Universal Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co., No. 12692

• Docket Nº: No. 12692
• Citation: 166 Mont. 128, 531 P.2d 668, 32 St.Rep. 102
• Case Date: February 05, 1975
• Court: United States State Supreme Court of Montana

Page 668

531 P.2d 668 166 Mont. 128 UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a corporation,
Plaintiff and Respondent,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a
corporation, and Herbert Solle, Individually and as
Administrator of the Estates of David Solle and Gregory
Solle, Deceased, et al., Defendants and Appellants. No. 12692. Supreme Court of Montana. Submitted Sept. 11, 1974.
Decided Feb. 5, 1975.

[166 Mont. 130]

Page 670

Garlington, Lohn & Robinson, Sherman V. Lohn (argued), Worden, Thane, Haines & Williams, Shelton C. Williams (argued), Ronald A. Bender (argued), Missoula, Longan, Holmstrom & Cebull, Billings, for defendants and appellants.

Anderson, Symmes, Forbes, Peete & Brown, Rockwood Brown, Jr. (argued), Billings, for plaintiff and respondent.

DALY, Justice.

Plaintiff Universal Underwriters Insurance Company filed its complaint June 12, 1973, in the district court, Missoula County, seeking declaratory relief. All of the defendants appeared and filed answers. It was agreed between the parties that the matter would be submitted upon an agreed statement of facts.

The court on November 13, 1973, entered its findings of fact, conclusions of law and judgment declaring that defendants John D'Orazi, Sr., Darlyene D'Orazi and John Zachary D'Orazi, Jr., were not persons insured under the garage liability insurance policy issued by Universal Underwriters Insurance Company to Cislo Cheverolet-Olds, Inc., and that plaintiff was not liable for any acts or omissions of the D'Orazis pertaining to an accident which occurred on October 19, 1971, nor any damages or claims arising therefrom. It further declared that plaintiff was not liable to defend D'Orazis, or any thereof, against the civil action brought by Herbert Solle against the D'Orazis pertaining to the deaths of David and Gregory Solle, nor pay the costs of defense thereof.

Defendant Solle filed exceptions to the findings of fact, conclusions[166 Mont. 131] of law and the judgment and was joined in such filing by defendant State Farm Mutual Automobile Insurance Co. The court overruled Solle's and State Farm's exceptions. Thereafter all defendants appealed.

The agreed facts are: On or about April 1970, one Jane Howard Purchased an automobile from Courtesy Chevrolet-Olds, Inc. of Polson, Montana, and traded in a 1962 Mercury Monterey automobile, identification number 2Z67Z518891. She delivered the title certificate for the 1962 Mercury, notarized and endorsed in blank, to Courtesy. Around June 1970, Courtesy sold the Mercury to one Don Tidwell and delivered the title certificate to Tidwell, without executing the assignment, notarizing it, or forwarding the certificate of ownership, certificate of registration, and an application for registration to the state registrar of motor vehicles as required by section 53-109, R.C.M.1947.

In August 1970, Tidwell traded the 1962 Mercury to John D'Orazi, Sr., giving D'Orazi a bill of sale. On October 19, 1971, John D'Orazi, Jr., was driving the Mercury automobile in the city of Missoula when it collided with a motorcycle ridden by David Solle and his brother, Gregory Solle. As a result of the accident both David and Gregory Solle died.

Herbert Solle, individually and as administrator of the estates of David and Gregory Solle, filed in the district court, Missoula County, a combined wrongful death survival action. He named John Zachary D'Orazi, Jr., as a defendant based upon his negligent driving of the Mercury automobile and also named John D'Orazi, Sr., and Darlyene D'Orazi, the parents of John, Jr., on the basis of negligent entrustment as defendants. He claimed general, special, and punitive damages.

Page 671

At the time of the fatal accident defendant State Farm Mutual Automobile Insurance Company insured Herbert Solle under three automobile liability policies. Included in the coverage under each policy is uninsured motorist coverage. State Farm has agreed to pay Solle the sum of $40,000, allocation $30,000 to [166 Mont. 132] Gregory and $10,000 to David, in compromise of Solle's death claims under the uninsured motorist coverage provisions of the three policies which Solle carried with State Farm. The agreement also provides that Solle may pursue death claims against the D'Orazis, and in the event of judgment and recovery under the Universal Underwriters garage liability policy, State Farm would be entitled to subrogation against any recovery up to the amount of its $40,000 payment.

At the time of the accident there was in full force and effect a garage liability policy issued by Universal Underwriters to Cislo Chevrolet-Olds, Inc. (Countesy's successor). On or about March 2, 1973, Universal Underwriters received notice from defendants D'Orazi tendering defense of the Solle case and claiming coverage under Universal's garage liability policy on the grounds the 1962 Mercury automobile was still owned by Universal Underwriters' insured, by reason of its failure to process the transfer of title when the Mercury was sold to Don Tidwell in 1970. Universal Underwriters has denied coverage to D'Orazis but has assumed the defense of the underlying wrongful death and survival action upon an express reservation of rights and nonwaiver of its defenses under the policy. Paragraph V of the garage liability insurance policy containing the definition of 'persons Insured' provides:

'Each of the following is an insured under this insurance to the extent set forth below:

'* * *

'(3) with respect to the automobile hazard:

'(a) any partner, or paid employee, or director or stockholder thereof or a member of the household of the named insured or such partner or paid employee or director or stockholder while using an automobile covered by this policy or when legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission, and

'(b) any other person or organization legally responsible for [166 Mont. 133] the use thereof only while such automobile is physically operated by the...