No. 83-357
IN THE SUPREME COURT OF THE STATE OF MONTANA
1984
CYNTHIA FITZGERALD,
Plaintiff and Respondent,
-vs-
THE WESTERN FIRE INSURANCE CO.,
Defendant and Appellant.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable John M. McCarvel, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Garlington, Lohn & Robinson; Paul C. Meismer,
Missoula, Montana
For Respondent :
Marra, Wenz, Johnson & Hopkins; David A. Hopkins,
Great Falls, Montana
Submitted on Briefs: December 15, 1983
Decided: April 16, 1984
Filed: .\ ;J 1.: , :($84
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of
the Court.
Appellant raises this appeal from a summary judgment
granted to the plaintiff. The Eighth Judicial District
Court, Cascade County, found Western Fire Insurance Company
liable to pay punitive damages on its automobile liability
insurance coverage. We affirm.
Appellant issued an automobile insurance policy to
John or Grace Dawson. On November 10, 1977, respondent
suffered injuries as a result of an accident involving
Michael Dawson, a permissive driver of the Dawson's insured
vehicle. On July 13, 1981, a jury found Dawson guilty of
negligently driving the automobile and thereby causing
respondent's injuries. Trial testimony indicated Dawson, at
the time of the accident, had consumed a considerable
quantity of alcohol and was traveling at an extremely high
rate of speed in the Missoula, Montana, city limits.
On these facts, the jury awarded respondent, in
addition to the general and special damages, $5,000 in
punitive damages. Appellant paid all of the damages awarded
by the jury except the punitive damages. Respondent then
brought this action to recover the punitive damages from
appellant. Appellant answered, denying that its liability
insurance coverage provided payment for punitive damages.
Following a hearing, the court granted summary judgment for
respondent.
Appellant presents two issues on appeal:
(1) Whether the insurance policy language precludes
payment for punitive damages;
(2) whether public policy in the punitive damage
statute precludes insurance coverage against punitive
damages.
A p p e l l a n t ' s f i r s t i s s u e f o c u s e s o n t h e l a n g u a g e of t h e
i n s u r a n c e p o l i c y i s s u e d t o t h e Dawsons. The l a n g u a g e r e a d s :
"The W e s t e r n F i r e I n s u r a n c e Company ...
[algrees ... [ t l o p a y on b e h a l f o f t h e
i n s u r e d , a l l sums which t h e i n s u r e d s h a l l
become l e g a l l y o b l i g a t e d t o p a y a s
damages b e c a u s e o f : a . b o d i l y i n j u r y ; b.
p r o p e r t y damage; a r i s i n g o u t o f t h e
ownership, maintenance o r use of t h e
automobile."
Appellant contends this language permits payment of
c o m p e n s a t o r y damages, e i t h e r s p e c i a l o r g e n e r a l , f o r b o d i l y
injury or p r o p e r t y damage resulting from the use of the
vehicle. However, appellant maintains t h a t this language
fails to provide coverage for punitive damages. We
disagree.
Appellant's argument centers on making a clear
distinction between compensatory damages and punitive
damages. This distinction, it contends, comes from the
origin and p u r p o s e of t h e damages. C o m p e n s a t o r y damages
r e s u l t from a c t u a l l o s s e s r e s u l t i n g from b o d i l y i n j u r i e s o r
p r o p e r t y damages. P u n i t i v e damages a r i s e o u t o f specific
c o n d u c t deemed u n d e s i r a b l e a n d t h e r e b y r e q u i r e p u n i s h m e n t o f
the wrongdoer and make an example of him. Appellant
contends, the contract language read in light of this
d i s t i n c t i o n p r o v i d e s no c o v e r a g e f o r p u n i t i v e damages. We
r e j e c t t h i s argument.
The Oregon Supreme Court in Harrell v. Travelers
Indemnity Co. (1977), 279 Or. 199, 567 P.2d 1013,
i n t e r p r e t e d insurance c o n t r a c t language very s i m i l a r t o t h e
i n s t a n t c a s e and f o u n d c o v e r a g e f o r p u n i t i v e damages. It
concluded that the majority of courts held that such
language required coverage for the insured. It reasoned
t h a t t h e l a n g u a g e i n t h e c o n t r a c t was a m b i g u o u s and t h e r e b y
s u b j e c t t o i n t e r p r e t a t i o n s a g a i n s t t h e i n s u r a n c e company:
"[wle hold t h a t such p r o v i s i o n s were
ambiguous, a t t h e l e a s t , s o a s t o r e q u i r e
t h e r e s o l u t i o n of any r e a s o n a b l e d o u b t s
a g a i n s t t h e i n s u r a n c e company; t h a t upon
reading the policy provisions a s set
f o r t h a b o v e , and i n t h e a b s e n c e o f a n y
express exclusion of liability for
p u n i t i v e damages, a p e r s o n i n s u r e d by
s u c h a p o l i c y would h a v e r e a s o n t o
s u p p o s e t h a t he would be p r o t e c t e d
a g a i n s t l i a b i l i t y f o r p u n i t i v e damages, a
p e r s o n i n s u r e d by s u c h a p o l i c y would
h a v e r e a s o n t o s u p p o s e t h a t h e would b e
protected against l i a b i l i t y for ' a l l
s u m s ' w h i c h t h e i n s u r e d m i g h t become
' l e g a l l y o b l i g a t e d t o p a y ' and t h a t t h e
t e r m ' d a m a g e s ' would i n c l u d e a l l damages
i n c l u d i n g p u n i t i v e damages w h i c h became,
by judgment, a 'sum' t h a t h e became
' l e g a l l y obligated t o pay.'
" D e f e n d a n t i n s u r a n c e company c o u l d h a v e
removed this ambiguity easily by
i n c l u d i n g an e x p r e s s e x c l u s i o n from
l i a b i l i t y f o r p u n i t i v e damages b u t
apparently chose not t o do so. ..'there
is n o t h i n g i n t h e i n s u r i n g c l a u s e t h a t
would f o r e w a r n a n i n s u r e d t h a t s u c h was
t o be t h e i n t e n t of t h e p a r t i e s , ' if
i n d e e d , s u c h was t h e i n t e n t o f t h e
i n s u r a n c e company." 567 P.2d a t 1 0 1 5
I n t h e i n s t a n t c a s e , a p p e l l a n t c r e a t e s an ambiguity i n
the language by contending that we must read into the
l a n g u a g e t h e d i s t i n c t i o n between p u n i t i v e and compensatory
damages. Such a m b i g u i t y r e q u i r e s a p p l i c a t i o n o f the often
expressed rule: "[wlhere an ambiguity in an insurance
contract exists, every doubt should be resolved against
insurer." Fitzgerald v. Aetna I n s u r a n c e Co. ( 1 9 7 8 ) , 176
Mont. 1 8 6 a t 1 9 1 , 577 P.2d 370 a t 372.
The second issue presented by appellant, whether
public policy in the punitive damage statute precludes
i n s u r a n c e c o v e r a g e a g a i n s t p u n i t i v e d a m a g e s , was a d d r e s s e d
in First Bank (N.A.) Billings v. Transamerica Insurance
Company (Mont. 1984), No 83-299, P.2d I -
St.Rep. . I n t h a t c a s e , on c e r t i f i e d q u e s t i o n s from t h e
United S t a t e s D i s t r i c t Court, w e found "no e x p r e s s e d p u b l i c
policy by the legislature on the subject of insurance
c o v e r a g e f o r p u n i t i v e damages" p . 6. W e went on t o h o l d
t h a t p r o v i d i n g c o v e r a g e of p u n i t i v e damages is n o t c o n t r a r y
t o public policy. Because t h i s o p i n i o n d e a l s i n d e t a i l w i t h
t h e i s s u e s r a i s e d by a p p e l l a n t , w e n e e d n o t make a n y f u r t h e r
comment.
W t h e r e f o r e h o l d t h a t t h e l a n g u a g e of t h e i n s u r a n c e
e
c o n t r a c t p r o v i d e s f o r c o v e r a g e o f p u n i t i v e damages a n d t h a t
no public policy in Montana precludes payment of these
damages b y a n i n s u r a n c e c a r r i e r . W e a f f i r m t h e judgment o f
t h e D i s t r i c t Court.
W e concur:
?&8.k&
Chief J u s t i c e
Justice
f
Mr. Justice Daniel J. Shea dissenting:
I dissent. For years and years and years parties to
insurance contracts have operated on the assumption that
language such a s that interpreted here does not cover a claim
.
for punitive or exemplary damages. We should give some
weight to that practice in interpreting the contract
language, for surely damages to punish the insured defendant
were not within the contemplation of the parties.
Damages are for punishment or to make an example of the
defendant because of his conduct. While punitive damages as
part of an insurance contract may not be contrary to public
policy, I do not believe we should expand the interpretation
of the contractual language to reach this result. Here the
damages the insurance company agreed to pay were damages
related to bodily injury or property damage. But the
insurance company is here forced to pay additional damages
because its insured was drunk and inflicted the bodily injury
while he was drunk. The punitive damages are not to
compensate for bodily injury or property damage but to punish
the defendant. Clearly, they are not covered by the
insurance contract.