Dannels v. BNSF

03/23/2021

DA 19-0343
Case Number: DA 19-0343

IN THE SUPREME COURT OF THE STATE OF MONTANA
2021 MT 71

ROBERT DANNELS,

Plaintiff and Appellee,

v.

BNSF RAILWAY COMPANY,

Defendant and Appellant.

APPEAL FROM: District Court of the Eighth Judicial District,
In and For the County of Cascade, Cause No. BDV-14-001
Honorable Katherine M. Bidegaray, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Andrew S. Tulumello (argued), Gibson, Dunn & Crutcher LLP,
Washington, District of Columbia

Jeff Hedger, Michelle T. Friend, Hedger Friend, P.L.L.C., Billings,
Montana

For Appellee:

Deepak Gupta (argued), Lark Turner, Gupta Wessler PLLC, Washington,
District of Columbia

Dennis P. Conner, Keith D. Marr, Conner & Marr, PLLP, Great Falls,
Montana

For Amicus Association of American Railroads:

Anthony M. Nicastro, Knight Nicastro MacKay, LLC, Billings, Montana

For Amicus Washington Legal Foundation:

Mark D. Parker, Samantha A. Howard, Parker, Heitz & Cosgrove, PLLC,
Billings, Montana
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 Argued and Submitted: June 10, 2020

Decided: March 23, 2021

Filed:

cir-641.—if
__________________________________________
Clerk

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Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Defendant and Appellant BNSF Railway Company (BNSF) appeals the orders of

the Eighth Judicial District Court, Cascade County, denying BNSF summary judgment and

entering final judgment in favor of Plaintiff and Appellee Robert Dannels. We address the

following issue:

Does the Federal Employers’ Liability Act preempt an injured railroad employee’s
State law bad faith claims?

¶2 We affirm.

PROCEDURAL AND FACTUAL BACKGROUND

¶3 Dannels was employed by BNSF as a Maintenance of Way laborer and equipment

operator in northern Montana from approximately 1990 to 2010. On March 17, 2010,

Dannels was assigned to operate a Bobcat skidsteer to remove snow piles from a parking

lot in BNSF’s Havre railroad yard. The front-end of the skidsteer collided with a steel

wellhead concealed under a snow pile. As a result of the collision, Dannels suffered a

disabling back and spine injury which required medical care.

¶4 On December 6, 2010, Dannels sued BNSF under the Federal Employers’ Liability

Act (FELA) to recover damages for his work-related injury. Dannels alleged that

throughout his employment, BNSF negligently assigned him physical work activities that

caused “cumulative trauma” to his lower back and spine and made him susceptible to

permanent disability.

¶5 Before trial, BNSF moved in limine to preclude Dannels from referencing any

“emotional distress not directly tied to [Dannels’] physical injury.” The motion was
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granted and the District Court instructed the jury that it could only award damages

“caused by the event in question,” specifically “injuries . . . sustained as a consequence of

physical impact.”

¶6 On February 13, 2013, a jury returned a verdict in Dannels’ favor in the amount of

$1.7 million. The jury found BNSF to be 100% at fault and Dannels to be 0% at fault.

¶7 During the pendency of Dannels’ FELA claim, he never sought advance payment

from BNSF of either his medical expenses or his lost wages, nor did he file a declaratory

judgment action seeking a declaration of BNSF’s obligations in that regard. After the

verdict, but before the final judgment was entered, Dannels submitted a written request to

BNSF, seeking payment of the portion of the jury verdict that represented his past lost

wages. BNSF refused. After BNSF’s motion for a new trial was denied, it paid the

$1.7 million judgment.

¶8 On January 2, 2014, Dannels filed claims for bad faith and punitive damages against

BNSF. He asserted BNSF violated Montana common law and statutory duties of good

faith and fair dealing in handling his FELA claim by failing to advance his lost wages,

failing to reasonably investigate and adjust his claim, and failing to offer him alternative

or permanent employment. Dannels had originally named the individual claims adjustor

and BNSF Insurance Company, Ltd. (BNSF IC) as defendants in his bad faith complaint.

Dannels’ subsequently voluntarily dismissed the claims adjustor. On May 13, 2015, BNSF

IC filed a motion to dismiss for lack of personal jurisdiction. BNSF IC acknowledged that

it is a wholly owned subsidiary of the same parent company as BNSF, and that it maintains

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a program of self-insurance in conjunction with BNSF for coverage of FELA claims made

by BNSF employees. BNSF IC asserted it has no contacts with the State of Montana

because it is a licensed insurance company organized under the laws of Bermuda, a territory

of the United Kingdom. The District Court granted BNSF IC’s motion.

¶9 On May 1, 2017, BNSF moved for summary judgment, asserting that Dannels’ State

law bad faith claims were preempted by the FELA. The District Court denied BNSF’s

motion.

¶10 On February 2, 2018, BNSF filed motions in limine seeking to preclude Dannels

from offering evidence or testimony at trial regarding BNSF claims-handling practices or

reporting, including evidence or testimony that BNSF had a duty to advance pay Dannels’

FELA claim or offer him alternative employment or permanent employment. BNSF

argued in its motion that the FELA was the law governing Dannels’ underlying claim and

does not require railroads to advance pay claimants or offer alternative employment or

permanent employment as part of its settlement practices. BNSF further argued that

“[e]vidence of other claims or claims handling practices or reporting in other cases is not

relevant to the case at bar. [Dannels’] underlying claim and BNSF’s claim handling

practice is the only relevant issue.”

¶11 Before the District Court could rule on BNSF’s motions in limine, the parties filed

a stipulation for entry of final judgment. BNSF stipulated that judgment be entered against

it on Dannels’ bad faith claims in the amount of $7.4 million, inclusive of all fees, interest,

and costs. BNSF reserved its right to appeal the District Court’s denial of its summary

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judgment motion but stipulated that it would pay Dannels $2.25 million “regardless of the

outcome of any appeal.” BNSF stipulated that it would pay the $5.15 million balance upon

its exhaustion of its appeal rights to this Court and the United States Supreme Court, if its

appeals were unsuccessful. On May 14, 2019, the District Court accepted the parties’

stipulation and entered final judgment against BNSF.

STANDARDS OF REVIEW

¶12 We review a district court’s summary judgment ruling de novo, applying the criteria

set forth in M. R. Civ. P. 56. Sinclair v. Burlington Northern & Santa Fe Ry., 2008 MT 424,

¶ 26, 347 Mont. 395, 200 P.3d 46. Summary judgment is appropriate if the moving party

demonstrates from “the pleadings, the discovery and disclosure materials on file, and any

affidavits” that there is no genuine issue of material fact and that the movant is entitled to

judgment as a matter of law. Sinclair, ¶ 26; M. R. Civ. P. 56(c)(3). Where a district court

determines there is no material factual dispute and the moving party is entitled to judgment

as a matter of law, we review whether the district court correctly applied the law. Mont.

Immigrant Justice Alliance v. Bullock, 2016 MT 104, ¶ 28, 383 Mont. 318, 371 P.3d 430;

Sinclair, ¶ 26. A district court’s determination regarding federal preemption is a question

of law which we review for correctness. Mont. Immigrant Justice Alliance, ¶ 14.

DISCUSSION

¶13 Does the Federal Employers’ Liability Act preempt an injured employee’s State law
bad faith claims?

¶14 The Supremacy Clause of the United States Constitution provides:

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 This Constitution, and the Laws of the United States which shall be made in
pursuance thereof; and all treaties made, or which shall be made, under the
authority of the United States, shall be the supreme Law of the Land; and the
Judges in every State shall be bound thereby, anything in the Constitution or
Laws of any State to the Contrary notwithstanding.

U.S. Const. art. VI, cl. 2. The Supremacy Clause “invalidates state laws that ‘interfere with,

or are contrary to,’ federal law.” Hillsborough Cty. v. Auto. Med. Laboratories, Inc., 471

U.S. 707, 105 S. Ct. 2371, 85 L. Ed. 2d 714 (1985) (quoting Gibbons v. Ogden, 9 Wheat.

1, 211 (1824) (Marshall, C.J.). Congress is empowered by the Supremacy Clause to pass

federal acts that supersede state law in three ways: (1) express preemption, (2) field

preemption, or (3) conflict preemption, “the latter two being forms of implied preemption.”

Mont. Immigrant Justice Alliance, ¶ 28 (citing Valle Del Sol Inc. v. Whiting, 732 F.3d 1006,

1022-23 (9th Cir. 2013)).

¶15 BNSF argues that Dannels’ state law bad faith claims are preempted by the FELA.

The FELA is a federal act that serves as the “comprehensive” and “exclusive” scheme of

recovery for physical injuries suffered on-the-job by a railroad employee, any part of whose

duties further interstate commerce, as a result of the negligence of an employer.

See 45 U.S.C. § 51 (“Every common carrier by railroad while engaging in

commerce . . . shall be liable in damages to any person suffering injury while he is

employed by such carrier . . . for such injury or death resulting in whole or in part from the

negligence of any of the officers, agents, or employees of such carrier . . . .”);

New York C. R. Co. v. Winfield, 244 U.S. 147, 151-52, 37 S. Ct. 546, 548, 61 L. Ed. 1045,

1048-49 (1917). The FELA was originally enacted to address “the rising toll of serious

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injuries and death among workers in the railroad industry.” Reidelbach v.

Burlington N. & Santa Fe Ry. Co., 2002 MT 289, ¶ 19, 312 Mont. 498, 60 P.3d 418

(quoting Harris-Scaggs v. Soo Line R. Co., 2 F. Supp. 2d 1179 (Wis. 1998)).

See also Anderson v. BNSF Ry., 2015 MT 240, ¶ 35, 380 Mont. 319, 354 P.3d 1248

(quoting Kernan v. Am. Dredging Co., 355 U.S. 426, 432, 78 S. Ct. 394, 398,

2 L. Ed. 2d 382 (1958)) (“‘[I]t is clear that the general congressional intent was to provide

liberal recovery for injured workers.’”). When the FELA was enacted in 1908, railroading

was “a major industry in the United States and as such employed great numbers of people.”

Reidelbach, ¶ 19. Railroad employees “were exposed to many dangers and risks associated

with railroading but had little protection or recourse from work-related injury or death and

were frequently denied redress for their injuries by antiquated common-law rules favoring

employers.” Reidelbach, ¶ 19 (citing Rogers v. Consolidated Rail Corp., 948 F.2d 858

(2d Cir. 1991)). The FELA provided compensatory relief for injured railroad employees

by “modif[ying] or eliminat[ing] the common-law defenses that had previously precluded

railroad employees from recovering from their employers for injuries sustained during the

course of employment.” Reidelbach, ¶ 19 (citing Rogers, 948 F.2d at 861).

¶16 The Montana Unfair Trade Practices Act (UTPA) allows a person to seek damages

from an insurer engaging in unfair and deceptive practices. Section 33-18-101, MCA.

UTPA applies to “every person engaged as indemnitor, surety, or contractor in the business

of entering into contracts of insurance,” § 33-1-201(6), MCA, including “a person, firm, or

corporation utilizing self-insurance to pay claims made against them,”

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§ 33-18-242(8), MCA. But see Shattuck v. Kalispell Reg’l Med. Ctr., 2011 MT 229, ¶ 15,

362 Mont. 100, 261 P.3d 1021 (citing Ogden v. Mont. Power Co., 229 Mont. 387, 392,

747 P.2d 201, 204 (1987)) (Exempting some self-insured entities from the UTPA because

they are not “primarily in the business of . . . enter[ing] into insurance contracts.”). As we

have previously recognized in the context of workers’ compensation insurance, an injured

employee is considered a third-party claimant even when the employer is self-insured.

Suzor v. Int’l Paper Co., 2016 MT 344, ¶ 22, 386 Mont. 54, 386 P.3d 584 (“[A]n injured

employee’s position as a third-party claimant does not materially change in the context of

self-insurance.”). The UTPA authorizes a third-party claimant to pursue bad faith claims

against the insurer. Section 33-18-242(6)(b), MCA.

¶17 Section 33-18-242(1), MCA, of the UTPA authorizes an insured or a third-party

claimant to pursue “an independent cause of action against an insurer for actual damages

caused by the insurer’s violation of subsection (1), (4), (5), (6), (9), or (13) of

[§] 33-18-201[, MCA].” These subsections prohibit an insurer from engaging in the

following unfair claim settlement practices:

(1) misrepresent[ing] pertinent facts or insurance policy provisions relating
to coverages at issue;
. . .

(4) refus[ing] to pay claims without conducting a reasonable investigation
based upon all available information;
(5) fail[ing] to affirm or deny coverage of claims within a reasonable time
after proof of loss statements have been completed;
(6) neglect[ing] to attempt in good faith to effectuate prompt, fair, and
equitable settlements of claims in which liability has become reasonably
clear;
. . .
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 (9) attempt[ing] to settle claims on the basis of an application that was altered
without notice to or knowledge or consent of the insured;
. . .

(13) fail[ing] to promptly settle claims, if liability has become reasonably
clear, under one portion of the insurance policy coverage in order to
influence settlements under other portions of the insurance policy
coverage . . . .

Section 33-18-201(1), (4)-(6), (9), (13), MCA.

¶18 An insurer may also be held liable at common law for bad faith conduct once the

underlying claim is resolved. See Brewington v. Employers Fire Ins. Co., 1999 MT 312,

¶ 19, 297 Mont. 243, 992 P.2d 237; O’Fallon v. Farmers Ins. Exch., 260 Mont. 233,

244-45, 859 P.2d 1008, 1015 (1993). An insurer may be held liable for punitive damages

if the insurer acted with actual fraud or actual malice in its handling of a claim. See §§ 27-1-

220 and -221, MCA; Lorang v. Fortis Ins. Co., 2008 MT 252, ¶¶ 90-93, 345 Mont. 12, 192

P.3d 186.

¶19 Dannels has alleged BNSF improperly investigated, adjusted, and defended against

his underlying FELA action, thereby violating the common law and statutory duties

imposed under Montana’s bad faith laws. In determining whether the FELA preempts

Dannels’ State bad faith claims, we begin with the long-held presumption that

“Congress does not cavalierly [preempt] state-law causes of action. In all [preemption]

cases, . . . we start with the assumption that the historic police powers of the States were

not to be superseded by the Federal Act unless that was the clear and manifest purpose of

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Congress.” Reidelbach, ¶ 21 (quoting Favel v. Am. Renovation & Constr. Co.,

2002 MT 266, ¶ 39, 312 Mont. 285, 59 P.3d 412).

¶20 We begin our inquiry by examining express preemption. “Express preemption

occurs when Congress enacts a statute that contains an express preemption provision,”

Mont. Immigrant Justice Alliance, ¶ 29, thereby “making it clear that state law will not

apply in the area governed by federal statute.” Favel, ¶ 40. See also Hillsborough Cty.,

471 U.S. at 713, 105 S. Ct. at 2375, 85 L. Ed. 2d at 721. There is no express provision in

the FELA manifesting a congressional intent to preempt state laws such as the UTPA. We

therefore “will not categorically presume that Congress intends the FELA statute to

preempt state law.” Reidelbach, ¶ 23. We are thus left with an inquiry into implied

preemption, beginning with field preemption.

¶21 “Field preemption occurs when ‘the States are precluded from regulating conduct

in a field that Congress, acting within its proper authority, has determined must be

regulated by its exclusive governance.’” Mont. Immigrant Justice Alliance, ¶ 29

(quoting Arizona v. United States, 567 U.S. 387, 399, 132 S. Ct. 2492, 2501,

183 L. Ed. 2d 351, 369 (2012)). Congress’ intent to occupy the field of a particular area

of law becomes “evident where there is a ‘framework of regulation so pervasive . . . that

Congress left no room for the States to supplement it or where there is a federal

interest . . . so dominant that the federal system will be assumed to preclude enforcement

of state laws on the same subject.’” Mont. Immigrant Justice Alliance, ¶ 29

(Arizona, 132 S. Ct. at 2501, 183 L. Ed. 2d at 369). See also Favel, ¶ 40 (“[C]ongressional

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intent to preempt state law in a particular area may be implied where the regulation of the

area is so comprehensive that it is reasonable to conclude that Congress intended to ‘occupy

the field’ and to leave no room for supplementary state regulation.”).

¶22 As we recognized in Reidelbach, “[u]nlike most other federal statutory schemes, the

FELA has no underlying administrative regulations. Therefore, we cannot imply

preemption through administrative regulation.” Reidelbach, ¶ 25 (emphasis in original).

We must then determine if “[c]ongressional intent to preempt based on the ‘structure and

purpose’” of the FELA exists. Reidelbach, ¶ 26. As we observed in Reidelbach, “the plain

language of the FELA reveals that Congress’ purpose was to enact a compensatory

scheme” under which railway employees who suffered occupational injuries caused by the

negligence of their employer “and in pursuit of interstate commerce” could obtain redress.

Reidelbach, ¶ 26. We determined in Reidelbach that “[t]his Congressional purpose simply

does not contemplate, much less imply, that Congress intended to regulate through the

FELA the entire field of injuries and claims a railroad employee may have.”

Reidelbach, ¶ 26 (citing Pikop v. Burlington Northern Ry. Co., 390 N.W. 2d 743

(Minn. 1986), cert. denied, 480 U.S. 951, 941 L. Ed. 2d 800, 107 S. Ct. 1616 (1987)).

¶23 We reaffirm our conclusion in Reidelbach that the FELA does not occupy the

entirety of the field of recovery for injured railroad employees so as to preempt State bad

faith law claims premised on a self-insured railroad’s claims-handling conduct. As we

have previously determined, an insurer’s claims handling and settlement practices

constitute intentional conduct that is separate and distinct from the negligent cause of the

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occupational injuries at issue in the underlying FELA claim. See Reidelbach, ¶ 44

(“The railroad’s settlement practices do not arise from the railroad’s negligence in the

workplace, and will not influence the amount of FELA recovery . . . .”). See also

Graf v. Cont’l W. Ins. Co., 2004 MT 105, ¶ 12, 321 Mont. 65, 89 P.3d 22 (“The issues in a

UTPA claim are separate from the issues in the underlying claim.”). The focus of a UTPA

action is not the amount of the settlement paid to the plaintiffs by the insurer.

Peterson v. Doctors’ Co., 2007 MT 264, ¶¶ 39, 43, 339 Mont. 354, 170 P.3d 459. Instead,

we focus on “the process used by [the insurer] before entering settlement.” Peterson, ¶ 39.

As we stated in Peterson,

The essence of a claim under § 33-18-201, MCA, is that an insurer, given
information available to it, has acted unreasonably in adjusting a claim,
perhaps by failing to investigate, failing to communicate or failing to
negotiate in good faith. Section 33-18-201, MCA, seeks to protect parties
from such acts, and the relevant issue is almost universally how the insurer
acted given the information available to it.

Peterson, ¶¶ 39, 43.

¶24 The hallmark of the FELA is that it “does not make the employer the insurer of the

safety of his employees while they are on duty. The basis of his liability is his negligence,

not the fact that injuries occur.” Anderson, ¶ 67 (quoting Conrail v. Gottshall,

512 U.S. 532, 543, 114 S. Ct. 2396, 2404, 129 L. Ed. 2d 427, 440 (1994)). The FELA

extends only to a railroad’s negligent conduct resulting in occupational injuries. Nothing

in the FELA’s century-plus history evinces an intent that it would apply to a railroad’s

intentional bad faith conduct in handling the claim stemming from the injury. As we

observed in Reidelbach, “[G]iven the humanitarian purpose of the FELA, we find it
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inconceivable, as have several courts before us, that Congress intended the FELA to cover

only certain railroad worker injuries while absolutely precluding any remedy for others.”

Reidelbach, ¶ 53 (citing Mack v. Metro-North Commuter R.R., 878 F. Supp. 673, 677

(S.D.N.Y. 1995); Rogers v. Consolidated RailCorp., 688 F. Supp. 835, 839

(N.D.N.Y. 1988); Wabash R.R. v. Hayes, 234 U.S. 86, 34 S. Ct. 729, 58 L. Ed. 1226

(1914)).

¶25 We most recently distinguished a railroad’s claims-handling conduct from the

negligent conduct at issue in a FELA action in Sinclair. There, an injured railroad

employee brought an independent State law fraud claim challenging the validity of the

release and settlement he entered with BNSF in the underlying FELA suit. Sinclair, ¶ 5.

The release provided that the employee would “release and forever discharge” BNSF

“from all claims and liabilities of every kind of nature, including claims for injuries,

illnesses or damages, if any, which are unknown to me at the present time . . . .”

Sinclair, ¶ 3. The District Court dismissed the employee’s claims upon concluding that the

FELA governed and did not permit him to “simultaneously affirm the validity of his release

and independently pursue state law claims related to fraud.” Sinclair, ¶ 28. We affirmed,

holding that the employee’s FELA release was “inextricably linked” to his claims and,

unlike the bad faith claims at issue in Reidelbach, the FELA provided a direct remedy to

challenge the validity of a fraudulent release. Sinclair, ¶¶ 33, 35 (citing Reidelbach,

¶¶ 43-44; Counts v. Burlington N. R. Co., 896 F.2d 424, 425-26 (9th Cir. 1990)). See also

Dice v. Akron, C. & Y. R. Co., 342 U.S. 359, 361, 72 S. Ct. 312, 314, 96 L. Ed. 2d 398,

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403 (1952) (“[V]alidity of releases under [the FELA] raises a federal question to be

determined by federal rather than state law.”).

¶26 Conversely, Dannels’ FELA action provided him with no opportunity to recover

damages for BNSF’s alleged intentional bad faith conduct in handling his FELA claim.

The only other available avenue of recovery for this type of conduct was through a separate

State law bad faith action. BNSF’s argument that the FELA preempts state bad faith claims

would make the “inconceivable” void we cautioned against in Reidelbach a reality, in

which a railroader has no remedy for a railroad’s intentional claims-handling conduct, no

matter how egregious. See Reidelbach, ¶ 53.

¶27 The infirmity of BNSF’s preemption argument is laid bare by its motion in limine

in the FELA action, in which it sought to preclude Dannels from referencing any

“emotional distress not directly tied to [his] physical injury.” (Emphasis added.) The very

basis of BNSF’s motion was that the FELA was limited in scope to physical injuries. This

was granted by the District Court and the jury was instructed that it was limited to awarding

damages for “injuries . . . sustained as a consequence of physical impact.”

(Emphasis added.) Having foreclosed any scrutiny of its claims handling in the FELA

case, BNSF now incongruously argues that its claims handling should escape scrutiny in a

bad faith action because it is preempted by the FELA.

¶28 Without being able to present evidence of BNSF’s claims handling conduct to the

jury, Dannels was likewise foreclosed from seeking damages for BNSF’s alleged

intentional bad faith conduct. Montana’s bad faith laws fill the space left by the FELA and

15
advance our “overriding interest” in protecting Montana citizens from an insurer’s bad faith

claims practices and, as we discuss more fully below, “there is virtually no risk that the

state cause of action would interfere with the effective administration” of the FELA.

Reidelbach, ¶¶ 45-51 (citing Farmer v. Carpenters, 430 U.S. 290, 97 S. Ct. 1056,

51 L. Ed. 2d 338 (1977) (We must consult in a FELA preemption analysis the additional

considerations of whether (1) “the underlying act or conduct is protected or permitted by

the FELA; (2) the State has “an overriding interest in protecting its citizens from fraudulent,

malicious and bad faith claims practices and the infliction of intentional emotional injury”;

and (3) there is a “risk that the state cause of action would interfere with effective

administration of FELA.”). The FELA does not foreclose Dannels’ claims by field

preemption.

¶29 Finally, we examine conflict preemption. “Conflict preemption occurs when a state

law conflicts with a federal law . . . .” Mont. Immigrant Justice Alliance, ¶ 29 (citing

Arizona, 132 S. Ct. at 2501). “Such a conflict arises when ‘compliance with both federal

and state regulations is a physical impossibility . . . or when state law ‘stands as an obstacle

to the accomplishment and execution of the full purposes and objectives of Congress . . . .’”

Hillsborough Cty., 471 U.S. at 713, 105 S. Ct. at 2375, 85 L. Ed. 2d at 721 (citations

omitted).

¶30 BNSF argues conflict preemption is present between the UTPA and the FELA

because the UTPA imposes an obligation on a self-insured employer to pay a plaintiff’s

lost wages and medical expenses in advance of a final settlement or judgment of the

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underlying FELA claim when liability becomes reasonably clear. See Ridley v. Guaranty

Nat’l Ins. Co., 286 Mont. 325, 951 P.2d 987 (1997); Dubray v. Farmers Ins. Exch.,

2001 MT 251, 307 Mont. 134, 36 P.3d 897. In Ridley, we held that § 33-18-201(6) and

(13), MCA, of UTPA “by their terms[] impose” an advance payment obligation on the

insurer for an injured party’s medical expenses not reasonably in dispute.

Ridley, 286 Mont. at 334, 951 P.2d at 992. See also Dubray, ¶ 14 (“The essence of our

holding in Ridley is that where liability is reasonably clear, injured victims are entitled to

payment of those damages which are not reasonably in dispute without first executing a

settlement agreement and final release.”). We reasoned that prompt payment of an injured

party’s medical expenses was necessary:

Medical expenses from even minor injuries can be devastating to a family of
average income. The inability to pay them can damage credit
and . . . sometimes preclude adequate treatment and recovery from the very
injuries caused. Just as importantly, the financial stress of being unable to
pay medical expenses can lead to the ill-advised settlement of other
legitimate claims in order to secure a benefit to which an innocent victim of
an . . . accident is clearly entitled.

Ridley, 286 Mont. at 335, 951 P.2d at 993. We explained the limits of our holding,

however, stating:

This does not mean that an insurer is responsible for all medical expenses
submitted by an injured plaintiff. Liability must be reasonably clear for the
expense to be submitted. That is, even though liability for the accident may
be reasonably clear, an insurer may still dispute a medical expense if it is not
reasonably clear that the expense is causally related to the accident in
question.

Ridley, 286 Mont. at 334, 951 P.2d at 992. We later expanded our holding in Ridley when

we decided Dubray, determining advance payments should include “[l]ost wages which
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are reasonably certain and directly related to an insured’s negligence or wrongful act . . . .”

Dubray, ¶ 15.

¶31 BNSF, pointing to 45 U.S.C. §§ 51 and 53, asserts that the UTPA’s advance

payment obligation interferes with an employer’s right under FELA to only be held liable

for those damages determined by a jury at trial. “The right to trial by jury is ‘a basic and

fundamental feature of our system of federal jurisprudence” and . . . is ‘part and parcel of

the remedy afforded railroad workers under the [FELA].’” Dice, 342 U.S. at 363,

72 S. Ct. at 315, 96 L. Ed. 2d at 404 (quoting Bailey v. Central V. Ry., 319 U.S. 350, 354,

63 S. Ct. 1062, 1064, 87 L. Ed. 1444, 1448 (1943)). BNSF’s argument is misplaced.

¶32 First, it bears noting at the outset that Dannels made no demand for advance

payment of either his wage loss or medical bills until after the jury had rendered a verdict

in his FELA claim; nor did Dannels seek a declaratory judgment establishing BNSF’s

obligations to advance pay his wage loss or medical bills. Therefore, whether, and to what

extent, these rights and obligations under the UTPA may conceivably conflict with a

railroad’s payment obligations under the FELA is not an issue that is squarely before us

and we decline to speculate on Dannels’ right to take hypothetical actions.

Independence Med. Supply, Inc. v. Mont. Dep't of Pub. HHS, 2018 MT 57, ¶ 37,

391 Mont. 1, 414 P.3d 781 (“This Court has consistently held that we will not render

advisory opinions.”).

¶33 However, BNSF does not just argue that the FELA preempted Dannels’ ability to

file a declaratory judgment action, which he did not file, or seek advance payment of

18
medical expenses and wage loss, which he did not seek. BNSF also argues that the FELA

preempts a railroad workers’ right to seek redress for all bad faith conduct in the adjustment

of a claim. We disagree.

¶34 Assuming, for the sake of argument, that the UTPA’s advance pay obligations may

conflict with any provisions of the FELA, this still would not provide a basis for the total

preemption for which BNSF advocates. At most, it may provide a basis to foreclose a

declaratory judgment action regarding advance pay obligations or for limiting the grounds

upon which a worker may later seek bad faith damages under either the UTPA or the

common law. But as we discussed above, there is a wide array of conduct that is proscribed

by Montana’s bad faith laws wholly exclusive of the advance pay obligations. BNSF’s

argument would effectively immunize it from all bad faith conduct. Like all states,

Montana has an overriding interest in protecting its citizens from fraudulent, malicious,

and bad faith claims practices and the infliction of intentional emotional injury, regardless

of the source of that conduct. Sections 33-18-101, MCA, et seq. In light of the

well-established remedial and humanitarian purpose of the FELA, it would be ironic, to

say the least, if the FELA were to be used as a shield to immunize railroads from any

accountability for all bad faith claims handling.

¶35 BNSF’s obligations to adjust a claim in good faith do not impinge upon its right to

a jury trial under the FELA any more than any other party’s obligation to act in good faith

when adjusting a personal injury claim that is not brought under the FELA. They are two

separate actions, providing two distinct remedies for two distinct courses of conduct, for

19
damages that are wholly independent of each other. Indeed, this case illustrates this very

point. In the FELA action, BNSF successfully sought to exclude reference to any damages

Dannels may have sustained that were not directly related to his “physical injury.” After

the jury found in Dannels’ favor, BNSF ultimately paid the judgment for Dannels’ physical

injury. The appeal presently before us is from a final judgment, to which BNSF stipulated,

compensating Dannels for damages he sustained as a result of BNSF’s claims handling,

subsequent and in addition to the physical injuries that formed the basis of his FELA claim.

CONCLUSION

¶36 Because Dannels made no demand for advance payment of either his wage loss or

medical bills until after the jury had rendered a verdict in his FELA claim, and he did not

seek a declaratory judgment on these issues, we decline to address whether these discrete

claims may be preempted by the FELA. Regarding BNSF’s argument that the FELA

preempts a railroad workers’ right to seek redress for all bad faith conduct in the adjustment

of a claim, we affirm the District Court’s holding that it does not.

/S/ JAMES JEREMIAH SHEA

We Concur:

/S/ MIKE McGRATH
/S/ INGRID GUSTAFSON
/S/ AMY EDDY
District Court Judge Amy Eddy
sitting for Justice Laurie McKinnon

20
Justice Dirk Sandefur, specially concurring.

¶37 I concur in the Court’s opinion to the extent that it holds that FELA does not preempt

a related but independent Montana law duty requiring railroads to handle FELA claims in

a fair and reasonable manner under the particular facts and circumstances of each case in

accordance with governing FELA standards of liability. However, contrary to the

underlying presumption of the parties upon which the Court’s analysis is predicated, I

would hold that the UTPA bad faith claim provided in § 33-18-242, MCA, does not apply

to BNSF because it is neither an “insurer,” nor an entity “utilizing self-insurance” as

referenced in § 33-18-242(8), MCA. I would further hold, however, that BNSF is

nonetheless subject to a Montana common law claim for tortious FELA claims handling

based on violation of the implied contract covenant of good faith and fair dealing and the

special relationship between BNSF and injured workers in the FELA context.

A. BNSF Is Not an “Insurer” or Entity “Utilizing Self-Insurance” as Narrowly
Recognized Under Montana Law.

¶38 The UTPA is an integral component of the Montana Insurance Code. See

§§ 33-1-101 and 33-18-101, MCA. At all times pertinent, the purpose of the Insurance

Code has been to regulate the “transact[ion]” of the “business of insurance,” as

narrowly-defined by the Code. See §§ 33-1-101, -102, -201, 33-2-101, and -106, MCA.

The narrower purpose of the UTPA has been to “regulate trade practices in the business of

insurance” by “defining . . . and . . . prohibiting” unfair and deceptive “trade practices.”

Section 33-18-101, MCA.

21
¶39 Prior to 1987, the UTPA expressly proscribed various unfair insurance claims

handling practices, but provided no express private cause of action for damages in tort

when violated by insurers. See § 33-18-201, MCA (1977 Mont. Laws ch. 320, § 1).

Independent of the UTPA, and based on the common law covenant of good faith and fair

dealing implied as a matter of law in all contracts, insurers had a common law tort duty to

their insureds, as parties to the insurance contract and in special relation to the insured

thereunder, to settle first-party insurance claims within policy limits when liability under

the policy was reasonably clear. See Gibson v. W. Fire Ins. Co., 210 Mont. 267, 274-75,

682 P.2d 725, 730 (1984); Lipinski v. Title Ins. Co., 202 Mont. 1, 15-16, 655 P.2d 970, 977

(1982) (citing First Sec. Bank v. Goddard, 181 Mont. 407, 419-20, 593 P.2d 1040, 1047

(1979)). Accord Stephens v. Safeco Ins. Co. of Am., 258 Mont. 142, 145, 852 P.2d 565,

567-68 (1993) (citing Lipinski and Goddard). First-party claimants thus had a common

law tort remedy against insurers for breach of that duty (i.e., an insurance bad faith claim).

See Gibson, 210 Mont. at 274-75, 682 P.2d at 730; Lipinski, 202 Mont. at 15-16, 655 P.2d

at 977 (citing Goddard, 181 Mont. at 419-20, 593 P.2d at 1047). Accord Stephens, 258

Mont. at 145, 852 P.2d at 567-68 (citing Lipinski and Goddard). In contrast, as third parties

to the insurance contract, third-party claimants had no similar common law remedy against

insurers for failure to reasonably settle third-party liability claims against their insureds.

¶40 In 1983, in the absence of an express private remedy for violation of

UTPA-proscribed unfair insurance claims handling practices, we recognized an implied

third-party UTPA-based tortious bad faith claim against insurers. Klaudt v. Flink, 202

22
Mont. 247, 252, 658 P.2d 1065, 1067 (1983) (recognizing implied private right of action

for damages based on violations of § 33-18-201(6), MCA), overruled in part on other

grounds by Fode v. Farmers Ins. Exch., 221 Mont. 282, 286-87, 719 P.2d 414, 416-17

(1986).1 However, in 1987, motivated by the perceived need to ameliorate the effect of the

Klaudt claim on business insurance rates, the Legislature considered a purported tort-

reform bill primarily intended to “swing[] the pendulum back” by superseding it with a

more limited independent statutory insurance bad faith claim, narrowly predicated on

alleged violations of a specified subset of the unlawful trade practices proscribed in

§ 33-18-201, MCA. See Bill to Revise Law Relating to Insurance Bad Faith Claims, H.R.

240, 50th Leg., Reg. Sess. (1987); House Judiciary Committee Hearing Minutes on House

Bill 240, 50th Leg., Reg. Sess. (Jan. 27, 1987); Executive Session of House Judiciary

Committee Hearing Minutes on House Bill 240, 50th Leg., Reg. Sess. (Feb. 19, 1987);

Senate Business and Industry Committee Hearing Minutes on House Bill 240, 50th Leg.,

Reg. Sess. (Mar. 9-11, 1987); and Executive Session of Senate Business and Industry

1
Though we later anomalously referred to the Klaudt claim as a “common law” claim, it was more
accurately an implied statutory private right of action implied from the then-remediless unlawful
insurance trade practices proscribed by § 33-18-201, MCA. See O’Fallon v. Farmers Ins. Exch.,
260 Mont. 233, 243-44, 859 P.2d 1008, 1014-15 (1993) (characterizing Klaudt claim as “common
law cause of action” predicated on violations of § 33-18-201, MCA); compare Klaudt, 202 Mont.
at 250-52, 658 P.2d at 1066-67 (stating issue as whether § 33-18-201, MCA, “confers a private
cause of action” and holding that § 33-18-201, MCA, created duties to third-party claimants, a
breach of which is “the basis for a civil action”); Fode, 221 Mont. at 284-86, 719 P.2d at 415-16
(recognizing Klaudt claim as a UTPA-based claim rather than a common law claim). See also
Mark Ibsen, Inc. v. Caring for Montanans, Inc., 2016 MT 111, ¶¶ 41-42, 383 Mont. 346, 371 P.3d
446 (distinguishing statutorily-implied tort claims based on violations of statutory duty from
common law claims based on violations of independent common law duties).

23
Committee Hearing Minutes on House Bill 240, 50th Leg., Reg. Sess. (Mar. 12, 1987).

The bill became law and § 33-18-242, MCA, has remained unchanged since. See

§ 33-18-242, MCA (1987 Mont. Laws ch. 278, § 3).

¶41 The new independent statutory insurance bad faith claim was and remains expressly

available to both first- and third-party claimants. Section 33-18-242(1), MCA. While the

focus of the legislative impetus for the new action was on limiting the perceived adverse

effect of the Klaudt claim, the new statute also expressly abolished and precluded

independently recognized first-party common law bad faith claims. Section 33-18-242(3),

MCA. Consistent with the language of § 33-18-201, MCA, and the common law standards

from which it derived,2 § 33-18-242, MCA, also expressly clarified that insurers had no

statutory bad faith liability if a reasonable basis in fact or law existed for contesting liability

or the amount of the claim. Section 33-18-242(5), MCA. The new statute further expressly

provided that claimants did not have to prove, as otherwise required by the language of

§ 33-18-201, MCA, that an alleged UTPA claims handling “violation[] [was] of such

frequency as to indicate a general business practice.” Section § 33-18-242(2), MCA.

Compare § 33-18-201, MCA. However, in an apparently uncontemplated quirk, the

limited language of § 33-18-242, MCA, did not supplant the “common law” Klaudt claim

2
See White v. State ex rel. Montana State Fund, 2013 MT 187, ¶¶ 17-30, 371 Mont. 1, 305 P.3d
795 (noting that UTPA-specified unfair trade practices derived from application of common law
implied covenant of good faith and fair dealing in first-party insurance claim context).

24
it was intended to curb. See Brewington v. Emp’rs Fire Ins. Co., 1999 MT 312, ¶¶ 14-19,

297 Mont. 243, 992 P.2d 237. Compare § 33-18-242(3), MCA.

¶42 Prior to enactment of § 33-18-242, MCA (1987), and by operation of the narrow

Insurance Code definitions of “insurance” and “insurer,” individuals and entities not

primarily engaged in the business of providing contracts of insurance were not regulated

“insurers,” and thus not subject to § 33-18-201, MCA, and related tort liability under the

UTPA-based Klaudt claim. See Ogden v. Montana Power Co., 229 Mont. 387, 391-93,

747 P.2d 201, 204-05 (1987) (holding that a public power utility was not an “insurer” for

purposes of § 33-18-201, MCA, and Klaudt tort claim). Accord Martel v. Montana Power

Co., 231 Mont. 96, 108, 752 P.2d 140, 147 (1988). In Ogden, which like Martel involved

a pre-1987 Klaudt claim alleging that the Montana Power Company unreasonably failed to

settle a third-party negligence claim arising from a power line accident, we noted in passing

that the Legislature had recently enacted § 33-18-242, MCA, which, inter alia, expressly

applied the new statutory bad faith claim not only to insurers but also to “self-insurers.”

Ogden, 229 Mont. at 393, 747 P.2d at 205. However, almost 35 years later, we have never

had occasion to consider the meaning and intent of § 33-18-242(8), MCA (extending

statutory insurance bad faith liability beyond insurers to those “utilizing self-insurance to

pay claims made against them” (emphasis added)).

¶43 As a preliminary matter, § 33-18-242(8), MCA, was not present in the original bill

introduced before the House Judiciary Committee in 1987. See Bill to Revise Law Relating

to Insurance Bad Faith Claims, H.R. 240, 50th Leg., Reg. Sess. (1987). It was

25
mysteriously inserted without explanation or controversy in Executive Session before the

bill passed out to the House floor. See Executive Session of House Judiciary Committee

Hearing Minutes on House Bill 240, 50th Leg., Reg. Sess. (Feb. 19, 1987); H.R. Journal,

50th Leg., Reg. Sess., 762-63, 885, 909-10, 1379 (1987).3 Nor was the subsection (8)

self-insurance provision explained, discussed, or even referenced in any of the subsequent

Senate proceedings on the bill. See Senate Business and Industry Committee Hearing

Minutes on House Bill 240, 50th Leg., Reg. Sess. (Mar. 9-11, 1987); Executive Session of

Senate Business and Industry Committee Hearing Minutes on House Bill 240, 50th Leg.,

Reg. Sess. (Mar. 12, 1987); S. Journal, 50th Leg., Reg. Sess., 815, 884, 904, 938 (1987).

The legislative history of § 33-18-242, MCA, thus includes no indication of the perceived

necessity or intended purpose for extending the new statutory insurance bad faith liability

beyond “insurers” to those “utilizing self-insurance to pay claims made against them.” In

contrast to the precise Insurance Code definitions of “insurance” and “insurer,” the bill and

ultimate statute did not define the term “self-insurance” and, to this day, the term remains

undefined in the UTPA and larger Insurance Code. Section 33-18-242(8), MCA, is thus

facially vague or ambiguous as to whether the reference to those “utilizing self-insurance”

broadly refers to all who simply have no insurance coverage for a particular type of liability

3
Subsection (8) was included in the bill with other amendments in regard to which the legislative
intent and purpose was manifest without need for explanation or definition on the face of the
amended bill. See § 33-18-242(5)-(7), MCA, regarding the “reasonable basis in law or in fact”
defense, specified periods of limitations for the new statutory claim, and a procedural bifurcation
requirement based on former § 33-18-241, MCA, and Fode, 221 Mont. at 287, 719 P.2d at 417.
See also Executive Session of House Judiciary Committee Hearing Minutes on House Bill 240,
50th Leg., Reg. Sess. (Feb. 19, 1987).

26
claim and must thus necessarily “pay claims made against them” by other means or,

alternatively, more narrowly refers only to those who have affirmatively elected and

qualified to be a government-approved “self-insured” in accordance with a preexisting

statutory scheme apart from the Insurance Code.

¶44 In that regard, nothing in the legislative history of § 33-18-242, MCA, manifests or

suggests any legislative intent or purpose to broadly subject every individual or entity who

technically has no third-party insurance coverage for particular types of claims to insurance

bad faith liability under §§ 33-18-201 and -242(1), MCA, absent a reasonable basis in fact

or law for disputing liability or the amount of a claim. To the contrary, the legislative

history of § 33-18-242, MCA, indicates that the sole legislative impetus was to ameliorate

the perceived adverse effect of the Klaudt claim by displacing it with an express statutory

tort remedy more limited in scope and effect. Further indicating the complete absence of

any legislative intent to significantly expand the scope of tort liability under the new

statutory insurance bad faith claim are the historical facts that § 33-18-242, MCA, was a

tort reform measure in which the subject “self-insurance” provision was inconspicuously

included in a package of other more prominent amendments without explanation or

controversy. As a matter of law, the Legislature is presumed to be fully aware of the

substance and effect of its prior enactments. Under the totality of these circumstances, the

only reasonably conceivable explanation for the complete absence of explanation,

definition, reference, or controversy regarding the “self-insurance” provision in the

27
otherwise controversial bill was that the technical meaning of the term “self-insurance”

was already established and well-known to the Legislature through other prior enactments.

¶45 In pertinent part, the Insurance Code has at all times pertinent narrowly defined the

terms “insurance” and “insurer,” to wit:

“Insurance” is a contract through which one undertakes to indemnify another
or pay or provide a specified or determinable amount or benefit upon
determinable contingencies.

“Insurer” includes every person engaged as indemnitor, surety, or contractor
in the business of entering into contracts of insurance.

Section 33-1-201(5)(a) and (6), MCA (emphasis added).4 The Code has at all times further

defined the derivative terms “authorized insurer,” “domestic insurer,” “foreign insurer,”

and “alien insurer,” and specified for all that no “person acting as an insurer” may

“transact[] insurance in this state” without a prior “certificate of authority issued by the

[insurance] commissioner” in accordance with the requirements of §§ 33-2-106 and -115

through -117, MCA. Sections 33-1-201(1)-(4), (9), and 33-2-101, MCA. See also

§ 33-1-201(10), MCA (defining the term “unauthorized insurer”).

¶46 Against that precisely-defined statutory backdrop, the concept of “self-insurance”

was already established and well-known to the Legislature prior to 1987 in the Montana

Workers’ Compensation Act (Work-Comp Act) and the Montana Motor Vehicle Insurance

4
It is of further note that, at all times pertinent, the limited purpose of the Insurance Code has been
to regulate the “transact[ion] [of the] business of insurance” or “insurer transacti[on] [of]
insurance,” and that the limited purposes of the UTPA thereunder has been to “regulate [unfair or
deceptive] trade practices in the business of insurance.” Sections 33-1-102(1), 33-2-101(1), and
33-18-101, and -102, MCA.

28
Responsibility and Verification Act (MVIRVA). Under the Work-Comp Act, Montana

employers have at all times pertinent had three options by which to provide mandatory

workers’ compensation insurance benefits to employees. First, there were and remain two

options for acquiring the requisite insurance coverage from third-party providers—under

an insurance policy provided by a Montana-regulated “insurer” or by coverage acquired

from the statutory “state fund.” Section 39-71-2201, et seq., MCA (Plan 2 private

insurance option);5 Title 39, chapter 71, part 23, MCA (Plan 3 state fund option). As the

third option, employers could and can elect, upon “permission” of the responsible state

agency, to “provide self-insured workers’ compensation benefits for their employees.”

Sections 39-71-2101 and -2103, MCA (Plan 1 self-insurance option). In order to obtain

“permission” to provide self-insured workers’ compensation benefits, the Work-Comp Act

has at all times required applicants to “furnish[] satisfactory proof . . . of solvency and

financial ability to pay the compensation and benefits provided [under the Act] . . . and to

discharge all liabilities . . . reasonably likely to be incurred” during the subject time period.

Section 39-71-2101(1), MCA (1915 Mont. Laws ch. 96, § 30) (emphasis added). See also

§ 39-71-116(17), MCA (defining “insurer” as referenced in the Work-Comp Act to inter

alia include employers who elect to be “bound by compensation plan No. 1”).

5
As of 2007, employers can also obtain the requisite Plan 2 workers’ compensation insurance
coverage from a “captive reciprocal insurer established by or on behalf of any employer or a group
of employers.” Section 39-71-2201(3), MCA (2007 Mont. Laws ch. 117, § 10). However,
“captive” insurance companies were not authorized to transact insurance in Montana until after
2001, and then only as regulated under the Insurance Code. See §§ 33-28-101, -102, et seq., MCA
(2001 Mont. Laws ch. 298, § 1, as amended by 2003 Mont. Laws ch. 383, §§ 8-9).

29
¶47 Similarly, for purposes of the MVIRVA mandatory motor vehicle liability insurance

requirement, “[a]ny person in whose name more than 25 motor vehicles are registered may

qualify as a self-insurer by obtaining a certificate of self-insurance issued by the [Montana

Department of Justice].” Section 61-6-143(1), MCA (1951 Mont. Laws ch. 204, § 34)

(emphasis added). MVIRVA self-insurance certificates are available only on verification

of the requisite fleet requirement and satisfactory proof that the applicant “is possessed and

will continue to be possessed of ability to pay judgments obtained against such person.”

Section 61-6-143(2), MCA (1951 Mont. Laws ch. 204, § 34). For purposes of a certificate

of self-insurance, “[p]roof of financial responsibility” means “proof of ability to respond

in damages for liability on account of accidents occurring subsequent . . . [thereto and]

arising out of the ownership, maintenance, or use of a motor vehicle.” Section 61-6-102(9),

MCA.

¶48 Thus, as manifest in the Work-Comp Act and MVIRVA, there has been at all times

pertinent a significant and well-known technical legal distinction under Montana law

between affirmatively government-approved “self-insurers” and others who, for whatever

reason, technically have no insurance coverage for a type of liability claim and must pay

through other means when necessary. We must construe statutory terms or phrases that

have technical meaning in accordance with any “peculiar and appropriate meaning

[acquired] in law.” Section 1-2-106, MCA. Here, as referenced in § 33-18-242(8), MCA,

and in the absence of a contrary statutory provision, the phrase individual or entity

“utilizing self-insurance” has technical legal meaning referring only to those who

30
affirmatively obtain statutorily-specified government approval or verification to self-insure

or utilize self-insurance for liabilities within the scope of a statutorily-mandated form or

level of insurance, such as compulsory workers’ compensation or automobile liability

insurance, for example.

¶49 In the context of construing a standard insurance policy “other insurance” provision,

the New Jersey Superior Court, Appellate Division, long ago aptly explained the significant

distinction between the broad colloquial meaning of “self-insurance” and the more narrow

technical legal meaning of the term under a state insurance regulatory scheme similar to

ours, to wit:

We start from the premise that so-called self-insurance is not insurance at
all. It is the antithesis of insurance. The essence of an insurance contract is
the shifting of the risk of loss from the insured to the insurer. The essence of
self-insurance, a term of colloquial currency rather than of precise legal
meaning, is the retention of the risk of loss by the one upon whom it is
directly imposed by law or contract. . . . Clearly then, [in the broadest
colloquial sense,] [any]one may be regarded as a self-insurer as to any risk
of loss to which he is subject and which is susceptible to insurance coverage
but as to which he has not obtained such coverage. . . . But as a matter both
of common sense and the fundamentals of insurance law, a failure to
purchase obtainable insurance is not itself insurance. That failure simply
and inevitably means that there is no insurance for that risk. Thus, the
undertaking to self-insure cannot, by definition, be regarded as insurance.

Am. Nurses Ass’n v. Passaic Gen. Hosp., 471 A.2d 66, 69 (N.J. Super. Ct. App. Div. 1984)

(internal citations omitted), reversed in part on other grounds, 484 A.2d 670 (N.J. 1984).6

6
See also Aerojet-General Corp. v. Transport Indem. Co., 948 P.2d 909, 930 n.20 (Cal. 1997)
(“[i]n a strict sense, ‘self-insurance’ is a ‘misnomer[]’ . . . ‘[s]elf-insurance is equivalent to no
insurance’” (internal citations omitted)); Aetna Cas. & Sur. Co. v. World Wide Rent-A-Car, Inc.,
284 N.Y.S.2d 807, 809 (N.Y. App. Div. 1967) (auto liability self-insurance is not insurance); State

31
However, in contrast to “the general, imprecise and amorphous concept of self-insurance,”

the New Jersey Court further recognized that:

there is one type of self-insurance . . . [with] a legally-recognized identity and
a clearly defined consequence. We refer to the situation in which [a]
compulsory liability insurance . . . [scheme] provides that a person subject to
the mandate may, in accordance with specified standards and upon a
satisfactory showing of financial ability to bear the risk, be exempted from
the obligation to purchase insurance upon issuance by a designated
administrative officer or agency of a certificate of self-insurance. . . . This
qualified self-insurance, as it may be termed for convenience in reference,
has been held to require the self-insurer to provide the public sought to be
protected by the compulsory insurance with the same “coverage” and
incidents of “coverage” as he would have had to have purchased but for the
certificate of self-insurance.

Am. Nurses Ass’n, 471 A.2d at 69 (emphasis added).7

Farm Mut. Auto. Ins. Co. v. Du Page Cty, 955 N.E.2d 67, 74-75 (Ill. App. Ct. 2011) (county that
is colloquially self-insured “is not an insurer or an insurance company”—“[a]n insurance policy is
a contract requiring two parties, an insurer and an insured”); State v. Continental Cas. Co., 879
P.2d 1111, 1116 (Idaho 1994) (self-insurance is not insurance “[b]ecause [it] does not involve a
transfer of the risk of loss”—merely “a retention of that risk”); Cordova v. Wolfel, 903 P.2d 1390,
1392 (N.M. 1995) (“[m]ost authorities agree that self-insurance is not insurance”—“[i]nsurance is
a contract whereby for consideration one party agrees to indemnify or guarantee another party
against specified risks”); Am. Family Mut. Ins. Co. v. Missouri Power & Light Co., 517 S.W.2d
110 (Mo. 1974) (auto liability self-insurance is not insurance); Eakin v. Indiana Intergovt’l Risk
Mgmt Auth., 557 N.E.2d 1095, 1101 (Ind. Ct. App. 1990) (colloquial self-insurance through
risk-pooling is not insurance because “the risks and costs of civil liability are completely
internalized among [the] participants” without “shift[ing] the risk to for-profit risk takers”—
quoting Antiporek v. Vill. of Hillside, 499 N.E.2d 1307 (Ill. 1986)).
7
See also Martin v. Powers, 505 S.W.3d 512, 519-20 (Tenn. 2016) (noting “many formal
procedures . . . whereby an entity can become recognized as a self-insurer” under state law, “most
commonly . . . by filing a bond or furnishing another form of proof of the ability to pay amounts
for which the self-insurer may become liable” (internal punctuation and citation omitted)); United
Nat. Ins. Co. v. Philadelphia Gas Works, 289 A.2d 179, 181 (Pa. Super. Ct. 1972) (a certificate of
self-insurance under a mandatory motor vehicle liability scheme “is not an insurance policy . . .
[its] purpose . . . is the protection of the public against an owner of vehicles”—not to ensure
indemnification of individual tortfeasors (citing Farm Bureau Mut. Auto. Ins. Co. v. Violano, 123
F.2d 692, 696 (2d Cir. 1941)).

32
¶50 Here, it is beyond genuine material dispute that, as an interstate common carrier,

BNSF is not an “insurer” engaged in the transaction of the “business of insurance” as

referenced and defined in §§ 33-1-102(1), -201(1)-(6), (9), and 33-18-101, MCA. As a

state law matter, BNSF is thus not subject to the Montana Insurance Code or UTPA, unless

as an entity “utilizing self-insurance to pay claims made against [it],” as referenced in

§ 33-18-242(8), MCA. In that regard, the Montana Work-Comp Act does not apply to

BNSF as a matter of law, and the underlying FELA claim at issue does not arise as a matter

of fact or law within the scope of the MVIRVA. Nor does it arise under any similar

compulsory insurance scheme under Montana law.

¶51 Dannels nonetheless implicitly asserts that BNSF “utilizes self-insurance” as

referenced in § 33-18-242(8), MCA, because it “is reimbursed” for FELA claim payouts

by a “captive” company, “BNSF Insurance,” a Bermuda-incorporated entity through which

BNSF “participates in reinsurance pooling agreements with other railroads.” (Emphasis

added.) However, taking his description of “BNSF Insurance” as true, Dannels as a matter

of law cannot demonstrate that BNSF’s alleged reinsurance pooling agreements with other

railroads through an unregulated “captive” subsidiary either constitute “insurance” or

“self-insurance” as narrowly recognized under Montana law and referenced in

§ 33-18-242(8), MCA.8 Dannels cannot distinguish BNSF’s “reinsurance” pooling

8
Even under an alternative “insurer” or “captive insurer” theory of liability under
§ 33-18-242, MCA, Dannels has made no assertion, much less showing, that either BNSF or
“BNSF Insurance” is a “foreign insurer,” “alien insurer,” or “authorized insurer,” as defined and
regulated under §§ 33-1-201(1)-(6), (9), 33-2-101, -106, and -115 through -117, MCA, and

33
agreements through an unregulated “captive” subsidiary as anything more than an example

of the “myriad” of “customary [non-insurance] private indemnity agreement[s]”

distinguished by the New Jersey Court from true insurance or statutorily qualified

self-insurance, to wit:

The . . . question [arises as to] whether there should be any different result
when the nature of the self-insured risk of loss is an obligation to indemnify.
We do not perceive any viable conceptual basis for ascribing different
consequences to that risk of loss. . . . It is clear that all contracts of insurance
are, basically, indemnity agreements. But all indemnity agreements are not
insurance contracts. . . . As a matter of common understanding, usage, and
legal definition, an insurance contract denotes a policy issued by an
authorized and licensed insurance company whose primary business it is to
assume specific risks of loss of members of the public at large in
consideration of the payment of a premium. There are, however, other risk-
shifting agreements which are not insurance contracts. These include the
customary private indemnity agreement where affording the indemnity is not
the primary business of the indemnitor and is not subject to governmental
regulation but is merely ancillary to and in furtherance of some other
independent transactional relationship between the indemnitor and the
indemnitee. The indemnity is, thus, not the essence of the agreement creating
the transactional relationship but is only one of its negotiated
terms. . . . There are myriad other examples.

engaged in the transaction of the business of insurance in Montana as referenced in §§ 33-1-102(1)
or 33-18-101, MCA. Moreover, while “captive insurers,” including reciprocal captive insurers,
inter alia, may now transact insurance under Montana law, they may do so only subject to
regulation under the Montana Insurance Code upon advance issuance of a “certificate of authority”
issued upon qualification by the Montana insurance commissioner. See § 33-28-102(2), MCA.
Dannels has neither stated, nor shown, any reason to believe that “BNSF Insurance” is a regulated
“captive insurer” authorized to transact business in Montana. He has further failed in any event to
allege or show that “BNSF Insurance” was in any manner directly involved in the actual handling
of the FELA claim at issue or FELA claims in general.

34
Am. Nurses Ass’n, 471 A.2d at 70-71 (emphasis added).9 Thus, contrary to Dannels’

implied assertion, BNSF is in any event not a “self-insurer” or entity “utilizing

self-insurance” for FELA claims as recognized under Montana law and referenced in

§ 33-18-242(8), MCA.

¶52 At bottom as to FELA claims, whatever the structure of its unregulated subsidiary

“BNSF Insurance,” BNSF is neither an “insurer,” nor an entity that “utilizes

self-insurance” as narrowly recognized under Montana law. On this record, it is no more

than a technically-uninsured private entity, primarily engaged in business as a common

carrier of freight, and which participates in non-insurance liability indemnification

agreements with other non-insurer railroads through a wholly owned subsidiary not

regulated for that purpose under Montana law. As a matter of law, BNSF is neither an

“insurer,” nor an entity utilizing “self-insurance,” as referenced in § 33-18-242(1) and (8),

MCA, and is thus not subject to liability for unfair FELA claims handling practices under

§ 33-18-242, MCA.

B. BNSF Has a First-Party Common Law Duty of Good Faith and Fair Dealing
Under Montana Law to Reasonably Investigate and Settle FELA Claims When
FELA Liability Is Reasonably Clear.

¶53 The employment relationship between railroads and railroad workers is first and

foremost a contractual relationship arising under and governed by Montana law, except to

the extent preempted by applicable federal law. Sections 39-2-101 and -903(2), MCA;

9
See also Crone v. Crone, 2003 MT 238, ¶ 30, 317 Mont. 256, 77 P.3d 167 (insurance is only one
form of contract indemnity with another).

35
U.S. Const. art. VI. As a matter of fact, the contractual employment relationship between

BNSF and its railway workers, including Dannels, is presumably governed by the terms of

a collective bargaining agreement (CBA), as is typical, which are in turn governed by

federal labor law, such as the Labor Management Relations Act (LMRA), 29 U.S.C.

§ 185(a), and/or the Railway Labor Act (RLA), 45 U.S.C. § 151, et seq., as applicable.10

As a matter of law, the LMRA and RLA separately preempt state law claims for relief that

depend on application or interpretation of the express terms of CBAs in interstate

commerce. Conversely, however, the LMRA and RLA do not preempt employee claims

against employers predicated on alleged breach of independent legal duties that do not

depend on interpretation or application of the express terms of an otherwise governing

CBA. Hawaiian Airlines, Inc. v. Norris, 512 U.S. 246, 260-66, 114 S. Ct. 2239, 2247-51

(1994) (noting that RLA preemption standard is “virtually identical to” the LMRA

preemption standard recognized in Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 220, 105

S. Ct. 1904, 1916 (1985)); Pike v. Burlington N. R.R. Co., 273 Mont. 390, 398-401, 903

P.2d 1352, 1357-59 (1995) (citing Hawaiian Airlines).11

10
It is unclear and beyond the scope of the matters at issue to discern whether and to what extent
Dannels is subject to a CBA governed by the RLA, LMRA, or both.
11
Accord Winslow v. Montana Rail Link, Inc., 2000 MT 292, ¶¶ 14-27, 302 Mont. 289, 16 P.3d
992 (state statutory wrongful discharge and non-injury-based negligent railroad management
claims not preempted by LMRA or RLA where not based on an alleged breach, or interpretation
or application of, an express term of the CBA); Foster v. Albertsons, Inc., 254 Mont. 117, 123-28,
835 P.2d 720, 724-27 (1992) (state common law wrongful discharge claim based on tortious
breach of implied covenant of good faith and fair dealing preempted by LMRA because proof
dependent on interpretation or application of express terms of LMRA-governed CBA, but not
independent state law claim for retaliatory discharge regarding sexual harassment claim not

36
¶54 As a matter of state law, implied by law in every contract is a covenant of good faith

and fair dealing that requires “honesty in fact and the observance of reasonable commercial

standards of fair dealing in the trade.” Section 28-1-211, MCA,12 Story v. City of Bozeman,

242 Mont. 436, 449-50, 791 P.2d 767, 774-75 (1990). The covenant derives from the

“justified expectation” of each party “that the other will act in a reasonable manner” within

the framework of the express terms of the contract. Story, 242 Mont. at 450, 791 P.2d at

775. The extent of the implied covenant thus depends upon the justified expectations of

the parties under the totality of the circumstances under the particular contractual setting

at issue. See Hardy v. Vision Serv. Plan, 2005 MT 232, ¶¶ 13-17, 328 Mont. 385, 120 P.3d

402. By nature, proof of breach of the implied covenant of good faith and fair dealing does

not require or depend on proof of breach of an express contract term. Story, 242 Mont. at

450, 791 P.2d at 775. Proof of an alleged breach of the implied covenant merely requires

proof that the offending party acted within the framework of the express contract in a

manner that was an unreasonable deviation from prevailing commercial standards of

reasonableness in the trade at issue. See Story, 242 Mont. at 448-50, 791 P.2d at 774-75.

predicated or dependent on express terms of the CBA); Smith v. Montana Power Co., 225 Mont.
166, 169-71, 731 P.2d 924, 926-27 (1987) (common law wrongful discharge claim based on
alleged tortious breach of implied covenant of good faith and fair dealing preempted by LMRA
where proof of the claim was “substantially dependent” on express terms of the LMRA-governed
CBA).
12
See also §§ 30-1-201(2)(u) and -203, MCA (UCC recognition of implied covenant of good
faith).

37
Accord Phelps v. Frampton, 2007 MT 263, ¶ 29, 339 Mont. 330, 170 P.3d 474; Hardy,

¶ 13; Weldon v. Montana Bank, 268 Mont. 88, 94-95, 885 P.2d 511, 515 (1994).

¶55 In the context of FELA and the underlying relationship between a railroad and union

railway workers, the CBA is the base employment contract which, in pertinent essence,

expressly provides that covered railroad workers will perform assigned work as directed in

return for specified wages and benefits in accordance with the CBA, subject to specified

discipline and discharge provisions and rules. Upon formation of the employment contract,

FELA independently imposes on railroads a federal statutory duty to compensate workers

for work-related injuries in accordance with its remedial standard of liability.13 As a matter

of law, the net effect of the railroad employment contract, FELA, and covenant of good

faith and fair dealing implied in the contract as a matter of law is the mutual expectation of

the parties that the employing railroad will fairly and reasonably compensate its workers

for work-related injury in accordance with FELA liability standards. Accordingly, by

operation of the implied covenant of good faith and fair dealing overlaying the employment

contract in the FELA context, employing railroads have an implied Montana common law

contract duty to handle Montana-accrued FELA claims in a manner that is reasonable under

13
Congress enacted FELA for the humanitarian purpose of ameliorating the harsh common law
obstacles that previously impeded railroad workers from obtaining compensation for work-related
injury. See 45 U.S.C. § 51; Consolidated Rail Corp. v. Gottshall, 512 U.S. 532, 542-43,
114 S. Ct. 2396, 2403-04 (1994) (“[c]ognizant of the physical dangers of railroading that resulted
in the death or maiming of thousands of workers every year, Congress crafted a federal remedy
that shifted part of the ‘human overhead’ of doing business from employees to their employers”
(internal citations omitted)).

38
the facts and circumstances of each case in accordance with the governing FELA standard

of liability.

¶56 As previously held in Reidelbach v. Burlington N. & Santa Fe Ry. Co., 2002 MT

289, 312 Mont. 498, 60 P.3d 418, and again today, under the erroneous presumption

procedurally foisted on the Court by the parties’ stipulation below that the UTPA applies

to railroads operating in Montana,14 FELA does not preempt an independent state common

law fair claims handling duty implied from the employment contract because FELA neither

imposes, nor precludes, such a related but distinct legal duty. Nor does such state law duty

in any way impede or interfere with any purpose, provision, or operation of FELA for

purposes of the federal field preemption doctrine. Despite that it would not arise as a matter

of law in the absence of the underlying employment contract, the FLMA and the RLA, as

applicable, similarly do not preempt such a duty because it arises as a matter of state law

independent of the express terms of any otherwise governing CBA and is not dependent on

interpretation or application thereof. See Atchison, Topeka & Santa Fe Ry. Co. v. Buell,

480 U.S. 557, 561-67, 107 S. Ct. 1413-16 (1987) (holding that recovery of emotional

14
Unlike Dannels’ asserted claim of UTPA liability here, Reidelbach did not involve an express
UTPA insurance bad faith claim under § 33-18-242, MCA. See Reidelbach, ¶¶ 10 and 51. Rather,
Reidelbach involved a UTPA-implied third-party Klaudt claim theory (citing Brewington v.
Emp’rs Fire Ins. Co., 1999 MT 312, 297 Mont. 243, 992 P.2d 237 and § 33-18-101, MCA) and,
alternatively, an inconsistent first-party common law tortious bad faith claim based on alleged
breach of the implied covenant of good faith and fair dealing (citing Story v. City of Bozeman, 242
Mont. 436, 791 P.2d 767 (1990)) with reference to an alleged qualifying special relationship
between Reidelbach and BNSF. See Reidelbach, ¶¶ 10 and 51. As here, the focus in Reidelbach
was on the narrow FELA preemption issue without analysis of whether the asserted state law claim
even stated a cognizable claim for relief as applied to BNSF as a threshold matter of Montana law.

39
distress damages under FELA would not be inconsistent or in conflict with RLA collective

bargaining scheme). Thus, neither FELA, nor the RLA/FLMA, preempt an implied

Montana contract duty requiring railroads to handle FELA claims in a fair and reasonable

manner in accordance with FELA liability standards.

¶57 However, as in the foregoing analysis of the inapplicability of § 33-18-242, MCA,

to BNSF, a similar threshold state law question remains as to whether an independent

common law tortious bad faith claims handling claim would lie against BNSF on its

constituent elements. We have long recognized that Montana employers have an implied

common law contract duty “to deal fairly and in good faith with [their] employees.” Morse

v. Espeland, 215 Mont. 148, 152, 696 P.2d 428, 430 (1985). Accord Nicholson v. United

Pac. Ins. Co., 219 Mont. 32, 40, 710 P.2d 1342, 1347 (1985) (internal citations omitted),

overruled in part on other grounds by Story, 242 Mont. at 450, 791 P.2d at 775 (in re

standard for tortious violation); Weber v. Blue Cross of Montana, 196 Mont. 454, 463-64,

643 P.2d 198, 203 (1982). While generally compensable only in contract by contract

damages, Hardy, ¶ 13; Story, 242 Mont. at 450-51, 791 P.2d at 775-76, breach of the

implied covenant is compensable in tort if the breach occurred in the context of a “special

relationship” between the parties “not otherwise controlled by specific statutory

provisions.” Story, 242 Mont. at 451-52, 791 P.2d at 776. A special relationship giving

rise to tort liability for breach of the implied covenant exists when:

(1) “the contract [is] such that the parties are in inherently unequal
bargaining positions”;

40
 (2) the weaker party had a non-profit motivation for entering into the
contract, such as “to secure peace of mind, security, [or] future
protection”;

(3) “ordinary contract damages are not adequate” to remedy the breach
because they “do not require the party in the superior position to
account for its [wrongful] actions” and are not adequate to “make the
inferior party ‘whole’”;

(4) the weaker party “is especially vulnerable because of the type of harm
[the party] may suffer” and the related necessity of placing trust in the
stronger party to perform; and

(5) the stronger party is aware of the special vulnerability of the weaker
party.

Story, 242 Mont. at 451-52, 791 P.2d at 776 (quoting Wallis v. Superior Court, 207 Cal.

Rptr. 123, 129 (Cal. Ct. App. 1984)).

¶58 Here, Dannels’ railroad employment is presumably governed by the express terms

of the federally regulated CBA under which BNSF employed him. His ultimate entitlement

to compensation for work-related injury is then independently governed by FELA. Neither

govern, however, the question of whether BNSF handled his FELA claim in a fair and

reasonable manner under the circumstances in accordance with governing FELA liability

standards. Nor is that question governed by any other specific statutory scheme. Thus, a

common law tortious FELA claims handling claim is “not otherwise controlled by specific

statutory provisions” for purposes of the threshold Story criterion here.

¶59 Turning to the Story special relationship criteria, substantial parity presumably

exists between BNSF and union railroad workers in the collective bargaining process, at

least in regard to the general terms and conditions of employment. However, Dannels’

41
entitlement to compensation for work-related injury under FELA is not dependent on the

collective bargaining process or any resulting CBA. See Buell, 480 U.S. at 561-67, 107

S. Ct. at 1410-16. Moreover, like third-party claimants in the liability insurance context,

injured railroad workers have no leverage, alternative, or remedy in the FELA claims

handling and negotiation process other than the threat of FELA litigation, with nothing

waiting in the end zone other than the compensation to which they would in any event be

entitled under FELA liability standards from the get-go, albeit as significantly reduced by

the cost of attorney fees necessary to acquire it. As a result, it is distinctly possible for the

railroad to either delay or deny settlement of an injured worker’s FELA claim, without a

reasonable basis in fact or law for doing so, for no reason other than to leverage a more

advantageous settlement against an economically desperate worker. Such scenarios are

particularly damaging to injured workers who are temporarily or permanently unable to

continue working in their former railroad capacity as a result of a work-related disability.

Regardless of the relative parity between them as to other conditions of employment,

employing railroads and injured workers are in inherently unequal, widely-disparate

bargaining positions regarding the railroad’s handling of their FELA personal injury

claims.

¶60 Under the second and third Story criteria, railroad workers unquestionably have a

motive for economic gain in accepting and continuing railroad employment for wages and

related benefits. As a matter of law, however, they have no legitimate motive or interest

in economic gain in obtaining fair and reasonably prompt compensation for work-related

42
personal injury due them under FELA. To that end, ordinary FELA damages compensate

workers only for statutorily compensable injury and detriment caused by the subject

work-related injury. FELA damages do not compensate injured workers for any additional

provable harm caused by a railroad’s failure to promptly settle a FELA claim in the absence

of a reasonable basis in fact or law for contesting it. In that scenario, ordinary FELA

damages are not only inadequate to make the injured claimant whole for the additional

harm or detriment caused by unreasonable railroad intransigence in the claims handling

process, but further provide no disincentive or deterrent sufficient to hold the offending

railroad to account for additional harm or detriment caused thereby.

¶61 As to the fourth and fifth Story criteria, railroad workers who suffer more than minor

injuries that do not result in wage loss are particularly vulnerable to unreasonable railroad

claims handling because, in addition to the temporary or permanent disabling nature of the

injury on a worker’s physical integrity and function, the worker also inevitably faces the

related economic hardships of immediate wage loss, concomitant costs of medical

treatment and necessities of life, and the impairment of ability to work in any other railroad

or non-railroad capacity for some indefinite time into the future, if not permanently.

Employing railroads are unquestionably aware of this special vulnerability. Therefore, all

of the Story criteria for recognition of a special relationship giving rise to an independent

tort duty and liability between contracting parties are therefore present here as a matter of

law. Consequently, unlike the UTPA insurance bad faith claim asserted by Dannels, an

43
independent Montana common law claim for tortious FELA claims handling is cognizable

against BNSF.

¶62 Finally, by partial analogy to the UTPA standard of duty and liability, I would hold

that the standard of duty for determining whether a railroad handled a FELA claim in a fair

and reasonable manner is whether the railroad disputed the FELA claim without a

reasonable basis in fact or law to dispute a material aspect of any of the essential elements

of the claim under applicable FELA standards. Cf. §§ 33-18-201(6) and -242(5), MCA.

In this context, whether a railroad had a reasonable basis in fact or law to dispute an

essential element of a FELA claim is an objective standard based on consideration of

governing FELA liability standards as applied to the railroad’s knowledge of the pertinent

facts and circumstances then available. Cf. Peterson v. St. Paul Fire & Marine Ins. Co.,

2010 MT 187, ¶ 39, 357 Mont. 293, 239 P.3d 904.15 As in the UTPA context, an ultimate

finding by the trier of fact on the elements of a FELA claim has no bearing on whether the

railroad earlier reasonably disputed the claim based on the then-available material facts

known and applicable law. Cf. Peterson, ¶ 39.

¶63 However, because they are predicated in our UTPA bad faith jurisprudence on more

specific statutory duties specified in § 33-18-201, MCA, I would hold that

insurance-specific concepts and constructs, such as advance-pay requirements and related

15
I would further hold by partial analogy to the UTPA that the railroad’s duty to handle an asserted
FELA claim inter alia includes the duty to conduct a reasonable investigation of the claim based
on all pertinent information then available. Cf. § 33-18-201(4), MCA.

44
preliminary declaratory judgment procedures, inter alia, have no analogous application in

the railroad claims settlement context.16 To further ensure accomplishment of FELA’s

intended federal purpose free of abuse or other undue interference with a railroad’s

administration of FELA claims, I would further hold that a tortious FELA claims handling

claim is not cognizable or ripe for filing against a railroad until after all aspects of the

underlying liability claim are fully resolved by written settlement agreement or final

judgment in favor of the claimant, whether pursuant to M. R. Civ. P. 12, 56, or on verdict

or finding of the trier of fact. Cf. § 33-18-242(6)(b), MCA.

¶64 In summary, I would hold that the UTPA bad faith claim provided in § 33-18-242,

MCA, and incorporated unfair insurance trade practices specified in § 33-18-201, MCA,

do not apply to BNSF because it is neither an “insurer,” nor an entity “utilizing

self-insurance,” as referenced in § 33-18-242(1) and (8), MCA. I would further hold,

however, that BNSF is nonetheless subject to state common law liability for tortious FELA

claims handling based on breach of the implied contract covenant of good faith and fair

dealing in the context of the special relationship between BNSF and injured workers in the

remedial FELA context. On that basis, I specially concur in Court’s opinion to the extent

that it holds that FELA does not preempt a related but independent state law duty requiring

16
I thus concur in Justice Rice’s dissent to the extent that it points out the manifest incompatibility
of such insurance-specific UTPA constructs and procedures with the FELA claims handling
process.

45
railroads to handle FELA claims in a fair and reasonable manner under the particular facts

and circumstances of each case in accordance with the governing FELA liability standards.

¶65 I recognize unabashedly that the parties did not raise the state law issues analyzed

in this special concurrence on appeal. However, I simply cannot and will not be a party to

further perpetuation of the patently erroneous presumption, that BNSF is subject to UTPA

tort liability for unfair insurance claims handling practices, foisted on the Court by the

parties’ stipulated narrow focus on whether FELA preempts that only presumed state law

liability. As a mischievous result of the limiting effect of that stipulation on the scope of

the Court’s analysis, the majority opinion will, if otherwise left standing on such a shaky

state law predicate on subsequent FELA field preemption review in federal court, be

hereafter cited as a canon holding that BNSF, an entity “utilizing self-insurance” in only

the broadest colloquial sense under an undefined and unanalyzed statutory term, is subject

to tort liability for violating UTPA-proscribed unfair insurance claims handling practices.

Surely to follow will be the further expansive use of this holding to similarly impose new

tort liability unintended by the Legislature on other persons and entities who are simply

uninsured in the technical sense. I specially concur.

/S/ DIRK M. SANDEFUR

Justice Jim Rice, dissenting.

¶66 I would conclude that Dannels’ Unfair Trade Practices Act (UTPA), §§ 33-18, MCA

and Montana common law claims are preempted because the UTPA creates unique
46
obligations and damages conflicting with the comprehensive and exclusive framework for

railroad carrier liability under the Federal Employers Liability Act (FELA), 45 U.S.C.

§§ 51-60 (2021).

¶67 FELA is long recognized as the comprehensive and exclusive framework governing

railroad employer’s negligence. South Buffalo Ry. Co. v. Ahern, 344 U.S. 367, 371, 73

S. Ct. 340, 342 (1953). See also 45 U.S.C. § 54a; 49 U.S.C. § 20106(a)(1). In enacting

FELA, Congress undertook “to cover the subject of the liability of railroad companies to

their employees injured while engaged in interstate commerce.” New York Cent. R. Co. v.

Winfield, 244 U.S. 147, 152, 37 S. Ct. 546, 548 (1917) (emphasis added). FELA is a “broad

remedial statute” and “defined in broad language, which has been construed even more

broadly.” Atchison, Topeka & Santa Fe R.R. Co. v. Buell, 480 U.S. 557, 561-62, 107 S. Ct.

1410, 1413 (1987) (footnotes omitted). FELA “establishes a rule or regulation which

is intended to operate uniformly in all the States, as respects interstate commerce, and in

that field it is both paramount and exclusive.” New York Cent. & Hudson River R. Co. v.

Tonsellito, 244 U.S. 360, 361-62, 37 S. Ct. 620, 621 (1917) (emphasis added). See also

Dice v. Akron, Canton & Youngstown R. R. Co., 342 U.S. 359, 361, 72 S. Ct. 312, 314

(1952) (stating that “only if federal law controls can the federal Act be given that uniform

application throughout the country essential to effectuate its purposes”) (citation omitted).1

1
Regarding uniformity, as Appellant BSNF’s brief indicates, “[i]n every State except Montana, a
FELA employer is entitled to contest liability and damages on the merits unencumbered by
additional substantive state-law duties.”

47
¶68 Consequently, “Congress having declared when, how far, and to whom carriers shall

be liable on account of accidents in the specified class, such liability can neither be

extended nor abridged by common or statutory laws of the State.” Tonsellito, 244 U.S. at

362, 37 S. Ct. at 621. “We do not doubt that [FELA] . . . displaces any state law trenching

on the province of the Act.” Ahern, 344 U.S. at 371, 73 S. Ct. at 342 (1953). State laws

are preempted when they stand as an “obstacle to the accomplishment and execution of the

full purposes and objectives of Congress” in implementing a uniform system of regulation.

Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404 (1941) (footnote omitted). In

Toscano v. Burlington N. R. R. Co., a Montana federal district court found that a claim

based on Montana’s common-law duty of good faith and fair dealing was preempted by

FELA. Toscano v. Burlington N. R. R. Co., 678 F. Supp. 1477 (D. Mont. 1987). See also

Monessen Sw. Ry. Co. v. Morgan, 486 U.S. 330, 335, 108 S. Ct. 1837, 1842 (1988)

(providing that even though FELA does not address interest payments, it was error to assess

prejudgment interest under state law); Sinclair v. Burlington N. & Santa Fe Ry. Co., 2008

MT 424, ¶ 35, 347 Mont. 395, 200 P.3d. 46 (affirming dismissal of state law fraud claim

as preempted by FELA).

¶69 In conjunction with Montana’s common law, the UTPA, particularly, as interpreted

and applied in Ridley v. Guaranty Nat’l Ins. Co., 286 Mont. 325, 951 P.2d 987 (1997), and

its expanding progeny, provide both substantive and procedural state law remedies that

virtually parallel, but also interfere with, FELA. The UTPA requires self-insured railroad

carriers “to attempt in good faith to effectuate prompt, fair, and equitable settlements of

48
claims in which liability has become reasonably clear.” Section 33-18-201(6), MCA

(emphasis added). Likewise, prior to claim settlement, and during the pendency of FELA

claim litigation, the UTPA requires self-insured carriers to advance payments for an injured

worker’s medical expenses “for which liability has become reasonably clear,” Ridley, 286

Mont. at 338, 951 P.2d at 994, and for other damages that “are not reasonably in dispute,”

such as “[l]ost wages which are reasonably certain,” DuBray v. Farmers Ins. Exchange,

2001 MT 251, ¶¶ 14-15, 307 Mont. 134, 36 P.3d 897. Dannels’ UTPA claims here are

premised upon BNSF’s alleged failure to settle his FELA claim promptly despite liability

being reasonably clear and by declining to pay his lost wages prior to completion of the

FELA litigation.

¶70 We have held that “reasonably clear” liability is not the same as “negligence.”

Liability is “reasonably clear when a reasonable person, with knowledge of the relevant

facts and law, would conclude, for good reason, that the defendant is liable to the plaintiff.”

Peterson v. St. Paul Fire & Marine Ins. Co., 2010 MT 187, ¶ 39, 357 Mont. 293, 239 P.3d

904 (quotations omitted). This standard is expressly different than negligence:

A finding of liability by a trier of fact under the preponderance of evidence
standard in the negligence action does not necessarily imply that liability was
reasonably clear when the [defendant] was adjusting the claim. Instead,
reasonably clear liability is established when it is clear enough that
reasonable people assessing the claim would agree on the issue of liability.

Peterson, ¶ 39 (quotations omitted).

¶71 Additionally, procedural remedies have been expanded under the UTPA. While the

UTPA prohibits injured claimants from “fil[ing] an action under this section until after the

49
underlying claim has been settled or a judgment entered in favor of the claimant on the

underlying claim,” § 33-18-242(6)(b), MCA, declaratory actions to obtain advance

payments by showing reasonable clear liability are nonetheless authorized, even during the

pendency of the underlying action, requiring a carrier to litigate in two forums. See High

Country Paving, Inc. v. United Fire & Cas. Co., 2019 MT 297, ¶ 22, 398 Mont. 191, 454

P.3d 1210 (citing Dubray, ¶ 16); Teeter v. Mid-Century Ins. Co., 2017 MT 292, ¶ 18, 389

Mont. 407, 406 P.3d 464; Safeco Ins. Co. v. Montana 8th Judicial Dist. Ct., 2000 MT 153,

¶ 20, 300 Mont. 123, 2 P.3d 834.

¶72 In contrast, FELA liability is a federal question resolved through principles of

negligence and federal common law. Consol. Rail Co. v. Gottshall, 512 U.S. 532, 543, 114

S. Ct. 2396, 2404 (1993) (citing Urie v. Thompson, 337 U.S. 163, 182, 69 S. Ct. 1018,

1030-31 (1949); Ellis v. Union Pacific R. R. Co., 329 U.S. 649, 653, 67 S. Ct. 598, 600

(1947) (establishing that the basis of liability is the carrier’s negligence, “not the fact that

injuries occur”). Specifically, FELA rests on the “principle that compensation should be

exacted from the carrier where, and only where, the injury results from negligence

imputable to it.” Winfield, 244 U.S. at 150, 37 S. Ct. at 547-48 (emphasis added). “What

constitutes negligence for the statute’s purposes is a federal question, not varying in

accordance with the differing conceptions of negligence applicable under state and local

laws for other purposes.” Urie, 337 U.S. at 174, 69 S. Ct. at 1027 (1949). “[N]o part [of

FELA] points to any purpose to leave the States free to require compensation where the act

withholds it.” Winfield, 244 U.S. at 150, 37 S. Ct. at 548. Procedurally, any damages to

50
be paid by a carrier for its negligence under FELA must be determined by a jury in federal

litigation. Bailey v. Central Vt. Ry., 319 U.S. 350, 354, 63 S. Ct. 1062, 1064 (1943).

¶73 Montana’s UTPA imposes various additional duties upon a self-insured carrier,

including to advance damage payments and to attempt to settle, upon “reasonably clear”

liability, regardless of whether a carrier is ultimately determined to be negligent by a jury

in FELA litigation. Conceivably, a carrier could be required to advance damage payments

to a claimant in a declaratory action when liability is “reasonably clear,” while ultimately

obtaining a jury verdict in the FELA action that it was not negligent, a result incompatible

with federal precedent. See Winfield, 244 U.S. at 150, 37 S. Ct. at 547-48. The UTPA

requires carriers to fight liability in Montana on dual fronts and under dual standards, with

one decision necessarily impacting its liability or standing in the other. A carrier is forced

to choose between incompatible options: reserve negligence defenses for trial in the FELA

action and invite UTPA claims for failure to settle or advance damage payments; or,

advance damage payments and settle the FELA action to avoid any UTPA claims without

a jury determining negligence at trial, thus forfeiting any trial defenses.

¶74 The development of UTPA jurisprudence since Reidelbach v. Burlington N. & Santa

Fe Ry. Co., 2002 MT 289, 312 Mont. 498, 60 P.3d 418, the different claim posture, and the

different question and arguments raised here, require a different outcome. While the loss

of state law remedies is an unfortunate outcome, I believe the contradictory nature of these

schemes requires the conclusion that the UTPA claims Dannels has made are preempted

by FELA as an “obstacle to the accomplishment and execution of the full purposes and

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objectives of Congress.” Hines, 312 U.S. at 67, 61 S. Ct. at 404 (footnote omitted).

Concluding Dannels’ particular UTPA claims are preempted, I would reserve judgment

regarding the preemption of other potential UTPA claims until properly raised in future

litigation.

/S/ JIM RICE

Justice Beth Baker joins in the dissenting Opinion of Justice Rice.

/S/ BETH BAKER

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