O'Fallon v. Farmers Insurance Exchange

Summary

The Montana Supreme Court reversed the dismissal of claims by Collin O'Fallon and Harold Case against Farmers Insurance Exchange and claims adjuster Terry Falcon. The court held that the plaintiffs sufficiently alleged malicious prosecution and statutory bad-faith claims under Montana law, and that dismissal of the underlying counterclaim and third-party complaint could constitute favorable termination. The court further held that an individual claims adjuster may be personally liable under the common-law cause of action recognized in Klaudt, while the statutory cause of action under § 33-18-242, MCA, applies to insurers.

Holdings

1. The complaint stated a claim for malicious prosecution because it alleged all six required elements, and dismissal of the underlying counterclaim and third-party complaint could constitute a favorable termination. A settlement or dismissal rather than a judgment does not automatically preclude favorable termination; the true facts and substance of the disposition control.
2. Plaintiffs who alleged violations of Montana Code Annotated § 33-18-201(4) and (6) and personal damages resulting from those violations qualified as third-party claimants under § 33-18-242 and adequately stated a claim for relief.
3. A claims adjuster may be individually liable for personally violating § 33-18-201 because the statute prohibits prohibited conduct by any 'person,' not only by insurers. The common-law cause of action recognized in Klaudt remains available against individuals, while the statutory cause of action and its statutory burden of proof under § 33-18-242 apply only to insurers.

Questions Presented

1. Whether the complaint adequately alleged a malicious-prosecution claim notwithstanding dismissal of the underlying counterclaim and third-party complaint.
2. Whether plaintiffs adequately alleged a claim for damages under Montana Code Annotated §§ 33-18-201 and 33-18-242.
3. Whether a claims adjuster may be individually liable for personal violations of Montana Code Annotated § 33-18-201.

Disposition

reversed_and_remanded