Montana: No Bad Faith Action Allowed Despite Acquittal for Workers’ Comp Fraud

Montana: No Bad Faith Action Allowed Despite Acquittal for Workers’ Comp Fraud

The Montana Supreme Court recently held that a construction worker who was acquitted of charges that he had committed workers’ compensation fraud by, among other things, constructing and selling furniture to a private investigator may not maintain a civil action against the Montana State Fund, which provided workers’ compensation insurance to his employer, for terminating payment of benefits in bad faith. Plaintiff suffered an injury and his claim was accepted by the Fund. Medical benefits and TTD payments were made. Plaintiff was advised on several occasions that he was required to notify the Fund if he returned to active employment. Acting on a tip, the Fund hired a private investigator who met with plaintiff and arranged for plaintiff to construct some household furniture. After the sale, a search warrant was issued and a receipt book showing other income to plaintiff was found at the plaintiff’s home. In spite of this evidence, plaintiff was acquitted of the fraud charge. He then filed the instant action, contending the cessation of benefits was in bad faith. The high court agreed that the plain language of § 33-1-102(5), MCA, excluded the State Fund from application of the Insurance Code and, therefore, meant the civil action could not be maintained against it. The court added that under Montana common law, an insurer could not be held liable for bad faith if the insurer had a reasonable basis for its actions. Plaintiff had never contested that he built and sold the furniture and that he did so while receiving TTD benefits. The Fund’s decision to terminate benefits was based upon its belief that plaintiff was violating the law. It was appropriate, therefore, for the trial court to determine as a matter of law that the Fund had not acted in bad faith.

Reported by Thomas A. Robinson, J.D.

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See White v. Montana State Fund, 2013 MT 187, 2013 Mont. LEXIS 234 (July 12, 2013) [2013 Mont. LEXIS 234 (July 12, 2013)]

See generally Larson’s Workers’ Compensation Law, § 39.03 [39.03]

Source: Larson’s Workers’ Compensation Law, the nation’s leading authority on workers’ compensation law.

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