No. 14663
IN THE SUPREME COURT O THE STATE O PXNUWA
F F
1979
JOHN LINDELL, JON D. VICHE, and
ALASKA PACIFIC ASSURANCE COMPANY,
an Alaska corporation,
P l a i n t i f f s and Respondents,
ROBERT E RUTHR)RD,
.
Defendant and Appellant and Third
Party P l a i n t i f f ,
-VS-
UNITED SEXVICES AUIWDBILE,
Third Party Defendant.
Appeal £ram: D i s t r i c t Court of t h e Fourth Judicial D i s t r i c t ,
Honorable John B. M3Zlernan, Judge presiding.
Counsel of Record:
For Appellant:
Milodragovich, Dale & Dye, Missoula, Montana
Fdwin C. Daue argued, Missoula, Montana
For Respondents:
Garlington, Lohn and Robinson, Missoula, Montana
Gary Chumrau argued, Missoula, Mntana
Doug Austin, Superior, Mntana
Suhnitted: June 7, 1979
Decided: AUG . * 9
Filed: IE 1973
Mr. C h i e f J u s t i c e F r a n k I . Haswell d e l i v e r e d t h e O p i n i o n o f
t h e Court.
T h i s i s a n a p p e a l by a n i n s u r e d u n d e r a g e n e r a l l i a -
b i l i t y a n d comprehensive p e r s o n a l i n s u r a n c e p o l i c y from a
judgment i n f a v o r o f h i s i n s u r e r i n t h e D i s t r i c t C o u r t o f
M i n e r a l County.
The f a c t s i n d i c a t e t h a t on May 1 9 , 1977, J o s e p h Ruth-
f o r d , t h e s o n o f t h e named i n s u r e d R o b e r t R u t h f o r d , w a s
d r i v i n g h i s f a t h e r ' s p i c k u p l o o k i n g f o r h o r s e s , some o f
which w e r e owned by h i s f a t h e r . While s e a r c h i n g f o r t h e
h o r s e s i n a n o f f - r o a d a r e a , t h e p i c k u p became s t u c k i n t h e
mud. A l o g g i n g s k i d d e r w a s p a r k e d n e a r b y which, unknown t o
t h e s o n , had been d r a i n e d o f o i l . The s o n s t a r t e d t h e
s k i d d e r and moved i t n e a r t h e p i c k u p . Meanwhile, a t h i r d
p a r t y had c o n t a c t e d t h e f a t h e r by CB r a d i o a n d t h e f a t h e r
had a r r i v e d w i t h a l o g g i n g c h a i n . A t h i r d person a t t a c h e d
t h e l o g g i n g c h a i n t o t h e p i c k u p and s k i d d e r . The f a t h e r
s t o o d by and watched h i s s o n tow t h e p i c k u p o u t o f t h e mud.
Thereafter, t h e son returned t h e skidder t o t h e p l a c e he
o r i g i n a l l y found it.
The e n g i n e o f t h e s k i d d e r was s e v e r e l y damaged b e c a u s e
t h e r e was no o i l i n i t .
The owners o f t h e s k i d d e r and t h e i r i n s u r e r f i l e d a
damage a c t i o n a g a i n s t t h e f a t h e r s e e k i n g r e c o v e r y o f r e p a i r
c o s t s , l o s s of income a n d exemplary damages. The f a t h e r
answered denying l i a b i l i t y . He a l s o f i l e d a t h i r d - p a r t y
c o m p l a i n t a g a i n s t h i s i n s u r e r , U n i t e d S e r v i c e s Automobile
A s s o c i a t i o n , which i s t h e s u b j e c t o f t h i s a p p e a l . The
f a t h e r ' s t h i r d - p a r t y complaint a l l e g e d i n substance t h a t any
l i a b i l i t y on h i s p a r t t o t h e owners o f t h e s k i d d e r was
c o v e r e d by h i s i n s u r a n c e p o l i c y . Therefore, he alleged, h i s
i n s u r e r w a s o b l i g a t e d t o d e f e n d t h e damage a c t i o n b r o u g h t
a g a i n s t him and t o pay a n y damages r e c o v e r e d by t h e s k i d -
d e r ' s owners.
F o l l o w i n g p r e t r i a l d i s c o v e r y , t h e i n s u r e r moved f o r
summary judgment o n t h e f a t h e r ' s t h i r d - p a r t y c o m p l a i n t on
t h e b a s i s of p o l i c y e x c l u s i o n s . The D i s t r i c t C o u r t g r a n t e d
summary judgment t o t h e i n s u r e r and d i s m i s s e d t h e t h i r d -
p a r t y complaint. The f a t h e r a p p e a l s .
A l t h o u g h t h e i s s u e s o n a p p e a l are s t a t e d d i f f e r e n t l y by
each p a r t y , t h e substance of t h e c o n t r o v e r s y i s whether t h e
i n s u r a n c e p o l i c y provides coverage under t h e f a c t s of t h i s
case. The i n s u r e d f a t h e r c l a i m s c o v e r a g e u n d e r t h e omnibus
i n s u r i n g a g r e e m e n t a n d d e f i n i t i o n s i n t h e p o l i c y and d e n i e s
t h a t any p o l i c y e x c l u s i o n s e l i m i n a t e t h a t coverage. On t h e
o t h e r hand, t h e i n s u r e r claims a s p e c i f i c e x c l u s i o n i n t h e
p o l i c y eliminates coverage.
The c o m p l a i n t by t h e owners o f t h e s k i d d e r a g a i n s t t h e
f a t h e r a l l e g e s two b a s e s o f l i a b i l i t y : (1) t h a t t h e f a t h e r
" c o o p e r a t e d w i t h , a s s i s t e d , and r a t i f i e d t h e a c t s o f h i s
s o n " which b e n e f i t e d him by removing h i s p i c k u p from t h e
mud, and ( 2 ) t h a t t h e s o n w a s a c t i n g a s a g e n t o f h i s f a t h e r
s o t h a t t h e s o n ' s w r o n g f u l a c t s w e r e imputed t o h i s f a t h e r .
The b a s i c i n s u r i n g a g r e e m e n t i n t h e p o l i c y p r o v i d e s :
"The company w i l l pay o n 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 pay a s damages b e c a u s e o f b o d i l y
i n j u r y o r p r o p e r t y damage ... and t h e company
s h a l l have t h e r i g h t and d u t y t o d e f e n d any s u i t
a g a i n s t t h e i n s u r e d s e e k i n g damages on a c c o u n t
o f s u c h b o d i l y i n j u r y o r p r o p e r t y damage, e v e n
i f the allegations of t h e s u i t a r e groundless,
f a l s e o r fraudulent . . ."
The p o l i c y d e f i n e s " p e r s o n s i n s u r e d " i n p e r t i n e n t p a r t
as:
"The named i n s u r e d a n d , i f r e s i d e n t s o f t h e
named i n s u r e d ' s h o u s e h o l d , h i s s p o u s e , t h e
r e l a t i v e s o f e i t h e r , and any o t h e r p e r s o n u n d e r
t h e a g e o f 21 i n t h e care o f a n y i n s u r e d ; b u t
w i t h r e s p e c t t o any ... v e h i c l e , n o t owned by
any such i n s u r e d , o n l y w h i l e u s i n g o r having
c u s t o d y o r p o s s e s s i o n of such . . . vehicle
w i t h t h e p e r m i s s i o n o f t h e owner . . ."
The p o l i c y e x c l u s i o n on which t h e i n s u r e r r e l i e s p r o -
vides :
" T h i s c o v e r a g e does n o t a p p l y :
" ( j ) t o p r o p e r t y damage t o ... (2) property
o c c u p i e d o r used by t h e i n s u r e d o r r e n t e d t o o r
i n t h e c a r e , custody o r c o n t r o l of t h e insured
o r as t o which t h e i n s u r e d i s f o r any p u r p o s e
exercising physical control . . ."
The f i r s t b a s i s o f l i a b i l i t y a l l e g e d by t h e s k i d d e r ' s
owners a g a i n s t t h e f a t h e r i s t h a t t h e f a t h e r c o o p e r a t e d
w i t h , a s s i s t e d and r a t i f i e d t h e w r o n g f u l a c t s of h i s s o n .
T h i s a l l e g a t i o n i s based upon t h e f a t h e r ' s p e r s o n a l wrong-
d o i n g r e n d e r i n g him a j o i n t t o r t f e a s o r w i t h h i s son. Ac-
c o r d i n g l y , t h e f a t h e r a s t h e named i n s u r e d under t h e p o l i c y
would b e c o v e r e d f o r h i s own wrongdoing u n l e s s t h e p o l i c y
exclusion e l i m i n a t e s coverage.
The s k i d d e r was n o t p e r s o n a l l y used by t h e f a t h e r ,
r e n t e d by him, i n h i s c a r e , c u s t o d y o r c o n t r o l , n o r was t h e
f a t h e r exercising physical c o n t r o l over it. Thus t h e e x c l u -
s i o n would n o t e l i m i n a t e c o v e r a g e f o r any p e r s o n a l wrong-
d o i n g by t h e f a t h e r .
This b r i n g s us t o t h e crux of t h i s appeal. The second
b a s i s of l i a b i l i t y a l l e g e d by t h e s k i d d e r ' s owners a g a i n s t
t h e f a t h e r i s t h a t h i s son was h i s a g e n t ; t h a t t h e s o n ' s
w r o n g f u l a c t s a r e imputed t o t h e f a t h e r under t h e p r i n c i p l e
o f r e s p o n d e a t s u p e r i o r ; and t h a t t h e f a t h e r i s l i a b l e by
r e a s o n o f h i s s o n ' s wrongful a c t s .
I t i s a g r e e d t h a t t h e s o n w a s a member of h i s f a t h e r ' s
h o u s e h o l d , under t h e a g e o f 21, and i n t h e c a r e of h i s
f a t h e r , t h e named i n s u r e d . T h i s would q u a l i f y t h e s o n as
o n e o f t h e p e r s o n s i n s u r e d were i t n o t f o r t h e second c l a u s e
i n t h a t p o l i c y p r o v i s i o n set f o r t h above, v i z . , "but with
r e s p e c t t o any . . . vehicle n o t owned by a n y s u c h i n s u r e d ,
o n l y while using o r having custody o r possession of such . .
. vehicle w i t h t h e p e r m i s s i o n o f t h e owner . . ." It is
a d m i t t e d t h a t t h e s o n was n o t u s i n g t h e s k i d d e r , n o r d i d h e
have custody o r p o s s e s s i o n o f it, w i t h t h e permission of any
o f i t s owners. Thus, t h e s o n i s n o t a n i n s u r e d u n d e r t h e
f a c t s of t h i s case.
Because t h e s o n i s n o t a n i n s u r e d u n d e r t h e p o l i c y , t h e
c o v e r a g e e x c l u s i o n would n o t o r d i n a r i l y a p p l y . The e x c l u -
s i o n a p p l i e s only t o property used, rented t o , i n t h e c a r e ,
c u s t o d y , o r c o n t r o l o f " t h e i n s u r e d " o r which " t h e i n s u r e d "
i s f o r any purpose e x e r c i s i n g p h y s i c a l c o n t r o l .
However, h e r e t h e i n s u r e r c o n t e n d s t h a t t h e s o n was h i s
f a t h e r ' s a g e n t a n d t h e s o n ' s u s e , p o s s e s s i o n and p h y s i c a l
c o n t r o l o f t h e s k i d d e r w e r e l e g a l l y t h o s e o f h i s f a t h e r who
i s l i a b l e f o r h i s s o n ' s wrongful a c t s . The b a s i s o f t h i s
contention i s t h e d o c t r i n e of respondeat s u p e r i o r o r t h e
imputed l i a b i l i t y o f t h e p r i n c i p a l f o r t h e a c t s o f h i s
agent. Hence, a c c o r d i n g t o t h e i n s u r e r , t h e p o l i c y e x c l u -
s i o n becomes o p e r a t i v e and e l i m i n a t e s c o v e r a g e .
W e have n o t p r e v i o u s l y d e c i d e d t h i s i s s u e . The c o u r t s
of o t h e r states are divided. An example o f a c a s e h o l d i n g
no e x c l u s i o n o f c o v e r a g e u n d e r s i m i l a r f a c t s i s t h e d e c i s i o n
o f a n i n t e r m e d i a t e a p p e l l a t e c o u r t o f Washington i n H o l t e r
v . N a t i o n a l Union F i r e I n s u r a n c e Company ( 1 9 6 9 ) , 1 Wash.App.
46, 459 P.2d 61. T h e r e i t was h e l d t h a t b e c a u s e t h e p o l i c y
d e f i n i t i o n o f a n i n s u r e d d i d n o t i n c l u d e t h e employee who
c a u s e d t h e damage, t h e c a r e , c u s t o d y and c o n t r o l e x c l u s i o n
d i d n o t apply. The r e a s o n i n g of t h e Washington c o u r t was
t h a t t h e provisions of an insurance p o l i c y should be i n t e r -
p r e t e d i n t h e way i t would b e u n d e r s t o o d by t h e a v e r a g e man
purchasing insurance. Hence, where t h e p o l i c y d e f i n i t i o n o f
" i n s u r e d " i n c l u d e d e x e c u t i v e o f f i c e r s , d i r e c t o r s and s t o c k -
h o l d e r s b u t d i d n o t l i s t employees, t h e e x c l u s i o n a r y c l a u s e
would b e i n t e r p r e t e d most s t r o n g l y a g a i n s t t h e i n s u r e r and
c o v e r a g e would b e a f f o r d e d .
An example o f a c o n t r a r y r e s u l t i s t h e d e c i s i o n o f t h e
Oregon Supreme C o u r t i n C r i s t e t a l . v . Potomac I n s u r a n c e
Company ( 1 9 6 6 ) , 243 O r . 254, 413 P.2d 407. There t h e c o u r t
h e l d t h a t " c a r e , c u s t o d y and c o n t r o l " e x c l u s i o n a p p l i e d t o
a n employee of t h e i n s u r e d r e l i e v i n g t h e i n s u r e r o f any d u t y
t o d e f e n d t h e a c t i o n o r i n d e m n i f y t h e i n s u r e d i n t h e amount
of t h e s e t t l e m e n t . The r e a s o n i n g o f t h e Oregon c o u r t was
b a s e d on agency p r i n c i p l e s r e n d e r i n g t h e a c t s o f t h e employee
t h o s e o f h i s employer, t h e i n s u r e d .
W e hold t h a t t h e exclusionary c l a u s e does n o t e l i m i n a t e
coverage here. The i n s u r e r h a s t h e d u t y t o d e f e n d and
i n d e m n i f y t h e i n s u r e d f o r any damages f o r which t h e i n s u r e d
i s l i a b l e within the policy l i m i t s . W e r e a c h t h i s r e s u l t by
i n t e r p r e t i n g t h e p o l i c y i n t h e way i t would b e u n d e r s t o o d by
a n a v e r a g e man p u r c h a s i n g i n s u r a n c e . Holter, supra.
An i n s u r a n c e p o l i c y i s t o b e i n t e r p r e t e d a s a whole i n
t h e e n t i r e t y o f i t s t e r m s and c o n d i t i o n s . S e c t i o n 33-15-316
MCA. So c o n s t r u e d , t h e l a n g u a g e o f t h e p o l i c y i s ambiguous
a s applied t o the f a c t s of t h i s case. I n such case t h e
c o n s t r u c t i o n most f a v o r a b l e t o t h e i n s u r e d s h o u l d b e a d o p t e d .
Atcheson v . S a f e c o I n s u r a n c e Company ( 1 9 7 4 ) , 165 Mont. 239,
527 P.2d 549. Such c o n s t r u c t i o n a p p l i e s p a r t i c u l a r l y t o
exclusionary clauses. J o h n s o n v . E q u i t a b l e I n s u r a n c e Co.
( 1 9 6 3 ) , 142 Mont. 1 2 8 , 3 8 1 P.2d 778. Applying t h e s e p r i n -
c i p l e s w e hold t h a t t h e enlargement of t h e exclusionary
c l a u s e t o encompass t h e u s e , p o s s e s s i o n a n d p h y s i c a l c o n t r o l
of a n a l l e g e d a g e n t of t h e i n s u r e d i s unwarranted and l a c k s
merit.
W e h a v e examined t h e p e r i p h e r a l a r g u m e n t s a n d a u t h o r i t i e s
c i t e d by r e s p o n d e n t a n d f i n d t h a t none would c h a n g e o u r
r e s u l t i n t h i s case.
The summary judgment i s v a c a t e d . The c a u s e i s remanded
t o t h e D i s t r i c t Court f o r f u r t h e r proceedings c o n s i s t e n t
with t h i s opinion.
\
Chief J u s t i c e
W e concur:
Ww-4-2~Justices