Case Title: LINDELL v RUTHFORD

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1979-08-09T00:00:00Z

Document:
No. 14663 IN THE S U P R E M E COURT O F THE STATE O F PXNUWA 19 7 9 JOHN LINDELL, JON D. VICHE, and ALASKA PACIFIC ASSURANCE COMPANY, an Alaska corporation, Plaintiffs and Respondents, ROBERT E . RUTHR)RD, Defendant and Appellant and Third Party Plaintiff, -VS- UNITED SEXVICES AUIWDBILE, Third Party Defendant. Appeal £ram: D i s t r i c t Court of the Fourth Judicial District, Honorable John B. M3Zlernan, Judge presiding. Counsel of Record: For Appellant: Milodragovich, Dale & Dye, Missoula, Montana Fdwin C. Daue argued, Missoula, Montana For Respondents: Garlington, Lohn and Robinson, Missoula, Montana Gary Chumrau argued, Missoula, Mntana Doug Austin, Superior, Mntana Suhnitted: June 7, 1979 Decided: AUG . * 9 Filed: IE 1973 M r . Chief J u s t i c e Frank I. Haswell d e l i v e r e d t h e Opinion of t h e Court. This i s an appeal by a n i n s u r e d under a g e n e r a l l i a - b i l i t y and comprehensive personal insurance p o l i c y from a judgment i n f a v o r o f h i s i n s u r e r i n t h e District Court of Mineral County. The f a c t s i n d i c a t e t h a t on May 19, 1977, Joseph Ruth- f o r d , t h e son of t h e named i n s u r e d Robert Ruthford, w a s d r i v i n g h i s f a t h e r ' s pickup looking f o r h o r s e s , some of which w e r e owned by h i s f a t h e r . While searching f o r t h e h o r s e s i n an off-road a r e a , t h e pickup became s t u c k i n t h e mud. A logging s k i d d e r w a s parked nearby which, unknown t o t h e son, had been drained of o i l . The son s t a r t e d t h e s k i d d e r and moved it near t h e pickup. Meanwhile, a t h i r d p a r t y had contacted t h e f a t h e r by CB r a d i o and t h e f a t h e r had a r r i v e d w i t h a logging chain. A t h i r d person a t t a c h e d t h e logging c h a i n t o t h e pickup and s k i d d e r . The f a t h e r stood by and watched h i s son tow t h e pickup o u t of t h e mud. T h e r e a f t e r , t h e son r e t u r n e d t h e s k i d d e r t o t h e p l a c e h e o r i g i n a l l y found it. The engine of t h e skidder was s e v e r e l y damaged because t h e r e was no o i l i n it. The owners of t h e s k i d d e r and t h e i r i n s u r e r f i l e d a damage a c t i o n a g a i n s t t h e f a t h e r seeking recovery of r e p a i r c o s t s , l o s s of income and exemplary damages. The f a t h e r answered denying l i a b i l i t y . He a l s o f i l e d a t h i r d - p a r t y complaint a g a i n s t h i s i n s u r e r , United S e r v i c e s Automobile Association, which i s t h e s u b j e c t of t h i s appeal. The f a t h e r ' s t h i r d - p a r t y complaint a l l e g e d i n substance t h a t any l i a b i l i t y on h i s p a r t t o t h e owners of t h e skidder was covered by h i s insurance p o l i c y . Therefore, he a l l e g e d , h i s i n s u r e r w a s o b l i g a t e d t o defend t h e damage a c t i o n brought a g a i n s t him and t o pay any damages recovered by t h e skid- d e r ' s owners. Following p r e t r i a l discovery, t h e i n s u r e r moved f o r summary judgment on t h e f a t h e r ' s t h i r d - p a r t y complaint on t h e b a s i s of p o l i c y exclusions. The D i s t r i c t Court g r a n t e d summary judgment t o t h e i n s u r e r and dismissed t h e t h i r d - p a r t y complaint. The f a t h e r appeals. Although t h e i s s u e s on appeal are s t a t e d d i f f e r e n t l y by each p a r t y , t h e substance of t h e controversy i s whether t h e insurance p o l i c y provides coverage under t h e f a c t s of t h i s c a s e . The i n s u r e d f a t h e r claims coverage under t h e omnibus i n s u r i n g agreement and d e f i n i t i o n s i n t h e p o l i c y and d e n i e s t h a t any p o l i c y e x c l u s i o n s e l i m i n a t e t h a t coverage. On t h e o t h e r hand, t h e i n s u r e r claims a s p e c i f i c exclusion i n t h e p o l i c y e l i m i n a t e s coverage. The complaint by t h e owners of t h e s k i d d e r a g a i n s t t h e f a t h e r a l l e g e s two bases of l i a b i l i t y : (1) t h a t t h e f a t h e r "cooperated with, a s s i s t e d , and r a t i f i e d t h e acts of h i s son" which b e n e f i t e d him by removing h i s pickup from t h e mud, and (2) t h a t t h e son w a s a c t i n g a s a g e n t of h i s f a t h e r s o t h a t t h e s o n ' s wrongful a c t s w e r e imputed t o h i s f a t h e r . The b a s i c i n s u r i n g agreement i n t h e p o l i c y provides: "The company w i l l pay on behalf of t h e i n s u r e d a l l sums which t h e i n s u r e d s h a l l become l e g a l l y o b l i g a t e d t o pay a s damages because of bodily i n j u r y o r p r o p e r t y damage . . . and t h e company s h a l l have t h e r i g h t and duty t o defend any s u i t a g a i n s t t h e i n s u r e d seeking damages on account of such bodily i n j u r y o r property damage, even i f t h e a l l e g a t i o n s of t h e s u i t a r e groundless, f a l s e o r f r a u d u l e n t . . ." The p o l i c y d e f i n e s "persons i n s u r e d " i n p e r t i n e n t p a r t as: "The named i n s u r e d and, i f r e s i d e n t s of t h e named i n s u r e d ' s household, h i s spouse, t h e r e l a t i v e s of e i t h e r , and any o t h e r person under t h e age of 21 i n t h e care of any i n s u r e d ; b u t with r e s p e c t t o any . . . v e h i c l e , n o t owned by any such insured, only while using o r having custody o r possession of such . . . v e h i c l e with t h e permission of t h e owner . . ." The policy exclusion on which t h e i n s u r e r r e l i e s pro- v i d e s : "This coverage does n o t apply: " ( j ) t o property damage t o . . . ( 2 ) property occupied o r used by t h e insured o r rented t o o r i n t h e c a r e , custody o r c o n t r o l of t h e insured o r as t o which t h e insured i s f o r any purpose exercising physical c o n t r o l . . ." The f i r s t b a s i s of l i a b i l i t y a l l e g e d by t h e s k i d d e r ' s owners a g a i n s t t h e f a t h e r i s t h a t t h e f a t h e r cooperated with, a s s i s t e d and r a t i f i e d t h e wrongful acts of h i s son. This a l l e g a t i o n i s based upon t h e f a t h e r ' s personal wrong- doing rendering him a j o i n t t o r t f e a s o r with h i s son. Ac- cordingly, t h e f a t h e r a s t h e named insured under t h e policy would be covered f o r h i s own wrongdoing u n l e s s t h e policy exclusion eliminates coverage. The skidder was n o t personally used by t h e f a t h e r , r e n t e d by him, i n h i s c a r e , custody o r c o n t r o l , nor was t h e f a t h e r exercising physical c o n t r o l over it. Thus t h e exclu- s i o n would n o t e l i m i n a t e coverage f o r any personal wrong- doing by t h e f a t h e r . This b r i n g s us t o t h e crux of t h i s appeal. The second b a s i s of l i a b i l i t y a l l e g e d by t h e s k i d d e r ' s owners a g a i n s t t h e f a t h e r i s t h a t h i s son was h i s agent; t h a t t h e s o n ' s wrongful a c t s a r e imputed t o t h e f a t h e r under t h e p r i n c i p l e of respondeat superior; and t h a t t h e f a t h e r i s l i a b l e by reason of h i s s o n ' s wrongful a c t s . I t i s agreed t h a t t h e son w a s a member of h i s f a t h e r ' s household, under t h e age of 21, and i n t h e c a r e of h i s f a t h e r , t h e named insured. This would q u a l i f y t h e son as one of t h e persons i n s u r e d were it n o t f o r t h e second c l a u s e i n t h a t p o l i c y p r o v i s i o n set f o r t h above, v i z . , " b u t w i t h r e s p e c t t o any . . . v e h i c l e n o t owned by any such i n s u r e d , o n l y while using o r having custody o r possession of such . . . v e h i c l e w i t h t h e permission of t h e owner . . ." I t i s admitted t h a t t h e son was n o t using t h e s k i d d e r , nor d i d he have custody o r possession of it, w i t h t h e permission of any o f i t s owners. Thus, t h e son i s n o t an i n s u r e d under t h e f a c t s of t h i s case. Because t h e son i s n o t an i n s u r e d under t h e p o l i c y , t h e coverage e x c l u s i o n would n o t o r d i n a r i l y apply. The exclu- s i o n a p p l i e s only t o p r o p e r t y used, r e n t e d t o , i n t h e c a r e , custody, o r c o n t r o l of " t h e insured" o r which " t h e i n s u r e d " i s f o r any purpose e x e r c i s i n g p h y s i c a l c o n t r o l . However, h e r e t h e i n s u r e r contends t h a t t h e son was h i s f a t h e r ' s a g e n t and t h e s o n ' s use, possession and p h y s i c a l c o n t r o l of t h e s k i d d e r w e r e l e g a l l y t h o s e of h i s f a t h e r who i s l i a b l e f o r h i s s o n ' s wrongful a c t s . The b a s i s of t h i s c o n t e n t i o n i s t h e d o c t r i n e of respondeat s u p e r i o r o r t h e imputed l i a b i l i t y of t h e p r i n c i p a l f o r t h e a c t s of h i s agent. Hence, according t o t h e i n s u r e r , t h e p o l i c y exclu- s i o n becomes o p e r a t i v e and e l i m i n a t e s coverage. W e have n o t previously decided t h i s i s s u e . The c o u r t s of o t h e r states are divided. An example of a c a s e holding no exclusion of coverage under s i m i l a r f a c t s i s t h e d e c i s i o n of an i n t e r m e d i a t e a p p e l l a t e c o u r t of Washington i n H o l t e r v. National Union F i r e Insurance Company (1969), 1 Wash.App. 46, 459 P.2d 61. There it was held t h a t because t h e p o l i c y d e f i n i t i o n of an i n s u r e d d i d n o t i n c l u d e t h e employee who caused t h e damage, t h e c a r e , custody and c o n t r o l exclusion d i d n o t apply. The reasoning of t h e Washington c o u r t was t h a t t h e p r o v i s i o n s of an insurance p o l i c y should be i n t e r - p r e t e d i n t h e way it would be understood by t h e average man purchasing insurance. Hence, where t h e p o l i c y d e f i n i t i o n of "insured" included executive o f f i c e r s , d i r e c t o r s and stock- h o l d e r s b u t d i d n o t list employees, t h e exclusionary c l a u s e would be i n t e r p r e t e d most s t r o n g l y a g a i n s t t h e i n s u r e r and coverage would be afforded. An example o f a c o n t r a r y r e s u l t i s t h e d e c i s i o n of t h e Oregon Supreme Court i n C r i s t e t a l . v. Potomac Insurance Company (1966), 243 O r . 254, 413 P.2d 407. There t h e c o u r t h e l d t h a t " c a r e , custody and c o n t r o l " e x c l u s i o n a p p l i e d t o a n employee of t h e i n s u r e d r e l i e v i n g t h e i n s u r e r of any duty t o defend t h e a c t i o n o r indemnify t h e i n s u r e d i n t h e amount of t h e s e t t l e m e n t . The reasoning of t h e Oregon c o u r t was based on agency p r i n c i p l e s rendering t h e a c t s of t h e employee t h o s e of h i s employer, t h e insured. W e hold t h a t t h e exclusionary c l a u s e does n o t e l i m i n a t e coverage here. The i n s u r e r has t h e duty t o defend and indemnify t h e i n s u r e d f o r any damages f o r which t h e i n s u r e d i s l i a b l e w i t h i n t h e p o l i c y l i m i t s . W e reach t h i s r e s u l t by i n t e r p r e t i n g t h e p o l i c y i n t h e way it would be understood by a n average man purchasing insurance. H o l t e r , supra. An insurance p o l i c y i s t o b e i n t e r p r e t e d a s a whole i n t h e e n t i r e t y of i t s t e r m s and conditions. S e c t i o n 33-15-316 MCA. So construed, t h e language of t h e p o l i c y i s ambiguous a s a p p l i e d t o t h e f a c t s of t h i s case. I n such c a s e t h e c o n s t r u c t i o n most f a v o r a b l e t o t h e i n s u r e d should be adopted. Atcheson v. Safeco Insurance Company (1974), 165 Mont. 239, 527 P.2d 549. Such c o n s t r u c t i o n a p p l i e s p a r t i c u l a r l y t o exclusionary c l a u s e s . Johnson v. E q u i t a b l e Insurance Co. (1963), 142 Mont. 128, 381 P.2d 778. Applying t h e s e p r i n - c i p l e s w e hold t h a t t h e enlargement of t h e exclusionary c l a u s e t o encompass t h e use, possession and p h y s i c a l c o n t r o l of a n a l l e g e d a g e n t of t h e i n s u r e d i s unwarranted and l a c k s m e r i t . W e have examined t h e p e r i p h e r a l arguments and a u t h o r i t i e s c i t e d by respondent and f i n d t h a t none would change o u r r e s u l t i n t h i s c a s e . The summary judgment i s vacated. The cause i s remanded t o t h e D i s t r i c t Court f o r f u r t h e r proceedings c o n s i s t e n t w i t h t h i s opinion. \ Chief J u s t i c e W e concur: W w - 4 - 2 ~ J u s t i c e s