Estate of Gleason v. Central United Life Insurance, 379 Mont. 219

Background

Judith Gleason purchased a cancer benefit policy in 1990, paid premiums through her 2010 death from cancer; her estate (PRs) submitted claims after her death in 2010–2011.
Central United Life Insurance (CULI) had serviced/assumed the policy; it denied some claims as untimely under the policy notice provision (claims must be filed within 1 year + 90 days).
CULI admitted it was not prejudiced by late notice and ultimately paid $57,735.95 (March 17, 2011), additional payments later, and a $539,717.90 directed-verdict payment (Jan. 17, 2013) for untimely claims; CULI sued for declaratory relief and the case was remanded to state court.
The District Court (1) applied a notice-prejudice analysis and directed payment on untimely claims, (2) submitted a UTPA claim to the jury which found a UTPA violation but awarded no damages, and (3) entered mixed awards of costs and attorneys’ fees.
The Supreme Court affirmed adoption of the notice-prejudice rule for first-party claims, reversed the jury instruction on punitive damages, remanded for retrial on malice/punitive damages, adjusted SOL application, reversed award of trial costs to CULI, and affirmed attorneys’ fees to the Estate for contractual recovery.

Issues

Issue	Estate’s Argument	CULI’s Argument	Held
1. Application of notice‑prejudice rule to first‑party claims	Notice-prejudice should bar denial where insurer not prejudiced	Policy notice provision controls; timely notice is condition precedent	Court adopted notice‑prejudice for first‑party claims; because CULI admitted no prejudice, denial on timeliness was improper (affirmed)
2. Jury instruction requiring UTPA damages beyond contract damages before considering malice/punitive	Contract damages (directed verdict) suffice as UTPA compensatory damages to reach malice/punitive	Punitive damages require separate compensatory damages beyond contract; statute limits	Court held contract damages can be UTPA compensatory damages; instruction was reversible error; remand for new trial on malice/punitive
3. Directed verdict on UTPA liability	Court should have directed verdict for Estate on UTPA violation	Jury should decide factual elements	Not reached (jury already found UTPA violation; instruction error requires remand)
4. Reasonable‑basis‑in‑law defense under §33‑18‑242(5), MCA	CULI lacked reasonable legal basis because Montana law favored notice‑prejudice	CULI reasonably relied on unsettled precedent and its policy terms—legal defense as matter of law	Court affirmed denial of summary judgment; factual issues about CULI’s legal basis were properly for jury
5. Statute of limitations start date for oldest claims	SOL should run from date claim accrues (treatment date)	District Court used date insurer received notice; CULI argued even later dates	Court held accrual occurs when claim elements occurred; SOL runs from accrual; amend judgment to bar claims before June 24, 2003 (8 years before suit)
6. Admissibility of out‑of‑state law and claim‑handling evidence	Such evidence rebuts CULI’s reasonable‑basis defense and is relevant	CULI offered Montana cases showing unsettled law; evidence of other jurisdictions irrelevant	Court affirmed trial court discretion to admit both sides’ evidence as relevant to reasonable‑basis defense
7. Entitlement to trial costs and attorneys’ fees	Estate entitled to attorneys’ fees under insurance exception; costs to party prevailing on contract recovery	CULI claimed prevailing party (no UTPA damages) so awarded costs	Court reversed award of trial costs to CULI (remand on punitive); affirmed attorney’s fees to Estate for contractual recovery

Key Cases Cited

State Farm Mut. Auto. Ins. Co. v. Gibson, 163 P.3d 387 (Mont. 2007) (court enforces clear policy terms unless public policy dictates otherwise)
Sorensen v. Farmer’s Ins. Exch., 927 P.2d 1002 (Mont. 1996) (adopted no‑prejudice rule in underinsured motorist context)
Augustine v. Simonson, 940 P.2d 116 (Mont. 1997) (avoiding forfeiture absent showing of material prejudice in underinsurance context)
Lee v. Great Divide Ins. Co., 182 P.3d 41 (Mont. 2008) (upheld coverage denial where late notice prejudiced insurer)
Steadele v. Colony Ins. Co., 260 P.3d 145 (Mont. 2011) (treated notice as condition precedent where insurer was prejudiced)
Redies v. Attys. Liab. Prot. Soc’y, 150 P.3d 930 (Mont. 2007) (reasonable‑basis‑in‑law defense can be resolved as matter of law when it depends solely on legal precedent)
Jacobsen v. Allstate Ins. Co., 215 P.3d 649 (Mont. 2009) (punitive damages require compensatory damages; analysis limited to facts there)
Lorang v. Fortis, 192 P.3d 186 (Mont. 2008) (statute permits punitive damages for UTPA violations)
Watters v. Guaranty Nat. Ins. Co., 3 P.3d 626 (Mont. 2000) (summary judgment appropriate when insurer’s legal defense rests on clear precedent)
Quigley v. Acker, 955 P.2d 1377 (Mont. 1998) (anti‑forfeiture principles: relief from forfeiture unless grossly negligent or willful)