U.S. Specialty Ins. Co. v. Estate of Ward
| Decision Date | 26 March 2019 |
| Docket Number | OP 18-0373 |
| Citation | 395 Mont. 199,2019 MT 72,444 P.3d 381 |
| Court | Montana Supreme Court |
| Parties | U.S. SPECIALTY INSURANCE COMPANY, Plaintiff and Counter-Defendant, v. The ESTATE OF Darrell L. WARD and the Estate of Mark Melotz, Defendants. The Estate of Darrell L. Ward, Counter-Claimant, v. U.S. Specialty Insurance Company, Counter-Defendant. |
For Plaintiff and Counter-Defendant: Randall G. Nelson, Nelson Law Firm, P.C., Billings, Montana
For Defendant and Counter-Claimant Estate of Darrell L. Ward: Cory R. Laird, Robert T. Bell, Reep, Bell, Laird & Jasper, P.C., Missoula, Montana
For Defendant Estate of Mark Melotz: Timothy E. Dailey, Milodragovich, Dale & Steinbrenner, P.C., Missoula, Montana
For Amicus Curiae Aviation Insurance Association: James E. Ramsey, Cooling & Herbers, P.C., Kansas City, Missouri, Jacqueline T. Lenmark, Keller Law Firm, P.C., Helena, Montana
¶1 The United States District Court for the District of Montana certified a question to this Court to address the Estate of Darrell L. Ward’s third-party claim to stacked liability limits in an aircraft insurance policy that covered multiple aircraft. We accepted the question and have reformulated it pursuant to M. R. App. P. 15(4) as follows:
Is the Estate of Darrell L. Ward entitled to stack the limits of liability coverage for three separate aircraft under the terms of an insurance policy issued to the pilot of an aircraft in which Ward was a passenger at the time it crashed?
¶2 We conclude that the answer to the reformulated question is no.
¶3 Mark Melotz was piloting his aircraft, FAA Number N9936T, with Darrell Ward as a passenger. The plane crashed, and both Melotz and Ward were killed. At the time of the accident, Melotz insured N9936T and two other aircraft under one insurance policy issued by U.S. Specialty Insurance Company ("USSIC"). Melotz paid a separate premium for each aircraft.
¶4 The policy’s applicable coverage provision provides as follows:
The policy identifies each aircraft on the coverage identification page in item 6 with a $100,000 limit for "each person," and a $1,000,000 limit for "each occurrence," as follows:
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The policy defines an "occurrence" as "a sudden event ... involving the aircraft during the policy period, neither expected nor intended by you , that causes bodily injury ."
¶5 Following Ward’s death, USSIC paid Ward’s Estate $100,000—the per-passenger limit for bodily injury claims involving N9936T. The Estate argued that it was entitled to stack the coverage of each aircraft’s per-passenger limit, for a total of $300,000. USSIC filed a declaratory judgment action in the United States District Court for the District of Montana, seeking a declaration that it was under no duty or obligation to pay more than $100,000 to Ward’s Estate under the terms of the policy and that USSIC’s aircraft policy coverage for passengers cannot be stacked. The Estate and USSIC submitted cross-motions for summary judgment. The U.S. District Court certified to this Court the question of stacking insurance coverage limits in aviation cases.
¶6 M. R. App. P. 15(3) permits this Court to answer a question of law certified to it by another qualifying court. Our review of a certified question is "purely an interpretation of the law as applied to the agreed facts underlying the action." N. Pac. Ins. Co. v. Stucky , 2014 MT 299, ¶ 18, 377 Mont. 25, 338 P.3d 56 (internal citation omitted).
¶7 The interpretation of an insurance contract is a question of law. Fisher v. State Farm Mut. Auto. Ins. Co. , 2013 MT 208, ¶ 11, 371 Mont. 147, 305 P.3d 861. General rules of contract law apply to insurance policies. Kilby Butte Colony, Inc. v. State Farm Mut. Auto. Ins. Co. , 2017 MT 246, ¶ 10, 389 Mont. 48, 403 P.3d 664. "When interpreting an insurance contract, we accord the usual meaning to the terms and the words used, and we construe them using common sense." Fisher , ¶ 13 (citing Modroo v. Nationwide Mut. Fire Ins. Co. , 2008 MT 275, ¶ 23, 345 Mont. 262, 191 P.3d 389 ). An insurance contract is ambiguous if it is "reasonably subject to two different interpretations." Fisher , ¶ 15 (internal citations omitted). Whether a provision of an insurance contract is "reasonably susceptible to two different interpretations" is determined from "the viewpoint of a consumer with average intelligence, but untrained in the law or insurance business." Fisher , ¶ 15 (internal citations omitted). A provision is not ambiguous "just because a claimant says so or just because the parties disagree as to [its] meaning." Fisher , ¶ 15 (internal citations omitted).
¶8 The USSIC policy provides coverage in a "combined limit of liability for each occurrence which includes a lower limit for each passenger ." The Coverages and Limits of Liability table states, "The most we will pay under each coverage we provide is shown below for each aircraft." The policy defines aircraft as the aircraft shown on the Coverage Identification Page of the policy, where N9936T and two other aircraft are listed. The limit of liability for each aircraft is $100,000 for each passenger, up to a combined limit of $1,000,000 for each occurrence. An occurrence is a "sudden event ... involving the aircraft ... that causes bodily injury ." (Bold emphasis in original; italicized emphasis added). The policy does not define the word "involving," but a common-sense reading of that term makes plain that it refers to the aircraft that is a part of the sudden event that caused bodily injury. See Involve, Oxford English Dictionary (Compact ed. 1971) (). The aircraft that was part of the crash resulting in Ward’s and Melotz’s deaths was N9936T. Although the word "aircraft" could refer to either the singular or the plural, the provision must be read as a whole. See Farmers All. Mut. Ins. Co. v. Holeman , 1998 MT 155, ¶ 25, 289 Mont. 312, 961 P.2d 114. Reading the entire clause, it is unambiguous that the aircraft must be "involved" to be part of an occurrence.
¶9 An unambiguous insurance provision is enforced unless the provision violates public policy or is against good morals. Fisher , ¶ 25. Having determined that the USSIC policy unambiguously includes only the aircraft that is part of the sudden event, we next consider the Estate’s argument that public policy requires the stacking of the third-party liability coverage. "As a general rule, the Montana public policy is prescribed by the legislature through its enactment of statutes." Hardy v. Progressive Specialty Ins. Co. , 2003 MT 85, ¶ 32, 315 Mont. 107, 67 P.3d 892 (citing Duck Inn, Inc. v. Mont. St. Univ. , 285 Mont. 519, 523-24, 949 P.2d 1179, 1182 (1997) ).
¶10 Insurance provisions that violate express statutes are contrary to public policy and void. Fisher , ¶ 25. There is no Montana statute that applies specifically to aviation policies. Section 33-23-203(1), MCA, pertains to the stacking of coverage limits on "motor vehicle liability policies." Montana law defines both motor vehicle and aircraft. " ‘Motor vehicle’ means a vehicle propelled by its own power and designed primarily to transport persons or property on the highways of the state." Section 33-23-204(1)(a), MCA. " ‘Aircraft’ means a contrivance used or designed for navigation of or flight in the air." Section 67-1-101(4), MCA. Section 33-23-203, MCA, by its terms does not apply to aircraft liability policies. Indeed, Montana does not statutorily regulate aviation insurance in any manner. Compare with, e.g. , Haw. Admin. R. § 19-17.1-8 (); Md. Code Ann., Trans. § 5-1002 (). Further, the aircraft liability insurance requirements set forth by Congress apply only to air carriers and charter air carriers, not to general aviation aircraft.1 49 U.S.C. § 41112. Enactments of the Montana Legislature and Congress offer no guidance setting forth public policy regarding stacking of general aviation policies because neither has a statute governing the issue. No express statutes apply to the USSIC insurance policy, and it thus does not contravene any public policy set by statute.
¶11 As we observed in Fisher , ¶ 33, when there is no statute guiding the applicable policy, insurance provisions still may be against public policy and therefore void. We have, for example, voided insurance policies' subrogation clauses when they required the insured to reimburse contractual medical payments ("med-pay") benefits from their settlements with a third-party tortfeasor. See, e.g. , Youngblood v. Am. States Ins. Co. , 262 Mont. 391, 397, 866 P.2d 203, 206 (1993) ; Allstate Ins. Co. v. Reitler , 192 Mont. 351, 356, 628 P.2d 667, 670 (1981). We also have voided provisions that render coverage "illusory" by defeating coverage for which the insurer has received valuable consideration. Hardy , ¶¶ 38, 40 (citing Bennett v. State Farm Mut. Auto. Ins. Co. , 261 Mont. 386, 389, 862 P.2d 1146, 1148 (1993) ). In Hardy , the insured purchased a motor vehicle policy that provided $50,000 per person in underinsured motorist coverage for three separate vehicles. Hardy , ¶ 8. Due to an offset in...
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