Leibrand v. National Farmers Union Property and Cas. Co.

• Decision Date: 06 July 1995
• Docket Number: Nos. 94-416,94-503,s. 94-416
• Citation: 272 Mont. 1,898 P.2d 1220,52 St.Rep. 557
• Parties: Leslie LEIBRAND and Lois Leibrand, individually, and as the parents and next friends of Gordon Leibrand, a minor, Plaintiffs, v. NATIONAL FARMERS UNION PROPERTY AND CASUALTY CO., a corporation, Defendant. Eugene COLE and Mary Jo Cole, individually and as next friends of Lindsey Cole, a minor, Plaintiffs, v. TRUCK INSURANCE EXCHANGE, Defendant.
• Court: Montana Supreme Court

Page 1220

898 P.2d 1220

272 Mont. 1

Leslie LEIBRAND and Lois Leibrand, individually, and as the parents and next friends of Gordon Leibrand, a minor, Plaintiffs, v. NATIONAL FARMERS UNION PROPERTY AND CASUALTY CO., a

corporation, Defendant.

Eugene COLE and Mary Jo Cole, individually and as next

friends of Lindsey Cole, a minor, Plaintiffs, v. TRUCK INSURANCE EXCHANGE, Defendant.

Nos. 94-416, 94-503.

Supreme Court of Montana.

Submitted April 25, 1995.

Decided July 6, 1995.

Ira D. Eakin, Lynaugh, Fitzgerald, Eiselein & Eakin, Billings, for plaintiffs Leibrands.

Steven J. Harman, Brown, Gerbase, Cebull, Fulton, Harman & Ross, Billings, for plaintiffs Coles.

Don M. Hayes, Herndon, Hartman, Sweeney & Halverson, Billings, for defendant Nat. Farmers Union.

Shelton C. Williams and Richard Ranney, Williams & Ranney, Missoula, for defendant Truck Ins. Exchange.

TRIEWEILER, Justice.

These combined claims were either filed in or removed to the United States District Court for the District of Montana by the plaintiffs to recover the limits of liability coverage provided by the defendants pursuant to contracts of automobile liability insurance. The defendants denied that policy limits were recoverable, based on exclusions within each of the respective policies which limited recovery by a household member to the "limits of liability required by law." Pursuant to Rule 44, M.R.Civ.P., the United States District Court, in each case, certified the following question to this Court:

Is the amendatory endorsement at issue here and set forth in the agreed facts below, valid and enforceable?

We accepted certification of this issue and ordered that the certified cases be consolidated. After considering the issue presented, we conclude that the amendatory endorsements at issue are not valid and enforceable.

FACTUAL BACKGROUND

Leibrand v. National Farmers Union Property and Casualty Company

The following facts have been agreed upon by the parties:

Leslie Leibrand and Lois Leibrand are husband and wife and are the parents of Gordon Leibrand. At all times relevant, they resided together as a family unit at their home in Scobey, Montana.

The Leibrands have been continuously insured pursuant to an automobile liability insurance policy issued by the defendant, National Farmers Union Property and Casualty Company, since 1975. The "liability coverage" portion of that policy provided as follows:

We will pay damages for which any insured person is legally liable because of bodily injury and property damage arising out of the ownership, maintenance or use of a car or a utility trailer.

"Insured person" was defined to include the named insureds (Leslie and Lois) or a relative. The limit of liability coverage available per occurrence for each individual injured was specified to be $100,000. The record does not indicate that there was any change in these general liability provisions during the term of the Leibrands' policy.

The Leibrands' policy originally included the following exclusion: "This coverage does not apply to ... (10) bodily injury to any insured person."

In 1983, we decided Transamerica Ins. v. Royle (1983), 202 Mont. 173, 656 P.2d 820. In that case, we held that household exclusion clauses, like the one included in the Leibrand policy, were void and unenforceable, based on § 61-6-301(1), MCA, which requires that motorists carry insurance against loss resulting from liability suffered by any person. In 1991, when the Leibrands renewed their automobile insurance policy, they were provided with an "amendatory endorsement" which provided that:

1. Exclusion (10) under part 1, Liability, is replaced by the following:

(10) bodily injury to you or any relative to the extent the limits of liability of this policy exceed the limits of liability required by law.

At the time of subsequent policy renewals, the Leibrands were provided with a declarations page which stated that "[l]iability payments to household members are limited to the Financial Responsibility limits of the policy state."

On November 22, 1992, Gordon Leibrand was injured while riding in an insured vehicle being driven by his mother, Lois. He suffered injuries, which are alleged to be serious, and has sustained substantial damages. He has alleged that his damages resulted from Lois Leibrand's negligence. The Leibrands have made demand for payment to Gordon pursuant to their liability policy for the full $100,000 of coverage provided pursuant to the policy's general liability provisions. National Farmers Union has paid the sum of $25,000, but pursuant to its amendatory endorsement, has refused to pay any additional amount.

Cole v. Truck Insurance Exchange

In this case, the parties have stipulated to the following facts:

The plaintiffs, Eugene Cole and Mary Jo Cole, are husband and wife and are the parents of Lindsey Cole. At all times relevant to their claim, the Coles have lived together as a family at their residence in Manhattan, Montana.

Prior to 1991, the Coles were insured by an automobile liability insurance policy issued by Truck Insurance Exchange. In 1991, they were issued a new policy by the same company which included the following language:

We shall pay damages for which any insured is legally liable because of bodily injury or property damage caused by an occurrence arising out of the ownership, maintenance or use of any automobile.

Insureds were defined to include the policy holder, any family member, or any person under the age of 21 who was a resident of the policy holders' household.

The following exclusion was included in the 1991 policy:

We do not cover Bodily Injury:

....

2. Arising out of the liability of any insured for bodily injury to you or a family member unless the law of the state where the insured resides specifically prohibits this exclusion.

Included with the 1991 policy was a document entitled "Endorsement S 7016, Montana First Edition." That endorsement provided that:

Under Section II--Liability and Medical Coverage--Exclusions--Coverage D1--Automobile Liability, Item 2 under "we do not cover bodily injury" is deleted and replaced as follows:

2. Arising out of the liability of any insured for bodily injury to you or a family member to the extent the limits of liability of this policy exceed the limits of liability required by law.

During each subsequent year, at the time of policy renewal, the Coles were provided with a "declarations page" which provided for bodily injury and property damage liability coverage in the amount of $500,000 for each occurrence.

On November 20, 1993, while the aforementioned policy was in effect, Lindsey Cole drove an insured vehicle into her mother and caused bodily injury which has resulted in medical expense in excess of $43,000. The Coles, on behalf of Mary Jo, have demanded that Truck Insurance Exchange pay her damages in the amount of the policy limits of $500,000. Truck Insurance Exchange has paid $25,000 to Mary Jo, but has denied further coverage based on the language in its endorsement S 7016.

Is the amendatory endorsement at issue here and set forth in the agreed facts valid and enforceable?

SUMMARY OF POSITIONS

When discussed collectively, the Leibrands and the Coles will hereafter be referred to as "insureds." National Farmers Union Property and Casualty and Truck Insurance Exchange will be referred to as "insurers."

The insureds contend that the language in both policies which limits coverage for claims made by household members to the "limits of liability required by law," rather than the liability limits provided for on their declaration pages, is void and unenforceable because (1) the language is unclear and ambiguous; (2) given the effect claimed by the insurers, the provisions would violate their reasonable expectations; and (3) limiting coverage for claims by household members, as opposed to other persons injured by an insured, violates the public policy of this state.

The insurers contend that (1) the language of the policy is not unclear because all Montana drivers are charged with the responsibility of knowing the limits of liability coverage they are required to carry by law; (2) any expectations contrary to the plain language of the policy were not reasonable; and (3) the public policy of this state is as set forth in Montana's mandatory liability protection statutes which only require that insurance policies provide coverage to household claimants in the minimum amount provided by statute.

Since we conclude that the provisions in question are unclear and ambiguous, we decline to reach the issues of whether the provisions would violate the insureds' reasonable expectations, or are void because contrary to the public policy of this state.

DISCUSSION

We have held that "the interpretation of an insurance contract is a question of law." Truck Ins. Exchange v. Nelson (1987), 228 Mont. 233, 236, 743 P.2d 572, 574.

Ambiguities in an insurance policy are construed against the insurer and exclusions or words of limitation in a policy must be strictly construed against the insurer. Bauer Ranch, Inc. v. Mountain West Farm Bureau (1985), 215 Mont. 153, 156, 695 P.2d 1307, 1309.

An insurance policy clause is ambiguous when different persons looking at the clause in light of its purpose cannot agree upon its meaning. Bauer Ranch, 695 P.2d at 1309 (citing Walker v. Fireman's Fund Ins. Co. (D.Mont.1967), 268 F.Supp. 899).

The insureds contend that the amendments to their policies which attempted to limit the amount of recovery by household members were unclear and ambiguous because no purchaser or consumer of insurance could determine from the four corners of the policy the extent of coverage being provided. They contend that in contrast to the specific dollar amounts of liability coverage provided for on the declaration pages of their policies, the average consumer would not know what "financial responsibility limits" or "limits of liability required by...