Defend, Define, or Deal with the Consequences.

This case, like many others in Montana, both federal and state, makes clear that insurance companies who fail to defend their insured in claims involving questionable coverage, do so at considerable risk. The recent decision in Fettkether v. Progressive Nw. Ins. Co., 2024 U.S. Dist. LEXIS 5567 (D. Mont. 2024) is a stark reminder that an insurance company should exercise caution before unequivocally denying coverage. On January 9, 2024, the Federal District Court of Montana, Billings Division issued its opinion in Fetthether, upholding a $1.6 million consent judgment on a $25,000 policy limit policy, after Progressive Insurance incorrectly denied coverage because the ATV that rolled over and killed the plaintiff did not meet the definition of a Covered Auto as it was an “off-road vehicle.”

The Court held that Progressive could not unequivocally demonstrate that the ATV could never have been an “Auto” as defined by the relevant policy. In upholding the $1.6 million dollar consent judgment, the Court stated:

This case, like many presented to Montana state and federal courts, highlights the prudence that an insurer must undertake to not only uphold its duties under the policies it underwrites but also avoid liabilities in excess of the policy limits. Instead of filing a declaratory judgment action to determine coverage and only facing a potential judgment for, if anything, the Policy’s $25,000 limit, Progressive is now bound to pay the $1.6 million Confession of Judgment plus interest and attorney fees and costs. The Court hopes this case serves as yet another reminder to Progressive and similarly situated parties that the prudent course of action is always to proceed under the reservation of rights clause and file a declaratory judgment action.