No. 12491
I N THE SUPREME COURT O THE STATE O MONTANA
F F
1973
STONEWALL INSURANCE COMPANY,
a corporation,
P l a i n t i f f and A p p e l l a n t ,
JOHN L. WEST, STATE F R M T A
AM UU L
AUTOMOBILE INSURANCE COMPANY,
FREDERICK W. BERGER and RAYMOND EISENZIMER,
Defendants and Respondents.
Appeal from: D i s t r i c t Court of t h e Eighth J u d i c i a l D i s t r i c t ,
Honorable Paul G . H a t f i e l d , Judge p r e s i d i n g .
Counsel of Record :
For A p p e l l a n t :
Cure and Borer, G r e a t F a l l s , Montana
John F. Lynch argued, Great F a l l s , Montana
For Respondents:
D z i v i , Conklin, Johnson and Nybo, Great F a l l s ,
Montana
Dennis McCaff e r t y argued, Great Fa 11s , Montana
Submitted: September 1 0 , 1973
Decided : SEP 2 7 1973
Filed: S P 2 7 1973
E
M r . J u s t i c e Frank I . Haswell d e l i v e r e d t h e Opinion of t h e Court,
T h i s i s a d e c l a r a t o r y judgment a c t i o n t o determine coverage
under an automobile l i a b i l i t y i n s u r a n c e p o l i c y brought i n t h e
d i s t r i c t c o u r t of Cascade County, b e f o r e t h e Hon. Paul G . Hat-
field. The c a s e was submitted on an agreed s t a t e m e n t of f a c t s .
The d i s t r i c t c o u r t g r a n t e d summary judgment f o r a l l d e f e n d a n t s ,
h o l d i n g t h a t t h e p o l i c y provided coverage. P l a i n t i f f appeals
from t h a t judgment.
The accident- i n q u e s t i o n occurred about one and one-half m i l e s
s o u t h of Great F a l l s , Montana, on October 6 , 1968, when a v e h i c l e
d r i v e n by defendant John L. West c o l l i d e d headon w i t h a c a r d r i v e n
by defendant F r e d e r i c k W. Berger i n which defendant Raymond
Eisenzimer was a passenger.
k t t h e time of t h e a c c i d e n t defendant West had an automobile
l i a b i l i t y i n s u r a n c e p o l i c y w i t h p l a i n t i f f Stonewall I n s u r a n c e
Company p r o v i d i n g b o d i l y i n j u r y and p r o p e r t y damage coverage;
defendant Berger had an automobile i n s u r a n c e p o l i c y w i t h defendant
S t a t e Farm Mutual Automobile I n s u r a n c e Company. Following t h e
a c c i d e n t S t a t e Farm p a i d f o r damages s u f f e r e d by Berger and
all
Eisenzimer ancl/made c l a i m s f o r reimbursement from defendant West.
P l a i n t i f f Stonewall d e c l i n e d t o provide coverage f o r defendant
West w i t h r e s p e c t t o t h e a c c i d e n t .
The v e h i c l e defendant West was d r i v i n g a t t h e time of t h e
a c c i d e n t belonged t o Ralph Ward, a l i c e n s e d used c a r d e a l e r ,
who o p e r a t e d an automobile s a l e s agency and r e p a i r shop. Ward
had given defendant West permission t o d r i v e i t on a demonstra-
t i o n r i d e w i t h a view toward i n t e r e s t i n g him i n purchasing i t .
Defendant West's i n s u r a n c e p o l i c y w i t h p l a i n t i f f Stonewall con-
t a i n s t h e f o l l o w i n g coverage e x c l u s i o n :
"c
() This insuring agreement does not apply:
*
"* 9~ (2) to any action arising out of the
operation of an automobile sales agen2, re-
p.---- -
pair shop, service station, storage garage
or public parking place". (Emphasis added) .
The single issue presented for review is: Does this policy
exclusion preclude coverage for the accident in question?
Stonewall's contention is that the actual reason the car
was being driven by West was for demonstration purposes inci-
dent to the sale and purchase of an automobile. Demonstrating
automobiles is a function of an automobile sales agency, and
therefore within the exclusionary provisions of Stonewall's
insuring agreement.
Stonewall further contends it is not necessary that the
automobile sales agency be that of insured. Stonewall argues
that because West was using the automobile for demonstration
purposes for the ultimate benefit of Ward, the car salesman
and owner, policy reasons dictate that Ward should provide
insurance coverage for accidents which arise our of the opera-
tion of his automobile sales agency.
Stonewall's position is a minority view. State Farm
Automobile Insurance Co. v. Sampson, 305 F.Supp. 50, aff'd
428 F.2d 475. Such interpretation, excluding a "test drive"
situation, would create a gap in the insured's personal coverage.
To permit such an exclusion would be a strained construction
of the phrase "operation of an automobile sales agency". The
majority rule, limiting the exclusionary clause to situations
where the insured was using the non-owned automobile in an
automobile business of his own, is the better reasoned rule.
Helmich v. Northwestern Mutual Insurance Co., 376 F.2d 420;
United States Fidelity & Guaranty Co. v. Dixie Auto Ins. Co.,
292 F,Supp. 554, aff'd 403 F.2d 717; Caster v. Motors Insurance
Corporation, 28 Ill.App.2d 363, 171 W.E.2d 425.
In interpreting policies of insurance the courts resolve
uncertainties and ambiguities in the policy against the insurer,
s i n c e i t i s r e s p o n s i b l e f o r t h e language i n t h e c o n t r a c t .
S e c t i o n 13-720, R.C.M. 1947; S t . Paul F i r e & Marine I n s . Co.
v. Thompson, 150 Mont. 182, 433 P.2d 795; Johnson v. C o n t i n e n t a l
Cas.Co., 127 Mont. 281, 263 P.2d 551. Here, a r e a d i n g of t h e
excl.usion i n q u e s t i o n p r e s e n t s an u n c e r t a i n t y c r e a t e d by t h e
language used when a p p l i e d t o t h e f a c t s i n t h e p r e s e n t c a s e .
11
The e x c l u s i o n a r y p r o v i s i o n i s ambiguous a s t o whose automobile
s a l e s agency" t h e p o l i c y p r o v i s i o n s r e f e r .
The g e n e r a l r u l e i s t h a t e x c l u s i o n a r y c l a u s e s r e l a t i n g t o
t h e b u s i n e s s u s e o f non-owned v e h i c l e s a r e designed t o r e q u i r e
an i n s u r e d who u s e s non-owned v e h i c l e s i n f u r t h e r a n c e of h i s
b u s i n e s s t o seek a d d i t i o n a l coverage f o r t h e added r i s k s i n c i -
d e n t t o such u s e . The p e r t i n e n t i n q u i r y i n i n t e r p r e t i n g a u t o -
mobile b u s i n e s s e x c l u s i o n c l a u s e s i n harmony w i t h t h e i r g e n e r a l
purpose i s determing t h e r e l a t i o n s h i p , i f any, between t h e
i n s u r e d ' s u s e of a non-owned automobile and some b u s i n e s s o r
o c c u p a t i o n a l i n t e r e s t of t h e i n s u r e d . 7 Cum.Supp., Appleman-
I n s u r a n c e Law and P r a c t i c e - 44455, pp. 510,513 (1972).
I n t h e p r e s e n t c a s e t h e i n s u r e d had no b u s i n e s s i n t e r e s t i n
t h e p a r t i c u l a r automobile s a l e s agency. The i n s u r e d was merely
d r i v i n g a v e h i c l e owned by i t . Such p r o v i s i o n should n o t b e
c o n s t r u e d t o c r e a t e an u n a n t i c i p a t e d gap i n t h e i n s u r e d ' s lj-a-
b i l i t y coverage by r e q u i r i n g t h e i n s u r e d t o t e s t d r i v e automo-
biles a t his peril.
W hold t h a t t h e p o l i c y e x c l u s i o n a p p l i e s only where t h e
e
i n s u r e d o p e r a t e s an automobile s a l e s agency o r t h e o t h e r e n t e r -
p r i s e s named i n t h e e x c l u s i o n a r y c l a u s e .
The summary judgment of t h e d i s t r i c t c o u r t i s a f f i r m e d .
Justice,.