NO. 90-307
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
MOUNTAIN WEST FARM BUREAU MUTUAL
INSURANCE COMPANY,
Plaintiff and Appellant,
FEB - 5 3991
CREDIT GENERAL INSURANCE COMPANY,
Defendant and Respondent.
APPEAL FROM: District Court of the Fourth Judicial District,
In and for the County of Missoula,
The Honorable Edward McLean, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Larry E. Johnson; James, Gray & McCafferty, Great
Falls, Montana
For Respondent:
Ronald B. MacDonald; Datsopoulos, MacDonald & Lind,
Missoula, Montana
Submitted on Briefs: December 13, 1990
Decided: February 5, 1991
Filed:
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Justice Diane G. Barz delivered the Opinion of the Court.
This is an action for contribution. Mountain West Farm Bureau
Mutual Insurance Company (Farm Bureau) appeals from an order of
the District Court for the Fourth Judicial District, Missoula
County, granting judgment on the pleadings to Credit General
Insurance Company (Credit General). We affirm.
The issue is whether the District Court erred in ruling that
the Farm Bureau insurance policy provided primary coverage and that
the Credit General policy provided only excess coverage.
On September 16, 1988, a fire destroyed a residence owned by
Gerald Richie in Ravalli County, Montana. Richie had purchased a
policy of property and liability insurance from Farm Bureau for
that property. Citizen's State Bank (the bank) had a security
interest in the Richie property. The bank carried insurance with
Credit General to protect its interest in the Richie property and
in other properties in which it retained an interest.
In a bankruptcy proceeding, Farm Bureau petitioned for a
determination of insurance coverage between itself and Credit
General. The parties stipulated that Farm Bureau would pay
$127,500, the policy limit on the residence, to the bank. Farm
Bureau then brought this separate action to obtain contribution
from Credit General.
Both the Farm Bureau and the Credit General insurance policies
contained ''other insurance1' clauses. The Farm Bureau policy
purchased by Richie provided
If you are carrying other insurance on the property to
which this policy applies, the coverage under this policy
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is null and void. We may permit other insurance,
however, by endorsement to this policy. If other
insurance is permitted, we will not be liable for a
greater portion of any loss than our pro rata share in
excess of any deductible.
The Credit General policy purchased by the bank provided
If there is any other valid and collectible insurance
which would attach if the insurance provided under this
policy had not been affected, this insurance shall apply
only as excess and in no event as contributing insurance,
and then only after all other insurance has been
exhausted.
The District Court concluded that the Credit General policy
provided excess coverage which did not constitute "other insuranceI1
within the meaning of the Farm Bureau policy. It therefore granted
Credit General judgment on the pleadings.
In deciding this case, the District Court cited Mountain
States Mut. Cas. Co. v. American Casualty Co. (1959), 135 Mont.
475, 342 P.2d 748. That case involved an accident in which a
borrowed truck was at fault. The two insurance companies which
were potentially liable were the insurer of the truck and the
insurer of the borrower/driver of the truck. The lower court pro-
rated liability between the two insurers. On appeal, this Court
stated that
[A] non-ownership clause with an excess coverage
provision does not constitute other valid and collectible
insurance, within the meaning of a primary policy with
an omnibus clause.
Mountain States, Under this Court I s ruling , the
company that insured the truck bore full liability for damages.
Farm Bureau argues that application of the above rule to this
case is error. It asserts that unlike Mountain States, this case
involves two llnon-ownershipll
insurance clauses. Farm Bureau argues
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that its policy contains a llunion-typell
loss payable endorsement
which constituted an independent insurance policy between itself
and the bank, not dependent on the rights of Richie. It asserts
that both its policy and the Credit General policy insured the same
property, the same interest in the property, and the same risks
payable to the same party: the bank. It urges that liability be
prorated between the two carriers based on the limits of both
insurance policies, as is done where two applicable policies have
the same type of "other insurancel1 clauses. See Bill Atkin
Volkswagen, Inc. v. McClafferty (1984), 213 Mont. 99, 689 P.2d
1237; Glacier Gen. Assur. Co. v. State Farm Mut. Auto. Ins. Co.
(1968), 150 Mont. 452, 436 P.2d 533.
In this case, however, the two insurance policies do not have
the same type of "other insuranceI1 clauses. The "other insurancel1
clause in the credit General policy is an excess clause. The Farm
Bureau policy contains a pro-rata clause. In a majority of
jurisdictions, such conflicts between two insurance policies
covering the same interest are resolved as follows:
in [a conflict between a policy with a provision that it
will only provide excess coverage over that available
from other policies and one which specifies that it will
share coverage with other policies 1 , the terms of the
excess clause prevail over the terms of the pro-rata
clause. As explained by many of the courts adopting this
view, the policy containing the excess clause does not
purport to cover the event until other insurance covering
the event has been exhausted, so that there is no
"~ollectible~~insurance with which the loss can be shared
by the insurance policy containing the pro-rata clause.
Thus, the policy containing the pro-rata clause is the
primary insurance on the event, and this policy must be
exhausted before the excess policy is required to
contribute anything.
Annotation, vlResolution conflicts, in non-automobile liability
of
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insurance policies, between excess or pro-rata 'other insurance'
clause^,'^ 12 ALR 4th 993, 997 (1982). The majority rule contains
no limitation concerning whether the insurance policies are
ownership or non-ownership policies.
We conclude that in this instance it is immaterial whether
both insurance policy clauses are non-ownership clauses. The
majority rule is consistent with Mountain States and does not
conflict with the Montana cases cited by Farm Bureau. We agree
with the rationale behind the majority rule and hereby adopt that
rule in Montana. We therefore hold that the District Court did not
err in deciding that the excess provision in the Credit General
policy controls and that the Farm Bureau policy provides primary
coverage. We further hold that the District Court did not err in
granting Credit General's motion for judgment on the pleadings.
Affirmed.