Top Montana Court Rules ‘Assignments’ Constituted ‘Cancelations’

Case File

Montana's top court took up a case involving assignment of workers' compensation policies and found that an attempt to cast cancelations as assignments didn't negate the cancelation portion of the maneuver. Simply Research subscribers have access to the full text of the decision.

Case

Victory Ins. Co. v. State of Montana, 2025 MT 180 (Mont. 08/12/25)

What Happened

An insurer entered into a reinsurance agreement with another property and casualty company under which the insurer would sell its workers' compensation policies to the insurer.

The insurer alleged that it called each of the insured entities to notify them of the sale, but a few years thereafter, Montana's Commissioner of Securities and Insurance filed a notice of proposed agency action alleging that the insurer had illegally canceled its policies and asserted that the agency could impose up to a $2.7 million fine.

The case came before a hearing examiner, who found that the insurer had committed 165 violations of state law and that CSI could impose a fine of up to $4,125,000.

A deputy securities commissioner heard the case on appeal and imposed a fine of $250,000 with $150,000 suspended, coming due only of the insurer committed further violations of the insurance code.

The insurer appealed to court. The trial court rejected the insurer's arguments, and the insurer appealed to the Montana Supreme Court, arguing that the hearing examiner got it wrong on the question of whether the insurer violated the insurance code on the issue of whether the insurer's actions constituted "cancelations" or "assignments."

Rule of Law

Montana workers' compensation law does not define "cancelation," but the statute at issue had stated purposes of:

(1) Regulating the grounds for midterm cancelation of an insurance policy.

(2) Prohibiting midterm increases in premiums.

(3) Increasing the opportunity for insureds to shop for replacement or substitute insurance.

(4) Reducing the opportunity for breach of contract, misrepresentation by omission, or untimely disclosure, and unfair discrimination among insureds.

(5) Increasing the opportunity for insurance producers to compete freely.

The court interpreted these purposes to stand for an overall purpose of protecting insurance customers' ability to choose between related products without the pressure of unexpected changes and foster competition among insurance providers.

What the Court Said

The court held that an assignment could not constitute a cancelation under Montana law, and ruled that the hearing examiner did not err when he granted summary judgment to the company.

"The [insurer's] policies were terminated and replaced with [company] policies," the court wrote. "Irrespective of whether that also may be considered an assignment, it constituted a cancelation."

Verdict: The court upheld the trial court's ruling.

Takeaway

Under Montana workers' compensation law, an "assignment" of a policy can constitute a "cancelation" given the customer-protection purposes of state insurance law.

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