Iowa Mut. Ins. Co. v. Davis
| Decision Date | 18 March 1988 |
| Docket Number | No. 87317,87317 |
| Citation | 231 Mont. 166,45 St.Rep. 514,752 P.2d 166 |
| Parties | IOWA MUTUAL INSURANCE COMPANY, Plaintiff, v. Jeffrey DAVIS and Curtis Beck, Defendants. |
| Court | Montana Supreme Court |
James E. Aiken and Steven T. Potts argued, Jardine, Stephenson, Blewett and Weaver, P.C., Great Falls, for plaintiff.
Gary M. Zadick argued, Ugrin, Alexander, Zadick and Slovak, Great Falls, Erik B. Thueson argued, Helena, for defendants.
William Conklin, Conklin, Nybo and LeVeque, P.C., Great Falls, for amicus curiae State Farm.
Iowa Mutual instituted a declaratory judgment action in United States District Court, Great Falls Division, to determine whether it is under any obligation to indemnify or defend Jeffrey Davis (Davis) in a personal injury suit brought by Curtis Beck (Beck). Beck brought suit against Davis in the District Court of the Eighth Judicial District, Cascade County. The United States District Court certified the following question of law for review by this Court pursuant to Rule 44, M.R.App.P.:
Do the provisions of Title 61, Chapter 6, Part 3, Montana Code Annotated, "Mandatory Liability Protection," prohibit exclusion of a named driver or drivers from coverage under a motor vehicle liability policy?
We answer the certified question in the affirmative.
The following facts are garnered from the parties' briefs. Beck was a passenger in an automobile driven by Davis and was injured when the vehicle left the road and crashed. The automobile was owned at the time by Jeffrey Davis' parents, Donald and Betty Davis. The younger Davis was operating the automobile with his parents' permission.
Iowa Mutual insured the Davis' 1964 Oldsmobile involved in the accident. On several occasions during the 1970s, Donald and Betty Davis requested that Jeffrey Davis be specifically excluded from insurance coverage during times that Jeffrey resided away from home. Mr. and Mrs. Davis excluded Jeffrey and their other children on these occasions ostensibly to reduce their insurance premiums. On February 1, 1980, the last of these exclusions, Iowa Mutual endorsement form 1607(a), was executed by Mr. Davis. Iowa Mutual's endorsement form 1607(a) provided the following:
It is agreed that all insurance and coverage under this policy shall be null and void with respect to any claims arising out of the operation, use, or occupancy of the automobile described in this policy, or out of the operation, use or occupancy of any other automobile to which the terms of this policy otherwise extends, by the following named person(s):
Jeffrey L. Davis (D.O.B. 12-03-59) & Alan Davis (D.O.B. 8-25-57) Sons of Insured.
Provided, however, this endorsement shall not be effective if the automobile is operated by the named insured or the described automobile is operated by any person other than Jeffrey or Alan and such operation of the described automobile is by and under the express permission of the named insured.
The Davis' never requested that Jeffrey again be added to their auto insurance policy.
Subsequent insurance policies issued to cover the 1964 Oldsmobile included a "declaration" section which incorporated the 1980 form 1607(a) endorsement by reference. The 1980 endorsement was in effect in this manner at the time of the accident in which Beck was injured. Iowa Mutual contends that Jeffrey Davis is excluded from his parents' insurance coverage and that it is under no obligation to indemnify or defend Jeffrey Davis in the Montana District Court action.
The parties cross-motioned for summary judgment in the U.S. District Court. On February 2, 1987, the U.S. District Court, the Honorable Judge Paul G. Hatfield presiding, issued a memorandum and order in favor of defendants Davis and Beck. Iowa Mutual then moved to vacate the U.S. District Court order and requested that the question be certified to this Court. The U.S. District Court vacated its February 2, 1987, order and certified the aforementioned question of law to this Court. This Court ordered simultaneous briefs from plaintiff Iowa Mutual and defendants Davis and Beck. State Farm Mutual Automobile Insurance Company filed an amicus brief in support of Iowa Mutual's position.
We note that each party attempts to rephrase the certified question to present other issues. Certain parties have also presented affidavits for the first time to this Court. The additional issues and facts are outside the scope of the certified question and will not, therefore, be addressed in this opinion. For future reference, arguments to this Court regarding questions of law certified under Rule 44, M.R.App.P., must be confined to the four corners of the question and facts as defined by the certifying court.
Iowa Mutual first contends that neither the express terms of Sec. 61-6-301, MCA, nor the statute's legislative history prohibit exclusion of named persons in a motor vehicle liability insurance policy. Section 61-6-301(1) and (2), MCA, provide as follows:
(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.
(2) A motor vehicle owner who prefers to post an indemnity bond with the department in lieu of obtaining a policy of liability insurance may do so. The bond shall guarantee that any loss resulting from liability imposed by law for bodily injury, death, or damage to property suffered by any person caused by accident and arising out of the operation, maintenance, and use of the motor vehicle sought to be registered shall be paid within 30 days after final judgment is entered establishing such liability. The indemnity bond shall guarantee payment in the amount provided for insurance under subsection (1).
Iowa Mutual argues that the above statute does not dictate the terms of a particular insurance policy, but merely requires motor vehicle owners to insure their vehicles. According to Iowa Mutual, named driver exclusions are valid because the mandatory liability protection laws do not expressly prohibit such exclusions.
This Court rejected a similar argument in Bill Atkin Volkswagen, Inc. v. McClafferty (Mont.1984), 689 P.2d 1237, 41 St.Rep. 1981. In Bill Atkin, McClafferty was involved in an automobile accident while he drove a "loaner" vehicle owned by an automobile dealership. The dealership sued McClafferty for damages to the "loaner" vehicle. The dealership's insurance carrier refused to defend McClafferty so McClafferty sued the insurance carrier as a third-party defendant. The district court ruled in McClafferty's favor and the dealership and its insurance carrier appealed.
The first issue on appeal in Bill Atkin was whether "section 61-6-301(1), MCA, require[s] that an automobile dealer maintain a liability policy extending coverage to a customer using a 'loaner' vehicle with the dealer's permission?" Bill Atkin, 689 P.2d at 1238-1239 (additions ours). The appellant insurance company argued that McClafferty was excluded from coverage under the dealership's insurance because Sec. 61-6-301, MCA, did not specifically require that coverage be extended under the circumstances. Bill Atkin, 689 P.2d at 1239. We disagreed with the appellant's argument and reasoned that there were no exceptions, other than those listed in Sec. 61-6-303, MCA, 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." Bill Atkin, at 1239, 1240 (citing Sec. 61-6-301(1), MCA). Similarly, the absence of a specific statutory prohibition on named driver exclusions in this case does not support Iowa Mutual's position.
Iowa Mutual and State Farm cite Rooney v. Agricultural Ins. Co. (1970), 156 Mont. 118, 476 P.2d 783, for the proposition that this Court has ruled that named driver exclusions are valid. Rooney, however, was decided more than eight years before the enactment of Montana's mandatory liability protection laws and is not persuasive.
To determine the validity of the named driver exclusion in this case, we must first consider the requirements of the mandatory liability insurance statutes and then compare those requirements with the terms of the insurance policy. Bain v. Gleason (Mont.1986), 726 P.2d 1153, 1155, 43 St.Rep. 1897, 1900. 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 [Sec. 61-6-103, MCA]." Bain, 726 P.2d at 1156 (); see also, Transamerica Ins. Co. v. Royle (1983), 202 Mont. 173, 656 P.2d 820 (). Insurance policy provisions which countermand or diminish the statutory requirements "nevertheless will be considered to provide the statutory requirements." Bain, at 1156. We will not depart from the public policy embodied in Montana's mandatory insurance protection laws.
Michigan's legislature has seen fit to allow named driver exclusions in insurance policies written in that state so long as the insured authorizes such an exclusion and the policy contains conspicuous notice of the exclusion. Mich.Comp.Laws Sec. 500.3009(2) (1987). Prior to the enactment of Mich.Comp.Laws, Sec. 500.3009(2), the courts of Michigan construed that state's motor vehicle responsibility laws to invalidate...
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