Ibsen v. Caring for Montanans , 383 Mont. 346 ( 2016 )

May 11 2016
DA 15-0205
Case Number: DA 15-0205
IN THE SUPREME COURT OF THE STATE OF MONTANA
2016 MT 111
MARK IBSEN, INC., D/B/A URGENT CARE
PLUS, on behalf of itself and all those
similarly situated,
Plaintiff and Appellant,
v.
CARING FOR MONTANANS, INC., F/K/A
BLUE CROSS AND BLUE SHIELD OF
MONTANA, INC., and HEALTH CARE
SERVICE CORP., and JOHN DOES I-X,
Defendants and Appellees.
APPEAL FROM: District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. BDV 2014-270
Honorable Jeffrey M. Sherlock, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
John M. Morrison (argued), Linda M. Deola, Morrison Sherwood Wilson
& Deola, PLLP, Helena, Montana
John Heenan, Bishop & Heenan, Billings, Montana
For Appellees:
Michael F. McMahon (argued), Stefan T. Wall, McMahon, Wall
& Hubley, PLLC, Helena, Montana
(Attorneys for Caring for Montanans, Inc.)
Stan Kaleczyc (argued), Kimberly A. Beatty, Christy S. McCann,
Browning, Kaleczyc, Berry & Hoven, P.C., Helena, Montana
(Attorneys for Health Care Service Corp.)
For Amici:
Jesse Laslovich, Chief Legal Counsel, Lucas Hamilton, Legal Intern,
Office of the Commissioner of Securities and Insurance, Montana State
Auditor, Helena, Montana
(Attorney for Montana State Auditor)
Lawrence A. Anderson, Attorney at Law, P.C., Great Falls, Montana
(Attorney for Montana Trial Lawyer Association’s)
Argued and Submitted: February 24, 2016
Decided: May 11, 2016
Filed:
__________________________________________
Clerk
2
Justice Patricia Cotter delivered the Opinion of the Court.
¶1 Mark Ibsen, Inc., doing business as Urgent Care Plus (hereinafter Ibsen), owned
and operated the Urgent Care Plus medical clinic in Helena, Montana. The clinic
employed numerous employees and was a small business member of the Montana
Chamber of Commerce. Ibsen purchased health insurance coverage for its employees
from Blue Cross and Blue Shield of Montana (BCBSMT) through the Chamber of
Commerce’s program known as “Chamber Choices.” In July 2013, Health Care Service
Corporation (Health Care) acquired BCBSMT’s existing health insurance business and
BCBSMT changed its name to Caring for Montanans, Inc. (Caring). In April 2014, Ibsen
filed a complaint and class action against Caring and Health Care alleging that they had
violated the Unfair Trade Practices Act (UTPA or the Act) by charging Ibsen and other
similarly situated employers, excessive premiums and using the excess collections to pay
kickbacks to the Chamber of Commerce. Following removal to federal court and a
remand back to the First Judicial District Court, Helena, Montana, in March 2015, the
District Court granted Health Care’s motion to dismiss and Caring’s motion for summary
judgment. The court determined that the UTPA did not provide private litigants such as
Ibsen with a private right of action to seek enforcement of the Act. Ibsen appeals. We
affirm.
ISSUE
¶2 The issue on appeal is whether Ibsen may maintain a private right of action for
violation of §§ 33-18-208 and -212, MCA, of the UTPA, or, in the alternative, whether
Ibsen’s claims can be sustained as common law claims.
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FACTUAL AND PROCEDURAL BACKGROUND
¶3 For several years and until December 2015, Ibsen owned and operated the Urgent
Care Plus Clinic in Helena, Montana. Ibsen became a small business member of the
Montana Chamber of Commerce and during 2011, 2012, and 2013, it elected to provide
health insurance coverage for its employees through a Chamber program known as
“Chamber Choices.” It chose BCBSMT, a “Chamber Choice” vendor, as its provider and
paid monthly premiums to BCBSMT.
¶4 In accordance with applicable oversight statutes, the Montana Department of
Insurance (MDOI) conducted a Market Conduct Examination of BCBSMT in which it
reviewed the insurer’s business practices between July 1, 2006, and December 31, 2010.
In February 2014, the Montana State Auditor issued an Order fining BCBSMT $250,000
for numerous discrepancies, including improper medical premium billing in violation of
Unfair Trade Practices §§ 33-18-208 and -212, MCA. Caring did not challenge or appeal
the fine and paid it within the required 30-day payment period.
¶5 In April 2014, Ibsen filed a “Complaint Putative Class Action” against Caring and
Health Care. An amended complaint was filed shortly thereafter. Ibsen alleged that from
2007 through 2012, BCBSMT violated § 33-18-212, MCA, by improperly charging
consumers padded premiums that included undisclosed amounts exceeding the medical
premium. It claimed that BCBSMT used the overcharges to provide kickbacks to the
Chamber of Commerce, the organization that marketed BCBSMT’s insurance plan to its
members. It further argued that these kickbacks were given to ensure that BCBSMT
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remained as a “Chamber Choice" provider and thus were in violation of § 33-18-208,
MCA.
¶6 In addition to asserting class allegations, the amended complaint set forth the
following four counts:
Count I - Breach of Fiduciary Duty:
Ibsen claimed that Caring and Health Care owed it and the putative class fiduciary duties
under the UTPA that it breached by “collecting excessive and/or improper medical
premiums and by paying rebates in violation of the Montana Insurance Code [MIC].”
Ibsen asserted that it and the class were injured by these breaches and were entitled to
appropriate relief.
Count II – Unfair/Deceptive Trade Practices/Violation of Insurance Billing Statutes:
Ibsen maintained that BCBSMT violated §§ 33-18-208 and -212, MCA, by charging and
collecting improper and excessive medical premiums from it and the class and by paying
kickbacks. It claimed that BCBSMT’s conduct was an unfair and/or deceptive trade
practice under Title 33. Ibsen sought appropriate relief, treble damages, and reasonable
attorney’s fees.
Count III – Breach of Contract:
Ibsen alleged that it and the class entered into written insurance contracts with BCBSMT
and that these contracts “impliedly” contained all sections of the Montana Insurance
Code, including §§ 33-18-208 and -212, MCA. Ibsen asserted that under the contracts,
BCBSMT “implied and covenanted that it would act in good faith and follow the law and
the contracts with respect to its billing practices.”
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Count IV – Unjust Enrichment:
Lastly, Ibsen declared that BCBSMT’s collection of premiums and fees beyond those
authorized by applicable law and the payment of rebates to secure business for itself were
violations of the MIC and constituted unjust enrichment. It requested that BCBSMT be
disgorged of all excessive premiums collected and that those funds be returned to the
class members.
¶7 Caring promptly filed a Notice of Removal from the First Judicial District Court to
the United States District Court for Montana. Caring asserted that Ibsen’s claim fell
within the scope of § 502(a) of the Employee Retirement Income Security Act of 1974
(ERISA) and consequently should be decided in federal court. Ibsen countered with a
motion to remand to District Court arguing that its complaint raised state law claims
similar to those adjudicated in the federal decision, Fossen v. Blue Cross & Blue Shield of
Mont., 660 F.3d 1102 (9th Cir. 2011), in which the court held that almost-identical state
claims were not completely preempted by federal law. Without legal analysis or ruling on
other pending motions, in June 2014, the federal court granted Ibsen’s motion and
remanded the case to the District Court.
¶8 In rendering its March 2015 ruling on the motions to dismiss and for summary
judgment, the District Court held that the legislature did not provide private citizens with
the right to bring a cause of action to enforce §§ 33-18-208 and -212, MCA. The court
noted that § 33-18-242, MCA, offers the sole statutory exception to the Commissioner’s
exclusive authority to enforce the UTPA by allowing “insureds” to assert claims
involving “claims handling or settlement practices.” The District Court reasoned that
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because Ibsen was not an insured nor was it asserting a cause of action based upon claims
handling or settlement practices, § 33-18-242, MCA, has no application.
¶9 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).”
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 the 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 set forth in the Complaint was not a common law claim.
Citing § 33-1-311(1), MCA, the “General powers and duties” section of the MIC, the
court found that the clear intent of the legislature is that the insurance code is to be
enforced by the insurance commissioner and not private litigants, with exceptions not
applicable to this case.
¶10 Ibsen filed a timely appeal. The Montana Commissioner of Insurance
(Commissioner) and the Montana Trial Lawyers Association (MTLA) have filed amicus
briefs in support of Ibsen.
STANDARD OF REVIEW
¶11 We review a district court’s summary judgment ruling de novo, applying the same
rule, M. R. Civ. P. 56(c)(3), that a district court does when ruling on summary judgment.
Summary judgment “should be rendered if the pleadings, the discovery and disclosure
7
materials on file, and any affidavits show that there is no genuine issue as to any material
fact and that the movant is entitled to judgment as a matter of law.” M. R. Civ. P.
56(c)(3); Victory Ins. Co. v. Mont. State Fund, 2015 MT 82, ¶ 10, 378 Mont. 388, 344
P.3d 977 (internal citations omitted).
¶12 We review a district court’s ruling on a motion to dismiss under the standards set
forth in M. R. Civ. P. 12(b)(6). A complaint should not be dismissed for failure to state a
claim unless it appears beyond doubt that the plaintiff can prove no set of facts which
would entitle him to relief. A district court’s determination that a complaint has failed to
state a claim for which relief can be granted is a conclusion of law which we review for
correctness. Victory Ins. Co, ¶ 11.
DISCUSSION
¶13 May Ibsen maintain a private right of action for violation of §§ 33-18-208
and -212, MCA, of the UTPA, or, in the alternative, can Ibsen’s claims be
sustained as common law claims?
¶14 We first set forth the statutory provisions we reference throughout this Opinion.
¶15 Section 33-1-311(1), MCA, provides:
The commissioner shall enforce the applicable provisions of the laws of
this state and shall execute the duties imposed on the commissioner by the
laws of this state.
¶16 Section 33-18-201, MCA (Section 201), provides in relevant part:
A person may not, with such frequency as to indicate a general business
practice, do any of the following:
(1) misrepresent pertinent facts or insurance policy provisions relating to
coverages at issue;
. . .
(4) refuse to pay claims without conducting a reasonable investigation
based upon all available information;
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(5) fail to affirm or deny coverage of claims within a reasonable time after
proof of loss statements have been completed;
(6) neglect to attempt in good faith to effectuate prompt, fair, and equitable
settlements of claims in which liability has become reasonably clear;
. . .
(9) attempt to settle claims on the basis of an application that was altered
without notice to or knowledge or consent of the insured;
. . .
(13) fail 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 . . . .
¶17 Section 33-18-208, MCA (Section 208), provides:
Except as otherwise expressly provided by law, no person shall knowingly:
. . .
(2) pay or allow or give or offer to pay, allow, or give, directly or
indirectly, as inducement to such insurance or annuity any rebate of
premiums payable on the contract or any special favor or advantage in the
dividends or other benefits thereon or any paid employment or contract for
services of any kind or any valuable consideration or inducement whatever
not specified in the contract;
(3) directly or indirectly give or sell or purchase or offer or agree to give,
sell, purchase, or allow as inducement to such insurance or annuity or in
connection therewith and whether or not to be specified in the policy or
contract, any agreement of any form or nature promising returns and profits
or any stocks, bonds, or other securities or interest present or contingent
therein or as measured thereby of any insurance company or other
corporation, association, or partnership or any dividends or profits accrued
or to accrue thereon . . . .
¶18 Section 33-18-212, MCA (Section 212), provides:
. . .
(2) A person may not willfully collect as a premium or charge for
insurance any sum in excess of or less than the premium or charge
applicable to the insurance and, as specified in the policy, in accordance
with the applicable classifications and rates filed with or approved by the
commissioner . . . .
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¶19 Section 33-18-242, MCA (Section 242), provides:
(1) An insured or a third-party claimant has an independent cause of action
against an insurer for actual damages caused by the insurer’s violation
of subsection (1), (4), (5), (6), (9), or (13) of 33-18-201.
. . .
(3) An insured who has suffered damages as a result of the handling of an
insurance claim may bring an action against the insurer for breach of the
insurance contract, for fraud, or pursuant to this section, but not under
any other theory or cause of action. An insured may not bring an action
for bad faith in connection with the handling of an insurance claim.
¶20 Ibsen maintains it has the right to bring both common law and statutory claims
against Caring and Health Care for violation of specific provisions of the UTPA. The
defendants counter that the UTPA precludes private rights of action for claims arising
from the UTPA provisions relied upon by Ibsen.
¶21 We deem it appropriate to briefly review the history of the UTPA. In 1959, the
Montana legislature enacted the Montana Insurance Code (MIC), codified at Title 40,
R.C.M.1947. The legislation was derived from the Model Act drafted by the National
Association of Insurance Commissioners (NAIC). The MIC, subsequently renumbered,
spans forty chapters in Title 33 of the MCA, and governs numerous facets of the
relationship between and among insurers, insurance companies, insurance consumers,
and others. The UTPA constitutes one chapter of the MIC and is codified at Chapter 18
of Title 33, §§ 33-18-101 through 33-18-1006, MCA. Its purpose is to regulate trade
practices in the business of insurance by defining and prohibiting practices constituting
unfair acts or methods of competition. Section 33-18-101, MCA. While the UTPA
regulates the relationship among an insured, a claimant, and an insurer, it also provides
broader governance by, among other things: (1) restricting the relationship between
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insurers and mortuaries, §33-18-301, MCA; (2) penalizing insurer political contributions,
§ 33-18-305, MCA; (3) regulating how credit information for personal insurance may be
used, § 33-18-605, MCA; and (4) prohibiting insurer discrimination on the basis of
genetic traits, § 33-18-903, MCA. Notably, under the original UTPA, the Commissioner
was solely responsible for enforcement of the entire UTPA and no express private right
of action was codified in the Act.
¶22 In 1977, the legislature adopted amendments to the law that provided the
Commissioner with greater regulatory authority. In 1980, NAIC issued a report in which
it expressly stated, “the intent of the NAIC, as evidenced by the language of the [Act] and
the NAIC Proceedings, and supplemented by this Report, was clearly not to create a new
private right of action for trade practices which are prohibited by the Model Act.” 2
NAIC Proc. 344, 350 (1980). At that time, the Montana legislature did not incorporate
into Montana’s UTPA any provision precluding private rights of action or referencing the
NAIC’s 1980 report.
¶23 The first Montana case to reference the “Unfair Trade Practices Section of the
Montana Insurance Code” was Klaudt v. Flink, 202 Mont. 247, 658 P.2d 1065 (1983)
(overruled in part on other grounds and superseded in part by § 33-18-242, MCA).
Klaudt presented a case of first impression to this Court: Does the Unfair Trade Practices
Section of the MIC, specifically § 33-18-201(6), MCA, confer a private right of action
against an insurer by a third-party claimant? In Klaudt, 18-year-old Klaudt died of
injuries sustained in a high-speed automobile accident. Klaudt was a passenger in a
vehicle driven by Calvin Flink, who was intoxicated at the time. Flink admitted fault for
11
the accident and pleaded guilty to reckless driving. Flink’s insurer, State Farm, refused
to negotiate with the Klaudts and denied liability. Klaudt’s parents sued Flink and State
Farm alleging that State Farm breached its duty under the UTPA to fairly negotiate and
settle claims. The district court granted State Farm’s motion to dismiss on the grounds
that the Klaudts did not have standing. Klaudts appealed. Klaudt, 202 Mont. at 249, 658
P.2d at 1066.
¶24 To determine whether the insurer’s duty to settle claims under § 33-18-201(6),
MCA, ran to a third-party in addition to the insured, we reviewed cases from other
jurisdictions with similar statutes and discovered a split of authority on the issue. We
then set forth the four-prong test we subsequently applied in Wombold v. Assocs. Fin.
Servs. Co. of Mont., Inc., 2004 MT 397, 325 Mont. 290, 104 P.3d 1080. Klaudt, 202
Mont. at 250-51, 658 P.2d at 1066-67. After applying the test, the Court held that
Section 201(6), conferred a duty on insurers and claims adjusters covered by the unfair
trade practices section to settle claims with insureds and third-party claimants promptly,
fairly, and in good faith, and held that a civil action could be maintained for failure to do
so. Klaudt, 202 Mont. at 252, 658 P.2d at 1067.
¶25 Following Klaudt, the 1987 Montana Legislature enacted § 33-18-242, MCA.
Section 242(1) expressly grants an insured or a third-party claimant a right to bring an
independent cause of action against an insurer for actual damages caused by the insurer’s
violation of subsections (1), (4)-(6), (9), and (13) of § 33-18-201, MCA. These
subsections, set forth above at ¶ 16, prohibit unfair claim handling and settlement
practices.
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¶26 The legislative history indicates that the Legislature intended to limit the
expansion of private causes of action following Klaudt. On January 27, 1987,
Representative Fred Thomas sponsored House Bill 240, a bill drafted to revise the law on
insurance bad faith claims. He stated:
These are claims against insurers arising out of unfair claims
settlement practices, which is essentially an administrative remedy that has
been on the books for many years. The Supreme Court has expanded the
administrative remedy into a court created right of action called the Tort of
Insurance Bad Faith. Based on [Klaudt], the [C]ourt not only allows
insureds to sue their own insurer for the Tort of Insurance Bad Faith but
also allows an injured third party to sue the wrong doer’s insurance
company. Montana is one of a handful of liberal right of action states. The
right of action has also substantially increased premiums to businesses and
individuals across the state. Availability, affordability and fairness are the
issues of this bill. Our [C]ourt has swung the pendulum so far in favor of
the trial lawyers that it has stacked the deck against insurers, as a result, all
of us pay. This bill swings the pendulum back towards the middle. It
limits the action where an insurer should be held accountable for an injury
it causes to a person through highly improper conduct. This bill also
encourages alternative dispute resolution; this should cut down on court
congestion and unnecessary litigation processes. [The bill] moves us
toward the original intent of the Unfair Claims Settlement Practices Act but
courts will still be able to hear those insurance bad faith actions that in the
past have given insurance companies such a black eye.
¶27 The legislative history also contains written proposed amendments to HB 240 as
well as a transcript of discussions about the bill by proponents and opponents.
Then-Commissioner of Insurance Andrea Bennett supported the original bill in which
Section 242 granted but limited private rights of action.
¶28 Opponents to the bill complained that it was too limiting and did not allow for
private rights of action for all fourteen unfair claim settlement practices identified in
Section 201. In fact, the original HB 240 contained a statement that Section 242 was to
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apply to all provisions in Title 33, chapter 18, part 2, “Insurer’s Relations with Insured
and Claimant.” However, the Commissioner urged deletion of this statement and it was
deleted from the bill; thus, only a violation of the enumerated sections set forth in Section
242(1) are actionable.
¶29 At present, Section 242 allows an insured or third-party claimant to bring an
independent cause of action against an insurer for actual damages caused by the insurer’s
violation of the six enumerated subsections of § 33-18-201, MCA. Caring and Health
Care argue that Section 242 is the only provision of the UTPA that affords a private right
of action, and that it does not supply any authority for the claims made by Ibsen. First,
Caring and Health Care point out that Ibsen is neither an insured nor a third-party
claimant; thus, it has no standing to invoke the provisions of Section 242. Second, they
note that Section 242 does not in any event permit a private right of action by any person
for claims arising either from the unlawful extension of rebates (Section 208) or the
illegal dealing in premiums (Section 212).
¶30 Ibsen counters that Section 242 merely codified Klaudt’s common-law-recognized
private right of action for an insurer’s violation of claims handling practices because
“claims handling practices” was the only issue with which the legislators were concerned
in 1987. Ibsen argues that Section 242 does not preclude private rights of action
generally or for other claimed violations of the UTPA, nor does it preclude common law
claims based upon statutorily-prohibited conduct.
¶31 We have addressed previously whether an individual claimant has the right to
bring a private action to enforce a statute that primarily was intended to be regulated by a
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governing agency. In Wombold, we were asked to determine whether the Consumer
Loan Act (CLA) created or implied a private right of action to enforce the provisions of
the statute. Wombolds brought an action against Associates Financial Services Company
(AFS), a licensed lender under the CLA, alleging that AFS employed illegal lending
practices in its real estate-secured loans with the Wombolds. Wombold, ¶ 1. AFS argued
that the Department of Administration (DOA), the enforcement agency over the CLA,
was “the sole entity authorized to seek a remedy for violations of the act in the Courts.”
Wombold, ¶ 33. The district court disagreed and granted Wombolds’ motion for partial
summary judgment holding that the CLA afforded a private right of action. Wombold,
¶ 2. AFS appealed.
¶32 In our review, we first noted that the CLA did not expressly authorize a private
right of action, nor did the legislative history indicate an intent to expressly grant or deny
such a right. Wombold, ¶ 34. We then considered the following factors to determine if
the statute implied such a right: (1) is the interpretation [allowing a private right of
action] consistent with the statute as a whole; (2) does the interpretation reflect the intent
of the legislature considering the statute’s plain language; (3) is the interpretation
reasonable so as to avoid absurd results; and (4) has the agency charged with the
administration of the statute placed a construction on the statute. Wombold, ¶ 35. (As
noted in ¶ 24, this is the same test we applied in Klaudt.)
¶33 We determined that the CLA had the beneficent purpose to regulate consumer
lenders and protect borrowers; it should therefore be construed liberally. Wombold, ¶ 36.
We observed that the statute granted certain rights to borrowers regarding the structure of
15
their loans and that those rights would be meaningless if the borrowers could not enforce
them. Wombold, ¶ 37. We attributed the presence of an attorney fee provision in the law
as confirmation of legislative intent to grant a private right of action. Wombold, ¶ 42.
We also concluded that implying a private right of action would not lead to absurd
results. Wombold, ¶ 45. Lastly, in holding that a limited private right of action was
implied under the CLA, we acknowledged that the DOA had issued no statement
addressing this issue; therefore, we considered the Montana Attorney General’s
interpretation of the statute to include a private right of action. Wombold, ¶ 46. Based
upon this analysis, we determined that the CLA did not prohibit Wombolds’ private cause
of action. Wombold, ¶ 47.
¶34 We revisited this analysis in Faust v. Util. Solutions, LLC, 2007 MT 326, 340
Mont. 183, 173 P.3d 1183, when we were asked to determine whether the Montana Water
Use Act (WUA) created a private right of action. Faust, ¶ 4. Faust owned real property
and water rights in Gallatin County at the time of this suit. Faust, ¶ 5. Utility Solutions
operated a water and wastewater system to service private developments, and while
awaiting appropriate permits began pumping groundwater before final regulatory
approval had been granted. Faust, ¶ 6. Faust, arguing his water rights would be
adversely affected by Utility’s groundwater appropriations and violation of the WUA,
sought injunctive relief and civil penalties. Faust, ¶¶ 7 and 8. The district court granted
Utility’s motion to dismiss holding that Faust lacked standing to sue under the WUA.
Faust, ¶ 9.
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¶35 On appeal, the Court determined that Faust’s injunctive relief claim was moot
because the Department of Natural Resources and Conservation (DNRC), the permitting
and regulatory agency, had issued the final permit to Utility and the company was
extracting groundwater legally. Therefore, we addressed “only whether the [WUA]
creates a right of action that allows private citizens to enforce its civil penalty
provisions.” Faust, ¶ 23. Turning to the express language of the statute, we reviewed,
among other provisions, the WUA’s “judicial enforcement” provision and observed that
it referred only to actions initiated by the DNRC, not by private citizens. Faust, ¶ 25. As
in Wombold, we noted the existence of an attorney fee provision but ruled it inapplicable
to Faust’s claim for civil penalties because it pertained expressly and exclusively to
claims for injunctive relief. Faust, ¶ 26. Additionally, reviewing the statute as a whole,
we noted that the fines and penalties that could be imposed by a district court must be
deposited into a special fund to finance departmental regulatory enforcement of the Act;
thus, the district court was not authorized to award fines and penalties to a private citizen.
Faust, ¶ 27. Relying on these findings as well as the legislative history which supported
the absence of a private right of action, we affirmed the district court’s ruling and
concluded that the WUA tasked the DNRC, the attorney general, or the county attorney
with enforcing the Act’s civil penalty provisions, but it conferred no such right upon a
private citizen. Faust, ¶¶ 30-31.
¶36 Turning back to the UTPA, the United States District Court for Montana
concluded that the UTPA did not create or imply a private right of action to enforce
§§ 33-18-204 and -212, MCA, in Shupak v. New York Life Ins. Co., 780 F. Supp. 1328,
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1338 (D. Mont. 1991). Ibsen acknowledges this but argues that Shupak is not controlling
and has been contradicted by several subsequent Montana Supreme Court cases. Relying
on O’Fallon v. Farmers Ins. Exch., 260 Mont. 233, 859 P.2d 1008 (1993), Thomas v.
Northwestern Nat’l Ins. Co., 292 Mont. 357, 973 P.2d 804 (1998), and Williams v. Union
Fid. Life Ins. Co., 2005 MT 273, 329 Mont. 158, 123 P.3d 213, Ibsen maintains it is
entitled to bring common law tort claims based upon insurer conduct that is not expressly
listed in § 33-18-201, MCA.
¶37 In O’Fallon, O’Fallon was injured in an automobile accident caused by an insured
of Farmers. O’Fallon, 260 Mont. at 235, 859 P. 2d at 1009. O’Fallon brought an action
to recover damages for Farmers’ violation of § 33-18-201(4) and (6), MCA (refusal to
investigate, pay claims, and settle in good faith). The district court dismissed O’Fallon’s
complaint and he appealed. O’Fallon, 260 Mont. at 236, 859 P. 2d at 1010. This Court
reversed the district court, determining that O’Fallon was a “third-party claimant” under
the UTPA, and therefore his Sections 201 and 242 statutory claims were not barred.
O’Fallon, 260 Mont. at 242, 859 P. 2d at 1013. The claims asserted in O’Fallon were
clearly statutory claims expressly permitted under Section 242; they were not common
law tort claims.
¶38 In Thomas, the Thomases, plumbing and heating contractors, submitted a claim to
Northwestern Insurance, their CGL insurer, arising out of damages to a client’s property
resulting from a spill that occurred during an installation. The insurer denied the claim
based upon a modified “total pollution exclusion” that had been added to Thomases’
renewal policy but had not been pointed out by the insurer. Thomas, ¶¶ 7-8. Thomases
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claimed that the insurer failed to provide adequate notice of the revised and
more-restrictive exclusion provision, was negligent, and breached its fiduciary duty as
well as its duty of good faith and fair dealing. Thomas, ¶ 11. The insurer asserted that
Section 242 precluded Thomases from seeking recovery under their common law
theories. Thomas, ¶ 12. The district court agreed and granted the insurer’s motion for
summary judgment. Thomas, ¶ 13. We reversed, holding that Section 242 did not
preclude common law claims for insurer misconduct pertaining to contract renewal.
Thomas, ¶ 37. Notably, we observed that the provisions of § 33-18-201, MCA, did not
address the conduct which was the subject matter of the tort claims (Thomas, ¶ 34), and
that appellants “allege pure common law claims without adding violations of the UTPA.”
Thomas, ¶ 36. This case is distinguishable from the case at hand because the Thomases’
common law claims fell completely outside of the UTPA, and were not premised upon
any violation of the Act.
¶39 Similarly, in Williams, the insured filed a civil action against Union alleging
breach of contract, fraud, breach of implied covenant of good faith and fair dealing, and
breach of Union’s statutory obligations under the MIC and the Unfair Claim Settlement
Practices Act. Williams, ¶ 13. Following a jury ruling that Union did not breach its
contract, Williams appealed and Union cross-appealed. Williams, ¶ 16. On cross-appeal,
Union claimed that Williams’ fraud and bad faith claims were barred under Section 242.
Williams, ¶ 54.
¶40 In arguing that her common law claims were not barred, Williams observed that
while the legislature prohibited post-claim underwriting in § 33-18-215, MCA, she was
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not asserting that the post-claim underwriting violation could form the basis of an
independent claim; rather, she claimed that the statutory violation was relevant to her
claims of bad faith, fraud, and malice, as well as to her claim for breach of contract.
Williams, ¶ 30. She further maintained that her common law actions were premised upon
conduct that occurred prior to the application phase of the insurance transaction (which
by definition would have preceded any claims handling or settlement practices that are
the subject of Sections 201 and 242), and thus her claims were not governed or barred by
Section 242. Williams, ¶ 55. Without discussion, we agreed that Section 242 did not
govern. We then affirmed the district court on the grounds that Union had failed to
satisfy its summary judgment burden. Williams, ¶ 58.
¶41 As the foregoing cases establish, purely common law causes of action based upon
insurer misconduct are not precluded. However, there is a distinction between pursuing
damages for violation of a statute, and pursuing an independent common law cause of
action. As addressed further below, Ibsen, the plaintiff here, seeks to privately enforce a
regulatory statute so as to recover damages. In Thomas and Williams, by contrast, the
plaintiffs were pursuing common law claims, and not claims that were predicated upon a
statutory violation. While Williams referenced a statutory violation as evidentiary
support for her common law claims, she affirmatively stated she was not seeking to
enforce the statute as a basis for the recovery of damages. The distinction is not
semantical. A party may always allege and recover damages in a common law cause of
action upon proof of a common law claim, but a party is not entitled to obtain private
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enforcement of a regulatory statute that is not intended by the legislature to be
enforceable by private parties.
¶42 We now return to Ibsen’s Complaint. Ibsen acknowledges that Count II is
premised expressly upon violation of Sections 208 and 212 of the UTPA, but asserts that
the remaining three counts for breach of contract, breach of fiduciary duty, and unjust
enrichment are common law claims. We disagree. It is clear from the contents of the
Complaint as well as the express representations made by Ibsen in the federal proceeding
that Ibsen is seeking private enforcement of the foregoing provisions on behalf of the
class. Its breach of fiduciary duty count is premised upon the unlawful collection of
excessive medical premiums and the payment of rebates “in violation of the Montana
Insurance Code.” Its unjust enrichment count seeks disgorgement of the illegal or
excessive premiums and rebates “in violation of the Montana Insurance Code.” It is not
possible to conduct an informed analysis of Ibsen’s breach of contract claim because
Ibsen does not identify a particular contract that was breached; it simply asserts that all of
the parties entered into written insurance contracts and impliedly incorporated all sections
of the Montana Insurance Code into those various contracts. Again, however, this count
relies upon incorporation of the MIC. These are not purely common law causes of
action.
¶43 We are mindful that premising the class complaint upon a violation of the
insurance code that has already been established and sanctioned by the Insurance
Commissioner would pave a clear path to recovery on behalf of the class. If the UTPA
allowed a private right of action for rate discrimination and premium overcharges, we
21
would not hesitate to reverse the decision of the District Court. However, we conclude
that the UTPA does not expressly or impliedly create a private right of action for
violation of Sections 208 and 212.
¶44 Our conclusion here finds support in Fossen v. Caring for Montanans, Inc., 993 F.
Supp. 2d 1254 (D. Mont. 2014), and Fossen v. Caring for Montanans, Inc., 617 Fed.
Appx. 737 (9th Cir. 2015). While we are not bound by the decisions of the U. S. District
Court of Montana or the Ninth Circuit Court of Appeals, when federal courts have ruled
on issues substantially similar to those before us, it is proper for us to review their
opinions for guidance. Kafka v. Mont. Dep’t of Fish, Wildlife & Parks, 2008 MT 460,
¶ 162, 348 Mont. 80, 201 P.3d 8.
¶45 In Fossen, the Fossens brought a breach of contract claim against Caring for
Montanans alleging that Caring had unfairly discriminated against them by charging a
higher premium rate in violation of UTPA provision § 33-18-206(2), MCA. The U. S.
District Court for the District of Montana analyzed the UTPA in detail to determine
whether the statutes expressly or impliedly created a private right of action. Fossen, 993
F. Supp. 2d at 1258-1260. The court concluded that § 33-18-242, MCA, was the sole
provision in the UTPA granting to insureds and third-party claimants1 private rights of
action arising from certain specified claims handling and settlement practices identified
in § 33-18-201, MCA, but for no other purpose. Fossen, 993 F. Supp. 2d at 1260. As the
1
The District Court determined that Ibsen was neither an insured nor a third-party claimant
under the UTPA and Ibsen did not dispute this initially. Ibsen now claims that it was an “insured
employer.” As our disposition of this case does not require resolution of Ibsen’s status nor what
benefits such a status commands, we do not disturb the District Court’s ruling.
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Fossens’ claims rested upon rate discrimination in violation of § 33-18-206(2), MCA, and
not the insurer’s claims handling practices, Fossens had no right to bring an action under
the UTPA. Fossen, 993 F. Supp. 2d at 1264.
¶46 The U. S. District Court addressed Fossens’ reliance on State ex rel. Larson v.
Dist. Court, 149 Mont. 131, 423 P.2d 598 (1967) and First Sec. Bank v. Goddard, 181
Mont. 407, 593 P.2d 1040 (1979) by noting that both of these cases were claims handling
breach of contract cases decided before the enactment of Section 242, and they did not
support Fossens’ claims. The court held that there “is no common law or statutory
private right of action pertaining to . . . claims of rate discrimination in violation of
subsection 206 of the UTPA.” Fossen, 993 F. Supp. 2d at 1263. Subsequently, the Ninth
Circuit Court of Appeals affirmed the U. S. District Court decision. Fossen, 617 Fed.
Appx. at 739. The Ninth Circuit observed that since the 1987 legislative amendments,
“the Montana Supreme Court has never recognized a private right of action for the
violation of a UTPA provision other than those provisions identified in § 33-18-242(1).”
Fossen, 617 Fed. Appx. at 739.
¶47 Finally, our conclusion here is buttressed by application of the four-part test we
applied in Klaudt and Wombold to determine whether a statutory scheme implies a
private right of action. (See ¶¶ 24 and 32 herein). The first prong of the test is whether
the interpretation allowing a private right of action is consistent with the statute as a
whole. Wombold, ¶ 35. Ibsen’s interpretation fails this component of the test for two
reasons. First, the statute contains an express “Enforcement” section at §§ 33-18-1001
through -1006, MCA. These provisions charge the Commissioner with the enforcement
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of the UTPA, and provide it with the authority to investigate alleged violations of the
Code, conduct hearings, impose fines, and issue cease and desist orders. Second, Section
242 expressly grants insureds and third-party claimants, “an independent cause of action
against an insurer” for the insurer’s violation of discrete provisions of § 33-18-201,
MCA. Section 242 provides the narrow exception to the rule that it is the Commissioner
who will enforce the UTPA. Thus, an interpretation allowing a private right of action for
violation of Sections 208 and 212 is inconsistent with the statute as a whole.
¶48 The second prong of the test is whether the interpretation allowing for a private
right of action reflects the intent of the legislature considering the statute’s plain
language. Wombold, ¶ 35. Our discussion above at ¶¶ 25-27 establishes that the
legislature did intend to limit the expansion of private causes of action when it enacted
Section 242. The third prong of the test is whether the interpretation urged by Ibsen is
reasonable so as to avoid absurd results. Wombold, ¶ 35. We conclude, premised upon
the foregoing statutory and case history, that expanding the private right of action as
Ibsen urges is neither reasonable nor required to avoid absurd results.
¶49 Lastly, we turn to the final prong of the test, which is whether the agency charged
with the administration of the statute has placed a construction on the statute. Wombold,
¶ 35. The Commissioner of Insurance has been involved in the adoption and
interpretation of the Montana Insurance Code since its enactment. Then-Commissioner
John Holmes attended the January 1959 hearings pertaining to a proposed bill to
dramatically revise Montana insurance law. In 1977, counsel for the Commissioner
introduced a senate bill to revise the unfair insurance claim settlement and enforcement
24
procedures, giving greater authority to the Commissioner. Subsequently, in 1987, the
Commissioner was a consistent participant in the January, February, and March meetings
leading to the enactment of Section 242. During these meetings there was lengthy
discussion pertaining to the extent of private rights of action to be provided under
proposed Section 242. The legislative history clearly states that “an insured or third-party
claimant has a separate cause of action against an insurer for certain unfair claim
settlement practices.” (Emphasis added.) Mont. Sen. Business & Industry Comm.,
Meeting on House Bill 240, 50th Legis., Reg. Sess. (March 9, 1987). As noted above, the
sponsor of the bill emphasized that the bill was designed to “swing the pendulum back
towards the middle” rather than continuing a trend favoring trial lawyers and disfavoring
insurers. Opponents to the bill urged the committee to reject the bill because proposed
Section 242 “limit[ed] the kinds of prohibitive acts which give rise to an individual or a
private cause of action.” The Commissioner supported the bill and actively engaged in
discussion and proposed amendments.
¶50 In the Commissioner’s amicus brief in the case before us, the Commissioner
argues that the Model UTPA contains a provision that explicitly states the Act does not
create a private right of action, but the Montana UTPA does not contain such a statement.
She acknowledges that if a claimant has a dispute with an insurer based upon the
insurer’s claims handling or settlement practices, the claimant is expressly authorized to
bring a private cause of action under Section 242. She goes on to argue that if a claimant
has a dispute with an insurer based upon any type of UTPA misconduct that is unrelated
to claims and settlement handling, Section 242 simply does not restrict such claims. We
25
respectfully decline the present Commissioner’s invitation to announce an open-ended
private right of action for all violations of the UTPA. Because the Commissioner’s
understanding of the intent of the statute at the time the statute was enacted comports
with the intent of the Legislature when enacting Section 242, we defer to the construction
placed on the statute by the Commissioner directly involved with Section 242’s passage.
We therefore conclude that the UTPA does not imply a private right of action. Rather, it
expressly confers enforcement authority upon the Commissioner and narrowly provides a
limited private right of action only in Section 242.
¶51 Ibsen and amicus MTLA urge us to consider § 27-1-202, MCA, which states
“Every person who suffers detriment from the unlawful act or omission of another may
recover from the person in fault a compensation therefor in money, which is called
damages.” Our decision here does not run afoul of this statute. Ibsen and other
members of the class were entitled to pursue common law claims for fraud, deceit, and
misrepresentation against these defendants premised upon their actions, and to recover
damages for the detriment they suffered as a result.
¶52 As we are affirming the District Court, we need not address the ERISA arguments
presented by the parties nor the claims pertaining to Health Care.
CONCLUSION
¶53 For the reasons set forth in this Opinion, we conclude Ibsen’s private enforcement
claims against BCBSMT, Caring for Montana, and Health Care Services Corp. for
violations of Sections 208 and 212 of the UTPA are precluded. We therefore affirm the
decision of the District Court.
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/S/ PATRICIA COTTER
We Concur:
/S/ MIKE McGRATH
/S/ BETH BAKER
/S/ LAURIE McKINNON
/S/ JAMES JEREMIAH SHEA
/S/ JIM RICE
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