Lee v. USAA Cas. Ins. Co.

Citation22 P.3d 631,304 Mont. 356,2001 MT 59
Decision Date16 April 2001
Docket NumberNo. 99-623.,99-623.
PartiesStephanie LEE, Plaintiff and Appellant, v. USAA CASUALTY INSURANCE CO., Defendant and Respondent.
CourtUnited States State Supreme Court of Montana

For Appellant: Alexander Blewett, III, Hoyt & Blewett, Great Falls, MT.

For Respondent: Richard J. Briski, Helena, MT.

Justice JAMES C. NELSON delivered the Opinion of the Court.

¶ 1 Stephanie Lee (Lee) appeals from a summary judgment entered by the Eighth Judicial District Court, Cascade County, in favor of USAA Casualty Insurance Co. (USAA), and the denial of her motion for summary judgment. Lee claims that she was entitled to under-insured motorist coverage under a USAA policy which insured two vehicles that she co-owned with the named insured on the policy. USAA maintains that, as a matter of law, Lee is not a named insured under its policy, and is therefore not entitled to under-insured motorist coverage.

¶ 2 We affirm in part, reverse in part, and remand.

¶ 3 Lee raises the following issues for this Court's review:

1. Did the District Court err in denying Lee's motion for summary judgment based on USAA's letter affirming coverage because Lee was a registered owner of both vehicles?
2. Did the District Court err in granting USAA's motion for summary judgment because an issue of fact existed concerning "notice" to USAA?
FACTUAL AND PROCEDURAL BACKGROUND

¶ 4 The origins of this dispute took shape prior to August 9, 1998, the date when Lee sustained injuries while riding in a taxi cab near the airport in New Orleans, Louisiana, after the taxi was rear-ended by another driver. The driver of the other vehicle, who was at fault, carried liability insurance with a $10,000 policy limit, which undisputedly served only to scratch the surface of compensating Lee for her injuries.

¶ 5 Prior to that date, her long-term co-habitating boyfriend or companion, David Hoss, purchased insurance from USAA, which covered two vehicles, a 1988 Acura and a 1989 Acura. It is undisputed that Hoss and Lee co-owned the two vehicles, as evidenced by certificates of title in the record. They had jointly owned the 1989 Acura since 1990, and purchased the 1988 Acura in 1997, with a certificate of title listing them as co-owners issued on February 17, 1998. It is also undisputed that although not married, Lee and Hoss have shared a household and parenting responsibilities for 14 years.

¶ 6 It is also undisputed that Lee was not expressly made a named insured on the USAA policy, and that the definitions of a "covered person" in the policy did not include a co-habitating partner, unless that person was driving or was a passenger in a "covered auto." In a typical fashion, the policy provided coverage for the named insured and his or her "spouse" and "family members," which it defined as persons related by blood, marriage, or adoption residing in the named insured's household.

¶ 7 Hoss's policy with USAA included underinsured motorist (UIM) coverage. This coverage did not necessarily require that the "covered person" must be driving or be a passenger in a "covered auto." Thus, the UIM coverage potentially extended to the factual circumstances described here, where Lee was occupying a taxi cab which was involved in an accident.

¶ 8 Following her accident in Louisiana, Lee filed an UIM claim, contending she was entitled to stack coverage under both covered vehicles, which would make $200,000 available to cover the injuries she sustained in the accident.

¶ 9 USAA does not now contest that such a policy coverage scenario would be possible if, in fact, Lee was a "covered person" under the UIM provision found in Hoss's policy. USAA's current position is that Lee is not a named insured, and as a matter of law is not a "covered person" under the relevant policy provisions. Therefore, according to USAA, it has no obligation or duty to treat her as such under any of the legal theories argued by Lee.

¶ 10 USAA's position, however, was not always so certain. For example, it is undisputed that on October 16, 1998, Larry Hutchison, a claims adjuster for USAA in Florida, wrote a letter to Lee's attorney in Great Falls requesting a copy of the titles for the two Acuras. Hoss and Lee complied. Hutchison then wrote to Lee's counsel, on November 12, stating that because Lee was a co-owner of the vehicles, "she would be entitled to the Underinsured Motorists coverage of our policy ..." Hutchison informed counsel for Lee, however, that USAA would exclude her from medical payment coverage, because the accident occurred during the course of her employment and therefore Workers' Compensation benefits were available. The letter also advised Lee of the condition that she must first exhaust coverage from the at-fault party as well as any underinsured motorist coverage available from the taxi cab company before USAA coverage would be extended.

¶ 11 On November 19, 1998, counsel for Lee sent a letter to Hutchison, informing USAA that Lee intended to stack UIM coverage limits. It is undisputed that on November 20, 1998, USAA changed its position, and implicitly informed Hoss that Lee, as a co-owner of the vehicles under his policy, was not entitled to UIM coverage; rather, she had only "limited coverage." USAA would later deny Lee's claim to UIM coverage under Hoss's policy.

¶ 12 Lee filed her complaint on February 8, 1999, claiming that she was entitled to underinsured motorist coverage under Hoss's USAA policy. She further claimed that she had or would soon settle her claim with the negligent driver in Louisiana for the $10,000 policy limit.

¶ 13 USAA filed an amended Answer on April 2, 1999. USAA asserted a blanket denial to Lee's claim. Lee alleges that USAA's first Answer, filed on March 28, is material here, because USAA allegedly admitted that Lee was entitled to coverage under its policy with Hoss.

¶ 14 Both parties filed motions for summary judgment. Lee filed her motion for summary judgment on April 9, 1999. USAA responded on May 2, and filed its own motion for summary judgment on June 7, 1999. A hearing took place on July 29, 1999. ¶ 15 At issue here are two documents presented by USAA at the hearing. The documents, bearing the dates January 15, 1996, and January 15, 1999, are copies of a "policy integrity form" apparently sent each year to insureds for the stated purpose of assuring that the insured pays "the correct amount" for the insurance policy. The form requests that the named insured "make any changes or corrections as necessary" and may add "a driver or a vehicle." The form also provides that if an insured makes changes, he or she should return the form; otherwise, the insured is specifically instructed to not return the form if no changes are made. The 1996 form, which was signed and dated by Hoss on October 25, 1995, showed that Hoss was the named insured under the USAA policy, and also the principal driver of a 1989 Acura and a 1983 Ford. Other than the location where the two vehicles would be garaged, no changes were made. The 1999 form affirms that Hoss is the named insured, identifies the two Acuras at issue here, and then shows a handwritten amendment that Lee is an additional driver, and a principal driver of the 1988 Acura.

¶ 16 USAA offered the "policy integrity forms" as proof that it had no knowledge that Lee was the owner or operator of either vehicle at the time the accident occurred. This position was adopted at the hearing in response to Lee's argument that USAA simply made a mistake, or a clerical omission, by not including her, as an owner of the vehicles, on the policies as a named insured.

¶ 17 In response to Lee's objection, the court stated it was accepting the introduction of only the 1996 form for the singular purpose of showing that Hoss had the opportunity each year to review the policy and make any changes. For this purpose, counsel for Lee stated that he did not have an objection—but insisted that the forms in no manner whatsoever should be used to imply that Hoss had withheld information, or otherwise had "dirty hands."

¶ 18 The District Court denied Lee's motion for summary judgment and granted USAA's motion for summary judgment on September 20, 1999. The court determined that Lee was not an "insured" for the purposes of UIM coverage pursuant to the express language of Hoss's policy with USAA. Thus, in terms of governing contract law, the court determined that Lee could not gain the benefit from a bargain to which she was not a party.

¶ 19 Next, the court addressed the issue of whether Montana statutes mandating vehicle liability coverage must be construed to place a duty on insurance carriers to cover, as "insureds," all registered owners of all vehicles the carrier insures. Lee contended that this duty existed whether or not an owner was a party to the insurance contract, a named insured, or otherwise identified in the policy. The court disagreed, and identified the public policy underlying the mandatory liability statutes at issue as one intended to compensate innocent third parties injured or damaged in an accident, rather than provide all vehicle owners with liability protection.

¶ 20 Thus, the court concluded that Hoss's policy with USAA complied with the statutory requirements, notwithstanding the fact that a co-owner of the vehicles was never identified in the policy. The court determined, therefore, that "[t]here are no statutes or public policy reasons for extending underinsured or uninsured motorist coverages to persons who are not either expressly parties to the insurance contract or passengers in a covered vehicle."

¶ 21 The court next addressed the issue of estoppel or judicial admission. Finding no evidence that Lee had relied on the Hutchison letter, the court determined that USAA was not estopped from denying UIM coverage. The court also determined, as a matter of law, that USAA's first Answer did not serve as a judicial admission.

¶ 22 Lee...

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