Insurer Did Not Breach The Duty to Defend by Sending Adjuster Rather Than An Attorney To A Meditation Conference

In Farmers Ins. Exchange v. Johnson, __ P.3d __, 2009 WL 4981857 (Mont., 2009), the Montana Supreme Court addressed the issue of whether an insurer breached its duty to defend by sending an adjuster rather than an attorney to meditation conference. Farmers Insurance Exchange (“Farmers”) provided insurance to Daniel and Linda Johnson. Daniel Johnson was involved in a physical assault during which Ronald Ogden became seriously injured. The Johnsons tendered the defense of the criminal suit to Farmers who engaged in a pre-litigation meditation conference. The meditation produced an agreement by which Farmers would pay $40,000 while Daniel Johnson would pay $60,000. Per the agreement, the criminal chargers were ultimately dismissed and the payments was made to Ronald Ogden. Later, Linda Johnson requested indemnification from Farmers based on the monies paid to Ogden under the settlement agreement. Farmers denied Johnson’s request and filed a declaratory action. Johnson counterclaimed alleging that that Farmers breached its duty to defend by sending an insurance adjuster instead of an attorney to the meditation. Johnson argued that the policy required Farmers to “defend the insured against any suit.” Moreover, the policy definition of “suit” included any alternative dispute resolution proceedings in which damages are claimed. Since the meditation was an alternative dispute resolution, Johnson argued, Farmers breached its duty to defend by failing to send an attorney to defend Johnson. However, the Montana Supreme Court disagreed. The Court acknowledged that some functions, such as court appearances, can only be fulfilled by a licensed attorney. And yet insurance adjusters, the court recognized, “play a vital role in the resolution of claims prior to the initiation of litigation.” Here, the adjuster investigated the claims against Johnson, participated in the meditation conference, negotiated and conveyed settlement offers, and ultimately resolved the matter through settlement payments made by Farmers. The Court concluded that these actions fulfilled Farmer’s duty to defend.