No 

No. 98-056

IN THE SUPREME COURT OF THE STATE OF MONTANA

1999 MT 85

294 Mont. 134

979 P.2d 188

STEPHEN C. DILL and DEBRA K. DILL, individually 

and as guardians for JASON M. DILL, a minor,

Petitioners,

v.

MONTANA THIRTEENTH JUDICIAL DISTRICT COURT,

Honorable G. Todd Baugh, Judge Presiding,

Respondent.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (1 of 12)4/11/2007 11:17:59 AM
No 

ORIGINAL PROCEEDING

COUNSEL OF RECORD:

For Petitioners:

Patrick R. Sheehy (argued) and R. Russell Plath; Halverson, Sheehy

& Plath, P.C.; Billings, Montana

For Respondent:

Stephen J. Harman (argued) and James E. Roberts;

Brown Law Firm, P.C.; Billings, Montana

For Amicus Curiae:

Patricia O'Brien Cotter (argued); Cotter & Cotter, P.C.;

Great Falls, Montana (for Montana Trial Lawyers Association)

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (2 of 12)4/11/2007 11:17:59 AM
No 

Argued: September 8, 1998

Submitted: September 10, 1998

Decided: April 22, 1999

Filed:

__________________________________________

Clerk

Justice Jim Regnier delivered the opinion of the Court.

¶1. The Dills, individually and as guardians for their son Jason Dill, brought this 

action against Casey Jardine, a minor, Casey's parents, and State Farm Mutual 

Automobile Insurance Company in the District Court for the Thirteenth Judicial 

District, Yellowstone County, for damages suffered when Jason was hit as a 

pedestrian by a vehicle operated by Casey Jardine. After the Dills settled all of their 

claims against the Jardines, State Farm filed a motion in limine seeking to (1) amend 

the caption of the case to remove State Farm as a named defendant; (2) restrict the 

Dills from stating or otherwise informing the jury that the Jardines were protected 

by indemnity insurance; and (3) restrict the mention of the fact that the Dills carry 

underinsured motorist coverage with State Farm. On December 11, 1997, the District 

Court granted State Farm's motion in limine. The Dills sought a writ of supervisory 

control in this matter over the order of the District Court, which this Court granted. 

We reverse.

¶2. The issue presented by the writ of supervisory control is whether the District 

Court erred when it granted State Farm's motion in limine to restrict the Dills from 

in any way disclosing to the jury that they are making a claim for underinsured 

motorist benefits from State Farm.

FACTUAL BACKGROUND

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (3 of 12)4/11/2007 11:17:59 AM
No 

¶3. Jason Dill was a fourteen-year-old pedestrian who was hit and severely injured 

by a vehicle operated by fifteen-year-old Casey Jardine. Jardine's parents owned an 

auto insurance liability policy with State Farm Mutual Automobile Insurance 

Company with policy limits of $100,000. In addition, Jason's parents owned three 

separate policies of auto insurance issued by State Farm, all of which provided 

underinsured motorist coverage in the amount of $100,000. Jason's parents also 

owned a personal liability umbrella policy endorsement to their homeowner's policy 

issued by State Farm that included underinsured motorist coverage with limits of 

$2.3 million. Jason is a named insured on all of his parents' applicable insurance 

policies with State Farm.

¶4. After suing the Jardines, the Dills made a demand for underinsured motorist 

benefits from their insurer, State Farm. State Farm refused to pay underinsured 

motorist benefits. The Dills, therefore, amended their complaint and added State 

Farm as a party defendant as required by the State Farm policy. The Dills' fourcount amended complaint sought: (1) damages for Jason caused by the negligence of 

Casey Jardine; (2) damages for Jason for the negligent entrustment of the 

automobile to Casey Jardine by Jardine's parents; (3) damages for Jason, his 

parents, and family for negligent infliction of emotional distress; and (4) a breach of 

contract action by Jason and his parents against State Farm for failing to pay 

amounts due pursuant to the underinsured motorist provisions of the auto policies 

and umbrella policy owned by Jason's parents. State Farm did not object to being 

named as a party defendant.

¶5. After filing the amended complaint, the Dills settled all of their claims against the 

Jardines for their State Farm liability policy limits of $100,000. The general release 

executed on the Dills' behalf in favor of the Jardines specifically reserves the Dills' 

right to sue State Farm for payment of underinsured motorist damages pursuant to 

the Dills' various policies providing underinsured motorist coverage. 

¶6. State Farm waived subrogation rights against their own insureds, the Jardines. 

State Farm further consented to the Dills settling for the policy limits of the Jardines' 

liability coverage.

¶7. Shortly thereafter, State Farm filed a motion in limine in the District Court 

seeking to: (1) amend the caption of this case to remove State Farm as a named 

defendant; (2) restrict the Dills from stating or otherwise informing the jury that 

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (4 of 12)4/11/2007 11:17:59 AM
No 

Jardine was protected by indemnity insurance; and (3) restrict the mention of the 

fact that the Dills carry underinsured motorist coverage with State Farm. The 

District Court granted State Farm's motion and held that the Dills' claim against 

State Farm would not be ripe for adjudication until after Casey Jardine's fault was 

established and damages assessed in a negligence action. The Dills appeal the District 

Court's order and request that it be vacated.

STANDARD OF REVIEW

¶8. The standard of review of discretionary trial court rulings is abuse of discretion. 

See May v. First Nat'l Pawn Brokers, Ltd. (1995), 270 Mont. 132, 134, 890 P.2d 386, 

388. In Montana Rail Link v. Byard (1993), 260 Mont. 331, 337, 860 P.2d 121, 125, we 

held that "[t]he standard of abuse of discretion is applied to discretionary rulings, 

such as trial administration issues, post-trial motions and similar rulings" (citing 

Steer, Inc. v. Department of Revenue (1990), 245 Mont. 470, 474, 803 P.2d 601, 603).

DISCUSSION

¶9. The issue presented by the Dills in their petition for writ of supervisory control in 

this case is whether the District Court erred when it granted State Farm's motion in 

limine to restrict the Dills from in any way disclosing to the jury that they are 

making a claim for underinsured motorist benefits from State Farm.

¶10. The Dills' argument on appeal addresses the issue presented in several parts. 

We will address each accordingly.

Contract versus tort action

¶11. In response to the Dills' contention that State Farm breached its contract with 

them, the District Court's order in limine characterized this case as a tort action 

rather than as a contract action. The District Court phrased the issue as a tort 

question of "[w]ho, if anybody, was negligent?" However, Montana law is to the 

contrary. In State Farm Mutual Automobile Insurance Co. v. Estate of Braun (1990), 

243 Mont. 125, 793 P.2d 253, State Farm brought suit against its insured, claiming 

that it had no obligation to pay either uninsured or underinsured motorist benefits. 

State Farm argued that because the accident occurred in Canada, Canada's wrongful 

death damage limitation would apply, meaning that Braun's estate was not "legally 

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (5 of 12)4/11/2007 11:17:59 AM
No 

entitled to collect" damages pursuant to the State Farm policy. Our analysis of Braun 

began with a clear statement that the issues presented were contract, and not tort 

issues. We stated:

This case presents a controversy between an insurer and an insured over the interpretation 

of an insurance contract. As such the dispute sounds in contract and should be resolved by 

contract law.

. . . .

Respondent also erroneously argues that the Canadian damage limitation shields 

respondent because it is available to the tort-feasor. In essence, respondent asserts that it is 

the tort-feasor's alter-ego. However, tort law is relevant only in as far as the fault 

requirement is concerned. Once an insured demonstrates a legal entitlement to damages, 

principles of contract law define the coverage afforded by an underinsurance motorist 

provision.

Braun, 243 Mont. at 127-28, 793 P.2d at 254-55 (emphasis added).

¶12. Our holding in Braun is consistent with an earlier opinion issued by this Court 

in an action filed by an insured against State Farm for uninsured motorist benefits. 

In State Farm Mutual Automobile Insurance Co. v. Solem (1981), 191 Mont. 156, 622 

P.2d 682, which was decided soon after uninsured coverage became widely available, 

we stated: "Solem's action against State Farm isn't a tort action; rather it is a 

contract action." Solem, 191 Mont. at 159, 622 P.2d at 684. Because the Dills' action 

against State Farm is not a tort action but rather a breach of contract action, this 

dispute must be resolved by contract law.

¶13. Moreover, we agree with the Dills that they were required to file a contract 

action against State Farm in order to comply with the terms of their insurance 

contract with State Farm. The insurance contract entered into by the Dills provides 

that in exchange for a premium, State Farm would issue underinsured motorist 

coverage to the Dills. The contract provides that if there is an accident between the 

insured and the driver of an underinsured motor vehicle, then two questions must be 

decided by agreement between the insured and State Farm:

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (6 of 12)4/11/2007 11:17:59 AM
No 

1. Is the insured legally entitled to collect damages from the owner or driver of the 

uninsured motor vehicle or underinsured motor vehicle; and

2. If so, in what amount?

The policy further provides that if the parties cannot agree, then they must either arbitrate 

or litigate these two questions. The policy specifies:

If either party does not consent to arbitrate these questions, the insured shall:

a. file a lawsuit in the proper court against the owner or driver of the uninsured motor 

vehicle or underinsured motor vehicle and us . . .;

and

. . . .

c. secure a judgment in that action. 

(Underlining added.) The following language appears at page 14 of the policy:

THERE IS NO COVERAGE UNTIL THE LIMITS OF LIABILITY OF ALL BODILY 

INJURY LIABILITY BONDS AND POLICIES THAT APPLY HAVE BEEN USED UP 

BY PAYMENT OF JUDGMENTS OR SETTLEMENTS.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (7 of 12)4/11/2007 11:17:59 AM
No 

In Augustine v. Simonson (1997), 283 Mont. 259, 267, 940 P.2d 116, 121, however, we 

concluded that in order to prevent unnecessary litigation "the insured may proceed to bring 

his or her claim against their UIM carrier whether or not they have fully exhausted the tortfeasor's insurance policy limits." Although a claim must first be made with the tort-feasor's 

insurance company, the claim does not have to be finally disposed of before proceeding 

against the underinsurer. See Augustine, 283 Mont. at 267, 940 P.2d at 121.

¶14. Due to the fact that State Farm is both the liability insurer for the Jardines, and 

the underinsured motorist carrier for the Dills, State Farm has likely been aware 

from the inception of these proceedings of the Dills' actions to both collect the 

liability coverage carried by the Jardines, and the underinsured motorist benefits 

from their own policy.

¶15. We have held that when the terms of an insurance contract are clear and 

unambiguous, the contract language will be enforced. See Augustine, 283 Mont. at 

263, 940 P.2d at 119. We must give effect to the meaning and intention of the parties 

as expressed by the language in their contract. See Marko & Co., LLC v. Deaconess/

Billings Clinic Health System, 1998 MT 26, ¶ 17, 287 Mont. 293, ¶ 17, 954 P.2d 1116, 

¶ 17. The Dills have met all of the conditions precedent contained in their State Farm 

policy. They sued both the driver and State Farm in one action, as the contract 

required; they settled their claim against the underinsured driver for policy limits, as 

the contract required; they obtained State Farm's consent to the settlement; and they 

reserved their claim against State Farm for underinsured coverage. The State Farm 

policy requires the insured to file suit against it if the parties are unable to agree that 

the insured is legally entitled to collect damages in a particular amount. Because the 

Dills and State Farm could not agree on this question, this litigation follows as the 

next contractual requirement.

¶16. State Farm maintains that the issues of both fault and damages remain to be 

determined and that these issues must be resolved in a direct tort action against 

Casey Jardine, the settled tort-feasor. The District Court agreed. However, according 

to the clear terms of the policy there are no issues of fault for a fact-finder to resolve. 

As noted above, the only two questions that must be resolved either by agreement 

between the insured and State Farm, or by arbitration or litigation, are:

(a) Whether the insured is legally entitled to collect damages from the driver of the 

underinsured motor vehicle; and

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (8 of 12)4/11/2007 11:17:59 AM
No 

(b) If so, in what amount?

Regardless of whether anyone was at fault for the damages caused to the Dills, it is clear 

by the fact that the Dills received $100,000 from State Farm that they are "entitled to 

collect damages." The only question remaining, therefore, is what amount the Dills are 

entitled to collect beyond $100,000.

¶17. In spite of this, State Farm maintains that it is still entitled to litigate fault as 

well as damages in its capacity as the underinsured motorist carrier and, thus, that 

this is a tort action. The policy provides:

If the insured files suit against the owner or driver of the uninsured motor vehicle or 

underinsured motor vehicle, we have the right to defend on the issues of the legal liability 

of and the damages owed by such owner or driver.

In this case, the insureds, the Dills, did file suit against the driver, but that litigation has 

been settled and a full general release has been given so the underinsured driver, Casey 

Jardine, is no longer a proper party defendant. Thus, there is no underinsured driver for 

State Farm to defend. State Farm had the opportunity to litigate fault in this case when it 

represented Jardine outright. Instead, it settled the issue when it offered the Dills the 

liability policy limits on Jardine's behalf.

¶18. The question of whether anyone was at fault and the question of whether the 

insured is legally entitled to collect damages from the underinsured driver are not 

the same. One can be legally entitled to collect damages without first proving fault in 

a court of law--the Dills have done just that. Conversely, an insured could prove fault 

on the part of the defendant, and yet not be legally entitled to collect damages. The 

critical point to be noted is that the State Farm policy only requires that the insured 

show that he or she is legally "entitled to collect damages"--not prove fault. The Dills 

squarely answered that question in the affirmative when they collected $100,000 

from State Farm in its capacity as the Jardines' liability insurance carrier. The 

common sense reading of the language of the policy leads to the logical conclusion 

that if one collects damages, one is legally entitled to do so. 

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (9 of 12)4/11/2007 11:17:59 AM
No 

¶19. Once an insured demonstrates a legal entitlement to damages, principles of 

contract law define the coverage afforded by an underinsured motorist provision. 

Tort law is relevant only as far as fault is concerned. State Farm had the opportunity 

to litigate this case in the tort arena when it represented Casey Jardine as his liability 

insurer and, in fact, reserved that right in the policy when it stated:

If the insured files suit against the owner or driver of the uninsured motor vehicle or 

underinsured motor vehicle, we have the right to defend on the issues of the legal liability 

of the damages owed by such owner or driver.

(Underlining added.) Underinsured motorist coverage, on the other hand, is first-party 

coverage which is a carrier's direct promise to its insured to pay the insured for a loss. See 

Kratz v. Kratz (Okla. 1995), 905 P.2d 753, 755. The recovery of the insured is based on 

the terms of the policy, and so the action is one based on contract law. When State Farm 

accepted a premium from the Dills for underinsured motorist coverage, it contractually 

established its own liability for the tort of another. Because the tort-feasor has paid his 

policy limits and has been released from this action, we conclude that State Farm's 

contract now dictates the proceedings.

¶20. There are two insurance policies involved in this case; the Jardines' liability 

insurance policy with State Farm, and the Dills' underinsured motorist coverage with 

State Farm. State Farm maintains that the introduction of any evidence of insurance 

into this action would be reversible error. We conclude, however, that evidence of 

both policies is admissible at trial. 

Admissibility of the underinsured motorist policy between the Dills and State Farm

¶21. Rule 411, M.R.Evid., is entitled, "Liability insurance." It provides:

Evidence that a person was or was not insured against liability is not admissible upon the 

issue of whether the person acted negligently or otherwise wrongfully. This rule does not 

require the exclusion of evidence of insurance against liability when offered for another 

purpose, such as proof of agency, ownership, or control, or bias or prejudice of a witness.

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (10 of 12)4/11/2007 11:17:59 AM
No 

(Emphasis added). Rule 411, M.R.Evid., by its terms, applies only to liability insurance 

and therefore does not preclude the admissibility of the underinsured motorist policy 

between the Dills and State Farm. The Dills' complaint against State Farm is a coverage 

dispute pursuant to the terms of the State Farm policy, not a negligence action. Therefore, 

the result here does not contravene the purpose of Rule 411, M.R.Evid., on the 

admissibility of insurance. The rule only prohibits the introduction of insurance when it is 

offered for the purpose of showing negligence or liability. Here, the issues to be tried are 

separate and the rule is not violated. See Klaudt v. State Farm Mut. Auto. Ins. Co. (1983), 

202 Mont. 247, 253, 658 P.2d 1065, 1068. Accordingly, Rule 411, M.R.Evid., does not 

preclude the admission into evidence of the underinsured motorist policy.

Admissibility of the liability policy between the Jardines and State Farm

¶22. Rule 411, M.R.Evid., precludes evidence of liability insurance "upon the issue of 

whether the person acted negligently or otherwise wrongfully." As explained above, 

the Dills demonstrated that they are legally entitled to collect damages from the 

underinsured driver by collecting the limits of his liability coverage from State Farm. 

Because the policy does not impose upon the insured the obligation to demonstrate 

the legal liability of the tort-feasor, the State Farm liability policy would not be 

utilized to demonstrate that the tort-feasor "acted negligently or otherwise 

wrongfully." As Rule 411, M.R.Evid., allows, the policy would be offered "for 

another purpose"; to establish that the Dills have complied with the policy terms by 

settling with the tort-feasor's liability insurer before turning to their own 

underinsurance carrier for relief. The liability policy is relevant and admissible only 

to establish the Dills' compliance, and not to establish fault.

Admissibility of State Farm's settlement for policy limits on the Jardine liability claim

¶23. The Dills maintain that State Farm's settlement of the underlying liability claim 

against Jardine is admissible evidence pursuant to Rules 401 and 402, M.R.Evid. 

They further maintain that it is admissible as impeachment evidence pursuant to 

Rules 607 and 801(d)(2), M.R.Evid. Because State Farm has stipulated to the fact 

that State Farm paid the Dills $100,000, the policy limit, on behalf of Casey Jardine, 

and that it will pay any jury verdict that exceeds that amount up to the policy limit of 

$2.3 million, we conclude that evidence of State Farm's settlement of the policy limits 

on Casey Jardine's liability claim need not be brought before the jury. State Farm is 

bound to its stipulation that it will pay any damages above $100,000 awarded to the 

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (11 of 12)4/11/2007 11:17:59 AM
No 

Dills by the jury. Likewise, State Farm has admitted that the Dills have settled with 

the tort-feasor's liability insurance carrier, which is all the information the Dills need 

to explain their attempt to obtain underinsured motorist benefits. It is not essential 

that the jury be apprised of the amount actually paid to the Dills on behalf of Casey 

Jardine. Simple knowledge that the policy limits were paid will suffice.

¶24. Accordingly, we reverse the judgment of the District Court and remand this 

case for a trial between the Dills and State Farm to determine the amount of 

damages, if any, the Dills are entitled to recover pursuant to their underinsured 

motorist policy.

¶25. Reversed and remanded.

/S/ JIM REGNIER 

We Concur:

/S/ J. A. TURNAGE

/S/ TERRY N. TRIEWEILER

/S/ WILLIAM E. HUNT, SR.

/S/ KARLA M. GRAY

/S/ JAMES C. NELSON

/S/ W. WILLIAM LEAPHART

file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/98-056_(04-21-99)_Opinion_.htm (12 of 12)4/11/2007 11:17:59 AM