Bailey v. State Farm, 2013 MT 119 (May 2, 2013) (4-2) (Cotter, J., for the majority; Rice, J. & Baker, J., dissenting)
Issue: (1) Whether the district court erred in finding no genuine issues of fact regarding defendants’ duty to procure underinsured motorist coverage for Baileys; and (2) whether the district court erred in failing to recognize and impose a heightened duty beyond a duty to procure requested coverage.
Short Answer: (1) Yes, and (2) the Court declines to address this issue.
Dissents: Justice Rice would conclude that the Baileys did not demonstrate genuine issues of material fact and would affirm. Justice Baker agrees, and writes separately to express her concern that the Court has in fact imposed a heightened duty on an insurance agent despite its claim that it is not addressing this issue.
Facts: In October 2006, a drunk driver collided head-on with Brenda and Stanley Baileys’ vehicle, causing them severe injuries. Stan was hospitalized for five months, and Brenda remains wheelchair bound. Their medical expenses exceed $1 million.
The Baileys moved to Montana in 1998, having been State Farm customers for many years. A month after moving, they went to the agency in Cut Bank to transfer their Oregon policy to Montana. They recall presenting their Oregon insurance cards and asking for the same coverage. The policies they bought had no coverage for underinsured motorists, whereas their Oregon policies did.
Procedural Posture & Holding: The district court granted summary judgment to the defendants on Baileys’ claim that State Farm and its agent, Olson, had negligently failed to secure underinsured motorist coverage for the Baileys. Baileys appeal, and the Supreme Court reverses.
Reasoning: (1) The Court finds genuine issues of material fact regarding why Baileys’ insurance coverage in Montana was not the same as their coverage in Oregon. It holds that Baileys’ oral request for matching coverage is not barred by the parol evidence rule because extrinsic evidence may be admitted when a mistake of the writing is put in issue by the pleadings, or the validity of the agreement is the fact in dispute. Stan’s signing of the insurance application does not change this, as a fact question may exist as to whether Baileys acted reasonably in relying on the agent’s representation that the Montana coverage was the same as the Oregon coverage. The phone conversation between Stan and an agent in 2005 does not change this; the varying accounts of the conversation further demonstrate the need to submit these issues to a jury. Reasonable minds could differ as to whether State Farm and its agent acted negligently when placing the Baileys’ coverage.
(2) Because summary judgment is reversed and remanded for trial on the negligence claim, the Court deems it unnecessary to determine whether these circumstances may also give rise to a heightened duty on the part of the insurance agent.
Justice Rice’s Dissent: Justice Rice determines that there are no genuine issues of fact in dispute. He notes that the rule that an insured does not have to not read the insurance policy has only been applied when the insurer makes changes within the body of the policy and does not otherwise notify the insured of the change. Never before has the Court applied this rule to a one-page application form that plainly lists coverage choices, which the applicant certifies he has read and made the choices indicated. Justice Rice would affirm.
Justice Baker’s Dissent: Justice Baker concurs with Justice Rice, and writes to express her concern that the Court has in fact imposed a heightened duty on insurance agents.