NO. 92-416 IN THE SUPREME COURT OF THE STATE OF MONTANA

BONNIE LYNN ALDERINK BENNETT. Plaintiff and Respondent,

-vsSTATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellant.

ORIGINAL PROCEEDING

COUNSEL OF RECORD: For Appellant: Pamela A. okano (argued) and William R. Hickman; Reed McClure Law Firm. Seattle. Washinaton Allen P. ~anning; ~onklin, ~ybb and ~eljeque, Great Falls,Montana For Respondent: LymanH. Bennett (argued);Morrow, Sedivy & Bennett, Bozeman, Montana For Amicus Curiae: Michael D. Cok (argued); Cok & Wheat, Bozeman, Montana (for Montana Trial Lawyers) Patrick R. Sheehy;Halverson, Sheehy & Plath, Billings, Montana (forMontana Trial Lawyers) Peter F. Habein and Mary 

### E. Duncan; Crowley, Haughey, Hanson, Toole & Dietrich, Billings, Montana (for Farmers Insurance Exchange)

Filed: Submitted: May 6, 1993 Decided: November 4, 1993Justice John Conway Harrison delivered the Opinion of the Court. 

### This case is before us on a question certified to this Court by 

### the United States Court of Appeals for the Ninth Circuit. We accepted certificationby order dated August 27, 1992. RespondentBonnieAlderink Bennett (Bennett)broughtanaction in the Eighteenth Judicial District Court, Gallatin County, Montana, seeking a declaration that she was entitled to the cumulative amount of the flunderinsured motorist coverageuprovided by two automobile insurance policies issued to Bennett and her husband by State Farm Mutual Automobile Insurance Company (State Farm). State 

### Farm removed the case to the United States District Court for the District of Montana. On February 14, 1991, the Honorable Paul G. Hatfield entered declaratory judgment inBennett sfavor,holding that StateFarm 

### is required,under the terms of theunderinsuredmotorist endorsements in the two contracts of insurance between it and the Bennetts, to extend coverage to Bennett in 

### the amount 

### of $100,000 for each policy. Bennett

### v. StateFarm 

### Mutual Automobile 

### InsuranceCo. 

### (D. Monk. 1991), 758 F.Supp. 1388. State Farm appealed, The Ninth Circuit heard oral argument 

### on July 8, 2992, and subsequently issued its order certifying the following question 

### to this Court: Is an "other insurance" clause which prohibits stacking of underinsured motorist coverage provided by separate policies from the same insurer void as against public policy? Bennett was a pedestrian crossing East Babcock Street inBozeman, Montana, on October 6, 1986, when she was struck by a pickup truck operated by Lloyd A. Wind. She sustained bodily injurywith damagesalleged to be in excess of $200,000. Wind had liability insurance with Allstate Insurance Company and on his behalf Allstate paid Bennett $100,000 on May 7, 1987. At the time of the accident Bennett 

### was insured under two separate policies issued by State Farm in 1984. The first policy

was issued toher husband, Lyman

### H. Bennett 111, and covered a 1981 Chrysler. The second policy was issued to Bennett and covered a 1976 Oldsmobile. Both policies included "CoverageW," for damage caused by an underinsured vehicle. CoverageW definesanunderinsuredmotor vehicle as one Igwhose limits of liability for bodily injury liability are less 

### than the amount of the insured's darnages.I1 Each of the Bennettslpolicies limited State Farm's liability under Coverage W to $100,000 per person and $300,000 per accident. The Bennetts paid separate premiums for Coverage 

### W on each policy. On 

### June 12, 1987, State 

### Farm paid Bennett 

### and her husband $100,000, State Farm asserts that the following "other insurancew clause in Coverage W limits its liability to $100,000: If the insured sustainsbodily injuryas apedestrianand other underinsured motor vehicle coverage applies:

a. the total limits of liability 

### under all such coverages shall not exceed that of the coverage with the highest limit of liability; and b. we are liable only for our share. Our share is that per cent of the damages that the limit of liability of this coverage bears to the total of all underinsured motor vehicle coverage applicable to the accident.

### This court has consistently invalidated insurance contract clauses that limit the insurer's liability for uninsured motorist coverage. Grierv. Nationwide InsuranceCo. (1991)

## , 248Mont. 457, 812 

### P.2d 347. For example, we held in Kemp v. Allstate Insurance Co. (1979), 183 Mont. 526, 601 P.2d 20, that where separate premiums have been charged and collected on each vehicle for uninsured motorist coverage, the insured is entitled to recover up to the aggregate sum of the coverages on all the vehicles so insured. Consistent holdings appear inSullivanv. Doe (1972)

### , 159 Mont. 50, 495 P.2d 193; Chaffee v. U.S. 

### Fidelity & 

### Guaranty Co.

(1979), 181

### Mont. 1, 591 P.2d 1102: and Sayers

### v. Safeco Insurance Co. (l981), 192 Mont. 336, 628 P.2d 659. The public policy embodied in these decisions is that an insurermay not place in an insurance policy a provision that defeats coverage for which the insurer has received valuable consideration. State Farm contends that this public policy applies only to uninsuredmotorist coverage, which aMontana insurer is requiredby 33-23-201,MCA, to offer to all its customers. As Bennett has no statutory right to underinsuredmotor vehicle coverage, State Farm argues, the "other insurance" clause inher policy does not defeat public policy. We disagree. Thepurpose of underinsured motorist coverage is to provide a source of indemnification for accident victims when the tortfeasor does not provide adequate indemnification. State Farm Mutual Automobile InsuranceCo. v. Estate of Braun (1990),243 Mont. 125, 793 P.2d 253. Thepublic policy expressed in Braun,andin the earlier cases cited above, favors adequate compensation for accident victims. The absence of a statutory requirement is 

### irrelevant, for the public policy considerations that invalidate contractual vtanti-stackinglr provisions in an uninsured motorist endorsement also support invalidating those provisions 

### in an underinsured motorist endorsement. State Farm's second argument is that an insured cannot reasonably expect dual coverage,and that each of the Bennetts had paid for only $100,000worth of underinsured motorist protection, not for $200,000worth. A reasonable insured buying a policy on a second car does not expect to increase the limits of coverage on the

### car that he or a familymember has already insured,State Farm argues, but instead expects the limits of coverage on the new policy to apply only to the car that policy insures. This argumentmight be persuasive if 

### itwere not for the clear and unambiguous language of State Farm's insurance policy, which states in Coverage W that I1[w]ewill pay damages for bodily injury



### an insured 

### is legally entitled to collect 

### from the owner 

### or driver of an underinsured motor vehicle." This statement makes underinsured motorist coverage personal to the insured; coverage does not depend 

### on the insuredperson occupying

### an insuredvehicleSee Chaffee, 591 P.2d at 1104, in which we reached the same conclusion with regard to uninsured motorist coverage. Thus, Bennett could reasonably expect 

### to recover damages 

### up to the limit of both policies under which she was an insured and for which separate premiums had been paid.

### In Transamerica InsuranceCo. v. Royle (1983), 202Mont. 173, 656 P.2d 820,we invalidated a "household exclusion" clause in an automobile liabilitypolicybecause 

### it didnothonor thereasonable expectations of the insured. We reaffirmed that decision 

### in Wellcome

### v. Home InsuranceCo. (Mont. 1993), 849 P.2d 190, 193, 50 St.Rep. 305, 307, statingthatthe 9treasonable expectation doctrine 

### is in accord with our strong public policy that insurance is intended to serve a fundamentalprotectivepurpose.If We affirm it againhere. Montana citizens should have a reasonable expectation thatwhen theypurchase separatepolicies 

### forunderinsured motorist coverage,theywill receiveadequatecompensation for losses caused by 

### an underinsured motorist, up to the aggregate limits of the policies they have purchased. We answer the 

### certified question as follows: 

### An Ifother insuranceItclause thatprohibits stacking of underinsuredmotorist coverage provided 

### by separate policies from the same insurer is void as againstMontana public policy.

We concur:of the District Court, sitting withthe Court in the seat made vacant by the retirement of Justice R.C. McDonoughJustice Fred J. Weber specially concurs as follows: Iconcur with the majority conclusionbecause Ibelieve that 

### is required under previous Montana decisions. However, 

### Iwish to express grave concerns with regard to the theory of the case: As pointed out in the majority opinion, this Court has invalidated insurance contract clauses which limitedthe insurer's liability for uninsured motorist coverage. Those cases followed the 1967 enactment of 5 40-4403, RCM (1947),the predecessor to 5 33-23-2 01, MCA, which expressed the 

### limitation that no motor vehicle liability policy should be issued unless coverage was provided for thosewho are legally entitled to recoverdamages from operators of uninsured motor vehicles. That public policy was clearly defined and adopted by the Montana Legislature. It 

### was appropriate that such public policy as determined 

### by the Legislature shouldbe enforcedby this Court. However, that theory does not apply to the present case. Here 

### we have anunderinsured motorist coverage question. The Montana Legislature has not made a declaration of public policy covering underinsuredmotorist coverage. 

### Themajority opinion

### has reached the following conclusion: Montana citizens should have a reasonable expectation 

### that when they purchase separate policies for underinsured motorist coverage, they will receive adequate compensation for losses caused by an underinsured motorist, up to the aggregate limits of the policies they have purchased. Unfortunately that conclusion directly contradicts the very clear provision of 

### the insurance policy itself. Principles of contract law which are applied in other cases are not considered here.

### Insteadwe have injected a "reasonable expectation" standard with which we justify a nullification of clear contract provisions. Inthe absenceof a legislativepolicydeclaration, 

### Iquestion that this Courthas abasis to define the nature of the "reasonable expectationswof the purchasers of insurance policies. If we are freeto effectively cancel contractprovisions on anunderinsurance theory, can that analysis on our part be applied to a cancellation of any and all other provisions in insurance contracts? Can a similar theory be applied to other contract instruments which come before us, such as notes, mortgages, contracts for deed, and similar instruments? 

### I suggest that we have now proceeded beyond the reasonable bounds of judicial discretion. It may now be appropriate that the Legislature examine this

area and set forth its views of policies regarding such insurance contracts.