The Supreme Court of Montana has upheld regulatory findings that Victory Insurance Co. violated state insurance law by canceling workers compensation policies without consent and transferring coverage to a new insurer.
The decision affirms the Montana Commissioner of Securities and Insurance’s (CSI) authority to enforce penalties for such conduct.
In Victory Ins. v. State, the dispute centered on a 2019 agreement between Victory and Clear Spring Property and Casualty, under which Clear Spring agreed to reinsure all active workers compensation policies issued by Victory.
Victory later notified insureds via email that their policies would be “upgraded” to Clear Spring effective January 1, 2020. It argued the policy terms remained identical and that the change constituted a routine administrative transition.
However, the Montana Supreme Court disagreed, stating the substitution of the issuing insurer fundamentally altered the contract and removed the insured’s right to choose their carrier—an essential element of market competition under state law.
The court emphasized that even if the new insurer offers equal or better coverage, policyholders must retain the right to decide who underwrites their risk. Courts, it said, should not substitute that judgment.
“The policies may be materially identical in coverage,” the court wrote, “but there is one material difference: the issuing insurer. Montana law protects the right of insureds to select their carrier. The transfer eliminated that choice, which the law does not permit without proper cancellation.”
Regulators had previously alleged that Victory’s conduct amounted to illegal cancellation of 165 policies.
In 2023, the CSI imposed a $250,000 fine, suspending $150,000 contingent on future compliance.
Victory appealed, claiming the actions did not constitute policy cancellation, that the fine violated due process, and that it was entitled to a jury trial. The Supreme Court rejected all three arguments.
The ruling confirmed that:
- Transferring policies to another insurer without offering insureds a choice amounts to a cancellation under Montana law.
- The Montana Commissioner of Securities and Insurance has the authority to issue administrative fines under existing statute.
- As the case involved no material disputes of fact, the court held that a jury trial was not necessary.
The court concluded that enforcement actions like these support the competitive structure of Montana’s insurance market by ensuring transparency and consumer choice.
In Victory Ins. v. State, the Montana Supreme Court upheld regulatory findings that Victory Insurance Company violated state insurance law by transferring workers compensation policies to another insurer without policyholder consent.
In 2019, Victory entered a reinsurance agreement with Clear Spring Property and Casualty and later informed insured businesses that their policies had been “upgraded” to Clear Spring, claiming coverage remained unchanged. However, the court found that the shift in issuing insurer materially altered the contract, as it eliminated the insured’s right to choose their insurer—an essential principle of market competition under Montana law.
The Montana Commissioner of Securities and Insurance launched an enforcement action in 2022, citing 165 illegal cancellations and seeking penalties of up to $2.7 mn.
A hearing officer later imposed a $250,000 fine, with $150,000 suspended pending future compliance. Victory appealed, arguing the policy transfers did not constitute cancellations, that the fine violated due process, and that it had a right to a jury trial.
The court rejected all arguments, affirming that regulatory agencies may impose fines without a jury trial where facts are undisputed. The ruling reinforced the importance of insurer selection rights in maintaining fair competition in Montana’s insurance market and affirmed the state’s authority to regulate policy administration practices.
