Insurer Has No Duty to Interplead Policy Limits Under Montana Law When Faced with Multiple Claimants and Potentially Insufficient Limits

Applying Montana state law, the United States District Court for the District of Montana has held that an insurer has no duty to interplead its policy limits to satisfy claims by multiple competing claimants and did not violate Montana’s Unfair Trade Practices Act (“UTPA”) when successively settling claims of multiple plaintiffs. Amberg v. Travelers Cas. & Sur. Co. of Am., 2025 WL 1811459 (D. Mont. July 1, 2025).

In August 2022, certain aggrieved employees of the insured employer sued the employer and two other employees for harassment and retaliation after the employees reported patient abuse and neglect at the employer’s medical facility. The defendant employees, in turn, asserted their own claims against the employer for wrongful termination. The employer’s insurance policy provided a per-claim limit of liability of $1 million, applicable to defense costs and settlement payments. While settlement negotiations with the aggrieved employees were ongoing, the insurer settled with the other defendant employees, thereby depleting a significant portion of the policy limit. When the aggrieved employees sought a settlement with the insurer for an amount that exceeded the remaining policy limit, the insurer informed them that the policy’s limit had been largely depleted. The aggrieved employees subsequently settled for the remaining policy limit and then filed suit against the insurer alleging common law bad faith and violation of Montana’s Unfair Trade Practices Act (UTPA).

The aggrieved employees argued that the insurer had a duty to interplead the policy limits to protect all claimants when faced with multiple competing claims. In granting the insurer’s motion to dismiss, the court held that Montana law does not impose such a duty on insurers when there are multiple claimants and potentially insufficient limits to resolve all claims. The court also rejected the aggrieved employees’ arguments that the insurer violated the UTPA, holding that the employees failed to allege an affirmative misrepresentation or intentional concealment by the insurer regarding the policy; that the insurer did not deny the employees’ claims and therefore did not violate the UTPA’s prohibition against refusing to pay claims without a reasonable investigation; that the insurer had an objectively reasonable basis to contest liability and damages based on the limited evidence of damages in the aggrieved employees’ demand; and that the allegations that the insurer attempted to leverage settlement under the liability portion of the policy to secure a release of claims against it based on the implied covenant of good faith and fair dealing did not support a claim under the UTPA’s prohibition against failing to settle claims under one portion of the policy in order to influence settlements under another portion of the policy’s coverage. Finally, the court dismissed the aggrieved employees’ claim for common law bad faith because the claim was substantively identical to the legally deficient UTPA claims.