High Country Paving, Inc. v. United Fire & Casualty Company

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
HIGH COUNTRY PAVING, Nos. 20-35791
INC., 20-35826
Plaintiff-Appellee/
Cross-Appellant, D.C. No.
9:18-cv-00163-DWM
v.
UNITED FIRE & CASUALTY ORDER CERTIFYING
COMPANY, QUESTION TO THE
Defendant-Appellant/ SUPREME COURT OF
Cross-Appellee. MONTANA
Filed September 24, 2021
Before: M. Margaret McKeown and Ronald M. Gould,
Circuit Judges, and Jed S. Rakoff, * District Judge.
Order
*
The Honorable Jed S. Rakoff, United States District Judge for the
Southern District of New York, sitting by designation.
2 HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY
SUMMARY **
Montana Insurance Law
The panel certified to the Supreme Court of Montana the
following question:
Whether, when an insurance policy does not
include either a table of contents or a notice
section of important provisions, in violation
of Mont. Code Ann. § 33-15-337(2), the
insurer may nonetheless rely on
unambiguous exclusions or limitations to the
policy’s coverage, given that § 33-15-334(2)
provides that § 33-15-337(2) is “not intended
to increase the risk assumed under policies
subject to” its requirements?
ORDER
This case concerns an unresolved question of how to
interpret Montana’s Property and Casualty Insurance Policy
Language Simplification Act (“PSA”), Mont. Code Ann.
§ 33-15-333 et seq., where an insurer seeks to rely on
exclusions or limitations to the insurance policy’s coverage
that are otherwise controlling, but the policy does not include
either a table of contents or a notice section of important
provisions and is thus in violation of Mont. Code Ann. § 33-
15-337(2) as interpreted by the Montana Supreme Court in
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY 3
Montana Petroleum Tank Release Compensation Board v.
Crumleys, Inc., 174 P.3d 948 (Mont. 2008).
This central question of state law is determinative of
these consolidated appeals, and we find no controlling
precedent in the decisions of the Montana Supreme Court.
Mont. R. App. P. 15(3). Thus, we respectfully certify this
question of law to the Montana Supreme Court pursuant to
Rule 15 of the Montana Rules of Appellate Procedure.
As a general matter, “[t]he task of a federal court in a
diversity action is to approximate state law as closely as
possible in order to make sure that the vindication of the state
right is without discrimination because of the federal
forum.” Ticknor v. Choice Hotels Int’l, Inc., 265 F.3d 931,
939 (9th Cir. 2001) (quoting Gee v. Tenneco, Inc., 615 F.2d
857, 861 (9th Cir. 1980)). If the state’s highest appellate
court has not decided the question presented, then we must
predict how the state’s highest court would decide the
question. Id.However, if state law permits, we may exercise our
discretion to certify a question to the state’s highest court.
Lehman Bros. v. Schein, 416 U.S. 386, 390 (1974). The
Montana Supreme Court permits certification of questions
of law from federal courts. Mont. R. App. P. 15(3).
“We invoke the certification process only after careful
consideration and do not do so lightly.” Kremen v. Cohen,
325 F.3d 1035, 1037 (9th Cir. 2003). In deciding whether to
exercise our discretion, we consider: (1) whether the
question presents “important public policy ramifications”
yet unresolved by the state court; (2) whether the issue is
new, substantial, and of broad application; (3) the state
court’s caseload; and (4) “the spirit of comity and
federalism.” Id. at 1037–38.
4 HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY
This case presents important public policy ramifications
for Montana that have not yet been resolved by the Montana
Supreme Court. The interpretation of the PSA and its
requirements for casualty insurance in Montana implicate
important state policy concerns and are of broad application.
Although the Montana Supreme Court has addressed the
PSA before in Crumleys, the Montana Supreme Court has
never addressed the issue of whether, when an insurance
policy does not include either a table of contents or a notice
section of important provisions, in violation of Mont. Code
Ann. § 33-15-337(2), the insurer may rely on unambiguous
exclusions or limitations to the policy’s coverage, given that
§ 33-15-334(2) provides that § 33-15-337(2) is “not
intended to increase the risk assumed under policies subject
to” its requirements. Therefore, after considering these
factors, and in the spirit of comity and federalism, we
exercise our discretion to certify this question to the
Montana Supreme Court.
Pursuant to Montana Rule of Appellate Procedure 15(6),
we provide the following information for the consideration
of the Montana Supreme Court.
1
We first provide the factual context of this dispute, along
with the procedural history.
High Country Paving, Inc. purchased liability insurance
from United Fire & Casualty Company, which included
commercial auto liability coverage, commercial umbrella
coverage, and commercial general liability (“CGL”)
coverage. High Country Paving, Inc. v. United Fire & Cas.
Co., No. CV 18-163-M-DWM, 2019 WL 2058727, at *2
(D. Mont. May 9, 2019) (“High Country II”). In August
2016, a High Country employee was operating a company
HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY 5
truck and trailer. Id. The trailer detached and hit another
vehicle, killing the driver and injuring a passenger. Id. In
settlement of the resulting claims brought by the driver’s
estate and the passenger, United Fire paid the combined
$3 million limits of the commercial auto and umbrella
policy, 1 but denied coverage under the CGL policy based on
two exclusions to the CGL Policy: the Aircraft, Auto or
Watercraft (“AAW”) exclusion, and the Multiple Liability
Coverages Limitation (“MLCL”) endorsement. High
Country Paving, Inc. v. United Fire & Cas. Co., No. CV 18-
163-M-DWM, 2020 WL 42722, at **1, 3 (D. Mont. Jan. 3,
2020) (“High Country III”). United Fire argued that the
injuries arose out of the use of a vehicle pulling a loaded
equipment trailer, and thus arose out of the use of an “auto,”
precluding coverage under the CGL policy pursuant to the
AAW exclusion. Id. at *3. Additionally, because coverage
was provided under the commercial auto policy, United Fire
argued that the CGL policy did not provide any coverage,
pursuant to the MLCL endorsement. Id.High Country sued United Fire in state court for breach
of contract in denying coverage under the CGL policy, as
well as common law bad faith and a claim under the Montana
Unfair Trade Practices Act (“UTPA”), Mont. Code Ann.
§ 33-18-101 et seq. United Fire removed the case to federal
court on the basis of diversity jurisdiction. See High Country
1
United Fire released these funds to settle the claims without first
securing the consent of High Country to do so, an issue that was the basis
for the other claims before the district court, under the Montana Unfair
Trade Practices Act (“UTPA”), Mont. Code Ann. § 33-18-101, et seq.,
and common law bad faith, neither of which is at issue in this appeal. It
was in relation to the UTPA claim that the district court previously
certified a question in this case to the Montana Supreme Court. See High
Country Paving, Inc. v. United Fire & Cas. Co., 454 P.3d 1210 (Mont.
2019).
6 HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY
Paving, Inc. v. United Fire & Cas. Co., 365 F. Supp. 3d
1093, 1096 (D. Mont. 2019). As relevant to these
consolidated appeals regarding only the breach of contract
claim, the district court considered two questions on cross
motions for partial summary judgment: (1) whether the
AAW exclusion and MLCL endorsement were ambiguous
and should be construed in favor of coverage, and
(2) whether both provisions were void and unenforceable as
a matter of law because they failed to comply with the
requirements of Montana’s PSA as interpreted by the
Montana Supreme Court in Crumleys. High Country III,
2020 WL 42722, at *3. The district court decided that (1) the
provisions were unambiguous and excluded coverage, but
that (2) the provisions were unenforceable based on a plain
reading of Crumleys because the provisions were not listed
in a table of contents or notice section of important
provisions. Id. A copy of the district court decision is
attached.
United Fire appealed the district court’s decision that the
provisions were unenforceable; High Country cross-
appealed the district court’s ruling that the provisions were
unambiguous and excluded coverage. United Fire moved to
certify various questions related to its appeal to the Montana
Supreme Court; High Country opposed the motion. Because
of the importance of the state law question, and the
challenges faced by lower courts in resolving the issue, we
have elected to certify the issue to the Montana Supreme
Court.
2
The Montana Supreme Court has not decided the
question of whether, when an insurance policy does not
include either a table of contents or a notice section of
important provisions, in violation of Mont. Code Ann. § 33-
HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY 7
15-337(2), the insurer may rely on unambiguous exclusions
or limitations to the policy’s coverage, given that § 33-15-
334(2) provides that § 33-15-337(2) is “not intended to
increase the risk assumed under policies subject to” its
requirements. The Montana Supreme Court has once before
addressed the interpretation of one of the sections at issue,
§ 33-15-337(2), in Crumleys. The Montana Supreme Court
has not however, in Crumleys or otherwise, addressed the
other section at issue in this case, § 33-15-334(2). Lower
federal courts have wrestled with this unresolved issue in
applying Montana law in disputes over casualty insurance.
See, e.g., State Farm Fire & Cas. Co. v. Ward, No. CV 21-
07-M-KLD, 2021 WL 2981594, at **3–6 (D. Mont. July 5,
2021); Hatler v. Mountain West Farm Bureau Mut. Ins. Co.,
No. 20-cv-69-BMM, 2021 WL 2589729, at **4–6 (D. Mont.
June 24, 2021); Emps. Mut. Cas. Co. v. Hansen, No. CV 19-
114-TJC, 2021 WL 961775, at **8–9 (D. Mont. Mar. 15,
2021).
3
In light of the foregoing, we respectfully certify the
following question to the Montana Supreme Court:
Whether, when an insurance policy does not
include either a table of contents or a notice
section of important provisions, in violation
of Mont. Code Ann. § 33-15-337(2), the
insurer may nonetheless rely on
unambiguous exclusions or limitations to the
policy’s coverage, given that § 33-15-334(2)
provides that § 33-15-337(2) is “not intended
to increase the risk assumed under policies
subject to” its requirements?
8 HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY
We acknowledge that, as the receiving court, the
Montana Supreme Court may reformulate the certified
question. Mont. R. App. P. 15(6)(a)(iii).
The names and addresses of counsel for the parties, as
required by Mont. R. App. P. 15(6)(a)(iv), are as follows:
Robert K. Baldwin, Trent M. Gardner, and
Jeffrey J. Tierney, Goetz, Baldwin & Geddes,
P.C., 35 North Grand Avenue, P.O. Box
6580, Bozeman, MT 59771-6580, for
Appellee High Country Paving, Inc.
Jon T. Dyre, Crowley Fleck PLLP, P.O. Box
2529, Billings, MT 59103-2529, for
Appellant United Fire & Casualty Co.
4
The Clerk shall forward a certified copy of this
certification order, under official seal, to the Montana
Supreme Court. The Clerk is also ordered to transmit to the
Montana Supreme Court a copy of the Excerpts of Record
filed in these appeals and, if requested by the Montana
Supreme Court, provide all or part of the district court record
not included in the Excerpts of Record. Mont. R. App. P.
15(5). The Clerk is further directed to forward a copy of the
briefs filed by the parties.
Submission of these appeals for decision is vacated and
deferred pending the Montana Supreme Court’s final
response to this certification order. The Clerk is directed to
administratively close this docket, pending further order.
The parties shall notify the Clerk of this court within
fourteen days of the Montana Supreme Court’s acceptance
or rejection of certification, and again, if certification is
HIGH COUNTRY PAVING V. UNITED FIRE & CASUALTY 9
accepted, within fourteen days of the Montana Supreme
Court’s issuance of a decision.
QUESTION CERTIFIED; PROCEEDINGS
STAYED.