In so holding, the Montana Supreme Court also rejected CULI’s asserted “reasonable basis defense,” determining that the issue “was not solely a matter of interpreting legal precedent.” The Court affirmed the district court’s decision that the “legal advice which informed [the insurer’s] decision to contest [the] claim is relevant to whether that decision was grounded in ‘a reasonable basis in law,’” allowing the jury to hear evidence about CULI’s knowledge and application of Montana law. 
The underpinnings of the Court’s decision are threefold: a “natural conclusion of an ongoing trend” in the court’s jurisprudence; earlier antiforfeiture protection principles codified by the Montana Legislature; and equitable principles established in contract law.
Our decision here reaffirms our commitment to upholding the “fundamental protective purpose” of an insurance contract and ensures that a non-material, technical breach of a notice provision will not deprive the insured of coverage for which valuable consideration has been paid. 
This broad ruling in first party claims laid the groundwork for the Court’s adoption of the rule in third party actions, in Atlantic Casualty Insurance Company v. Greytak. Relying on a majority of jurisdictions having adopted the notice-prejudice rule in insurance coverage disputes, the Court held:
The public policy of Montana is to narrowly and strictly construe insurance coverage exclusions in order to promote the “fundamental protective purpose” of insurance. An insured’s technical or illusory failure to comply with obligations of a policy will not automatically terminate coverage, and an insurer who does not receive timely notice required by the terms of an insurance policy must demonstrate prejudice from that lack of notice in order to avoid the obligation to provide defense and indemnification of the insured. This rule applies whether the claim arises from the insured as in Gleason or from a third party claiming damages as in the present case. 
Reacting to the Court’s decision, State Auditor ex officio Commissioner of Securities and Insurance Monica Lindeen (the Commissioner)  has initiated a proactive regulatory posture regarding the rule and has issued a draft advisory bulletin to insurers and their trade associations seeking comment. The draft advisory instructs all insurers in all lines of insurance to “ENSURE that all insurance forms and practices conform to the notice prejudice rule within sixty (60) days of the date of this Advisory Memorandum.” Comments from industry and others were accepted until close of business on April 21, 2016.  A formal bulletin or revised draft has not been issued.
Ibsen v. Caring for Montanans
Private Right of Action to Enforce UTPA
In a May 11, 2016 opinion, the Montana Supreme Court held that a person may not maintain a private right of action for a violation of the UTPA except as expressly permitted in section 33-18-242 of the Montana Code Annotated (the Code). The issue before the court was whether Plaintiff Mark Ibsen could maintain a private right of action for his insurer’s violation of Code sections 33-18-208 (rebates prohibited) and 33-18-212 (illegal dealing in premiums), or in the alternative, whether the claims could be sustained as common law claims. 
For several years and until December 2015, Mr. Ibsen owned and operated an urgent care clinic in Helena, Montana (Ibsen). Ibsen became a small business member of the Montana Chamber of Commerce and, during 2011, 2012, and 2013, elected to provide health insurance coverage for its employees through a Chamber program known as “Chamber Choices,” choosing Blue Cross and Blue Shield of Montana, Inc. (BCBSMT) as its vendor/provider “choice.” Ibsen paid monthly premiums to BCBSMT. As part of a routine market conduct examination, the Office of the Montana State Auditor, Commissioner of Securities and Insurance (CSI) reviewed BCBSMT’s business practices between July 1, 2006, and December 31, 2010. In February 2014, the CSI issued an order fining BCBSMT  for numerous discrepancies, including improper medical premium billing in violation of UTPA sections 33-18-208 and -212. BCBSMT did not challenge or appeal the fine and paid it within the required payment period. 
In April 2014, Ibsen filed a “Complaint Putative Class Action” against BCBSMT (now known as Caring for Montanans, Inc.) and Health Care Service Corporation alleging that, from 2007 through 2012, BCBSMT violated Code section 33-18-212 by improperly charging consumers enhanced premiums that included undisclosed amounts exceeding the medical premium. It claimed that the overcharges were used to provide kickbacks to the Chamber, which marketed BCBSMT’s insurance plan to its members, to ensure that BCBSMT would remain a “Chamber Choice” provider and thus were also in violation of Code section 33-18-208. 
In addition to class allegations, the amended complaint alleged four counts all premised on the violations of Code sections 33-18-208 and -212: (1) breach of fiduciary duty; (2) unfair and deceptive trade practices; (3) breach of contract; and (4) unjust enrichment. Ibsen asserted that three of its four claims were common law claims rather than statutory claims brought under the UTPA. The district court disagreed. The court pointed out that “Count II clearly alleges a statutory violation and purports to allow [Ibsen] to enforce the two provisions of the insurance code ([S]ections -208 and -212) [sic].” It therefore held that “Count II . . . is strictly and explicitly a statutory claim [and] is not allowed to be brought by private claimants.”  The district court also invoked Ibsen’s assertions in a parallel federal court proceeding that its “several causes of action” were “all based on violations of the two insurance code sections.”  Consequently, the district court held that each remaining count of the Complaint was not a common law claim. Citing 33-1-311(1), MCA, the “General powers and duties” section of the Montana Insurance Code, the court found that the clear legislative intent was that the insurance code is to be enforced by the Insurance Commissioner and not private litigants. 
Section 33-18-242, of the Code, confers a narrow private right of action for violations of six specific subsections of 33-18-201.  The court rejected Ibsen’s claims, applying a four-part test to determine if a statutory scheme implies a private right of action: whether the interpretation (1) is consistent with the statute as a whole; (2) reflects legislative intent considering the statute’s plain language; (3) is reasonable so as to avoid absurd results; and (4) is a construction placed on the statute by the agency charged with its administration.  In reaching its decision, the court relied on a detailed examination of the UTPA’s legislative history,  including its origin in NAIC model law,  the interpretation advanced by the 1959 and 1977 sitting Commissioners of Insurance who were actively engaged in its enactment and later amendments,  and the 1987 Commissioner’s direct involvement in the enactment of Code section 33-18-242.  It then retraced the court’s seminal opinions relative to violations of the UTPA from 1983 to the present time. 
Commissioner Lindeen appeared amicus in the appeal, urging the court to adopt a broad exception to the rule that it is the Commissioner only who will enforce the UTPA, arguing that the statute does not expressly preclude a private right of action for other claims. The court likewise rejected this “invitation to announce an open-ended private right of action for all violations of the UTPA,” deferring to the construction placed on the statute by the Commissioner directly involved in its enactment. 
The court expressly recognized that premising the class complaint upon a violation of the Insurance Code “that had already been established and sanctioned by the Commissioner would pave a clear path to” the class’s recovery. It affirmed that, if the UTPA allowed such a private right of action, it would not hesitate to overrule the district court’s conclusion. Instead, the court confirmed that the UTPA does not “expressly or impliedly” create a private right of action for claims falling outside the enumerated subsections of Code section 33-18-201.