Lewis v. Mid-Century Ins. Co.

• Decision Date: 10 January 1969
• Docket Number: MID-CENTURY,No. 11428,11428
• Citation: 152 Mont. 328,449 P.2d 679
• Parties: Doris LEWIS, Guardian In behalf of Alice Leona Tafolla, Nadine Arline Tafolla, et al., Plaintiff, v.INSURANCE COMPANY, a corporation, Defendant.INSURANCE COMPANY, a corporation, Third-Party Plintiff, v. AMERICAN CASUALTY COMPANY et al., Third-Party Defendant.
• Court: Montana Supreme Court

Page 679

449 P.2d 679

152 Mont. 328

Doris LEWIS, Guardian In behalf of Alice Leona Tafolla, Nadine Arline Tafolla, et al., Plaintiff, v. MID-CENTURY INSURANCE COMPANY, a corporation, Defendant.

MID-CENTURY INSURANCE COMPANY, a corporation, Third-Party Plintiff, v. AMERICAN CASUALTY COMPANY et al., Third-Party Defendant.

No. 11428.

Supreme Court of Montana.

Submitted Oct. 14, 1968.

Decided Dec. 9, 1968.

As Modified on Denial of Rehearing Jan. 10, 1969.

Jones, Olsen & Christensen, Paul G. Olsen (argued), Billings, for plaintiffs.

Crowley, Kilbourne, Haughey, Hanson & Gallagher, Bruce R. Toole (argued), Billings, Jardine, Stephenson, Blewett & Weaver, John D. Stephenson, Jr. (argued), Great Falls, for defendants.

JAMES T. HARRISON, Chief Justice.

This is an original proceeding brought pursuant to Rule 1 of the Rules of the Montana Supreme Court wherein the United States District Court has requested this Court to decide certain issues specified in its order of December 15, 1967. The facts of the case may be summarized as follows:

Duane Tafolla had an automobile accident while driving a vehicle owned by Martin Stulc. At the time of the accident Stulc and Duane's wife, Darlene Tafolla, were passengers in the vehicle. Darlene was killed. The six minor children of Duane and Darlene, acting through a guardian, Doris Lewis, the plaintiff herein, recovered a judgment against Duane in the amount of $91,172.55 for the wrongful death of their mother.

At the time of the accident the Stulc vehicle was insured by American Casualty Company with $10,000/$20,000 limits. Duane was insured by Mid-Century Insurance Company in a policy with $25,000/$50,000 limits. American Casualty undertook the defense of the guardian's action, but before trial, and with the consent of Duane, settled with the guardian for $7,500 and abandoned the defense. Duane thereafter defended the case with his own counsel.

The guardian, to whom Duane assigned all of his rights, now seeks to recover from Mid-Century the amount of the judgment puls the attorney's fees for which Duane became obligated in the wrongful death action in the amount of $1,850.

The Mid-Century policy insuring Duane contained an exclusion as follows:

'to the liability for any insured for bodily injury to (a) any member of the same household of such insured except a servant, * * *'.

At the time of the accident Duane and Darlene and the children were members of the same household. Mid-Century did not defend the action, did not pay to defend it, and has refused to pay all or any part of the judgment.

After the guardian recovered the judgment in the state court the defendant, Mid-Century, certified to the supervisor of the Motor Vehicle Responsibility Law, on a standard form, SR-21, that Duane was insured on the day of the accident under a policy with limits at least equal to those required by the law.

Unable to execute and recover on the judgment against Duane, the plaintiff took an assignment from Duane of his rights against Mid-Century, his insurance carrier, and subsequently initiated an action in United States District Court against Mid-Century. Mid-Century then joined American Casualty as third-party defendant contending (1) that it was not liable because of the exclusion in the policy, and (2) that American Casualty would be liable as primary carrier on the Stulc vehicle.

A decision in the case being of importance because it would affect the interpretation of most of the standard form insurance policies in force in Montana and because Rule 1 provided a mechanism whereby some state questions pending in federal court might be answered by this Court, the United States District Court ordered the plaintiff to commence in this Court a declaratory judgment action as prescribed by Rule 1 and stayed all further proceedings in federal court pending a decision by us.

Subsequently we granted plaintiff's application for an order accepting jurisdiction and 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.

We previously recognized that '* * * there is a substantial conflict of authority as to whether the requirements of automobile liability insurance policies contained in these acts (i. e., Motor Vehicle Safety Responsibility Acts) apply to all automobile liability policies. See 8 A.L.R.3d 388 for a collection of cases from all jurisdictions.' Boldt v. State Farm Mutual Automobile Insurance Co., Mont., 443 P.2d 33 (1968), 25 St.Rep. 432. However, we choose to follow that line of cases that hold that exclusions such as the one in question here are not in contradiction to the statute, so long as the policy has not been certified as proof of financial responsibility under the act.

We have stated in the recent past in Northern Assurance Company v. Truck Insurance Exchange, Mont., 439 P.2d 760, 763 (1968), 25 St.Rep. 254, and in Boldt v. State Farm Mutual, supra, at 36, that 'In Montana you are not required to have liability insurance to get a driver's license or to drive. When you are required to obtain liability insurance then the requirements of section 53-438 are effective.' Also in the Northern Assurance Company case, supra, at 763, we noted that 'We find the exclusion is not violative of public policy, no showing having been made that this policy was issued to show proof of financial responsibility.' We now reaffirm what we said in those two cases.

The Montana Act, section 53-418, subd. 12, defines proof of financial responsibility as 'Proof of ability to respond in damages for liability, on account of accidents occurring subsequent to the effective date of said proof, arising out of the ownership, maintenance or use of a motor vehicle * * *.' The 'effective date of said proof' is the same as the date of the certification of proof of financial responsibility made to the supervisor. R.C.M.1947, section 53-436.

We have also said that generally speaking proof of financial responsibility is required '(1) if a judgment arising out of liability for damages in an automobile accident is outstanding and unsatisfied (subject to exceptions not pertinent to the instant case), section 53-430; or (2) in case of conviction or forfeiture of bail for certain driving offenses, section 53-434.' Boldt v. State Farm Mutual, supra, at 35. Neither of those conditions were present when the two policies in question here were issued so that the mandatory requirements of section 53-138, relating to policies issued as proof of future financial responsibility under the Act and eliminating policy defenses, never attached. Both of the policies here were simply ordinary ones voluntarily carried by a motorist. For that reason the household exclusion was not contrary to any public policy of Montana.

(2) 'Does the provision of the policy 'Terms of this policy which are in conflict with the statutes of the state wherein this policy is issued, are hereby amended to conform to such statutes' in effect incorporate section 53-438 and in effect eliminate the quoted exclusion?'

No...