Montana Life Insurance Claim Laws: Interest, 33-18-242 and Rescission

Not legal advice. This page paraphrases the Montana Code Annotated (2025) as posted by the Montana Legislature.

Montana’s distinctive rules

Three features set Montana apart:

Two payment clocks with interest. A general pay-or-deny deadline carries 10% interest (33-18-232), and a life-specific rule requires settlement within 60 days of proof of death with interest from day 30 (33-20-114).
A statutory remedy instead of a bad-faith tort. Claims about how an insurer handled a claim go through 33-18-242, which bars a separate common-law bad-faith action by an insured.
Specific questions only. Rescission for an application misstatement requires that the question asked was sufficiently specific (33-15-403(2)(d)).

Deadlines and interest

General rule, 33-18-232. After receiving proof of loss, an insurer has 30 days to pay or deny. If it makes a reasonable request for more information or documents, it has 60 days from the proof of loss, unless it has told the claimant why it is not paying in full or reasonably believes fraud occurred and has reported it to the commissioner. When the insurer misses the deadline and owes the claim, it must add 10% annual interest from the date the claim was due (day 30, or day 60 after a reasonable information request), paid to whoever receives the benefit, if the interest exceeds $5. Compliance with this section cannot be the basis of, or evidence in, a private action under 33-18-201 or 33-18-242 (33-18-232(3)).

Life rule, 33-20-114. Settlement of a death claim must be made within 60 days of receipt of proof of death. If settlement comes after the first 30 days, it must include interest from the 30th day, at the greater of the policy rate or the monthly average discount rate on 90-day AA asset-backed commercial paper at the Federal Reserve Bank for the ninth district at the time of proof of death. These terms apply to every death claim filed with an insurer whether or not the policy contains them (33-20-114(2)). We have not found a Montana decision on how the two interest provisions interact; ask a Montana lawyer which applies to a given delay.

The contest period

After the policy has been in force for two years during the insured’s life, measured from the policy date of issue, it is incontestable except for unpaid premium; disability and accidental-death provisions are not covered by this rule (33-20-105(1)). A policy issued by exchange or conversion of existing coverage with the same insurer or its subsidiaries is incontestable once the original policy has been in force two years, except for any added amount (33-20-105(2)).

Exclusions and suicide

MCA 33-20-121 allows an individual life policy to exclude only death from war or military service, aviation, a named hazardous occupation, residence outside the continental U.S. and Canada, or suicide within two years of issue. Where an exclusion applies, the insurer still pays at least the reserve, adjusted for loans and dividend credits. A policy may also not set a shorter suit period than the statute provides (33-20-121(1)(a)). The section does not apply to group or industrial life.

Application answers and rescission

Montana’s rescission statute, 33-15-403, has an extra step. Application statements are representations. An untrue answer, omission or concealment precludes a benefit and allows rescission only if:

it was fraudulent, or material to the risk or hazard, or the insurer in good faith would have declined, issued less, charged more or excluded the hazard had it known; and
the application question was sufficiently specific that a reasonable person would understand they had to provide those facts and that their answer mattered to the coverage or price decision (33-15-403(2)(d)).

Disputes over a rescission can be decided by a Montana district court under the Uniform Declaratory Judgments Act (33-15-403(4)). When an insurer relies on a vague or catch-all question, the specificity requirement is often the place to start.

Grace, cancellation notices and deductions

Grace. Each renewal premium has 30 days (or one calendar month, if the insurer prefers) of grace. Coverage continues meanwhile, and if death occurs in that window the unpaid premium comes out of the benefit (33-20-104).
Cancellation notice. An insurer may not cancel an individual life policy for nonpayment until it has mailed or delivered a written cancellation notice, separate from any bill, at least 30 days before the cancellation date, running concurrently with grace (33-20-141(1)). Applicants must be told they can name a third party to get a copy (33-20-141(2)). The notice must state the amount due, where to pay and that the policy will lapse (33-20-142(1)).
Limits. The notice rule does not apply to group policies, industrial policies or policies with monthly or more frequent premiums. A suit claiming the insurer failed to give this notice must be filed within two years of the missed premium’s due date (33-20-142(4), (5)).
Deductions. The insurer may subtract unpaid current-year premiums and policy loans with interest from the amount due (33-20-120(2)).

Unfair claim settlement practices

MCA 33-18-201 lists fifteen claim practices that violate the code when an insurer engages in them with a frequency indicating a general business practice, including misrepresenting facts or policy terms (1), refusing payment without first investigating reasonably on all available information (4), taking too long to accept or reject coverage once the claimant’s proof of loss is done (5), neglecting good-faith efforts at a prompt, fair settlement when liability is reasonably clear (6), settling on an altered application (9), and withholding payment under one coverage to gain leverage on another (13).

The 33-18-242 cause of action

MCA 33-18-242 turns six of those practices into a lawsuit:

Who and what. An insured (or a third-party claimant) may sue for actual damages caused by violations of 33-18-201(1), (4), (5), (6), (9) or (13) (33-18-242(1)).
No pattern needed. The plaintiff need not prove a general business practice (33-18-242(2)).
Exclusive theories. An insured harmed by claim handling may sue for breach of contract, for fraud or under this section, but not under any other theory, and may not bring a bad-faith action (33-18-242(3)).
Damages. Proximately caused damages, and exemplary damages under 27-1-221 (33-18-242(5)).
Defense. No liability if the insurer had a reasonable basis in law or fact for contesting the claim or its amount (33-18-242(6)).
Deadline. An insured must sue within two years from the date of the violation (33-18-242(8)(a)), far shorter than the contract limit below.

The statute speaks of an “insured” and a “third-party claimant.” Whether a life insurance beneficiary sues as an insured, a third-party claimant or neither is a question we have not verified in Montana decisions; it affects the two-year deadline, so raise it with a Montana lawyer early.

Group life

Conversion. Someone who loses group coverage because their job or eligible class ends can obtain an individual policy with no health questions if the application and first premium reach the insurer within 31 days. The person may choose any form the insurer customarily issues, including term if the group coverage was term, with benefits at least equal to the group coverage (33-20-1209).
Death in the window. If the person dies during those 31 days, the group insurer owes what could have been converted, whether or not they ever applied (33-20-1211).
Late notice. Without notice at least 15 days before the deadline, the window runs until 15 days after notice, but no more than 60 days past the original deadline (33-20-1212).

Employer plans are often subject to ERISA; see employer group life.

Time limits

An action on a contract founded on a written instrument must be filed within six years (MCA 27-2-202(1)). The separate two-year deadline for a 33-18-242 claim and the two-year limit for a lapse-notice claim under 33-20-142(4) are much shorter.

Killers and financial abusers

MCA 72-2-813 covers both a person who feloniously and intentionally kills the insured and an abuser who financially exploited the insured as a vulnerable adult (generally age 60 or older or otherwise dependent, with at least $1,000 taken).

Either one forfeits estate benefits, and the killing or exploitation revokes any revocable beneficiary designation in their favor (72-2-813(2), (3)).
A final conviction, after appeals are exhausted, conclusively establishes the person as killer or abuser. Without a conviction, the court decides on an interested person’s petition under a preponderance of the evidence standard (72-2-813(7)).
An insurer that pays in good faith on proof of death is not liable before it receives written notice of a claimed forfeiture or revocation. The notice must name the decedent and claimant, describe the benefit and state the claim, and must go by certified mail, return receipt requested, to the insurer’s main office or be served like a summons; notice to a sales agent does not count (72-2-813(8)).

Divorce: 72-2-814

Montana’s divorce rule, Mont. Code Ann. 72-2-814, revokes a revocable disposition to the former spouse or the former spouse’s relatives made in a governing instrument before the divorce or annulment. It does not reach a retirement system established in Title 19, and it yields to the express terms of the instrument, a court order or a contract dividing the marital estate.

Montana gives payors a short buffer: an insurer has no duty to ask whether the couple were still married, and it is liable only for actions taken two or more business days after it actually receives written notice that names the decedent and the claimant, describes the benefit and states that the divorce occurred. That notice must go by registered or certified mail, return receipt requested, to the main office or home, or be served like a summons. Employer plans under ERISA may follow plan documents instead (Egelhoff).

An example

A Billings insured dies; the insurer receives proof of death on March 2. On March 20 it reasonably asks for medical records, and it pays on April 25. Under 33-20-114, settlement was due by May 1 (60 days), so it was timely, but because it came after day 30 the payment must include interest from April 1 at the statutory or policy rate. Under 33-18-232, the information request gave the insurer 60 days, so 10% interest would apply only had it paid after May 1. If instead the insurer had denied on a vague “any other conditions” question, 33-15-403(2)(d) would be the first defense to raise.

Complaints to the commissioner

The Montana Commissioner of Securities and Insurance accepts written and online insurance complaints: Insurance Complaints & Fraud (CSI). A complaint does not pause the two-year 33-18-242 deadline.

Sources

Montana Code Annotated 2025, Titles 27, 33 and 72, Montana Legislature: archive.legmt.gov.
Montana Commissioner of Securities and Insurance, Insurance Complaints & Fraud: csimt.gov. (search listing).
Montana Code Annotated 72-2-814 (Montana Legislature): legmt.gov.

Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.