Bad Faith Blog

Summary: Automobile insurer filed suit seeking declaratory judgment that “Limits of Liability” for “Each Person” limited coverage on derivative claims brought by passenger’s daughter for passenger’s death as a result of a car accident caused by insured’s negligence to $50,000 limit that had already been paid to passenger’s estate. The insured and personal representative of passenger’s estate, who was also acting as a conservator for the daughter, filed a counterclaim for breach of policy and bad faith.The District Court ruled that the insurer had correctly interpreted “Each Person” limit of liability. However, the Montana Supreme Court reversed and remanded (Freyer I). On remand, the insured and personal representative/conservator amended the counterclaim adding a claim for violation of the Unfair Trade Practices Act (UTPA) and sought enforcement against insurer of a stipulated judgment of $2.7 million in the suit brought by personal representative/conservator against insured for wrongful death. The District Court entered summary judgment in insurer’s favor on all claims. However, the Supreme Court held that the insurer’s reliance on precedent at time of claim was not an affirmative defense to a claim for policy breach, but the stipulated judgment between the insured and the personal representative/conservator was not an appropriate measure of consequential damages to passenger’s daughter for insurer’s breach of duty to indemnify. Moreover, insurer did not act in bad faith or breach its duty of good faith and fair dealing by refusing the settlement offer on daughter’s claims. Further, insurer did not misrepresent the scope of coverage on daughter’s claim under the provision for “Each Person” Limit of Liability under the UTPA. (Freyer II)