No. 86-03 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1986 

STATE FARM MUTUAL AUTOMOBILE 

INSURANCE COMPANY, 

Plaintiff and Respondent, 

GRAHAM STUART TAYLOR, DAVID ALLEN 

CALLAWAY, SUSAN JOHANNA HANSON, 

Personal Representative of the Estate 

of SCOTT ERLAND HANSON, Deceased and 

TIMOTHY E. MOSS, 

Defendants and Appellants. 

and 

STATE FARM FIRE AND CASUALTY COMPANY, 

SUSAN JOHANNA HANSON, Personal Representative 

of the Estate of SCOTT ERLAND HANSON, Deceased, 

and TIMOTHY E. MOSS, 

Defendants and Appellants. 

APPEAL FROM: District Court of the Eighteenth Judicial District, 

In and for the County of Gallatin, 

The Honorable Thomas A. Olson, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Poore, Roth & Robinson; C. Richard Anderson and Robert 

Poore both argued, Butte, Montana 

For Respondent: 

Morrow, Sedivy & Bennett; Terry Schaplow argued, 

Bozeman, Montana 

Filed: 

Submitted: July 301 1986 

Decided: September 12, 1986 
Mr. Justice Fred J. Weber delivered the Opinion of the Court. 

Appellants were involved in an automobile accident. The 

District Court for the Eighteenth Judicial District granted 

the motion of State Farm Fire and Casualty Company (State 

Farm) for summary judgment. It held that State Farm insurance 

policies held by Mr. Taylor and Mr. Hanson did not provide 

uninsured motor vehicle coverage for this accident. We 

reverse. 

The issues are: 

1. Did the State Farm policies provide uninsured motor 

vehicle coverage under the circumstances of this case? 

2. Is State Farm absolved of liability because the 

insured violated the "no consent to settlement" exclusion of 

the insurance policies? 

Mr. Hanson and Mr. Taylor were insured under State Farm 

automobile liability insurance policies. Mr. Taylor was 

driving a vehicle in which Mr. Hanson and Mr. Callaway were 

passengers. Their vehicle was rearended at a high rate of 

speed by Mr. Moss, who was driving a truck owned by yet 

another person. As a result of the accident, Mr. Hanson died 

and Mr. Callaway and Mr. Taylor were severely injured. Mr. 

Callaway, Mr. Taylor, and Mr. Hanson's family sued Mr. Moss, 

and judgments were rendered. The vehicle Mr. Moss was driving was uninsured, but he personally had liability insurance. 

The victims settled with Mr. Moss' insurer, which paid to his 

policy limit, but the judgments remain partially unsatisfied. 

In this action, State Farm obtained a judgment that it 

was not required to apply Mr. Taylor's and Mr. Hanson's 

uninsured motor vehicle coverage to the unsatisfied portions 

of the judgments. The District Court held that the State 
Farm uninsured motor vehicle coverage did not apply where the 

offending vehicle was uninsured but its driver had insurance. 

Did the State Farm policies provide uninsured motor 

vehicle coverage under the circumstances of this case? 

Uninsured motor vehicle insurance coverage must be 

offered by insurers in Montana under § 33-23-201, MCA: 

No automobile liability . . . policy . . . for 

bodily injury . . . arising out of the ownership, 

maintenance, or use of a motor vehicle shall be 

delivered . . . in this state, with respect to any 

motor vehicle registered . . . in this state, 

unless coverage is provided [in limits of $25,000 

per person as set forth in S 61-6-103, MCA,] for 

the protection of persons insured . . . who are 

legally entitled to recover damages from owners or 

operators of uninsured motor vehicles . . . 

There is no statutory definition of uninsured motor vehicle. 

Montana also requires by statute that vehicles registered and 

operated in the state have liability insurance coverage. 

Section 61-6-301, MCA. 

The State Farm policy provision at issue is: 

Sec. 111 - Uninsured Motor Vehicle - Coverase U. 

We will pay damages for bodily injury an insured is 

leqally entitled to collect from the owner or 

driver- of an uninsured motor vehicle. The bodily 

injury must be caused by accident arising out of 

the operation, maintenance or use of an uninsured 

motor vehicle. 

Uninsured Motor Vehicle--means: 

1. a land motor vehicle, the ownership, maintenance or use of which is: 

a. not insured or bonded for bodily injury 

liability at the time of the accident . . . 

State Farm argues that the plain meaning of the policy 

is that when the use of an offending motor vehicle is insured 

(as was Mr. Moss' use of the offending vehicle) , the uninsured motorist coverage does not apply. State Farm has cited 

a number of cases in which it has been held that a vehicle is 
not an uninsured motor vehicle for purposes of insurance 

coverage if either the driver or the owner has insurance. 

See, e.g. Sorbo v. Mendiola (Minn. 1985), 361 N.W.2d 851; 

Stordahl v. Government Emp. Ins. Co. (Alaska 1977), 564 P.2d 

63; Citizens Ins. Co. of America v. Povey (Mich. App. 1982) , 

319 N.W.2d 341. In none of these cases was the policy provision the same as the provision in this case. Since we conclude the language of this policy is critical, the cases 

cited by State Farm are not decisive. 

The appellants contend that under the policy, a motor 

vehicle is uninsured if the ownership, maintenance or use is 

not insured for bodily injury. In this instance, the ownership was not insured. As a result there is a reasonable 

contention that under the express provision of the policy, 

because the ownership was not insured for bodily injury, this 

is an uninsured motor vehicle. The first sentence of the 

provision says that State Farm will pay damages an insured is 

legally entitled to collect from the owner or driver of an 

uninsured motor vehicle. If this is an uninsured motor 

vehicle because of the absence of insurance covering ownership, then the first sentence requires State Farm to pay its 

uninsured coverage because the driver of the uninsured motor 

vehicle caused the damages. 

The Washington courts have examined an insurance policy 

provision comparable to this one. That policy defined an 

uninsured motor vehicle as one "with respect to the ownership, maintenance or use of which there is . . . no bodily 

injury insurance . . . " Finney v. Farmers Ins. Co. (Wash. 

App. 1978), 586 P.2d 519, aff'd, 600 P.2d 1272. The court 

held that the policy was ambiguous and the provision was 

subject to more than one interpretation because of the use of 
the disjunctive "or," and that the clause could be interpreted to mean that a "vehicle is uninsured if there is no 

insurance as to either its ownership - or its maintenance - or 

its use." Finney, 586 P.2d at 526. We agree with that 

rationale. 

An ambiguous provision in an insurance policy is 

construed against the insurance company. A clause 

in an insurance policy is ambiguous when different 

persons looking at it in the light of its purpose 

cannot agree upon its meaning. [citation omitted.] 

If the language is unambiguous, and subject to only 

one meaning, there is no basis for the interpretation of policy coverage under the guise of 

ambiguity. 

Bauer Ranch v. Mountain W. Farm Bur. MU^. Ins (Mont* 1985) 

695 P.2d 1307, 1309, 42 St.Rep. 255, 257. This policy does 

not clearly state whether it provides uninsured motor vehicle 

coverage when the driver is insured but the ownership of the 

vehicle is not. We conclude that the policy is ambiguous. 

We therefore interpret the policy to provide coverage. We 

hold that the State Farm policies provided uninsured motor 

vehicle coverage under the circumstances of this case. 

Is State Farm absolved of liability because the insured 

violated the "no consent to settlement" exclusion of the 

insurance policies? 

State Farm argues that even if this Court concludes the 

insurance policies provided coverage under the uninsured 

motor vehicle provisions, there is no insurance coverage 

because the appellants settled with Mr. Moss' insurance 

company without State Farm's consent. State Farm cites the 

policy provision that: 

THERE IS NO COVERAGE: 

1. FOR ANY INSURED WHO, WITHOUT OUR WRITTEN CONSENT, SETTLES WITH ANY PERSON OR ORGANIZATION WHO 

MAY BE LIABLE FOR. THE BODILY INJURY. 
This Court has held that an insurance policy clause which 

prohibited the insured from obtaining judgment against 

liable parties is void. In Dominici v. State Farm Mutual 

Automobile Ins. Co. (1964), 143 Mont. 406, 408 and 411-12, 

390 P.2d 806, 807 and 809, this Court stated: 

The insurance contract further contained an exclusion whereby the above-mentioned coverage would not 

apply "(a) to bodily injury to an insured . . . with respect to which such insured, his legal 

representative or any person entitled to payment 

under this coverage [if he or they] shall, without 

written consent of the company, make any settlement 

with or prosecute to judgment any action against 

any person or organization who may be legally 

liable therefor; . . ." (Emphasis supplied.) 

The problem to be resolved here is what effect, if 

any, did the judgments taken by each plaintiff have 

upon the rights and obligations of the insured and 

insurer in light of the "no judgment" clause of the 

insurance contract? State Farm contends that no 

action can now lie against them because there has 

not been full compliance with the terms of the 

policy. Plaintiffs rely upon the prohibition 

contained in R.C.M. 1947, S 13-806. This statute 

states: 

"Every stipulation or condition in a contract by 

which any party thereto is restricted from enforcing his rights under the contract, by the usual 

proceedings in the ordinary tribunals . . . is 

void. " 

It is plaintiffs' position that State Farm agreed 

to pay all sums plaintiffs were legally entitled to 

recover (up to and including the limits of the 

policy coverage) from an uninsured motorist; and, 

the "no judgment" clause would restrict plaintiffs 

from enforcing these rights. Therefore, this 

clause in the policy would be void under section 

13-806. 

We hold with the contentions of plaintiffs. . . . State Farm argues that the no-consent-to-settlement 

clause does not restrict insureds' access to the courts and 

thus does not violate the Dominici rule. Instead, State Farm 

argues, it protects the insurer's right of subrogation. It 

is technically correct that the holding in Dominici was that 
the 'no judgment' provision unlawfully restricted the plaintiff's access to the courts. A 'no settlement' clause does 

not directly limit access to the courts. However, the rationale in Dominici was that the 'no judgment' clause would 

restrict the insureds from enforcing their rights under the 

insurance contract. 

"This Court does not support provisions placed on uninsured motorist coverage which restrict or thwart available 

liability coverage that the insured would be entitled to in 

an accident." Guiberson v. Hartford Cas. Ins. Co. (~ont. 

this Court nullified an insurance policy provision which 

would have denied uninsured motor vehicle coverage where the 

uninsured driver did not have the insured's consent to operate the vehicle. We conclude that enforcement of the 

no-consent-to-settlement clause here would result in a backing away from the mandatory offering requirement of the 

uninsured motor vehicle statute. It would also place control 

of efforts to collect from the responsible party in the hands 

of the insurer. 

The central purpose of the clause is to provide uninsured motor vehicle coverage for which the insured has paid a 

premium. The insurance company is obligated to furnish 

uninsured motor vehicle coverage, whether it can obtain 

subrogation or not. While we do not deny the insurer's right 

to subrogation, we will not allow the right to subrogation to 

negate the required offering of uninsured motor vehicle 

coverage. Under these circumstances, we conclude that the 

no-consent-to-settlement clause is void. 
We therefore reverse the decision of the District Court. 

We Concur: 

,/ 

c Chief Justice 
Mr. Justice John C. Sheehy, specially concurring: 

I concur in the foregoing opinion and wish to add other 

reasons for my concurrence in the result. 

There are two types of uninsured motor vehicle statutes. 

One type is called the mandatory insured motorist statute, 

wherein it is required that every motor vehicle policy of 

insurance includes such coverage. Seventeen states have this 

type of coverage. The other type of uninsured motorist 

coverage is the "mandatory offerings statutes" of which 

Montana's statute is typical. According to 1 Widiss, 

Uninsured - and Underinsured Motorist Insurance $ 2.5 (2d ed. 

1985), there are thirty-three states which mandate that 

uninsured motorist coverage be offered in every policy of 

liability insurance in the state. 

The second thing to note is that there is a significant 

difference between most of the statutes requiring uninsured 

motorist coverage and the statute that is provided in 

Montana. Most of the statutes of the other states refer to 

the "uninsured motorist" but Montana's statute refers to the 

uninsured motor vehicle. The pertinent language in § 

33-23-201, MCA is: 

No automobile liability . . . policy shall be 

delivered or issued for delivery in this state . . . unless coverage is provided therein or 

supplemental thereto . . . for the protection of 

persons insured thereunder who are legally entitled 

to recover damages from owners or operators of 

uninsured motor vehicles because of bodily injury, 

sickness or disease, including death, resulting 

therefrom. (Emphasis supplied.) 

The term "uninsured motor vehicl.esW is unqualified in 

the statute, is unambiguous, and needs no interpretation. It 

is a matter of public policy that such coverage be 

mandatorily offered and if the coverage offered is less than 
what is mandated by our statute, the public policy 

requirement has not been met. Section 33-23-201, MCA. 

An example of a different kind of uninsured motorist 

statute can be found in Kansas. There, the provisions of 

Kan. Stat. Ann. 5 40-284(a) (Supp. 1985) state: 

No automobile liability insurance policy . . . shall be delivered or issued for delivery in this 

state . . . unless the policy contains or has 

endorsed thereon, a provision . . . for payment of 

part or all sums which the insured or the insured's 

legal representative shall be legally entitled to 

recover as damages from the uninsured owner or 

operator of the motor vehicle because of bodily 

injury, sickness or disease, including death, 

resulting therefrom, sustained by the insured, 

caused by accident and arising out of ownership, 

maintenance or use of such motor vehicle . . . (Emphasis supplied. ) 

It requires no great intellectual skill to determine 

that the Kansas statute is directed to the status of the 

driver or operator as uninsured, whereas the Montana statute 

is directed to the status of the uninsured motor vehicle. 

The difference is critical in this case, because although the 

- use of the uninsured motor vehicle in this case was insured 

by the driver's separate insurance policy, and thus would 

qualify under the Kansas statute, the Montana statute has no 

reference to ownership, maintenance or use and such terms 

cannot be used to diminish the mandated offered coverage that 

Montana requires under 5 33-23-201, MCA. 

As to the application of the statute therefore, I would 

hold in this case that under a Montana statute, if the motor 

vehicle itself is uninsured, then the uninsured motor vehicle 

coverage of the other vehicles attaches and coverage is 

extended to its insureds under the uninsured motor vehicle 

coverage. 

There are other results commanded by our decision here 

which are not discussed for the reason that they have not yet 
been before the Court. For reasons that should appear clear 

to counsel on remand, it seems to me that the medical 

payments coverage should be reduced by the amount recovered 

under the liability insurance policy that was issued to the 

driver to the extent that such reduction does not reduce the 

recovery from State Farm below the sum of $55,000. In other 

words, the $100,000 received from the insurance on the driver 

would be used to reduce the medical payments coverage in this 

State Farm policy. 

Q& &. B-k, Justice 
Mr. Justice L. C. Gulbrandson, dissenting. 

I respectfully dissent. 

The majority cite only a Washington Supreme Court 

opinion wherein a comparable insurance policy provision was 

held to be ambiguous. Finney v. Farmers Ins. Co. (wash. 

The majority agreed with the rationale expressed 

therein, and I perhaps would do the same if this case were to 

be decided under Washington law. The author of Finney 

clearly indicated that that opinion does not cover the 

factual situation before this Court: 

. . . nor are we confronted with a 

factual situation in which the only 

responsible party was insured under a 

policy which extended coverage for the 

accident in question. Here there are two 

responsible parties, one of which was 

uninsured, the other underinsured. The 

use of the word "or" is disjunctive. 1A 

C. Sands, Sutherland Statutory 

Construction $ 21.14 (4th ed. 1972). 

Childers v. Childers, 89 Wash.2d 592, 575 

P.2d 201 (1978). We are persuaded that 

the legislature intended to provide 

uninsured motorist protection where 

either one of the responsible parties 

lacks insurance coverage. (Emphasis 

added. ) 

Under Washington law, where the ownership 

of an automobile is admitted and the 

owner is a passenger, there arises a 

presumption that, at the time of the 

accident, the driver was operating the 

vehicle as the agent or servant of the 

owner. (Citing cases.) The owner is 

vicariously liable for the driver's 

negligence. Moffitt v. Krueger, supra; 

Coins v. Washington Motor Coach Co., 34 

Wash.2d 1, 208 P. 2d 143 (1949). 

Finney , 

Finney cited Allstate Ins. Co. v. Chastain (Fla. 1971), 

251 So.2d 354, as authority for its position, but correctly 
stated that in that case the uninsured owner was liable under 

Florida's dangerous instrumentality doctrine. 

In this case, there is no suggestion that the uninsured 

owner was a responsible party and I therefore consider the 

Finney citation to be inadequate authority. 

The trial judge, in granting summary judgment for the 

respondent, relied upon the rationale expressed in Sorbo v. 

Mendiola (Minn. 1985), 361 N.W.2d 851, and stated: 

I frankly have been tempted by the plight 

of the defendants to hold that the 

policies in question are ambiguous, 

thereby granting the benefit of the doubt 

to the defendants. But I find it is 

sufficiently clear that the liable 

person, the driver Moss, has insurance 

and the defendants were not struck by an 

uninsured motorist. 

In my view, the policy definition of "uninsured motor 

vehicle" as a land motor vehicle, the use of which is not 

insured, is not ambiguous and I would affirm the order of the 

trial judge.