State Farm Mutual Auto. Ins. Co. V.

No. 86-03
IN THE SUPREME COURT OF THE STATE OF MONTANA
1986

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Plaintiff and Respondent,

GRAHAM STUART TAYLOR, DAVID ALLEN
CALLAWAY, SUSAN JOHANNA HANSON,
Personal Representative of the Estate
of SCOTT ERLAND HANSON, Deceased and
TIMOTHY E. MOSS,
Defendants and Appellants.
and
STATE FARM FIRE AND CASUALTY COMPANY,

SUSAN JOHANNA HANSON, Personal Representative
of the Estate of SCOTT ERLAND HANSON, Deceased,
and TIMOTHY E. MOSS,
Defendants and Appellants.

APPEAL FROM: District Court of the Eighteenth Judicial District,
In and for the County of Gallatin,
The Honorable Thomas A. Olson, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Poore, Roth & Robinson; C. Richard Anderson and Robert
Poore both argued, Butte, Montana
For Respondent:
Morrow, Sedivy & Bennett; Terry Schaplow argued,
Bozeman, Montana

Submitted: July 3 0 1 1986
Decided: September 12, 1986

Filed:
Mr. Justice Fred J. Weber delivered the Opinion of the Court.

Appellants were involved in an automobile accident. The
District Court for the Eighteenth Judicial District granted
the motion of State Farm Fire and Casualty Company (State
Farm) for summary judgment. It held that State Farm insurance
policies held by Mr. Taylor and Mr. Hanson did not provide
uninsured motor vehicle coverage for this accident. We
reverse.
The issues are:
1. Did the State Farm policies provide uninsured motor
vehicle coverage under the circumstances of this case?
2. Is State Farm absolved of liability because the
insured violated the "no consent to settlement" exclusion of
the insurance policies?
Mr. Hanson and Mr. Taylor were insured under State Farm
automobile liability insurance policies. Mr. Taylor was
driving a vehicle in which Mr. Hanson and Mr. Callaway were
passengers. Their vehicle was rearended at a high rate of
speed by Mr. Moss, who was driving a truck owned by yet
another person. As a result of the accident, Mr. Hanson died
and Mr. Callaway and Mr. Taylor were severely injured. Mr.
Callaway, Mr. Taylor, and Mr. Hanson's family sued Mr. Moss,
and judgments were rendered. The vehicle Mr. Moss was driv-
ing was uninsured, but he personally had liability insurance.
The victims settled with Mr. Moss' insurer, which paid to his
policy limit, but the judgments remain partially unsatisfied.
In this action, State Farm obtained a judgment that it
was not required to apply Mr. Taylor's and Mr. Hanson's
uninsured motor vehicle coverage to the unsatisfied portions
of the judgments. The District Court held that the State
Farm uninsured motor vehicle coverage did not apply where the
offending vehicle was uninsured but its driver had insurance.

Did the State Farm policies provide uninsured motor
vehicle coverage under the circumstances of this case?
Uninsured motor vehicle insurance coverage must be
offered by insurers in Montana under § 33-23-201, MCA:

No automobile liability . . .
policy . . .
for
bodily injury ... arising out of the ownership,
maintenance, or use of a motor vehicle shall be
delivered ... in this state, with respect to any
motor vehicle registered . . .in this state,
unless coverage is provided [in limits of $25,000
per person as set forth in S 61-6-103, MCA,] for
the protection of persons insured . . .
who are
legally entitled to recover damages from owners or
operators of uninsured motor vehicles ...
There is no statutory definition of uninsured motor vehicle.
Montana also requires by statute that vehicles registered and
operated in the state have liability insurance coverage.
Section 61-6-301, MCA.
The State Farm policy provision at issue is:

Sec. 111 - Uninsured Motor Vehicle - Coverase U.
We will pay damages for bodily injury an insured is
leqally entitled to collect from the owner or
driver- of an uninsured motor vehicle. The bodily
injury must be caused by accident arising out of
the operation, maintenance or use of an uninsured
motor vehicle.
Uninsured Motor Vehicle--means:
1. a land motor vehicle, the ownership, main-
tenance or use of which is:
a. not insured or bonded for bodily injury
liability at the time of the accident . . .
State Farm argues that the plain meaning of the policy
is that when the use of an offending motor vehicle is insured
(as was Mr. Moss' use of the offending vehicle) , the unin-
sured motorist coverage does not apply. State Farm has cited
a number of cases in which it has been held that a vehicle is
not an uninsured motor vehicle for purposes of insurance
coverage if either the driver or the owner has insurance.
See, e.g. Sorbo v. Mendiola (Minn. 1985), 361 N.W.2d 851;
Stordahl v. Government Emp. Ins. Co. (Alaska 1977), 564 P.2d
63; Citizens Ins. Co. of America v. Povey (Mich. App. 1982) ,
319 N.W.2d 341. In none of these cases was the policy provi-
sion the same as the provision in this case. Since we con-
clude the language of this policy is critical, the cases
cited by State Farm are not decisive.
The appellants contend that under the policy, a motor
vehicle is uninsured if the ownership, maintenance or use is
not insured for bodily injury. In this instance, the owner-
ship was not insured. As a result there is a reasonable
contention that under the express provision of the policy,
because the ownership was not insured for bodily injury, this
is an uninsured motor vehicle. The first sentence of the
provision says that State Farm will pay damages an insured is
legally entitled to collect from the owner or driver of an
uninsured motor vehicle. If this is an uninsured motor
vehicle because of the absence of insurance covering owner-
ship, then the first sentence requires State Farm to pay its
uninsured coverage because the driver of the uninsured motor
vehicle caused the damages.
The Washington courts have examined an insurance policy
provision comparable to this one. That policy defined an
uninsured motor vehicle as one "with respect to the owner-
ship, maintenance or use of which there is . . . no bodily
injury insurance . . . " Finney v. Farmers Ins. Co. (Wash.
App. 1978), 586 P.2d 519, aff'd, 600 P.2d 1272. The court
held that the policy was ambiguous and the provision was
subject to more than one interpretation because of the use of
the disjunctive "or," and that the clause could be inter-
preted to mean that a "vehicle is uninsured if there is no
insurance as to either its ownership - its maintenance -
or or
its use." Finney, 586 P.2d at 526. We agree with that
rationale.
An ambiguous provision in an insurance policy is
construed against the insurance company. A clause
in an insurance policy is ambiguous when different
persons looking at it in the light of its purpose
cannot agree upon its meaning. [citation omitted.]
If the language is unambiguous, and subject to only
one meaning, there is no basis for the interpreta-
tion of policy coverage under the guise of
ambiguity.
Bauer Ranch v. Mountain W. Farm Bur. MU^. Ins (Mont* 1985)

695 P.2d 1307, 1309, 42 St.Rep. 255, 257. This policy does
not clearly state whether it provides uninsured motor vehicle
coverage when the driver is insured but the ownership of the
vehicle is not. We conclude that the policy is ambiguous.
We therefore interpret the policy to provide coverage. We
hold that the State Farm policies provided uninsured motor
vehicle coverage under the circumstances of this case.

Is State Farm absolved of liability because the insured
violated the "no consent to settlement" exclusion of the
insurance policies?
State Farm argues that even if this Court concludes the
insurance policies provided coverage under the uninsured
motor vehicle provisions, there is no insurance coverage
because the appellants settled with Mr. Moss' insurance
company without State Farm's consent. State Farm cites the
policy provision that:

THERE IS NO COVERAGE:
1. FOR ANY INSURED WHO, WITHOUT OUR WRITTEN CON-
SENT, SETTLES WITH ANY PERSON OR ORGANIZATION WHO
MAY BE LIABLE FOR. THE BODILY INJURY.
This Court has held that an insurance policy clause which
prohibited the insured from obtaining judgment against
liable parties is void. In Dominici v. State Farm Mutual
Automobile Ins. Co. (1964), 143 Mont. 406, 408 and 411-12,
390 P.2d 806, 807 and 809, this Court stated:

The insurance contract further contained an exclu-
sion whereby the above-mentioned coverage would not
apply "(a) to bodily injury to an insured
with respect to which such insured, his legal
. . .
representative or any person entitled to payment
under this coverage [if he or they] shall, without
written consent of the company, make any settlement
with or prosecute to judgment any action against
any person or organization who may be legally
liable therefor; . . ."
(Emphasis supplied.)

The problem to be resolved here is what effect, if
any, did the judgments taken by each plaintiff have
upon the rights and obligations of the insured and
insurer in light of the "no judgment" clause of the
insurance contract? State Farm contends that no
action can now lie against them because there has
not been full compliance with the terms of the
policy. Plaintiffs rely upon the prohibition
contained in R.C.M. 1947, S 13-806. This statute
states:
"Every stipulation or condition in a contract by
which any party thereto is restricted from enforc-
ing his rights under the contract, by the usual
proceedings in the ordinary tribunals . . .
is
void. "
It is plaintiffs' position that State Farm agreed
to pay all sums plaintiffs were legally entitled to
recover (up to and including the limits of the
policy coverage) from an uninsured motorist; and,
the "no judgment" clause would restrict plaintiffs
from enforcing these rights. Therefore, this
clause in the policy would be void under section
13-806.
We hold with the contentions of plaintiffs. ...
State Farm argues that the no-consent-to-settlement
clause does not restrict insureds' access to the courts and
thus does not violate the Dominici rule. Instead, State Farm
argues, it protects the insurer's right of subrogation. It
is technically correct that the holding in Dominici was that
the 'no judgment' provision unlawfully restricted the plain-
tiff's access to the courts. A 'no settlement' clause does
not directly limit access to the courts. However, the ra-
tionale in Dominici was that the 'no judgment' clause would
restrict the insureds from enforcing their rights under the
insurance contract.
"This Court does not support provisions placed on unin-
sured 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. (~ont.

this Court nullified an insurance policy provision which
would have denied uninsured motor vehicle coverage where the
uninsured driver did not have the insured's consent to oper-
ate the vehicle. We conclude that enforcement of the
no-consent-to-settlement clause here would result in a back-
ing away from the mandatory offering requirement of the
uninsured motor vehicle statute. It would also place control
of efforts to collect from the responsible party in the hands
of the insurer.
The central purpose of the clause is to provide unin-
sured motor vehicle coverage for which the insured has paid a
premium. The insurance company is obligated to furnish
uninsured motor vehicle coverage, whether it can obtain
subrogation or not. While we do not deny the insurer's right
to subrogation, we will not allow the right to subrogation to
negate the required offering of uninsured motor vehicle
coverage. Under these circumstances, we conclude that the
no-consent-to-settlement clause is void.
 We therefore reverse the decision of the District Court.

c
We Concur:
,/

Chief Justice
Mr. Justice John C. Sheehy, specially concurring:

I concur in the foregoing opinion and wish to add other
reasons for my concurrence in the result.
There are two types of uninsured motor vehicle statutes.
One type is called the mandatory insured motorist statute,
wherein it is required that every motor vehicle policy of
insurance includes such coverage. Seventeen states have this
type of coverage. The other type of uninsured motorist
coverage is the "mandatory offerings statutes" of which
Montana's statute is typical. According to 1 Widiss,
Uninsured - Underinsured Motorist Insurance
and $ 2.5 (2d ed.
1985), there are thirty-three states which mandate that
uninsured motorist coverage be offered in every policy of
liability insurance in the state.
The second thing to note is that there is a significant
difference between most of the statutes requiring uninsured
motorist coverage and the statute that is provided in
Montana. Most of the statutes of the other states refer to
the "uninsured motorist" but Montana's statute refers to the
uninsured motor vehicle. The pertinent language in §

33-23-201, MCA is:
No automobile liability ...
policy shall be
delivered or issued for delivery in this state
...unless coverage is provided therein or
supplemental thereto ...
for the protection of
persons insured thereunder who are legally entitled
to recover damages from owners or operators of
uninsured motor vehicles because of bodily injury,
sickness or disease, including death, resulting
therefrom. (Emphasis supplied.)
The term "uninsured motor vehicl.esW is unqualified in
the statute, is unambiguous, and needs no interpretation. It
is a matter of public policy that such coverage be
mandatorily offered and if the coverage offered is less than
what is mandated by our statute, the public policy
requirement has not been met. Section 33-23-201, MCA.
An example of a different kind of uninsured motorist
statute can be found in Kansas. There, the provisions of
Kan. Stat. Ann. 5 40-284(a) (Supp. 1985) state:
No automobile liability insurance policy
shall be delivered or issued for delivery in this
..
.
state ... unless the policy contains or has
endorsed thereon, a provision . .
. for payment of
part or all sums which the insured or the insured's
legal representative shall be legally entitled to
recover as damages from the uninsured owner or
operator of the motor vehicle because of bodily
injury, sickness or disease, including death,
resulting therefrom, sustained by the insured,
caused by accident and arising out of ownership,
maintenance or use of such motor vehicle .. .
(Emphasis supplied.)
It requires no great intellectual skill to determine
that the Kansas statute is directed to the status of the
driver or operator as uninsured, whereas the Montana statute
is directed to the status of the uninsured motor vehicle.
The difference is critical in this case, because although the

- of
use the uninsured motor vehicle in this case was insured
by the driver's separate insurance policy, and thus would
qualify under the Kansas statute, the Montana statute has no
reference to ownership, maintenance or use and such terms
cannot be used to diminish the mandated offered coverage that
Montana requires under 5 33-23-201, MCA.
As to the application of the statute therefore, I would
hold in this case that under a Montana statute, if the motor
vehicle itself is uninsured, then the uninsured motor vehicle
coverage of the other vehicles attaches and coverage is
extended to its insureds under the uninsured motor vehicle
coverage.
There are other results commanded by our decision here
which are not discussed for the reason that they have not yet
been before the Court. For reasons that should appear clear
to counsel on remand, it seems to me that the medical
payments coverage should be reduced by the amount recovered
under the liability insurance policy that was issued to the
driver to the extent that such reduction does not reduce the
recovery from State Farm below the sum of $55,000. In other
words, the $100,000 received from the insurance on the driver
would be used to reduce the medical payments coverage in this
State Farm policy.

Q &. B-k,
& Justice
Mr. Justice L. C. Gulbrandson, dissenting.

I respectfully dissent.
The majority cite only a Washington Supreme Court
opinion wherein a comparable insurance policy provision was
held to be ambiguous. Finney v. Farmers Ins. Co. (wash.

The majority agreed with the rationale expressed
therein, and I perhaps would do the same if this case were to
be decided under Washington law. The author of Finney
clearly indicated that that opinion does not cover the
factual situation before this Court:
... nor are we confronted with a
factual situation in which the only
responsible party was insured under a
policy which extended coverage for the
accident in question. Here there are two
responsible parties, one of which was
uninsured, the other underinsured. The
use of the word "or" is disjunctive. 1A
C. Sands, Sutherland Statutory
Construction $ 21.14 (4th ed. 1972).
Childers v. Childers, 89 Wash.2d 592, 575
P.2d 201 (1978). We are persuaded that
the legislature intended to provide
uninsured motorist protection where
either one of the responsible parties
lacks insurance coverage. (Emphasis
added. )

Under Washington law, where the ownership
of an automobile is admitted and the
owner is a passenger, there arises a
presumption that, at the time of the
accident, the driver was operating the
vehicle as the agent or servant of the
owner. (Citing cases.) The owner is
vicariously liable for the driver's
negligence. Moffitt v. Krueger, supra;
Coins v. Washington Motor Coach Co., 34
Wash.2d 1, 208 P.2d 143 (1949).
Finney ,
Finney cited Allstate Ins. Co. v. Chastain (Fla. 1971),
251 So.2d 354, as authority for its position, but correctly
stated that in that case the uninsured owner was liable under
Florida's dangerous instrumentality doctrine.
In this case, there is no suggestion that the uninsured
owner was a responsible party and I therefore consider the
Finney citation to be inadequate authority.
The trial judge, in granting summary judgment for the
respondent, relied upon the rationale expressed in Sorbo v.
Mendiola (Minn. 1985), 361 N.W.2d 851, and stated:
I frankly have been tempted by the plight
of the defendants to hold that the
policies in question are ambiguous,
thereby granting the benefit of the doubt
to the defendants. But I find it is
sufficiently clear that the liable
person, the driver Moss, has insurance
and the defendants were not struck by an
uninsured motorist.
In my view, the policy definition of "uninsured motor
vehicle" as a land motor vehicle, the use of which is not
insured, is not ambiguous and I would affirm the order of the
trial judge.