Newbury v. State Farm Fire & Cas. Ins. Co.

• Decision Date: 01 May 2008
• Docket Number: No. DA 06-0036.,DA 06-0036.
• Citation: 184 P.3d 1021,2008 MT 156,343 Mont. 279
• Court: Montana Supreme Court
• Parties: Gerald NEWBURY, Plaintiff and Appellant, v. STATE FARM FIRE & CASUALTY INS. CO. OF BLOOMINGTON, ILLINOIS, licensed to do business in the State of Montana; and State Farm Mutual Automobile Ins. Co. of Bloomington, Illinois, licensed to do business in the State of Montana, Defendants and Appellees.

184 P.3d 1021

2008 MT 156

343 Mont. 279

Gerald NEWBURY, Plaintiff and Appellant, v. STATE FARM FIRE & CASUALTY INS. CO. OF BLOOMINGTON, ILLINOIS, licensed to do business in the State of Montana; and State Farm Mutual Automobile Ins. Co. of Bloomington, Illinois, licensed to do business in the State of Montana, Defendants and Appellees.

No. DA 06-0036.

Supreme Court of Montana.

Submitted on Briefs October 11, 2006.

Decided May 1, 2008.

For Appellant: Laurie Wallace, Bothe & Lauridsen, P.C., Columbia Falls, Montana.

For Appellees: Tracy Axelberg, Christensen, Moore, Cockrell, Cummins & Axelberg, P.C., Kalispell, Montana.

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

¶ 1 Gerald Newbury filed a complaint for declaratory relief seeking to have certain provisions in his automobile insurance policies declared void as against public policy and asking that State Farm Fire & Casualty Co. (State Farm) be required to pay outstanding medical expenses. The parties filed cross-motions for summary judgment. The District Court for the Eleventh Judicial District, Flathead County, granted State Farm's Motion for Summary Judgment and denied Newbury's Motion for Summary Judgment. Newbury appeals. We affirm.

¶ 2 Newbury raises three issues on appeal:

¶ 3 1. Whether the workers' compensation provisions in Newbury's policies are ambiguous.

¶ 4 2. Whether the workers' compensation provisions violate public policy by violating Newbury's reasonable expectations.

¶ 5 3. Whether the workers' compensation provisions violate public policy by defeating coverage for which valuable consideration has been paid.

Factual and Procedural Background

¶ 6 The facts in this matter are not in dispute. The parties submitted agreed facts which the District Court relied on in ruling on the parties' cross-motions for summary judgment. The agreed facts are summarized below.

¶ 7 Newbury worked for the Montana Highway Maintenance Department. On December 31, 1995, while plowing a stretch of highway, he came upon a vehicle in the ditch. As Newbury was attempting to assist the driver of the vehicle, the driver struck Newbury with the door of her car as she backed out of the ditch and fled the scene. Newbury was knocked down injuring his left arm and the left side of his back.

¶ 8 As a result of this incident, Newbury filed a claim for workers' compensation insurance benefits. The State Workers' Compensation Insurance Fund (State Fund) accepted the claim and paid medical benefits to Newbury. Between December 31, 1995, and December 31, 1998, Newbury incurred medical expenses of $18,405.80. Of that amount, the State Fund paid $17,230.00 in medical expenses "reduced by the schedule applied to workers' compensation claims." The State Fund did not pay the remaining $1,175.80 in medical expenses.

¶ 9 Newbury had two automobile insurance policies with State Farm. One policy covered Newbury's 1985 Honda Accord, and the other covered his 1985 Nissan pickup. These policies provided medical payment coverage of $5,000.00 per policy for reasonable medical expenses incurred within three years of a covered loss. Among other things, the policies provided that medical expenses are payable to the insured for bodily injury sustained "through being struck as a pedestrian by a motor vehicle or trailer." The policies also state that there is no coverage "to the extent workers' compensation benefits are required to be payable." Newbury paid separate premiums for each medical payment coverage.

¶ 10 On April 6, 2001, Newbury submitted a claim seeking payment of the full $10,000.00 in medical benefits from his State Farm policies. State Farm paid the remaining $1,175.80 for the medical expenses not paid by the State Fund. In the agreed facts, the parties stated that after the payments by the State Fund and State Farm, "there were no balances owing to Gerald Newbury's medical providers for services rendered from December 31, 1995 through December 31, 1998." The parties further stated that "[f]or all amounts paid by the [State Fund], [State Farm has] denied payment of medical benefits pursuant to the provision in the policies offsetting payments of benefits made by [the State Fund]."

¶ 11 Newbury filed a Complaint for Declaratory Relief on December 9, 2003, seeking to have the District Court declare the workers' compensation provision in both policies void as against public policy and order State Farm to pay the outstanding medical payment benefits in the amount of $8,824.20.¹ Newbury also sought the costs of suit and attorney fees. The parties stipulated to an agreed set of facts (as summarized above) and submitted cross-motions for summary judgment on October 18, 2004. The parties waived oral argument on their summary judgment motions.

¶ 12 The District Court issued an order on December 6, 2005, granting State Farm's Motion for Summary Judgment and denying Newbury's motion. In that order, the court determined that the language of the workers' compensation provisions in Newbury's State Farm policies was not ambiguous and, because the policies clearly demonstrated an intent to exclude coverage, Newbury's expectations did not meet the requirements of the reasonable expectation doctrine. The court also determined that because the premiums charged and collected by State Farm were for coverage of an insured's medical expenses — except to the extent that workers' compensation benefits are required to be payable — the exclusion did not negate coverage for which a premium had been paid. Consequently, the court concluded that the workers' compensation provision did not violate Montana public policy and was enforceable. The court further concluded that Newbury had not incurred any medical expenses that had not been paid for, thus he was not entitled to additional medical payment coverage.

¶ 13 Newbury appealed.

Standard of Review

¶ 14 Summary judgment is proper only when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Watkins Trust v. Lacosta, 2004 MT 144, ¶ 16, 321 Mont. 432, ¶ 16, 92 P.3d 620, ¶ 16 (citing M.R. Civ. P. 56(c)). Our standard in reviewing a district court's summary judgment ruling is de novo. Watkins Trust, ¶ 16 (citing Johnson v. Barrett, 1999 MT 176, ¶ 9, 295 Mont. 254, ¶ 9, 983 P.2d 925, ¶ 9; Stutzman v. Safeco Ins. Co. of America, 284 Mont. 372, 376, 945 P.2d 32, 34 (1997)). We use the same M.R. Civ. P. 56 criteria applied by the district court. Watkins Trust, ¶ 16 (citing Johnson, ¶ 9). Moreover, all reasonable inferences which may be drawn from the offered proof must be drawn in favor of the party opposing summary judgment. Watkins Trust, ¶ 16 (citing Johnson, ¶ 8; Schmidt v. Washington Contractors Group, 1998 MT 194, ¶ 7, 290 Mont. 276, ¶ 7, 964 P.2d 34, ¶ 7). If there is any doubt regarding the propriety of the summary judgment motion, it should be denied. 360 Ranch Corp. v. R & D Holding, 278 Mont. 487, 491, 926 P.2d 260, 262 (1996) (citing Whitehawk v. Clark, 238 Mont. 14, 18, 776 P.2d 484, 486-87 (1989)).

¶ 15 In addition, the interpretation of an insurance contract is a question of law for the court to decide. Montana Pet. Tank Comp. Bd. v. Crumley's, 2008 MT 2, ¶ 32, 341 Mont. 33, ¶ 32, 174 P.3d 948, ¶ 32 (citing State Farm Mut. Auto. Ins. Co. v. Gibson, 2007 MT 153, ¶ 9, 337 Mont. 509, ¶ 9, 163 P.3d 387, ¶ 9). We review a district court's conclusions of law to determine whether they are correct. Crumley's, ¶ 32.

Issue 1.

¶ 16 Whether the workers' compensation provisions in Newbury's policies are ambiguous.

¶ 17 Newbury argues that three ambiguities arise as a result of the language in the policies that coverage is excluded "to the extent worker's compensation benefits are required to be payable." First, he argues that the language itself is ambiguous, if not completely incomprehensible. He maintains that this phrase is subject to multiple interpretations because it is not defined anywhere in the policies, nor is it readily understandable by a reasonable consumer of insurance. Second, he argues that the language is ambiguous because the workers' compensation provision presents itself as an exclusion, but acts like an offset. Third, he argues that there is an ambiguity between this provision, the declarations pages, and the limits of liability provisions.

¶ 18 State Farm argues that Newbury seeks to create an ambiguity where none exists and that Newbury's purported inability to understand the provision does not render it ambiguous. State Farm maintains that, contrary to Newbury's assertions, the language in the policy is clear and unambiguous.

¶ 19 When interpreting an insurance policy, we read the policy as a whole and, if possible, we reconcile its various parts to give each one meaning and effect. Crumley's, ¶ 34 (citing Farmers Alliance Mut. Ins. Co. v. Holeman, 1998 MT 155, ¶ 25, 289 Mont. 312, ¶ 25, 961 P.2d 114, ¶ 25). The terms and words used in an insurance contract are to be given their usual meaning and construed using common sense. Mitchell v. State Farm Ins. Co., 2003 MT 102, ¶ 26, 315 Mont. 281, ¶ 26, 68 P.3d 703, ¶ 26 (citing Dakota Fire Ins. Co. v. Oie, 1998 MT 288, ¶ 5, 291 Mont. 486, ¶ 5, 968 P.2d 1126, ¶ 5). If the parties dispute the meaning of a term, we determine whether the term is ambiguous by viewing the policy from the viewpoint of a consumer with average intelligence not trained in the law or insurance business. Crumley's, ¶ 34. An ambiguity exists when the policy, taken as a whole, is reasonably subject to two different interpretations. Mitchell, ¶ 26 (citing Holeman, ¶ 25). However, this Court will not create an ambiguity in an insurance policy where none exists. Stutzman v. Safeco Ins. Co. of America, 284 Mont. 372, 379, 945 P.2d 32, 36 (1997) (citing Canal Ins. Co. v. Bunday, 249 Mont. 100, 106-07, 813 P.2d 974, 977-78 (1991); Farmers Alliance Mut. Ins. Co. v. Miller, 869 F.2d 509, 512 (9th Cir.1989)).

¶ 20 As to Newbury's first contention,...