Bad Faith: Misrepresentation & Failure to Investigate Claims Under the Montana Unfair Trade Practices Act.

March 22, 2017

“The essence of a claim under § 33-18-201, MCA, is that an insurer, given information available to it, has acted unreasonably in adjusting a claim, perhaps by failing to investigate, failing to communicate or failing to negotiate in good faith.” Peterson v. Doctors’ Co., 2007 MT 264, ¶ 43, 339 Mont. 354, 170 P.3d 459. The relevant issue is “almost universally” how the insurer acted given the information available to it at the time. Id. 
       a. Subsection (1) Claims.
Subsection (1) of § 33-18-201 forbids the misrepresentation of “pertinent facts or insurance policy provisions relating to coverages at issue.” Lorang, ¶ 125. Though subsection (1) references “coverages,” it also forbids the misrepresentation of facts relating to the “claim” at issue. Jacobsen v. Allstate Ins. Co., 2009 MT 248, ¶ 47, 351 Mont. 464, 215 P.3d 649. Further, it does not require a showing of intent but rather categorically forbids misrepresentations: “[A] claim of misrepresentation under the UTPA is determined by an objective analysis of the substance of the representation at issue, without regard to whether it resulted from an intentional effort to mislead[.]” Lorang, ¶¶ 125-127.
      b. Subsection (4) and (6) Claims.
Subsection (4) of § 33-18-201 prohibits an insurer from “refus[ing] to pay claims without conducting a reasonable investigation based upon all available information.” McVey v. USAA Cas. Ins. Co., 2013 MT 346, ¶ 17, 372 Mont. 511, 313 P.3d 191 (quoting subsection (4)). “[T]he sole issue in a claim under § 33-18-201(4), MCA, is whether the investigation itself was objectively reasonable.” Lorang v. Fortis Ins. Co., 2008 MT 252, ¶ 145, 345 Mont. 12, 192 P.3d 186. It is an independent cause of action solely for an unreasonable investigation and does not require proof that reasonably clear liability existed for the underlying claim. Id. at ¶ 146. The
sole issue under (4) is “whether the investigation itself was objectively reasonable.” Id. at ¶ 148.

Subsection (6) forbids any insurer from “neglect[ing] to attempt in good faith to effectuate prompt, fair, and equitable settlement of claims in which liability has become reasonably clear.” Lorang, ¶ 169. Whether an insurer violated its duty to act in good faith to effectuate prompt settlement is typically a factual issue. Id. (citing Precision Theatrical Effects, Inc. v. United States, N.A., 2006 MT 236, ¶ 23, 333 Mont. 505, 143 P.3d 442).