they did not fill it out or understand all of its terms, and the
application did not contain the terms that they requested. Since an insurance agent has a
duty to obtain the coverage requested by a client, the Baileys’ claims that they orally
requested “full coverage” and the same exact coverage as they had in Oregon must
necessarily be considered when examining whether their insurance agent breached her
duty. Based on the evidence in the record, a jury could reasonably conclude that Softich
12
transcribed different terms into the application than what the Baileys requested. The
Baileys have produced sufficient evidence to survive summary judgment.
¶28 Furthermore, the District Court misapprehended the effect of Stan’s signing of the
application for insurance. The insurance application was an electronic form that Softich
completed. Softich was the person who selected the coverages and limits when filling
out the form. After Softich completed the form, she printed it and Stan signed it. Given
the Baileys’ uncontroverted testimony that they requested the same coverage as they had
in Oregon and requested “full coverage,” a fact question may exist as to whether the
Baileys acted reasonably in relying upon the representations of Softich rather than
reading the application for insurance and the policy.1 As noted above, however, the
District Court never reached the question of whether State Farm and Olson may amend
their answer to allege that the Baileys’ conduct should be compared to that of State Farm
and Olson. This will be a determination for the District Court to make on remand.
¶29 The remaining issue is the phone conversation that occurred in May 2005. Fetters
testified that it was a short conversation, but her notes indicate that she mentioned to Stan
that he did not have UIM coverage. Stan testified that he was under the impression that
he had the same coverage as he had in Oregon, and therefore did not need any additional
coverage. Fetters admitted that she did not explain what UIM coverage was during this
1
The dissent incorrectly asserts that the Court is adopting a “new, broadly-stated,
‘no-read’ principle.” This assertion is completely unfounded. As our case law clearly
establishes and as addressed in ¶ 22, the extent of an insured’s obligation to read the
policy is dictated by what is reasonable under the particular facts and circumstances of
each case. A determination of what is reasonable is, of course, a fact issue for resolution
by a jury. Thus, we do not adopt a new principle; we merely follow the law.
13
phone conversation with Stan, and the Baileys maintained that they did not even know
what UIM coverage was until after the accident. The parties’ varying accounts of the
conversation further demonstrate the need to submit these factual issues to the jury.
¶30 Under the facts and circumstances of this case, State Farm and Olson have not met
their “heavy burden of demonstrating, in a manner sufficient to exclude any real doubt,”
that the Baileys did not request different insurance than what they received. Monroe,
¶ 32. Negligence actions typically involve questions of fact and ordinarily are not
susceptible to summary judgment. Questions of fact can be determined as a matter of law
only when reasonable minds cannot differ. Meloy v. Speedy Auto Glass, Inc., 2008 MT
122, ¶ 10, 342 Mont. 530, 182 P.3d 741; Henricksen v. State, 2004 MT 20, ¶ 19, 319
Mont. 307, 84 P.3d 38. In deciding a motion for summary judgment, all reasonable
inferences must be drawn in favor of the non-moving party so that if there is any doubt as
to the existence of a genuine issue of material fact, that doubt must be resolved in favor
of the party opposing summary judgment. Lorang v. Fortis Ins. Co., 2008 MT 252, ¶ 38,
345 Mont. 12, 192 P.3d 186; Newbury v. State Farm Fire & Cas. Ins. Co., 2008 MT 156,
¶ 14, 343 Mont. 279, 184 P.3d 1021. Drawing all reasonable inferences in favor of the
Baileys, we conclude that reasonable minds could differ concerning whether State Farm
and Olson acted negligently when placing the Baileys’ coverage. Therefore, the District
Court erred in entering summary judgment in favor of State Farm and Olson on Baileys’
negligence claims.
¶31 Did the District Court err in granting summary judgment by failing to recognize
and impose a duty arising in negligence beyond a duty to procure requested
coverage?
14
¶32 Because we reverse the entry of summary judgment and remand for trial on the
merits under the negligence theory asserted by the Baileys, we deem it unnecessary to the
resolution of this case to determine whether these circumstances may also give rise to a
heightened duty on the part of Olson. We therefore decline to address the Baileys’
second issue.
CONCLUSION
¶33 For the foregoing reasons, we reverse the District Court’s grant of summary
judgment and remand for further proceedings in accordance with this Opinion.
/S/ PATRICIA COTTER
We Concur:
/S/ MIKE McGRATH
/S/ MICHAEL E WHEAT
/S/ BRIAN MORRIS
Justice Jim Rice, dissenting.
¶34 In my view, the record establishes that the District Court correctly granted
summary judgment to the Defendants.
¶35 “The party moving for summary judgment has the initial burden of proving that no
genuine issues of material fact exist. . . . The burden then shifts to the non-moving party
to prove by more than mere denial and speculation that a genuine issue of material fact
15
exists.” Brown & Brown of MT, Inc. v. Raty, 2012 MT 264, ¶ 17, 367 Mont. 67, 289 P.3d
156 (citing Myers v. Dee, 2011 MT 244, ¶ 10, 362 Mont. 178, 261 P.3d 1054). State
Farm presented sufficient evidence to carry its initial burden, demonstrating from the
record that it had obtained the insurance coverage the Baileys had requested. The Court’s
analysis impliedly reaches that conclusion also. Opinion, ¶¶ 23, 25, 30. However,
although Baileys demonstrated a genuine issue of material fact with regard to some of
State Farm’s evidence, they failed to satisfy their burden to demonstrate a genuine issue
as to the entirety of State Farm’s evidence, and thus failed to carry their burden.
¶36 State Farm presented the testimony of Nola Softich, who testified that it was her
custom and practice to provide a new customer with the “goldenrod pamphlet,” which
was “included with every packet” given to customers. This pamphlet described all the
coverages available for purchase from State Farm. Softich always reviewed those
coverages with the customer, including uninsured and underinsured motorist coverages.
This is evidence of the standard procedure Softich would have followed when meeting
with the Baileys on April 3, 1998. As the District Court noted, the Baileys offered no
evidence to specifically refute Softich’s testimony that these coverages had been
discussed. However, the Baileys did testify that they gave their insurance card to the
agency and requested the same coverages as they had in Oregon. Softich testified that
she has never advised an insured to decrease uninsured or underinsured coverage. This
evidence about the parties’ initial conversation reflects a genuine issue of fact about what
understanding arose from that conversation. If there was no further evidence, denial of
summary judgment would be appropriate.
16
¶37 Based on that initial conversation, Softich then prepared two applications for
coverage on Baileys’ two vehicles. The applications were one-page printed forms that
listed 12 coverages in column form. The heading of this column was “Coverages
Available.” Next to the column of available coverages was another column with the
heading “Selected?” Under this heading, a “Yes” or “No” was entered next to each
coverage indicating whether or not the applicant had selected that coverage. On both
applications, the word “No” appeared next to the coverage for underinsured motor
vehicle. However, the coverages were not identical on each application. A different list
of coverages was selected for each vehicle, although UIM coverage was selected for
neither vehicle. At the bottom of each application, as the Court notes in ¶ 7 of the
Opinion, the form stated that the applicant was applying “for the insurance indicated,”
that the applicant had read the form and the statements were correct, and that the
applicant had personally selected the coverages. Stan Bailey signed both applications.
These documents are the result of the parties’ initial conversation on April 3, 1998.
¶38 The Court cites the principle that an insured does not have an absolute duty to read
an insurance policy. Opinion, ¶ 22. On the basis of this principle, the Court apparently
excuses any obligation on the part of the Baileys to read or be accountable for the signed
applications and statements made therein. However, we have applied the “no read”
principle only in cases where an insurer made changes within the body of a policy and the
insured was not otherwise notified of the change. Robertus, ¶ 42; Thomas, ¶¶ 26-27;
Fillinger, 283 Mont. at 78-79, 938 P.2d at 1352. Never before have we held that an
insurance applicant has no obligation to read a one-page application form that plainly
17
lists coverage choices and on which the applicant certifies that he has read the form and
made the coverage choices as indicated. The Court cites no authority for this principle.
The Court also holds that Baileys’ statement about wanting the same coverage as they
had in Oregon is not barred by the parol evidence rule because, by merely alleging they
did not understand its terms, the Baileys have made a proper challenge to “the validity of
the insurance application” prepared by Softich. Opinion, ¶ 27. Such a weak factual
assertion should not be permitted to create a genuine issue of fact about the signed
applications. “To raise a genuine issue of material fact, the proffered evidence must be
‘material and of a substantial nature, not fanciful, frivolous, gauzy or merely
suspicious.’” Estate of Willson v. Addison, 2011 MT 179, ¶ 14, 361 Mont. 269, 258 P.3d
410. “Generally speaking, once an agreement is reduced to writing, it is considered to
contain all terms of the agreement and extrinsic evidence concerning the intentions of the
parties is not admissible. Section 28-2-905(1), MCA.” McCulley v. Am. Land Title Co.,
2013 MT 89, ¶ 33, ___ Mont. ___, ___ P.3d ___. On this record, I would conclude that
the Baileys did not present sufficient evidence to create a genuine factual issue about the
signed applications, which were individually prepared for each of the Baileys’ two
vehicles after the parties’ initial conversation, and signed by the Baileys underneath
language stating that they had read the form and chosen the coverages as indicated.
¶39 Thereafter, the Baileys paid premiums for the next seven years and received
insurance coverage cards, policies and booklets. The Baileys received new insurance
cards at least two times a year for each policy, listing their coverages. They also received
renewal notices two times a year for each policy, with each notice listing the coverages
18
and charges for each coverage. The Baileys simply allege that they didn’t read any of
these and the Court, apparently under the new, broadly-stated, “no-read” principle,
accepts this excuse and gives no significance to this evidence. However, this is further
evidence that State Farm provided the coverages that the Baileys had requested.
¶40 Then, in 2005, Stan called the agency and talked to Jeannie Fetters to make some
changes in his coverages. In that conversation, Fetters pointed out to Stan that he did not
have UIM coverage, and Stan responded he did not want to add that coverage, but, rather,
only wanted to make the changes he had called about. Fetters specifically remembered
the conversation and also made notes about the conversation in State Farm’s master
record. Baileys offered no contradictory evidence. However, the Court, citing the
Baileys’ assertion that “they did not even know what UIM coverage was until after the
accident,” concludes that there are “varying accounts” about this conversation. Opinion,
¶ 29. This is incorrect. Baileys offered nothing in contradiction to the very specific and
recorded evidence offered by State Farm about this conversation. Baileys’ statement
merely claims ignorance about the nature of UIM insurance—again, “gauzy” and
speculative evidence—and nothing about the conversation.
¶41 To further rebut the evidence of this 2005 event, the Court again cites Stan’s
abiding belief that he had the same coverage as he had in Oregon. The Court’s reliance
on Stan’s Oregon coverage pales when it is recalled that the Baileys made that request
seven years earlier in 1998, thereafter signed contrary application forms, paid contrary
premiums, and received contrary coverage notices until 2005, when Stan called to change
their coverages. By then, the “Oregon request” was long past and there is no evidence
19
that Stan was still trying to obtain the same coverage he had in Oregon. As we have
recently stated, when reviewing the record for purposes of summary judgment, it is
important to recognize the “chronology of events” that the evidence demonstrates.
McCulley, ¶ 35.
¶42 I would conclude that the Baileys did not carry their burden to demonstrate
genuine issues of material fact and that State Farm was entitled to summary judgment as
a matter of law. I would affirm the District Court.
/S/ JIM RICE
Justice Beth Baker, dissenting.
¶43 I agree with Justice Rice that the District Court did not err in granting summary
judgment to State Farm on this record. I write separately because of my concern that the
Court has in fact imposed a heightened duty on an insurance agent, despite its statement
to the contrary. Opinion, ¶ 32.
¶44 Baileys raised, as their second issue on appeal, the claim that State Farm and
Olson had “a duty to advise the Baileys regarding UIM coverage,” and they urge this
Court to “expand an agent’s duty beyond a mere duty to procure” the insurance requested
by the insured. They cite numerous cases from other jurisdictions in which courts have
held that an insurance agent’s duty is not limited to responding to a specific request for
coverage, but that an agent may be liable under theories of professional negligence for
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failing to recommend UIM coverage or advise the insured of coverage needs. They also
point out “that no such heightened duty of care has yet been recognized under Montana
law.” Monroe v. Cogswell Agency, 2010 MT 134, ¶ 31, 356 Mont. 417, 234 P.3d 79. By
finding a factual issue for trial on the basis that Fetters did not explain UIM coverage
when Stan called her in May 2005 to change his coverages (Opinion, ¶ 29), the Court is
at least implicitly ruling that Olson and his agents had a heightened duty to advise or
offer specific coverages, just as Baileys have requested. Without expressly so holding,
the Court’s ruling today will generate additional confusion in the law regarding the scope
of an insurance agent’s duty to the insured.
/S/ BETH BAKER
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