Boettcher v. Montana Guaranty Fund

No. DA 06-0011

IN THE SUPREME COURT OF THE STATE OF MONTANA

2007 MT 69

____________________________________

WILLIAM BRIAN BOETTCHER and CAROL BOETTCHER,

Plaintiffs and Appellants,

v.

MONTANA GUARANTY FUND, WESTERN GUARANTY
FUND SERVICES, JAMES REED, and STEVE KASTE d/b/a
STEVE’S SPORTS CENTER,

Defendants and Respondents.

____________________________________

APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade, Cause No. BDV-05-031,
The Honorable Julie Macek, Presiding Judge.

COUNSEL OF RECORD:

For Appellants:

Gary M. Zadick and Mark F. Higgins, Ugrin, Alexander, Zadick &
Higgins, Great Falls, Montana

For Respondents:

Kelly J.C. Gallinger and Lisa A. Speare, Brown Law Firm, P.C., Billings,
Montana

____________________________________
Submitted on Briefs: October 3, 2006
Decided: March 13, 2007

Filed:

_____________________________________________
Clerk
Justice Brian Morris delivered the Opinion of the Court.

¶1 William Brian Boettcher and Carol Boettcher (collectively the Boettchers) appeal

from an order of the Eighth Judicial District, Cascade County, granting summary

judgment in favor of Montana Insurance Guaranty Association (MIGA), Western

Guaranty Fund Services (Western Guaranty), and James Reed (Reed). Defendant Steve

Kaste (Kaste) does not join this appeal. We affirm in part and reverse in part.

¶2 The Boettchers present the following issues for appeal:

¶3 1. Whether § 33-10-110, MCA, grants MIGA immunity from liability arising out

of statutory and common law claims of bad faith.

¶4 2. Whether § 33-10-110, MCA, extends immunity to Western Guaranty and Reed

for statutory and common law claims of bad faith.

¶5 3. Whether § 33-10-110, MCA, violates substantive due process.

FACTUAL AND PROCEDURAL BACKGROUND

¶6 William Brian Boettcher fell from a loft and shattered both heels while painting

Kaste’s commercial building on July 26, 2001. Legion Insurance Company (Legion)

insured Kaste at the time of the accident with a $1 million policy for commercial auto and

property coverage. The Boettchers filed claims against the Legion policy seeking

compensation for their injuries. Legion became insolvent before resolving the

Boettchers’ claims.

¶7 The Boettchers’ claims transferred to MIGA upon Legion’s insolvency. The

Boettchers improperly refer to MIGA as the Montana Guaranty Fund in the caption of

their appeal. MIGA is the nonprofit association of insurance companies statutorily

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created to provide a mechanism for payment of covered claims to avoid financial loss to

claimants or policyholders because of the insolvency of an insurer. Western Guaranty is

a nonprofit organization that performs claims handling for MIGA. Reed worked for

Western Guaranty and handled the Boettchers’ claims.

¶8 The Boettchers filed a complaint for declaratory relief in the Eighth Judicial

District, Cascade County on January 10, 2005. The Boettchers allege that MIGA,

Western Guaranty, and Reed failed to settle their claims in a reasonable manner. The

Boettchers requested that the District Court issue a declaratory ruling that: 1) MIGA has

all the rights, duties, and obligations of the insolvent insurer including statutory and

common law obligations of good faith owed to an insured and to a third party under the

Montana Insurance Guaranty Association Act (the Act); 2) the limitation of liability

afforded MIGA under the Act applies only to its obligations within the policy limits of

the insolvent insurer and not to the “extra-contractual” liability involving violations of

statutory and common law principles of good faith and fair dealing; 3) statutory or

common law limitations of liability do not extend to any entity or person hired to

administer claims on behalf of MIGA; and 4) any immunity from any “extra-contractual”

liability granted to MIGA violates equal protection and due process under the state and

federal constitutions. MIGA, Western Guaranty, and Reed denied the Boettchers’ claims

for declaratory relief in an answer filed on February 25, 2005.

¶9 The Boettchers filed a motion for summary judgment on July 22, 2005,

specifically challenging § 33-10-110, MCA, the statute that insulates MIGA from any

liability relating to acts performed within its duties. MIGA, Western Guaranty, and Reed

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also filed a motion for summary judgment on July 25, 2005. The Boettchers

acknowledged that they had received the statutory maximum claim of $300,000 allowed

under MIGA. They argued, however, that Montana law entitled them to pursue recovery

of the expenses that they incurred in forcing MIGA, Western Guaranty, and Reed to pay

the $300,000. The Boettchers asserted that MIGA, Western Guaranty, and Reed withheld

payment and caused a two-year delay and unnecessary litigation in settling their claims.

¶10 The District Court granted summary judgment in favor of MIGA, Western

Guaranty, and Reed. The court concluded that MIGA’s rights, duties, and responsibilities

extend only to “covered claims,” not including statutory and common law obligations of

good faith owed to an insured and a third-party claimant. The court determined that the

2001 version of § 33-10-110, MCA, protected MIGA from statutory and common law

good faith and fair dealing claims and that such immunity extended to Western Guaranty

and Reed for acts performed on behalf of MIGA. The court concluded that the immunity

statute does not violate substantive due process rights under the Fourteenth Amendment

of the United States Constitution or Article II, Section 4, of the Montana Constitution.

The Boettchers appeal.

STANDARD OF REVIEW

¶11 We review de novo the district court’s grant of summary judgment. Petroleum

Tank Release v. Capitol Indem., 2006 MT 133, ¶ 12, 332 Mont. 352, ¶ 12, 137 P.3d 522,

¶ 12. If no genuine issue of material fact exists, we determine whether the moving party

is entitled to judgment as a matter of law. Petroleum Tank Release, ¶ 12. Accordingly,

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we review the district court’s legal determinations to establish whether the conclusions

were correct. Petroleum Tank Release, ¶ 12.

DISCUSSION

¶12 Whether § 33-10-110, MCA, grants MIGA immunity from liability arising out of

statutory and common law claims of bad faith.

¶13 The Boettchers concede that § 33-10-110, MCA, cloaks MIGA with immunity

from liability arising out of actions taken in the performance of its powers and duties.

The Boettchers argue that MIGA acted outside of its statutory duty in failing to

reasonably settle their claims, and thus the immunity provision cannot protect MIGA

from liability arising out of bad faith claims. The Boettchers contend that § 33-10-

105(1)(b), MCA, implicitly requires MIGA to settle claims reasonably under the Unfair

Trade Practices Act (UTPA), embodied in Title 33, Chapter 18, MCA. The Boettchers

argue that any breach of that duty gives rise to both a common law cause of action for

bad faith and a statutory cause of action under § 33-18-242, MCA.

The Act (2001) versus the Act (2005)

¶14 As a preliminary matter, we must determine whether to apply the 2001 version of

the Act or the amended 2005 version. We determine the substantive rights between the

parties according to the law in effect at the date of injury. Anderson v. Werner

Enterprises, Inc., 1998 MT 333, ¶ 28, 292 Mont. 284, ¶ 28, 972 P.2d 806, ¶ 28. The

Boettchers urge us to apply the 2001 version of the Act, because the claims handling

practices in question occurred before the Legislature amended the Act on March 18,

2005.

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¶15 MIGA concedes that the 2001 version of the Act constituted the law at the time of

Boettcher’s underlying injury related to his fall from the loft. MIGA argues nevertheless

that the 2005 version of the Act should govern any potential third party claims that the

Boettchers may have against MIGA. MIGA bases its contention on the fact that the

underlying claim settled on October 6, 2005, when the parties executed an assignment of

claims document. MIGA contends that the October settlement signified the proper time

for filing a third party action under § 33-18-242(6), MCA, and, therefore, the law in

effect at the time that the claims could be filed under the UTPA should control which

version of the Act applies to the Boettchers’ claims.

¶16 MIGA’s position disregards our longstanding rule, however, to apply the law in

effect at the date of the injury. Anderson, ¶ 28. For purposes of the Boettchers’ potential

common law bad faith claim, the alleged tortious conduct began when MIGA, Western

Guaranty, and Reed handled and supposedly unreasonably rejected the Boettchers’ first

demand for payment. All elements of the tort existed upon the alleged unreasonable

refusal to pay. Brewington v. Employers Fire Insurance Co., 1999 MT 312, ¶ 29, 297

Mont. 243, ¶ 29, 992 P.2d 237, ¶ 29.

¶17 Similar reasoning applies to the Boettchers’ potential statutory bad faith claim

pursuant to the UTPA. The injuries in this case, if any, took place when MIGA, Western

Guaranty, and Reed failed to handle the Boettchers’ claims in a reasonable manner.

Section 33-18-242(1), MCA. This first alleged failure took place when the Boettchers

made a demand for payment from MIGA before the Legislature amended the Act in

2005. Any claim processing restrictions imposed under § 33-18-242(6)(b), MCA, do not

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alter the fact that the Boettchers’ alleged injuries in this case occurred when MIGA,

Western Guaranty, and Reed handled and allegedly unreasonably rejected the Boettchers’

demands for payment. These alleged injuries occurred when the 2001 Act controlled.

¶18 The Boettchers further contend that § 33-10-110, MCA, as amended in 2005,

contains no express provision on retroactivity and, therefore, the amended statute can be

applied only prospectively. We will not apply a statute retroactively unless the

Legislature clearly expresses its intention of such retroactive application. Anderson, ¶ 28.

Nothing in the face of the 2005 version of § 33-10-110, MCA, indicates that the

Legislature intended for the amended statute to be applied retroactively. We apply the

2001 version of the Act in light of the fact that the Boettchers’ alleged injuries occurred

before the Legislature enacted the 2005 amendments.

Application of the Act (2001)

¶19 We consider whether § 33-10-110, MCA (2001), grants MIGA immunity from

bad faith claims. We seek to implement the objectives that the Legislature sought to

achieve in interpreting statutes. Mont. for Justice v. State ex. rel. McGrath, 2006 MT

277, ¶ 60, 334 Mont. 237, ¶ 60, 146 P.3d 759, ¶ 60. The plain language of the statute

controls our interpretation if the legislative intent can be determined from the plain

meaning of the words used. Mont. for Justice, ¶ 60. We must “interpret individual

sections of an act in such a manner as to ensure coordination with the other sections of

the act.” Howell v. State, 263 Mont. 275, 286, 868 P.2d 568, 574 (1994).

¶20 Section 33-10-110, MCA, provides that there is no liability on the part of, and that

no cause of action of any nature may be brought against “any member insurer, the

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association or its insurance producers or employees, the board of directors, or the

commissioner or his representatives . . . .” This immunity applies to “any action taken by

them in the performance of their powers and duties under this part.” Section 33-10-110,

MCA.

¶21 We considered in Howell, 263 Mont. at 286, 868 P.2d at 575, whether MIGA

enjoyed immunity under § 33-10-110, MCA (2001), from a claim of attorney fees. We

determined that the statute on its face could be read to insulate MIGA from “any

liability,” including MIGA’s statutory obligation to pay “covered claims” under § 33-10-

105, MCA. We declined to apply the provision so broadly, however, in light of the Act’s

primary purpose of “avoiding financial loss to claimants or policyholders by the

insolvency of an insurer . . . .” Howell, 263 Mont. at 287, 868 P.2d at 575; See § 33-10-

101, MCA.

¶22 We determined that MIGA maintained a statutory duty to pay only “covered

claims” under § 33-10-105, MCA. Howell, 263 Mont. at 287, 868 P.2d at 575. A

“covered claim” means “an unpaid claim, including one for unearned premiums, that

arises out of and is within the coverage and not in excess of the applicable limits of an

insurance policy to which this part applies . . . .” Section 33-10-102(2)(a), MCA. We

concluded that the Legislature, by enacting § 33-10-110, MCA (2001), intended to

preclude liability against MIGA for claims other than “covered claims,” such as claims

for attorney fees. Howell, 263 Mont. at 287, 868 P.2d at 575.

¶23 The Boettchers attempt to distinguish Howell by arguing that the Court addressed

only attorney fees and not claims of bad faith. The Boettchers ignore the fact that, in

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deciding to preclude an action against MIGA for recovery of attorney fees, we relied on

the reasoning in decisions from four other states that prevented bad faith actions against

an insurance guaranty association. Howell, 263 Mont. at 287-88, 868 P.2d at 575-76.

¶24 For instance, we considered a Missouri appellate court’s decision in Pannell v.

Missouri Ins. Guar. Ass’n, 595 S.W.2d 339 (Mo. App. 1980), to preclude a “vexatious

refusal to pay” action against the Missouri Insurance Guaranty Association based on a

similar statutory immunity provision and the guaranty association’s authority to pay only

covered claims. Howell, 263 Mont. at 287, 868 P.2d at 575. We cited a Washington

decision that concluded that bad faith did not constitute a covered claim and, therefore,

the guaranty association could not be held liable for such damages. Howell, 263 Mont. at

287, 868 P.2d at 575, citing Vaughn v. Vaughn, 597 P.2d 932 (Wash. App. 1979). We

also looked to Isaacson v. California Ins. Guaranty Ass’n, 750 P.2d 297 (Cal. 1988),

wherein the Supreme Court of California held that the insurance guaranty association

stands in the shoes of the insolvent insurer only to the extent of covered claims and not

tort claims relating to claims handling practices. Howell, 263 Mont. at 288, 868 P.2d at

575. Based on the reasoning of those cases, we concluded in Howell that MIGA could

not be held liable for claims that do not constitute a “covered claim” under § 33-10-102,

MCA.

¶25 The Boettchers urge the Court to limit the holding in Howell as simply excluding

claims for attorney fees from a “covered claim.” They urge us instead to adopt the

reasoning in Washington Ins. Guar. Assn. v. Ramsey, 922 P.2d 237 (Alaska 1996), for

bad faith claims against MIGA. The Alaska Supreme Court in Ramsey determined that

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Washington Insurance Guaranty Association (WIGA) did not enjoy immunity from bad

faith liability under the Washington immunity provision, because its failure to settle a

claim in good faith constituted an action outside of its statutory duty. Ramsey, 922 P.2d

at 243. The Ramsey court reasoned that if WIGA maintained the statutory duty to settle

claims reasonably, then “such a refusal is not in accordance with WIGA’s statutory

duties, and therefore WIGA cannot claim immunity from liability based on that refusal.”

Ramsey, 922 P.2d at 243.

¶26 MIGA counters that we should reject the Ramsey decision based on our decision

in Howell and the reasoning of Hudson Environmental v. NJ PLIGA, 858 A.2d 39 (N.J.

Super. 2004), and Bills v. Arizona Prop. and Cas. Ins. Guaranty Fund, 984 P.2d 574

(Ariz. App. 1999). The New Jersey court in Hudson faced the same question presented

here: whether the immunity provision contained in the state’s insurance guaranty

association act precluded bad faith actions against the insurance guaranty association.

The court rejected the Alaska court’s “narrow” reading of the immunity provision, stating

that such interpretation “turns the immunity provision into a sieve, immunizing [the

insurance guaranty association] only when its agents or employees committed no wrong

and had little need for protection.” Hudson, 858 A.2d at 54. The Hudson court also cited

to dicta in Bills, where the Arizona court reached a similar conclusion, stating that “‘to

accept plaintiff’s contention that statutory immunity is automatically unavailable [when

bad faith is alleged] would completely dilute, if not altogether eliminate’ the immunity

provision.” Hudson, 858 A.2d at 54 (quoting Bills, 984 P.2d at 579). The Hudson court

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rejected Ramsey, explaining that its holding provided immunity to the insurance guaranty

association only when its exposure to liability is virtually non-existent.

¶27 The Hudson court determined the scope of immunity provided under the New

Jersey insurance guaranty association act by examining the plain language of the

immunity provision. The court focused on the statute’s phrase that the insurance

guaranty association is immune from liability for an “action . . . taken . . . in the

performance of . . . powers and duties under this act.” Hudson, 858 A.2d at 55. The

court determined that the insurance guaranty association’s “powers and duties” under the

act encompassed only those actions incidental to claims adjustment, processing, and

payment on covered claims. Hudson, 858 A.2d at 55. The court concluded, therefore,

that the immunity provision protected the guaranty insurance association from liability

arising out of its powers and duty to adjust, process, and pay covered claims, such as

claims of bad faith.

¶28 The key distinction between Hudson and Ramsey rests on how the courts defined

the insurance association’s “powers and duties” under the immunity provision. The

Hudson court looked to the state’s insurance guaranty association act “as a whole” to

determine the extent of the association’s immunity from liability arising out of claims of

bad faith. Hudson, 858 A.2d at 52. The Ramsey court by contrast relied on parts of the

state’s insurance guaranty association act read in conjunction with Washington’s

common law duties of good faith placed on ordinary insurers to determine the extent of

WIGA’s duties to pay covered claims. Ramsey, 922 P.2d at 243.

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¶29 The Boettchers ask us to undertake the reasoning in Ramsey because their claims

rest on the statutory duties contained in the Act and the Unfair Trade Practices Act. The

plain language of § 33-10-110, MCA, however, prevents us from doing so. The statute

precludes liability on the part of MIGA, “for any action taken by [it] in the performance

of [its] powers and duties under this part.” Section 33-10-110, MCA (emphasis added).

The plain meaning of the words “under this part” directs us to look within the Act to

determine what constitutes actions taken in the performance of MIGA’s powers and

duties for the purposes of determining the scope of immunity.

¶30 Section 33-10-105, MCA, expressly provides MIGA’s “general powers and

duties,” including MIGA’s primary duty to pay “covered claims” arising out of an

insurance policy issued by an insolvent insurer that remained unpaid prior to the

insolvency. See § 33-10-105(1)(a)(i), MCA. To this end, MIGA “is considered the

insurer to the extent of its obligation on the covered claims and to that extent has all

rights, duties, and obligations of the insolvent insurer as if the insurer had not become

insolvent.” Section 33-10-105(1)(b), MCA.

¶31 The Boettchers argue that the language in § 33-10-105(1)(b), MCA, that MIGA

carries “all the rights, duties, and obligations of the insolvent insurer . . . ,” implicitly

requires the Court to consider the duties of good faith imposed on an insurer under the

Unfair Trade Practices Act. The Boettchers overlook the fact that MIGA stands in the

shoes of the insolvent insurer only to the extent of “its obligation on the covered claims.”

Section 33-10-105(1)(b), MCA. MIGA fulfilled its obligations under § 33-10-105(1)(b),

MCA, by paying the statutory cap of $300,000 on the covered claims in this case.

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¶32 The Boettchers could have maintained an action to force MIGA to perform its

statutory obligation to pay on the covered claims up to the $300,000 statutory limit stated

in § 33-10-105(1)(a)(ii), MCA. We have refused to interpret the immunity granted by §

33-10-110, MCA, so broadly as to prevent an action that seeks to force MIGA to provide

the service it was statutorily created to do—pay covered claims under the insurance

policy. Howell, 263 Mont. at 287, 868 P.2d at 575. We determined in Howell that a

claim of attorney fees did not constitute a covered claim for the purposes of maintaining

suit against MIGA. Howell, 263 Mont. at 288, 868 P.2d at 576. Likewise, an action for

bad faith, whether sounding in tort or statutorily based, falls outside the definition of

“covered claims” in § 33-10-102(2)(a), MCA. Moreover, bad faith claims arise out of

actions taken by MIGA in performance of its statutory duty within the Act to pay such

covered claims. Section 33-10-110, MCA, specifically bars such claims.

¶33 This conclusion furthers the Act’s stated purposes to “provide a mechanism for the

payment of covered claims under certain insurance policies to avoid excessive delay in

payment and to avoid financial loss to claimants or policyholders because of the

insolvency of an insurer . . . .” Section 33-10-101(2), MCA. Reading the Act as a whole

reflects the Legislature’s intent to carry out the purpose of the Act by providing limited

recovery to insureds. For instance, § 33-10-105, MCA, limits MIGA’s duties to paying

only covered claims as defined in the Act. Section 33-10-105(2)(a)(ii), MCA, caps such

payments to $300,000 per covered claim. Section 33-10-115, MCA, requires insureds to

collect payment under other policies carried by solvent insurers before turning to MIGA.

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¶34 We must construe these provisions “liberally” so as to give effect to the purpose of

the Act. See § 33-10-101(4), MCA. In light of the Act’s purpose to provide limited

recovery, we interpret § 33-10-110, MCA, as protecting MIGA from liability arising

from bad faith actions, whether grounded in tort or statutorily based, as such liability

arises out of MIGA’s actions in the performance of its duties to pay covered claims. We

affirm the District Court’s Order granting summary judgment in MIGA’s favor.

¶35 Whether § 33-10-110, MCA, extends immunity to Western Guaranty and Reed.

¶36 The Boettchers argue that Western Guaranty and Reed remain unprotected by §

33-10-110, MCA (2001), for two reasons. The Boettchers first assert that nothing in the

plain language of the statute extends immunity to MIGA’s agents, such as Western

Guaranty and its employee Reed. The 2001 statute provides immunity to “the

association or its insurance producers or employees.” Section 33-10-110, MCA. Second,

the Boettchers argue that the Legislature’s 2005 amendment to § 33-10-110, MCA, to

extend immunity explicitly to MIGA’s agents confirms that the 2001 statute failed to

protect Western Guaranty and Reed from liability at the time the Boettchers filed their

claims.

¶37 The plain language of § 33-10-110, MCA (2001), provides protection from

liability to a specific class of people or organizations involved with MIGA. Those

protected under the statute include: “any member insurer, the association or its insurance

producers or employees, the board of directors, or the commissioner or his

representatives . . . .” Section 33-10-110, MCA. Montana’s original version of the

immunity provision, enacted in 1971, expressly granted immunity to MIGA’s “agents.”

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The original statute parallels immunity provisions protecting insurance guaranty

associations and their “agents” in Nevada, Washington, Arizona, California, and Florida.

See Nevada Ins. Guaranty v. Sierra Auto Center, 844 P.2d 126 (Nev. 1992); Ramsey, 922

P.2d 237; Wells Fargo Cr. v. Arizona Prop. & Cas.¸ 799 P.2d 908 (Ariz. App. 1990);

Jones v. Florida Ins. Guar. Ass’n, Inc., 908 So.2d 435 (Fla. 2005). Our Legislature

deleted the word “agent,” however, from the entire insurance code in 1989, and inserted

instead the term “insurance producers.”

¶38 Western Guaranty and Reed argue that they remain protected under the 2001

statute regardless of Legislature’s change of terms in 1989. Western Guaranty and Reed

assert that the Legislature contemplated that MIGA would delegate its powers and duties

to another organization under its authority in § 33-10-106, MCA. Western Guaranty and

Reed contend that the legislative history behind § 33-10-110, MCA, shows the

Legislature’s intent to cloak those entities and their employees with the same immunity

granted to MIGA.

¶39 The legislative history behind the 1989 amendments indicates that the Legislature

changed the terminology to correspond with industry language and to streamline

Montana’s insurance licensing requirements with the licensing requirements of other

states. The shift from “agent” to “insurance producer” effectively required an agent to

have an insurance license, and thus any revocation of a license in Montana could be

recognized by other states. Likewise, the change allowed Montana to enforce license

revocations imposed by other states operating under the multi-state licensing model.

Nothing in the legislative history discusses the effect of the change in language to the

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Act, although such changes affected the entirety of the Act. House Comm. on Business

and Economic Development, Hearing on H.B. 734, (Feb. 17, 1989); Sen. Comm. On

Business and Industry, Hearing on H.B. 734, (Mar. 10, 1989).

¶40 Western Guaranty and Reed assert that the Legislature’s 1989 amendment

constituted a housekeeping measure that sought to align Montana’s code with insurance

provisions in other states. They argue that the Legislature, although changing the terms

from “agents” to “insurance producers,” never intended to abandon its original objective

to provide immunity to MIGA’s agents. Western Guaranty and Reed assert that the 2005

amendment reintroducing the term “agent” into § 33-10-110, MCA, simply clarified a

pre-existing right of immunity.

¶41 Our review of the legislative history behind the 2005 amendment shows, however,

that the change in language “extends” immunity to MIGA’s agents. House Comm. on

Business and Labor, Hearing on H.B. 168, (Jan. 12, 2005); Sen. Comm. On Business,

Labor, and Economic Affairs, Hearing on H.B. 168, (Mar. 4, 2005). The 2005

amendment and the accompanying legislative history convince us that the previous

version of the statute failed to protect MIGA’s agents from liability. No amendment

would have been necessary otherwise.

¶42 We must construe the 2001 statute as written. Mont. for Justice, ¶ 60. An

“insurance producer,” means “a person who solicits, negotiates, effects, procures,

delivers, renews, continues, or binds” policies of insurance for risks residing, located, or

to be performed in this state. Section 33-17-102(9)(a)(i), MCA. Section 1-2-101, MCA,

forbids this Court from inserting the term “agent” into the statute where the Legislature

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intentionally deleted it and replaced it with the term “insurance producer.” Western

Guaranty and Reed, as agents of MIGA, do not perform any of the specified functions of

an “insurance producer” as defined by the 2001 statute. Western Guaranty and Reed do

not solicit, negotiate, effect, or procure policies of insurance. Western Guaranty and

Reed likewise do not deliver, renew, continue, or bind policies of insurance. Western

Guaranty and Reed handle claims for MIGA on policies originally sold by insolvent

insurers.

¶43 Western Guaranty and Reed also do not qualify as employees of MIGA or any

other parties so as to warrant their protection under the 2001 version of § 33-10-110,

MCA. Title 33 of the Montana Code does not specifically define “employee.” In the

absence of a specific definition, we have employed the “common sense interpretation” as

meaning “those engaged in the services for wages and salary by another.” Farmers

Union Mut. Ins. Co. v. Horton, 2003 MT 79, ¶ 18, 315 Mont. 43, ¶ 18, 67 P.3d 285, ¶ 18.

Western Guaranty is a voluntary, nonprofit organization created by MIGA and five

insurance guaranty associations from other states for the purposes of carrying out the

statutory duties under the states’ respective insurance guaranty association acts. Western

Guaranty performs services for MIGA in exchange for its operating costs, not for “wages

and salaries” as required by the common definition of the word “employee.” Thus,

Western Guaranty does not qualify as an employee of MIGA as contemplated by the

immunity provision of the 2001 Act. Similarly, Reed presumably serves as an employee

of Western Guaranty. The 2001 Act extends no immunity to Western Guaranty and thus

cannot extend immunity to Reed as an employee of Western Guaranty. We conclude,

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therefore, that the District Court erred in granting summary judgment in favor of Western

Guaranty and Reed. We reverse and remand to the District Court for further proceedings

on the issue of common law and statutory claims of bad faith involving Western

Guaranty and Reed’s handling of the Boettchers’ claims.

¶44 Whether § 33-10-110, MCA, violates substantive due process.

¶45 The Boettchers challenge the constitutionality of § 33-10-110, MCA, on grounds

that the law violates substantive due process. We already have determined that M. R.

App. P. 38 precludes this Court from considering the Boettchers’ constitutional

arguments. See Boettcher v. Montana Guar. Fund (Boettchers I), 2006 MT 127, ¶¶ 12-

29, 332 Mont. 279, ¶¶ 12-29, 140 P.3d 474, ¶¶ 12-29.

¶46 M. R. App. P. 38 requires a party to give written notice to this Court and the

Montana attorney general of a constitutional challenge in an action where the state is not

a party. Such notice “shall be given contemporaneously with the filing of the notice of

appeal or with the filing of an original proceeding in the supreme court.” M. R. App. P.

38. The Boettchers’ failure to file contemporaneous notice of their constitutional

question as required by M. R. App. P. 38 precludes our consideration of the Boettchers’

constitutional arguments on appeal. Boettchers I, ¶¶ 12-29.

CONCLUSION

¶47 We affirm the District Court’s Order granting summary judgment in favor of

MIGA on the grounds that § 33-10-110, MCA, protected it from liability arising from

statutory and common law claims of bad faith. We reverse the District Court’s Order

granting summary judgment in favor of Western Guaranty and Reed and remand for

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further proceedings on the issue of Western Guaranty and Reed’s liability related to the

Boettchers’ statutory and common claims of bad faith.

/S/ BRIAN MORRIS

We Concur:

/S/ KARLA M. GRAY
/S/ PATRICIA COTTER
/S/ JIM RICE
/S/ JOHN WARNER

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