Opinion ID: 888148
Heading Depth: 2
Heading Rank: 1

Heading: The Reasonable Basis in Law Defense

Text: ¶27 As noted above, Redies brought the instant action under the statutory provisions which prohibit unfair trade practices by insurance companies. Specifically, § 33-18-242(1), MCA, creates an independent cause of action by an insured or a third-party claimant against an insurer for actual damages caused by the insurer's violation of subsection (1), (4), (5), (6), (9), or (13) of XX-XX-XXX. Redies' complaint does not specify any particular subsections of § 33-18-201, MCA; however, on appeal she and ALPS confine their respective arguments to subsections (4) and (6), which provide as follows: No person may . . . do any of the following: . . . (4) refuse to pay claims without conducting a reasonable investigation based upon all available information; . . . (6) neglect to attempt in good faith to effectuate prompt, fair, and equitable settlements of claims in which liability has become reasonably clear; . . . . Section 33-18-201(4), (6), MCA (paragraph breaks omitted). ¶28 An insurer, however, is not liable under § 33-18-242, MCA, if it had a reasonable basis in law or in fact for contesting the claim or the amount of the claim, whichever is in issue. Section 33-18-242(5), MCA. An insurer asserting this affirmative defense has the burden of establishing it by a preponderance of the evidence. Watters v. Guaranty Nat. Ins. Co., 2000 MT 150, ¶¶ 65, 67, 300 Mont. 91, ¶¶ 65, 67, 3 P.3d 626, ¶¶ 65, 67, overruled in part on other grounds, Shilhanek v. D-2 Trucking, Inc., 2003 MT 122, ¶ 21, 315 Mont. 519, ¶ 21, 70 P.3d 721, ¶ 21. ALPS invoked the reasonable basis in law portion of § 33-18-242(5), MCA, as a defense to Redies' claims against it. ¶29 To determine whether an insurer had a reasonable basis in law . . . for contesting the claim or the amount of the claim, it is necessary first to survey the legal landscape as it existed during the relevant time period. See Shilhanek, ¶¶ 24-31. Thus, we must step into ALPS's shoes during the communications and negotiations which took place from July 2001 (when Redies, through Harris, first presented Addy with her claims against him) through December 2002 (when the parties finally settled those claims). We then determine, from this perspective, whether the defense proffered by ALPSnamely, that an attorney retained by a conservator does not owe a duty to the protected personwas, at that time, a reasonable basis in law for contesting Redies' claims. Before doing so, however, it is necessary first to address the parties' dispute over whether this issue presents a question of fact or a question of law.