Court OKs Allowing Insurance Companies To Set Rates Based On Marital Status

The Montana Auditor and Commissioner of Securities and Insurance James Brown is cheering a recent court ruling by Lewis and Clark County District Court Judge Mike Menahan which determined legislation passed in 2021 doesn’t violate the state’s Constitution by allowing insurance companies to figure marital status when setting rates.

A group of individuals and organizations challenged House Bill 379, sponsored by Rep. Sue Vinton, R-Billings, which overturned a 1985 law that banned insurance companies from taking into account marital status when determining rates.

A group of individuals and organizations were represented by Upper Seven Law Firm, and they argued that using a person’s marital status violated the equal protection clause of the Montana Constitution, and the legislation was also unconstitutional because it violated a provision that prohibits “special legislation.” Special legislation is often defined as bills meant to single out or provide benefits to a specific group or industry.

HB 379 allows insurance providers to make rates baed on sex and marital status. Menahan concluded that while Montana’s Constitution covers a variety of protected classes, including race, sex, or religious ideas, whether a person is wed is not among those.

“The clause does not explicitly prohibit discrimination on the basis of marital status,” Menahan said in his 12-page ruling.

From there, Menahan said because Montana law does not protect marital status, the legislation — in this case HB 379 — must be tied to a legitimate government interest.

Brown in his filings told the court that the State of Montana has a legitimate interest in keeping rates low.

Experts who testified also said that “married couples provide lower risk for purposes of automobile insurance” and therefore have lower premiums in car insurance. Shawn Kraft, who co-owns Leavitt Great West Insurance Company, said married people are less like to make an insurance claim than single people, and 42 states and the District of Columbia offer a discount to married couples.

Expert Ryan Purdy, who testified as an actuarial expert, said determining insurance rates can be complicated. For example, married people tend to drive slightly more, which increases risk. However, married couples tend to engage in less risky types of driving, which lowers the risk.

Plaintiffs who brought the lawsuit noted that some paid higher premiums, including one who paid 6.2 percent more because he was single.

“Simply because a statute discriminates on the basis of marital status does not mean the statute is irrational,” Menahan said.

He ruled that even though rates for single and married people differ — that difference can be explained by actuarial results, which is a logical practice for an insurance company. Special Legislation Clause

The Montana Constitution also prohibits the Legislature from passing a “special or local act.” This is often interpreted to mean that the lawmakers can’t pass legislation that is narrowly tailored to a particular industry or situation.

The group of plaintiffs allege that HB 379 gives special treatment to the insurance companies.

“Insurance companies do not face the same regulatory regime as similarly situated entities,” the lawsuit said.

Menahan said that the legislation works the same for all insurance companies, and therefore the classification is reasonable and does not violate the constitution.

Brown’s office had argued that because of the “unisex” law, insurance companies could not factor into their premiums all the information, for example, marital status.

“This is another case where a special interest group ran to the courts to try to overturn a common- sense law passed by the Montana Legislature. My office stepped into the breach and successfully defended the constitutionality of HB 379,” Brown said in a written statement. “The idea that government should ban insurance companies from looking at sex and marital status when setting policy rates the very definition of big government overreach and nonsensical meddling.”