United States Fidelity & Guaranty Co. v. Wilcox

• Decision Date: 25 June 1979
• Docket Number: No. CV 77-55-GF.,CV 77-55-GF.
• Citation: 472 F. Supp. 74
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY, a Maryland Corporation, Plaintiff, v. Steven E. WILCOX, Linda White, John Lansford, as guardian of Linda White, James R. White, Cheryl Jenks, Khrista Callan, and Pamela Callan, Individually and as parent of Khrista Callan, Defendants.
• Court: U.S. District Court — District of Montana

472 F. Supp. 74

UNITED STATES FIDELITY AND GUARANTY COMPANY, a Maryland Corporation, Plaintiff, v.Steven E. WILCOX, Linda White, John Lansford, as guardian of Linda White, James R. White, Cheryl Jenks, Khrista Callan, and Pamela Callan, Individually and as parent of Khrista Callan, Defendants.

No. CV 77-55-GF.

United States District Court, D. Montana, Great Falls Division.

June 25, 1979.

Robert Emmons, Smith, Emmons, Baillie & Walsh, Great Falls, Mont., for plaintiff.

James S. Craven, Winston & Cashatt, Spokane, Wash., for defendants.

OPINION AND ORDER

RUSSELL E. SMITH, District Judge.

The plaintiff, United States Fidelity and Guaranty Company(USF&G), seeks a declaration of its rights under an insurance policy issued by it to 93 Chrysler-Plymouth, Inc.(93 Chrysler).In April 1974, 93 Chrysler leased a 1973 Chevrolet to one Steven E. Wilcox for 36 months.The lease provided that Wilcox should pay the taxes on the vehicle and provide insurance in specified amounts.Wilcox initially insured the car with State Farm Mutual, but he allowed the policy to lapse.On October 29, 1974, after the State Farm policy had lapsed,¹ Wilcox had a collision with another car, and, as a result, occupants of the other car, some of whom are defendants here, were injured.The questions are whether the USF&G policy covers Wilcox and whether USF&G is liable for the payment of damages to the injured persons.Wilcox has defaulted, and the case pends between USF&G and some of the injured parties.

There can be no question here but that the relationship between 93 Chrysler and Wilcox was one of lessor and lessee and that Wilcox, by express agreement, undertook to provide his own public liability insurance.The car leased by Wilcox was to be in his sole possession, and for all use purposes he was the owner of it.A perusal of the entire policy in no way suggests that USF&G intended by the policy in question to extend blanket coverage to all of the persons to whom 93 Chrysler might lease cars.The relationships of the parties here were not obscure.93 Chrysler was in an automobile leasing business, which meant that many drivers would be driving many 93 Chrysler cars.The risks involved were substantial, and it would not be expected that the coverage of risks generated by such a distinct business would be hidden in fine print.The problem is whether USF&G, in issuing a massive policy with multiple endorsements dealing with multiple coverages for multiple relationships, somehow stumbled into a liability which it did not expressly assume.

Defendants argue that the omnibus clause of the policy, contained in the comprehensive general liability section of the policy, provides coverage for Wilcox.The clause provides:

II PERSONS INSURED

Each of the following is an Insured under this insurance to the extent set forth below:

. . . . .

(e) with respect to the operation, for the purpose of locomotion upon a public highway, of mobile equipment registered under any motor vehicle registration law,

. . . . .

(ii) any other person while operating with the permission of the Named Insured any such equipment registered in the name of the Named Insured and any person or organization legally responsible for such operation, but only if there is no other valid and collectible insurance available, either on a primary or excess basis, to such person or organization.

It is the defendants' position that, since a person operating a leased vehicle operates it with the permission of the lessor, Wilcox falls within the broad definition of "persons insured" and that any attempt elsewhere in the policy to limit the omnibus coverage is contrary to public policy.In some jurisdictions where the law requires that each policy contain an omnibus clause, courts have held that it is contrary to public policy to limit the omnibus coverage.SeeCousineau v. United States,493 F.2d 692(9th Cir.1974);Metz v. Universal Underwriters Insurance Co.,10 Cal.3d 45, 109 Cal.Rptr. 698, 513 P.2d 922(1973).In Montana the Motor Vehicle Safety-Responsibility Act, Mont. Code Ann. §§ 61-6-101-61-6-151(1978), requires an omnibus clause only when a policy is issued for certification under the Act.The policy here was not issued for the purpose of certification under the Act.The exact question posed here was specifically answered by the Supreme Court of Montana at the request of this court.Thus, in Lewis v. Mid-Century Insurance Co.,152 Mont. 328, 331, 449 P.2d 679, 680-81(1969), the court said:

... the United States District Court certified to us five questions which it felt were controlling in the case.We now undertake to answer those five questions.

(1)"Does Section 53-438, R.C.M.1947, prohibit an insurer from inserting exclusions in an insurance policy if those exclusions are not mentioned in the section?"

No, unless the policy is certified to the supervisor as proof of financial responsibility under the Montana Vehicle Safety Responsibility Act.Absent such certification an insurer may insert exclusions in its policies which are not mentioned in section 53-438.²

The problem is whether coverage under the omnibus clause was excluded.An endorsement on the policy reads:

This endorsement modifies such insurance as is afforded by the provisions of the policy relating to

Comprehensive Automobile Liability

...