Anyone who has dealt directly with an insurance company will very likely testify to the inherently frustrating nature of the process. Insurers in Montana are justifiably infamous for denying claims without factual justification, making unreasonably low offers when negotiating the settlement of a claim, or engaging in other practices that are designed to preserve the insurer’s assets while escaping liability for legitimate claims. Montana’s legislature has endeavored to restrict or eliminate such practices by passing a law that permits a person who has suffered damages caused by the bad faith actions of an insurance company to initiate a law suit to recover those damages.
The statute first enumerates the types of claims that may be brought against an insurer for “damages as a result of the handling of an insurance claim” such as201 breach of the insurance contract, for fraud or for any of the causes of action specified in Section 33-18-242 of the statute. The statute specifically prohibits claims alleging a general theory of “bad faith” in the “handling of an insurance claim.”
Specific examples of insurer bad faith actions
Section 201 of the statute enumerates fourteen separate types of settlement practices that are deemed to be fraudulent or to have been taken in bad faith. Examples include misrepresenting pertinent facts or terms of an insurance policy provision that is applicable to the coverage terms at issue, failing to acknowledge or act promptly upon communications relating to the claim at issue, failing to affirm or deny coverage within a reasonable time after proof of loss statements have been submitted, or failing to settle a claim when liability has become reasonably clear.
A court or jury may award damages that were proximately caused by any of the actions enumerated in Section 201. To recover monetary damages, a plaintiff in this type of suit must prove that he or she suffered a pecuniary loss as the direct result of the insurance company’s actions. Punitive or exemplary damages may be awarded as provided in that section of the state’s statutes that govern such awards.