Full Opinion

11/10/2026 DA 25-0695 Case Number: DA 25-0695 IN THE SUPREME COURT OF THE STATE OF MONTANA 2026 MT 269 VICTORY INSURANCE COMPANY, Petitioner and Appellant, v. STATE OF MONTANA, COMMISSIONER OF SECURITIES AND INSURANCE, MONTANA STATE AUDITOR, Respondent and Appellee. APPEAL FROM: District Court of the First Judicial District, In and For the County of Lewis and Clark, Cause No. ADV-2025-4 Honorable Mike Menahan, Presiding Judge COUNSEL OF RECORD: For Appellant: Linda M. Deola, Scott L. Peterson, Morrison Sherwood Wilson & Deola, PLLC, Helena, Montana For Appellee: Rune Vander Wey, Commission of Securities & Insurance, Office of the Montana State Auditor, Helena, Montana Submitted on Briefs: May 13, 2026 Decided: November 10, 2026 Filed: __________________________________________ Clerk Justice Ingrid Gustafson delivered the Opinion of the Court. ¶1 Victory Insurance Co. (Victory) appeals from the September 3, 2025 Order – Petition for Judicial Review issued by the First Judicial District Court, Lewis and Clark County. The District Court’s order denied Victory’s petition for judicial review, which was filed after the Montana Commissioner of Securities and Insurance (Commissioner) was granted summary judgment in administrative proceedings against Victory for violating the Montana Insurance Code, and a $25,000 fine was imposed against Victory. ¶2 We address the following issues on appeal: 1. Did the District Court err by affirming the agency’s summary judgment ruling that Victory failed to disclose a significant federal suit which put its financial condition potentially at risk? 2. Is reversal warranted for the failure of the Commissioner to explain the $25,000 fine? ¶3 We affirm in part, reverse in part, and remand. FACTUAL AND PROCEDURAL BACKGROUND ¶4 Victory is a worker’s compensation insurer based in Montana. As a Montana insurer, Victory is subject to Montana’s insurance laws as set forth in Title 33, MCA. The Commissioner has the duty and authority to “enforce the applicable provisions” of the insurance code and “ensure that the interests of insurance consumers are protected.” Section 33-1-311(1), (3), MCA. ¶5 In 2019, Clear Spring Property and Casualty Company (Clear Spring), a Texas insurer with its headquarters in Illinois, purchased Victory’s book of workers’ compensation policies. As part of the sale, Victory agreed to serve as Clear Spring’s 2 managing general agent in Montana and was authorized to withhold quarterly payments of $800,000 from premiums paid by Clear Spring’s Montana workers’ compensation customers as payment. ¶6 On March 1, 2021, Clear Spring sued Victory in the United States District Court for the Northern District of Illinois, alleging Victory breached various provisions of the management agreement. Clear Spring sought a judgment in excess of $8 million. Clear Spring and Victory actively litigated the matter until entering a confidential settlement agreement on April 21, 2022, whereupon the federal lawsuit was dismissed. ¶7 As a Montana insurance company, Victory is required by the Insurance Code to annually file with the Commissioner “a full and true statement of the authorized insurer’s financial condition, transactions, and affairs[.]” Section 33-2-701(1), MCA. Victory timely filed its 2021 Annual Statement in early 2022. While noting Victory was subject to potential litigation in the normal course of business, the Annual Statement did not specifically disclose the existence of the Clear Spring federal lawsuit. On March 17, 2022, the Commissioner of Securities and Insurance (CSI) Chief Financial Examiner Steve Matthews wrote a letter asking Victory to amend Note 14 of its 2021 Annual Statement to disclose the (then-ongoing) Clear Spring litigation. Matthews wrote another letter on April 1, 2022, explaining the request to amend or supplement the Annual Report was a “direction” to do so. Victory responded on April 15, 2022, informing Matthews that it did not intend to amend the 2021 Annual Statement. On May 4, 2022, CSI sent a letter to Victory directing it to amend Note 14E of the Annual Statement to disclose (1) that Victory was the defendant in the Clear Spring lawsuit and (2) that the lawsuit had settled. After 3 receiving no response from Victory, CSI sent another letter noting it was requiring the Annual Statement to be supplemented for additional information in accordance with the Commissioner’s power to do so in § 33-2-701(1)(a), MCA, and his duty to ensure the interests of insurance consumers are protected in accordance with § 33-1-311(3), MCA. On June 30, 2022, Victory responded with a letter explaining it would not amend the 2021 Annual Statement and the Commissioner’s requirement to amend Note 14E to disclose the settlement of the Clear Spring lawsuit, which did not occur until the second quarter of 2022, would amount to requiring Victory to make an untrue statement. ¶8 On December 27, 2022, the Commissioner issued a Notice of Proposed Agency Action and Opportunity for Hearing, wherein the Commissioner proposed to order the CSI Chief Financial Examiner to supplement Victory’s 2021 Annual Statement “to include the fact of and subsequent settlement of” the Clear Spring federal litigation and to impose a $25,000 fine pursuant to § 33-1-317, MCA. Victory requested a hearing on the proposed agency action and the matter was assigned to a Hearing Examiner. The Commissioner filed a motion for summary judgment seeking an order allowing it to supplement Victory’s 2021 Annual Statement, which the parties fully briefed. After briefing, the Hearing Examiner granted in part and denied in part the Commissioner’s motion on March 5, 2024. The Hearing Examiner issued a Recommended Decision allowing the Commissioner to supplement the Annual Statement “to include the fact of the existence of Clear Spring v. Victory” and to impose a fine not exceeding $25,000, while determining the Commissioner “may not supplement Victory’s 2021 Annual Statement to include the settlement of Clear Spring v. Victory because that event occurred outside the time period covered by Victory’s 4 2021 Annual Statement.” After the Hearing Examiner issued his recommended decision, Special Deputy Insurance Commissioner (SDIC) Adam Duerk issued an Order on Opportunity for Respondents to File Exceptions, Present Briefs and Oral Argument. Victory filed exceptions to the recommended agency decision, the Commissioner filed a response, and Victory filed a reply. SDIC Duerk held oral argument on Victory’s exceptions on September 5, 2024. SDIC Duerk issued the Final Agency Decision on December 2, 2024, which generally upheld the Hearing Examiner’s recommended decision, allowing the Commissioner to supplement Victory’s 2021 Annual Statement to include the existence of the Clear Spring federal lawsuit, but denying the Commissioner authority to amend the Annual Statement to include the settlement of that lawsuit. In addition, SDIC Duerk imposed a $25,000 fine, noting the Commissioner’s discretion to determine a just amount of a fine was not limited by statute and Victory was “not without recourse” because it could appeal the fine to the District Court. ¶9 Victory filed a petition for judicial review of the final agency decision in the District Court on December 31, 2024. After full briefing and oral argument, the District Court denied Victory’s petition for judicial review on September 3, 2025. The District Court upheld the Commissioner’s Final Agency Decision in all respects, and specifically noted that “the Commissioner is empowered to impose a fine authorized by law without explanation as to the reason for doing so.” ¶10 Victory appeals. Additional facts will be discussed as necessary below. 5 STANDARD OF REVIEW ¶11 The Montana Administrative Procedure Act (MAPA) governs courts’ review of final agency decisions. Victory Ins. Co. v. State, 2026 MT 100, ¶ 7, 428 Mont. 89, 590 P.3d 387 (citing Blaine Cnty. v. Stricker, 2017 MT 80, ¶ 16, 387 Mont. 202, 394 P.3d 159) (Victory 2026). We review a district court order reviewing an agency action by employing the same standards the district court used to review the agency decision. Victory Ins. Co. v. State, 2025 MT 180, ¶ 8, 423 Mont. 377, 573 P.3d 772 (Victory 2025). A district court’s review of an agency decision “must be conducted by the court without a jury and must be confined to the record[.]” Section 2-4-704(1), MCA. A district court reviews an administrative agency’s findings of fact to determine whether they are clearly erroneous and its interpretations and applications of law to determine whether they are correct. Victory 2025, ¶ 8 (citations omitted). While the district court “may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact,” the district court may “reverse or modify the [agency’s] decision if the substantial rights of the appellant have been prejudiced[.]” Section 2-4-704(2), MCA. Such prejudice occurs by way of administrative findings, inferences, conclusions, or decisions which are: (i) in violation of constitutional or statutory provisions; (ii) in excess of the statutory authority of the agency; (iii) made upon unlawful procedure; (iv) affected by other error of law; (v) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; 6 (vi) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion[.] Section 2-4-704(2)(a), MCA. “An evaluation of a petition for judicial review calls for the Court to review the entire administrative record.” DeBuff v. Mont. Dep’t of Nat. Res. & Conservation, 2021 MT 68, ¶ 24, 403 Mont. 403, 482 P.3d 1183 (citing KB Enters., LLC v. Mont. Human Rights Comm’n, 2019 MT 131, ¶ 6, 396 Mont. 134, 443 P.3d 498). DISCUSSION ¶12 1. Did the District Court err by affirming the agency’s summary judgment ruling that Victory failed to disclose a significant federal suit which put its financial condition potentially at risk? ¶13 Victory asserts the Commissioner issued an unlawful order when it ordered amendment of the 2021 Annual Statement and Victory cannot be penalized for failing to comply. The Commissioner contends his directive to amend the 2021 Annual Statement to include the Clear Spring federal lawsuit was both lawful and necessary to protect Montana consumers, as the potential liabilities from the suit—over $8 million—could have bankrupted the company. ¶14 The primary thrust of Victory’s argument is that the Commissioner’s directive ordered it to disclose both the existence of the lawsuit and that it had been settled. Because the settlement of the lawsuit occurred outside of the 2021 Annual Statement’s reporting period, the Commissioner lacked statutory authority to include its inclusion in the 2021 Annual Statement. The Hearing Examiner, SDIC Duerk, and the District Court all reached this same conclusion and the Commissioner does not argue it is incorrect on appeal. Victory argues that since the order to include the settlement went beyond the 7 Commissioner’s authority, it was entitled to simply ignore the Commissioner’s directive to amend the 2021 Annual Statement to include the existence of the Clear Spring litigation. Victory is incorrect. ¶15 Victory is required by law to annually file a “full and true statement” of its “financial condition, transactions, and affairs as of the preceding December 31.” Section 33-2-701(1), MCA. The annual statement must be: (a) in the general form and context as is required or not disapproved by the commissioner, as is in current use for similar reports to states in general with respect to the type of insurer and kinds of insurance to be reported upon, and as supplemented for additional information required by the commissioner; (b) completed in accordance with the annual statement instructions and the Accounting Practices and Procedures Manual of the national association of insurance commissioners; (c) accompanied by an actuarial opinion attesting to the adequacy of the insurer’s reserves; (d) verified by the oath of the insurer’s president or vice president and secretary or, if a reciprocal insurer, by the oath of the attorney-in-fact or its like officers if a corporation. The commissioner may waive the verification under oath. Section 33-2-701(1)(a)-(d), MCA. The Commissioner’s authority to require an annual statement to be “supplemented for additional information” to ensure the statement is actually a “full and true statement” of an insurer’s financial affairs is broad. Section 33-2-701(1)(a), MCA. The Commissioner is mandated by law to protect Montana’s insurance consumers. Section 33-1-311, MCA. The Commissioner is also entitled by statute to “make reasonable rules necessary for or as an aid to the effective administration 8 of any provision of” the Montana Insurance Code, § 33-1-313, MCA, and has done so. Admin R. M. 6.6.3401 (2017). ¶16 In this case, the Commissioner (or his employee/designee) requested Victory amend its 2021 Annual Statement to disclose the Clear Spring litigation four times prior to filing the Notice of Proposed Agency Action. In response, Victory either declined or simply ignored the Commissioner’s directive. The first (and second) directive to amend the 2021 Annual Statement came before the Clear Spring litigation settled, when CSI Chief Financial Examiner Matthews requested Victory “amend the annual statement” to disclose the “ongoing litigation between Victory and Clear Spring.” After Victory responded, Matthews sent a further letter stating his initial letter comprised “a direction that Victory amend its 2021 annual statement to include a disclosure to readers, who may include policyholders and investors, both current and future, that Victory is subject to a lawsuit that, if decided against Victory, will have a material adverse impact on Victory’s financial status.” Victory responded with a letter stating it disagreed, “[did] not intend to amend its annual statement,” and did not believe an insurance company was required “to follow directions from the Commissioner’s staff[.]” Further letters occurred after the lawsuit was settled, and only then did the Commissioner begin to assert the statement should be amended to include both the existence of the lawsuit and its ultimate settlement. ¶17 It is true the Commissioner lacked authority to order Victory to amend its 2021 Annual Statement to include the settlement of the Clear Spring litigation, a fact which both the Hearing Examiner and SDIC Duerk recognized. But the Commissioner overstepping his bounds with respect to one of two amendments ordered does not give Victory carte 9 blanche to ignore all Commissioner directives. Furthermore, had Victory simply amended its 2021 Annual Statement to include the existence of the lawsuit when directed the first (or second) time, its amendment would have been complete prior to the Clear Spring litigation settlement and there would have been no cause to order disclosure of a settlement that did not yet exist. ¶18 The Commissioner has broad authority to order an insurance company to amend its annual statement to ensure a “full and true statement” of the company’s affairs are available to interested Montana insurance consumers and/or investors. The Commissioner’s repeated directives to amend Victory’s 2021 Annual Statement to include the existence of the Clear Spring litigation, when Clear Spring was seeking a judgment with the potential to place Victory at great financial risk, if not become insolvent, were within the Commissioner’s statutory authority. Section 33-2-701(1), MCA. Victory was not free to reject and/or ignore such a directive, and its conduct in doing so violated the Montana Insurance Code. The Hearing Examiner correctly granted summary judgment to the Commissioner on this issue, which was properly affirmed by both SDIC Duerk in the Final Agency Decision and by the District Court on judicial review. ¶19 2. Is reversal warranted for the failure of the Commissioner to explain the $25,000 fine? ¶20 Victory asserts the Commissioner’s imposition of a $25,000 fine, the maximum allowed, was arbitrary and capricious because the Commissioner provided no rationale behind the choice to impose the maximum fine. The Commissioner contends he is not required “to provide a detailed explanation of why he selected a particular fine amount,” 10 only that the decision be supported by substantial evidence and within the bounds of his lawful authority. ¶21 In resolving the summary judgment motion, the Hearing Examiner determined the Commissioner could require Victory to amend its 2021 Annual Statement to include the existence of the Clear Spring litigation, but could not require Victory to amend the statement to include the settlement of that litigation because it occurred outside the time period covered by the statement. After resolving those two issues, the Hearing Examiner addressed the statutory authority which allows the Commissioner to, after conducting a hearing, “impose a fine not to exceed the sum of $25,000” for violating the Insurance Code. Section 33-1-317, MCA. The Hearing Examiner noted the Commissioner was vested with the discretion to “determine the just amount of a fine imposed,” and Victory was “not without recourse” because it could appeal the fine amount to the District Court. The Hearing Examiner’s recommended order stated the “Commissioner may impose a fine in an amount not to exceed $25,000.” SDIC Duerk, in the Final Agency Decision, simply found “the appropriate fine to be imposed” pursuant to the Commissioner’s statutory authority was $25,000, finding only that its failure to disclose the existence of the Clear Spring litigation was a violation of the insurance code and again noting Victory was “not without recourse” because it could appeal the amount of the fine to the District Court. ¶22 The Commissioner argues this matter is governed by Victory Ins. Co. v. Downing, 2023 MT 139, ¶ 15, 413 Mont. 80, 532 P.3d 850, wherein we noted the Commissioner was vested by the Legislature with the authority to impose fines for violations of the Insurance Code. But Downing’s recognition of the (undisputed) fact the Commissioner has been 11 vested with the discretion to impose a fine of up to $25,000 does not mean the Commissioner is not required to explain why he exercised his discretion in the manner chosen. Our MAPA jurisprudence has consistently made clear that “we will not afford unfettered deference to agency decisions without a thorough and careful review of the administrative record and defer only to ‘consistent, rational, and well-supported agency decision-making.’” DeBuff, ¶ 24 (quoting Mont. Env’t Info. Ctr. v. Mont. Dep’t of Env’t Quality, 2019 MT 213, ¶ 26, 397 Mont. 161, 451 P.3d 493 (MEIC 2019)). In practice, this “requires that an agency cogently explain why it has exercised its discretion in a given manner,” DeBuff, ¶ 24 (internal quotation marks and citation omitted), and a reviewing court to “consider whether an agency decision was based on a consideration of all relevant factors.” DeBuff, ¶ 24 (citing Clark Fork Coal. v. Mont. Dep’t of Env’t Quality, 2008 MT 407, ¶ 21, 347 Mont. 197, 197 P.3d 482). ¶23 Here, we have no explanation for why the Commissioner decided on the maximum fine in this case because the Final Agency Decision simply recounts that Victory violated the Insurance Code. But the existence of a violation of the insurance code is a necessary condition for an imposition of any fine. Section 33-1-317, MCA. It does not explain why the Commissioner, vested with the discretion to impose any fine between $0 and $25,000, chose to impose the maximum penalty in this case. This is unlike the case of the fine we upheld in Victory 2026, where the Hearing Examiner set forth Victory’s violations of the insurance code, its attempts to frustrate the Commissioner’s investigation of those violations by not producing requested records in usable formats, and factual misrepresentations Victory made to the Hearing Examiner. The Special Deputy Insurance 12 Commissioner adopted the Hearing Examiner’s findings in the final agency decision. Victory 2026, ¶¶ 26-27. We affirmed the imposition of the maximum fine, determining the agency considered “relevant factors”—Victory’s facially illegal agreement, Victory willfully and actively impeding the Commissioner’s investigation, and Victory misrepresenting facts to the Hearing Examiner—before deciding to impose the maximum fine. Victory 2026, ¶ 28. On MAPA review, we may “reverse or modify the [agency’s] decision if the substantial rights of the appellant have been prejudiced[.]” Section 2-4-704(2), MCA. Here, we find the imposition of the maximum fine, with no explanation for why this amount was appropriate, violated Victory’s substantial rights because the agency decision was “arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.” Section 2-4-704(2)(a)(vi), MCA. ¶24 Victory seeks this Court order the dismissal of the entire agency action because our review “must be judged on the grounds and reasons set forth in the challenged order(s); no other grounds should be considered.” MTSUN, LLC v. Mont. Dep’t of Pub. Serv. Regul., 2020 MT 238, ¶ 51, 401 Mont. 324, 472 P.3d 1154. We disagree with this contention under the facts of this case. As discussed in Issue 1, Victory did violate the Insurance Code when it refused to amend its 2021 Annual Statement to include the existence of the Clear Spring litigation after being directed to do so by the Commissioner. We have reviewed the “grounds and reasons set forth” in the agency decision and agreed with the agency that Victory violated the Insurance Code and § 33-1-317, MCA, grants the Commissioner the discretion to impose a fine of up to $25,000 for such a violation. However, the Commissioner may not exercise his discretion without explanation as he did in this case. 13 DeBuff, ¶ 24. When faced with a situation where there has been a demonstrated violation of the Insurance Code but the maximum fine was imposed without explanation, the proper remedy is not to completely dismiss the agency action, it is to remand with instructions to the agency to “cogently explain why it has exercised its discretion in a given manner.” MEIC 2019, ¶ 97. Accordingly, while we affirm the District Court as it relates to affirming the agency finding a violation of the Insurance Code, we reverse the imposition of the $25,000 fine and remand to the District Court with instructions to remand to the agency to “cogently explain why it has exercised its discretion” prior to the imposition of any fine. Victory may then appeal any fine which may ultimately be imposed to the District Court. Section 33-1-317, MCA. CONCLUSION ¶25 The District Court did not err by affirming the Commissioner’s final order which determined Victory violated the Insurance Code by failing to supplement its annual report and disclose the federal lawsuit. The District Court’s affirmance of the fine, however, is reversed and remanded with instructions to remand to the agency to explain why it has exercised its discretion prior to the imposition of any fine. ¶26 Affirmed in part, reversed in part, and remanded. /S/ INGRID GUSTAFSON We Concur: /S/ CORY J. SWANSON /S/ BETH BAKER /S/ KATHERINE M. BIDEGARAY /S/ JAMES JEREMIAH SHEA 14