No. 88-212
IN THE SUPREME COURT OF THE STATE OF MONTANA
1988
HORACE MANN INSURANCE, an Illinois
corporation,
Plaintiff and Respondent,
-vs-
MATTHEW HAMPTON, SAFECO INSURANCE COMPANY
OF AMERICA, a Washinton corporation, and
LAWRENCE BLUNDELL, an individual,
Defendants and Appellants.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable James B. Wheelis, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Richard Ranney; Williams Law Firm, Missoula, Montana
For Respondent:
Kim L. Ritter; Milodragovich, Dale & Dye; Missoula,
Montana
Submitted on Briefs: Aug. 11, 1988
Decided: January 11, 1989
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ED SllITH
Clerk
Mr. Justice John Conway Harrison delivered the Opinion of the
Court.
Respondent Horace Mann Insurance filed a declaratory
judgment action in the District Court of the Fourth Judicial
District of Montana, Missoula County, seeking to avoid
coverage under its automobile liability policy issued to
Bernard and Claudia Wever. The District Court granted
summary judgment in favor of respondent, holding that the
terms of the policy were violated when the vehicle was not
used within the scope of the owners' consent. We reverse.
On the evening of January 21, 1987, near East Missoula,
Montana, Matthew Hampton (Hampton) was seriously injured in
an automobile accident caused by Lawrence Blundell
(Blundell). Blundell was driving the other vehicle involved
in this accident, a 1977 Chevrolet Malibu, owned by Bernard
and Claudia Wever. Blundell was under the influence of
alcohol, crossed the center line, and struck Hampton's
vehicle nearly head-on. The Wever vehicle was insured by
Horace Mann. Blundell had no insurance of his own.
Blundell was a mechanic and rented a shop building and
lot from Sophie Wever, Bernard's mother and de facto owner of
the car. Because he was behind in his rent, Blundell agreed
with the Wevers to overhaul the engine on the 1977 Chevrolet
Malibu in exchange for three months rent credit. On January
21, 1987, at about 5 : 3 0 p.m., Blundell took possession of the
car at Sophie Wever's house and drove it a short distance to
the shop. Blundell expected another customer to pick up a
vehicle which would make room for the Wever car at his shop.
Blundell waited for approximately one hour but the customer
did not arrive. As a result, Rlundell believed it would he
us'
nae to leave the Wever car at his shop overnight because
of possible theft or vandalism. For this reason, and to test
drive it for diagnostic purposes, Blundell determined he
would drive the car to his home that evening.
At about 6 : 3 0 p.m., Rlundell drove with his son in the
lilever car to a local tavern. There the two drank beer for
several hours and talked. Rlundell then drove his son home
and was enroute to his home when the accident occurred about
11:15 p.m.
Hampton made claim for his damages against Rlundell and
Wevers' liability insurer, Horace Mann Insurance Company.
Horace Mann filed this declaratory judgment action against
Blundell, Hampton, and Safeco Insurance Company of America
(Hampton's uninsured motorist insurer) denying liability
coverage to Rlundell based on the omnibus clause in its
policy which reads in part as follows:
WHO IS AN INSURED?
When we refer to your car, a newlv
acquired car or a temporary substitute
car, insured means:
1. you;
2. your relatives;
3. any other person while using your
car if its use is within the scope
of your consent;
Horace Mann contends the consensual use of the vehicle
granted to Rlundell by the Wevers was narrow and that
Blundell exceeded the scope of the consent by driving to the
tavern for personal purposes and driving while intoxicated.
The argument is that the Wevers did not consent to the use of
the car for the purpose to which it was applied and for the
atrocious behavior of drunk driving and causing an accident.
Therefore, the consensual use was extinguished and liability
insurance coverage did not extend. The effect of Horace
Mann's argument would be that permittee drivers become
uninsured motorists when they exceed the scope of their
authorized use.
The issue on appeal is whether Montana's Mandatory
Liability Protection Act, S 61-6-301, MCA, requires
automobile liability insurance policies to continue in force
and effect for the use by Blundell of Wever's automobile. We
answer that it does extend coverage to the minimum statutory
requirement.
Prior to the enactment of S 61-6-301, MCA, Montana
relied solely upon a statutory scheme of insurance protection
under what is known as the Financial Responsibility Act, or
the "Motor Vehicle Safety-Responsibility Act," S 61-6-101,
MCA. Under this act, a driver whose license has been revoked
by the state must have proof of financial responsibility as
required by the statute. This may be accomplished by filing
a certificate of insurance, a bond or a certificate or
deposit of money or securities. Section 61-6-132, MCA.
In 1979, Montana's Legislature enacted the Mandatory
Liability Protection Act which reads in part:
61-6-301. Required motor vehicle
insurance. (1) Every owner of a motor
vehicle which is registered and operated
in Montana by the owner or with his
permission shall continuously provide
insurance against loss resulting from
liability imposed by law for bodily
injury or death or damage to property
suffered by any person caused by
maintenance or use of a motor vehicle, as
defined in 61-1-102, in an amount not
less than that required by 61-6-103, or a
certificate of self-insurance issued in
accordance with 61-6-143.
The clear purpose of this statute is to protect
innocent members of the qeneral public iniured on the
highways through the negligence of financially irresponsible
motorists. Iowa Mutual Ins. Co. v. Davis (Mont. 1988), 752
P.2d 166, 45 St.Rep. 5 2 4 . As stated in 12A Couch on
Insurance 2d (Rev. ed.), 5 45:692, the statute is remedial in
nature, and insurance policies issued under this scheme must
he liberally construed in light of the clear purpose and
public policy of the statute -- to provide compensation to
those injured by automobiles.
In Transamerica Ins. Co. v. Royle (1983), 202 Mont.
173, 656 P.2d 820, we examined a "household exclusion" in an
automobile insurance policy in light of the Mandatory
Liability Protection Act language requiring insurance
protection against bodily injury and property damage to "any
person." We held this statutory language to be an express
outlawing of household exclusion clauses.
Similarly, in Rill Atkin Volkswagen Inc. v. McClafferty
(1984), 213 Mont. 99, 689 P.2d 1237, we held Montana's
Mandatory Tiability Protection Act required an automobile
dealer's insurance to extend to customers using "loaner
cars. " B y focusing on the statute's "every owner of a motor
vehicle" language, we rejected the argument of the insurance
company and held that an automobile dealer, though not an
operator, is an owner and therefore required by law to
provide liability coverage to its permittees.
Most recently, in Iowa Mutual, supra, we carefully
examined the validity of a named driver exclusion in light of
the Mandatory Liability Protection Act. We concluded that
such an attempted exclusion was contrary to public policy and
therefore invalid. The analysis made in Iowa Mutual is
particularly pertinent to this case. We there pointed out
that under Bill Atkin, other than the specific exceptions
listed in S 61-6-303, MCA, there were no exceptions to the
statutory requirement that "every owner of a motor vehicle
registered and operated in Montana by the owner or with his
permission [is] to provide insurance for liability caused by
maintenance or use of the motor vehicle." Iowa Mutual, 7 5 2
P.2d at 168. In that case we emphasized the statutory
requirement for insurance of a vehicle operated with
permission unless it met one of the other exceptions. Those
exceptions are not applicable to the present case.
In Iowa Mutual, we next referred to Bain v. Gl.eason
(Mont. 1986), 726 P.2d 1153, 43 St.Rep. 1897, where we
stated:
In Bain we recognized that "it is the
public policy of [the State of Montana]
... that every owner of a motor vehicle
[licensed and] operated in Montana must
procure a policy of insurance which
continuously provides coverage up to the
limits set forth in [ $ 61-6-103, MCA] .
Bain, 726 P.2d at 1156...
Iowa Mutual, 752 P. 2d at 169. This underscored the need for
an owner to provide continuous coverage up to the required
statutory limits.
The insurance carrier argued in Iowa Mutual that the
invalidation of the driver exclusion would thwart public
policy and create a burden on the insureds. In response to
those arguments we then stated:
We are convinced that the opposite
is true. Our ruling today will eliminate
yet another avenue through which the
compensation of innocent automobile
accident victims can he sidestepped. Our
ruling does not, however, prohibit an
insurer from entering into agreements
with their insureds to limit coverage to
the statutory minimum amounts as set
forth in $ 61-6-103, MCA. Other states
have reached similar conclusions.
The enforcement of minimum
statutory coverage is mandated by statute
in Montana and is a minor burden on
insureds when compared to increased
protection of the general traveling
public.
Iowa Mutual, 752 P.2d at 170-71.
As we further stated in Iowa Mutual, laws established
for the benefit of the public cannot be contravened by
private contract. Iowa Mutual, 752 P.2d at 169. When an
insurer fails to provide a policy in compliance with the
requirements of a statute mandating insurance protection, the
courts are forced to reform the policy so that it is in
compliance. 12A Couch - Insurance - (Rev. ed.), § 45:692.
on 2d
We conclude that we shall give effect to the
requirement of § 61-6-103, MCA, which requires motor vehicle
liability insurance to provide continuous coverage up to the
limits of the statute, for every motor vehicle operated with
the permission of the owner. Where a driver of a motor
vehicle initially obtains control and operates a vehicle with
the permission of the owner, we hold that Montana's Mandatory
Liability Protection Act requires liability insurance must
continue to cover the vehicle even though the permittee may
have exceeded the scope of the owner's permission or consent.
As we did in Iowa Mutual, we further hold that the
enforcement of minimum statutory coverage in Montana is
mandated. We recognize that the lower court may wish to
reconsider whether permission was given by the insured in a
manner sufficient to warrant the extension of liability
coverage in excess of the statutory minimum.
The judgment is reversed and remanded for further
proceedings consistent with this decision.
We concur: -
Mr. Justice 1,. C. Gulbrandson, a-issenting.
I respectfully dissent.
In mv view, the maiority, by adopting the "initial
permission" test (more colorfully known by many writers as the
"Come hell or high water rule") has departed drastically from
authority previously enunciated in decisions of this Court, without
reference to, or discussion of, those decisions.
To illustrate the previous view, two examples should suffice.
In Mountain West Farm Bureau v. Farmers Insurance (15,841, 209
Mont. 467, 680 P.2d 330, this Court declared:
A complete and unreasonable departure
from the intended use, or an
intentionally dangerous and wrongful
operation could support a ruling that the
use was outside of the scope of permitted
use as a matter of law. (Emphasis
included.)
Mountain West, 680 P. 2d at 331. Thereafter, in Farmer's Ins.
Exchange v. Janzer (Mont. 1985), 697 P.2d 460, 42 St.Rep. 337, this
Court, in commenting on Mountain West, supra, stated:
Mountain West involved a question
regarding the degree of permission
granted. .. This court affirmed the
lower court's ruling that Mountain West
was the insurer of the defendant for the
defense of the action and the payment of
any damages arising out of the incident.
The instant case, likewise, presents a
question involving scope of "permission."
(Emphasis added.)
Farmer's Ins. Exchange, 697 P.2d at 465-466.
The foregoing statements clearly indicated to the bench and
bar of this state, in my opinion, that this Court had adopted, or
would adopt, some rule other than the "initial permission" rule.
The decision to now adopt a minority absolute rule, in the light of
contra expressions of this Court, should, in my view be left to the
Montana Legislature.
I would affirm the judgment of