No
No. 98-072
IN THE SUPREME COURT OF THE STATE OF MONTANA
1998 MT 329
AMERICAN FAMILY MUTUAL INSURANCE
COMPANY,
Plaintiff and Respondent,
v.
ROSS LIVENGOOD and BRENDA LIVENGOOD,
Defendants and Appellants.
APPEAL FROM: District Court of the Seventh Judicial District,
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In and for the County of Dawson,
The Honorable Dale Cox, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
Marvin L. Howe; Simonton, Howe & Schneider, Glendive,
Montana
For Respondent:
Fred E. Whisenand; Crowley, Haughey, Hanson, Toole & Dietrich,
Williston, North Dakota
Submitted on Briefs: July 16, 1998
Decided: December 30, 1998
Filed:
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__________________________________________
Clerk
Justice Karla M. Gray delivered the Opinion of the Court.
¶1. American Family Mutual Insurance Company (American Family) filed a
declaratory judgment action in the Seventh Judicial District Court, Dawson County,
seeking a determination of the effect of a "nonowned automobile exclusion" in the
policy issued to its insured, Nancy Henninger (Henninger). The District Court
granted American Family's motion for summary judgment, concluding that the
"nonowned automobile exclusion" is valid and excludes coverage for Henninger in
the related negligence action commenced by Ross and Brenda Livengood (the
Livengoods). Judgment was entered accordingly, the Livengoods appeal and we
affirm.
¶2. The overall issue on appeal is whether the District Court erred in granting
summary judgment to American Family. The specific issues raised by the Livengoods
in that regard are:
¶3. 1. Whether the District Court erred in concluding that the "nonowned
automobile exclusion" in Henninger's policy applies.
¶4. 2. Whether the District Court erred in concluding that the "nonowned
automobile exclusion" in Henninger's policy does not violate Montana's public policy.
¶5. 3. Whether the District Court erred in concluding that the "nonowned
automobile exclusion" in Henninger's policy does not violate the reasonable
expectations of the insured.
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BACKGROUND
¶6. Henninger was driving a 1993 Ford van owned by her roommate, Arthur Frehse
(Frehse), on July 17, 1995, when she and the Livengoods were involved in a vehicle/
motorcycle accident. The Livengoods sustained injuries in the accident and filed a
negligence action against Henninger. Frehse and Henninger had separate automobile
liability policies with American Family. American Family defended Henninger in the
Livengoods' negligence action under the coverage afforded by the Frehse policy, but
denied coverage under the Henninger policy.
¶7. American Family subsequently filed the instant action seeking a declaration that
Henninger's policy did not obligate it to defend Henninger or pay any compensatory
damages for bodily injury recovered by the Livengoods. It contended that
Henninger's policy covered compensatory damages for bodily injury arising from
Henninger's use of her own vehicle, but expressly excluded coverage--under a
provision hereinafter referred to as the nonowned automobile exclusion--while
Henninger was operating Frehse's vehicle because Henninger and Frehse were
residents of the same household.
¶8. Both American Family and the Livengoods moved for summary judgment. The
District Court granted American Family's motion, denied the Livengoods' motion,
and entered judgment accordingly. The Livengoods appeal.
DISCUSSION
¶9. The nonowned automobile exclusion at issue in this case provides as follows:
This coverage does not apply to:
....
9. Bodily injury or property damage arising out of the use of a vehicle, other than your
insured car, which is owned by or furnished or available for regular use by you or any
resident of your household.
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The District Court determined that no genuine issue of material fact existed with regard to
Henninger and Frehse being residents of the same household and concluded that the
nonowned automobile exclusion in Henninger's policy applies. It also concluded that the
exclusion did not violate either public policy or the insured's reasonable expectations. On
those bases, the District Court granted summary judgment to American Family.
¶10. We review a district court's grant of summary judgment de novo, applying the
same Rule 56(c), M.R.Civ.P., criteria used by that court. Stutzman v. Safeco Ins. Co.
(1997), 284 Mont. 372, 376, 945 P.2d 32, 34 (citations omitted). In establishing the
propriety of summary judgment,
[t]he movant must demonstrate that no genuine issues of material fact exist. Once this has
been accomplished, the burden then shifts to the non-moving party to prove, by more than
mere denial and speculation, that a genuine issue does exist. Having determined that
genuine issues of fact do not exist, the court must then determine whether the moving
party is entitled to judgment as a matter of law. We review the legal determinations made
by a district court as to whether the court erred.
Bruner v. Yellowstone County (1995), 272 Mont. 261, 264-65, 900 P.2d 901, 903
(citations omitted).
ISSUE ONE¶11. Did the District Court err in concluding that the nonowned automobile exclusion in
Henninger's policy applies?
¶12. The Livengoods first assert that the District Court erred in granting summary
judgment to American Family because a genuine issue of material fact exists
regarding whether Henninger and Frehse were residents of the same household for
purposes of applying the nonowned automobile exception. We disagree.
¶13. American Family alleged in its complaint that, at the time of the accident,
Henninger and Frehse were residents of the same household. The Livengoods denied
that allegation in their answer. Thereafter, however, Henninger and Frehse
answered the complaint and admitted that they were residents of the same household
on the date of the accident. That admission was sufficient to meet American Family's
burden of establishing the absence of a genuine issue of material fact regarding
residency in the same household. Thus, the burden shifted to the Livengoods to come
forward with substantial evidence, not mere denial or speculation, that a genuine
issue of fact existed as to whether Henninger and Frehse were residents of the same
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household. See Bruner, 272 Mont. at 264, 900 P.2d at 903.
¶14. The Livengoods did not come forward with any evidence whatsoever, much less
substantial evidence, to controvert Henninger and Frehse's admission that they were
residents of the same household and, thereby, to raise a genuine issue of fact in that
regard. Instead, the Livengoods advanced cases from other jurisdictions setting forth
factors tending to indicate whether two persons are residents of the same household.
They advance those cases again on appeal, arguing therefrom that questions remain
as to those factors in the present case. The problem with the Livengoods' argument,
however, is that none of the cases on which they rely involve an admission by the
persons involved that they were, in fact, residents of the same household. As a result,
the questions the Livengoods raise about the duration and nature of Henninger and
Frehse's relationship, their "intentions" regarding the future and the like, are merely
speculative and are insufficient to meet their burden of raising a genuine issue of
material fact regarding whether Henninger and Frehse were residents of the same
household at the time of the accident. We conclude, therefore, that the District Court
did not err in determining that no genuine issue of material fact exists regarding
Henninger and Frehse being residents of the same household at the time of the
accident.
¶15. The Livengoods also contend that the District Court erred in interpreting the
nonowned automobile exclusion to require only that the vehicle driven by Henninger
at the time of the accident be owned by Frehse, a resident of her household, and in
determining, on that basis, that the exclusion applies. They posit that, in order for the
exclusion to apply, Frehse also must have either furnished his vehicle--or made it
available--for Henninger's "regular use." Again, we disagree.
¶16. As set forth above, the policy language at issue excludes coverage for injury
arising out of the insured's use of a vehicle "owned by or furnished or available for
regular use by you or any resident of your household." In its common usage, "or"
connotes the disjunctive, and it is used to express an alternative or give a choice of
one among two or more things. See Black's Law Dictionary 1095 (6th ed. 1990).
When a provision is written in the disjunctive, it is clear that only one of the
separately stated factors must exist. See Baldridge v. Board of Trustees (1997), 287
Mont. 53, 62, 951 P.2d 1343, 1349. Indeed, in Stutzman, we implicitly interpreted a
similarly worded exclusion of a vehicle "owned by or furnished for the regular use of
the named insured or any relative" disjunctively, requiring the insurer to establish
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only that the vehicle was owned by a relative of the named insured. Stutzman, 284
Mont. at 378, 945 P.2d at 35.
¶17. Here, the disjunctive "or" separates each alternative in the nonowned
automobile exclusion at issue. As a result, coverage clearly is excluded for injuries
arising from Henninger's use of a vehicle--other than her insured car--which is either
"owned by" or "furnished or available for regular use" by either Henninger or any
resident of her household. American Family established that Henninger was using a
vehicle owned by Frehse, a resident of her household, at the time of the accident. It
was not required to show that the separately stated alternative regarding a vehicle
furnished or made available for her regular use by a resident of her household also
was satisfied.
¶18. We hold that the District Court did not err in interpreting the policy language
or in concluding that the nonowned automobile exclusion in Henninger's policy
applies.
ISSUE TWO
¶19. Did the District Court err in concluding that the nonowned automobile exclusion in Henninger's
policy does not violate Montana's public policy?
¶20. Having rejected the Livengoods' argument that the exclusion at issue did not
apply, the District Court also rejected their contention that the nonowned automobile
exclusion in Henninger's policy violates Montana's mandatory insurance laws and is
void as against public policy pursuant to Transamerica Ins. Co. v. Royle (1983), 202
Mont. 173, 656 P.2d 820. On appeal, the Livengoods continue to rely on Royle in
contending that the District Court erred.
¶21. In Royle, a daughter sued her parents for injuries sustained while a passenger in
a car being driven by her mother, owned by her father, and insured by
Transamerica. Royle, 202 Mont. at 174, 656 P.2d at 821. The parents' insurance
policy contained a household exclusion clause which excluded coverage for " 'bodily
injury to any person who is related by blood, marriage, or adoption to [the insured],
if that person resides in [the insured's] household at the time of loss.' " Royle, 202
Mont. at 174, 656 P.2d at 821. Relying on the exclusion, Transamerica refused to
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defend and the parents sought a declaratory judgment in federal court that the
household exclusion was invalid. Royle, 202 Mont. at 174-75, 656 P.2d at 821.
¶22. On certification from the federal court, we addressed whether § 61-6-301(1),
MCA, requiring an owner of a motor vehicle to " 'continuously provide insurance
against loss resulting from liability imposed by law for bodily injury or death or
damage to property suffered by any person. . . '[,]" prohibited the household
exclusion. Royle, 202 Mont. at 175, 656 P.2d at 821. Determining that the legislature
had expressly outlawed the household exclusion by requiring protection against
bodily injury to any person, we held that the household exclusion was void and
unenforceable. Royle, 202 Mont. at 177, 181, 656 P.2d at 823, 824.
¶23. Royle is not applicable here. There, we invalidated the household exclusion
because it precluded coverage for injuries to relatives living in the insured's
household in violation of the § 61-6-301(1), MCA, mandate that a vehicle owner's
policy provide liability coverage for injuries to all persons. Royle, 202 Mont. at 181,
656 P.2d at 824. In contrast, Henninger's policy complies with the requirements of §
61-6-301(1), MCA, by providing liability coverage for injuries suffered as the result
of her operation of her insured vehicle. The nonowned automobile exclusion in
Henninger's policy simply precludes coverage while she uses certain vehicles other
than her insured vehicle. It does not preclude coverage for injuries sustained by
particular persons in contravention of § 61-6-301(1), MCA, as was the case in Royle.
Thus, the Livengoods' reliance on Royle is misplaced.
¶24. Moreover, we distinguished Royle in addressing a household/vehicle exclusion in
Stutzman. Both Stutzman and her husband were the named insureds in an
automobile insurance policy issued by Safeco. Stutzman, 284 Mont. at 375, 945 P.2d
at 33. Stutzman was injured while a passenger in her husband's vehicle and claimed
damages in excess of $200,000. Stutzman, 284 Mont. at 375, 945 P.2d at 33. Safeco
paid her the $100,000 liability limits under the policy and Stutzman sought
additional coverage pursuant to the underinsured motorist benefits provided in the
policy. Stutzman, 284 Mont. at 375, 945 P.2d at 33-34. Safeco denied the additional
coverage based on a policy clause that removed from the definition of "underinsured
motor vehicle" any vehicle " 'owned by or furnished for the regular use of the named
insured or any relative. . . .' " Stutzman, 284 Mont. at 378, 945 P.2d at 35. It argued
that, because the vehicle was owned by Stutzman's husband, a relative of the named
insured, the vehicle was not an "underinsured motor vehicle" as defined under the
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policy and no additional coverage was available. Stutzman, 284 Mont. at 378, 945
P.2d at 35.
¶25. Stutzman filed an action in the district court to recover the underinsured
motorist benefits. Stutzman, 284 Mont. at 374, 945 P.2d at 33. Both parties moved for
summary judgment and the district court granted Safeco's motion and denied
Stutzman's motion. Stutzman, 284 Mont. at 374, 945 P.2d at 33. Stutzman contended
on appeal that, pursuant to Royle, household exclusion clauses in bodily injury
liability cases were void and, therefore, the exclusion in her policy violated
Montana's public policy. Stutzman, 284 Mont. at 380, 945 P.2d at 37.
¶26. We rejected Stutzman's argument. While not specifically stated in our opinion,
Stutzman's policy provided the mandatory liability coverage required by statute at
the time of the accident. Cf. Stutzman, 284 Mont. at 375, 945 P.2d at 33-34; and §§ 61-
6-301(1) and 61-6-103(2)(b), MCA. Thus, unlike the situation in Royle, the
underinsured motorist coverage at issue in Stutzman was optional, rather than
statutorily mandated; as a result, the parties could freely contract regarding
exclusions or limitations on the optional coverage. See Stutzman, 284 Mont. at 380-81,
945 P.2d at 37. Therefore, while noting that we may invalidate a policy exclusion
which violates Montana's mandatory insurance law, we ultimately held that the
exclusion at issue--which was not contrary to any statutory mandate--did not violate
Montana's public policy. Stutzman, 284 Mont. at 380, 382, 945 P.2d at 37.
¶27. In the present case, as in Stutzman, Henninger's policy provides the mandatory
liability coverage required by §§ 61-6-301(1) and 61-6-103(2)(b), MCA, and the
nonowned automobile exclusion is not contrary to any statutory mandate. Thus, on
the record before us, we conclude that the nonowned automobile exclusion at issue in
the present case does not violate Montana's public policy.
¶28. The Livengoods also present several hypothetical scenarios under which either
they or Frehse might have been completely denied coverage for bodily injuries,
arguing therefrom that the nonowned automobile exclusion in Henninger's policy is
contrary to Montana's public policy. Our function, however, is to interpret the law
and apply it to the facts before us. As a result, we decline to address the Livengoods'
hypothetical scenarios.
¶29. We hold that the District Court correctly concluded that the nonowned
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automobile exclusion in Henninger's policy does not violate Montana's public policy.
ISSUE THREE
¶30. Did the District Court err in concluding that the nonowned automobile exclusion in Henninger's
policy does not violate the reasonable expectations of the insured?
¶31. With regard to the Livengoods' "reasonable expectations" argument, the
District Court concluded that the nonowned automobile exclusion was clear as to its
meaning and intent and, as a result, did not offend Henninger's reasonable
expectations. The Livengoods contend that the nonowned automobile exclusion is
ambiguous both in and of itself and because of its positioning in the policy.
Accordingly, they urge that the exclusion violates the insured's reasonable
expectations.
¶32. The reasonable expectations doctrine provides that the objectively reasonable
expectations of insurance purchasers regarding the terms of their policies should be
honored notwithstanding the fact that a painstaking study of the policy would have
negated those expectations. Royle, 202 Mont. at 180-81, 656 P.2d at 824 (citation
omitted). The doctrine is consistent with our strong public policy that insurance is to
serve a fundamental protective purpose; moreover, it "goes hand in hand with our
rule of strictly construing policy exclusions." Wellcome v. Home Ins. Co. (1993), 257
Mont. 354, 358, 849 P.2d 190, 193 (citation omitted).
¶33. On the other hand, the reasonable expectations doctrine is inapplicable where
the terms of the policy at issue clearly demonstrate an intent to exclude coverage.
Wellcome, 257 Mont. at 359, 849 P.2d at 194. The reason, of course, is that "[e]
xpectations which are contrary to a clear exclusion from coverage are not
'objectively reasonable.' " See Wellcome, 257 Mont. at 359, 849 P.2d at 194.
¶34. The Livengoods first contend that the exclusion language is ambiguous, thereby
offending Henninger's reasonable expectations. Specifically, they claim that the
nonowned automobile exclusion is ambiguous because Henninger could have
interpreted it to apply only if she and Frehse were residents of the same household
and she regularly used Frehse's vehicle. We disagree.
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¶35. We recently addressed the application of the reasonable expectations doctrine to
exclusion language in Stutzman. The language at issue in Stutzman's policy excluded
underinsured motor vehicle coverage for any vehicle " 'owned by or furnished for
the regular use of the named insured or any relative. . . .' " Stutzman, 284 Mont. at
378, 945 P.2d at 35. Stutzman's first contention on appeal was that the term
"relative" was ambiguous with regard to whether it included a spouse. Stutzman, 284
Mont. at 379, 945 P.2d at 36.
¶36. We began our discussion by reiterating the ambiguity principles applicable to
insurance policies: 1.) that we will construe any ambiguity in a policy strictly against
the insurer; and 2.) that we will not create an ambiguity where none exists, but will
"interpret the terms of an insurance policy, . . . according to their usual, common
sense meaning as viewed from the perspective of a reasonable consumer of insurance
products." Stutzman, 284 Mont. at 379, 945 P.2d at 36 (citations omitted). We
concluded that, when applying a common sense interpretation to the term "relative,"
the average consumer would conclude that the term included his or her spouse.
Stutzman, 284 Mont. at 379-80, 945 P.2d at 36. We also concluded that, even when
strictly construed against the insurer and from the perspective of the average
consumer of insurance, the exclusionary language clearly and unambiguously
excluded vehicles from the definition of an underinsured motor vehicle if owned by a
relative, including a spouse, of the insured. Stutzman, 284 Mont. at 380, 945 P.2d at
36.
¶37. Stutzman also contended that the exclusion was void because it violated her
reasonable expectations as an insured. Stutzman, 284 Mont. at 381, 945 P.2d at 37.
We referred back to our conclusion that the exclusion clearly and unambiguously
included one's spouse and, in reliance thereon, determined that any expectation by
the insured to the contrary would not be objectively reasonable. Stutzman, 284 Mont.
at 381, 945 P.2d at 37. Consequently, we held that the exclusion did not violate the
reasonable expectations of the insured. Stutzman, 284 Mont. at 382, 945 P.2d at 37.
¶38. As discussed above, the use of disjunctives to separate each alternative in the
nonowned automobile exclusion in Henninger's policy clearly precluded coverage for
injuries arising from Henninger's use of a vehicle owned by a resident of her
household. Thus, while strictly construing the nonowned automobile exclusion
against American Family and applying a common sense meaning as viewed from the
perspective of a reasonable consumer of insurance products, we conclude that the
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exclusion clearly and unambiguously precludes coverage under the facts before us.
As a result, the nonowned automobile exclusion in Henninger's policy clearly
demonstrates an intent to exclude coverage while Henninger was using a vehicle
owned by Frehse, a resident of her household, and any expectation by Henninger to
the contrary would not be objectively reasonable. See Stutzman, 284 Mont. at 381,
945 P.2d at 37 (citation omitted).
¶39. The Livengoods also contend that, under Shook v. State Farm Mut. Ins. of
Bloomington, Ill. (D.Mont. 1994), 872 F.Supp. 768, the nonowned automobile
exclusion is ambiguous via its positioning in the policy and, as a result, violates the
reasonable expectations of the insured. American Family responds that the
Livengoods did not raise this "positioning" contention in support of their reasonable
expectations argument in the District Court and, as a result, they may not raise it on
appeal. We agree.
¶40. The entirety of the Livengoods' reasonable expectations argument in the District
Court was set forth in two paragraphs. The first paragraph merely asserted in
conclusory fashion that the nonowned automobile exclusion at issue was invalid in
failing to honor the reasonable expectations of the purchaser and cited to our
description of the reasonable expectations doctrine in Royle. The second paragraph
simply stated that the exclusion was void and unenforceable because it violated the §
61-6-301(1), MCA, requirement that motorists carry insurance against loss resulting
in liability imposed by law for injuries suffered by any person. We addressed this
latter contention above and concluded that the nonowned automobile exclusion
contained in Henninger's does not violate § 61-6-301(1), MCA.
¶41. It is clear that the Livengoods' reasonable expectations argument in the District
Court did not include a Shook-style positioning contention. It is equally clear that a
party may not raise a new theory on appeal. See Clover Leaf Dairy v. State (1997),
285 Mont. 380, 387, 948 P.2d 1164, 1168 (citation omitted). As a result, we decline to
address this contention.
¶42. We hold that the District Court correctly concluded that the nonowned
automobile exclusion in Henninger's policy did not violate the reasonable
expectations of the insured.
¶43. Affirmed.
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/S/ KARLA M. GRAY
We concur:
/S/ J. A. TURNAGE
/S/ TERRY N. TRIEWEILER
/S/ JIM REGNIER
/S/ JAMES C. NELSON
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