NO. 88-248 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1989 

GUARANTY NATIONAL INSURANCE COMPANY, 

a Colorado Corporation, 

Plaintiff and Respondent, 

STATE FARM INSURANCE COMPANY, 

Defendant and Appellant. 

APPEAL FROM: ~istrict Court of the ~ifth ~udicial ~istrict, 

In and for the County of Jefferson, 

The Honorable Frank ~avis, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Michael J. McKeon; Anaconda, Montana 

For Respondent: 

Gary L. Walton, Poore, Roth & ~obinson; Butte, Montana 

Submitted: April 25, 1989 

Decided: August 3, 1989 

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- - Clerk 
Mr. Justice William E. Hunt, Sr., delivered the Opinion of 

the Court. 

State Farm Insurance Company (State Farm), defendant and 

appellant, appeals from a partial summary judgment entered in 

favor of Guaranty ~ational Insurance Company (Guaranty 

National), plaintiff and respondent, by the District Court of 

the ~ifth Judicial District, Jefferson County. We affirm and 

remand for a resolution of issues pending before the District 

Court. 

The following issues are raised on appeal: 

1. Was ~utte-silver Bow, Guaranty ~ational's insured, 

an additional omnibus insured under the State Farm insurance 

policy issued personally to Mario ~icone, a ~utte-silver Bow 

employee? 

2. id the District Court properly prioritize insurance 

policies by finding State Farm the primary insurance carrier 

and Guaranty ~ational the excess insurance carrier? 

3. Was Guaranty National a volunteer when it negotiated 

a settlement? 

Guaranty National was the insurer of Butte-Silver Bow on 

January 9, 1979, when an automobile accident occurred 

involving Mario Micone, the Chief ~xecutive of ~utte-silver 

Bow, and Wilford and Anna Hibbs. ~ilford died and Anna 

sustained injuries as a result of the accident. At the time 

of the accident, Micone was acting in the course and scope of 

his employment as a ~utte-silver Bow employee and was driving 

his personal vehicle insured by State Farm. 

In February of 1980, Anna Hibbs, individually, and 

Arlene Pratt, as personal representative of the ~ilford Hibbs 

estate, brought an action against Butte-silver Bow and ~icone 

for the resulting damages. In July of 1981 a jury was 
empaneled and evidence submitted, however, a settlement was 

reached before a verdict was returned. 

At the commencement of the trial, State Farm defended 

Micone and Guaranty National defended Butte-Silver Bow. At 

the conclusion of evidence, the District Court granted 

Micone's motion to dismiss under 5 2-9-305, MCA (19791, 

because he was indemnified by ~utte-Silver Bow as an employee 

when acting in the course and scope of his employment. 

Immediately following dismissal of Micone, Guaranty National. 

moved to join State Farm to aid in the defense of 

Butte-Silver Bow. The motion was granted. 

Guaranty National settled the case on the eve of the 

last day of trial. State Farm had been advised of the 

settlement negotiations but did not participate. 

Subsequently, Guaranty National brought this declaratory 

judgment action in order to adjudicate the obligations and 

rights of the insurance companies under their respective 

insurance policies. Guaranty National moved the ~istrict 

Court for partial summary judgment. The motion was granted 

and the court ruled that (1) ~utte-Silver Bow was an 

additional omnibus insured under Micone's State Farm policy; 

(2) State Farm was the primary insurer and Guaranty National 

the excess insurer; and (3) Guaranty ~ational was not a 

volunteer when it negotiated the settlement. The order was 

certified as final under Rule 54(b), M.R.Civ.P. 

The first issue raised on appeal is whether ~utte-Silver 

Bow, Guaranty National's insured, was an additional omnibus 

insured under the State Farm policy issued personally to 

~ario Micone, a Butte-Silver Bow employee. 

State Farm's insurance policy issued to Mario Micone 

contained an omnibus clause that provided in part: 

Insured--the unqualified word "insured" includes 

(1) the named insured, and . . . 
(5) . . . any other person or orqanization, but 

only with respect to his or its liability for the .- 

use of such owned motor vehlcle by an insured as 

defined . . . (Emphasis ours.) 

Omnibus coverage is required under S 61-6-103(2) (b), MCA. 

In its argument, State Farm ignores the omnibus clause 

and relies on the indemnification provisions set forth in the 

State Tort Claim Act (the Act) under S 2-9-305, MCA (1979). 

The 1979 Act provided for the indemnification of public 

employees sued for their actions occurring during the course 

and scope of employment. In Oregon, the appeals court stated 

that the basis for a Tort Claim Act is to eliminate a public 

employee's liability concern for a good faith failure to use 

reasonable care in executing employment responsibilities. 

united Pacific ~eliance Ins. Co. v. Horace Mann Ins. Co. 

(0r.App. 1983), 670 P.2d 172. 

Because ~icone was acting in his capacity as a 

~utte-Silver Bow employee at the time of the accident, he was 

indemnified by his employer. State Farm argues that it 

should stand in the shoes of its insured, ~icone and, 

therefore, be free from liability. We disagree. 

Authority from other jurisdictions hold, that the 

employer is an additional omnibus insured--under a similar 

policy provision--notwithstanding the employees' 

indemnification. See Govt. Employees In. Co. v. ~ibraltar 

Casualty Co. (Cal. 1986), 229 Cal.Rptr. 57, 184 Cal.App.3d 

163; ~arleysville Ins. Co. v. united States (E.D.Pa. 19731, 

363 F.Supp. 176; Taggert v. united States (M.D.Pa. 1967), 262 

F.Supp. 572; united States v. Myers (5th ~ir. 1966), 363 F.2d 

615; united States v. State Farm Mutual Automobile Ins. Co. 

(D.Or. 19651, 245 F.Supp. 58; Govt. Employees Ins. Co. v. 

united States (10th Cir. 19651, cert.den., 382 U.S. 1026, 86 

S.Ct. 646, 15 L.Ed.2d 539, 349 F.2d 83; Rarker v. united 
States (N.D.Ga. 1964), 233 F.Supp. 455; and Gahagan v. State 

Farm Mutual Automobile Ins. Co. (W.D.La. 19641, 233 F.Supp. 

In Harleysville, a United States postal employee was 

making mail deliveries in his personal vehicle when he was 

involved in an accident. The scenario in Harleysville is 

comparable to the case at issue. Both controversies involved 

a public employee who, while driving his personally insured 

vehicle in the course and scope of employment, caused an 

accident; in both, the employee's insurance policy contained 

an omnibus clause; in both, the employee's insurance company 

entered the defense of the government after the employee was 

dismissed from the suit; in both, the cases were settled 

before trial proceedings concluded. Also, in ~arleysville, 

suit was brought under the Federal Tort claim Act, which, 

like the State Tort claim Act in the present case, 

indemnified the government employee from liability. In both 

instances the employee's personal insurance carrier argued 

that a Tort Claim Act shielded it from liability. 

The court in ~arleysville held that the United States, 

as an organization, was an additional insured under a government employee's private insurance policy when the employee 

was acting in the course and scope of employment, since the 

omnibus clause was an express provision in the employee's 

personal insurance policy. We follow the rationale set forth 

in Harleysville and hold that ~utte-Silver Bow is an 

additional insured under the omnibus clause contained in 

Micone's State Farm insurance policy and, therefore, State 

Farm is not afforded the insulation provided to Micone under 

the Act. 

The second issue raised on appeal is whether the District Court properly prioritized the insurance policies in 

question by finding State Farm the primary insurance carrier 
and Guaranty National the excess insurance carrier. The crux 

of the issue is determined by the clauses utilized in the 

insurance carriers' respective policies. See ~iberty Mutual 

Ins. Co. v. United States ~idelity & Guaranty Co. (D.C.Mt. 

1964), 232 F.Supp. 76. 

Guaranty National's insurance included an "excess 

insurance" clause. It read as follows: 

With respect to a hired automobile, or a non-owned 

automobile, this insurance shall be 

excess insurance over any other valid and collectible insurance available to the insured. (~mphasis 

ours. ) 

An excess insurance clause provides that the primary 

insurance must be exhausted before the excess coverage can be 

reached. 

In ~ountain States Mutual Casualty Co. v. ~rnerican 

Casualty Co. (1959), 135 Mont. 475, 342 P.2d 748, we established the applicable rule regarding excess and primary 

coverage where one insurance company was an additional omnibus insured under a personal insurance policy of an employee. 

In Mountain States, the McBee Company loaned a truck it owned 

to the ~ilands Golf Club. The McBee Company had an insurance 

policy issued by Mountain States which contained an omnibus 

clause similar to the State Farm clause in question. The 

policy contained pro rata coverage in its other insurance 

clause as did the State Farm policy. The American Casualty 

policy also contained an excess insurance clause for 

non-owned automobiles similar to the clause included by 

Guaranty National in the present case. An employee of 

Hilands Golf Club injured a third party while driving the 

truck in the course and scope of his employment. Hilands 

Golf Club was sued by the injured party. A declaratory 

judgment action was brought to determine priority of coverage 

between the two insurance companies. We held that American 
Casualty, as the employer's insurance company, was the 

excess insurer while Mountain States, as the truck owner's 

insurance company, was the primary insurer. 

In Mountain States, 135 Mont. at 482, 342 P.2d at 751, 

we held: 

. . . where the owner of a . . . [car] has a policy 

-- with an omnibus clause and the additional insured 

also has a nonownership policy which provides that 

it shall constitute excess coverage -- over and above, 

any other valid, collectible insurance, the owners 

insurer has the primary liability. (Parenthetical 

inserts omitted; emphasis ours.) 

See also American Surety Co. of N.Y. v. Canal Ins. Co. (4th 

~ir. 1958), 258 F.2d 934, and Aetna Casualty & Surety Co. v. 

Buckeye union Casualty Co. (1952), 157 0hio St. 385, 105 

State Farm, however, argues that under its "other 

insurance" clause its policy provided for excess insurance 

coverage only. The clause read as follows: 

. . . if the insured has other insurance against 

liability or loss covered by this policy, the 

company shall not be liable for a greater proportion of such liability or loss than the applicable 

limit of liability bears to the total applicable 

limit of liability of all collectible insurance 

against such liability or loss. (Emphasis ours.) 

Further, in ~ountain States, 342 P.2d at 752, we stated 

that where there is a nonownership clause with an excess 

provision--such as in the Guaranty ~ational policy--it does 

not constitute "other insurance" as State Farm contends. 

 his was so in ~ountain States even though the primary 

insurer had a pro rata clause. Moreover, the insurance 

provided for in Guaranty National's excess clause would not 

become available until the primary policy coverage was 

exhausted. 
We hold that the District Court did not err when it 

found State Farm the primary insurance carrier and Guaranty 

National the excess insurance carrier under the rationale we 

set forth in Mountain States. 

The last issue raised on appeal is whether Guaranty 

National acted as a volunteer when it negotiated the 

settlement with the plaintiff's in the original action. 

On the eve of the last day of trial, Guaranty National 

settled the case. At that time, State Farm had been joined 

in ~utte-silver Bow's defense. State Farm argues that 

because it did not participate in the settlement, Guaranty 

National acted as a volunteer and thus, had no subrogation or 

indemnification rights from State Farm. 

State Farm and Guaranty ~ational were, at the time of 

the settlement, contractually obligated to defend the 

interests of Butte-Silver Bow--not merely the interests of 

the individual insurance companies. In Montana, the duty to 

settle is a "fidiciary duty running from the insurer to the 

insured" under the insurance policy. Klaudt v. link (1983), 

202 Mont. 247, 250, 658 P.2d 1065, 1066. "In determining 

whether to settle, the insurer must give the insured's 

interest as much consideration as it gives its own interest." 

~ibson v. Western ire Ins. Co. (1984), 210 Mont. 267, 275, 

682 P.2d 725, 730. 

State Farm conceded that Guaranty ~ational settled the 

case due to the insistence of ~utte-silver Bow, the insured. 

Further, State Farm, in response to Guaranty National's 

request for admissions, admitted that it had knowledge of the 

settlement conference in question. As counsel, Guaranty 

~ational was bound by a fiduciary duty to settle the case and 

will not now be penalized for fulfilling its contractual and 

fiduciary obligations by deeming it a volunteer. Guaranty 

National, as the excess insurer, is entitled to 
indemnification and subrogation by State Farm, the primary 

Insurer. 

We affirm in this case that State Farm is the primary 

insurer and that Guaranty National is the excess insurer and 

remand for a resolution of issues pending before the District 

Court. 

We Concur: