$12 million judgment overturned
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$12 million
judgment overturned
RONAN – The Montana Supreme Court will allow an insurance company to make its case in Flathead County District Court that it should not have to pay the $12 million settlement resulting from construction disputes for Shelter Island, which lies in the middle of Flathead Lake.
On March 11 the high court overturned the lower court’s March 17, 2014 decision.
“We remand and direct the District Court to enter an order allowing James River Insurance Company to intervene in order to raise the issue of reasonableness of the confessed judgment and whether it was the product of collusion,” Justice Mike McGrath wrote in the ruling.
The ruling said the facts of the case are difficult to determine because neither party agrees on what happened. Shelter Island is a private 24-acre island with a 32,000 square-foot building that is the “largest private home in Montana” with 7,000 feet of lakeside frontage, according to a real estate listing asking for $59.5 million for the property.
The island was purchased by Donald Abbey in 2001, under the name Abbey/Land LLC. The corporation fell into dispute with contractors who were working on the massive home, and Abbey formed another corporation, Glacier Construction Partners LLC to complete construction. Abbey signed documents for both Abbey/Land and Glacier Construction Partners to enter into a contract to complete construction.
Glacier Construction Partners entered a $1.4 million contract with Interstate Mechanical, Inc. for the design and installation of plumbing and heating-cooling systems in the home. The cost ballooned by more than $1 million and the two companies entered arbitration in 2009 so Interstate could recover payments for its work.
In September 2009, Glacier and Abbey Land filed action against Interstate Mechanical and other businesses involved in the construction project. Glacier asked for counterclaims in the case and was successful in Flathead County District Court in January 2011, for the amount of $400,000. In September 2011, Abbey Land amended its complaint, and named its sister entity Glacier Construction as a defendant, when the company had previously been a plaintiff. Glacier Construction then tendered claims to its general liability insurer, James River in regards to Abbey Land.
The insurance company refused to provide coverage.
In 2013, Glacier Construction and Abbey/Land settled between themselves. The agreement required Glacier to confess to a $12 million judgment in favor of Abbey/Land and to assign to Abbey/Land all its rights against various insurers, including James River.
James River asked to intervene in the settlement “to contest the reasonableness of the confession as it is the result of impermissible collusion between plaintiff Abbey/Land LLC and Defendant Glacier, who are both owned by Donald G. Abbey.”
The District Court never ruled on the motion to intervene, but the Montana Supreme Court said it must.
“While the District Court’s judgment recited that the confessed judgment was entered in good faith and that the amount was reasonable, those pro-forma recitations are insufficient to satisfy James River’s right to meaningfully contest the reasonableness of settlement amount,” McGrath wrote. “The District Court erred by entering final judgment without considering James River’s application.”
Abbey Land and James River are both litigants in a separate ongoing Lake County District Court case at this time.
