No. 86-03 IN THE SUPREME COURT OF THE STATE OF MONTANA 1986

STATEFARMMUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiffand Respondent,

GRAHAM STUARTTAYLOR,DAVIDALLEN CALLAWAY, SUSAN JOHANNAHANSON, PersonalRepresentative of the Estate of SCOTT ERLAND HANSON,Deceased and TIMOTHY E. MOSS, Defendantsand Appellants. and STATE FARM FIREAND CASUALTY COMPANY,

SUSAN JOHANNAHANSON, PersonalRepresentative of the Estate of SCOTT ERLAND HANSON,Deceased, and TIMOTHY E. MOSS, Defendantsand Appellants.

APPEAL FROM: District Court of the Eighteenth JudicialDistrict, In and for the County of Gallatin, TheHonorable ThomasA. Olson, Judgepresiding. COUNSEL OF RECORD: ForAppellant: 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 12,1986Mr. JusticeFred J. Weber delivered the Opinion of the Court. Appellants were involved in an automobileaccident. The District Court for the Eighteenth Judicial District granted the motion of State Farm Fire and Casualty Company (State Farm) for summary judgment. Itheld 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 circumstancesof 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. Taylorwere 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 anotherperson. 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 drivingwas uninsured, but he personally had liability insurance. Thevictims settledwith Mr. Moss' insurer, whichpaid to his policy limit,but the judgments remainpartially 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 StateFarmuninsuredmotor vehicle coveragedid not applywhere the offendingvehiclewas uninsured but its driverhad insurance.

Did the State Farm policies provide uninsured motor vehicle coverage under the circumstancesof this case? Uninsured motor vehicle insurance coverage must be offered by insurers inMontana 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 ofuninsured motor vehicles

# . . . There is no statutory definition of uninsured motor vehicle. Montana also requiresby statute that vehicles registered and operated in the state have liability insurance coverage. Section 61-6-301,MCA. The StateFarmpolicy provision at issue is:

Sec. 111 

## - Uninsured Motor Vehicle 

## - Coverase U. We willpay damages forbodily 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 MotorVehicle--means: 1. a land motor vehicle, the ownership, maintenance oruse ofwhich 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 thatwhen the use of an offendingmotor vehicle is insured (aswas Mr. Moss' use of the offending vehicle)

## , the uninsuredmotorist coverage does not apply. State Farm has cited

a number of cases inwhich ithas been held that avehicle isnot 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. ofAmerica v. Povey (Mich.App. 1982)

## , 319N.W.2d 341. In none of these caseswas thepolicy 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 ownershipwas not insured forbodily injury, this is an uninsured motor vehicle. The first sentence of the provision says that State Farmwill 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 interpretationbecause of the use ofthe 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 ambiguouswhen different persons looking at it in the light of its purpose cannot agree upon itsmeaning. [citationomitted.] If the language isunambiguous,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 statewhether itprovides uninsuredmotor 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 circumstancesof this case.

Is State Farm absolved of liability because the insured violated the "no consent to settlement" exclusion of the insurancepolicies? 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.THEBODILY 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;

# . .." (Emphasissupplied.)

The problem to be resolved here is what effect, if any,did the judgments takenby each plaintiffhave 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 topay all sumsplaintiffs 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 notviolate the Dominici rule. Instead,State Farm argues, it protects the insurer's right of subrogation. It is technically correct that the holding in Dominiciwas thatthe '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. "ThisCourt does not supportprovisions 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 uninsuredmotor vehicle statute. Itwould also place control of efforts to collect from the responsibleparty in the hands of the insurer. The central purpose of the clause is to provide uninsuredmotor vehicle coverage forwhich the insuredhaspaid 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,wewill not allow the right to subrogationto negate the required offering of uninsured motor vehicle coverage. Under these circumstances, we conclude that the no-consent-to-settlementclause isvoid.We therefore reverse the decision of the District Court.

We Concur: ,/

Chief Justice 

# cMr. Justice John C. Sheehy, specially concurring:

I concur in the foregoing opinion and wish to add other reasons formy concurrence in the result. There are two types of uninsuredmotor 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 stateshave 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 thereunderwho 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. (Emphasissupplied.) 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 thanwhat is mandated by our statute, the public policy requirementhas not beenmet. 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. Thedifference 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, theMontana statutehas no reference to ownership, maintenance or use and such terms cannotbe used to diminish themandated offered coverage that Montana requires under 5 33-23-201,MCA. As to the application of the statute therefore, Iwould hold in this case that under a Montana statute, if the motor vehicle itself is uninsured,then the uninsuredmotor 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 notdiscussed for the reason that they have notyetbeen 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 $100,000received from the insurance on the driver would be used to reduce the medical payments coverage in this State Farmpolicy. 

# Q& &.

# B-k, JusticeMr. 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 Iperhaps 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 thisCourt:



# ...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 inquestion. 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). Childersv. Childers, 89Wash.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 citedAllstate Ins. Co. v. Chastain (Fla. 1971), 251 So.2d 354, as authority for its position, but correctlystated that in that case the uninsured ownerwas liableunder Florida's dangerous instrumentality doctrine. In this case,there isno suggestion that the uninsured

owner was a responsible party and I therefore consider the Finney citation tobe inadequate authority. The trial judge, in granting summary judgment for the respondent, relied upon the rationale expressed in Sorbo 

### v. Mendiola (Minn. 1985), 361N.W.2d 851,and stated: I frankly have been tempted by theplight of the defendants to hold that the policies in question are ambiguous, therebygranting thebenefit of thedoubt to the defendants. But I find it is sufficiently clear that the liable person, the driver Moss, has insurance and the defendants were not struckby 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, isnot ambiguous and Iwould affirm the order of the trial judge.