Montana law requires an insurer to advance pay certain damages prior to settlement or judgment, subject to certain limitations. The seminal case on an insurer’s duty to advance pay medical expenses is the 1997 decision Ridley v. Guarantee Nat’l Ins. Co.[i], in which the Montana Supreme Court held that, where liability is reasonably clear, an insurer has an obligation to pay the third-party claimant’s medical expenses as incurred. The Court reasoned that the insurance industry’s practice of refusing to advance medical expenses pending full settlement was “leveraging,” which was a practice violating two provisions of the Unlawful Trade Practices Act (UTPA). In Ridley, the Montana Supreme Court held that an insurer had an obligation to advance pay a third-party’s medical expenses “when liability is reasonably clear.”[ii] The Court further held that liability must be reasonably clear for the expense that is submitted. Thus, even if liability for the accident is clear, an insurer may still dispute a medical expense if it is not “reasonably clear that the expense is causally related to the accident in question.”[iii] The Ridley Court cited policy considerations, holding that their interpretation of Mont. Code Ann. §33-18-201(6) was consistent with the purpose of the UTPA, which was to assure prompt payment of damages for which an insurer was clearly obligated.
Subsequently, in Dubray v. Farmers Insurance Exchange [iv], the Montana Supreme Court expanded Ridley’s holding to include lost wages, and intimated that other obligations might fall within the ambit of Ridley.
“Nothing in Ridley suggests that its scope should be categorically limited to medical expenses. Rather, medical expenses are just one of the obligations incurred by victims that mandatory liability insurance laws were designed to alleviate. Lost wages which are reasonably certain and directly related to an insured’s negligence or wrongful act are another example.”[v]
It is important to note that Dubray is not limited to wage loss, but only offers wage loss as another example of expenses an insurer might be obligated to advance. Courts will continue to define what expenses fall within an insurer’s advance payment obligations, which might include travel expenses and home care among others.
There are a number of potential pitfalls that an insurer should be aware of that could trigger a bad faith claim. Carriers must be cautious in making an initial assessment of when liability is “reasonably clear.” The Montana Supreme Court has held that liability is reasonably clear when “a person with knowledge of the relevant facts and law, would have concluded for good reason that [defendant] was 50% or more negligent.”[vi] Another pitfall is whether and to what extent an insurer is entitled to an offset for payments made by a collateral source, or whether advance payments can be withheld if the Plaintiff has already received a collateral source payment for the expense at issue.
There are obviously too many potential pitfalls to list them all here. The Montana Supreme Court has repeatedly advised that if a carrier has questions about their duties under an insurance policy, they should seek a declaratory judgment to determine obligations under a policy.[vii] If a carrier has any questions about duties to defend under a policy or duties to advance pay, they should promptly seek the advice of an attorney to assist them in navigating these issues.
For further information or questions regarding this matter, contact Brian Taylor, of Hall & Evans, LLC, at (406) 969-5231.
[i]Ridley v. Guarantee Nat’l Ins. Co., 286 Mont. 325, 951 P.2d 987 (1997)
[ii]Ridley, 286 Mont. at 334, 951 P.2d at 992
[iii]Id.
[iv]Dubray v. Farmers Insurance Exchange, 307 Mont. 134, 36 P.3d 897 (2001)
[v]Dubray, 307 Mont. at 138, 36 P.3d at 900
[vi]Peterson v. St. Paul Fire & Marine Ins. Co., 357 Mont. 293, 308, 239 P.3d 904, 915 (2010)
[vii] State Farm Mutual Auto. Ins. Col, v. Freyer, 372 Mont. 191, 205, 312 P.3d 403, 415 (2013)