No. 81-226
IN THE SUPREME COURT OF THE STATE OF MONTANA
HELEN JACOBSON and ELVA J. DIKE,
Personal Representatives of the Estate
of Sammy D. Harlan,
Plaintiff and Respondent,
IMPLEMENT DEALERS MUTUAL INSURANCE CO.
AND KENNETH HEIMER,
Defendant and Appellant.
Appeal from: District Court of the Fourth Judicial District,
In and for the County of Missoula
Honorable James B. Wheelis, Judge presiding.
Counsel of Record:
For Appellant:
Worden, Thane & Haines, Missoula, Montana
Robert J. Phillips, Missoula, Montana
For Respondent:
Garlington, Lohn & Robinson, Missoula, Montana
Paul C. Meesmer argued, Missoula, Montana
Submitted: December 1, 1981
Decided: ~ € 1T
8 gq
Filed:
Mr. Justice Gene B. Daly delivered the dpinion of the Court.
This is an appeal from the District Court of the
Fourth Judicial District of the State of Montana, in and for
the County of Missoula, the Honorable James B. Wheelis
presiding. Plaintiffs are the personal representatives of
the estate of Sammy D. Harlan, deceased. They commenced
this action in District Court to enforce the uninsured
motorist coverage of an insurance policy issued by defendant
and appellant, Implement Dealers Mutual Insurance Company
(hereinafter IDM), to the plaintiffs1 decedent (Harlan).
Both parties moved for a summary judgment on the issue of
the availability of uninsured motorist coverage. The
District Court granted summary judgment in favor of the
plaintiffs. IDM appeals from the summary judgment and
requests that this Court reverse the District Court and
grant judgment in its favor on the basis that there is no
coverage available in this case.
Sammy D. Harlan died as a result of a motor vehicle
accident two and one-half miles east of Big Timber, Montana,
on June 20, 1978, when the 1974 Peterbilt tractor-trailer
unit which he owned and was driving was involved in a colli-
sion with a motor vehicle driven by Kenneth Heimer. By
stipulation of counsel, Heimer is deemed to be at fault in
Sammy D. Harlan's death. Heimer had no liability insurance
coverage at the time of the accident.
Harlan had purchased a policy of automobile liability
insurance from IDM on a 1971 Ford pickup truck which he
owned. This policy provided for uninsured motorist coverage
in the amount of $25,000. The policy of insurance issued by
IDIvl on the Ford pickup truck contained an exclusion which
read:
"This pol-icy does not apply under Part I V :
"(a) to bodily injury to an insured while
occupying an automobile (other than an
insured automobile) owned by the named
insured or a relative, or through being
struck by such an automobile . ." .
Montana's mandatory uninsured motorist coverage
statute, section 33-23-201, MCA, requires all motor vehicle
liability insurance policies issued in this state to include
uninsured motorist coverage unless the named insured rejects
such coverage.
The statute in question, section 33-23-201, MCA,
provides:
"Motor vehicle liability policies to include
uninsured motorist coverage -- rejection by
insured. (1) No automobile liability or
motor vehicle liability policy insuring
against loss resulting from liability imposed
by law for bodily injury or death suffered by
any person arising out of the ownership,
maintenance, or use of a motor vehicle shall
be delivered or issued for delivery in this
state, with respect to any motor vehicle
registered or principally garaged in this
state, unless coverage is provided therein or
supplemental thereto, in limits for bodily
injury or death set forth in 61.-6-103, under
provisions filed with and approved by the
commissioner, 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, incl-uding
death, resulting therefrom.
"(2) The named insured shall have the right
to reject such coverage. Unless the named
insured requests such coverage in writing,
such coverage need not be provided in or
supplemental to a renewal policy where the
named insured had rejected the coverage in
connection with the policy previously issued
to him by the same insurer."
One issue is presented to this Court on appeal: Did
the District Court err in holding that the insurance
policy's exclusion (a) was not a permissible limitation
under lqontana insurance law?
Appellant contends exclusion (a) is not invalidated
by section 33-23-201, MCA. p l r specifically, appellant
loe
argues that because there is no express provision in the
statute which prohibits this type of exclusion, it is
thereby valid. Further, it is arguea that if the legis-
lature wished to proscribe this type of exclusion, it would
have done so. Finally, appellant contends that in the
interest of public policy, the exclusion should be held to
be valid.
While it is true that courts in several states have
upheld the validity of exclusion clauses similar to exclu-
sion (a), the majority of courts have held similar exclu-
sion clauses are in conflict with the uninsured motorist
statutes. See, State Farm Automobile Insurance Co. v.
Reaves (1974), 292 Ala. 218, 292 So.2d 95; Mullis v. State
Farm Mutual Automobile Ins. Co. (Fla. 1971), 252 So.2d 229;
Bass v. State Farm Mut. Auto. Ins. Co. (1973), 128 Ga.App.
285, 196 S.E.2d 485, modified, 231 Ga. 269, 201 S.E.2d 444;
Doxtater v. State Farm Mutual Automobile Insurance Co.
(1972), 8 Ill.App.3d 547, 290 N.E.2d 284; State Farm Mutual
Automobile Ins. Co. v. Robertson (1973), 156 1nd.App. 149,
295 N.E.2d 626; Cannon v. American Underwriters, Inc.
(1971), 150 1nd.App. 21, 275 N.E.2d 567; Elledge v. Warren
(La.App. 1972), 263 So.2d 912; Nygaard v. State Farm Mutual
Automobile Ins. Co. (1974), 301 Minn. 10, 221 N.W.2d 151;
State Farm Mutual Automobile Ins. Co. v. Hinkel (1971), 87
Nev. 478, 488 P.2d 1151; Bell v. State Farm Mut. Auto. Ins.
Co. (W. Va. 1974), 207 S.E.2d 147; hidiss, A Guide T o
Uninsured Motorist Coverage, 82.9 at 31 (1981).
The discussions upholding the validity of exclusion
clauses do so on the grounds that if a statute is silent
there is no reason to prevent the withholding of coverage by
the insurer. Widiss, supra, at 30; see also, Rodriquez v.
Plaryland Indemnity Insurance Co. (1975), 24 Ariz.App. 392,
539 P.2d 196; Barton v. American Family Mutual Insurance Co.
(* 1972), 485 S.W.2d 628. Regardless of this rationale,
16 m o . ftqp.
this Court elects to follow the majority position.
There are two equally sound positions adopted by the
majority of courts holding this type of exclusion clause to
be invalid. First, the exclusionary cl-ause is ineffective
because it reduces the scope of coverage required by the
statutory mandate. Mullis v. State Farm Mutual Automobile
Insurance Co. (Fla. 1971), 252 So.2d 229; Allstate Insurance
Company v. Meeks (1967), 207 Va. 897, 153 S.E.2d 222;
Federated American Ins. Co. v. Raynes (1977), 88 Wash.2d
439, 563 P.2d 815. In Mullis, the court stated:
"The public policy of the uninsured motorist
statute (Section 627.0851) is to provide
uniform and specific insurance benefits to
members of the public to cover damages for
bodily injury caused by the negligence of
insolvent or uninsured motorists and such
statutorily fixed and prescribed protection
is not reducible by insurers' policy exclu-
sions and exceptions any more -than a r e the
benefits provided for persons protected by
automobile liability insurance secured in
compliance with the Financial Responsibility
Law.
"Insurers or carriers writing automobile
liability insurance and reciprocal uninsured
motorist insurance are not permitted by law
to insert provisions in the policies they
issue that exclude or reduce the liability
coverage prescribed by law for the class of
persons insured thereunder who are legally
entitled to recover damages from owners or
operators of motor vehicles because of bodily
injury." 252 So.2d at 233-234.
The second, and equally sound, rationale is that the
clause is contrary to tile public policy embodied in the
statute. Phillips v. Midwest Mutual Insurance Company
(1971), 329 F.Supp. 853. The policy behind the statute is
to protect the policyholders from uninsured motorists in all
instances.
In this case, when exclusion (a) is analyzed under
either or both of the above rationales, it is clear that the
exclusion is a violation of public policy and Iqontana insur-
ance law, and that it tries to limit the scope of coverage
mandated by section 33-23-201, MCA.
Appellant alleges that there is a connection between
the automobile which is insured and the uninsured motorist
coverage. It is contended that the connection is based upon
the additional risk which the insurance company incurs by
the operation of the insured vehicle. Also, it is contended
that the risk of a party being injured by an uninsured
motorist increases when a person is operating a motor
vehicle. Therefore, appellant concludes that an insurer
must attempt to exclude from its coverage any activity
involving a risk for which it cannot toll-ect a premium or
for which the premium cannot be calculated.
The arguments made by appellant may be true, and they
are certainly reflective of sound business judgment. How-
ever, they fail to address the underlying purpose and scope
of the uninsured motorist statute. The court in Elledge v.
barren (La.App. 1 9 7 2 ) , 263 So.2d 912, when discussing the
purpose of its uninsured motorist statute, stated:
"The purpose of the statute is to protect
completely, those willing to accept its
protection, from all harm, whatever their
status--passenger, driver, pedestrian--at the
time of injury, produced by uninsured
~notorists. The only restrictions are that
the plaintiff must be an insured, the defen-
dant motorist uninsured, and that plaintiff
be legally entitled to recover. We will not
enlarge upon these qualifications and re-
strict the coverage of such a socially desir-
able policy by allowing insurance companies
to pursue alleged 'business interests.'
". . . An insurance company may not create
irrational and illusory 'business interests'
and interpose them as a bar to the compre-
hensive coverage required by our statute."
263 So.2d at 918-919.
Appellant's argument that premiums for uninsured
motorist coverage are somehow risk-related is unfounded.
The type of premium charged for uninsured motorist protec-
tion illustrates the coverage afforded. The rate is a flat
rate, and coverage is available to everyone at the same
rate. The rate is not related to risk. In this instance,
the fact that Harlan had purchased uninsured motorist
coverage for only one vehicle and paid a premium on this
vehicle does not give rise to the exclusion of coverage on
any other owned vehicles. In other words, the importance or
value of the imputed business purpose for this exclusion
seems tenuous as applied to the purchaser who owns more than
one vehicl-e. Acquisition of insurance for a second vehicle,
especially with premiums that are not risk-related, is
relatively inexpensive; therefore, permitting the insurer to
withhold coverage for the small return seems of dubious
merit. Widiss, supra, S2.9 at 29.
There is no requirement that the insured be occupying
an insured vehicle. Therefore, there is no connection
between the insured and the automobile listed on the policy.
The named automobile merely illustrates that the person has
satisfied the legal requirement of purchasing insurance and
has uninsured motorist coverage unless expressly waived.
Montana's uninsured motorist coverage is personal and port-
able. This point was exemplified by the court in Bradley v.
Mid-Century Ins. Co. (Mich. 1980), 294 N.W.2d 141, when it
held :
"We conclude that once uninsured motorist
coverage is purcl~ased, the insured and his
relatives insured for liability have
uninsured motorist protection under all
circumstances. Uninsured motorist coverage,
like no-fault coverage, is personal and
portable.
". . . They are insured when injured in an
owned vehicle named in the policy, in an
owned vehicle not named in the policy, in an
unowned vehicle, on a motorcycle, on a
bicycle, whether afoot or on horseback or
even on a pogo stick." 294 N.W.2d at 152.
It must be emphasized that all waivers of uninsured
motorist coverage are not improper. The waiver must be
expressed by the insured in a manner that is clear, concise
and equitable to both parties involved in the insurance
contract. The exclusion clause in question in this case
does not satisfy this requirement. The Washington Supreme
Court, in Federated American Ins. Co. v. Raynes (1977), 88
Wash.2d 439, 563 P.2d 815, when discussing an exclusion
clause similar to that presented here, stated:
.
". . R.C.W. 48.22.030 mandates uninsured
motorist coverage 'for the protection o f
persons insured' under the policy, unless the
named insured rejects such coverage. . . the
parties may agree to a narrow definition of
insured so long as that definition is applied
consistently throughout the policy, but once
it is determined that a person is an insured
under the policy, that person is entitled to
uninsured motorist coverage. Respondent is a
named insured in F.A.I.'s policy. Exclusion
(b) does not narrow the definition of insured
so as to exclude from being an insured under
the policy. Rather, the exclusion merely
excludes coverage when the insured is injured
in a certain situation, i.e., occupying a car
owned by him but not insured by F.A.I. This
attempt to exclude coverage for an insured is
impermissible under R.C.W. 48.22.030." 563
P.2d at 818.
See also, Chaffee v. USF&G (1979), 181 ivlont. 1, 591 P . 2 d
1102, 36 St.Rep. 398.
The exclusion clause in the IDM policy is lost in the
myriad of verbage that makes up the insurance contract. This
particular exclusion clause would be unnoticeable by the
average policyholder and can, therefore, never constitute an
express waiver.
The judgment of the District Court is affirmed.
.'" Justice / Q A ~
We concur:
Chief Justice
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.