Montana Legislature to Meet on 'Liability Crisis.'

By Sudo, Philip T. | American Banker, March 4, 1986 | Go to article overview

Montana Legislature to Meet on 'Liability Crisis.'


Sudo, Philip T., American Banker


NEW YORK -- A rash of "bad faith" lawsuits against Montana banks, coupled with a widespread liability insurance crisis, has led Montana Gov. Ted Schwindin to call for a special legislative sission beginning March 24.

In preparation for the special session, the Montana State Chamber of Commerce has formed a "liability coalition" in conjunction with the state bankers, insurance, medical, agricultural, small business, and bar owners associations.

The coalition proposes a constitutional referendum that would allow the state Legislature to approve liability limitations for private business and government agencies and to restrict attorneys' fees. That referendum would be put up before state voters next fall.

With generous punitive damage awards coming out of the courts and nearly 100 court cases still pending, the Montana liability crisis has been described by John Cadby, executive director of the Montana Bankers Association, as a "disaster in this state."

Calling Montana's court system too liberal, Mr. Cadby said, "Our liberal court decisions have opened the door wide. Montana is the butt of many jokes at lawyers' conferences around the nation because of our court rulings and because of our high awards."

The rash of lawsuits was triggered over two years ago, when a jury handed down an $8 million judgment to a Butte, Mont., car dealer against First Bank Butte, a subsidiary of the Minneapolis-based First Bank Systems. The bank settled the case out of court for $4 million.

"It was a huge verdict and it scared everybody," said George Bennett, attorney for the bankers association.

First Bank Butte recently suffered another adverse verdict, this time with a $1.5 million punitive damage award, after it tried to foreclose on a local meat market. The bank has appealed the ruling.

In all, at least 80 banks -- more than half of those in the state -- have bad faith litigation pending, Mr. Cadby said. Norwest Bank in Billings and Norwest Bank in Great Falls, both subsidiaries of Norwest Co. in Minneapolis, each have six cases pending.

"Everybody has the lottery mentality," he said. "They all want to become instant millionaires."

The rash of suits has also been prompted by a downturn in the agricultural economy and an active trial lawyer's group in the state, Mr. Bennett said.

"Foreclosures are almost universally being met with bad faith lawsuits," he said, "and the trial lawyers are very good and very persuasive. …

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