Idaho v. Bunker Hill Co.

No. 83-3161 (D. Idaho January 30, 1987)

The court rules on an insurer's motions for summary judgment in litigation involving the Bunker Hill hazardous waste site in Idaho. The court first holds that the issue of whether a hazardous waste site operator complied with an insurance policy's coverage requirement of written notice of a pending lawsuit depends on factual issues and is not appropriate for summary judgment. The court reopens its earlier decision at 17 ELR 20479, finding that Idaho does not recognize a tort of bad faith in these circumstances, in light of a subsequent decision on point by the Idaho Supreme Court. In light of the Idaho Supreme Court's opinion, the court reaffirms its earlier decision finding that there is no private cause of action under Idaho Code § 41-1329, dealing with unfair trade practices. The court denies as premature motions for summary judgment regarding punitive damages and award of attorneys fees.

[This opinion reconsiders issues initially decided at 17 ELR 20479. Other related opinions appear at 16 ELR 20715 and 16 ELR 20879.]

Counsel for Plaintiff
P. Mark Thompson, Deputy Attorney General
Office of the Attorney General
Statehouse, Boise ID 83720
(208) 334-2400

Counsel for Defendant
James P. Keane
Evans, Keane, Koontz, Boyd & Ripley
1st Interstate Plaza, Suite 301, 505 Front Ave., Coeur d'Alene ID 83814
(208) 664-9287

[17 ELR 20961]

Ryan, J.:

Order

The Insurance Company of the State of Pennsylvania (Penn) has moved for partial summary judgment on five grounds: (1) breach of conditions precedent; (2) bad faith claims fail to state a cause of action; (3) no private right of action under Idaho Code § 41-1329; (4) punitive damages are inappropriate; (5) attorney's fees under Idaho Code § 41-1839 are inappropriate. Since these issues have previously been addressed by the court or are issues of law, a hearing on the motion is unnecessary.

The insurance policy issued by Penn, like the other insurers involved in this action, contains a standard clause which states that in the event of an occurrence which is potentially covered by the policy, written notice is to be given to the insurance company "as soon as reasonably possible." Also, if suit is brought against the insured, the insured shall immediately forward to the company a summons or other process that may be served upon them. Penn argues that Pintlar/Bunker Hill breached these conditions precedent to any action against the insurer and, therefore, the action against Penn must be dismissed.

This court previously addressed the standards under Idaho law for breach of conditions precedent. In the court's Memorandum Opinion and Order filed September 2, 1986, the court found that Idaho law requires only substantial compliance considering excuses by the insured in finding substantial compliance and, to insure fairness, provides that the insurance company need not show prejudice. Id. at 25.

Penn contends that Pintlar/Bunker Hill was placed on notice that a claim was to be filed against them on December 9, 1983, and that the Complaint was filed soon thereafter. Penn points out that Pintlar/Bunker Hill sent a letter to a number of insurance companies (eleven) on January 4, 1984, informing them of the lawsuit. The Amended Complaint was filed in April 1984. Pintlar/Bunker Hill has asserted that it gave Penn notice of the State's litigation and tendered defense through a letter dated May 10, 1985, signed by T. Barry Tierney. Defendant asserts that it never received the letter from Pintlar/Bunker Hill. Penn contends that due diligence would have mandated that Pintlar/Bunker Hill provide notice by certified mail. Most important to Penn's argument is that the May 1985 letter, even if sent, was mailed seventeen months after notice of claim. Penn argues that the court should rule as a matter of law that the condition precedent to any duties under the insurance contract of notice was breached and, therefore, any duties under the contract are null and void.

Pintlar/Bunker Hill's defense is that diligent effort was made to locate all insurance policies which may provide coverage under the claims brought by the State. Pintlar/Bunker Hill further asserts that the claims made by the State required a preliminary review and analysis before they were able to pinpoint policies potentially providing coverage. All of this took a substantial amount of time. Further, we must assume for purposes of summary judgment that notice was given on May 10, 1985.

The court has previously found that questions of fact are inherent in this argument regarding substantial compliance. The court has previously denied Admiral Insurance Company (Admiral) and Fidelity & Casualty Company of New York's (Fidelity) motions for summary judgment on this issue. It should be noted that Fidelity was not given notice of any claim until May 24, 1985, even after notice was given to Penn. On the same basis that the court denied Admiral and Fidelity's motions for summary judgment, because factual issues necessarily attend the issue of whether the conditions precedent have been breached, Penn's motion must be denied.

The second issue addressed by Penn in this motion is that Idaho does not recognize the tort of bad faith and that count three of the third-party complaint against Penn should be dismissed. This issue was addressed by the court in its September 2, 1986, Memorandum Opinion and Order, wherein the court found that Idaho would not recognize a cause of action for tortious bad faith under these circumstances. However, on December 29, 1986, the Idaho Supreme Court in White v. Unigard Mutual Insurance Co., No. 168, slip op. (Supreme Court of the State of Idaho, Dec. 29, 1986), recognized the tort of bad faith as applied to insurance companies on a question certified to the Idaho Supreme Court by Judge Marion Callister.

The ruling by the Idaho Supreme Court presents interesting issues. In the court's September 2nd opinion, the court made an attempt to determine what the Idaho Supreme Court would do. It now turns out that the court was incorrect. Questions are raised as to the effect of the supreme court's ruling, both as it applies to Penn and all other insurers involved in this action. Therefore, the court will request briefing on the issue of the impact of the supreme court's decision from any party interested in submitting briefing. The court will refrain from ruling on this issue until it is properly addressed.

The third issue which is raised by Penn is whether or not Idaho recognizes a private right of action under Idaho Code § 41-1329. The court has previously ruled on this issue and found that there is no private right of action under Idaho Code § 41-1329. Memorandum Opinion and Order filed September 2, 1986, at 22. In the White v. Unigard Mutual Insurance Co. case, filed December 29, 1986, by the Idaho Supreme Court, the court found, upon certification of the question, that indeed there was no private right of action under Idaho Code § 41-1329. Therefore, the court will dismiss count four against Penn.

The fourth issue raised by Penn is regarding punitive damages. Penn argues that Pintlar/Bunker Hill has not established a prima facie case to support its claim for punitive damages. As noted at page 26 of the September 2, 1986, Memorandum Opinion and Order, the court informed counsel from the bench during oral argument that any motion to dismiss defendants' punitive damages claims would be premature. Therefore, the court will deny Penn's motion for summary judgment on this issue as premature.

Finally, Penn asks the court to dismiss Pintlar/Bunker Hill's claims for attorney's fees under Idaho Code § 41-1839. Idaho Code § 41-1839 provides for attorney's fees when an insurer fails for a period of thirty days after proof of loss has been furnished to pay the amount justly due under the policy. Penn asserts that no proof of loss has been furnished and, therefore, no award of attorney's fees would be proper. Penn states that "[n]o proof of loss has been presented to PENN; no settlement of judgment has occurred." Penn's Memorandum Supporting Summary Judgment Against Third-Party Plaintiffs, filed May 14, 1986, at 18. It was true at the time that the motion was made that no settlement had occurred, but settlement has now been executed and judgment entered.

Pintlar/Bunker Hill asserts that where an insurance company rejects tender of defense, denying liability, it thereby waives any requirement that proof of loss be furnished as a prerequisite to recovery of attorney's fees. The case of Bonner County v. Panhandle Rodeo Association, Inc., 101 Idaho 772, 620 P.2d 1102 (1980), would support that position. While there is some dispute as to whether tender of defense has been properly made with respect to Penn, the issue simply provides additional questions of fact.

Since the settlement has occurred in this action and since there are questions of fact regarding whether or not Penn has waived the requirement that proof of loss be furnished by virtue of failing to accept defense, the motion for summary judgment to strike the claim for attorney's fees award under Idaho Code § 41-1839 is premature and will be denied.

Based upon the foregoing and the court being fully advised in the premises,

IT IS HEREBY ORDERED that the Insurance Company of the State of Pennsylvania's motion for partial summary judgment should be, and is hereby, GRANTED as to count four of the Third-Party Complaint, which is hereby DISMISSED. The court hereby reserves ruling on the issue of bad faith and the motion is DENIED in all other respects.