Background
Plaintiffs exposed to asbestos from a Montana vermiculite mine sued the state, which settled in two thousand seventeen and two thousand nineteen. They alleged the insurer acted in bad faith by delaying coverage, causing lower settlement amounts.
The court’s reasoning
The court found the insurer had a reasonable basis to contest coverage because the legal landscape regarding known losses versus foreseeable risks was debatable. The Montana Supreme Court had not definitively resolved the issue when the settlements occurred. The court also held that reasonableness is a legal question for the judge, not a factual one for a jury.
It is well-accepted that insurance does not cover known losses.
Nat’l Indem. Co. v. State, 499 P.3d 516, 538 (Mont. 2021)
What it means going forward
Insurers may reasonably contest coverage for complex or novel legal issues without facing bad faith liability, even if the insured’s liability is clear.