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:
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.
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).
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).
Chartwell Law represents the interests of insurers and employers, as such, we continue to continue to monitor the legal landscape. If you have any questions about issues associated with right of action for bad faith claims, our attorneys are available to help. Please contact your Chartwell Law attorney.