Montana

Mont. Code Ann. § 33-18-201 (1977) (Unfair claim settlement practices prohibited) provides:

A person may not, with such frequency as to indicate a general business practice, do any of the following:

1. misrepresent pertinent facts or insurance policy provisions relating to coverages at issue;
2. fail to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;
3. fail to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;
4. refuse to pay claims without conducting a reasonable investigation based upon all available information;
5. fail to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
6. neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;
7. compel insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by the insureds;
8. attempt to settle a claim for less than the amount to which a reasonable person would have believed the person was entitled by reference to written or printed advertising material accompanying or made part of an application;
9. attempt to settle claims on the basis of an application that was altered without notice to or knowledge or consent of the insured;
10. make claims payments to insureds or beneficiaries not accompanied by statements setting forth the coverage under which the payments are being made;
11. make known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;
12. delay the investigation or payment of claims by requiring an insured, claimant, or physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information;
13. fail to promptly settle claims, if liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage; or
14. fail to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

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Available Third Party Causes of Action

A claimant has both statutory and common law recourse for bad faith refusal to settle within the insured’s policy limits.

A statutory cause of action for third-party claimants exists but “[a] third-party claimant may not file an action under this section until after the underlying claim has been settled or a judgment entered in favor of the claimant on the underlying claim.” M.C.A. § 33-18-242(6)(b).

Moreover, a third-party claimant is not prohibited from bringing an action for common law bad faith in addition to a claim under § 33-18-201. Brewington v. Employers Fire Ins. Co., 297 Mont. 243, 248, 992 P.2d 237 (Mont. 1999); M.C.A. §33-18-242.

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Applicable Statute of Limitations

The Statute of Limitations for bringing a claim under § 33-18-201 is one year. M.C.A. § 33-18-242(7)(b). The Statute of Limitations for bringing a common law bad faith claim is three years. M.C.A. § 27-2-204(1); see also Brewington v. Employers Fire Ins. Co., 297 Mont. 243, 249, 992 P.2d 237, 241 (Mont. 1999). The period of limitations begins to run “when the claim or cause of action accrues.” M.C.A. § 27-2-102(2).

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Recoverable Damages

M.C.A. § 33-18-242 (4) allows an award of “such damages as were proximately caused by the violation of subsection (1), (4), (5), (6), (9), or (13) of § 33-18-201.” Emotional distress damages may also be awarded. See, e.g., Stephens v. Safeco Ins. Co. of America, 258 Mont 142, 852 P.2d 565 (Mont. 1993). Attorney fees are generally not recoverable, as they are not provided for in the statute. Sampson v. Nat’l Farmers Union Prop & Cas. Co., 333 Mont. 541, 547-48, 144 P.2d 797 (Mont. 2006).

“[A]n insurer which in bad faith fails to settle a bona fide third party liability claim against its insured, within policy coverage limits, takes the risk of a judgment by the trier of fact in excess of the coverage limits. The effect of such bad faith is to open the policy coverage limits to the extent of the trial result. Gibson v. Western Fire Ins. Co., 210 Mont. 267, 274, 682 P.2d 725, 730 (1984).

Additionally, M.C.A. § 33-18-242(4) authorizes recovery of exemplary damages in accordance with M.C.A. § 27-1-221. To recover punitive damages, the claimant must prove actual fraud or actual malice by clear and convincing evidence. M.C.A. § 27-1-221(1) and (5). “Clear and convincing evidence means evidence in which there is no serious or substantial doubt about the correctness of the conclusions drawn from the evidence. It is more than a preponderance of evidence but less than beyond a reasonable doubt.” M.C.A. § 27-1-221(5).

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