Bad Faith

If you are involved in an insurance coverage dispute because an insurance company refuses to pay your insurance claim, you may have the right to bring an insurance bad faith suit.  Insurance bad faith is a legal term that describes a claim that an insured person may have against an insurance company for its bad acts.  Under Montana law, insurance companies owe a duty of good faith and fair dealing to the persons and companies they insure.  This duty is often referred to as the “implied covenant of good faith and fair dealing” which automatically exists by operation of law in every insurance contract.  Insurance companies must be held responsible when their unlawful conduct results in the denial or delay of claims.  Our attorneys at Datsopoulos, MacDonald & Lind, P.C. handle all types of insurance bad faith claims, including auto insurance, life insurance, disability insurance, fire insurance, homeowners insurance, long-term care insurance, commercial insurance, and health insurance claims.

Unfair Trade Practices Act

When the insurance company’s actions are not in good faith, either the insured person or company (the “first party” to the insurance contract) and the person he or she injures (the “third party” to the insurance contract) may bring actions against the insurance company who violate Montana’s Unfair Trade Practices Act (“UTPA”).  Third parties are allowed to recover against another person’s or company’s insurance policy because it is the insurance company that usually controls the defense of the underlying lawsuit and the decision to settle.

The UTPA is designed to, among other things, protect claimants against insurers who would deny a claim without first conducting a reasonable investigation.  The essence of a UTPA claim “is that an insurer, given the information available to it, has acted unreasonably in adjusting a claim.”

The UTPA provides a laundry list of prohibited behavior, commonly referred to as “statutory bad faith,” for which an insurance company will be liable to either or both its policy holder and the injured third party:

  • misrepresenting pertinent facts or insurance policy provisions relating to the coverage at issue;
  • refusing to pay claims without conducting a reasonable investigation based upon all available information;
  • failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;
  • neglecting to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear;
  • attempting to settle claims on the basis of an application which was altered without notice to or knowledge or consent of the insured;
  • failing to promptly settle claims, if liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage.

§ 33-18-201, M.C.A.


If an insurer violates the UTPA, claimants may be able to recover compensatory damages.  Compensatory damages are damages sufficient in amount to compensate the injured party for the loss suffered.  Punitive damages may also be assessed against an insurer which has committed UTPA violations.  Under Montana law, punitive damages serve two purposes: (1) to set an example, and (2) to punish the wrongdoer.  They are a type of private fine or civil penalty inflicted to deter similar conduct in the future.  Claimants may also be entitled to interest calculated from the date on which an insurance company should have paid a claim and emotional distress in the form of mental injuries caused when insurers refuse to handle claims in a reasonable and prudent manner.

Statute of Limitations

You should be aware, however, that bad faith and unfair trade practices claims must be brought within the applicable statute of limitations..  The time in which you may file suit depends on whether you are the policyholder or a “third party.”  The time periods are shorter than you might think.  Contact us to discuss the specific facts of your case and how the statutes of limitation apply.