Grimsrud v. Hagel, 04-256.

• Citation: 119 P.3d 47,2005 MT 194
• Decision Date: 15 August 2005
• Docket Number: No. 04-256.,04-256.
• Parties: Jay GRIMSRUD, Steve Wentz, and EMC Insurance Companies, subrogee, Plaintiffs and Appellants, v. Michael Frank HAGEL, Defendant and Cross-Appellant, v. State Farm Mutual Automobile Insurance Company, Intervener and Respondent.
• Court: Montana Supreme Court

119 P.3d 47

2005 MT 194

Jay GRIMSRUD, Steve Wentz, and EMC Insurance Companies, subrogee, Plaintiffs and Appellants, v. Michael Frank HAGEL, Defendant and Cross-Appellant, v. State Farm Mutual Automobile Insurance Company, Intervener and Respondent.

No. 04-256.

Supreme Court of Montana.

Submitted on Briefs November 23, 2004.

Decided August 15, 2005.

For Appellants: Lynn M. Grant, Peterson & Schofield, Billings, Montana.

For Cross-Appellant: Robert J. Savage, The Savage Law Firm, Sidney, Montana.

For Respondent: Randall G. Nelson, Nelson & Dahle, P.C., Billings, Montana.

Justice JOHN WARNER delivered the Opinion of the Court.

¶ 1 Michael Frank Hagel ("Hagel"), Defendant and Cross-Appellant, and Plaintiffs Jay Grimsrud ("Grimsrud"), Steve Wentz ("Wentz"), and EMC Insurance Company ("EMC"), appeal from an Amended Judgment entered February 18, 2004, in favor of State Farm Mutual Automobile Insurance Company ("State Farm"), based on an Order and Memorandum granting State Farm's motion for summary judgment. We affirm.

¶ 2 We address the following issues on appeal:

¶ 3 1. Did the District Court err in holding that the exclusion in State Farm's motor vehicle liability insurance policy for damage to property being transported by Hagel did not violate § 61-6-301(1)(a), MCA, which mandates motor vehicle insurance coverage?

¶ 4 2. Did the District Court err in not concluding that State Farm had a duty to defend Hagel in this lawsuit?

I. FACTUAL AND PROCEDURAL BACKGROUND

¶ 5 On February 24, 2002, Hagel, Grimsrud and Wentz were returning from a snowmobile trip on Interstate Highway 94 in Hagel's truck when they were involved in a multiple car accident about 12 miles east of Billings. Hagel admitted he negligently caused the accident. Hagel was towing a trailer that belonged to Wentz which contained two snowmobiles, one belonging to Grimsrud and the other to Wentz. Hagel struck a guard rail causing him to rebound into traffic where he was struck by approaching semi-trucks. As a result of the accident, in addition to damage to the vehicles and the guard rail, the trailer and the 2 snowmobiles were destroyed.

¶ 6 Multiple claims were filed against Hagel as a result of the accident. His State Farm insurance policy provided property damage liability coverage up to $50,000 per accident. The multiple claims exceeded Hagel's $50,000 policy limit. State Farm retained counsel to represent Hagel concerning the claims and to negotiate an apportioned settlement of the claims within policy limits. State Farm paid the policy limit for all claims it determined were covered under Hagel's property damage liability policy, and obtained releases.

¶ 7 State Farm determined that damage to the trailer itself was specifically covered pursuant to a clause in the policy which stated that "[t]railers designed to be pulled by a private passenger car or a utility vehicle ... are covered while owned or used by an insured." Accordingly, it paid Wentz's claim for the damage to the trailer as a part of the $50,000 property damage coverage.

¶ 8 State Farm denied coverage for the damage to the snowmobiles. It determined that an exclusion in the policy which said there was no coverage for "any damages to property owned by, rented to, in the charge of or transported by an insured" applied.

¶ 9 Damages for destruction of the snowmobiles was determined to be $16,600. Grimsrud and Wentz were each insured with EMC, which paid a total of $16,100 in first party claims. Grimsrud and Wentz both paid $250 deductibles.

¶ 10 On September 27, 2002, Grimsrud, Wentz and EMC (jointly referred to as "Claimants") demanded payment in writing from Hagel and State Farm in the amount of $16,600. Hagel and State Farm refused payment and Claimants filed suit to recover damages, costs and attorney's fees.

¶ 11 Hagel and State Farm exchanged numerous letters in which Hagel insisted State Farm pay the amount demanded by Claimants. State Farm consistently advised Hagel that the claims for destruction of the snowmobiles were excluded from liability coverage. State Farm also told Hagel that it would not defend him in any suit filed by the three Claimants to recover for loss of the snowmobiles.

¶ 12 On November 19, 2002, Claimants filed suit against Hagel. On December 6, 2002, State Farm filed a combined Motion to Intervene in the suit and Motion to Stay Proceedings against Hagel pending the District Court's determination of State Farm's obligation to provide coverage pursuant to its insurance policy with Hagel. Then, on January 8, 2003, Hagel filed a Confession of Judgment in which he admitted liability in the amount of $16,600 in property damage, $5,533.33 in attorney's fees, and $160 in court costs, for a total judgment of $22,293.33. On January 8, 2003, State Farm's Motion to Intervene and Motion to Stay Proceedings was heard. It was granted on February 7, 2003.

¶ 13 On February 13, 2003, State Farm filed a Motion for Partial Summary Judgment. Claimants filed a Cross-Motion for Partial Summary Judgment on March 7, 2003, and Hagel filed a Cross-Motion for Partial Summary Judgment on March 14, 2003. All parties agreed that there were no genuine issues of material fact and that the case was ripe for summary judgment. By order of November 7, 2003, the District Court granted State Farm's Motion for Partial Summary Judgment, and denied the other parties' motions. The amended judgment appealed from was entered February 23, 2004.

II. STANDARD OF REVIEW

¶ 14 This Court's review of a district court's grant of summary judgment is de novo. Farmers Union Mutual Ins. Co. v. Staples, 2004 MT 108, ¶ 18, 321 Mont. 99, ¶ 18, 90 P.3d 381, ¶ 18. Our evaluation is the same as that of the trial court. Staples, ¶ 18. We apply the criteria contained in Rule 56, M.R.Civ.P. Staples, ¶ 18. According to this rule, "[t]he moving party must establish both the absence of a genuine issue of material fact and entitlement to judgment as a matter of law." Staples, ¶ 18. If this is accomplished, "the burden then shifts to the non-moving party to prove, by more than mere denial and speculation, that a genuine issue does exist." Staples, ¶ 18. If the court determines that no genuine issues of fact exist, "the court must then determine whether the moving party is entitled to judgment as a matter of law." Staples, ¶ 18. We review legal determinations made by a district court to determine whether the conclusions are correct. Staples, ¶ 18.

III. DISCUSSION

ISSUE ONE

¶ 15 Did the District Court err in holding that the exclusion in State Farm's motor vehicle liability insurance policy for damage to property being transported by Hagel did not violate § 61-6-301(1)(a), MCA, which mandates motor vehicle insurance coverage?

¶ 16 There is no claim that the exclusion in State Farm's policy for property owned, used by, or in the care of Hagel is ambiguous, or that it does not exclude coverage for the snowmobiles in question. The three Claimants base their arguments only on the provisions of § 61-6-301(1)(a), the Mandatory Liability Protection Act ("MLPA")¹.

¶ 17 Claimants argue that State Farm's exclusionary clause violates § 61-6-301(1)(a), MCA, because it deprives Claimants of liability coverage. Section 61-6-301(1)(a), MCA, provides:

Except as provided in subsection (1)(b), an 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, 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.

¶ 18 Absent a statutory exception, an exclusion contrary to this Section is void and unenforceable. See Iowa Mutual Ins. Co. v. Davis (1988), 231 Mont. 166, 169, 752 P.2d 166, 168; Bill Atkin Volkswagen, Inc. v McClafferty (1984), 213 Mont. 99, 104, 689 P.2d 1237, 1239. However, the purpose of the MLPA is to protect the public from uncompensated losses arising from the use of a motor vehicle, and so long as the terms of an automobile liability policy provide the statutorily required coverage, an insurer and its insured are free to enter into an agreement that limits liability coverage to the extent that the agreement is otherwise lawful. Davis, 231 Mont. at 171-72, 752 P.2d at 170; Lewis v. Mid-Century Ins. Co. (1968), 152 Mont. 328, 335, 449 P.2d 679, 682.

¶ 19 The only exception to required coverage which is set forth in § 61-6-301, MCA, is contained in subsection (1)(b) which concerns exclusion of a named family member. This exclusion is not involved here. Thus, Claimants argue that the exclusion in the policy in question is unlawful.

¶ 20 However, § 61-6-103(5), MCA, provides:

A motor vehicle liability policy need not insure ... any liability for damage to property owned by, rented to, in charge of, or transported by the insured.

¶ 21 State Farm argues subsection (5) of § 61-6-103, MCA, is a statutory exception to the coverage requirements of a motor vehicle liability policy mandated by § 61-6-301(1)(a), MCA, and the exclusion in the policy in question is, therefore, valid.

¶ 22 In 1951, the Montana Safety-Responsibility Act,² now Title 61, Chapter 6, Part 1, was enacted. From its inception it contained the authorization for the exclusion of transported property set forth above. This portion of Title 61, Chapter 6, applies to those drivers who have "bad" records, and requires that they be insured. Between 1951 and 1979, only bad drivers were required to have liability insurance. Then, in 1979, § 61-6-301(1)(a), MCA, which in this case we call the MLPA, was enacted. It provides that every owner of a motor vehicle used and registered in Montana must provide a liability insurance policy covering such vehicle.

¶ 23 This Court has not previously decided the...