Mlekush v. Farmers Insur. Exchange

Mlekush v. Farmers Insur. Exchange, 2015 MT 302 (Oct. 20, 2015) (Shea, J.) (7-0, rev’d)

Issue: Whether the district court erred in determining Mlekush could not recover attorney fees and costs from Farmers.

Short Answer: Yes.

Reversed and remanded

Facts: Mlekush was in a car accident with another driver, Shaunaugh McGoldrick, in January 2011. McGoldrick admitted liability and Mlekush recovered McGoldrick’s $50,000 policy limits for bodily injuries. At the time, Mlekush was insured with Farmers Insurance under a policy that included underinsured motorist coverage with a $200,000 policy limit. Mlekush entered into a contingency fee agreement with Doubek, Pyfer & Fox, LLP to represent her on her UIM claim. In August 2012, Mlekush’s attorneys sent Farmers a letter of representation and asked Farmers to open a medical payments claim. Over the following months, the parties exchanged information about Mlekush’s treatment, medical bills and reports, prior injuries, and lost wages.

On Jan. 21, 2013, Farmers sent Mlekush’s attorneys a letter asking for additional medical and wage-loss information, stating they were not denying any demands but were merely requesting additional information. The attorneys sent records the next day, and on the following day, filed suit against Farmers. Farmers answered and filed a third-party complaint against McGoldrick. Eventually, the district court granted summary judgment to McGoldrick on the basis that a third-party claim must be made in good faith, and McGoldrick was judgment-proof.

The case went to trial in July 2014 and the jury returned a verdict for Mlekush for $450,000. Mlekush stipulated to entry of judgment for her policy limits of $200,000.

Procedural Posture & Holding: Mlekush filed a memorandum of costs for $1,757.45, and Farmers moved to tax costs, arguing &996 of Mlekush’s requests costs were not allowed under § 25-10-201, MCA. Mlekush then moved for attorney fees and nontaxable costs of $10,439.30. The district court concluded the insurance exception to the American Rule did not apply and denied Mlekush’s motion for attorney fees and nontaxable costs. It also denied in part Farmers’ motion to tax costs. Mlekush appeals, and the Supreme Court reverses.

Reasoning: The Court first clarifies that it applies de novo review to mixed questions of law and fact. Mlekush sought attorney fees under the insurance exception to the American Rule, which allows an insured to recover attorney fees when the insurer forces the insured to resort to legal action to obtain the benefit of the insurance contract. The district court held this exception did not apply because Mlekush filed suit before Farmers had made a decision regarding her claim. However, “legal action” includes all stages of litigation. Farmers increased its settlemet offers over the 17 months between the filing of the complaint and the jury verdict, but the district court did not consider on the record the amounts of scuh offers, when they were made, whether they required a full and final release, what Mlekush’s responses were, and what relationship, if any, the increasing settlement offers bore to Mlekush’s increasing economic damages. The determination of whether an insured is entitled to attorney fees under the insurance exception requires factual findings that consider both parties’ actions throughout the litigation process.