Case Title: MT WEST FARM BUR v NEAL

Citation: 

Docket Number: 

State: montana

Court: Montana Supreme Court

Date: 1976-02-09T00:00:00Z

Document:
No. 13047 I N T H E S U P R E M E C O U R T O F THE STATE O F MONTANA 19 7 5 M O U N T A I N W E S T F A R M BUREAU, e t a1.y P l a i n t i f f and Appellant, R O B E R T L. NEAL, individually and as Administrator of t h e Estate of DEBORAH NEAL, Deceased, and R O B E R T C. DRIGGS, Defendants and Respondents. Appeal from: D i s t r i c t Court of t h e F i r s t J u d i c i a l D i s t r i c t , Honorable Gordon R. Bennett, Judge presiding. Counsel of Record: Scanlon and Connors, Anaconda, Montana Joseph C. Connors argued, Anaconda, Montana Radonich, Brolin and Reardon, Anaconda, Montana - p ~ / 0/&~7e& For R e q m d m t s : L.L - & Johnson and Foster, Lewistown, Montana Robert L. Johnson argued, Lewistown, Montana Submitted: December 17, 1975 F i l e d : M r . J u s t i c e Frank I. Haswell delivered the Opinion of the Court. P l a i n t i f f Mountain West Farm Bureau Mutual Insurance Company (Farm Bureau) brought a declaratory judgment action against defendants Neal and Driggs seeking a declaration t h a t Farm Bureau is l i a b l e t o pay no more than $10,000 t o i t s insured, I t Neal, under i t s uninsured motorist" coverage. Neal counter- claimed t h a t Farm Bureau is l i a b l e i n t h e amount of $80,000. The d i s t r i c t court, Lewis and Clark County, found Farm ~ u r e a u ' s l i a b i l i t y t o be $40,000. Farm Bureau and Neal appeal from t h i s order. The underlying i s s u e i s whether and under what circum- stances a person carrying a single policy of automobile l i a b i l i t y insurance, which insures two o r more vehicles and includes a provision f o r uninsured motorist coverage, may "stack" o r I I pyramid" the uninsured motorist coverage l i m i t s . The d i s t r i c t court held t h a t under the insurance policy i n question t h e uninsured motorist coverage l i m i t s may be stacked on the basis of t h e number of vehicles insured, but t h a t those l i m i t s may not be stacked on both the wrongful death and survival claims. W e affirm. The f a c t s of t h i s case were stipulated i n the d i s t r i c t court and a r e undisputed here. Prior t o July 4, 1971, Farm Bureau issued i t s policy of automobile l i a b i l i t y insurance t o Neal, the policy included a provision f o r uninsured motorist coverage i n the amount of $10,000 f o r one person i n any one accident. Four motor vehicles, a l l owned by Neal, were covered by the same policy. Neal, h i s wife, and h i s daughter Deborah were named insureds by d e f i n i t i o n under the policy, which was i n f u l l force and e f f e c t on July 4 , 1971. O n July b , 1971, Deborah Neal was riding on a motorcycle owned and operated by Robert Driggs, the other defendant herein. A n accident occurred i n which Deborah was injured; she died on July 10, 1971. Driggs was an uninsured motorist a t t h e time of t h e accident. Neal brought an action against Driggs and Farm Bureau i n the d i s t r i c t court of Gallatin County seeking damages from Driggs f o r ~ e b o r a h ' s injury and death, and reimbursement from Farm Bureau under the uninsured motorist provisions of i t s policy with Neal. Thereafter, on February 6, 1974, Farm Bureau f i l e d i t s complaint f o r declaratory judgment i n Lewis and Clark County against Neal and Driggs. The Gallatin County action between Neal and Driggs i s pending, Farm Bureau having been dropped a s a party thereto. Farm Bureau alleged i n i t s complaint t h a t it had tendered $10,000 t o Neal t o s a t i s f y i t s obligation under the uninsured motorist provisions of i t s policy; t h a t s a i d tender had been repeatedly refused; and t h a t Neal believed he was e n t i t l e d t o multiply the $10,000 l i m i t f o r uninsured motorist coverage by the number of automobiles Neal had insured under the same policy. Farm Bureau prayed f o r a declaratory judgment t o the e f f e c t t h a t it was under no duty o r obligation t o pay more than $10,000 t o Neal f o r i n j u r i e s t o and death of Deborah Neal under the terms of the policy. Defendant Neal answered by admitting a l l of Farm Bureau's allegations save those which would l i m i t Farm Bureau's l i a b i l i t y t o $10,000 o r t o $40,000. Neal counterclaimed f o r a declaratory judgment declaring t h a t Farm Bureau's maximum obligation under the policy i s $80,000 ---$40,000 f o r the damages t o t h e h e i r s f o r t h e wrongful death of Deborah Neal, and $40,000 f o r t h e bodily i n j u r i e s and personal suffering of Deborah Neal under her survival claim. Thus Neal sought t o "stack" uninsured motorist coverage l i m i t s i n two ways, viz. (1) by multiplying t h e $10,000 l i m i t by the number of insured vehicles (four), and (2) by multiplying the $40,000 l i a b i l i t y r e s u l t i n g thereby by the number of claims prosecuted by Neal a s an insured individual and representative of the h e i r s of Deborah Neal, and a s administrator of Deborah Ileal' s e s t a t e , (two). The d i s t r i c t court of Lewis and Clark County had before it the stipulated f a c t s and a copy of t h e insurance policy issued by Farm Bureau t o Neal. Following hearing and submission of b r i e f s , the court held t h a t Farm ~ u r e a u ' s maximum t o t a l obligation t o Neal under i t s policy f o r a l l i n j u r i e s t o and the death of Deborah Neal i s the sum of $40,000. Farm Bureau appeals from t h a t portion of the d i s t r i c t c o u r t ' s order which permits stacking t h e $10,000 uninsured motorist coverage l i m i t on the theory t h a t four vehicles were insured by one policy; Neal appeals from the portion of the order which denies h i s attempt t o stack the two claims a s an insured individual and a s administrator of Deborah ~ e a l ' s e s t a t e . The issues on appeal are: (1) D o the insurance policy provisions r e l a t i n g t o uninsured motorist coverage contain contradictions which render t h e policy ambiguous, thus permitting a j u d i c i a l construction of the policy which allows stacking based on the number of vehicles insured? (2) Can t h e insurance claimant Neal stack uninsured motorist coverage l i m i t s on the basis of h i s capacity t o sue on two claims, i . e . , a s an insured individual and a s administrator of Deborah ~ e a l ' s e s t a t e ? In i t s order and opinion dated March 12, 1975, the d i s t r i c t court disposed of the f i r s t issue i n t h i s language: "1t i s the opinion of the Court t h a t the provisions of the policy dealing with and labelled ' ~ i m i t s of ~ i a b i l i t y ' (pg.32) and those provisions of paragraph '1' of the d e f i n i t i o n s section of the policy (pg.37) a r e contradictory, ambiguous and beyond reconciliation and must therefore be construed i n favor of the policy- holder. When so construed, t h e e f f e c t of paragraph '1' af the definitions i s t o provide four separate - p o l i c i e s of uninsured motorist insurance with maxlmum l i a b i l i t y of $10,000 each f o r each person physically injured o r k i l l e d i n a p a r t i c u l a r occurrence, there having been four vehicles insured under the policy a t the time of the injury. JC JC JX" (Emphasis supplied.) The l i m i t s of l i a b i l i t y provision referred t o s t a t e s i.n p a r t : "(a) 'The l i m i t of l i a b i l i t y , a s stated i n the declarations f o r uninsured motorist coverage, a s ' applicable t o each person' i s the l i m i t of the company's l i a b i l i t y f o r a l l damages, including damages f o r care o r loss of services, because of bodily injury sustained by one person as the r e s u l t of any one accident and, subject t o the above pro- vision respecting each person, the l i m i t of l i a b i l i t y stated i n the declarations a s applicable t o 'each accident' i s the t o t a l l i m i t of the Company's l i a b i l i t y f o r a l l damages, including damages f o r care or l o s s of services, because of bodily injury sustained by two o r more persons a s a r e s u l t of any one accident. I I I' I t L~aragraph 1 of the definitions section provides i n oertinent part: I' (1) T w o (2) o r more automobiles--- Fhen two (2) o r more automobiles a r e insured hereunder, the terms of Section 1 1 1 s h a l l apply separately t o each JX it J;." This provision i s referred t o a s the separability clause. The r u l e of construction of insurance policies i n Montana < " a i s s t a t e d i n section 40-3725, R.C.M. 1947: 1' Construction of policies. Every insurance contract s h a l l be construed according, t o the e n t i r e t v of i t s terms and conditions a s set-forth i n the and as amplified, extended, o r modified by any r i d e r , endorsement, o r application which i s a part of the policy. 11 It i s a l s o the r u l e i n Montana t h a t where an ambiguity i n an insurance policy e x i s t s a f t e r viewing it i n i t s e n t i r e t y , t h e terms thereof w i l l be construed l i b e r a l l y i n favor of the insured and s t r i c t l y against the insurer. In Atcheson v. Safeco Insurance Company, 165 Mont. 239, 527 P.2d 549, 31 St.Rep. 839,846, it i s said: "When an ambiguity a r i s e s ik J ; * the insured i s en- t i t l e d t o the benefit of any doubt. I I See also: Lamb v. "age, 153 Mor~t. 171, 455 P.2d 337; St. Paul Fire & Marine Ins. Co. v. Thompson, 150 Mont. 182, 433 P. 2d 795; Johnson v. Equitable Ins. Co., 142 Mont. 128, 381 P.2d 778; Eby v. Foremost Insurance Co., 141 Mont. 62, 374 P.2d 857. Cf. Stonewall Ins. Co. v. West, 163 Mont. 12, 514 P.2d 764; Jones v. Virginia Surety Co., 145 Mont. 440, 401 P.2d 570; Section 13-720, R.C.M. 1947. Viewing the limits of liability clause and separability clause in juxtaposition and as part of the entire policy leads I I to the conclusion that they are contradictory, ambiguous and 1 1 beyond reconciliation. The separability clause is expressly made part of the uninsured motorist coverage. The limits of liability clause limits coverage for "each person" in any one accident to $10,000. On the other hand, under the separability clause each separate automobile is governed by the limits of liability clause of the policy. Thus, under the former clause Neal would recover no more than $10,000; under the latter he could recover up co $40,000. Applying the rules of construction of insurance policies hereinabove stated, we hold the district court was correct in construing the ambiguous provisions in favor of the insured, Neal, and stacking uninsured motorist coverage limits to a maximum of $40,000. Further clarification of this holding can be found in uninsured motorist cases from Montana and other jurisdictions. Farm Bureau and Neal strongly contested the application to the in- stant case of Sullivan v. Doe, 159 Mont. 50,59,60,62, 495 P.2d 1 9 3 , the only other reported Montana case dealing with uninsured motorist coverage. The pertinent issue in Sullivan as stated by the Court was: ' I * * * whether it is permissible for an insurance company in Montana to place limitations in its t uninsured motorist1 coverage which reduce or eliminate its liability below the statutory limits." This Court unanimously held where there were two insurance policies on one individual, both of which contained uninsured motorist coverage, neither insurer could l i m i t i t s l i a b i l i t y below the $10,000 s t a t u t o r y l i m i t by deducting workman's com- pensation o r "other insurance" benefit payments by v i r t u e of c e r t a i n policty clauses. These clauses, a s applied by the insur- ance companies, were i n derogation of the l e t t e r and s p i r i t of Montana's uninsured motorist s t a t u t e , section 40-4403, R.C.M. 1947, and were declared void. In Sullivan we were dealing with two insurance policies and with a "primary" and "excess1' insurer. Nevertheless, Sullivan a i d s our task here by declaring: "* Jc * The basic purpose of t h i s [uninsured motorist] s t a t u t e i s obvious---to provide protection f o r t h e automobile insurance policyholder against the r i s k of inadequate compensation f o r i n j u r i e s or death caused by the negligence of financially irresponsible motor- ists. t I The l e g i s l a t i v e purpose * * i s simply t o place the injured policy holder i n the same position he would have been i f the uninsured motorist had l i a b i l i t y in- surance * * *. ' 1 11 In discussing the excess" insurer's contention t h a t i t s "other insurance" clause relieved it of any l i a b i l i t y , we stated: 119c * * the s t a t u t o r y requirement of $10,000 I uninsured motorist' coverage prescribes a minimum amount only and does not purport t o f i x a s t a t u t o r y maximum. l I The l e g i s l a t i v e policy considerations enunciated i n Sullivan apply with equal force here. Therefore, where an insurer does not validly l i m i t i t s l i a b i l i t y t o the statutory minimum, che uninsured motorist coverage l i m i t s can be stacked t o effectuate the purpose of the uninsured motorist s t a t u t e . That purpose i s indemnification f o r the insured up t o the l i m i t of the i n s u r e r ' s Liability, a s stacked, or the t o t a l damages suffered by the insured--- whichever i s less. Both p a r t i e s i n t h i s appeal c i t e d cases from other j u r i s - dictions in support of t h e i r contentions regarding t h e stacking of uninsured motorist coverage l i m i t s based on number of vehicles insured. Without extensively reviewing those conflicting cases i n t h i s opinion, we find ~ e a l ' s a u t h o r i t i e s more persuasive. I n i t s order and opinion, the d i s t r i c t court expressly r e l i e d on the Indiana case of J e f f r i e s v. Stewart, (1nd.App. 1974), 309 N.E.2d 448. In J e f f r i e s the court found an ambiguity created by a l i m i t s of l i a b i l i t y clause and separability clause almost i d e n t i c a l t o those i n the i n s t a n t case, and construed the policy i n favor of stacking coverage l i m i t s . Subsequently i n Miller v. Hartford Accident & Indemnity Co., 506 F.2d 11,15, the Court of Appeals applied Indiana law t o an uninsured motorist coverage stacking s i t u a t i o n , affirmed the D i s t r i c t Court and held t h a t stacking was not permissible. However, it reconciled t h i s holding with J e f f r i e s by s t a t i n g : If* * * Resolving t h e ambiguity i n favor of the insured, it [the J e f f r i e s court1 held t h a t t h e insured was e n t i t l e d t o aggregate t h e l i a b i l i t y l i m i t s . In t h e case a t bar, however, there was no separability clause a f f e c t i n g t h e uninsured motorist coverage and no ambiguity i n the policy coverage, and t h e case l o g i c a l l y may be d i s t i n - guished. f: ik -'-I1 48 It i s with the reasoning of t h i s statement from Miller t h a t we distinguish Westchester F i r e Insurance Company v. Tucker, (Tex.1974), 512 S.W.2d 679, r e l i e d on by Farm Bureau. Cf. Talbot v, S t a t e Farm Mutual Automobile Ins. Co. (Miss.1974), 291 So.2d 699, (no reference t o separability clause). Other cases c i t e d by Farm Bureau e i t h e r deal with general l i a b i l i t y coverage r a t h e r than uninsured motorist coverage, Pacific Indemnity Company v. Thompson, 56 Wash.2d 715, 355 P.2d 12; o r f a i l t o make any d i s t i n c t i o n between the two types of coverage, Castle v. United Pacific Insurance Group, 252 O r . 44, 448 P.2d 357; Kennedy v. American Hardware Mutual Ins. Co., 255 O r . 425, 467 P.2d 963; A l l s t a t e Insurance Company v. Schmitka, 21 Cal.App.3d 59, 90 Cal.Rptr. 399; Arminski v. United States F i d e l i t y and Guaranty Co., 23 Mich.App. 352, 178 N.W.2d 497; Otto v. A l l s t a t e Insurance Company, 2 I11.App.3d 58, 275 N.E.2d 766; A l l s t a t e Insurance Company v. IlcHugh, 124 N,J.Super. 105, 304 A,2d 777; Hurles v. Republic Franklin Ins. Co., 39 Ohio App,2d 118, 316 N.E.2d 494. In order t o promote the adjudicated purpose of our uninsured motorist s t a t u t e , we decline t o follow these cases. Farm Bureau urges one more point with respect t o t h e I I f i r s t issue, namely, t h a t the duplicate coverage" clause of the policy e n t i t l e d the insured t o only one s e t of uninsured motorist coverage l i m i t s . However, we agree with the d i s t r i c t court, which s t a t e d i n i t s order and opinion: I I The 'duplicate coverage' provision 9 : * * deals with duplicate coverage within a single policy, not similar coverage i n multiple policies. I f it was intended t o l i m i t the s t a t u t o r i l y re- quired and accepted uninsured motorist coverage within any of the separate policies, it i s invalid. I t Cf. Sullivan v, Doe, 159 Mont. 50, 495 P.2d 193. O n cross-appeal Neal maintains t h e $40.000 l i a b i l i t y of . ' , Farm Bureau should be doubled because there a r e two claims i n the main t o r t action--survival and wrongful death. In e f f e c t , Neal claims coverage a s (1) t h e l e g a l representative a s administrator of Deborah Neal's e s t a t e f o r her personal i n j u r i e s and death, and (2) an insured.individua1 under t h e policy and representative of Deborah ~ e a l ' s h e i r s , a l s o insureds under the policy, Alternatively, Neal seems t o claim t h a t i n event the $20,000 l i m i t of l i a b i l i t y f o r "each accident" s e t f o r t h i n the l i m i t s of l i a b i l i t y clause and the policy declarations can be stacked on the four separate p o l i c i e s t o $80,000. The main argument runs afoul of t h a t portion of the policy d e f i n i t i o n of "Named insuredi' which provides : I I The insurance afforded under Coverage P [uninsured motorist] applies separately t o each insured, but the inclusion herein of more than one insured s h a l l not operate t o increase the l i m i t s of the Company's l i a b i l i t y . " Accordingly ~ e a l ' s claim of $80,000 uninsured motorist coverage must f a i l . Neal's a l t e r n a t i v e contention t h a t the "each accident" l i m i t of $20,000 can be stacked is without merit. The l i m i t s of liability clause, heretofore set forth, subordinates the "each It accident1' provision to the each person" provision. The district court was correct in denying this claim. The order of the district court is affirmed. Justice . We Concur: n Chief' Justice James T. Harrison and Justice Wesley Castles dissenting: We dissent. We do not agree that there is any ambiguity in the liability and separability clauses and thus would not construe anything. However, we do agree with the majority's discussion of the cross-appeal. Justice. i ' " " . -