No. 89-455 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

MARK YOVISH, 

Plaintiff and Respondent, 

UNITED SERVICES AUTOMOBILE ASSOCIATION, ---. Y..:,! . #: 

Defendant and Appellant. CLERK OF Su:-RU,.I: CS~JRT STATE OF Pl;SI!TAP.~a 

APPEAL FROM: District Court of the Eighth Judicial District, 

In and for the County of Cascade, 

The Honorable Thomas M. McKittrick, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Dennis Tighe, Cure, Borer & Davis, Great Falls, 

Montana 

For Respondent: 

J. David Slovak, Urgin, Alexander, Zadick & Slovak, 

Great Falls, Montana 

Submitted: December 21, 1989 

Filed: 

Decided: June 26, 1990 * 

8 Clerk , L. 

*. 
Justice William E. Hunt, Sr., delivered the Opinion of the Court. 

Mark Yovish, plaintiff and respondent, filed suit against 

United Services Automobile Association (USAA), alleging a wrongful 

denial of coverage. The Eighth Judicial District Court, Cascade 

County, sitting without a jury, found in favor of Yovish, awarding 

him compensatory damages and attorney fees. USAA appeals. We 

affirm in part and reverse in part. 

We will discuss the following issues on appeal: 

1. Whether USAA complied with the insurance policy provisions 

governing renewal so that the policy expired of its own terms prior 

to the automobile accident in question; 

2. Whether the District Court abused its discretion by 

awarding attorney fees to Yovish. 

USAA, an insurance company with a principal place of business 

in San Antonio, Texas, provides multi-line insurance coverage 

exclusively to military personnel and their dependents. Mark 

Yovish, a member of the United States Air Force, insured his 1983 

Volkswagen Rabbit with USAA in January, 1983. Yovish paid monthly 

premiums on the Volkswagen in response to premium notices sent by 

USAA. The notices indicated the amount due on the policy. 

Sometime around May, 1983, Yovish moved from California to 

Great Falls. He retained his policy with USAA and continued to pay 

his premiums in response to monthly premium notices sent by the 

company. In early 1984, he moved from one Great Falls location to 

another. Consequently, his February, 1984 premium notice was 

returned to USAA by the post office. This notice indicated that 

the policy would be renewed for six months beginning February 1, 

1984. Although Yovish did not receive the notice or pay the 

premium until approximately February 10, 1984, USAA backdated the 

coverage to the beginning of the month, leaving the six-month 

policy term running from February 1 to August 1, 1984. About this 

same time, Yovish also received a renewal declarations page to 

attach to his policy. The declarations page displayed a policy 

period of February 1 through August 1, 1984. 
As USAA did not have any local agents, Yovish occasionally 

contacted the company by telephone to conduct business or obtain 

general rate and coverage information. In mid-February, 1984, he 

called the company for premium quotes. In April, 1984, after 

securing rental insurance coverage with Farmers, he called USAA to 

cancel his rental insurance policies. 

On June 9 or 10, 1984, he again called the company. At trial, 

the parties disputed the substance of this conversation. Yovish 

maintained that he called USAA in June simply to obtain rate and 

coverage information. USAA, on the other hand, contended that he 

told the company not to renew the policy in August because he was 

insuring the automobile with Farmers. Yovish did not receive any 

written confirmation of the phone call from USAA nor did he receive 

a notice of non-renewal or cancellation. In fact, the last written 

notice Yovish received from USAA consisted of a May, 1984 premium 

notice indicating that, due to the cancellation of his rental 

policies, the balance on his auto policy was fully paid. 0 n 

August 5, 1984, Yovish sideswiped a parked car on a residential 

street in Great Falls. He admitted liability, and phoned USAA the 

following day to report the accident. A few days later, USAA 

denied coverage of the accident, maintaining that Yovishls policy 

had expired on August 1, 1984, the last day of the six-month policy 

period. USAA based its denial on the substance of the June 

telephone conversation. 

On the advice of counsel, Yovish forwarded a $408 check to 

USAA on August 10, 1984 in an attempt to retain coverage from 

August 1, 1984. The check was cashed by the company but the money 

was returned to Yovish in late August. 

Total damages incurred in the accident amounted to $3,634-- 

$1,843 for Yovishls vehicle and $1,791 for the other car. After 

USAA refused to accept the claim, Yovish was forced to take out a 

$3,000 loan at 10 percent interest to cover the damages. 

On April 25, 1985, Yovish instituted suit against USAA, 

asserting that USAA1s rejection of the claim and alleged failure 

to comply with statutory notice provisions governing insurance 
companies constituted oppressive and malicious conduct. On 

December 23, 1986, the District Court denied USAA1s motion for 

summary judgment. A bench trial commenced on December 31 of that 

year. On February 24, 1989, over two years later, the court issued 

findings of fact, conclusions of law and order, awarding Yovish 

$3,384 in compensatory damages (total damages of $3,634 offset by 

$250 deductible) and $322 in interest. The court denied Yovishls 

prayer for punitive damages but granted his request for attorney 

fees. On May 4, 1989, the court denied USAA1s motion to amend the 

judgment with respect to the award of attorney fees. Following a 

hearing, the court awarded attorney fees in the amount of $8,703. 

USAA appealed to this Court. 

USAA argues that it fully complied with both the policy 

provisions and statutory law governing renewal and non-renewal of 

auto insurance policies. Therefore, USAA maintains, it was not 

required to provide coverage for the car accident of August 5, 

1984, because the policy had expired of its own terms on August 1, 

1984 due to Yovishls failure to pay the renewal premium. 

Montana's insurance notice statutes provide that an insurer 

may not cancel or refuse to renew an insurance policy without 

furnishing adequate notice of such intent to the insured. Sections 

33-23-212 and 33-23-214, MCA. The statutes were enacted in order 

to prevent lapses in insurance coverage by supplying insureds with 

sufficient time to obtain insurance elsewhere. See Cantrell v. 

Benefit Assln of Ry. Employees, 136 Mont. 426, 431, 348 P.2d 345, 

348 (1960) . Preventing lapses in insurance coverage assures that 

drivers do not travel the state's highways without the benefit of 

insurance protection. 

Many insurance policies possess similar notice provisions. 

As long as the terms in the policy regarding notice do not restrict 

the rights of Montana citizens given by the insurance notice 

statutes, the terms do not defeat public policy and are therefore 

valid. Because an insurance policy constitutes a contract between 

the parties, this Court will interpret the terms of the policy 

according to contract law. Universal Underwriters Ins. Co. v. 
State Farm Mut. Ins. Co., 166 Mont. 128, 135, 531 P.2d 668, 673 

(1975). However, if a contractual term restricts the rights of the 

insured, we will construe the contract by looking to the statutes 

governing insurance law. 

In the present case, the relevant policy provisions do not 

restrict the statutory rights of the insured. Therefore, we shall 

decide this case by construing the terms of the policy. 

The applicable policy terms provided as follows: 

Non-renewal. If we decide not to renew or continue this 

policy, we will mail notice to the named insured shown 

in the Declarations at the address shown in this policy. 

Notice will be mailed at least 20 days before the end of 

the policy period. If the policy period is other than 

1 year, we will have the right not to renew or continue 

it only at each anniversary of its original effective 

date. 

Automatic Termination. If we offer to renew or continue 

and you or your representative do not accept, this policy 

will automatically terminate at the end of the current 

policy period. Failure to pay the required renewal or 

continuation premium when due shall mean that you have 

not accepted our offer. (Emphasis added.) 

The policy was unambiguous. The clause concerning automatic 

termination required USAA to offer to renew the policy. Yovishls 

obligation to pay the premium was contingent upon USAA1s offer to 

renew. Once USAA offered to renew the policy, Yovish could accept 

the offer by paying the renewal premium. The policy could 

automatically expire only if USAA extended an offer of renewal to 

Yovish and Yovish rejected that offer by failing to pay the premium 

when due. 

USAA acknowledges that it failed to send Yovish any written 

offer of renewal. It neglected to forward Yovish either a premium 

notice or a renewal declarations page, as had been its practice in 

previous dealings with Yovish. Because USAA failed to offer to 

renew the policy, it failed to comply with the terms of the 

automatic termination clause. Thus, it cannot rely on that clause 

for the proposition that the policy automatically expired on August 
1, 1984, the final day of the policy period. 

USAA also neglected to mail Yovish notice of its intent not 

to renew as mandated by the non-renewal clause. Nevertheless, USAA 

argues that it did not need to mail Yovish written notice of nonrenewal because Yovish, not USAA, had decided not to renew the 

policy. 

USAA bases this argument on the substance of the disputed 

June, 1984 phone call. The District Court, however, found that 

Yovish called USAA in June, 1984, simply to obtain rate and 

coverage information and that he did not inform the company during 

the conversation that he did not intend to renew or otherwise 

cancel the policy. These findings are not clearly erroneous. 

Yovish testified that the June telephone conversation was 

extremely brief and that it concerned only ballpark estimates about 

rates and coverages. He maintained throughout his testimony that 

he did not request cancellation of his coverage with USAA nor did 

he inform USAA that he did not wish to renew his coverage after the 

next expiration date. His testimony was supported by the 

deposition testimony of his roommate, who was present during the 

telephone conversation in question. 

Yovish's testimony was also supported by his conduct. The 

record indicates that he had always taken great care to insure his 

property. He cancelled his USAA rental insurance policies in 

April, 1984, only after securing other insurance. Yet he did not 

obtain other insurance after the June, 1984 phone call, as would 

have been his normal course of conduct had he not intended to renew 

his coverage with USAA. Furthermore, he contacted USAA immediately 

after the accident, indicating that he believed that he was still 

covered by that insurer. 

Carole Thomas, the USAA employee who took the June phone call, 

disputed Yovish's testimony. Thomas contended that Yovish could 

not have requested or received rate information because the 

computers were down at the time he called. She further testified 

that he informed her that he would not be renewing his automobile 

coverage, that he would be insuring with Farmers instead. 
USAA contends that Thomas's testimony was inherently more 

credible than Yovish's because Thomas's statement was supported by 

a written memorandum of the telephone conversation. This is not 

so. Although a written memorandum may lend credence to a witness's 

testimony, it is not necessarily more reliable than another 

witness's verbal recollection of an event. 

The written memo introduced by USAA was not entirely free of 

errors. The memorandum possessed at least two inaccuracies, the 

wrong date and Yovish's incorrect insurance status. The District 

Court could reasonably have questioned both the trustworthiness of 

the memo as well as Thomas's reliability when she testified that 

she incorrectly assumed that Yovish was a dependent of a subscriber 

rather than a subscriber in his own right due to the immaturity of 

his voice. The court could also have viewed Thomas's ability to 

recall the conversation accurately with a degree of skepticism 

considering the fact that she received between 40 and 50 telephone 

calls per shift. 

The present case is particularly appropriate for limited 

review. The parties hotly contested the substance of the June 

telephone conversation, thus calling the credibility of the 

witnesses into question. The District Court had the opportunity 

to listen to the testimony of both witnesses before making its 

decision, a decision that is not clearly erroneous. We will not 

second guess its judgment. 

Because the District Court found that Yovish had not 

communicated to USAA a desire not to renew his policy, USAA was 

compelled to comply with the policy terms governing renewal. The 

policy required USAA to send Yovish written notice of non-renewal. 

USAA admits that it neglected to send any such notice. 

Where the insurer has failed to comply with the policy terms 

regarding renewal and notice of non-renewal, the insurance policy 

does not expire of its own terms and the insurer cannot deny 

coverage to the insured for an accident that occurs after the 

renewal date. Accord Sausen v. American Family Mut. Ins. Co., 360 

N.W.2d 565 (Wis. Ct. App. 1984); Barbara Corp. v. Bob Maneely Ins. 
Agency, 484 A.2d 1292 (N.J. Super. App. Div. 1984); National 

Automobile and Casualty Ins. Co. v. California Casualty Ins. Co., 

188 Cal. Rptr. 670 (Cal. Ct. App. 1983) ; Prudential Property & 

Casualty Ins. Co. v. Pritchett, 313 S.E.2d 706 (Ga. Ct. App. 1983) ; 

Shore v. Coronet Ins. Co., 288 N.E.2d 887 (Ill. App. Ct. 1972); 

Nationwide Mut. Ins. Co. v. Davis, 171 S.E.2d 601 (N.C. Ct. App. 

1970). Although the cases cited above refer to failure to comply 

with statutory notice provisions, the same reasoning applies to 

failure to comply to the contractual provisions in this case, where 

the policy provided that automatic termination was contingent upon 

an offer of renewal extended by the insurance company and that the 

insurer was required to supply the insured with written notice of 

non-renewal. 

USAA next argues that the District Court abused its discretion 

by awarding attorney fees to Yovish. USAA does not dispute the 

reasonableness of the amount of attorney fees, for it stipulated 

that the $8,703 fee was reasonable. USAA does contest the 

propriety of any attorney fee award at all in this case. 

Generally, attorney fees may not be awarded to a prevailing 

party in the absence of a specific statute or a contractual 

provision granting fees. Martin v. Crown Life Ins. Co., 202 Mont. 

461, 469, 658 P.2d 1099, 1104 (1983). This action presents neither 

a statutory nor a contractual basis for an award of attorney fees. 

Nor does it fall within one of the narrow exceptions to the general 

rule regarding attorney fees. Therefore, we agree that the 

District Court abused its discretion in awarding fees. 

We have approved awards of attorney fees in the absence of a 

specific statute or contractual provision granting the right to 

attorney fees in cases where an insurer has breached its obligation 

to defend an insured. Lindsay Drilling & Contracting v. United 

States Fidelity €4 Guar. Co., 208 Mont. 91, 676 P.2d 203 (1984) ; 

Truck Ins. Exch. v. Wolstad, 212 Mont. 418, 687 P.2d 1022 (1984); 

Home Ins. Co. v. Pinski Bros., Inc., 160 Mont. 219, 500 P.2d 945 

(1972). The present case, however, is not a case where an insurer 

has wrongfully refused to defend an insured but where an insurer 
has wrongfully refusedto provide coverage to an insured. Although 

the distinction may be slight, we hesitate to expand the exception 

to the general rule without legislative authority. See Martin, 202 

Mont. at 469, 658 P.2d at 1104; Tynes v. Bankers Life Co., 224 

Mont. 350, 369, 730 P.2d 1115, 1127 (1986). 

We understand that the failure to award attorney fees in cases 

such as the present one may result in circumstances where the 

entire compensatory award is consumed by the costs of litigation. 

We also recognize that the failure to grant attorney fees may force 

insureds with modest claims to simply accept an insurer's erroneous 

denial of coverage. Nonetheless, the legislature, not the courts, 

must remedy the wrongs created by this situation. 

Affirmed as to the award of compensatory damages. Reversed 

as to the award of attorney fees. / 

Justice 

We Concur: /'