Two years ago, the day after Christmas, Ned Hardy of Charlo suffered a broken neck in an auto accident when he and his wife were hit broadside by another car. The other driver failed to obey a yield sign and Hardy spent the next several days of the holiday season in the hospital.
After the other driver’s insurance agreed to pay $50,000, the two-car collision at the intersection of Mission Dam Road and Hillside Road could have faded into obscurity—just one more accident among thousands in the state each year that are settled out of court.
Instead, 79-year-old Hardy sued his own insurer, claiming the settlement didn’t meet his needs because his neck had not healed after three months. Since then, the case has moved from U.S. District Court in Missoula to the Montana Supreme Court where attorneys will debate the definition of “underinsured motorist” and whether a 1997 law that prevents the “stacking” of insurance policies is constitutional. The court’s decision could affect every car driver in the state by either raising premiums or lowering the amount insurance companies are willing to cover.
After the wreck in 2000, Hardy tried to collect from his own insurance company, Progressive Specialty Insurance of Idaho. If $50,000, the upper limit of the other driver’s liability insurance, wasn’t enough compensation, Hardy intended to get the remainder from Progressive. Hardy paid premiums on three underinsured motorist policies for precisely this reason: to cover the gray-zone between his damages in an auto accident and someone else’s lia- bility insurance.
When the claim was denied, Hardy’s attorney, Edward Duckworth of Ronan, filed suit in federal court. Duckworth argued that Hardy’s underinsured motorist coverage for $50,000 should not be “zeroed out” just because the other driver carried that much in liability coverage. Instead, Progressive’s coverage should begin where the other driver’s insurance stopped. Otherwise, Progressive was engaged in fraud, he said, by charging premiums for $50,000 in coverage but not paying up when claims like Hardy’s are filed.
In addition, Duckworth said the coverage for Hardy’s three different vehicles should be “stacked” for a total of $150,000. He argued that they each applied to Hardy as a person, not individually to his three cars.
In defense of Progressive, attorney Robert Phillips of Missoula countered that Hardy had not been hit by an underinsured driver as defined by the policies. Underinsured coverage, according to Progressive, is the gap between the other driver’s liability insurance and the upper limit of their driver’s coverage. In Hardy’s case, that was zero because the policies he paid for guaranteed him $50,000 in coverage, which he received from the insurance company of the driver who hit him.
Phillips also cited the 1997 state law that was lobbied for by the insurance industry and now prevents the stacking of policies. It’s this statute that’s being challenged by the Hardy case. University of Montana law professor Greg Munro says, “This case points out something political: We have a very corporate-centered Legislature and a very consumer-centered court.”
The debate over auto insurance in Montana dates back at least three decades. In 1972, the Supreme Court first stacked uninsured motorist coverage and in 1981, during an era of tort reform, the insurance industry responded with the passage of a law that prevented stacking. Since then the issue has gone back and forth with the insurance industry posting the most recent win in 1997.
As Munro points out, many Montana legislators are sympathetic to the well-funded lobbyists of the insurance industry. Meanwhile, five of the seven justices of the state’s highest court—Patricia Cotter, Jim Regnier, Karla Gray, William Leaphart, and Terry Treiweiler—are former members of the Montana Trial Lawyers Association. It’s this group that sues insurance carriers such as Progressive on behalf of clients like Hardy.
The court could side with Hardy and declare the 1997 anti-stacking law unconstitutional. And it could also reject the language of Progressive’s policies, which allowed the company to avoid paying Hardy anything after his crash. Both outcomes could trigger a backlash from the insurance industry, which might feel justified in raising its rates or lowering its coverage in Montana.
Hardy’s attorney says Progressive and other insurance companies offer only “illusory” underinsured motorist coverage. Progressive’s definition is misleading by any commonsense interpretation, insists Duckworth.
“[Montana requires] $25,000 in mandatory liability coverage, but if you have $50,000 in underinsured motorist coverage you’re never going to get that first $25,000,” says Duckworth. “The point is, why pay for it?”