No. 12692 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1974 

UNIVERSAL UNDERWRITERS INSURANCE 

COMPANY, a corporation, 

Plaintiff and Respondent, 

STATE FARM MUTUAL AUTOMOBILE INSURANCE 

COMPANY, a corporation; HERBERT SOLLE, 

individually and as Administrator of the 

Estates of DAVID SOLLE and GREGORY SOLLE, 

Deceased, et al., 

Defendants and Appellants. 

Appeal from: District Court of the Fourth Judicial District, 

Honorable Jack L. Green, Judge presiding. 

Counsel of Record : 

For Appellants : 

Garlington, Lohn and Robinson, Missoula, Montana 

Sherman V. Lohn argued, Missoula, Montana 

Worden, Thane, Haines and Williams, Missoula, 

Montana 

Shelton C. Williams argued and Ronald A. Bender 

argued, Missoula, Montana 

Longan, Holmstrom and Cebull, Billings, Montana 

For ~espondent : 

Anderson, Symmes, Forbes, Peete & Brown, Billings, 

Montana 

Rockwood Brown, Jr. argued, Billings, Montana 

Submitted : September 11, 1974 

Decided : - 5 1975 
Mr. Justice Gene B. Daly delivered the Opinion of the Court. 

Plaintiff Universal Underwriters Insurance Company filed its 

complaint June 12, 1973, in the district court, Missoula County, 

seeking declaratory relief. All of the defendants appeared and 

filed answers. It was agreed between the parties that the matter 

would be submitted upon an agreed statement of facts. 

The court on November 13, 1973, entered its findings of fact, 

conclusions of law and judgment declaring that defendants John 

~'Orazi, Sr., Darlyene ~'Orazi and John Zachary ~~Orazi, Jr., were 

not persons insured under the garage liability insurance policy 

issued by Universal Underwiters Insurance Company to Cislo ChevroletOlds, Inc., and that plaintiff was not liable for any acts or 

omissions of the DtOrazis pertaining to an accident which occurred 

on October 19, 1971, nor any damages or claims arising therefrom. 

It further declared that plaintiff was not liable to defend DtOrazis, 

or any thereof, against the civil action brought by Herbert Solle 

against the ~'0razis pertaining to the deaths of David and Gregory 

Solle, nor pay the costs of defense thereof. 

Defendant Solle filed exceptions to the findings of fact, conclusions of law and the judgment and was joined in such filing by 

defendant State Farm Mutual Automobile Insurance Co. The court 

overruled Solle's and State arm's exceptions. Thereafter all def endan t s appealed. 

The agreed facts are: On or about April 1970, one Jane Howard 

purchased an automobile from Courtesy Chevrolet-Olds, Inc. of Polson, 

Montana, and traded in a 1962 Mercury Monterey autombile, identification number 22672518891,. She delivered the title certificate for 

the 1962 Mercury, notarized and endorsed in blank, to Courtesy. 

Around June 1970, Courtesy sold the Mercury to one Don Tidwell and 

delivered the title certificate to Tidwell, without executing the 

assignment, notarizing it, or forwarding the certificatg of ownership, certificate of registration, and an application for registration to the state registrar of motor vehicles as required by section 

53-109, R.C.M. 1947. 

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In August 1970, Tidwell traded the 1962 Mercury to John ~'~razi, 

Sr., giving DtOrazi a bill of sale. On October 19, 1971, John 

DtOrazi, Jr., was driving the Mercury automobile in the city of 

Missoula when it collided with a motorcycle ridden by David Solle 

and his brother, Gregory Solle. As a result of the accident both 

David and Gregory Solle died. 

Herbert Solle, individually and as administrator of the estates 

of David and Gregory Solle, filed in the district court, Missoula 

County, a combined wrongful death survival action. He named John 

Zachary DtOrazi, Jr., as a defendant based upon his negligent 

driving of the Mercury automobile and also named John ~'Orazi, Sr., 

and Darlyene DtOrazi, the parents of John, Jr., on the basis of 

negligent entrustment as defendants. He claimed general, special, 

and punitive damages. 

At the time of the fatal accident defendant State Farm Mutual 

Automobile Insurance Company insured Herbert Solle under three 

automobile liability policies. Included in the coverage under each 

policy is uninsured motorist coverage. State Farm has agreed to 

pay Solle the sum of $40,000, allocating $30,000 to Gregory and 

$10,000 to David, in compromise of Solle's death claims under the 

uninsured motorist coverage provisions of the three policies which 

Solle carried with State Farm. The agreement also provides that 

Solle may pursue death claims against the DtOrazis, and in the 

event of judgment and recovery under the Universal Underwriters 

garage liability policy, State Farm would be entitled to subrogation 

against any recovery up to the amount of its $40,000 payment. 

At the time of the accident there was in full force and effect 

a garage liability policy issued by Universal Underwriters to Cislo 

Chevrolet-Olds, Inc. (Courtesy's suecessor). On or about March 2, 

1973, Universal Underwriters received notice from defendants ~'0razi 

tendering defense of the Solle case and claiming coverage under 

universal's garage liability policy on the grounds the 1962 Mercury 

automobile was still owned by Universal Underwriters' insured, by 
reason of its failure to process the transfer of title when the 

Mercury was sold to Don Tidwell in 1970. Universal Underwriters 

has denied coverage to ~'Orazis but has assumed the defense of the 

underlying wrongful death and survival action upon an express 

reservation of rights and nonwaiver of its defenses under the policy. 

Paragraph V of the garage liability insurance policy containing 

the definition of "Persons Insured" provides: 

"Each of the following is an insured under this 

insurance to the extent set forth below: 

"(3) with respect to the automobile hazard: 

"(a) any partner, or paid employee, or 

director or stockholder thereof or a member of the 

household of the named insured or such partner 

or paid employee or director or stockholder while 

using an automobile covered by this policy or when 

legally responsible for the use thereof, provided 

the actual use of the automobile is by the named 

insured or with his permission, and 

"(b) any other person or organization legally 

responsible for the use thereof only while such automobile is physically operated by the named insured or 

any such partner or paid employee or director or 

stockholder, or member of the household of the named 

insured or partner or paid employee or director or 

stockholder, provided the actual use of the automobile 

is by the named insured or with his permission. 11 

Appellants present these issues for this court's review: 

1. Whether there is coverage for the defendants D'Orazi 

under the Universal Underwriters garage liability policy under the 

Safeco Insurance Co. v. Northwestern Mutual Insurance Co., 

Ostermiller v. Parker, and Irion v. Glenn Falls Insurance Co., cases? 

2. Whether the person insured provision of the Universal 

underwriters' policy is ambiguous and should be construed against 

the insurer? 

3. Whether under the Cbner's Responsibility Law (section 53-438, 

R.C.M. 1947), the Universal Underwriters' garage policy must contain 

a mandatory omnibus clause? 

4. Whether the limitation and/or exclusion of a permissive user 

from the definition of insured, as respondent contends, is a limitatation or exclusion in an insurance contract which is unenforceable 

as being violative of public policy? 
Appellants in their first issue contend this court's decisions in 

Sazeco Ins. Co. v. Northwestern Mutual Ins. Co., 142 Mont. 155, 

382 P.2d 174; Ostermiller v. Parker, 152 Mont. 337, 451 P.2d 515; 

and Irion v. Glenn Falls Ins. Co., 154 Mont. 156, 461 P.2d 199, 

established the rule that if a car dealer fails to comply with 

section 53-109(c), R.C.M. 1947, by failing to send to the registrar 

of motor vehicles a certificate of ownership, certificate of 

registration, plus an application for registration upon the sale of 

a car, and that car is involved in an accident, the automobile 

dealer's liability insurance policy covers the person driving the 

car, regardless of the language or limitations regarding coverage 

contained in the insurance policy. 

This seems to go to the question of liability of the garage 

owner which is not at issue here. Here, the sole question to be 

determined is whether or not the "garage" liability policy issued 

by Universal to Cislo Chevrolet-Olds, Inc. (formerly Courtesy) 

also insures the ~'Orazis; which is a question of coverage. 

The confusion arises because the three cases cited by appellants 

all had "omnibus" clauses and coverage was not in issue but rather 

ownership was the central question to be determined. The three cases 

held, as a matter of law, that if the car dealer failed to comply 

with section 53-109(c), R.C.M. 1947, then the title to that automobile remains with the car dealer, as in the case here. However, 

as in all cases of this nature, once ownership is established the 

language of the insurance contract in force governs the coverage 

available to a person claiming coverage, if any. The statute under 

consideration is not penal. 

Appellants' issue No. 3 is not well taken inasmuch as public 

policy and this Court's interpretation of section 53-438, R.C.M. 

1947, are laid to rest in Northern Assurance Co. v. Truck Insurance 

Exchange, 151 Mont. 132, 439 P.2d 760, and in Boldt v. State Farm 

Mutual Auto. Ins. Co., 151 Mont. 337, 443 P.2d 33. Interestingly, 

counsel here for appellants Solle and State Farm were involved in 
Northern Assurance. There has been no showing in the instant case 

that the policy in question was issued to show proof of financial 

responsibility as required by sections 53-418 through 53-458, R.C.M. 

1947. 

Appellants' issues 2 and 4 will be discussed hereinafter in the 

context of the limitations on those insured under Paragraph V, 

heretofore cited, of the garage liability policy. The exclusions are 

not at issue here. 

11 The policy under consideration here does not contain an omnibus" 

clause but a limitation of those insured and hence is not a standard 

liability policy. Appellants contend this is violative of public 

policy. Section 13-801, R.C.M. 1947, on unlawful contracts provides: 

 hat is not lawful which is: 

It (1) Contrary to an express provision of law; 

"(2) Contrary to the policy of express law, though 

not expressly prohibited; or, 

"(3) Otherwise contrary to good mcrals. " 

Many out of jurisdiction cases have examined exclusions and 

limitations of coverage cases similar to the instant one and have 

not been moved to declare the absence of "omnibus" coverage against 

public policy. This Court in Northern Assurance found exclusions 

not violative of public policy if not in violation of statute, and 

the same would apply to limitations. We have disposed of the 

statutory argument concerning section 53-438, R.C.M. 1947, and will 

only comment that the claimed application of section 40-4403, R.C.M. 

1 I 1947, concerning omnibus" coverage to be contained in "uninsured 

motorist policies" has no application to the problem here presented 

to this Court in the agreed statement of facts. 

Two parties may contract in any manner they so choose with 

any insurance coverage they desire, as long as that contract is not 

contrary to an express provision of law; contrary to the policy 

of express law, though not expressly prohibited; or, otherwise 

contrary to good morals. 
~ppellants' issue 2 argues the "persons insured" provision 

contained in Paragraph V of the policy in question is ambiguous and 

should be construed against the insurer. 

The policy of insurance between Universal and Cislo Chevrolet 

is a contract, and subject to applicable contract law of Montana. 

The language of a contract governs its interpretation, if the 

language is clear and explicit. Section 13-704, R.C.M. 1947. The 

intention of the contracting parties is to be ascertained from the 

contract itself, if possible. Section 13-705, R.C.M. 1947. Where 

the language of an insurance policy admits of only one meaning there 

is no basis for interpretation of the policy coverage under the 

guise of ambiguity. Nelson v. Combined Insurance Co. of America, 

155 Mont. 105, 467 P.2d 707. In Kansas City Fire and Marine 

Insurance Company v. Clark, 217 F. Supp. 231, 235, (D.C.Mont. 1963), 

Judge Jameson noted the general rule that ambiguous or uncertain 

provisions of an insurance policy shall be construed in favor of the 

insured and against the insurer, but he cautioned: 

"On the other hand, if the intention of the parties 

is clear, the courts have no authority to change the 

contract in any particular, or to disregard the express 

language the parties have used. In James v. Prudential 

Ins. Co., 1957, 131 Mont. 473, 477, 312 P.2d 125, 127, 

1 the court said: But even though it is a cardinal principle of insurance law that a contract of insurance is 

to be construed liberally in favor of the insured and 

strictly against the insurer, contracts of insurance 

should be given a fair and reasonable construction. Park 

Saddle Horse Co. v. Royal Indemnity Co., 81 Mont. 99, 111, 

261 P. 880. In arriving at such construction, no matter 

how strictly construed against the insurer, the intention 

of both insurer and insured is to be ascertained from the 

language of the policy. R.C.M. 1947, !$ 13-704. Effect 

must be given to every part of the policy contract. R.C.M. 

1947, $13-707. The words of the contract are to be understood in their usual meaning. R.C.M. 1947, !$ 13-710. 

1 Common sense controls. Moreover, '[almbiguity does not 

exist just because a claimant says so. It can only exist 

where the wording or phraseology of a contract is reasonably subject to two different inter retations.' Holmstrom v. ? . MI-1 Benefit Health & Accident Ass n, 1961, 139 Mont. 426, 

364 P.2d 1065, 1066." 

To the same effect the Ninth Circuit Court of Appeals in National 

Farmers Union Property and Casualty Company v. Colbrese, 368 F.2d 

405, 411, commented that the foregoing rule: 
"* * * does not prevent application of the more 

general principle that an insurance policy, like 

any other contract, must be given an interpretation which is reasonable and which is consonant with 

the manifest object and intent of the parties." 

Paragraph V, section (3)(a), of the policy provides that in 

addition to the named insured, Cislo Chevrolet-Olds Inc., any 

partner, paid employee, director or stockholder of the named 

insured, or any member of the household of any of the foregoing 

are covered under the insurance policy in question. This section 

is clear and unambiguous and clearly does not include the ~'0razi.s 

under the facts. 

Section (3)(b) of Paragraph V of the policy provides that in 

addition to the named insured, any other person or organization 

legally responsible for the use of an owned automobile will be an 

additional insured under the policy provided that such automobile is 

physically operated by the named insured or any such partner or 

paid employee or director or stockholder or member of the household 

of the insured, partner, paid employee, director or stockholder. 

Since the 1962 Mercury was not physically operated at the time 

of the accident by the named insured or any partner, paid employee, 

director or stockholder, or member of the household of any of the 

foregoing specified category of persons, the ~'0razis do not come 

within the definition of an insured under Section (3) (b) . Appellants present case law and a strong argument that the term 

I I physically operate" is unclear and susceptible of various constructions and more so when the named insured is a corporation. 

They rely on an Idaho case, Mayflower Ins. Exchange v. Kosteriva, 

84 Ida. 25, 367 P.2d 572, 574 (1961) for principal support. However, 

11 the language there was operate" in an exclusion of military personel. 

I I The contention there was actual physical control" or "the right 

of direction and control", and the court found the term "operate" 

as used ambiguous and uncertain. 

I I Here, our term is physically operated" and tkrefore not in 

point with the Idaho court's analysis. A better analysis of our 

problem, concerning the same policy provision, at a time when it 
contained only the term "operatet', by the Ninth Circuit Court is 

found in Orth v. Universal Underwriters Insurance Co., 284 F.2d 

Orth involved a corporate insured and the same argument was 

advanced to the Ninth Circuit Court as here and in this regard 

the Court concluded: 

"Having reached this conclusion through an analysis of the 

contract language and finding no ambiguity, the determination 

that Aronson is not insured under the ~olicv is one of law 

1 and not of fact. Since operated' as Lsed in clause (3) 

does not include the concept of direction and control, no 

issue of fact is resented as to whether West Seattle Motors 

directed and contkolled Aronson in the use of the automobile. 

Having thus determined that Arnson's operation of the automobile is excluded in any event from coverage under the policy, 

it is immaterial whether his use of the car was permissive, 

as required by the proviso at the end of clause (3).11 (Emphasis 

added). 

The trial court correctly held as a matter of law that the 

DIOrazis were not parties insured under the garage liability 

insurance policy issued by respondent Universal Underwriters 

Insurance Company to Cislo Chevrolet-Olds, Inc. and in question 

here. 

The judgment of 

We Concur: I 

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. --*--------------------------------- 

Chief Justice