96-173
No. 96-173
IN THE SUPREME COURT OF THE STATE OF MONTANA
1997
MARY SWANK and FARMERS
INSURANCE EXCHANGE, a reciprocal
or inter-insurance exchange,
Plaintiffs and Appellants,
v.
CHRYSLER INSURANCE CORPORATION,
Defendant and Respondent.
APPEAL FROM: District Court of the Eighth Judicial District,
In and for the County of Cascade,
The Honorable Robert P. Goff, Judge presiding.
COUNSEL OF RECORD:
For Appellants:
William J. Gregoire (argued), Dennis P. Clarke; Smith, Walsh,.
Clarke & Gregoire, Great Falls, Montana
For Respondent:
Robert F. James (argued); James, Gray & McCafferty, Great
Falls, Montana
Submitted: January 30, 1997
Decided: May 6, l997
Filed:
__________________________________________
Clerk
Justice Karla M. Gray delivered the Opinion of the Court.
Mary Swank and her insurer, Farmers Insurance Exchange, appeal from the
judgment entered by the Eighth Judicial District Court, Cascade County, on its order
granting Chrysler Insurance Corporation's motion for summary judgment. We reverse
and remand with instructions.
FACTS
The facts are not in dispute. On June 22, 1994, Mary Swank (Swank) was test-
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-173%20Opinion.htm (1 of 6)4/11/2007 2:37:45 PM
96-173
driving a vehicle owned by Haggarty Motors (Haggarty), an automobile dealership in
Great Falls. During the test-drive, she was involved in an accident with Bonnie May
(May). May subsequently filed suit against Swank.
Chrysler Insurance Corporation (Chrysler) was Haggarty's automobile liability
insurer on the date of the accident. Swank made a demand on Chrysler for coverage and
a defense against May's suit. Chrysler refused the demand. Thereafter, Farmers
Insurance Exchange (Farmers), Swank's personal automobile insurer, undertook the
defense of May's suit on Swank's behalf.
Swank and Farmers (collectively, hereafter, Swank) filed a declaratory judgment
action in the District Court alleging that Swank was an insured under the Chrysler policy
and that Chrysler's refusal to provide coverage violated 61-6-301, MCA, Montana's
mandatory motor vehicle liability insurance statute. Swank also alleged that, under the
terms of the Chrysler and Farmers policies, the Chrysler policy should provide primary
coverage, and the Farmers policy secondary coverage, for the accident. In its answer,
Chrysler denied that Swank was entitled to coverage under its policy.
The parties filed cross-motions for summary judgment and the District Court
granted Chrysler's motion. It concluded that Farmers must provide primary coverage to
Swank and that Chrysler would be liable only to the extent coverage was necessary to
reach the statutorily-required minimum coverage. Swank appeals.
STANDARD OF REVIEW
Summary judgment is proper when no genuine issues of material fact exist and the
moving party is entitled to judgment as a matter of law. Rule 56(c), M.R.Civ.P. We
review a district court's grant of summary judgment de novo and apply the same Rule
56(c), M.R.Civ.P., criteria used by that court. Jarrett v. Valley Park, Inc. (1996), 277
Mont. 333, 338, 922 P.2d 485, 487 (citing Matter of Estate of Lien (1995), 270 Mont.
295, 298, 892 P.2d 530, 532). Ordinarily, such a review requires that we first determine
whether the moving party met its burden of establishing the absence of genuine issues of
material fact and entitlement to judgment as a matter of law. Jarrett, 922 P.2d at 487.
In this case, however, the facts are undisputed. Through their cross-motions for
summary judgment, each party asserted entitlement to judgment as a matter of law.
Therefore, our review is confined to the District Court's conclusions of law. We review
a district court's conclusions of law to determine whether the court's interpretation of the
law is correct. Carbon County v. Union Reserve Coal Co., Inc. (1995), 271 Mont. 459,
469, 898 P.2d 680, 686.
DISCUSSION
Did the District Court err in granting Chrysler's motion for summary judgment?
In granting Chrysler's motion, the District Court determined that Farmers must
provide coverage to Swank because the Chrysler policy, by its terms, provides no
coverage where there is other insurance meeting the statutory minimums. In making that
determination, the court implicitly concluded that the Chrysler policy met the
requirements of 61-6-301, MCA.
Haggarty is the named insured under the Chrysler policy, which contains the
standard Montana endorsement providing that it conforms to the minimum requirements
of Montana law and that any nonconforming provision is amended to conform. The
policy's standard insuring clause for covered autos provides that Chrysler will pay all
sums an insured legally must pay as damages.
Under the Chrysler policy, an "insured" is defined expansively to include, in
addition to Haggarty, anyone using a covered auto owned by Haggarty with Haggarty's
permission. Thereafter, however, customers using such vehicles with permission
(permissive use customers) are expressly excluded from the definition of "insureds;" they
become "insureds" only if they are uninsured or underinsured and, in that event, the
coverage provided is limited to the amounts required by financial responsibility laws.
Thus, Chrysler's definition of "insured" generally excludes Haggarty's permissive use
customers from coverage and extends coverage only when, and to the extent, they are
uninsured or underinsured. We refer to these provisions below as the exclusion-limitation
language relating to permissive use customers.
On appeal, Swank asserts that 61-6-301, MCA, and Bill Atkin Volkswagen, Inc.
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-173%20Opinion.htm (2 of 6)4/11/2007 2:37:45 PM
96-173
v. McClafferty (1984), 213 Mont. 99, 689 P.2d 1237, require Chrysler to provide her
coverage for the accident without regard to the existence of her own liability policy.
Chrysler argues that its policy meets the requirements of Montana law because it provides
coverage to customers using vehicles with permission if they do not have insurance of
their own and that Bill Atkin Volkswagen is distinguishable.
Section 61-6-301(1), MCA, provides that:
[A]n owner of a motor vehicle that is registered and operated in Montana
by the owner or with the owner's 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 . . . in an amount not less than
that required by 61-6-103 . . . .
We addressed 61-6-301(1), MCA, in Bill Atkin Volkswagen, which involved whether
a permissive user of an automobile dealer's vehicle was an insured as defined in the
dealer's policy. Given Swank's position that that case is dispositive here, we first discuss
its applicability.
William McClafferty (McClafferty) had left his vehicle for repair at Bill Atkin
Volkswagen (Atkin VW), a Butte automobile dealership. While driving a loaner vehicle
owned by the dealership, McClafferty was involved in an accident which admittedly was
his fault. Bill Atkin Volkswagen, 689 P.2d at 1238. McClafferty was sued by the owner
of the other vehicle and tendered defense of the suit to Universal Underwriters Insurance
Company (Universal), Atkin VW's insurer. Bill Atkin Volkswagen, 689 P.2d at 1238.
Universal denied coverage and McClafferty's own insurer defended the case. The
dealership also commenced an action against McClafferty and coverage issues arose in
third-party pleadings. Bill Atkin Volkswagen, 689 P.2d at 1238.
In pertinent part, the liability policy issued by Universal extended coverage to any
person "required by law" to be an insured while using a covered automobile with the
dealer's permission. Bill Atkin Volkswagen, 689 P.2d at 1239. Universal argued that
61-6-301, MCA, did not require it to insure all permissive users and that the statute
was satisfied by McClafferty and Atkin VW each maintaining coverage. Bill Atkin
Volkswagen, 689 P.2d at 1239. The district court concluded that 61-6-301, MCA,
requires an automobile dealer to provide liability coverage for permissive users and, as
a result, that McClafferty was an insured under the Universal policy. Bill Atkin
Volkswagen, 689 P.2d at 1240.
On appeal by Universal, we determined that 61-6-301, MCA, requires coverage
by the owner where a vehicle is operated with the owner's permission, observing that no
statutory exception existed for situations in which the operator was covered under a
separate liability policy. Thus, the fact that the operator of the vehicle maintained his
own policy did not exempt the owner from the statutory requirement of insuring against
liability resulting from permissive use of its vehicles. Bill Atkin Volkswagen, 689 P.2d
at 1239. Because 61-6-301, MCA, required Atkin VW to maintain a liability insurance
policy extending coverage to a person using a loaner vehicle with the dealer's permission,
we held that McClafferty was an "insured" under the Universal policy defining insured
as any person required by law to be an insured. Bill Atkin Volkswagen, 689 P.2d at
1240.
Our holding in Bill Atkin Volkswagen does not resolve the question presently
before us. We did nothing more in Bill Atkin Volkswagen than reiterate the statutory
language contained in 61-6-301, MCA, determine that no statutory exception existed
for a permissive user who had his own liability policy, and apply the statute to the facts
before us. Because 61-6-301, MCA, required coverage, the permissive user was an
insured under the Universal policy definition of insured as "any person required by law
to be an insured."
Here, the Chrysler policy maintained by Haggarty contains substantially different
language. It first defines "insured" to include all permissive users of Haggarty's vehicles.
This language clearly meets the requirements of 61-6-301, MCA, and Bill Atkin
Volkswagen. The Chrysler policy goes on, however, to exclude permissive use
customers such as Swank from the definition of insured; it then extends coverage to her
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-173%20Opinion.htm (3 of 6)4/11/2007 2:37:45 PM
96-173
if, and to the extent, other insurance is not available which meets the mandatory
minimum coverage required by Montana law. Thus, the threshold issue is whether this
exclusion-limitation language in the Chrysler policy satisfies the requirements of 61-6-
301, MCA.
As set forth above, 61-6-301(1), MCA, requires the owner of a vehicle operated
with its permission to continuously provide insurance against loss resulting from liability
caused by use of the vehicle in an amount not less than that required by 61-6-103,
MCA. This plain statutory language requires Haggarty's Chrysler policy to provide
coverage to any person operating a covered auto with Haggarty's permission in an
amount not less than the statutory minimum.
The Chrysler policy at issue, however, extends coverage to permissive use
customers of Haggarty-owned vehicles only if they are uninsured or underinsured and,
in that event, coverage is provided only up to the statutorily-mandated minimum. It is
clear that the Chrysler policy does not extend coverage to any customer using a Haggarty-
owned vehicle with its permission. It initially excludes customers and then extends
coverage only to certain of those customers; namely, permissive use customers who do
not provide their own liability coverage or who are underinsured. It is equally clear that,
as to those underinsured customers to whom coverage is extended, the coverage extended
may be less than that required by statute in Montana by virtue of the language limiting
coverage to "the amount by which the compulsory or financial responsibility law limits
exceed the limit of their other insurance." In this regard, the Chrysler policy sets a
"ceiling" level of coverage rather than the "floor"--or minimum--amount of coverage
required by the "not less than" language in 61-6-301(1), MCA, and that ceiling level
of coverage can be less than the statutory minimum. We conclude that the definition of
"insured" contained in the Chrysler policy does not meet the requirements of 61-6-
301(1), MCA.
Our prior decisions interpreting insurance policies in the context of mandatory
liability coverage establish that policy language which excludes statutorily-mandated
coverage is void as contrary to public policy. Allstate Ins. Co. v. Hankinson (1990), 244
Mont. 1, 4, 795 P.2d 480, 482 (citing Horace Mann Ins. v. Hampton (1989), 235 Mont.
354, 767 P.2d 343; Iowa Mutual Ins. Co. v. Davis (1988), 231 Mont. 166, 752 P.2d
166). On that basis, it is clear that the exclusion-limitation language in the Chrysler
policy is void as contrary to public policy and unenforceable, because that language
excludes or limits coverage mandated by 61-6-301(1), MCA, for permissive operators
of vehicles.
The effect of our conclusion that the exclusion-limitation portions of the definition
of an insured in the Chrysler policy are void and unenforceable remains to be resolved.
Chrysler argues that, in the event we determine there is coverage for Swank under its
policy, coverage is limited to the minimum amount of coverage mandated by 61-6-103
and 61-6-301, MCA. Swank contends that the full general liability policy limits
contained in the Chrysler policy apply.
We recently rejected the argument Chrysler advances here. In Leibrand v. Nat.
Farmers Union (1995), 272 Mont. 1, 10-11, 898 P.2d 1220, 1226, we determined that
certain amendatory policy endorsements were unenforceable and then addressed the effect
of that determination on the amount of coverage to be extended. Addressing the insurers'
argument that the unenforceable provisions were invalid only to the extent coverage was
required under Montana's mandatory liability protection laws, we adopted as "more
persuasive [that line of cases] which hold that when insurance policy exclusions are
unenforceable, the policy should be enforced according to the remainder of its terms."
We quoted at length from Meyer v. State Farm Mutual Auto Ins. Co. (Colo. 1984), 689
P.2d 585, where, in the context of policy language invalid by virtue of violating statutory
requirements, the Colorado Supreme Court stated that:
[O]ur choice of rules is supported by the well-established principle of
contract law that where a provision in a contract is void because it is
contrary to public policy, the remaining portions of the agreement are
enforceable to the extent the illegal provision can be separated from the
valid promises. [Citations omitted.]
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-173%20Opinion.htm (4 of 6)4/11/2007 2:37:45 PM
96-173
Leibrand, 898 P.2d at 1226 (citing Meyer, 689 P.2d at 593). On that basis, we
concluded that the full amount of general liability coverage in the policies at issue was
available to the insureds. Leibrand, 898 P.2d at 1227.
Applying Leibrand to the present case, we conclude that the void and
unenforceable exclusion-limitation language relating to Haggarty's permissive use
customers in the Chrysler policy can be easily separated from the remaining portions of
the policy. Deleting those offending provisions leaves an insured defined, in pertinent
part, as "[a]nyone else while using with your permission a covered 'auto' . . . ." This
definition of insured fully meets the requirements of 61-6-301, MCA, and Bill Atkin
Volkswagen. We conclude, therefore, that Swank must be extended coverage to the full
amount provided for under the general liability amount contained in the Chrysler policy.
Nor, in light of Leibrand, can Chrysler limit its liability exposure by relying on
the Montana endorsement in its policy which states that any policy provision not
conforming to the minimum requirements of a Montana statute "is amended to conform
to such statute." Leibrand is controlling and requires that Chrysler extend coverage to
the policy limits. Leibrand, 898 P.2d at 1226-27. We have "conformed" the Chrysler
policy accordingly. At most, application of Leibrand's mandate that the policy be
enforced "according to the remainder of its terms" would result in a conflict between the
provision limiting Chrysler's responsibility to the statutory minimum and the general
liability limits provision. In such a circumstance, the legislative intent to maximize rather
than minimize coverage (see Leibrand, 898 P.2d at 1226 (citing Meyer, 689 P.2d at 593))
would necessitate extending coverage in the larger amount. To do otherwise would
permit Chrysler to limit its liability to the statutory minimum after having failed in its
effort, through artful drafting, to avoid the statutory requirements altogether or limit those
requirements in a manner not authorized by statute.
The final question before us is how coverage for Swank should be coordinated
between the Farmers and Chrysler policies. Recalling that the vehicle Swank was driving
in this case was owned by Haggarty, not Swank, we turn first to the language contained
in each policy. Swank's Farmers policy states that the insurance it provides for any
vehicle not owned by Swank "shall be excess over any other collectible insurance." The
Chrysler policy's "Other Insurance" clause provides that "[f]or any covered 'auto' you
own, this Coverage Form provides primary insurance[;]" it also contains a pro rata share
provision in the event the Chrysler policy and any other policy "covers on the same basis,
either excess or primary . . . . "
The language of both policies is clear and unambiguous and, when applied to the
facts of this case, produces consistent results. Swank was driving a vehicle not owned
by her at the time of her accident with May. Furthermore, based on our earlier
conclusion, the Chrysler policy provides collectible insurance other than Swank's Farmers
policy. Thus, pursuant to the Farmers "Other Insurance" provision, the Farmers
insurance is excess over the Chrysler insurance. The Chrysler policy, on the other hand,
states clearly that, for any covered auto "you own," it provides primary insurance.
"You" is defined as the named insured, Haggarty, and it is undisputed that Haggarty
owned the vehicle Swank was driving at the time of the accident. Thus, pursuant to its
terms, the Chrysler policy provides primary coverage.
Chrysler contends that, because its policy does not afford coverage to a Haggarty
permissive use customer operating a Haggarty-owned vehicle who has her own policy,
the vehicle was not a "covered auto" under the terms of the policy. This contention is
not further developed, explained or supported. Having concluded above that the Chrysler
policy must extend coverage to Swank, we need not attempt to decipher the meaning of
this contention or address it further.
Chrysler also contends that the pro rata share provision in its policy is applicable
by its terms and pursuant to Bill Atkin Volkswagen. First, we observe that Chrysler
characterizes its policy as providing that "if there is other insurance for an accident, that
Chrysler will not be 'primary,' but instead it will pay pro rata with the other company."
The actual policy language differs significantly from Chrysler's paraphrasing of it,
however; it states that "[w]hen this Coverage Form and any other Coverage Form or
policy covers on the same basis, either excess or primary, we will pay only our share."
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-173%20Opinion.htm (5 of 6)4/11/2007 2:37:45 PM
96-173
(Emphasis added.) We concluded above that, pursuant to the plain language of both
policies, the Chrysler policy provides primary coverage and the Farmers policy provides
excess coverage. Thus, this case does not involve two policies covering "on the same
basis, either excess or primary" and, therefore, the pro rata share provision in the
Chrysler policy is inapplicable. Moreover, the Bill Atkin Volkswagen discussion of pro
rata sharing is inapposite here. There, we held that where both the vehicle owner's
policy coverage and the operator's policy coverage are excess with respect to a particular
event, each insurer is liable for a pro rata share of the loss. Bill Atkin Volkswagen, 689
P.2d at 1242. Again, because the Farmers and Chrysler policies do not provide coverage
on the same basis, a pro rata sharing of coverage does not result here. Based on the
plain language of the two policies, we conclude that Chrysler must provide primary
coverage to Swank up to its policy limits, with Farmers responsible for excess coverage.
We hold that the District Court erred in granting Chrysler's motion for summary
judgment.
As a final matter, we observe that, where all of the facts bearing on the resolution
of the legal issues are before us, this Court has the power to reverse a district court's
grant of summary judgment and direct it to enter summary judgment in favor of the other
party. Matter of Estate of Langendorf (1993), 262 Mont. 123, 128, 863 P.2d 434, 438;
Duensing v. Traveler's Companies (1993), 257 Mont. 376 386, 849 P.2d 203, 210. The
material facts in this case are undisputed and, indeed, both parties moved for summary
judgment in the District Court on that basis. For the reasons set forth herein, we hold
that Swank is entitled to summary judgment.
Reversed and remanded for entry of summary judgment in Swank's favor
consistent with this opinion.
/S/ KARLA M. GRAY
We concur:
/S/ J. A. TURNAGE
/S/ WILLIAM E. HUNT, SR.
/S/ JIM REGNIER
/S/ JAMES C. NELSON
/S/ TERRY N. TRIEWEILER
/S/ W. WILLIAM LEAPHART
file:///C|/Documents%20and%20Settings/cu1046/Desktop/opinions/96-173%20Opinion.htm (6 of 6)4/11/2007 2:37:45 PM