DA 16
- 0097



### IN THE SUPREME COURT OF THE STATE OF MONTANA 20 16 MT 285 ELIZABETH WEST, as Guardian Ad Litem for PETER LEE,

Plaintiff and Appellee,
v. UNITED SERVICES AUTOMOBILE ASSOCIATION (USAA), an Unincorporated Reciprocal Inter

- Insurance Exchange, and USAA CASUALTY IN SU RANCE COMPANY,

Defendants and Appellants.

APPEAL FROM: District Court of the Eighth Judicial District,

In and For the County

of Cascade, Cause No. ADV

- 15
- 075 Honorable Greg ory Pinski , Presiding Judge COUNSEL OF RECORD:

For Appellant s : David M. McLean (argued), Ry an C. Willmore, McLean & Associates , PLLC, Missoula, Montana For Appellee : Alexander (Zander) Blewett, III, Anders Blewett (argued), Hoy t & Blewett PLLC, Great Falls, Montana
Argued and Submitted: September 28, 2016

Decided: November 9, 2016 Filed:

__________________________________________ Clerk 11/09/2016

Case Number: DA 16-00972

Justice Beth Baker delivered the Opinion of the Court. ¶1 Elizabeth West, acting as Guardian Ad Litem for Peter Lee, and United Services Automobile Association and USAA Casualty Insurance Company (collectively USAA) dispute the effect of TRICARE medical payment lien s on USAA’s responsibility to promptly pay Lee’s liability settlement claim against its insured . Lee asserted that USAA acted in bad faith by conditioning payment on resolving the TRICARE lien s . The Eighth Judicial District Court agreed and held USAA liable for its insured’s $1,464,000 consent judgment. ¶2 We conclude that USAA had a reasonable basis in law to condition its payment of policy limits upon resolution of the TRICARE liens, and we therefore reverse .

**PROCEDURAL AND FACTUAL BACKGROUN D**  ¶3 In December 2012, Lee and three other passengers were injured in a single vehicle accident. Lee sustained catastrophic injuries. The driver, Julian Perez , held a USAA insurance policy. All of the passengers were military servicemen covered by TRICARE,
a government insurance program for military members and their families

. TRICARE paid medical benefits for the passengers and therefore had a statutory right to recover the benefits it paid. TRICARE’s liens fo r the passengers’ combined medical expenses totaled over $215,000 ; more than $204,000 of the total were for L ee’s expenses alone

. ¶4 USAA insured Perez under an automobile liability policy with coverage limits of $50,000 per person and $100,000 per accident. After conducting a liability investigation, USAA determined that Perez was 100% at fault for the accident. Because of the extent3

of Lee’s injuries, USAA informed Perez that he may be potentially liable for damages exceeding his coverage limits. ¶5 On August 21, 2013, Lee’s counsel

— who represented all four injured passengers
—made a settlement demand on USAA for Perez’s $100,000 policy limits. The letter stated that the offer would be withdrawn and that the claimants would seek to
recover all of their damages from USAA if USAA did not agree to pay the policy limits in twenty days. One week later, USAA ’s claims examiner contacted Lee’s counsel and offered to pay the full policy limits , provided that the TRICARE liens were addressed

. Lee’s counsel immediately responded with a letter stating that his clients would indemnify and hold USAA harmless from any responsibility for the TRICARE lien s . ¶6 On September 9, 2013, USAA responded , stating that the offer to indemnify was not sufficient to protect Perez or USAA f rom the TRICARE lien s . U SAA confirmed in writing its offer to pay the policy limits , provided either that TRICARE be included as a payee on the settlement check or that Lee’s counsel first secure lien releases from TRICARE. Lee’s counsel followed with a letter two days later, stating that his clients would indemnify both USAA and Perez from any responsibility for the TRICARE lien s . The letter gave USAA a deadline of September 21. USAA did not respond by the deadline. In the meantime, both USAA and L ee’s counsel attempted to determine the status of TRICARE’s liens

. In early November 2013, USAA received letters from the Air Force providing notice of its claims and requesting payment of the liens pursuant to4

42 U.S.C. § 2651. TRICARE finally agreed to waive its liens at the end of January 2014, and USAA issued a check for the policy limits of $100,000 six weeks later

. ¶7 Lee had filed suit against Perez in October 2013 , and he continued his suit after receiving the policy limits payment from USAA
. In J anuary 2015, Perez agreed to a consent judgment in the amount of $1,464,000, and assigned his claims against USAA to Lee. On behalf of Lee , West filed a separate suit that same month alleging bad faith against USAA. The District Court granted West summary judgment, concluding that USAA did not have a reasonable basis in law for conditioning payment of the settlement check. The court held therefore that USAA was liable to Lee for the consent judgment. USAA filed a motion to alter or amend the judgment that was deemed denied when th e District Court did not rule. USAA appeals. **STANDARD OF REVIEW** ¶8 We review summary judgment rulings de novo , applying the standards set forth in M. R. Civ. P. 56 (c)(3)

. Citizens for a Better Flathead v. Bd. of Cnty. Comm’r s , 2016 MT 256, ¶ 10, 385 Mont. 156, ___ P.3d ___; accord State Farm Mut. Auto. Ins. Co. v. Freyer, 2013 MT 301, ¶ 22, 372 Mont. 191, 312 P.3d 403. Generally, questions of reasonableness are factual matters properly answered by the finder of fact. Estate of Gleason v. Cent. United Life Ins. Co. , 2015 MT 140, ¶ 60, 379 Mont. 219, 350 P.3d 349; Freyer, ¶ 48. But an insurer’s reasonableness is a question of law for the court to decide5

when the insurer’s basis in law is grounded on a legal conclusion and no issues of fact remain in dispute. 1 Estate of Gleason , ¶ 60 ; Freyer, ¶ 48. **DISCUSSION** ¶9 Whether the District Court correctly concluded that USAA did not have a reasonable basis in law for conditioning the settlement check up on resolution of the TRICARE liens

. ¶10 Because insurers have the authority under their policies to settle third

- party claims, insurers in Montana have a duty to accept reasonable settlement offers within the policy limits. Freyer, ¶ 4 6
. When an insurer acts in bad faith and “ fails to settl e a bona fide third party liability claim against its insured, within policy coverage limits,” that insurer “takes the risk of a judgment by the trier of fact in excess of the coverage limits.” Freyer, ¶ 47 (citation and internal quotations omitted). A n insurer does not act in bad faith , however, and therefore is not liable , “for failing to settle within policy limits when it had a reasonable basis in law or fact for contesting coverage.” Freyer, ¶ 47. In determining whether an insurer has a reasonable basis in law for contesting coverage , “it is first necessary to survey the legal landscape as it existed during the relevant time period.” Freyer, ¶ 48 (citation and internal quotations omitted). The “determinative question” in our inquiry “is whether the law in effect at the time, caselaw or statutory, provided sufficient guidance to signal to a reasonable insurer that its grounds for denying the claim were not meritorious.” Freyer, ¶ 48. We are not to ask whether we agree “with the plaintiff’s theories of liability in the underlying suit but, rather, whether the insurer’s

1 Throughout the case, West has contended that no fact issues exist and that the case presents only questions of law. During oral argument before this Court , counsel for USAA agreed.6

grounds for contesting those theories were reasonable under existing law.” Freyer, ¶ 48 (citation and internal quotations omitted)

. ¶11 Soon after filing her complaint in this action, West moved for summary judgment

. She argu ed that USAA acted in bad faith by failing to promptly settle the claim . USAA responded , arguing on the authority of Freyer that it had a reasonable basis in law to condition payment of the settlement upon resolution of the TRICARE liens. U SAA contended that federal law

— specifically 42 U.S.C. § 2651

—and our decision in Conway

v. Benefis Health Systems, Inc. , 2013 MT 73, 369 Mo nt. 309, 297 P.3d 1200, established TRI CARE as a secondary payer and obligated USAA either to include TRICARE as a
co - payee or to secure a waiver of the liens before making payment to West. Despite Justice Cotter’s assertion to the c ontrary , Dissent , ¶ 30 , USAA has asserted throughout litigation that the principal issue is whether its grounds for conditioning the settlement payment were reasonable under existing law because TRICARE is a secondary payer

. ¶12 The District Court recognized as much , identifying the is sue before it as follows: “Did USAA engage in bad faith settlement practices by refusing to pay an admitted liability settlement unless TRICARE was named as a co

- payee on Lee’s settlement check or TRICARE waived its statutory lien?” The court ruled that U SAA lacke d a reasonable basis in law to delay payment of policy limits because of the TRICARE liens

. The court focused its analysis on USAA’s condition to include TRICARE as a payee on the
se ttlement check. The court first noted that the parties had not identified any cases “addressing this narrow issue

. ” It rejected USAA’s reliance on Conway , finding the case7

not directly on point

. The court similarly rejected USAA’s comparison of TRICARE to Medicare because it concluded that Medicare and TRICARE statutes and regulations are distinct

. Specifically, the court noted that “unlike the automatic first payer liability imposed

. . . on Medicare, there is no corresponding provision under TRICARE.” Finally, the court rejected USAA’s reliance on 42 U.S.C. § 2651, which governs the United States’ right to recover incurred medical costs from liable third parties and their insurers. ¶13 The court determined that the federal statute would apply only if the United States had commenced litigation or intervened to enforce its lien s ; in that case , “USAA w ould have a compelling argument it properly included TRICARE on the settlement check.” The court also determined that although TRICARE sent USAA notice of its claim and requested payment of the liens , “there is no obligation in the TRICARE regulations requiring USAA to protect the government lien. ” “Most pertinently,” the court specified, “there is no requirement that USAA name TRICARE on Lee’s settlement check.” As such, the court concluded that “USAA’s unilateral decision [to include TRICARE as a payee on the settlement check] is without support in statute, regulation, or common law.” ¶14 Further, the court noted that Lee expressly agreed to indemnify USAA, but that “USAA made the unilateral decision to condition its legal obligation to settle Lee’s claims on including TRICARE as a settlement check payee.” Such a condition, the District Court concluded, went against Montana’s public policy regarding settlement of insurance claims. The court emphasized, “When an insurer unilaterally adds a payee to a8

claimant’s settlement check, the insurer substantially delays settlement, imposes onerous
obligations not required by law, and creates unreasonable burdens on a claimant to receive funds the insurer is legally obligated to pay.” Such a result, the court concluded, “is hardly what the Montana legislature intended when it obligated insurers to ‘attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear. ’ ” ( Quoting § 33
- 18
- 201(6), MCA.) The court therefore held that “USAA ’s decision to condition payment on naming TRICARE as a payee of the settlement funds is unreasonable under applicable law

. ” As a result, the District Court ordered USAA to pay the entire consent judgment. ¶15 First, the District Court correctly recognized that “a TRICARE lien arises under the Medical Care Reco very Act, 42 U.S.C. § 2651(a)

. ” The Air Force’s November 2013 letters to USAA referenced this section in asserting the United States’ “independent right to recover costs
. ” But the court incorrectly interpreted the statute. The statute broadly provides that, whenever the United States furnishes benefits to a beneficiary who is injured under circumstances creating a tort liability upon some third person . . . to pay damages therefor, the United States shall have a right to recover (independent of the rights of the injured or diseased person) from said third person, or that person’s insurer, the reasonable value of the care and treatment so furnished, to be furnished, paid for, or to be paid for and shall, as to this right be subrogated to any right or clai m that the injured [beneficiary] . . . has against such third person. 42 U.S.C. § 2651(a). By bestowing upon the United States a right to recover from Perez
or USAA, 42 U.S.C. § 2651(a) obligated Perez or USAA to honor the TRICARE liens

.9

Th e same statute allows the United States to enforce its right to recover by

“ interven[ing] ” in or “ institut[ing] and prosecut [ing] legal proceedings against the third person who is liable for the injury

. . . or the insurance carrier

. . . responsible for the payment or reimbursement of medical expenses.” 4 2 U.S.C. § 2651(d). C ontrary to the District Court’s conclusion, USAA’s obligation to honor the liens under § 2651(a) did not depend upon the United States already having pursu ed judicial enforcement under § 2 651(d). ¶16 Second, w e disagree with the District Court that Conway offers no guidance here

. W e concluded in Con way that “federal regulations mandate that TRICARE functions as a secondary payer.” Conw ay , ¶ 32 (citing 32 C.F.R. § 199.8(a)). TRICARE’s statu s as a secondary payer means that “where the medical treatment at issue is necessitated as a result of the negligence of an insured third party, any payment originally made by TRICARE must be reimbursed.” Conway , ¶ 32 (citing 32 C.F.R. § 199.8(a), (b)(3)) (emphasis added). TRICARE benefits therefore are not “ available to a TRICARE beneficiary where there is third party insurance available to pay the expenses of medical treatment .” Conway , ¶ 32. Conw ay supports USAA’s contention that it had an obligation to reimburse TRICARE given TRICARE’s status as a secondary payer.10

¶17 Third, our conclusion finds additional support in other TRICARE statutes and regulations in effect at the time

. 2 The federal statute governing contractor payment o f certain claims under T RICARE provides: (a) Payment of claims. (1) The Secretary of Defense may authorize a contractor under the TRICARE program to pay a claim described in paragraph (2) before seeking to recover from a third

- party payer the costs incurred by the contractor to provide health care services that are the basis of the claim to a beneficiary under such program. (2) A claim under this paragraph is a claim

-- (A) that is submitted to the contractor by a provider under the TRICARE program for payment for services for health care provided to a covered beneficiary; and (B) that is identified by the contractor as a claim for which a third

party payer may be liable. (b) Recovery from third

- party payers. The United States shall have the same right to collect charges related to claims described in subsection (a) as charges for claims under [10 U.S.C. § 1095]. (c) Definition of Third

- Party Payer. In this section, the term “third

- party payer” has the meaning given that term in [10 U.S.C. § 1095(h)] , except that such term excludes primary medical insurers.

2 We are unpersuaded by West’s argument that we cannot co nsider statutes and regulat io ns that were not ci

ted by USAA in it s br iefing on summary j udgment. A lt hough we generally do not address an issue raised fo r the first time on appeal or a pa rty’s change in legal theory, “we have permitted parties to bolster thei r preserved issues wi

th addi tional legal authori

ty o r to mak e further arguments wi

thin the scope of

the legal theory

articulated to the trial court.” State v. Montgomery , 2010 MT 193, ¶ 12, 357 Mon t. 348, 239 P.3d 929. TRICARE’s lien rights and USAA’s corresponding obligat io ns were the fo cus of the legal theory that USAA presented to the trial court. And the District Court is not co nfined in it s summary judgment review

—nor is this Court on appeal

—to authorit ies present ed in the parties’ br iefs. See Junkermier, Clark, Campanella, Stevens, P.C. v. Alborn, Uithoven, Riekenberg, P.C. , 2016 MT 218, ¶ 22, 384 Mont. 464, ___ P.3d ___. Besides , as explained above , the District Court erred in it s analysis of the legal authority that USAA did present.11

10 U.S.C. § 1095b. Federal regulations confirm that “10 U.S.C. [ § ] 1095b establishes the statutory obligation of third

- party payers to reimburse the United States the costs incurred
on behalf of TRICARE beneficiaries who are also covered by the third

- party payer’s plan.” 32 C.F.R. § 199.12(a). ¶18 In turn, 10 U.S.C. § 1095 provides that “the United St ates shall have the right to collect from a third

- party payer reasonable charges for health care services incurred by the United States on behalf of [a person who is a covered beneficiary].” 1 0 U.S.C. § 1095(a)(1 ) ; accord 42 U.S.C. § 2651(a)

. Se ction 1095 defines a “third

- party payer” as “an entity that provides an insurance, medical service, or health plan by contract or agreement, including an automobile liability insurance or n o fault insurance carrier.” 10 U.S.C. § 1095(h)(1). U SAA is clearly a “third

- party payer” pursuant to both 10 U.S.C. § 1095b(c) and 10 U.S.C. § 1095(h)(1). These statutes make clear that the United State s had “the right to collect from [USAA] reasonable charges for health care services incurred by the United States on behalf of [Lee]. ” 10 U.S.C. § 1095(a)(1); accord 10 U.S.C. § 1095b(b) ; 42 U.S.C. § 2651(a)

. ¶19 More, the federal TRICARE regulations provide : “The only way for a third

- party payer to satisfy its obligation under 10 U.S.C. [ § ] 1095b is to pay the United States or authorized representative of the United States. P ayment by a third

- party payer to the beneficiary does not satisfy 10 U.S.C. [ § ] 1095b.” 32 C.F.R. § 199.12(d)(3). The United States’ right to recover costs incurred on behal f of a TRICARE beneficiary “includes the authority under 10 U.S.C. [ § ] 1095(e)(1) for the United State s to institute and prosecute12

legal proceedings against a third

- party payer to enforce a right of the United States under 10 U.S.C. [ § ] 1095b and this section.” 3 2 C.F.R. § 199.12(g)(1). The United States may also “compromise, settle or waive a claim” of its right to reimbursement. 3 2 C.F.R. § 199.12(g)(2) ; 10 U.S.C. § 1095(e)(2 ). ¶20 These statutes and regulations, “in effect at the time” of USAA’s negotiations with Lee’s counsel, Freyer, ¶ 48, obligated USAA to reimburse TRICARE for the costs TRICARE incurred on behalf of Lee. So USAA issuing a settlement check to Lee would “not satisfy” its statutory obligation. 3 2 C.F.R. § 199.12(d)(3)

. Rather , the only way USAA could meet its obligation to reimburse TRICARE was “to pay the United States or authorized representative of the United States
. ” 32 C.F.R. § 199.12(d)(3). If USAA did not satisf

y its statutory obligation, the United States could “institute and prosecute legal proceedings against” USAA to enforce its right to reimbursement. 32 C.F.R. § 199.12(g)(1) ; 10 U.S.C. § 1095(e)(1) ; 42 U.S.C. § 2651(d)

. Based on the plain language of the governing statutes and regulations, we conclude that the District Court incorrectly determined that “there is no obligation in the TRICARE regulations requiring USAA to protect the government lien.” ¶21 Justice Cotter takes issue with our reliance on these statutes and regulations because they were not presented to the District Court , nor to West at the time USAA responded to her demand for policy limits

. D issent, ¶ ¶ 31, 34
. USAA’s failure to cite specific statutes and regulations does not mean that those requirements were not part of the “le gal landscape as it existed” when USAA conditioned payment of the settlement13

check upon resolution of the TRICARE liens

. Freyer, ¶ 48. O ur role is to assess objectively whether it was reasonable for USAA to condition payment

—i.e., its “proffered defense”

— “in light of that legal landscape .” Freyer, ¶ 48 (emphasis added)

. West’ s argument , in any event , is that because Lee made an offer to indemnify USAA and Perez, the law did not obligate USAA to address the TRICARE liens before settling Lee’s third

- party claim, a position that Justice Cotter does not appear to embrace. ¶22 Contrary to West’s argument, neither Lee’s offer to indemni fy nor his obligation pursuant to 32 C.F.R. 199.12(h)(3) to “cooperate” with the United States in any reimbursement acti on by the United States against USAA a ffect s USAA’s statutory obligation to reimburse TRICARE, nor do they impact the United States’ right to recover medical payments from USAA. Any agreement between Lee’s counsel and USAA would not bind the government or exempt USAA from federal law. 3 ¶23 The District Court was correct that “there is no requirement that USAA name TRICARE on Lee’s settlement check.” As the District Court pointed out, if USAA had tendered the settlement check with TRICARE as a payee, the check would not have been negotiable until an authorized government agent endorsed it , and Lee could have been denied the insurance proceeds he was entitled to receive. As the District Court also

3 We note that the State Bar of Montana Ethics Committee recent ly issued an ethics opinion concl uding that an attorney should not agree in a settlement r eleas e to personally indemnify an insurer fro m any lien claims against the settlement proceeds fo r a plaint iff’s medical expenses . M. Bar Ass’n, Ethics Op. 131224 (2013). T he opinio n notes that “[t]his pract ice presents a number of

p rof essional responsibilit y challenges” and potentially vio lates mu lt iple rules under the Montana Rules of Professional Conduct. M. Bar Ass’n , Ethics Op. 131224, at 3
- 7. Because our resol ut io n of the appeal does not turn on the issue of indemnificat io n , we do not discuss the ethics opinion

here.14

observed , Lee’s attorney could not have deposited “the check in his

. . . IOLTA account until fully endorsed, making it impossible to comply with the Montana Rules of Professional Conduct.” ¶24 As the District Court’s order recognized, USAA did not , however, just condition payment of Lee’s settlement on including TRICARE as a payee on the check

—it also gave Lee’s counsel the option of “obtain[ing] waivers of any lien or negotiat [ing] the liens.” USAA also foll owed up with the government to determine the status of the liens. Federal law expressly provides that the United States may “compromise, settle or waive a claim” of its right to reimbursement. 3 2 C.F.R. § 199.12(g)(2); 10 U.S.C. § 1095(e)(2). The Distri ct Court erred in not considering USAA’s request for lien waiver before concluding that USAA did not have a reasonable basis in law to condition payment of the settlement. ¶25 Justice Wheat also misses the import of USAA’s alternative offers for resolving th e TRICARE liens. In remarking that USAA “had no lawful basis to refuse to settle Lee’s claim based upon the status of TRICARE’s lien,” Dissent, ¶ 4 0, Justice Wheat quotes only from the District Court’s observation regarding USAA’s offer to include TRICARE as a settlement check payee

. See supra ¶ ¶ 13
- 14
. His conclusion that “USAA had no legal obligation to protect TRICARE’s lien,” Dissent, ¶ 4 0, fails to acknowledge the governing law. ¶26 The District Court properly invoked Freyer as the correct framework f or analysis. Applying that framework to determine whether USAA had a reasonable basis in law for15

contesting Lee’s claim, we have “survey [ed] the legal landscape as it existed during the relevant time .” Freyer , ¶ 48 ( emphasis added). That landscape compe ls a conclusio n that USAA did have a reasonable basis in law to condition its settlement payment on waiver of the TRICARE lien from the United States. The “ only way ” for USAA to satisfy its statutory obligation to TRICARE

—the secondary payer
— was to pay the United States , not to pay Le e . 32 C.F.R. § 199.12(d)(3) ; see Conw ay , ¶ 32. If USAA had not honored the lien, the United States presumably still could have gone after USAA to enforce its right to reimburse ment. 32 C.F.R. § 199.12(g)(1); 10 U.S.C. § 1 095(e)(1); 42 U.S.C. § 2651(d). The law “provided sufficient guidance to signal to a reasonable insurer that its grounds . . . were . . . meritorious.” Freyer , ¶ 48. This is especially so given “the absence of caselaw on point .” See Freyer, ¶ 48. Accordingly, we hold that USAA’s “grounds [for conditioning payment] were reasonable under existing law.” Freyer, ¶ 48. ¶27 Although USAA did not mo ve for summary judgment before the District Court , “[w]e require no cross - motion . . . when the moving party h ad a full and fair opportunity to consider the proposition and all other criteria for summary judgment are met.” Watson
v. Dundas , 2006 MT 104, ¶ 30, 322 Mont. 164, 136 P.3d 973 (citing Canal Ins. Co. v. Bunday , 249 Mont. 100, 108, 813 P.2d 974, 979 (1991 ) )

. W est had a full and fair opportunity to argue the law applicable to her bad faith claim , there are no genuine issues of material fact, and USAA is entitled to judgment as a matter of law. We therefore
reverse the District Court’s gr ant of summary jud gment in favor of West and order it to16

enter summary judgment in favor of USAA. See Bunday , 249 Mont. at 108, 813 P.2d at 979. **CONCLUSION** ¶28 The District Court’s order granting summary judgment to West is reversed and the case is remanded to the Distri ct Court for entry of judgment in favor of USAA.

/S/ BETH BAKER
We concur: /S/ MIKE McGRATH /S/ LAURIE McKINNON /S/ JAMES JEREMIAH SHEA /S/ JIM RICE
Just ice Patricia Cotter, dissenting. ¶29 I dissent. I begin by recit ing significant facts that the Court has omitted from its Opinion. Fi rst, USAA consented to Perez entering and filing the consent judgment, and had no obj ection to the amount of

the judgment which does represent actual damages sustained by Lee. I n addi tion, USAA agreed not to raise any policy defenses to precl ude Perez from

f iling the consent judgment. There is therefore no issue of collusion or unreasonableness of the settlement amount before us. ¶30 Second, USAA’s leg al theories have been a moving target from the beginning. A s addressed below, the legal authori ties itr elied upon when dealing wi th W est and then presented to the District Court were different than those raised on appeal and upon which the Court now relies. I n addi

tion , af ter arguing in it s opening br ief before this Court that itw as requi red to17

include TRICARE on the settlement check, USAA asserted in it s reply br ief that itw as not requi red to include TRICARE as a payee on the settlement check. In short, USAA’ s lega l arguments have been scattershot. T hese inconsistencies matter because the so le quest io n before the Court is whether USAA had reasonable grounds under the law at the time itimposed the condi tions at issue upon the settlement with West. ¶31 In a footno te on ¶ 17, n. 2 , the Court rejects West’s argument that we should not consider statutes and regulat io ns that were not ci ted by USAA in it s br iefing on summary j udgment in the District Court, ci

ting our decision

in Junkermier, Clark, Campanella, Stevens, P.C. v. Alborn fo r the proposi

tion that we are not confined on appeal to authorit ie s that were presented in the parties’ br iefs. While that general proposi tion may be true, itis who lly misplaced in this case because , as the Court states at¶ 1 0, the fo cal question here is whether the insurer’s grounds fo r contesti ng plaint iff’s theories were reasonable under exist ing law at the time it imposed the conditions at issue on the settlement

. We must therefore “assess the insurer’s proffered defense” that was pr esented to West in 2013. Freyer, ¶ 48. ¶32 When itr efused to pay the settlement wi thout TRICARE’s name on the check or lien waivers in 2013, USAA did not “proffer a def ense” to West premised on 10 U.S.C. § 1095 or TRICARE regulat io n 32 C.F.R. § 199 and it s various sub

- parts upon which this Court centers i ts decisio n. The statute and the regulat io ns were never ment io ned to West, and USAA did not ci te these statutes and regulat io ns as authori ty in it s briefing bef

ore the District Court
. These facts
com pel the inevitable conclusio n that USAA did not at the time it conditioned the settlement have reasonable leg al

grounds under exist ing law fo r contesting plaint iff’s theories. Freyer, ¶ 48.18

¶33 The Court places much em phasis upon USAA’s reference to 42 U.S.C. § 2651 in it s dealings wi

th West and it s br ief opposing summary j udgment before the District Court. 42 U.S.C. § 2651 is a general public healt h and welfare statute that permit s the Uni ted States to
recover sums paid to persons injured in cases where the inj ury is the responsibili ty o f a thi rd

party
. T his statute does not reference TRICARE nor does itc ontain any provision r equi ring insurance com

panies to protect government liens. It is 10 U.S.C. § 1095 that addresses medica l expenses paid on behalf of memb ers of

the milit ary. As 32 C.F.R. § 199.12 (a)(1) st at es, “ 10 U.S.C. [§] 1095 b establishes the statutory o bligation of

third

- part y payers to reimburse the United States the costs incurred on behalf of T RICARE beneficiaries.” In point of f act, the Court grounds i

ts detailed analysis upon this statute and the supporting regulat io ns set forth in 32 C.F.R. § 199, and not upon 42 U.S.C. § 2651. See Opinio n, ¶¶ 17
- 20, 22, 24, 26
. ¶34 After extensive review of 1 0 U.S.C. § 1095 and 32 C.F.R. § 199 and it s subparts, the Court states at ¶ 20: “Based on the plain language of the governing statutes and regulat io ns, we concl ude that the District Court incorrectly determined that ‘there is no obligat io n in the TRICARE regulations requi ring USAA to protect the government lien. ’ ” The problem wi th this concl usion o f course is that USAA did not present these statutes and regulations to the District Court fo r it s considerat io n. T he District Co urt right ly premised it s decisio n upon the authorit ie s submitted by the parties; it was under no obligation to scour the legal landscape to assist USAA. As we have stated, we will generally “‘ not address ei ther an issue raised fo r the first time on appeal or a party ’s change in legal theory. The basis fo r the general rule is that itis fundamentally unf

air to fault the trial court fo r fa iling to rule correctly on an issue itw as never given the opportuni

ty t o co nsider. ’ ” Becker v. Rosebud Operating Servs., Inc. , 2008 MT 285,19

¶ 17 , 345 Mont. 368, 191 P.3d 435 (quoting Unified Industries, Inc. v. Easley , 1998 MT 145, ¶ 15, 289 Mont. 255, 961 P.2d 100 (internal citations and quotations omitted) ). ¶35 I disagree with the C ourt’s concl usion at ¶ ¶ 17 and 21 that because the TRICARE statutes and regulat io ns were part of the exist ing leg al

l andsca pe at the time the settlement was in dispute, USAA had a reasonable basis in law to condi tion the settlement upon reso lut io n of the TRICARE liens. Respect fu lly, USAA did not know these TRICARE regulat io ns and statute existed when itcondi

tioned the settle ment. It stands to reason that in order to have a reasonable basis in law for a posit io n, one m ust know what the law is. ¶36 We err in supplying legal authori ty f or USAA’s def

ense lo ng af

ter the fact. In a case in which the int ent and knowledge of the insurer at the time itc ondi tioned the settlement is disposi tive, we have no business providing retroactive support fo r a decisio n USAA made th ree years ago wi

thout ci ting the governing law, and no business providing USAA wit h a lifeline now premised upon legal authori ties itd id not present to the District Court. G iven the sparse lega l authori ty U SAA provided to the District Court in opposi tion to West’s mo tion fo r summary judgment, the District Court did not err in granting summary judgment in favor of West
. That is the decisio n we should be reviewing, not USAA’s decisio n to present new legal authori ties on appeal. I therefore dissent from our decision overturning the District Court’s order and di rect ing the entry of j udgment in favor of USAA. /S/ PATRICIA COTTER
Just ice Michael E Wheat jo ins in the foregoing dissent. /S/ MICHAEL E WHEAT20

Just ice Michael E Wheat, dissent ing. ¶37 I join the Dissent of Justice Cotter, but provide additional reasons for separating myself from the reasoning of the majority. ¶38 On December 1, 2012, Peter Lee and three others were injured when Julian Perez, the driver of the car in which they were passengers, caused a high

- speed rollover collision. L ee’s injuries were particularly catastrophic. P erez was insured by USAA. Importantly, by mid

- December USAA knew without question that Perez’s negligence caused the crash and was absolutely liable for all damages to the injured parties, which would probably exceed policy limits given the extent of the injuries to the parties . More importantly, by this time USAA also knew, or should have known, that TRICARE would be paying some or all of the medical expenses of the injured parties, especially Lee, and would have a subrogation interest in the policy proceeds. ¶39 On June 4, 2013 , the Blewett firm notified USAA that they were representing Le e and that policy limits would be inadequate. On August 21, 2013, Blewett offered to settle for policy limits, in exchange for a full release, and placed a 20
- day trigger on the offer. On August 28, 2013, USAA agreed by phone to pay, but only if TRICARE was named as
a payee or a lien waiver was produced. O n September 9, 2013, USAA confirmed its position in writing, and several days later Blewett extended the deadline for settlement and again reiterated a full and final release would be provided to Perez. O n October 17, 2013, Lee filed suit against Perez, and shortly thereafter Perez, with the assistance of counsel, entered into a consent judgment with Lee to protect himself from an excess21

judgment. On March 14, 2014, USAA paid policy limits after Lee provided a TRICARE lien waiver. ¶40 Therefore, by mid

- December 2012, USAA knew it was statutorily obligated “to attempt in good faith to effectuate prompt, fair, and equitable settlement” of all clai ms covered by Perez’s policy. S ection 33
- 18
- 201(6), MCA. At the same time USAA had a duty to defend and protect Perez against any claims and/or judgments resulting from his clear negligence. Additionally, and simultaneously, USAA apparently believed, fo r its
ow n protection , it was required to protect TRICARE’s subrogation interest. This last conclusion, however, was incorrect. A s noted by the Alabama Supreme Court in Mut. Assur., Inc. v. Schulte , 970 So. 2d 292 (Ala. 2007), “the inquiry relevant to a c laim alleging bad faith failure to settle is whether the insurer’s failure to settle had any ‘lawful basis,’ that is, whether the insurer had any ‘legitimate or arguable reason for failing to pay the claim. ’” Schulte , 970 So. 2nd at 296 (citations omitted). In the case before us, the District Court, based upon the arguments presented to it as discussed in Justice Cotter’s Dissent, concluded that USAA’s “unilateral decision” to protect TRICARE’s lien, was “without support in statute, regulation, or common law.” In other words, USAA had no legal obligation to protect TRICARE’s lien; consequently, it had no lawful basis to refuse to settle Lee’s claim based upon the status of TRICARE’s lien. ¶41 Moreover, if TRICARE’s lien status posed significant problems to U SAA’s settlement determination, upon USAA’s realization of its obligation to settle Perez’s claim, it should have undertaken actions in December 2012 to insure that TRICARE’s22

subrogation interest would not hinder settlement rather than delaying settlement and imposing the obligation to obtain a TRICARE lien waiver on Lee. ¶42 Under these facts, I submit that USAA violated its obligations to its insured and to the injured parties to exercise good faith to enter into a prompt, fair and equitable settlement. Instead, it delayed until a demand was made and then unilaterally imposed a requirement that TRICARE be named as a co - payee or that Lee obtain a lien release, equally for its own benefit and protection, even though Lee’s attorneys offered to fully release and indemnify both USAA and Perez. At the expense of Perez and Lee, USAA demanded that Lee’s attorneys agree to protect USAA, when USAA did nothing to protect itself, and was obligated to do so. ¶43 For these reasons and the reasons expressed by Justice Cotter, I dissent.

/S/ MICHAEL E WHEAT