The Montana Supreme Court Just Made It Much Harder For Insurers To Litigate The Value of UM/UIM Claims

HELENA, Oct. 24 – While disclaiming it was creating a new concept of insurer bad faith in the state, the Supreme Court of Montana just announced a bright line rule in first party UM/UIM litigation that discourages insurers from contesting in good faith the value of an insured’s injury, and rolls back the American Rule which requires that each litigant bear his or her own attorneys fees.

In Mlekush v. Farmers Ins. Exchange, 2017 MT 256, a unanimous Montana Supreme Court held that an insurer contesting an insured’s claim for UM/UIM dollars must reimburse the insured for attorneys fees if the insured goes to trial and recovers an amount in excess of the insurer’s last offer.  Justice Michael A. Wheat wrote for a unanimous court:

“[w]e hold that, when a first-party insured is compelled to pursue litigation and a jury returns a verdict in excess of the insurer’s last offer to settle an underinsured motorist claim, the insurer must pay the first-party insured’s attorney fees in an amount subsequently determined by the district court to be reasonable.   To be clear, if a first-party insured goes to trial and obtains a verdict in excess of the insurer’s last offer, this constitutes prima facie proof that the insured was forced to assume the burden of legal action to obtain the full benefit of the policy, thus obviating the need for an inquiry as to whether or not the insurance exception applies. However, in cases in which the policy limits are tendered prior to a verdict being returned, the district court may consider the entirety of the litigation to determine ‘whether, and to what extent, [the] insured was forced to assume the burden of legal action in order to recover the full benefits of the insurance contract.'”

Mlekush v. Farmers Ins. Exch., 2017 MT 256 (Oct. 24, 2017)(Wheat, J.)

Editor’s Note:   While the Court took steps to walk back from any suggestion it was creating new bad faith law, the opinion essentially creates  a rule of strict bad faith liability for any insurer who takes a UIM claim to trial and the jury awards more than the insurer’s offer.  The opinion is wholly  silent, of course on whether an insurer is entitled to recoup attorneys fees from the insured if the jury awards an amount less than the insurer’s last offer, and despite the symmetry of it,  it is probably not reasonable to assume such a corollary would ever be endorsed by the Court.  

Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than three decades, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800. View all posts by CJ Haddick