Montana’s Supreme Court just clarified when insurers can recover payouts after an accident, setting a clear standard for subrogation timing and policy coverage.
On September 2, 2025, the Montana Supreme Court affirmed the dismissal of claims brought by Mark and Molly Johnson against State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Company. The dispute arose after a 2017 car accident involving Molly Johnson, who was insured by State Farm. While State Farm paid for most of the Johnsons’ property losses, some items were not covered. After paying out, State Farm exercised its right to subrogation, recovering the payout from the at-fault driver’s insurer, GEICO.
The Johnsons argued that State Farm violated Montana’s made whole doctrine by collecting from GEICO before they were fully compensated for all losses, including attorney fees. They also brought a claim for conversion, contending that State Farm’s actions deprived them of their right to recover fully from the at-fault party.
The case moved through both federal and state courts. The District Court dismissed the Johnsons’ claims, finding they had not shown that State Farm’s subrogation caused them uncompensated loss for damages covered by their insurance policy. The court also determined that the conversion claim was pre-empted by Montana law.
On appeal, the Montana Supreme Court upheld the lower court’s decision. The court clarified that Montana’s made whole doctrine requires insurers to wait until insureds are fully compensated – including attorney fees – before seeking subrogation. However, the court found that the Johnsons’ remaining losses and attorney fees related to damages not covered by their State Farm policy. As a result, the doctrine did not apply, and State Farm’s subrogation was permitted.
The Supreme Court also rejected the Johnsons’ conversion claim, noting it was based on the same facts and failed for the same reasons as the made whole claim. The decision did not turn on any specific insurance policy clauses but relied on established principles of subrogation and Montana law.
This final decision offers clear guidance for insurers and claims professionals: under Montana law, subrogation must wait until insureds are made whole for covered losses, but not for losses outside policy coverage. The ruling highlights the importance of understanding policy terms, coverage scope, and the timing of subrogation – key considerations for those managing claims and risk in today’s insurance and mortgage landscape.
