Case Explained: COLEMAN, ET AL. V. NATIONAL INDEMNITY COMPANY

Court: United States Court of Appeals for the Ninth Circuit

Filed: 2026-06-24

Docket: 4:19-cv-00039-JTJ

The Ninth Circuit affirmed the district court’s dismissal of Plaintiffs’ bad faith insurance claims against National Indemnity Company. The court held that under Montana law, an insurer does not act in bad faith if it has a “reasonable basis in law or in fact” for contesting a claim, as set forth in Mont. Code Ann. § 33-18-242(6). The court applied the standard of review de novo and determined that National had a reasonable basis to deny coverage because the legal landscape regarding asbestos exposure at the Libby mine was an “open question” when Plaintiffs settled their claims in 2017 and 2019. Although the Montana Supreme Court later ruled against National in *National Indemnity Co. v. State* (2021), that decision acknowledged the arguments were not “wholly unreasonable” and involved complex, debatable legal issues. The court further rejected Plaintiffs’ argument that a jury must determine the insurer’s subjective reliance on these defenses, noting that the reasonableness of an insurer’s interpretation of legal precedent is a question of law for the court. Additionally, the court affirmed the dismissal of the unjust enrichment claim because Montana provides an adequate legal remedy for bad faith damages and National had an adequate legal basis to retain funds while contesting coverage. As a result of this decision, the judgment dismissing the Plaintiffs’ lawsuit is final, and they are barred from pursuing bad faith or disgorgement remedies against the insurer based on the delayed coverage dispute.

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