                                              No. 04-032

                 IN THE SUPREME COURT OF THE STATE OF MONTANA

                                              2004 MT 391


TYLER DEMPSEY, Individually and
on behalf of all others similarly situated,

               Plaintiff,

         v.

ALLSTATE INSURANCE COMPANY,
an Illinois corporation,

               Defendant.


CERTIFIED QUESTION FROM:

                       The United States District Court, District of Montana, Butte Division,
                       Honorable Sam E. Haddon, Presiding Judge

COUNSEL OF RECORD:

               For Plaintiff:

                       Brian Fay (argued) and Christopher Angel, Angel, Coil and Bartlett,
                       Bozeman, Montana

               For Defendant:

                       Peter Habein (argued), Crowley, Haughey, Hanson, Toole & Dietrich,
                       Billings, Montana

               For Amici Curiae:

                       Randall G. Nelson, Nelson & Dahle, Billings, Montana (MDTLA)

                       Roger M. Sullivan (argued), McGarvey, Heberling, Sullivan & McGarvey,
                       Kalispell, Montana (MTLA)

                       Jon Metropoulos and Dana Hupp, Gough, Shanahan, Johnson & Waterman,
                       Helena, Montana (Property Casualty Insurers)


                                                                      Argued: July 14, 2004
                                                                    Submitted: August 31, 2004
                                                                    Decided: December 30, 2004

Filed:

                       __________________________________________
                                         Clerk
Justice W. William Leaphart delivered the Opinion of the Court.


¶1      The Plaintiffs, Tyler Dempsey and those similarly situated, brought this class action in the

United States District Court for the District of Montana to recover damages from Allstate Insurance

Company pursuant to insurance policies Allstate had issued. The Class alleges that the retroactive

application of our decision in Hardy v. Progressive Specialty Insurance Co., 2003 MT 85, 315

Mont. 107, 67 P.3d 892, entitles them to additional payments from past insurance claims that were

not previously allowed because their automobile insurance policies did not allow for stacking.

Allstate moved to dismiss, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. The

District Court certified a question and six relevant facts to this Court and denied Allstate’s motion

without prejudice pending our answer.

¶2      We accepted the certified question, which is stated as:

¶3      Does the Montana Supreme Court’s decision in Hardy v. Progressive Specialty Insurance

Co., 2003 MT 85, 315 Mont. 107, 67 P.3d 892, apply prospectively only, or does it apply

retroactively to require payment of stacked uninsured, underinsured motorist and medical payment

insurance coverages in qualifying circumstances on claims arising before the date of the Hardy

decision?

¶4      Our answer is that the Hardy decision applies retroactively to cases pending on direct review

or not yet final.
                      FACTUAL AND PROCEDURAL BACKGROUND

¶5      The District Court certification included the following four agreed upon facts: 1

¶6      1. On January 1, 2000, Dempsey was injured in a motor vehicle accident in Gallatin County,

Montana. He was a named insured under an Allstate policy which had medical payment coverage

limits of $2,000 applicable to each of four vehicles listed in the policy.

¶7      2. Although Dempsey’s medical expenses exceeded $10,000, Allstate only paid the single

limit of liability, $2,000, and declined to stack limits, relying on anti-stacking language in the policy

and Montana’s anti-stacking statute, § 33-23-203, MCA, which was in effect at the time of

Dempsey’s accident.

¶8      3. On April 18, 2003, the Montana Supreme Court decided Hardy v. Progressive Specialty

Insurance Co., which determined Montana’s anti-stacking statute to be unconstitutional and the anti-

stacking language in Progressive’s insurance policy to be void and unenforceable and further held

that Progressive had to “stack” and pay underinsured motorist benefits for each coverage for which

the insured had paid a separate premium.

¶9      4. Allstate has maintained that the Hardy decision applies prospectively only. On that basis,

Allstate has declined to stack uninsured motorist, underinsured motorist, or medical payment

benefits in claims arising before the April 18, 2003, decision in Hardy. Dempsey accordingly

brought a class action to force Allstate to stack medical payment, uninsured, and underinsured

policy limits on all claims arising prior to the Hardy decision.

¶10     In sum, the claims of Dempsey and of many other Montana automobile insurance consumers

ride on our determination of whether the Hardy decision applies retroactively or whether it only



        1
       Facts 5 and 6 were disputed by the Class. However, we do not include them as
we determine that they are not material to our decision.
applies to claims that arose on or after April 18, 2003. In addressing this issue, we invited the

Montana Trial Lawyers Association (MTLA) and the Montana Defense Trial Lawyers Association

(MDLTA) to appear as amicus curiae. We held oral argument en banc on July 14, 2004.

                                           DISCUSSION

¶11    Does the Montana Supreme Court’s decision in Hardy v. Progressive Specialty Insurance

Co. apply prospectively only, or does it apply retroactively to require payment of stacked uninsured,

underinsured motorist and medical payment insurance coverages in qualifying circumstances on

claims arising before the date of the Hardy decision?

I.     The Rule of Retroactivity in Montana

¶12    In 1971 the United States Supreme Court announced Chevron Oil Co. v. Huson (1971), 404

U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296. Chevron laid-out a flexible three-factored test for whether

a decision applies prospectively only. We adopted the Chevron test for questions of Montana law

in LaRoque v. State (1978), 178 Mont. 315, 318-19, 583 P.2d 1059, 1061, and subsequently applied

it several times. See, e.g., Poppleton v. Rollins, Inc. (1987), 226 Mont. 267, 271, 735 P.2d 286, 289;

Nehring v. LaCounte (1986), 219 Mont. 462, 471, 712 P.2d 1329, 1335; Jensen v. State, Dep’t of

Labor & Indus. (1984), 213 Mont. 84, 88, 689 P.2d 1231, 1233. In the meantime, the United States

Supreme Court revisited the question of prospective application several times and eventually

overruled Chevron in Harper v. Virginia Dep’t of Taxation (1993), 509 U.S. 86, 113 S.Ct. 2510,

125 L.Ed.2d 74.

¶13    Then, in Porter v. Galarneau (1996), 275 Mont. 174, 185, 911 P.2d 1143, 1150, and without

analyzing Harper, we strayed from our reliance on Chevron. Although Porter involved statutory

retroactivity, we remarked in dicta that “[w]e will continue to give retroactive effect to judicial

decisions, which is in accord with the U.S. Supreme Court’s holding in Harper v. Virginia Dep’t of
Taxation.” Subsequently, this time as a general rule of law, we cited Porter in support of

retroactivity. See Kleinhesselink v. Chevron, U.S.A. (1996), 277 Mont. 158, 162, 920 P.2d 108, 111

(holding that “[w]e give retroactive effect to judicial decisions” and therefore a decision of ours “is

applicable to this case even though it was not available to the District Court . . . .”); Haugen v.

Blaine Bank of Montana (1996), 279 Mont. 1, 8, 926 P.2d 1364, 1368; State v. Steinmetz, 1998 MT

114, ¶ 10, 288 Mont. 527, ¶ 10, 961 P.2d 95, ¶ 10 (criminal case).

¶14    Following Steinmetz it appeared that we would follow the rule of the United States Supreme

Court’s Harper decision. However, subsequent decisions did not bear that out. In Ereth v. Cascade

County, 2003 MT 328, 318 Mont. 355, 81 P.3d 463, Seubert v. Seubert, 2000 MT 241, 301 Mont.

382, 13 P.3d 365, and Benson v. Heritage Inn, Inc., 1998 MT 330, 292 Mont. 268, 971 P.2d 1227,

without reference to the Porter line of cases, we applied the Chevron test to determine whether

prospective application was appropriate. The Class argues that we did not expressly adopt a new

approach to retroactivity in Ereth, Seubert, and Benson, that only pre-Harper cases were cited by the

parties in those cases, and that the decisions were therefore aberrations where this Court inadvertently

reverted to old discredited precedent. Given our long history of applying decisions prospectively we

cannot ignore these recent decisions applying the Chevron test. However, we also cannot ignore our

holdings in Kleinhesselink and Haugen. As we explain later in this opinion, the two lines of cases

may be comfortably merged into a rule of retroactivity in keeping with the last seventy years of this

Court’s jurisprudence.

¶15    The question of whether we should follow the philosophy espoused by Chevron or by Harper

does not produce a simple or binary answer. In settling what rule of retroactivity this Court follows

we must look to the history surrounding the retroactivity of judicial decisions and what other states

have fashioned for themselves in the wake of the United States Supreme Court’s repudiation of the
Chevron rule. We will conclude by adopting the best elements of the Harper and Chevron rules, thus

adhering to our precedents and extending a measure of flexibility not available under an outright

adoption of Harper. In terms of the instant case, Allstate does not overcome our strong presumption

in favor of retroactivity.

A.      A Brief History of Retroactivity

¶16     The retroactive/prospective distinction is relatively new to our common law tradition. In the

days of Blackstone the law was understood as something that the courts applied, not something that

they made. Accordingly, it made no sense for a court to comment on whether its ruling applied

retroactively or not. Its ruling was simply the law as it is and always was. See Kermit Roosevelt III,

A Little Theory Is a Dangerous Thing: The Myth of Adjudicative Retroactivity, 31 Conn. L. Rev.

1075, 1083 (1999) (“[T]he Blackstonian model takes law as a timeless constant, always

(optimistically) assuming the correctness of the current decision. Prior inconsistent decisions are and

always were incorrect.”).

¶17     This view, of course, is no longer even remotely fashionable in today’s climate of legal realism

and aversion to castles in the clouds. Justice Holmes, the great realist of his time, was one of the first

to see past Blackstone and spy the retroactive/prospective distinction. In endorsing what we now

call “retroactivity” he characterized common law adjudication not as a search for an entity separate

from the courts, but as an act of creation, stating “[t]he law of a State does not become something

outside of the state court and independent of it by being called the common law. Whatever it is called

it is the law as declared by the state judges and nothing else.” Kuhn v. Fairmont Coal Co. (1910),

215 U.S. 349, 372, 30 S.Ct. 140, 148, 54 L.Ed. 228, 239 (Holmes, J., dissenting).

¶18     After flirting with the issue of prospective decisions in a handful of now defunct pre-Erie

common law cases, see, e.g., Kuhn, 215 U.S. at 360, 30 S.Ct. at 143, 54 L.Ed. at 234; Gelpcke v.
City of Dubuque (1863), 1 Wall. 175, 206, 68 U.S. 175, 206, 17 L.Ed. 520, 525, the Court ruled in

1932 that a state supreme court does not violate the United States Constitution by giving a decision

mere prospective effect. Great N. Ry. Co. v. Sunburst Oil & Ref. Co. (1932), 287 U.S. 358, 364, 53

S.Ct. 145, 148, 77 L.Ed. 360, 366 (“A state in defining the limits of adherence to precedent may

make a choice for itself between the principle of forward operations and that of relation backward.”).

Great Northern merely recognized a practice which had been gathering strength in the state courts

for some time. Significantly for our purposes, however, the opinion affirmed two consolidated cases

of this Court. In the rates case of Montana Horse Products Co. v. Great Northern Railway Co.

(1932), 91 Mont. 194, 7 P.2d 919, we explicitly overruled portions of Doney v. Northern Pacific

Railway Co. (1921), 60 Mont. 209, 199 P. 432. However, in the interests of fairness, we made our

holding prospective only and gave the parties before us the benefit of the overruled rule of law. We

explained that, retroactivity notwithstanding, “It would be manifestly unjust and improper” to penalize

the losing party for relying on Doney even though we judged that case to have been in error. See

Montana Horse Products Co., 91 Mont. at 211, 7 P.2d at 925. We did the same in the companion

case. Sunburst Oil & Ref. Co. v. Great N. Ry. Co. (1932), 91 Mont. 216, 220-21, 7 P.2d 927, 929.



¶19    After receiving the United States Supreme Court’s blessing in Great Northern this Court used

its power to prospectively apply its decisions when it saw fit. See e.g., Graham v. Rolandson (1967),

150 Mont. 270, 290-91, 435 P.2d 263, 274; Hayward v. Richardson Const. Co. (1959), 136 Mont.

241, 250-51, 347 P.2d 475, 480; State ex. rel. Mueller v. Todd (1945), 117 Mont. 80, 86, 158 P.2d

299, 302. The United States Supreme Court fully endorsed and justified its own use of prospective

application in 1965 with Linkletter v. Walker (1965), 381 U.S. 618, 85 S.Ct. 1731, 14 L.Ed.2d 601.

In Linkletter the Warren Court was faced with an extraordinarily explosive issue. Four years before,
in Mapp v. Ohio (1961), 367 U.S. 643, 81 S.Ct. 1684, 6 L.Ed.2d 1081, the Court had ruled that the

exclusionary rule applies against the states. Linkletter argued that his conviction was obtained

through evidence that should have been inadmissible under the exclusionary rule. Even though he

was convicted and his case became final before the Mapp ruling, he reasoned that because the

decisions of the United States Supreme Court apply retroactively he must be granted habeas corpus

relief. Linkletter, 381 U.S. at 621, 85 S.Ct. at 1733, 14 L.Ed.2d at 604.

¶20    If the Court had granted Linkletter’s request, thousands of otherwise properly obtained

convictions would have immediately become suspect. The Court found such retroactive application

too great a disruption of the criminal justice system. Linkletter, 381 U.S. at 637-38, 85 S.Ct. at

1742, 14 L.Ed.2d at 613. Also, applying Mapp to cases closed before its issuance would do nothing

to further the policy behind the exclusionary rule–deterrence of unconstitutional police actions.

Linkletter, 381 U.S. at 636-37, 85 S.Ct. at 1741-42, 14 L.Ed.2d at 612-13. Therefore, after weighing

these factors and others, the Court concluded it was prudent to rule that cases final before the Mapp

decision were unaffected by it.

¶21    In 1971 the Court extended this flexible approach to civil cases in Chevron Oil Co. v. Huson

(1971), 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296. In applying a prior decision that had greatly

changed the operation of statutes of limitations under the Outer Continental Shelf Lands Act, the

Court adopted a version of the nonretroactivity test used in its criminal cases. In the context of

criminal appeals, the three factors of the test were as follows:

       First, the decision to be applied nonretroactively must establish a new principle of law,
       either by overruling clear past precedent on which litigants may have relied or by
       deciding an issue of first impression whose resolution was not clearly foreshadowed.
       Second, it has been stressed that “we must . . . weigh the merits and demerits in each
       case by looking to the prior history of the rule in question, its purpose and effect, and
       whether retrospective operation will further or retard its operation.” Finally, we have
       weighed the inequity imposed by retroactive application, for “[w]here a decision of
        this Court could produce substantial inequitable results if applied retroactively, there
        is ample basis in our cases for avoiding the ‘injustice or hardship’ by a holding of
        nonretroactivity.”

Chevron, 404 U.S. at 106-07, 92 S.Ct. at 355, 30 L.Ed.2d at 306 (citations omitted). With this test

in place the federal courts had flexibility to grant nonretroactive relief to litigants who had justifiably

relied on old rules of law when there was no indication that the rule would change. Gone was any

pretense that the law that the courts announce is the law as it has always been.

B.      The Decline and Fall of Chevron

¶22     The United States Supreme Court’s tolerance of prospective decisions did not last long. After

indicating several times that it was not satisfied with current doctrine, the Court finally overruled itself

in 1987, jettisoning the Linkletter approach. Griffith v. Kentucky (1987), 479 U.S. 314, 107 S.Ct.

708, 93 L.Ed.2d 649. The Court announced a new rule requiring that all criminal decisions apply

retroactively to all cases “pending on direct review or not yet final.” Griffith, 479 U.S. at 328, 107

S.Ct. at 716, 93 L.Ed.2d at 661. It reasoned that it was unfair to announce a new rule that would

affect some defendants and not others merely because of the timing of their prosecutions. See

Griffith, 479 U.S. at 327-28, 107 S.Ct. at 715-16, 93 L.Ed.2d at 661.

¶23     It was only a matter of time before this approach to retroactivity in criminal cases found its

way into the Court’s civil jurisprudence. Relying on Griffith and the split opinion of James B. Beam

Distilling Co. v. Georgia (1991), 501 U.S. 529, 111 S.Ct. 2439, 115 L.Ed.2d 481, the Court

announced that due to the inequities inherent in a flexible Chevron approach, federal rules of law may

not be selectively applied prospectively. The Court stated:

        When this Court applies a rule of federal law to the parties before it, that rule is the
        controlling interpretation of federal law and must be given full retroactive effect in all
        cases still open on direct review and as to all events, regardless of whether such
        events predate or postdate our announcement of the rule. The rule extends Griffith’s
        ban against “selective application of new rules.” Mindful of the “basic norms of
        constitutional adjudication” that animated our view of retroactivity in the criminal
        context, we now prohibit the erection of selective temporal barriers to the application
        of federal law in noncriminal cases.

Harper v. Virginia Dep’t of Taxation (1993), 509 U.S. 86, 97, 113 S.Ct. 2510, 2517, 125 L.Ed.2d

74, 86 (citations omitted). After Harper, the Chevron test no longer had any applicability to

interpretations of federal law, whether in federal or state court. The Harper decision is grounded in

fairness and the arbitrariness of “temporal barriers,” rather than a renewed embrace of Blackstone’s

theory of law “existing” independently of a court’s decisions.

C.      Revolt in the Provinces: Chevron is Alive and Well in the State Courts

¶24     Chevron concerned a federal question, and thus only governed issues of federal law.

Therefore, although the United States Supreme Court has rejected Chevron, the states are free to

continue employing the Chevron criteria in deciding questions of retroactivity of state law. Prior to

Harper, the Chevron approach proved popular in state courts. See, e.g., Schreiner v. Fruit (Alaska

1974), 519 P.2d 462, 466-67; Peagler v. Phoenix Newspapers, Inc. (Ariz. 1977), 560 P.2d 1216,

1220; Hoff v. Kempton (Minn. 1982), 317 N.W.2d 361, 363; First of McAlester Corp. v. Oklahoma

Tax Com’n (Okla. 1985), 709 P.2d 1026, 1034; Taskett v. KING Broad. Co. (Wash. 1976), 546 P.2d

81, 86-87. As stated earlier, we followed the trend by adopting the Chevron approach for ourselves

in LaRoque v. State (1978), 178 Mont. 315, 318-19, 583 P.2d 1059, 1061.

¶25     The state courts’ reactions to Harper have been decidedly mixed, with many expressing

disagreement, if not open hostility. For example, the Supreme Court of New Hampshire voiced

support for the rejection of Chevron. See Ireland v. Worcester Ins. Co. (N.H. 2003), 826 A.2d 577,

581. However, inspired by Justice O’Connor’s dissent in Harper, the court reserved for itself the

authority to give new rules prospective effect, but that if a rule is applied retroactively to the parties

before the court, it must be given uniform retroactive effect. Ireland, 826 A.2d at 581. In contrast,
the New Mexico Supreme Court took great issue with much of Harper, especially Justice Scalia’s

concurrence. Beavers v. Johnson Controls World Servs., Inc. (1994), 881 P.2d 1376, 1380-81

(criticizing Justice Scalia’s seeming embrace of the Blackstonian view of judicial discovery). Stating

that its jurisprudence “is more nearly consistent with the views of the Harper minority,” the court

employed Harper’s equality rationale to construct a presumption in favor of retroactivity “in lieu of

the hard-and-fast rule prescribed for federal cases in Harper.” Beavers, 881 P.2d at 1383. See also

McCullar v. Universal Underwriters Life Ins. Co. (Ala. 1996), 687 So.2d 156, 184 (“A long line of

Alabama precedent favors prospective application . . . when vested contractual rights are pervasive,

and when retroactive application will create staggering losses . . . .”).

¶26    Some state courts have welcomed Harper as being consistent with the court’s own approach

to retroactivity. See e.g., State v. Styles (Vt. 1997), 693 A.2d 734, 735. The more common

approach, however, has been to decline Harper’s invitation to rethink Chevron, and merely to note

that Harper is only applicable to federal law. See, e.g., Citicorp v. Franchise Tax Bd. (Cal. App.

2000), 100 Cal.Rptr.2d 509, 525 (briefly stating that “[a]lthough Harper cast doubt on the three-part

test set out in Chevron Oil” it was not controlling on issues of state law); Aleckson v. Vill. of Round

Lake Park (Ill. 1997), 679 N.E.2d 1224, 1227 (limiting Harper to questions of federal law and

analyzing it no further); Wenke v. Gehl Co. (Wis. 2004), 682 N.W.2d 405, 430 n.43. Many states

are uncomfortable with the harsh results that might follow if they abandon Chevron and completely

disallow prospective decisions.

D.     Reserving Chevron as an Exception

¶27    Our precedent allows for a compromise between the powerful arguments of the Harper court

and the compelling need for prospective application in limited circumstances. As explained earlier,

our adoption of Chevron did not represent a break with a history of consistently applying universal
retroactivity. Chevron merely gave us the criteria by which to judge the merits of prospectively

applying a decision. As it happens, Chevron has not been very helpful to Montana litigants seeking

prospective application. Although we have applied the Chevron test numerous times, the test has

resulted in a prospective application on only four occasions. See Ereth v. Cascade County, 2003 MT

328, 318 Mont. 355, 81 P.3d 463; Seubert v. Seubert, 2000 MT 241, 301 Mont. 382, 13 P.3d 365;

Sheehy v. State (1991), 250 Mont. 437, 820 P.2d 1257; Montana Bank of Roundup v. Musselshell

County Bd. of Com’rs (1991), 248 Mont. 199, 810 P.2d 1192. The last two of these cases concerned

questions of federal law, and thus were abrogated by Harper. Sheehy, 250 Mont. at 441-42, 820

P.2d at 1259 (interpreting Davis v. Michigan Dep’t of the Treasury (1989), 489 U.S. 803, 109 S.Ct.

1500, 103 L.Ed.2d 891, as not applying retroactively--the exact view later overruled in Harper);

Montana Bank of Roundup, 248 Mont. at 206, 810 P.2d at 1196 (prospectively applying Montana

Bankers Ass’n v. Montana Dep’t of Revenue (1978), 117 Mont. 112, 580 P.2d 909, where we

interpreted 31 U.S.C. § 742). That leaves only two cases where we have given a decision

nonretroactive effect under the Chevron test.

¶28    We agree with the Harper court that limiting a rule of law to its prospective application

creates an arbitrary distinction between litigants based merely on the timing of their claims. Interests

of fairness are not served by drawing such a line, nor are interests of finality. In the interests of

finality, the line should be drawn between claims that are final and those that are not (the line drawn

in Harper). “New legal principles, even when applied retroactively, do not apply to cases already

closed.” Reynoldsville Casket Co. v. Hyde (1995), 514 U.S. 749, 758, 115 S.Ct. 1745, 1751, 131

L.Ed.2d 820, 830. We have already recognized the arbitrary nature of prospective decisions in the

criminal context in State v. Waters, 1999 MT 229, 296 Mont. 101, 987 P.2d 1142. There, in keeping

with the United States Supreme Court’s opinion in Griffith, we overruled all of our prior decisions
which limited a new judicial rule of criminal procedure to prospective application. Waters, ¶ 20.

¶29     We also understand, however, that what follows from civil litigation is different in kind from

the consequences inherent in a criminal prosecution and conviction. On many occasions we have

noted the disruption that a new rule of law can bring to existing contracts and to other legal

relationships. Therefore today we reaffirm our general rule that “[w]e give retroactive effect to

judicial decisions,” Kleinhesselink v. Chevron, U.S.A. (1996), 277 Mont. 158, 162, 920 P.2d 108,

111. We will, however, allow for an exception to that rule when faced with a truly compelling case

for applying a new rule of law prospectively only.

¶30     The Chevron test is still viable as an exception to the rule of retroactivity. However, given

that we wish prospective applications to be the exception, we will only invoke the Chevron exception

when a party has satisfied all three of the Chevron factors. This is in keeping with our prior holdings.

In the only two relevant decisions–that is, state law decisions where we prospectively applied a rule

of law under the Chevron test–we concluded that all three of the factors weighed in favor of

prospective application. See Ereth, ¶ 29 (“All three of these factors weigh in favor of nonretroactive

application of this new rule in our jurisprudence.”); Seubert, Order Clarifying Decision on Grant of

Rehearing, 301 Mont. at 400, 13 P.3d at 375 (quoting Holmberg v. Holmberg (Minn. 1999), 588

N.W.2d 720, 726-27). Admittedly, we noted in Poppleton v. Rollins (1987), 226 Mont. 267, 271,

735 P.2d 286, 289, that only one factor need be met. However, that statement was dicta, since we

determined that none of the Chevron factors were satisfied and thus that the decision in question

should have retroactive effect. Poppleton, 226 Mont. at 271-72, 735 P.2d at 289-90.

¶31     Therefore, we conclude that, in keeping with our prior cases, all civil decisions of this court

apply retroactively to cases pending on direct review or not yet final, unless all three of the Chevron

factors are satisfied. For reasons of finality we also conclude that the retroactive effect of a decision
does not apply ab initio, that is, it does not apply to cases that became final or were settled prior to

a decision’s issuance.

II.     Hardy Does not Pass the Chevron Test

¶32     Having determined our rule of retroactivity, we must now ask whether our decision in Hardy

satisfies all three Chevron factors. We conclude that it does not.

¶33     Since we conclude that Hardy does not satisfy the first Chevron factor, we need not address

the other two. That factor is, again, that “the decision to be applied nonretroactively must establish

a new principle of law, either by overruling clear past precedent on which litigants may have relied

or by deciding an issue of first impression whose resolution was not clearly foreshadowed.” We

dispose of this factor by citing Hardy itself. In Hardy we ruled that § 33-23-303, MCA, violated

Article II, Section 17, of the Montana Constitution, and that it also violated the public policy of this

state. We relied on Bennett v. State Farm Mutual Auto Insurance Co. (1993), 261 Mont. 386, 389-

90, 862 P.2d 1146, 1148-49, where “we concluded that a provision that defeats coverage for which

valuable consideration has been received violates Montana public policy. We held that UIM

[underinsured motorist] coverage, by definition, is personal and portable. Therefore, a Montanan

could reasonably expect coverage up to the aggregate limit of the separate policies when a separate

premium for UIM coverage was charged for each.” Hardy, ¶ 40 (citations omitted).

¶34     Bennett, along with the earlier case of Chaffee v. U.S. Fidelity & Guaranty Co. (1979), 181

Mont. 1, 591 P.2d 1102, indicated that anti-stacking policies were discouraged by this Court and

contrary to public policy. These cases, coupled with others where we allowed stacking, see, e.g.,

Farmers Alliance Mut. Ins. Co. v. Holeman (1996), 278 Mont. 274, 280-81, 924 P.2d 1315, 1319

(limiting the application of § 33-23-203, MCA), gave notice to the insured and insurers of this state

that the statute was of questionable validity. We did not have to “overrule clear past precedent” in
order to declare that statute unconstitutional and against public policy.

¶35    Allstate argues that Christensen v. Mountain West Farm Bureau Mutual Insurance Co., 2000

MT 378, 303 Mont. 493, 22 P.3d 624, and Guiberson v. Hartford Casualty Insurance Co. (1985),

217 Mont. 279, 704 P.2d 68, recognized the validity of § 33-23-303, MCA, and therefore muddied

the legal waters, making the unconstitutionality of the statue not clearly foreseeable. The Class aptly

points out, however, that the language in Guiberson cited by Allstate merely noted that the anti-

stacking statute was not in effect when the action at issue arose. It said nothing regarding the

statute’s legality. Also, Christensen involved liability coverage, as opposed to personal and portable

coverages–the class of coverage at issue in Hardy. We conclude that Hardy did not establish a new

principle of law or decide an issue of first impression whose resolution was not clearly foreshadowed.



¶36    Amici in support of Allstate also argue that applying Hardy retroactively violates the

Contracts Clause of the United States and Montana Constitutions. This issue, however, was not

raised by the parties before the Court. An amicus cannot raise separate issues not raised by the

parties. Dep’t of Health v. Lasorte (1979), 182 Mont. 267, 596 P.2d 477. Accordingly, we decline

to address this question.

                                          CONCLUSION

¶37    For the foregoing reasons we conclude that Hardy applies retroactively to require payment

of stacked uninsured, underinsured motorist and medical payment insurance coverages in qualifying

circumstances on open claims arising before its issuance. However, in the interests of finality, as

discussed above, we limit this retroactivity to cases pending on direct review or not yet final.



                                                       /S/ W. WILLIAM LEAPHART
We concur:


/S/ KARLA M. GRAY
/S/ PATRICIA O. COTTER
/S/ JIM REGNIER
/S/ JAMES C. NELSON
/S/ JOHN WARNER
Justice Jim Rice dissenting.

¶38    I respectfully dissent.

¶39    Leaving for another day some of the Court’s philosophical musings about the source

of the law, in particular, that the law is that which is declared by judges, I nonetheless

appreciate the Court’s effort to meld our conflicting precedent into a practical rule.

However, I cannot agree with the new rule because it is inconsistent with additional

precedent which the Court neither overrules nor reconciles. Further, I believe this Court will

need, as demonstrated recently in Ereth, the flexibility of the Chevron test on questions

concerning the prospective application of our holdings. I would retain this test, which, as

the Court notes, the United States Supreme Court specifically allows states to do.

¶40    Taking up the first prong of the Chevron test, which the Court today re-casts as the

exception to its new rule of presumptive retroactive application, the Court rejects Allstate’s

argument that Hardy established a new principle of law, relying on our cases which

“indicated that anti-stacking policies were discouraged by this Court and contrary to public

policy” and which the Court asserts had given “notice to the insured and insurers of this state

that the statute was of questionable validity.” See ¶ 34. The Court fails to mention,

however, that all of the cases it cites were decided prior to the enactment of the anti-stacking

statute by the Legislature in 1997. Therefore, these prior holdings, including the “notice”

the Court had provided about this state’s public policy, had, by the time of the Hardy

decision, been superseded by legislative enactment. Thus, the statutory prohibition on




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stacking was the public policy of the state when Allstate issued the insurance policy herein,

and we indeed overruled that public policy by declaring the statute unconstitutional.

¶41    The Court then faults Allstate’s reliance on Guiberson’s application of the anti-

stacking statute because that case “said nothing regarding the statute’s legality.” See ¶ 35.

However, it did not need to. “Statutes are presumed to be constitutional.” Lafournaise v.

Montana Developmental Center, 2003 MT 240, ¶ 26, 317 Mont. 283, ¶ 26, 77 P.3d 202, ¶

26, citing Romero v. J & J Tire (1989), 238 Mont. 146, 149, 777 P.2d 292, 294. Allstate was

therefore justified in its reliance on a statute which had legislatively established this state’s

public policy with regard to stacking and which was presumptively constitutional.

¶42    Consequently, the new principle of law thus established in Hardy should, according

to our precedent, be applied prospectively. See Poppleton v. Rollins, Inc. (1987), 226 Mont.

267, 271, 735 P.2d 286, 289 (“[A] rule of law will not be applied retroactively if any of the

[Chevron factors] are present.” (emphasis added)). That being so, it is unnecessary for

purposes of this dissent to discuss the other two Chevron factors. The Court cites no

authority in support of its new requirement that all three Chevron factors be met in order to

apply a holding prospectively, and further, fails to acknowledge or overrule the contrary rule

of Poppleton. Poppleton is, of course, implicitly overruled by the Court’s holding herein,

along with our other cases which, wisely in my view, applied the Chevron test.



                                                           /S/ JIM RICE




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