Opinion ID: 1171928
Heading Depth: 1
Heading Rank: 1

Heading: Is National an Insurer?

Text: National concedes in brief that if this Court refers only to the statutes for determining whether National is an insurer under Montana law, there is little doubt that National surely would be designated as an insurer. This for the reason that § 33-1-201(6), MCA, defines an insurer as including every person engaged as an indemnitor, surety, or contractor in the business of entering into contracts of insurance. Moreover, § 33-1-201(5), MCA, defines insurance as a contract whereby one undertakes to indemnify another or to pay or provide a specified or determinable amount or benefit upon determinable contingencies. In addition, § 33-1-211, MCA, defines surety insurance as including insurance guaranteeing the performance of contracts, other than insurance policies, and guaranteeing and executing bonds, undertakings, and contracts of suretyship. However, National argues, though those statutory provisions make National an insurer, it is not necessarily subject to regulations found within Montana's Unfair Claim Settlement Practices Act, § 33-18-201, MCA. National argues that the statute never uses the term insurer, and only the term insurance as a word which qualifies the term policies. National maintains that there are distinctions between surety and insurance contracts. It contends that the first paragraph of § 33-18-101, MCA, indicates that the purpose of the chapter is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in Public Law 79-15, which was approved March 9, 1945. Thereafter National points to Group Life and Health Insurance v. Royal Drug Company (1979), 440 U.S. 205, 99 S.Ct. 1067, 59 L.Ed.2d 261 as holding that insurance is that business where a large number of risks are accepted, some of which involve losses, and the spreading of such risks which enables the insurer to accept each risk at a slight fraction of the possible liability upon it. National maintains that no court has ever construed the McCarran-Fergus Act so as to extend the business of insurance to a surety. This, National argues, because the liability of a surety is not left up to chance or hazard and is not a spreading of risk, because the nature, size and source of the possible loss to the creditor is known from the start. On this point we find ourselves in agreement with the holding in General Insurance Company of America v. Mammoth Vista Owners Association (Cal. App. 1985), 174 Cal. App.3d 810, 220 Cal. Rptr. 291, that by plain and explicit language, the legislature made suretyship a class of insurance subject to regulation under the code. Therefore, for the purpose of the insurance code, one who issues surety bonds is in the business of insurance, and subject to the provisions prohibiting unfair and deceptive practices. 174 Cal. App.3d at 824, 220 Cal. Rptr. at 298. Our statutes clearly commend this result. Section 33-1-102(1), MCA, provides that no person shall transact the business of insurance in Montana without complying with the applicable provisions of this code. Surety insurance is one of the various kinds of insurance found in the statutes, and § 33-1-211, MCA, defines surety insurance as insurance guaranteeing the performance of contracts. The word insurer includes surety, under § 33-1-201(6), MCA. No insurer may transact business in Montana unless authorized by a certificate issued by the Commissioner of Insurance. Section 33-2-101, MCA. Finally, since § 33-18-101, MCA, provides that the purpose of the chapter regulating trade practices applies to the business of insurance and a surety bond, issued by a licensed insurer, is a contract issued in the course of the business of insurance, the licensed surety is therefore subject to the trade practices provisions of our codes. Once we determine that an insurer issuing a surety bond is transacting the business of insurance in Montana, the remainder of our decision in this cause is predictable. Every insurer in Montana has an implied-in-law duty to act fairly and in good faith in handling a claim under a contract issued by the insurer. In Lipinski v. Title Insurance Company (1982), 202 Mont. 1, 15, 655 P.2d 970, 977, we said: Should there by any doubt, we now expressly hold that insurance companies have a duty to act in good faith with their insureds, and that this duty exists independent of the insurance contract and independent of statute. Any statements in our cases, to the extent that they may be or appear to be in conflict with this holding, are expressly overruled. In Weber v. Blue Cross of Montana (1982), 196 Mont. 454, 643 P.2d 198, we held that Blue Cross, though not technically an insurance company, had a duty of acting in good faith toward those for whom it provided coverage. In Nicholson v. United Pacific Insurance Company (Mont. 1985), 710 P.2d 1342, 42 St.Rep. 1822 we held that if the implied covenant is breached, the reasonable expectations of the contracting parties are not met. It is also clear in Montana that a breach of the applicable provisions of § 33-18-201, MCA, by an insurer is conduct compensable in tort as to third parties to the insurance contract. Klaudt v. Flink (1983), 202 Mont. 247, 658 P.2d 1065. It follows therefore that if a surety, transacting the business of insurance, violates the provisions of § 33-18-201, MCA, the claimant, in addition to his or her contract remedies, may be compensated under tort law. Klaudt v. Flink, supra.