Case Title: STONEWALL INS CO v WEST

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1973-09-10T00:00:00Z

Document:
No. 12491 I N T H E S U P R E M E C O U R T O F THE STATE O F MONTANA 1973 S T O N E W A L L INSURANCE C O M P A N Y , a corporation, P l a i n t i f f and Appellant, JOHN L. WEST, STATE F A R M M U T U A L AUTOMOBILE INSURANCE C O M P A N Y , FREDERICK W. BERGER and RAYMOND EISENZIMER, Defendants and Respondents. Appeal from: D i s t r i c t Court of t h e Eighth J u d i c i a l District, Honorable Paul G. Hatfield, Judge presiding. Counsel of Record : For Appellant : Cure and Borer, Great F a l l s , Montana John F. Lynch argued, Great F a l l s , Montana For Respondents: Dzivi, Conklin, Johnson and Nybo, Great F a l l s , Montana Dennis McCaff e r t y argued, Great Fa 11s , Montana Submitted: September 10, 1973 Decided : SEP 2 7 1973 F i l e d : S E P 2 7 1973 M r . J u s t i c e Frank I. Haswell delivered the Opinion of the Court, This i s a declaratory judgment action t o determine coverage under an automobile l i a b i l i t y insurance policy brought i n t h e d i s t r i c t court of Cascade County, before the Hon. Paul G. Hat- f i e l d . The case was submitted on an agreed statement of f a c t s . The d i s t r i c t court granted summary judgment f o r a l l defendants, holding t h a t the policy provided coverage. P l a i n t i f f appeals from t h a t judgment. The accident- i n question occurred about one and one-half miles south of Great F a l l s , Montana, on October 6, 1968, when a vehicle driven by defendant John L. West collided headon with a c a r driven by defendant Frederick W. Berger i n which defendant Raymond Eisenzimer was a passenger. k t the time of the accident defendant West had an automobile l i a b i l i t y insurance policy with p l a i n t i f f Stonewall Insurance Company providing bodily injury and property damage coverage; defendant Berger had an automobile insurance policy with defendant State Farm Mutual Automobile Insurance Company. Following the accident State Farm paid f o r damages suffered by Berger and a l l Eisenzimer ancl/made claims f o r reimbursement from defendant West. P l a i n t i f f Stonewall declined t o provide coverage f o r defendant West with respect t o the accident. The vehicle defendant West was driving a t the time of the accident belonged t o Ralph Ward, a licensed used c a r dealer, who operated an automobile sales agency and repair shop. Ward had given defendant West permission t o drive i t on a demonstra- t i o n r i d e with a view toward i n t e r e s t i n g him i n purchasing it. Defendant West's insurance policy with p l a i n t i f f Stonewall con- t a i n s the following coverage exclusion: " ( c ) This insuring agreement does not apply: " * 9~ * ( 2 ) to any action arising out of the operation of an automobile sales agen2, re- p.---- - pair shop, service station, storage garage or public parking place". (Emphasis added) . The single issue presented for review is: Does this policy exclusion preclude coverage for the accident in question? Stonewall's contention is that the actual reason the car was being driven by West was for demonstration purposes inci- dent to the sale and purchase of an automobile. Demonstrating automobiles is a function of an automobile sales agency, and therefore within the exclusionary provisions of Stonewall's insuring agreement. Stonewall further contends it is not necessary that the automobile sales agency be that of insured. Stonewall argues that because West was using the automobile for demonstration purposes for the ultimate benefit of Ward, the car salesman and owner, policy reasons dictate that Ward should provide insurance coverage for accidents which arise our of the opera- tion of his automobile sales agency. Stonewall's position is a minority view. State Farm Automobile Insurance Co. v. Sampson, 305 F.Supp. 50, aff'd 428 F. 2d 475. Such interpretation, excluding a "test drive" situation, would create a gap in the insured's personal coverage. To permit such an exclusion would be a strained construction of the phrase "operation of an automobile sales agency". The majority rule, limiting the exclusionary clause to situations where the insured was using the non-owned automobile in an automobile business of his own, is the better reasoned rule. Helmich v . Northwestern Mutual Insurance Co., 376 F.2d 420; United States Fidelity & Guaranty Co. v. Dixie Auto Ins. Co., 292 F,Supp. 554, aff'd 403 F.2d 717; Caster v. Motors Insurance Corporation, 28 Ill.App.2d 363, 171 W.E.2d 425. In interpreting policies of insurance the courts resolve uncertainties and ambiguities in the policy against the insurer, since i t i s responsible f o r the language i n the contract. Section 13-720, R.C.M. 1947; S t . Paul F i r e & Marine Ins. Co. v. Thompson, 150 Mont. 182, 433 P.2d 795; Johnson v. Continental Cas.Co., 127 Mont. 281, 263 P.2d 551. Here, a reading of the excl.usion i n question presents an uncertainty created by the language used when applied t o the f a c t s i n the present case. 11 The exclusionary provision i s ambiguous a s t o whose automobile sales agency" the policy provisions r e f e r . The general r u l e i s t h a t exclusionary clauses r e l a t i n g t o the business use of non-owned vehicles a r e designed t o require an insured who uses non-owned vehicles i n furtherance of h i s business t o seek additional coverage f o r the added r i s k s inci- dent t o such use. The pertinent inquiry i n interpreting auto- mobile business exclusion clauses i n harmony with t h e i r general purpose i s determing the relationship, i f any, between the insured's use of a non-owned automobile and some business o r occupational i n t e r e s t of the insured. 7 Cum.Supp., Appleman- Insurance Law and Practice- 44455, pp. 510,513 (1972). I n the present case the insured had no business i n t e r e s t i n the particular automobile sales agency. The insured was merely driving a vehicle owned by it. Such provision should not be construed t o create an unanticipated gap i n the insured's lj-a- b i l i t y coverage by requiring the insured t o t e s t drive automo- b i l e s a t h i s p e r i l . W e hold t h a t the policy exclusion applies only where the insured operates an automobile s a l e s agency o r the other enter- prises named i n the exclusionary clause. The summary judgment of the d i s t r i c t court i s affirmed. Justice,.