NO. 93-138

IN THE SUPREME COURT OF THE STATE OF MONTANA

1993

CAROL SAGAN,

Plaintiff and Appellant,

-vsPRUDENTIAL INSURANCE COMPANY

OF AMERICA,

Defendant and Respondent.

APPEAL FROM: District Court of the Eighth Judicial District,

In and for the County of Cascade,

The Honorable Joel G. Roth, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Robert J. Vermillion: Smith, Walsh, Clarke &

Gregoire, Great Falls, Montana

For Respondent:

William D. Jacobsen and John D. Stephenson, Jr.;

Jardine, Stephenson, Blewett & Weaver, Great Falls

Montana

Fi

Submitted on Briefs: July 1,

Decided: August

Clerk

1993

5, 1993
Justice Karla M. Gray delivered the Opinion of the Court.

In this action by the beneficiary of a life insurance policy

against an insurer, we conclude that 5 33-20-121(2), MCA, must be

read into an insurance policy containing an otherwise valid suicide

exclusion. Therefore, we affirm.

The facts of this case are not in dispute. Prudential

Insurance Company of America (Prudential) issued a life insurance

policy to Samuel Sagan on July 1, 1989, providing for payment of

$50,000 in benefits upon his death. Samuel Sagan died on September

22, 1990, as a result of suicide. Carol Sagan (Sagan) is Samuel

Sagan's widow and the named beneficiary under the Prudential life

insurance policy.

Sagan submitted a claim for the policy benefits. Prudential

denied the claim, relying on a suicide exclusion in the policy

which provided that if the insured died by suicide within two years

from the issue date, Prudential would pay out no more than the sum

of the premiums paid. At the time it denied Sagan's claim,

Prudential tendered to her a check in the amount of $802.71,

representing the sum of the premiums paid plus interest: Sagan

refused the tendered check.

Sagan commenced this action against Prudential in the Eighth

Judicial District Court, Cascade County, seeking the full $50,000

benefit under the policy. She alleged that the policy did not

comply with § 33-20-121(2), MCA, which requires life insurance

policies with suicide exclusions to provide for payment of an

2
amount not less than the commissioner's reserve value in the event

of death under circumstances to which the suicide exclusion

applies. She further alleged that compliance with the statute was

not waived by the Montana Commissioner of Insurance and that the

Commissioner did not specifically approve the nonconforming *'sum of

the premiums" provision in Prudential's policy. Absent compliance,

waiver or approval, Sagan asserted entitlement to the full $50,000

benefit on the basis that, pursuant to § 33-15-315, MCA, the policy

was to be construed as though the suicide exclusion provision did

not exist.

Both parties moved for summary judgment. They filed an Agreed

Statement of Facts and agreed that there were no material facts in

dispute.

The District Court determined that Prudential was entitled to

summary judgment as a matter of law, granted Prudential's motion,

and entered judgment accordingly. Sagan appealed.

Sagan asserts a number of legal errors by the District Court.

This case can be resolved, however, by addressing only her final

argument: that the District Court erred in reading 5 33-20-121(2),

MCA, into the policy by operation of law. Our standard of review

of a trial court's conclusions of law is whether the conclusions

are correct. Steer, Inc. v. Dep't of Revenue (1990), 245 Mont.

470, 475, 803 P.2d 601, 603.

Section 33-20-121(1)(v), MCA, expressly permits life insurance

policies to exclude or restrict coverage in the event of a death

resulting from suicide within two years of the date of issue of the

3
policy. The Prudential policy at issue here contained such a

suicide exclusion. Moreover, Samuel Sagan's death as a result of

suicide within two years after the issuance of the policy is not

disputed. Thus, the suicide exclusion is applicable here.

Section 33-20-121(Z), MCA, requires a policy containing an

authorized suicide exclusion also to provide that, in the event of

a death under the oircumstances to which the exclusion applies, the

insurer must pay an amount not less than that determined according

to the Commissioner's reserve valuation method. Prudential's

"return of premiums" language does not mirror the language of 5 33-

20-121(2), MCA; nor does it expressly guarantee payment of an

amount not less than the reserve value amount. It is undisputed,

however, that the amount Prudential tendered to Sagan exceeds the

amount of payment required by utilizing the methodology contained

in § 33-20-121(2), MCA.

The District Court determined that § 33-15-315, MCA, required

that the Commissioner's reserve value provision of § 33-20-121(2),

MCA, be read into the Prudential policy. While Sagan agrees that

§ 33-15-315, MCA, is applicable, she argues that a proper

application of the statute to the policy before us results in

invalidating the entirety of the suicide exclusion rather than

reading the reserve value provision into the policy. We cannot

agree.

Section 33-15-315, MCA, provides in pertinent part:

Any insurance policy . . . which contains any condition

or provision not in compliance with the requirements of

this code shall not be thereby rendered invalid but shall

be construed and applied in accordance with such

4
conditions and provisions as would have applied had such

policy . . . been in full compliance with this code.

The statute codifies general principles of insurance law contained

in both case law and leading insurance authorities. As long ago as

our decision in Lee v. Providence Washington Ins. Co. (1928), 82

Mont. 264, 276, 266 P. 640, 644, we concluded that the provisions

of insurance statutes are to be read into an insurance policy as

though written therein: our decisions on that question have

remained consistent. See, e.g., First Sec. Bank of Bozeman v.

Goddard (1979), 181 Mont. 407, 414, 593 P.2d 1040, 1044. Leading

authorities in the field of insurance law agree:

Contracts of insurance . . . are presumed to have been

made with reference to the law of the land, including the

statutory laws which are in force and are applicable, and

such statutes . . . enter into and become a part of the

contract as much as if they were actually incorporated

therein. Provisions of an insurance code are in the

nature of special provisions pertaining to insurance

contracts, which are superimposed upon those provisions

of law which cover contracts generally.

1 Couch on Insurance 2d (Rev. ed) 5 13:6. See also 13 Appleman,

Insurance Law and Practice (1976 ed.) 5 7382.

The role of the courts in construing a statute is to determine

what is in terms or substance contained therein. Section l-2-101,

MCA. Our primary tool for ascertaining the legislature's intent is

the plain meaning of the words used. Dorn v. Bd. of Trust. of

Billings Sch. Dist. (1983), 203 Mont. 136, 144, 661 P.2d 426, 430.

The legislative intent in enacting § 33-15-315, MCA, is clear

from the words used. The plain meaning of 5 33-15-315, MCA, is to

give effect to insurance policies and provisions to the fullest

extent possible by reading statutory provisions into them to

5
achieve full compliance with the insurance code. Nothing in the

plain language of the statute supports applying it to invalidate

policy provisions.

Here, the policy contains a plain and clear suicide exclusion

specifically permitted by § 33-20-121(1)(v), MCA. Pursuant to that

provision, both Samuel Sagan and Prudential contemplated an

exclusion from coverage for death by suicide within two years. The

policy also contemplates some payment to the beneficiary in the

event of such a suicide. While the payment provided for in the

policy in the event of a suicide arguably does not expressly comply

with 5 33-20-121(2), MCA, the parties clearly contemplated payment

in an amount much reduced from the total benefit amount in the

policy. Under these circumstances, we conclude that application

of § 33-15-315, MCA, to the policy at issue mandates reading the

provisions of § 33-20-121(Z), MCA, into the policy. In this

manner, the arguably nonconforming payment in the event of suicide

provision does not render any portion of the policy invalid:

instead, the 5 33-20-121(2), MCA, provision is included in the

policy so as to bring the entirety of the suicide exclusion and the

policy itself into full compliance with Montana's insurance code.

This is the mandate of 5 33-15-315, MCA.

Sagan argues that reading 5 33-20-121(2), MCA, into the policy

rather than invalidating the entire suicide exclusion is justified

only if the insurance code is designed to protect insurers rather

than insureds and their beneficiaries. She asserts in conclusory

fashion that the legislature intended the insurance statutes in

6
general and § 33-15-315, MCA, in particular, to protect insureds

and not the insurance industry. In this regard, she cites several

cases purporting to require a liberal construction of the statute.

Sagan's arguments are flawed. As discussed above, 5 33-15-

315, MCA, requires no real interpretation: it is plain and clear on

its face and is not in accord with the construction Sagan advances.

To accept her argument that 5 33-15-315, MCA, requires voidinq a

suicide exclusion expressly permitted by statute would contravene

the plain language contained therein by invalidating rather than

effectuating provisions clearly contemplated by the parties.

Nor does the plain language of the statute indicate that its

purpose is to falvor either party to an insurance policy; the

statutory language is entirely neutral. Only where legislative

intent cannot be determined from the content of the statute may we

properly refer to legislative history. -,Dorn 661 P.2d at 430.

Moreover, the cases relied on by Sagan to support her "liberal

construction" theory are inapposite. Neither Attix v. Robinson (D.

Mont. 1957), 155 F.Supp. 592, nor State ex rel. School, Etc. v.

Board of County Com'rs, Etc. (1978), 180 Mont. 285, 590 P.2d 602,

stands for the proposition that insurance statutes which are clear

on their face should be V1liberally construed."

Attix was an action for refund of federal estate taxes

involving the Technical Changes Act of 1953. The Act was remedial

in nature and, being unable to ascertain its purpose from its plain

language, the federal district court relied on the "general rule

that relief or remedial provisions must be liberally construed to

7
effectuate the objective sought." 155 F.Supp. at 596. State ex

rel. School. Etc. was a Subdivision and Platting Act case in which

we were called upon to interpret such statutory language as

V8appropriate*V and "whenever necessary;" we noted the Act's stated

purpose of protecting the public health, safety and general welfare

and applied the principle of statutory construction that

legislation enacted for such purposes should be liberally

construed. 590 P.2d at 605. Neither case involved insurance

statutes or unambiguous statutory language and, therefore, neither

has any application to the case before us.

We hold that the District Court did not err in concluding that

5 33-20-121(2), MCA, must be read into the policy at issue by

operation of 5 33-15-315, MCA.

Affirmed.

We concur:
August 5, 1993

CERTIFICATE OF SERVICE

I hereby certify that the following order was sent by United States mail, prepaid, to the

following named:

Robert J. Vermillion, Esq.

Smith, Walsh, Clarke & Gregoire

P.O. Box 2227

Great Falls. MT 59403-2227

John D. Stephenson, Jr. & William D. Jacobsen

Jardine, Stephenson, Blewett & Weaver, P.C.

P.O. Box 2269

Great Falls, MT 59403

ED SMITH

CLERK OF THE SUPREME COURT