If you have ever had an insurance claim in your life (hopefully you haven’t), I bet you never thought: “Wow, the insurance company paid me so fast, I wish they would have taken much longer.” Insurer’s are notoriously slow to pay perfectly legitimate claims. Yet, in 2023 the Montana legislature wrote a new law, one that no Montanan was asking for, that arbitrarily gives insurers much more time to pay insurance claims. It’s a textbook example of a government regulation aimed at solving a problem that doesn’t exist, or perhaps even making a problem worse.
Here’s the biggest problem – the supposed reason to pass insurer-friendly laws is to lower insurance rates for Montanans, is simply not true. Studies show time and time again that these laws do not lower premiums. So the end result is insurance companies get richer, and Montanans get screwed. Montana politicians really need to pay more attention, rather than blindly doing insurance-company bidding.
Historical Insurance Claim Handling Timelines in Montana
Traditionally, timelines on insurance claims are determined on a case by case basis. Every claim is different. Some claims are complicated, and some are straightforward. The time necessary for an insurer to analyze and pay for a broken windshield (likely a matter of days) is vastly different than the time necessary for an insurer to analyze and pay for hundreds of personal items lost in a fire (likely months). A one-size-fits-all timeline does not make sense because insurance claims vary.
Montana law historically recognized the varying nature of insurance claims, from simple to complex. As a result, Montana law wisely decided to impose a flexible standard for timelines in insurance claims. Instead of clumsy government regulation and arbitrary timelines, Montana law merely requires “prompt” responses from insurers. Under Montana law, insurer’s must not:
(2) Fail to ackowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies; Mont. Code. Ann. 33-18-201(2).
(6) neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. Mont. Code. Ann. 33-18-201(6).
The legal requirement is to respond “reasonably promptly,” ie, they must be reasonable and also prompt. Doesn’t seem like a big ask. The “reasonably prompt” requirement has worked well for decades, and “prompt” and reasonable payment timelines are fair. In the rare cases where there was a question whether an insurer paid “promptly,” juries (meaning community members like you) are well equipped to decide if the insurer acted reasonably given the context. Montanas know what is fair and “prompt,” and do not need politicians (the government) to tell them what’s reasonable.
In the rare case where there a questions arose about the timeline, Montana courts and juries have decided both for and against insurers on the question of whether the payments were “prompt.” The decisions are always fact-specific, meaning it depends on the exact circumstances of the claim as to whether the insurer acted reasonably or not. This flexible standard allows Montanans to individually decide cases, rather than have insurers and the government arbitrarily decide what is fair in any given insurance claim.
The New Insurer Friendly Statute For Insurance Claims
In 2023, the government decided to take away from Montanans the ability to decide whether insurance company were acting reasonably. It is typical clumsy government regulation that only adds red-tape and government control in a situation that was fine without it. Specifically, the government took issue with time limits placed upon insurers to pay claims.
The law is found at Mont. Code Ann. 33-18-251. Instead of the historically flexible standard, the new law imposes a minimum timeline on an insurance company of 60 days, or two months, for any “time-limited demand from a claimant to an insurer offering to settle any claim.” Thus, claimants now have very little power to compel an insurance company to do anything within 2 months. Broken windshield? 2 months. Headlight? 2 months. Medical Bill that might go to collections? 2 months.
Certainly, in some cases 60 days may very well be reasonable. For instance, we handle some medical malpractice cases, which are notoriously complicated. It is likely reasonable to provide an insurer 60 days to decide upon a demand. But for the vast majority of cases, 60 days is an eternity, and can really hurt the Montana family with an insurance claim.
The law seems to presume that the insurance company knows nothing about the claim at the time of the demand, which is rarely the case. In other words by requiring 60 days and meticulous copies of evidence, the law presumes that the insurer has no evidence at the time of the demand – not true. In our cases at Duckworth Law, by the time we make a demand on the insurance company we have likely already sent them all the relevant evidence months or years before. In fact, they may know more about the case then we do, since they have access to the defendant. Thus, the idea that they need 60 days, and a meticulous demand, is contrary to reality.
One final point in line with the above erroneous presumption that the insurer is in the dark. In many cases, demands are made more than once. A demand might be made pre-litigation, then multiple demands at various points during litigation. By the time we make a third demand, perhaps after months or years of litigation, the insurer knows EVERYTHING. Yet, this law does not account for this scenario, and instead again requires a minimum of 60 days. That’s absurd. By the time the case is in litigation, 15 days is an eternity for the insurer to decide. Again, this statute fails to account for this reality, and exposes itself as clumsy government regulation.
It has a misleading euphemistic title of “Insurer’s Fair and Reasonable Opportunity to Investigate and Evaluate Claims.” Insurers have always had a “fair” and “reasonable” opportunity to evaluate claims, and really this is just big government protection for big insurance companies. Montanans lose.
What was the Problem that this Statute Solved?
The supposed problem that this new law is meant to solve, is that insurer’s were occasionally getting punished for delayed payment of insurance claims. In other words, there were some claims where insurance companies got punished for ignoring “reasonable and prompt” timelines. These insurance companies lobbied Montana’s Republican legislature, convincing a perhaps naive legislature that insurance companies should not have to pay Montanans on time. The Republican legislature was happy to give the insurance companies what they wanted, and most Montanans aren’t involved with insurance often enough to know what it means.
In practice, insurers were sometimes (pretty rarely) getting sued for delayed payments. Now, most people would agree that insurer’s should be punished for unreasonably delaying claim. If insurance companies are not punished for unreasonable delays, what incentive would they ever have to pay promptly?
The law only applies to Time Limited Demands, but that theoretically includes any situation where a Montanan asks for payment by a certain date. Montanans and their Lawyers rightfully demand payment for a legitimate insurance claim within a certain time. For example, a lawyer might write, “please pay the $5,000 for John Doe’s medical bills within 30 days.” If the insurer failed to pay within 30 days, without good reason, the insurer may get sued.
The amount of time that was reasonable for a demand varies case by case, and practicing attorneys know this. It does no good for a lawyer to put an unreasonably short timeline on a demand, and unreasonably short timelines will not be upheld in court. However, it may be reasonable to put a relatively short timeline on paying an insurance claim for a broken windshield (perhaps 15 days), whereas a reasonable timeline for a complicated personal injury case might need to be 45-60 days.
These timelines matter, because without timelines insurers have no legal obligation to pay an insurance claim at any certain time. Even if an insurer is ultimately responsible, if payment doesn’t come for months later, it can cause real-world problems for Montanas. For instance, without a windshield, you can’t drive your car. Medical bills might get turned into collections after 30 days. Society doesn’t allow for bills to go unpaid, and thus insurance companies must pay timely, ie, “reasonably promptly,” or else the Montanan suffers consequences.
Now Montanans must wait 60 days for any time limit demand, at a minimum. Section (4) of the law even states the 60 days can even be extended by the insurance company seemingly unilaterally, if the insurers claim a need for more information. This author fails to see how this law helps Montanans, and it appears to be special legislation to help (mostly) out-of-state insurers.
Poilicy Limit Demands in Insurance Claims
There’s also another niche situation this law attacks, the Policy Limit Demand. This issue is somewhat “inside baseball”, but let me attempt to explain.
Consider the situation where John runs a read light and hits Joe. Joe’s ankle is broken and he has surgery. The medical bills are $15,000, and Joe misses months of work. John has liability insurance in the amount of $25,000, the Montana minimum coverage. Liability insurance is meant to protect the insured (John) by paying the claimant (Joe) for damages caused by John.
Joe hires a lawyer. The lawyer writes the insurance company a letter and says,”Joe offers to settle the case for John’s $25,000 policy limit, and in exchange will sign a release that releases John from any further liability.” In this situation, both John and Joe will get what they want — Joe gets the $25,000 to pay for his bills and other damages, and John gets released from liability without having to pay out-of-pocket. That’s what insurance is for.
In the above situation, the Montana lawyer will also say in the letter to John’s insurance company, “you have 30 days to agree to pay the $25,000 limit, or else we will be forced to sue John, your insured.” The 30 days is reasonable because Joe has bills to pay, and it gives the insurer a whole month to decide.
In this situation, it is unequivocally in John’s best interest for his insurance company to accept the offer, pay the policy limit, and get John released from liability. John WANTS his insurer to pay, BUT the insurer company gets to decide. If the insurance company delays and refuses to agree within 30 days (plenty of time to decide a case like this), or if the insurance company only offers $15,000, Joe’s only real choice is to sue John.
At this point, the insurance company is calling all the shots. Joe is fully willing to accept the $25,000, which is likely less than his damages, and let John off the hook. But the insurance company is being unreasonable and John is the pawn. Joe then sues John, the case goes to trial, and a jury finds that Joe’s damages are $100,000, way more than the $25,000 limit.
Now the insurance company tells John,”sorry, we will pay our $25,000, but good luck paying that additional $75,000 out of your own pocket.” In this situation, the insurance company doesn’t care, because they still only have to pay the $25,000. The rest is on John. John has to pay for the additional $75,000 out of pocket, even though it was the insurance company who refused to settle for much less when it had a chance.
The above example is clearly not fair, and Montana law long ago accounted for this scenario. For instance, see, Peris v. Safeco, 276 Mont. 486 (Mont. 1996), holding insurers responsible for an excess verdict when it was the insurer who called the shots and refused reasonable offers. In Montana, historically, when insurers have refused to settle on time and instead put their own insured at risk, the insurer ends up having to pay any verdict in excess of the policy limit. Since it was the insurance companies decision to roll the dice, it is the insurance company who has to pay for a bad decision.
This new law, Mont. Code Ann. 33-18-251, now imposes the 60 days timeline, as well as host of ticky-tac requirements that must be “strictly” followed. If the law isn’t “strictly” followed, the insurer is relieved from bad faith liability, and the Montanans (both Joe and John) suffer the consequences. Instead of the insurance company paying for it’s poor decision, John pays for it.
Indeed, insurance companies deserve a fair shake, but this law is merely government red-tape special legislation that protects insurance companies, and limits Montanans ability to hold insurance companies responsible for bad faith. Instead of Montanans being able to decide what a “reasonable” timeline means, the government now says it’s 60 days, minimum.
Conclusion
All in all, the law is a clumsily written law that hopefully has limited application. Make no mistake, it only helps out of state insurance companies, and not Montanans. Yet, for most situations a careful and experienced lawyer can avoid the law entirely, or make sure you comply with the law and put pressure on insurance companies for timely payment. The reality is you will just have to wait longer to fix your windshield, or your roof, or pay your medical bills – because notoriously slow insurance companies just got Montana’s blessing to be even slower on your insurance claim.
Every insurance claim is unique, and an experienced Montana lawyer can help. Call us to discuss your Montana insurance claim.
This article should not be taken as legal advice, as every case is different, and each case depends on it’s specific facts. We recommend consulting with an experienced attorney on your insurance claim.