DA 09-0523

IN THE SUPREME COURT OF THE STATE OF MONTANA

2010 MT 191

STATE FARM MUTUAL AUTOMOBILE

INSURANCE COMPANY,

Plaintiff and Appellee,

v.

FRANK FREYER, as Personal Representative

of the Estate of Heath Evans Freyer, and as

Conservator of the Estate of Alicia Freyer,

a Minor Child, and VAIL FREYER,

Defendants and Appellants.

APPEAL FROM: District Court of the Eighteenth Judicial District,

In and For the County of Gallatin, Cause No. DV 07-754A

Honorable Holly Brown, Presiding Judge

COUNSEL OF RECORD:

For Appellant Frank Freyer:

Allan H. Baris, Moore, O’Connell & Refling, P.C., Bozeman, Montana

For Appellant Vail Freyer:

Daniel P. Buckley, Buckley Law Office, P.C., Bozeman, Montana

For Appellee:

Robert F. James, Cathy J. Lewis, Ugrin, Alexander, Zadick

& Higgins, P.C., Great Falls, Montana

Submitted on Briefs: April 21, 2010

Decided: August 27, 2010

Filed:

August 27 2010
2

__________________________________________

Clerk
3

Justice Patricia O. Cotter delivered the Opinion of the Court.

¶1 Heath Freyer, his wife, Vail, and their daughter, Alicia, were involved in an

automobile accident in October 2003. Heath was killed and Alicia was injured in the

accident. Frank Freyer, Heath’s father, was appointed personal representative of Heath’s

estate and conservator of Alicia’s estate. Frank made a claim for benefits under Heath

and Vail’s State Farm policy. State Farm paid benefits in accordance with its

interpretation of the policy. Frank and Vail both disputed State Farm’s determination of

policy benefits. State Farm sought declaratory judgment to determine coverage. The

Eighteenth Judicial District Court ruled State Farm had accurately determined and paid

benefits. Frank and Vail appeal. We reverse and remand.

ISSUE

¶2 A restatement of the issue on appeal is whether the District Court erred in granting

State Farm’s motion for partial summary judgment vis-à-vis the insurer’s interpretation

of the policy’s Limits of Liability clause.

FACTUAL AND PROCEDURAL BACKGROUND

¶3 Heath, Vail, and their then three-month-old daughter, Alicia, were traveling

southbound on South 19th Avenue near Bozeman, Montana, on the evening of October

25, 2003. Vail was driving when their car collided with another vehicle driven by

Michelle Manning. Vail lost control of her car, it rolled, and Heath was ejected, suffering

serious injury. He subsequently died from his injuries. Alicia, who was confined by her

car seat, also suffered injuries resulting in over $2,500 for medical treatment.
4

¶4 Frank sued Vail and Manning, seeking to recover damages on behalf of Heath’s

estate and Alicia. That case is pending before another district court judge. Manning’s

insurer paid Heath’s estate $50,000 representing the “each accident” policy limit in

Manning’s policy. In addition, State Farm paid Heath’s estate the “Each Person” policy

limit of $50,000, and separately paid the medical expenses for Alicia. Frank, seeking

additional damages, demanded that State Farm pay to Alicia wrongful death and

survivorship benefits arising from her father’s death, arguing that these additional

benefits should be paid out of the policy’s $50,000 “Each Person” limit for Alicia. Such

payment would, when added to the $50,000 paid to Heath’s estate, exhaust the $100,000

“Each Accident” policy limit. The insurer refused, and in October 2007 filed a

Complaint for Declaratory Judgment arguing that it had fulfilled its contractual

obligations as they pertained to Heath’s death.

¶5 In May 2008, State Farm filed a motion for partial summary judgment, asserting

that under the unambiguous terms of the insurance contract, it had fully satisfied its

responsibilities to Heath’s estate arising from his death and was entitled to judgment as a

matter of law. Both Frank and Vail subsequently filed motions for summary judgment as

well. On July 9, 2008, the District Court held a hearing on the motions. On May 1,

2009, the court issued its order determining that the policy “definition of ‘bodily injury to

one person’ ” is not ambiguous, contrary to Frank’s argument. The court ruled that

“[a]ny claims asserted by Alicia related to the wrongful death or survivorship of her

father are restricted by his ‘Each Person’ policy limit.” It therefore granted State Farm’s

motion as to that issue. Frank and Vail appeal. We reverse and remand.
5

STANDARD OF REVIEW

¶6 We review a district court’s ruling on summary judgment de novo. Hern v. Safeco

Ins. Co. of Illinois, 2005 MT 301, ¶ 18, 329 Mont. 347, 125 P.3d 597. The interpretation

of a contract presents a question of law which we review for correctness. Modroo v.

Nationwide Mut. Fire Ins., 2008 MT 275, ¶ 23, 345 Mont. 262, 191 P.3d 389. We

examine insurance contracts as a whole, with no special deference to specific clauses.

We accord the usual meaning to the terms and the words in an insurance contract, and we

construe them using common sense. An insurance contract is ambiguous if it is

“reasonably subject to two different interpretations.” We determine whether an

ambiguity exists from the viewpoint of a consumer with average intelligence, but

untrained in the law or the insurance business. We construe ambiguities in an insurance

contract against the insurer and in favor of extending coverage. Modroo, ¶ 23.

DISCUSSION

¶7 The Limits of Liability insurance clause at the center of this case states:

The amount of bodily injury liability coverage is shown on the

declarations page under “Limits of Liability-Coverage A-Bodily Injury,

Each Person, Each Accident.” Under “Each Person” is the amount of

coverage for all damages due to bodily injury to one person. “Bodily injury

to one person” includes all injury and damages to other persons, including

emotional distress, sustained by such other persons who do not sustain

bodily injury. Under “Each Accident” is the total amount of coverage,

subject to the amount shown under “Each Person”, for all damages due to

bodily injury to two or more persons in the same accident. [Emphasis in

original removed.]

“Bodily injury” is defined in the policy as “physical bodily injury to a person and

sickness, disease or death which results from it. A person does not sustain bodily injury
6

if they suffer emotional distress in the absence of physical bodily injury.” The Freyer

policy indicated that the “Each Person” limit is $50,000 and the “Each Accident” limit is

$100,000.

¶8 At issue in this case is the tension between our jurisprudence concerning

“derivative” damages, and the language of this particular State Farm policy. Derivative

damages are damages that “derive” from another person’s injury or wrongful death.

They are typically sought by the spouse or children of the injured or deceased person, and

include, among other things, loss of consortium, loss of support, grief, sorrow, and

mental anguish. Mikelson v. Montana Rail Link, Inc. 2000 MT 111, ¶ 110, 299 Mont.

348, 999 P.2d 985; Farmers Union Mut. Ins. Co. v. Staples, 2004 MT 108, ¶ 9, 321 Mont.

99, 90 P.3d 381; Allstate v. Wagner-Ellsworth, 2008 MT 240, 344 Mont. 445, 188 P.3d

1042. In Wagner-Ellsworth, we held, essentially, that under the policy provision there at

issue, the claims of family members for derivative losses sustained as a result of another

family member’s bodily injury must be recovered under the “each person” limit of the

insured who sustained bodily injury. Wagner-Ellsworth, ¶ 24.

¶9 In the case before us, Alicia is seeking both direct damages as a result of her

bodily injury and derivative damages arising from the loss of her father. Setting aside her

claim for her own bodily injury which State Farm paid, the question presented is whether

Alicia’s claim for damages deriving from Heath’s death should be satisfied out of her

$50,000 “Each Person” policy limit rather than being subsumed in the “Each Person”

limit already paid to Heath’s estate. The resolution of this question hinges not upon our

“derivative damages” jurisprudence, but upon the language contained in the above clause.
7

¶10 Frank focuses upon the following sentence contained in the insurance policy

clause set forth above: “ ‘Bodily injury to one person’ includes all injury and damages to

other persons, including emotional distress, sustained by other persons who do not sustain

bodily injury.” (Emphasis added.) Frank maintains that this sentence grants Alicia the

right to claim both her direct and derivative damages up to the policy’s “Each Person”

and “Each Accident” limits because she—unlike one who might be seeking purely

derivative damages—actually “sustain[ed] bodily injury.” Therefore, she asserts she is

entitled to claim “Each Person” benefits under the policy up to $50,000, to include

damages associated with her bodily injury as well as damages occasioned by the loss of

her father.

¶11 State Farm counters that Heath’s “Each Person” limit of $50,000 encompassed all

independent and derivative claims arising out of Heath’s death. In other words, the

$50,000 State Farm paid to Heath’s estate after his death covered Heath’s bodily injuries

as well as any possible claims by Heath’s family members based on his wrongful death

or survivorship. State Farm asserts that the District Court correctly interpreted its policy

to mean that “[w]hen someone else sustains bodily injury, that person is entitled to his or

her own Each Person limit for his or her own bodily injury, but not for damages that are

the consequence of another’s bodily injury.” The insurer further argues that because all

potential derivative claims arising as a result of Heath’s death were encompassed within

the benefit paid to Heath’s estate, Alicia may not “transfer” her derivative claims

resulting from her father’s death to her own “Each Person” policy limit or the “Each

Accident” policy limit.
8

¶12 The policy provides a $50,000 “Each Person” limit and a $100,000 “Each

Accident” limit. The “Each Person” policy explanation merely states the maximum

amount the insurer will pay for one insured’s bodily injury. In the case before us, two

people suffered bodily injury—Heath and Alicia. The third sentence of the Limits of

Liability clause at issue here applies, by its terms, to derivative claims of persons “who

do not sustain bodily injury.” It is thus inapplicable to Alicia.

¶13 The Limits of Liability clause provides that “Under ‘Each Accident’ is the total

amount of coverage, subject to the amount shown under ‘Each Person’ for all damages

due to bodily injury of two or more persons in the same accident.” This sentence

provides that where two or more persons are injured in the same accident, the maximum

amount that will be paid is $100,000, and the phrase “subject to the amount shown under

Each Person” provides that no one person can receive more than $50,000. We conclude

that the complete and plain language of this Limits of Liability Clause must be

interpreted to mean that because two people suffered bodily injury, the “Each Accident”

limit of $100,000 is available and the “Each Person” limitation of $50,000 applies

separately to Heath’s claim and to Alicia’s claim. Because Alicia suffered a bodily

injury, her “Each Person” limit covers both her direct damages for her physical injury and

her derivative damages for the loss of her father up to $50,000.

¶14 To interpret the policy as urged by State Farm would require that we ignore the

existence of the clause confining its limitation to those claimants “who do not sustain

bodily injury,” and would thus require us to omit from consideration what has been

inserted into the policy. The interpretation we apply here gives effect to all of the
9

provisions in the policy language and, from the viewpoint of the ordinary consumer and

Frank, is a reasonable interpretation of the policy language chosen by the insurer.

¶15 Alternatively, if the insurance contract is ambiguous because it is “reasonably

subject to two different interpretations,” Mitchell v. State Farm Ins. Co., 2003 MT 102,

¶ 26, 315 Mont. 281, 68 P.3d 703, the construction most favorable to the insured or other

beneficiary must prevail, particularly if an ambiguous provision attempts to exclude the

liability of the insurer. Pablo v. Moore, 2000 MT 48, ¶ 17, 298 Mont. 393, 995 P.2d 460.

Under either a plain language or an ambiguous clause analysis, Alicia is entitled to the

coverage she seeks.

¶16 In closing, we emphasize that it is the particular language of the policy before us

that drives our decision. It is not our intention here to alter our “derivative claims”

jurisprudence as most recently set forth in Wagner-Ellsworth.

CONCLUSION

¶17 For the foregoing reasons, we reverse the District Court’s order granting partial

summary judgment in favor of State Farm, and remand for issuance of a declaratory

judgment consistent with the interpretation of the policy language set forth above.

/S/ PATRICIA COTTER

We concur:

/S/ MIKE McGRATH

/S/ JAMES C. NELSON
10

/S/ W. WILLIAM LEAPHART

/S/ MICHAEL E WHEAT

/S/ BRIAN MORRIS

Justice Jim Rice, dissenting. 

¶18 I believe the Court has erred by adopting a policy interpretation offered by

Appellants which is nonsensical. Further, I believe this decision directly conflicts with

our precedent regarding coverage for derivative claims.

¶19 To illustrate, Alicia’s bodily injury claim was paid by State Farm pursuant to her

own “Each Person” limit, which is defined by the same language at issue here:

Under “Each Person” is the amount of coverage for all damages due to 

bodily injury to one person. “Bodily injury to one person” includes all

injury and damages to other persons, including emotional distress,

sustained by such other persons who do not sustain bodily injury.

(Emphasis omitted.) Alicia’s bodily injuries were paid under this provision because it

includes and covers her bodily injuries. Obviously, the phrase “[b]odily injury to one 

person” includes bodily injuries, and, likewise, the “Each Person” limit applies “for all 

damages due to bodily injury to one person.” There is no dispute about this. 

Nonetheless, when analyzing Alicia’s derivative claim, the Court concludes that this

identical language applies only to persons who have not sustained a bodily injury, and is

thus inapplicable to Alicia. See Opinion, ¶ 12. This interpretation requires, for derivative 

claims, that the phrase “[b]odily injury to one person” excludes persons who have

suffered a bodily injury. I believe this is a nonsensical rendering of the policy.
11

¶20 Pursuant to the above language, the “Each Person” coverage for Heath’s bodily

injuries “is the amount of coverage for all damages due to bodily injury to one person.”

(Emphasis added.) “[A]ll damages” due to Heath’s bodily injuries necessarily includes

Alicia’s derivative damages. Thus, this provision is consistent with our clear precedent

providing that derivative claims are made against the “Each Person” limits of the injured

party, here Heath. See e.g. Allstate Ins. Co. v. Wagner-Ellsworth, 2008 MT 240, ¶ 24,

344 Mont. 445, 188 P.3d 1042; Bain v. Gleason, 223 Mont. 442, 451, 726 P.2d 1153,

1158 (1986); cf. Wages v. First Natl. Ins. Co. of Am., 2003 MT 309, ¶¶ 6-7, 10, 318

Mont. 232, 79 P.3d 1095; Treichel v. State Farm Mut. Automobile Ins. Co., 280 Mont.

443, 447-49, 930 P.2d 661, 664-65 (1997). I believe the Court’s interpretation ignores

this language, permitting Alicia to claim derivative damages through her own “Each

Person” limit, contrary to our precedent. Opinion, ¶ 13.

1

Further, I believe the Court’s

decision subjects our previously clear “derivative claim jurisprudence” to the vagaries of

individual policy interpretation.

¶21 Importantly, the correct result is also provided by statute. As we explained when

applying § 61-6-103(2)(b), MCA (2003), in Wagner-Ellsworth, “the statutory monetary

coverage limit specified for a bodily injury to one person applies to others who have

1 The Court also references the “Each Accident” limit in ¶ 13, but there is no need to analyze that

limit here, as it is subordinated under the policy to the “Each Person” limit and, thus, subject to 

the proper interpretation of the “Each Person” limit. The Court may have been confused by the 

Appellants’ change in theory in their appellate briefing. They begin by seeking coverage under 

the “Each Accident” limit (see Frank Freyer’s opening brief, p. 10) and close by seeking

coverage under Alicia’s own “Each Person” limit (see Frank Freyer’s reply brief, p. 17-18). The

amount of coverage proceeds under either theory is the same for this policy, but the analysis is

different.
12

suffered losses arising from the bodily injury to that one person.” Wagner-Ellsworth,

¶ 22.

¶22 The Court reasons that my position ignores the phrase “who do not sustain bodily

injury” contained within the policy definition of “[b]odily injury to one person.”

Opinion, ¶ 14. However, as the policy states, this definition “includes all injury and

damages to other persons, including emotional distress, sustained by such other persons

who do not sustain bodily injury.” (Emphasis added.) Thus, the phrase “who do not

sustain bodily injury” simply clarifies that “all injury and damages to other persons”

includes nonphysical, emotional injuries as well—not that it applies exclusively to those

injuries. See Vassiliu v. Daimler Chrysler Corp., 839 A.2d 863, 868 (N.J. 2004) (“[T]he

word ‘includes’ is usually a term of enlargement, and not of limitation.”).

¶23 When the language in an insurance policy is clear, then it is this Court’s duty to

enforce the language as written. Am. Family Mut. Ins. Co. v. Livengood, 1998 MT 329,

¶ 36, 292 Mont. 244, 970 P.2d 1054; Canal Ins. Co. v. Bunday, 249 Mont. 100, 106, 813

P.2d 974, 978 (1991); see also § 28-3-401, MCA. I believe the policy is clear and

unambiguous, contrary to the Court’s alternative conclusion in ¶ 15. An ambiguity arises

only when an insurance policy is “reasonably subject to two different interpretations.”

Newbury v. State Farm Fire & Cas. Ins. Co., 2008 MT 156, ¶ 19, 343 Mont. 279, 184

P.3d 1021 (emphasis added). Appellants’ interpretation of the phrase “[b]odily injury to

one person” as excluding a derivative claimant who has sustained a bodily injury is not

reasonable and, thus, does not establish an ambiguity. “[W]e determine whether the term

is ambiguous by viewing the policy from ‘the viewpoint of a consumer with average
13

intelligence but not trained in the law or insurance business.’” Mont. Petroleum Tank

Release Compen. Bd. v. Crumleys, Inc., 2008 MT 2, ¶ 34, 341 Mont. 33, 174 P.3d 948

(quoting Farmers Alliance Mut. Ins. Co. v. Holeman, 1998 MT 155, ¶ 25, 289 Mont. 312,

961 P.2d 114). No consumer with average intelligence would conclude that the term

“[b]odily injury to one person” fails to include a person with a bodily injury.

¶24 State Farm paid Heath’s estate the “Each Person” policy limit of $50,000, thereby

exhausting the available amount of damages “due to” Heath’s “bodily injury.” State

Farm additionally paid the medical expenses Alicia sustained due to her own “bodily

injury” under her “Each Person” policy limit. Alicia now seeks to recover wrongful

death and survivorship damages, all of which are derivative of Heath’s “bodily injury.”

The policy at issue provides coverage for Alicia’s derivative claim, but only up to the

limits of Heath’s “Each Person” limit, now exhausted. I would therefore affirm the

District Court.

/S/ JIM RICE