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July 20, 2023
A Defeat for Victory
The Montana Supreme Court this week cleared the way for an administrative proceeding against a legally beleaguered workers’ compensation insurance firm tied to state Rep. Nelly Nicol, R-Billings, a freshman lawmaker who ran a bill this session that would have eliminated regulatory positions at a state agency engaged in legal battle with her father’s company.
To understand the import of the decision, a bit of background may be in order.
In 2021, an Illinois-based workers’ comp firm called Clear Spring contacted the Montana Commissioner of Securities and Insurance and alleged that Victory Insurance Company, of Miles City, had not responded to multiple requests for policy documents that belonged to Clear Spring, according to court documents. The two companies had entered into a contract in 2019 allowing Victory to serve as managing general agent — a broker, in essence — for Clear Spring’s workers’ compensation policies in Montana. That agreement ended in February 2021. The termination of the contract ignited a series of legal and regulatory battles that continue today.
Later in 2021, the two firms sued each other in federal court, with Clear Spring arguing that Victory had not returned its policy documents and data in a usable form, effectively breaching their contract, and Victory arguing that Clear Spring was trying to access proprietary company information.
The parties eventually settled and agreed to dismiss the case, but not before Clear Spring had registered its complaint to the Montana Commissioner of Securities and Insurance. That office, headed by Republican State Auditor Troy Downing, ultimately alleged various legal violations by Victory and announced possible fines. But before the commissioner’s office reached a final decision, Victory filed a court motion seeking to stop the proceedings, arguing that the commissioner’s office was exceeding its jurisdiction by getting involved in a contract dispute between private parties. A district court ruled in favor of the state, which maintained that it was investigating a possible statutory violation, and on July 18 a panel of five state Supreme Court justices concurred.
“The Commissioner asserted claims under the Insurance Code, not a breach of contract claim on behalf of Clear Spring,” the high court’s ruling reads. The underlying administrative process — which includes the possibility of further appeal — will now proceed as intended, a spokesperson for the commissioner’s office said.
Why does any of this matter in the world of Capitol politics? In 2022, Nelly Nicol waltzed into a Billings House seat having run unopposed in both the primary and general elections. Nicol’s father, Keith Brownfield, is the founder and CEO of Victory Insurance Company, and Nicol works as the firm’s communications and marketing director. In 2020, when Nicol ran for state auditor — a.k.a. the Commissioner of Securities and Insurance — Victory was the primary funder of a PAC that spent hundreds of thousands of dollars in support of her ultimately failed campaign.
In the 2023 session, as first reported by the Lee newspapers’ State News Bureau, now-Rep. Nelly Nicol carried House Bill 277, which would have removed funding for two regulatory positions at the CSI office. The positions were funded by contributions from the Montana State Fund, a quasi-public workers’ compensation insurance company (and Victory Insurance’s main competitor), which Nicol said created the “smell” of conflict of interest. Unmentioned in the background was years of legal back-and-forth involving Victory, the commissioner’s office and other firms regarding a number of matters, Lee’s Seaborn Larson reported.
Nicol told the State News Bureau the bill was not designed as retaliation against the commissioner’s office, and said it was only intended to prevent the possibility of a conflict of interest between a regulator and a regulated entity. Regardless, the proposal died in committee.
But potential CSI enforcement actions against Victory Insurance are still alive and well. In addition to the administrative procedure the state Supreme Court allowed to continue this week, the commissioner’s office could levy an up-to-$4.125 million fine against Victory related to a separate legal quagmire involving Clear Spring. In that case, the commissioner’s office alleges that Victory misled its customers into believing their policies were being “upgraded” when they were just being transferred to Clear Spring and did not provide adequate notice of the change.
The court’s ruling this week has no bearing on that case, a spokesperson for the commissioner said. A designee for the commissioner has given Victory the opportunity to argue the fine and has yet to reach a final determination.
New Entrant in SupCo Race
The first signs of competition in the two races for Montana’s Supreme Court slated for next year are beginning to show.
In June, Montana Free Press reported that neither Chief Justice Mike McGrath nor Justice Dirk Sandefur would seek re-election at the end of their current terms. Candidates — and rumors of candidates — began to surface.
Most recently, 7th Judicial District Court Judge Katherine Bidegaray filed to run for Sandefur’s seat, setting up a contest between Bidegaray, 11th Judicial District Court Judge Dan Wilson, and possibly others. Wilson has already raised almost $13,000, a sum that includes a self-loan of $10,000. Bidegaray has yet to file campaign finance reports.
The race for the chief justice seat so far features only one candidate: former federal magistrate court judge Jerry Lynch. But there’s already evidence of an anti-Lynch campaign backed by some familiar GOP-aligned interests, with mailers attributed to a group called Montanans for Fair Judiciary that paint Lynch as a “liberal trial lawyer.” That group is associated with Jake Eaton, a prominent Republican political consultant and former campaign strategist for Montana Attorney General Austin Knudsen. Lynch has raised almost $60,000 so far this cycle.
Montanans for Fair Judiciary reported a $4,000 contribution in June from the Montana Judicial Accountability Initiative, a separate group that lists Eaton as treasurer. MFJ authorized the expenditure on the mailers around the same time.
The Montana Judicial Accountability Initiative has received sizable contributions over the last year from Women Speak Out PAC, an anti-abortion group; Big Sky Opportunity PAC, the leadership PAC affiliated with U.S. Sen. Steve Daines; and a number of individual donors, according to state campaign finance records.
In interviews with MTN News, all three candidates have dropped breadcrumbs hinting at what will likely be major themes in the campaign this year: provisions in the Montana Constitution related to privacy and the environment; a still smoldering separation-of-powers row between the court system and the Legislature; and the growing politicization of nominally nonpartisan judicial races.
“I feel lucky to live in a state that has adopted protections in its Constitution for very important rights,” Bidegaray told MTN News.
“Common sense not only means that we should look at the law and interpret it without regard to what a special interest group might prefer that we find for a meaning or even what our personal preferences might be — but merely to say what is there, and not to seek to put what is not there,” Wilson said.
And from Lynch, responding to the mailers from Montanans for Fair Judiciary:
“I think that my motivation in protecting and defending the independence of the judiciary and the rule of law, and protecting what I think is the most thoughtful state Constitution in the United States, gives me the motivation that I’m prepared to do what it takes.”
Legislator’s bill could affect auditor that fined her employer $2.7M: For the whole story on Victory Insurance — or at least a pretty comprehensive summary of numerous intertwining legal battles stretching almost a decade — see Seaborn Larson’s piece in Lee newspapers.
Candidates begin making cases for open Montana Supreme Court seats: MTN News had a series of thoughtful interviews with each of the current three candidates for Montana Supreme Court.