NO. 94-624

IN THE SUPREME COURT OF THE STATE OF MONTANA

1995

LAURIE SIMPSON DAGEL,

Plaintiff and Respondent,

v.

FARMERS INSURANCE GROUP OF

COMPANIES/FARMERS INSURANCE

EXCHANGE,

Defendant and Appellant.

APPEAL FROM: District Court of the First Judicial District,

In and for the County of Lewis and Clark,

The Honorable Jeffrey Sherlock, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Lyman H. Bennett, III, Morrow, Sedivy & Bennett,

Bozeman, Montana

For Respondent:

John C. Doubek, Kirk S. Bond, Small, Hatch, Doubek

& Pyfer, Helena, Montana

Filed:

Submitted on Briefs: June 15, 1995

Decided: September 29, 1995
Justice James C. Nelson delivered the Opinion of the Court.

The plaintiff, Laurie Simpson Dagel (Dagel), brought an action

in the District Court against Farmers Insurance Group of Companies

and Farmers Insurance Exchange (Farmers) seeking the benefits of

the uninsured motorist provision of the motor vehicle insurance

policy issued to her by Farmers. The District Court for the First

Judicial District, Lewis and Clark County, granted summary judgment

in favor of Dagel. Farmers appeals. We affirm.

We address the following issue on appeal:

Did the District Court err in determining that Dagel was not

required to exhaust the policy limits for uninsured motorist

coverage of the insurance policy on the vehicle she was operating

prior to making a claim for benefits under her own policy's

uninsured motorist provision?

Background Facts

On January 18, 1990, Dagel was involved in a two-vehicle

accident in Helena, Montana. The car Dagel was driving was struck

from behind by another vehicle after Dagel stopped to allow a

pedestrian to cross the street. It was later determined that the

vehicle that struck Dagel and the vehicle's driver were uninsured.

Northern Ford, the owner of the car driven by Dagel, was

covered by an insurance policy issued by Employer's Mutual

Companies (Mutual). This policy included uninsured motorist

coverage with a policy limit of $50,000. Dagel asserted a claim

against Mutual under the uninsured motorist provision of Mutual's

policy. Eventually, a settlement was negotiated between Dagel and

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Mutual in the amount of $30,000; $20,000 less than the available

policy limits.

At the time of the accident, Dagel had a motor vehicle

insurance policy with Farmers. The policy included uninsured

motorist coverage, with a policy limit of $100,000. Dagel asserted

a claim against Farmers, seeking the benefits of the uninsured

motorist provision.

On February 18, 1994, Farmers filed a motion seeking summary

judgment pursuant to Rule 56, M.R.Civ.P. Farmers contended that

because Dagel settled for less than the limits for uninsured

motorist coverage on the policy issued by Mutual, Dagel could not

recover under the uninsured motorist provision of the policy issued

by Farmers.

Farmers cited the following language from the uninsured

motorist portion of Farmers' policy to support its claim:

We will pay under this coverage only after the limits of

liability under any applicable bodily injury liability

bonds or policies have been exhausted by payment of

judgments or settlements.

Farmers contended that this language prohibited payment of benefits

to Dagel under the uninsured motorist provision of the policy

issued to Dagel by Farmers because Dagel did not "exhaust" the

limits of the uninsured motorist coverage of the Mutual policy.

On March 1, 1994, Dagel filed a cross-motion for summary

judgment on the issue of Farmers' liability under its policy. Oral

arguments were heard on June 24, 1994. On September 9, 1994, the

District Court issued its Order on Motions for Summary Judgment

denying Farmers' motion and granting Dagel's cross-motion on the

3
issue of liability.

Farmers subsequently filed a Motion for Clarification

regarding the computation of damages and the District Court issued

its Order on Motion for Clarification on December 8, 1994. Farmers

appeals both orders.

Standard of Review

Our standard in reviewing a grant of summary judgment is the

same as that initially utilized by the district court. Youngblood

v. American States Ins. Co. (1993), 262 Mont. 391, 394, 866 P.2d

203, 204 (citing McCracken v. City of Chinook (19901, 242 Mont. 21,

24, 788 P.2d 892, 894). Summary judgment is proper when there is

no genuine issue as to any material fact and the moving party is

entitled to a judgment as a matter of law. Rule 56(c), M.R.Civ.P.;

Younqblood, 866 P.2d at 204.

In Montana, the interpretation of an insurance contract is a

question of law. Wellcome v. Home Ins. Co. (1993), 257 Mont. 354,

356, 849 P.2d 190, 192 (citing Truck Ins. Exchange v. Waller

(1992), 252 Mont. 328, 331, 828 P.2d 1384, 1386). We review

district court conclusions of law to determine if the court's

interpretation of the law is correct. Nimmick v. State Farm Mut.

Auto. Ins. Co. (Mont. 1995), 891 P.2d 1154, 1156, 52 St.Rep. 208,

209 (citing Steer, Inc. v. Department of Revenue (1990), 245 Mont.

470, 474-75, 803 P.2d 601, 603).

Discussion

Did the District Court err in determining that Dagel was not

required to exhaust the policy limits for uninsured motorist

coverage of the insurance policy on the vehicle she was operating

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prior to making a claim for benefits under her own policy's

uninsured motorist provision?

Montana's uninsured motorist statute, § 33-23-201, MCA, bases

payment of uninsured motorist benefits on two conditions: (I) the

claimant is legally entitled to recover damages from the owner or

operator of the uninsured vehicle; and (2) the driver of the

vehicle is uninsured. Hubbel v. Western Fire Ins. Co. (1985), 218

Mont. 21, 23, 706 P.2d 111, 112 (citing Oleson v. Farmers Insurance

Group (1980), 185 Mont. 164, 166, 605 P.2d 166, 167). The language

"legally entitled to recover" means that the insured must have a

cause of action against the tort-feasor and must be able to

establish fault and the existence of damages. State Farm v. Estate

of Braun (1990), 243 Mont. 125, 128, 793 P.2d 253, 254. The basic

purpose of the uninsured motorist statute is to provide protection

for the automobile insurance policyholder against the risk of

inadequate compensation for injuries or death caused by the

negligence of financially irresponsible motorists. Hubbel, 706

P.2d at 113 (citing Sullivan v. Doe (1972), 159 Mont. 50, 60, 495

P.2d 193, 198). We have previously stated that this Court does not

support provisions placed on uninsured motorist coverage which

restrict or thwart available liability coverage that the insured

would be entitled to in an accident. Guiberson v. Hartford Cas.

Ins. Co. (1985), 217 Mont. 279, 289, 704 P.2d 68, 74.

Farmers admits that if Dagel had exhausted coverage on the

Mutual policy, there would be no question that the uninsured

motorist coverage provided by the Farmers' policy would be

available to Dagel. Farmers contends that the uninsured motorist

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coverage under Farmers' policy was unavailable to Dagel because

Dagel settled with Mutual for an amount less than the available

liability limits under Mutual's policy. Dagel did not "exhaust"

Mutual's policy limits as required by Farmers' policy. We do not

address Farmers' contention that Mutual's policy is "primary" and

Farmers' policy is "excess," as we find the interpretation of the

exhaustion clause to be the dispositive issue in this case.

Dagel contends that the exhaustion clause in Farmers' policy

is unenforceable here because of the language of the clause itself.

The clause provides:

We will pay under this coverage only after the limits of

liability under any applicable bodily injury liability

bonds or policies have been exhausted by payment of

judgments or settlements. [Emphasis added.1

Dagel argues that the only possible claim she could have made

against a bodily injury liability policy would have been against

one held by the driver of the other vehicle.

We find Dagel's argument persuasive. In this case there was

no other bodily injury liability policy in effect that applied to

Dagel's injuries because the driver of the other vehicle was

uninsured. In interpreting insurance contracts, the words of the

policy are to be understood in their usual meaning; common sense

controls. Duensing v. Traveler's Companies (1993), 257 Mont. 376,

381, 849 P.2d 203, 206 (citing James v. Prudential Ins. Co. (1957),

131 Mont. 473, 477, 312 P.2d 125, 127).

The Farmers' policy defines an "uninsured motor vehicle" as

one which is "not insured by a bodily injury liability bond or

policy at the time of the accident." Accordingly, under Farmers'

6
own definition, since the vehicle that injured Dagel was uninsured,

there was no bodily injury liability bond or policy applicable to

Dagel's injuries at the time of the accident. Exclusions and words

of limitation in a policy must be strictly construed against the

insurer. Leibrand v. Nat. Farmers Union (Mont. 1995), 898 P.2d

1220, 1223, 52 St.Rep. 557, 559, (citing Bauer Ranch, Inc. v.

Mountain West Farm Bureau (1985), 215 Mont. 153, 156, 695 P.2d

1307, 1309).

Accordingly, we hold that the District Court correctly

determined that the exhaustion clause in the Farmers' policy was

inapplicable in the present case and that Dagel is entitled to

recover under the uninsured motorist provision of the Farmers'

policy.

Since neither party argued either for or against the District

Court's determination of the portion of damages to be allocated to

Affirmed.

We Concur:

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September 29, 1995

CERTIFICATE OF SERVICE

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

following named:

Lyman H. Bennett, III.

MORROW, SEDIVY & BENNETT, P.C.

P.O. Box 1168

Bozeman, MT 59771-1168

JOHN C. DOUBEK

SMALL, HATCH, DOUBEK & PYFER

P.O. BOX 236

HELENA, MT 59601

ED SMITH

CLERK OF THE SUPREME COURT

STATE OF MONTANA