Tidyman's Management Services Inc. v. Davis

Summary

The Montana Supreme Court reviews a dispute arising from National Union Fire Insurance Company’s refusal to continue defending claims against Tidyman’s officers and directors. The court addresses choice of law, the insurer’s duty to defend, reasonableness and collusion concerning stipulated settlements, and prejudgment interest. It affirms in part, reverses in part, and remands for further proceedings.

Holdings

1. Montana law governs an insurance contract dispute when the policy contains no effective choice-of-law provision and Montana is an anticipated place of performance.
2. An insurer that recognizes that a complaint potentially implicates its policy, but unjustifiably refuses to defend while seeking no proper judicial determination of coverage, breaches its duty to defend and may be estopped from denying coverage.
3. Montana law does not automatically require a separate reasonableness hearing whenever an insurer breaches its duty to defend, although a district court may hold one.
4. A stipulated settlement resulting from an insurer's breach of the duty to defend must be reasonable, and when the insurer identifies specific facts suggesting excessiveness, a factual issue requiring a reasonableness hearing may preclude summary judgment.
5. The facts asserted by NUFI did not establish a need for a separate collusion inquiry because they showed, at most, issues concerning reasonableness rather than evidence of an agreement to defraud or break the law.
6. Prejudgment interest began accruing when the District Court approved the stipulated settlements and entered judgment, not when the first stipulation was filed.

Questions Presented

1. Whether Montana or Washington law governed the insurance dispute.
2. Whether NUFI breached its duty to defend without a prior judicial analysis of policy coverage.
3. Whether NUFI was entitled to a hearing and discovery concerning the reasonableness and possible collusion of the stipulated settlements.
4. Whether prejudgment interest was proper and when it began accruing.

Disposition

reversed_and_remanded