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.
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