NO. 8 8 - 2 4 8
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: ~istrictCourt of the ~ i f t h ~udicial~istrict,
In and for the County of Jefferson,
The Honorable Frank ~ a v i s ,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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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 ~ i f t hJudicial 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 ~ i c o n e ,a ~utte-silverBow
employee?
2. id the District Court properly prioritize insurance
policies by finding State Farm the primary insurance carrier
and Guaranty ~ationalthe 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. ~ i l f o r d 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-silverBow 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 ~ i l f o r dHibbs
estate, brought an action against Butte-silver Bow and ~ i c o n e
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-SilverBow 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 ~ i c o n e was acting in his capacity as a
~utte-SilverBow 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, ~ i c o n e 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 ~ i r .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, 2 3 3 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 govern-
ment 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 Dis-
trict 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 ~ibertyMutual
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 collect-
ible 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 estab-
lished the applicable rule regarding excess and primary
coverage where one insurance company was an additional omni-
bus insured under a personal insurance policy of an employee.
In Mountain States, the McBee Company loaned a truck it owned
to the ~ilandsGolf 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 -- above,
over and
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
~ i r .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 propor-
tion 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 ~ountainStates, 342 P.2d at 752, we stated
that where there is a nonownership clause with an excess
provision--such as in the Guaranty ~ationalpolicy--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 ~ationalwere, 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."
~ i b s o nv. 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
~ationalwas 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: