Montana Auto Insurance & Crash Law · Citizen Guide
Montana Insurance Claims Handling & Bad Faith
Montana closely regulates how insurers investigate, evaluate, communicate, decide coverage and settle claims. “Bad faith” remains useful public shorthand, but current Montana law requires the legal analysis to identify the specific statutory violation, contract claim or fraud theory actually authorized.
“Bad faith” is shorthand—not the current cause-of-action label
Montana's Legislature now expressly identifies which claim-handling legal theories an insured or third-party claimant may pursue against an insurer.
Current authorized theories
Under MCA § 33-18-242, an insured who suffers damages from handling of an insurance claim may pursue breach of the insurance contract, fraud, or the independent statutory action provided by § 33-18-242.
Current authorized theories
A third-party claimant who suffers damages from claim handling may pursue fraud or the independent statutory action under § 33-18-242, subject to its procedural requirements.
Montana's core insurer claim-handling duties
MCA § 33-18-201 lists numerous prohibited claim practices. Six of those subsections currently support the independent private action created by § 33-18-242.
Truthful coverage information
An insurer may not misrepresent pertinent facts or insurance-policy provisions relating to coverages at issue.
Reasonable investigation
An insurer may not refuse payment without conducting a reasonable investigation based on all available information.
Timely coverage decision
An insurer may not fail to affirm or deny coverage within a reasonable time after proof-of-loss statements have been completed.
Prompt, fair and equitable settlement
When liability has become reasonably clear, the insurer must make good-faith efforts toward prompt, fair and equitable settlement.
No altered-application settlement
The insurer may not attempt to settle a claim based on an application altered without proper notice to or knowledge or consent of the insured.
No improper coverage leverage
When liability is reasonably clear, one portion of coverage may not be withheld in order to influence settlement under another portion.
How the current statutory action works
| Issue | Current Montana rule |
|---|---|
| Actionable UTPA provisions | § 33-18-201(1), (4), (5), (6), (9), and (13). |
| General business practice | A plaintiff under § 33-18-242 does not have to prove violations occurred frequently enough to establish a general business practice. |
| Insured's theories | Breach of insurance contract, fraud, or § 33-18-242 statutory action. |
| Third-party claimant's theories | Fraud or § 33-18-242 statutory action. |
| Separate bad-faith action | Not authorized in connection with handling the insurance claim under current § 33-18-242. |
| Damages | Damages proximately caused by an actionable statutory violation. |
| Insurer defense | No liability under § 33-18-242 if the insurer had a reasonable basis in law or fact for contesting the claim or amount at issue. |
Who can file—and when?
May file with other claims
An insured may bring the § 33-18-242 action together with other causes of action the insured is authorized to assert against the insurer, subject to possible bifurcation where justice requires.
Statutory action generally comes later
A third-party claimant may not file the § 33-18-242 action until the underlying liability claim has settled or judgment has been entered in favor of the claimant.
Current limitation periods
| Plaintiff | § 33-18-242 limitations period |
|---|---|
| Insured | Generally within two years from the date of the § 33-18-201 violation. |
| Third-party claimant | Generally within one year from settlement of the underlying claim or entry of judgment. |
The insurer has a statutory reasonable-basis defense
Montana does not impose statutory liability merely because the insurer eventually loses a coverage, causation or valuation dispute.
Section 33-18-242 provides that an insurer may not be held liable under that section if it had a reasonable basis in law or fact for contesting the claim or the amount of the claim.
Dean: factual reasonableness often belongs to the fact finder
Dean v. Austin Mutual Insurance Co., 263 Mont. 386, 869 P.2d 256 (1994), explains that where the insurer's reasonableness depends on disputed evidence and credibility, the question ordinarily belongs to the trier of fact.
The legal landscape is measured when the claim was adjusted
Montana's reasonable-basis analysis looks to the law and information available during the relevant claim-handling period—not merely to a legal argument developed after litigation begins.
A later payment does not automatically cure an earlier unreasonable investigation
McVey v. USAA Casualty Insurance Co., 2013 MT 346, is particularly important for automobile claims.
USAA eventually paid McVey the available UM/UIM limits after further investigation. The Montana Supreme Court held that eventual payment was not enough, by itself, to preclude scrutiny under § 33-18-201(4) of whether the insurer's earlier investigation had been reasonable.
The operative question remains whether the insurer actually conducted the reasonable investigation Montana law required before taking the disputed claim position.
Ridley: reasonably clear liability can require payment before global settlement
Ridley v. Guaranty National Insurance Co., 286 Mont. 325, 951 P.2d 987 (1997), remains one of Montana's most significant automobile claim-handling decisions.
Under the circumstances addressed there, the UTPA did not permit the liability insurer simply to withhold qualifying medical expenses until the injured third-party claimant agreed to settle every component of the case.
Shilhanek: Ridley is not confined to compulsory minimum limits
In Shilhanek v. D-2 Trucking, Inc., 2003 MT 122, 315 Mont. 519, 70 P.3d 721, the Montana Supreme Court rejected an argument that Ridley's UTPA analysis applied only within Montana's compulsory minimum automobile-liability limits.
The Court explained that Ridley arises from Montana's UTPA rather than only from the motor-vehicle financial-responsibility statute.
Watters: mandatory limits cannot always be held for a global release
Watters v. Guaranty National Insurance Co., 2000 MT 150, 300 Mont. 91, 3 P.3d 626, involved reasonably clear automobile liability and damages that undisputedly exceeded the applicable mandatory limits.
Under those circumstances, the Montana Supreme Court held that conditioning payment of the owed mandatory limits on a full and final release constituted an unfair trade practice.
Watters also demonstrates the reasonable-basis defense
Although the Court announced the substantive rule, it concluded that the insurer had relied on then-existing Montana precedent that provided a reasonable basis in law for its earlier position.
The case therefore demonstrates both sides of Montana's statutory system: a substantive insurer duty and a distinct reasonable-basis defense.
The claimant's cooperation now matters expressly
MCA § 33-18-243, enacted in 2023, expressly requires insureds and third-party claimants to cooperate with an insurer concerning an insurance claim and comply with reasonable requests in the investigation and handling of the claim.
They also must deliver reasonably available claim information sufficient to provide the insurer a fair and reasonable opportunity to investigate and evaluate the claim.
Reasonably investigate
Seek and evaluate material liability, coverage and damage information before refusing payment or taking a claim position.
Provide reasonably available information
Cooperate with reasonable requests and provide information sufficient to create a fair investigative opportunity.
Claims-handling audit
Reconstruct the claim chronologically. The central question is what the insurer knew, what it did with that information, and whether its position remained reasonable as the record developed.
Claim-file evidence to preserve
- date claim reported
- claim number
- complete applicable policy
- coverage investigation
- reservation-of-rights letters
- coverage denials
- police report
- witness statements
- photographs
- vehicle evidence
- liability evaluation
- comparative-fault evaluation
- medical records supplied
- medical bills supplied
- causation analysis
- treatment-necessity analysis
- adjuster correspondence
- claimant correspondence
- insured correspondence
- adjuster notes where discoverable
- supervisor review where discoverable
- coverage opinions where discoverable
- legal research where discoverable
- settlement offers
- settlement demands
- reasons for delay
- reasons for denial
- claim information requested
- claim information supplied
- policy-limit exposure
- excess-exposure communications
Damages require causation
Section 33-18-242 authorizes recovery of damages proximately caused by an actionable violation of § 33-18-201.
Punitive damages require a separate showing
Section 33-18-242 allows exemplary damages only in accordance with Montana's punitive-damages law. A UTPA violation does not automatically establish entitlement to punitive damages.
Punitive damages require the separate proof demanded by MCA § 27-1-221, including actual fraud or actual malice under the statutory standard.
Estate of Gleason: UTPA damages and punitive damages are distinct questions
Estate of Gleason v. Central United Life Insurance Co., 2015 MT 140, illustrates why contract benefits, statutory claim-handling damages and punitive-damages proof should not be collapsed into one inquiry.
First-party and third-party claims require different records
The insured versus the insured's own carrier
Track the contractual benefit, the claim investigation, the insurer's stated basis, any breach of contract, any independently actionable UTPA violation, any supported fraud theory and damages attributable to each alleged wrong.
The injured claimant versus the liability insurer
Track when liability became reasonably clear, which damages became reasonably clear, what information was supplied, what remained disputed, settlement conduct, any release demand and the ultimate settlement or judgment.
Common claims-handling mistakes
- Calling every insurance dispute “bad faith” without identifying the legal claim.
- Using an older common-law case without checking current § 33-18-242.
- Assuming every § 33-18-201 subsection creates a private action.
- Failing to distinguish contract damages from UTPA damages.
- Assuming denial automatically establishes unreasonable conduct.
- Assuming ultimate payment automatically cures an earlier inadequate investigation.
- Treating liability for the crash as proof that every damage item is reasonably clear.
- Ignoring the insurer's reasonable-basis defense.
- Judging the insurer only with information learned after the claim decision.
- Failing to document when important evidence reached the carrier.
- Ignoring claimant cooperation under § 33-18-243.
- Ignoring which requested information was reasonably available.
- Failing to preserve settlement demands and responses.
- Conditioning analysis solely on whether policy limits were eventually paid.
- Assuming a UTPA violation automatically establishes punitive damages.
Montana authority map
Frequently asked questions
Can I sue a Montana insurer for “bad faith”?
“Bad faith” remains useful public terminology, but current MCA § 33-18-242 expressly limits claim-handling theories. An insured may pursue breach of contract, fraud, or the statutory action; a third-party claimant may pursue fraud or the statutory action. The statute bars a separate bad-faith claim arising from handling the insurance claim.
Which UTPA violations can support the statutory action?
Current § 33-18-242 identifies § 33-18-201(1), (4), (5), (6), (9), and (13).
Does the plaintiff have to prove that the insurer routinely does this to many people?
No. Section 33-18-242 expressly states that a plaintiff in the independent statutory action does not have to prove violations occurred frequently enough to establish a general business practice.
Can an insurer contest a disputed claim without violating the UTPA?
Yes. Section 33-18-242 provides a defense when the insurer had a reasonable basis in law or fact for contesting the claim or amount at issue.
If the insurer eventually pays, does that end an unreasonable-investigation claim?
Not automatically. McVey holds that later payment does not itself cure or erase an earlier failure to conduct the reasonable investigation required by § 33-18-201(4).
Does Ridley require immediate payment of every medical bill?
No. Ridley applies when liability for the particular expense has become reasonably clear. Causation, reasonableness, necessity, amount and other legitimate disputes can remain.
Can a third-party claimant file the UTPA suit while the injury case is still pending?
The § 33-18-242 damages action generally cannot be filed until the underlying claim is settled or judgment has been entered in the claimant's favor. The conduct should nevertheless be documented as it occurs.
How long does an insured have to file a § 33-18-242 action?
The statute presently provides two years from the date of the § 33-18-201 violation for an insured's statutory action.
How long does a third-party claimant have?
The current statute generally provides one year from settlement of the underlying claim or entry of judgment.
Does a claimant have to cooperate with the insurer?
Yes. MCA § 33-18-243 imposes express cooperation and claim-information duties. Failure to comply does not create an insurer's independent damages action, but it can affect evidence and specified statutory defenses.
Does proving a UTPA violation automatically produce punitive damages?
No. Exemplary damages require the separate showing required by Montana's punitive-damages statute.
A claims-handling case is built from the timeline.
Identify what coverage applied. Reconstruct what the insurer knew and when. Examine the investigation. Determine when liability or particular damages became reasonably clear. Identify the carrier's contemporaneous legal or factual basis. Evaluate claimant cooperation. Then connect any actionable statutory violation to the damages it actually caused.