King v. State Farm Mut. Auto. Ins. Co.

397 Mont. 126

447 P.3d 1043

2019 MT 208

Kyra KING, Plaintiff and Appellant,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellee.

DA 18-0503

Supreme Court of Montana.

Submitted on Briefs: July 24, 2019

Decided: September 3, 2019

For Appellant: Terryl T. Matt, Matt Law Office, PLLC, Cut Bank, Montana

For Appellee: Paul R. Haffeman, Stephanie A. Hollar, Davis, Hatley, Haffeman & Tighe, P.C., Great Falls, Montana

Justice Ingrid Gustafson delivered the Opinion of the Court.

¶1 Kyra King appeals the Order on Attorney Fees and Litigation Expenses issued by the Seventeenth Judicial District Court, Phillips County, on July 27, 2018. We affirm in part, reverse in part, and remand for further proceedings.

¶2 We restate the issue on appeal as follows:

Whether the insurance exception to the American Rule allows the insured to recover otherwise nontaxable costs she would not have incurred but for the insurer’s behavior.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 On December 27, 2014, Carla King (Carla) was driving a vehicle which was hit by a drunk driver on U.S. Highway 2, near Malta. In the vehicle with Carla were Karen Yazzie, Kyra King (King), and Kyrsten Henry. Carla, Karen Yazzie, and King were all injured in the accident.

The three filed a lawsuit against both the driver of the other vehicle, Eric Keltesch (Keltesch), and State Farm Mutual Automobile Insurance Company (State Farm) on June 22, 2016. State Farm insured the vehicle that was being driven by Carla at the time of the 2014 accident, and the relevant policy included underinsured motorist (UIM) coverage with a policy limit of $50,000. Keltesch was underinsured for the damages and injuries which resulted from the accident. Karen Yazzie’s UIM claim was ultimately dismissed because she was not covered by the policy and Carla’s UIM claim was settled before trial.

¶4 King and State Farm did not agree on the value of her claim and so it proceeded to trial in April 2018. State Farm had offered to settle King’s claim for $20,000. The jury returned its verdict on April 18, 2018, which found that King had suffered damages in the amount of $410,000. On May 7, 2018, King filed a Motion for Attorney Fees and Litigation Expenses, seeking both attorney fees and a total of $12,767.33 in litigation expenses and costs. On May 11, 2018, King filed an Affidavit for Attorney Fees and Litigation Expenses in Support of Motion, which revised her request for litigation expenses and costs to $12,758.35. State Farm filed its response brief on May 21, 2018, agreeing that King was entitled to her attorney fees, but arguing that King was not entitled to claim her costs because they were not timely filed and exceeded those allowable by statute. On May 22, 2018, the District Court entered its Judgment against State Farm in the amount of $50,000—the policy limit—along with "interest and taxable costs." The District Court’s Judgment further stated that the "issue of Plaintiff’s attorneys’ fees and non-taxable costs shall be determined later." On June 4, 2018, King filed both a Renewed Motion for Attorney Fees and Litigation Expenses and a Reply Brief in Support of Litigation Expenses.

¶5 The District Court held a hearing on King’s Motion for Attorney Fees and Litigation Expenses on July 24, 2018. At the hearing, counsel for King again revised her requested litigation expenses and costs—this time seeking a total of $11,800.08. On July 27, 2018, the District Court issued its Order on Attorney Fees and Litigation Expenses. The District Court awarded King $20,000 in attorney fees, pursuant to King’s 40% contingency fee arrangement with her attorney, and denied all of King’s claimed litigation expenses and costs because they were not filed within five days of the jury’s verdict as required by § 25-10-501, MCA.¹ King appeals, arguing that the timing requirement of § 25-10-501, MCA, only applies to those taxable costs found in § 25-10-201, MCA, and she should have been granted her request for nontaxable costs in the form of litigation expenses not covered by the statute.

STANDARD OF REVIEW

¶6 We review a district court’s order concerning costs for an abuse of discretion. Total Indus. Plant Servs. v. Turner Indus. Group, LLC , 2013 MT 5, ¶ 61, 368 Mont. 189, 294 P.3d 363 (citing Hitshew v. Butte/Silver Bow County , 1999 MT 26, ¶ 29, 293 Mont. 212, 974 P.2d 650 ). We review a district court’s application of a statute in determining entitlement to costs for correctness. Total Indus. Plant Servs. , ¶ 61 (citing Neal v. State , 2003 MT 53, ¶ 4, 314 Mont. 357, 66 P.3d 280 ).

DISCUSSION

¶7 Whether the insurance exception to the American Rule allows the insured to recover otherwise nontaxable costs she would not have incurred but for the insurer’s behavior.

¶8 As a general rule, the award of costs to a prevailing litigant is governed by statute and includes a requirement that the party claiming costs submit a memorandum of costs within five days:

The party in whose favor judgment is rendered and who claims the party’s costs shall deliver to the clerk and serve upon the adverse party, within 5 days after the verdict or notice of the decision of the court or referee or, if the entry of the judgment on the verdict or decision is stayed, then before the entry is made, a memorandum of the items of the party’s costs and necessary disbursements in the action or proceeding. The memorandum must be verified by the oath of the party, the party’s attorney or agent, or the clerk of the party’s attorney, stating that to the best of the person’s knowledge and belief, the items are correct and that the disbursements have been necessarily incurred in the action or proceeding.

Section 25-10-501, MCA.

¶9 Taxable costs, which are required to be listed in the memorandum of costs, are similarly governed by statute:

A party to whom costs are awarded in an action is entitled to include in the party’s bill of costs the party’s necessary disbursements, as follows:

(1) the legal fees of witnesses, including mileage, or referees and other officers;

(2) the expenses of taking depositions;

(3) the legal fees for publication when publication is directed;

(4) the legal fees paid for filing and recording papers and certified copies of papers necessarily used in the action or on the trial;

(5) the legal fees paid stenographers for per diem or for copies;

(6) the reasonable expenses of printing papers for a hearing when required by a rule of court;

(7) the reasonable expenses of making transcript for the supreme court;

(8) the reasonable expenses for making a map or maps if required and necessary to be used on trial or hearing; and

(9) other reasonable and necessary expenses that are taxable according to the course and practice of the court or by express provision of law.

Section 25-10-201, MCA.

¶10 In the present case, it is undisputed that King did not file a memorandum of costs within five days of the jury’s verdict. To the extent that King’s motion for attorney fees and litigation expenses claimed costs listed in § 25-10-201, MCA, the District Court correctly denied King’s request for those costs and its decision is affirmed in that respect. See Total Indus. Plant Servs ., ¶¶ 67-69. King’s appeal in this case, however, claims that the District Court erred by applying this rigid statutory framework to her request for nontaxable costs. We agree.

¶11 "Montana generally follows the American Rule regarding attorney fees, ‘where each party is ordinarily required to bear his or her own expenses absent a contractual or statutory provision to the contrary.’ " Mlekush v. Farmers Ins. Exch. , 2015 MT 302, ¶ 10, 381 Mont. 292, 358 P.3d 913 ( Mlekush I ) (quoting Winter v. State Farm Mut. Auto. Ins. Co. , 2014 MT 168, ¶ 31, 375 Mont. 351, 328 P.3d 665 ). We also recognize several narrow exceptions to the American Rule. Mlekush I , ¶ 10 (citing Winter , ¶ 31 ). One such exception to the American Rule we have long recognized, relevant here, is the insurance exception. The insurance exception applies "whenever an insurer forces its insured to assume the burden of litigation to obtain what the insured is entitled to under an insurance contract." Abbey/Land v. Glacier Constr. Partners, LLC , 2019 MT 19, ¶ 64, 394 Mont. 135, 433 P.3d 1230 (citations omitted).

¶12 We have previously held that § 25-10-501, MCA, "addresses memoranda of costs only[.]" In re Estate of Lande , 1999 MT 179, ¶ 12, 295 Mont. 277, 983 P.2d 316. In addition, " Section 25-10-201, MCA, enumerates the types of costs ‘generally allowable’ in a party’s bill of costs, but we have long held that the list of items in that section ‘is exclusive except as to cases taken out of its operation by special statute, by stipulation of parties, or by rule of court.’ " Total Indus. Plant Servs. , ¶ 64 (quoting Roseneau Foods v. Coleman , 140 Mont. 572, 580, 374 P.2d 87, 91 (1962) (emphasis in original)).

¶13 This case arises out of State Farm’s failure to provide UIM benefits to King after an accident. By their very nature, insurance contracts such as King’s with State Farm are not bargained on equal footing between the parties, but are contracts of adhesion. See Winter , ¶ 19 (citation omitted). After State Farm offered King only $20,000—well below the policy limit of $50,000—King was forced to take the matter to trial, where a jury determined that she had suffered $410,000 in damages in the accident, to recover the benefits to which she was entitled from the insurance contract with State Farm. It is undisputed that King’s case falls under the insurance exception to the American Rule, and all parties agree that she is entitled to her $20,000 award of attorney fees. As previously addressed, it is also undisputed that King did not file a memorandum of costs within five days of the jury’s verdict to recover her taxable costs pursuant to §§ 25-10-201 and -501, MCA. Where the parties differ, however, is regarding King’s entitlement to her litigation expenses which do not fall under § 25-10-201, MCA, or her ...