Victory Insurance v. CSI - Fines Upheld For Illegal Policy Cancellations

Plan Two insurer Victory Insurance Company, based in Miles City, Montana was subject of enforcement action by the insurance department ("CSI").  The enforcement was related to Victory's transfer (sale) of its book of Montana workers' compensation business to Clear Spring Property and Casualty Company.

In its original notice to Victory, CSI provided notice that it found the January 1, 2020 transfer of hundreds of Victory policies to Clear Spring was a violation of Montana statute (illegal cancellation of insurance policies in force).  The enforcement notice contained a potential penalty of $2.7 million. The case went to a Montana Hearing Examiner ("HE") who upheld the basic premise that the policies were improperly cancelled, not simply reinsured as argued by Victory. The fine was said to have been $250,000.

The case found its way to the Montana Supreme Court in 2025.  Victory v. CSI, found at https://juddocumentservice.mt.gov/getDocByCTrackId?DocId=532484 , provides an insight into the position of Victory Insurance and how CSI made the determination that Victory was in violation of statute by cancelling their Montana policies...essentially a book transfer of active policy obligations.

The MT SC found in favor of CSI and held that the actions taken by Victory were in fact policies cancellations in violation of Montana statute.  The court found:

"The Hearing Examiner in this case resolved the issues of Victory’s violations after both the CSI and Victory moved for summary judgment. Summary judgment was proper because there were no material disputes of fact left in the case. Regardless of whether Victory might have been otherwise entitled to a jury trial, it was not deprived of that right when the Hearing Examiner properly used summary judgment to resolve the case.

CONCLUSION

The District Court’s August 27, 2024 Judicial Review Petition Order is affirmed.

/S/ JAMES JEREMIAH SHEA"

At this time, short of an appeal to the U.S. Supreme Court or a different novel theory of prosecution that Victory may pursue, the matter appears determined in favor of CSI, with Victory responsible for a significant penalty resulting from its actions impacting hundreds of policyholders.