HARMAN v MIA SERVICE CONTRACTS
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92-270 NO. IN THE SUPREME COURT OF THE STATE OF MONTANA 1993 STEVEN J. HARMAN, Plaintiff and Appellant, v. MIA SERVICE CONTRACTS and AMERICAN ADJUSTMENT COMPANY, INC., Defendants APPEAL FROM: and Respondents. Court of the Thirteenth Judicial District, In and for the County of Yellowstone, The Honorable Maurice R. Colberg, Jr., Judge presiding. District COUNSEL OF RECORD: For Appellant: Paul M. Warren, Attorney at Law, Billings, Montana: A. Clifford Edwards, Edwards Law Firm, Billings, Montana For Respondents: William Werner R. McNamer, McNamer, Thompson, & Stanley, Billings, Montana Submitted on Briefs: Decided: September August lo, 19, 1992 1993 Justice Terry N. Trieweiler Court for recover with the opinion Steven J. Harman filed Plaintiff delivered his complaint the Thirteenth Judicial damages pursuant a Billings to a vehicle administrator made pursuant to Company, plaintiff's not claim. entitled in alleged dismissing that recover plaintiff's plaintiff's judgment, defendant complaint claim plaintiff and against appeals. it into (MIA) and adjusted American that adjusting plaintiff AAC under granted claims Adjustment for Court concluded against entered Contracts assumed responsibility The District to MIA Service Defendant contract. County to contract of the contract (MC) I later Inc. the in the District inYellowstone service Defendant auto dealer. was the original District of the Court. was any theory AAC'S motion by summary judgment. We affirm in part From and reverse in part. The issues Was plaintiff 1. entered into therefore, Indemnity failure that for of a contract Company, Inc., and contract? Adjustment violations at 5 33-18-201, to first beneficiary Adjustment sue American Company, Act found by plaintiff's American to enforce Can plaintiff Practices are: a third-party by defendant entitled 2. Century on appeal of MCA, or is comply with Company, Inc., the Unfair such a suit or Trade barred 5 33-18-242(6)(b), MCA? FACTUAL BACKGROUND On November 23, 1985, plaintiff Bert Arnlund Arnlund Chrysler $655 for in a vehicle purchased Billings. On August service contract 2 a Jeep Cherokee 29, 1986, in which Arnlund from he paid agreed to make certain time covered repairs vehicle in the manufacturer's The contract Service to plaintiff's provided Contracts warranty that and that would be administered it authorization of administrator that the accordance The contract administrator's with their dealers contracts, and then administer the contracts contracts after throughout prior approval. the were sold. and put into a reserve to the contracts. A portion dealer as his claims Pursuant could of the selling contract; Century Company (Century) which exceeded the dealer's In business 1987, Century Arnlund covering above, vehicle with each dealer made pursuant to the agreement against and by the by the to by MIA to those claims agreement owned subsidiary bankrupt MIA's was paid was paid under its to made pursuant a portion to insure itself that service premium was retained and a portion is a wholly as administrator in appears not be made without responsibility MIA declared As mentioned dealer to a separate the contract; the MIA and Century. it fund to pay some claims MIA to administer Indemnity the the holder, of the premium would be retained dealer fee for to market agreement repairs A portion was country by adjusting between MIA and the dealer, that to the contract from the record, had a separate they provided for agreement. From what can be determined MIA helped also liability separate by MIA must be contacted did not assume any liability but of agreement. the administrator repairs. beyond the period with of CIGNA. stopped doing of the contracts. Century him against had sold vehicle 3 service an insurance contract policy claims to above those amounts which were covered by the reserve fund maintained by Arnlund. Another basically wholly dormant until the sole purpose marketed by of adjusting manager, claims would However, it have is clear adjusting to MIA pursuant to its and he replaced He submitted separate it to AAC for to that to handle these in had previously with been Arnlund. Jeep Cherokee Bozeman at a cost the amount of that authorize defendant Century. AAC assumed those contract while refused based upon the fact AAC's pump in plaintiff's a claim defendant that to AAC and that claims 12, 1990, the fuel malfunctioned However, testimony for to contracts According between been by Century the agreement into his AAC, had made pursuant bankruptcy. entered from for On April its CIGNA, was resurrected McAllister, been of any claims to Robert responsibilities assigned subsidiary 1988 when it MIA prior general $144. owned payment had not given for repair. the prior of repair approval for the expenditure. On October drive line that repair. covered MIA provided drive axle line and requested However, part plaintiff's 17, 1990, plaintiff under purchase plaintiff discovered coverage AAC denied the vehicle AAC for the drive the line front cost axle of was a contract. service a brochure Prior to contract, Arnlund and that the which indicated would be covered. On November 13, 1990, plaintiff and MIA in from service of the vehicle with that damage to his which he described filed the 4 vehicle a complaint service against contract AAC and alleged his that it had been breached for claim breach defendants' denial good faith and fair defendants violated Practices fraud, gross punitive plaintiff were and oppression not appear that were negligent, the guilty of of that Unfair Trade constructive which entitled to § 27-1-221, did alleged MCA, of defendants to of the covenant defendants § 33-18-201(5), MIA In addition was a violation that dealing, damages pursuant plaintiff's plaintiff to MCA. and did not respond to allegations. On April for of his claims negligence, Defendant contract, of and that Act, by defendants. 11, the reason plaintiff that and pursuant to underlying 1991, that § AAC moved for had no direct it defendant contractual the third-party 33-18-242, claim that claim MCA, must plaintiff had summary judgment relationship filed await by plaintiff resolution against the with of auto any dealer, Arnlund. On April and order 1, 1992, granting April 21, 1992, final favor of AAC and the AAC's District Court motion judgment certified for final its memorandum judgment, summary was entered as entered and on Court in by the District pursuant to Rule 54(b), M.R.Civ.P. On appeal from the judgment arguments focus plaintiff had enforceable contracts in which AAC promised benefit. The second issue of the on two principal issues. rights Court, District The first as a third-party to perform is whether 5 services plaintiff's is whether beneficiary for of plaintiff's AAC can be sued as an insurer for violation of resolution of the Unfair Trade plaintiff's right Practices under Act its without contract any prior with the auto Arnlund. dealer, CONTRACT ISSUE The District entered into determined by the folded, Century contracts. AAC were under upon the itself, the genuine issue contract for Arnlund for District of the that performance However, Arnlund bankruptcy that was not proceedings under neither the the written of that there there was of contract. which fact sue to and had not 6 was both the suit appeared. in agreement at least under Court regarding a the also whether make MIA liable the the nor used coverage would Therefore, service contracts. The District MIA, a party the brochure issue could when MIA Century service terms for Arnlund and that between was a genuine plaintiff be administrator vehicle whether the also must insured claims made by plaintiff. under that the the as an agent the Century concluded as to fact contract contracts, concluded claims was acting that Court there concluded in and the was It dealer. that adjust discrepancy contract contract plaintiff. AAC to marketing the under service court service auto but found extended in his done to also the vehicle (MIA), resurrected involved marketing work liability However, Based concluded repair Court claims the and administrator District against that plaintiff any no personal The found between that approved assumed Court District dealer Court and MIA. and MIA was involved The District plaintiff Court sought parties concluded to join nor its concluded they related that even though on Century's policy of insurance, there plaintiff first to have pursuant resolve his it it arrangement is with some agreement plaintiff's true that also service impliedly a manner consistent It is beneficiary Amlund's to beneficiary, the promisor, contract The rule enforce claim that issued any claim against that Act is a plaintiff had no direct would the dealer agreed to handle to those to did so, promised by in under the contract. was claims and into responsibilities he adjust to enforce When it formerly obligations enter made pursuant Arnlund. that contractual inference, claims with obligations, that those the intended consistent as an obligations with intended against We agree. regarding contracts of insurance responsibility he has the right AAC. to Trade Practices adjust agreement contractual pursuant by necessary position of AAC's and AAC can be pursued, with Arnlund's plaintiff's Amlund, Therefore, plaintiff assumed the administrative It Court MCA. Century vehicle of the the District policy underlying AAC, AAC did, with breach claims to the Unfair and before (whom insure did adjusting to § 33-18-242(6)(b), while MIA. Furthermore, or AAC to plaintiff. claim; Century by amendment) nor AAC were was no direct may have pursuant third-party it in neither not be sued for Century behalf Century could theories. acted from either since as a defendant to the contract, contract that the rights is accurately of third-party summarized 7 beneficiaries at Restatement to (Second) of Contracts 5 304 (1981), a contract creates a beneficiary to the issue then beneficiary of AAC's it in provides the that "[a] promisor any (1981), promise, and is The answer contract. $3 302 the whether plaintiff was administer is where found to intended in intended claims agreement the to promise duty." The duty perform may enforce where in Restatement intended (Second) are beneficiaries beneficiary an intended under the of Contracts described as follows: (1) Unless otherwise agreed between promisor and a beneficiary of a promise is an intended promisee, beneficiary if recognition of a right to performance in the beneficiary is appropriate to effectuate the intention of the parties and either (a) obligation beneficiary: the performance of the promise of the promisee to pay or will satisfy money to an the (b) the circumstances indicate that the intends to give the beneficiary the benefit promised performance. promisee of the In AAC to claims this case, under Century's Century Amlund's obligation AAC agreed to to insure like the performance obligation of exclusive authority to contract, we also conclude Century right against administer agreement those claims promise because and do so under plaintiff. And since or that disapprove claims it performance is in 8 appropriate order to that the satisfied to approve of possibly rights to adjust we conclude plaintiff's its and Arnlund to of Therefore, the of services service plaintiff. contract, plaintiff's the extended pay money to claimants when enlisted an AAC has under to the recognize effectuate the intentions of provided for For these to perform seek its summary that for reversed administer for in this and he had its failure accordance The contract. case is of not by to with his District Court's remanded to plaintiff's the rights insured Practices in Act Pursuant there was no insurance contract either and Arnlund, claims to and Century accordance found AAC made against against claim that ACT Century. AAC or disagree. plaintiff his TRADE PRACTICES plaintiff and adjust claim. Century, AAC determination found between does Century Trade benefits was an intended with from and a factual Court into Plaintiff handle plaintiff agreement service all contract. The District claim that responsibilities UNFAIR entered receive Arnlund. damages vehicle is Court with of AAC's administrative the plaintiff we conclude contract judgment District that contract reasons, under under his beneficiary right rights parties under third-party a the at with agreed Amlund. or AAC for the MCA, Century Therefore, their provisions § 33-18-201, 5 33-18-242(6)(b), with any failure of is to the to Unfair a third-party MCA: A third-party claimant may not file an action under this section until after the underlying claim has been settled or a judgment entered in favor of the claimant on the underlying claim. We agree § 33-18-242, be brought with the District MCA, no claim against under AAC or Century Court's the until 9 holding Unfair Trade plaintiff that pursuant Practices first Act asserts to can and resolves his claim Arnlund. That part dismissing plaintiff's on the of underlying the contract District pursuant claim Court's to against summary 5 33-18-201, AAC or judgment MCA, is affirmed. For is the affirmed proceedings foregoing in part, consistent reasons, reversed with the in this part, opinion. We concur: Chief Justice Justices District McCarter Justice judgment Court Judge Dorolhy sitting in place of Karla M. Gray 10 and of the District remanded for Court further Justice Fred I J. Weber dissent dissents from the an intended plaintiff was (American Adjustment Indemnity Company) AAC for in its Contract of the majority third-party to perform to its plaintiff's opinion that of AAC's beneficiary agreement and had a right with with seek Century contract administrative rights (Century damages from responsibilities under the Vehicle Service (VSC). Plaintiff purchased Automotive, Inc. On August from conclusion Company) failure accordance as follows: 29, 1986, Arnlund. Arnlund d/b/a a 1986 Arnlund Jeep Chrysler plaintiff of the from Plymouth purchased The key part Cherokee Jeep a Vehicle VSC is the Arnlund (Amlund). Service Contract following promise by as dealer: The Dealer [Arnlund] agrees that subject to all terms and conditions on the front of this Service Contract for the period indicated to make such repairs to the described vehicle as shall become necessary because of mechanical failure as defined herein. The record party not defendant. because the does Plaintiff's Arnlund repair of was not (MIA). party Arnlund was suggest that making vehicle it In why briefs the plaintiff's The VSC showed Contracts demonstrate under the was administered case of loss the the not named the as reason decisions VSC. by defendant pertinent MIA Services provisions of IN CASE OF LOSS event of mechanical failure to any licensed repair facility. 11 was regarding VSC are: In the vehicle a you may take However, it your is the suggested that you take your vehicle back to the dealer from whom you purchased it. In your presence have the service manager contact the office of the administrator the administrator before [MIA]. . . . You must contact authorizing repairs . . . No indemnity shall be payable under the service contract without authorization issued by the dealer [Arnlund] or administrator [MIA] prior to the repair or replacement of vehicle parts covered by this service contract. . . . The administrator [MIA]does not assume, and specifically disclaims any liability to you [plaintiff] for any benefits provided herein. The liability of the Administrator [MIA] is only to the Dealer [Arnlund] in accordance with their separate agreement. Note that and not but MIA as administrator to plaintiff. because of Plaintiff the The District reference Court to made between in of MIA, its foregoing further reference and Century, only to Arnlund as dealer has named MIA as a party-defendant bankruptcy Court the Arnlund was liable it is Memorandum contractual to not an active and Order made specific provisions. the party. contractual The District relationship stating: connection with the VSC Arnlund also had an In Contract Policy with "Automobile Extended Service Arnlund was the insured and Century the Century. insurer. . . . Century agreed to insure Arnlund to pay under certain conditions and subject to some self insurance provisions "losses arising out of the reasonable and customary cost of repair or replacement under and in accord with the all of the terms of the service contracts extended issued by the insured [Arnlund] on or after the inception date of this policy". . . . The District various parties Court further established the relationship between stating: The deposition of Robert McCallister, the general manager of American [AAC] establishes the relationships between American [AAC], Century and related companies. When MIA filed bankruptcy Century took steps to protect consumers and itself concerning contracts it had insured such as 12 the contract with plaintiff. . . . Century is a wholly owned subsidiary of CIGNA. . . . Century did not have an adjusting department and American [AAC] was used for that purpose. American was a previously dormant company revived for the purpose of adjusting the claims of dealers for which MIA had acted as administrator under VSC contracts. American is also a wholly owned subsidiary of CIGNA. Neither Century nor American were involved in any way in marketing anv VSC contracts or the particular contract issued to olaintiff in 1986. . . .(Emphasis supplied.) The uncontradicted Court facts was correct With in further its regard in the above to record establish stated conclusions. AAC the District that Court the District stated: The only defendant who has appeared is American [AAC] which is the wholly owned subsidiary of CIGNA given the job of adjusting the VSC contracts administered by MIA after its business failure. The reason American is adjusting the contracts is because of the automobile extended service contract policy written by Century, another wholly owned subsidiary of CIGNA. That policy names Arnlund as the insured and Century as the insurer. . . . It is important and conclusions to emphasize the District Court's further analysis as follows: Century's sole involvement in this case is because its automobile service of extended contract policy written in favor of Arnlund where it has agreed to insure Arnlund for "losses arising out of the reasonable and customary costs of repair or replacement" under the VSC (McCallister Depo. Ex. 12). American's sole involvement is its charge to adjust the claims for Century under previously issued VSC's naming MIA as administrator after the business failure of MIA. Under no theory are Century and American oarties to the VSC who could be sued directlv by olaintiff for breach of contract or breach of covenants runninq with the contract. The VSC is between plaintiff and Arnlund. Perhaps MIA could be held liable under the contract as the principal represented by its agent Arnlund but there is no theorv wherebv Centurv and American are themselves parties to the contract with plaintiff. (Emphasis added.) 13 The District because Court of its policy uncontradicted that to and Arnlund. do under The the the Robert that on Century to contracts and AAC both which deposition its with are established arrangement, record. nothing with the with Arnlund oral VSC contracts exception The majority only arranged as that the opinion upon The of the specific claimed the of for plaintiff by public. CIGNA. The adjustment of terms of established that in the the AAC had that in the done any way involved and Arnlund, losses. as follows: While it is true that plaintiff had no direct contractual arrangement with AAC, AAC did, by necessary inference, enter into some agreement with Century to adjust claims made pursuant to plaintiff's vehicle service contract with Arnlund. When it did so, it responsibility assumed the administrative formerly promised by MIA. It also impliedly agreed to handle those responsibilities in a manner consistent with Amlund's obligations under the contract. 14 any that adjusting with are not between for in realization of and was not adjustment states the established marketing, such relied subsidiaries or in writing, claims I VSC. obligation AAC. point MIA was required existence owned further to of in Century through deposition regard were this the which CIGNA came to the The AAC was not McCallister over wholly that whether The take in only Arnlund. adjust plaintiff-Amlund the manner involved At mentioned, the of losses claims was to of have of conclusion. involvement establishes to was favor VSC in terms Court was going that As previously deposition District it sole Century in supports AAC's way administering that written record emphasize Century emphasized with I find of nothing any in the record administrative Clearly that Arnlund. assumed a reference is in nothing of MIA. I find nothing may conclude that AAC under the in a manner states to record the apparent and that that from with his plaintiff VSC, was obligated consistent under plaintiff referring under it by MIA. demonstrate AAC and in to take which agreed to After to by AAC promised between impliedly an the record the contract--again obligation opinion the VSC demonstrates place in the responsibilities which responsibilities an assumption formerly to nothing any administrative particular establishes responsibilities is There which the to the opinion handle Amlund's the obligation reference to Arnlund's VSC. Restatement provisions, the majority as follows: In this case, Century enlisted the services of AAC to adjust claims under Arnlund's extended service agreement because of Century's obligation to insure against those claims and possibly pay money to claimants like plaintiff. Therefore, we conclude that when AAC agreed to administer the plaintiff's rights under the contract, the performance of its promise to do so satisfied an obligation of Century and Arnlund to plaintiff. And since AAC has exclusive authority to approve or disapprove claims under the contract, we also conclude that it is appropriate to recognize plaintiff's right to performance in order to effectuate the intentions of the parties that plaintiff receive all benefits provided for under his contract with Arnlund. The record does not "administer the AAC agreed to adjust provisions of the support contract of plaintiff's course conclusion rights the contract is the not claims under made between directly that agreed to the contract." At most against Arnlund under the Arnlund connected 15 AAC and to Century. the That VSC contract between plaintiff that We find and Amlund. AAC agreed to administer contract, by which plaintiff the no record basis plaintiff's I assume reference rights under the and Arnlund. Next the majority approve or concludes disapprove that performance. between the emphatically recognize plaintiff's intentions of the parties. under with in the record MIA. that performance The record AAC should right of that AAC As it claims. of the VSC MIA must be that AAC in a result is appropriate to does not I to effectuate the substantiate any succeed to any of the obligations the plaintiff-Arnlund Next the majority to that to establish of the conclusion it disapprove does provide to which the conclusions to the provisions which right from plaintiff's or responsibilities disagree authority" contract approve is referring There is nothing that the to recognize to and Arnlund way assumed intention under does not support authority plaintiff made to the VSC between AAC has "exclusive is appropriate the majority contacted. that claims The record Apparently any it exclusive had states is to conclude of MIA VSC. opinion states: For these reasons, we conclude that plaintiff was an intended third-party beneficiary of AAC's agreement with Century, and he had a right to seek contract damages from its failure to perform its administrative AAC for responsibilities in accordance with his rights under the vehicle service contract. I find no record demonstrates that basis for AAC did the not foregoing have 16 any conclusion. obligation The record to perform administrative under the I responsibilities VSC between conclude conclusions opinion's I would in the on the affirm of the Chief Justice the foregoing plaintiff of any type and in particular not of the findings and and Arnlund. record part reversal of supports the District the summary District all Court. Court. J. A. Turnage dissent. judgment I dissent and Justice 17 by the District R. C. M from the Court. August19, 1993 CERTIFICATE OF SERVICE I herebycertify that the following order was sentby United Statesmail, prepaid,to the following named: PaulM. Warren Attorney at Law P.O. Box 21282 Billings, MT 59104 A. Clifford Edwards Edwards& Paoli P.O. Box 20039 Billings, MT 59104 William R. McNamer McNamer, Thompson, Werner, & Stanley P.O. Box 1980 Billings, MT 59103-1980 ED SMITH CLERK OF THE SUPREMECOURT STATEfi)F MONTANA
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