Universal Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 05 February 1975
• Docket Number: No. 12692,12692
• Citation: 166 Mont. 128,531 P.2d 668,32 St.Rep. 102
• Parties: 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.
• Court: Montana Supreme Court

Page 668

531 P.2d 668

166 Mont. 128

UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a corporationPlaintiff 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.

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.

PlaintiffUniversal 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 defendantsJohn 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 of law and the judgment and was joined in such filing by defendantState 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.

At the time of the fatal accident defendantState 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 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 the use thereof only while such automobile is physically operated by the named insured or any such partner or paid employee or director or stockholder, or member of the household of the named insured or partner or paid employee or director or stockholder, provided the actual use of the automobile is by the named insured or with his permission.'

Appellants present these issues for this Court's review:

1.Whether there is coverage for the defendants D'Orazi under the Universal Underwriters garage liability policy under the Safeco Insurance Co. v. Northwestern Mutual Insurance Co., Ostermiller v. Parker, and Irion v. Glenn Falls Insurance Co., cases?

2.Whether the person insured provision of the Universal Underwriters' policy is ambiguous and should be construed against the insurer?

3.Whether under the Owner's Responsibility Law (section 53-438, R.C.M.1947), the Universal Underwriters' garage policy must contain a mandatory omnibus clause?

4.Whether the limitation and/or exclusion of a permissive user from the definition of insured, as respondent contends, is a limitation or exclusion in an insurance contract which is unenforceable as being violative of public policy?

Appellants in their first issue contend this Court's decisions in Safeco Ins. Co. v. Northwestern Mutual Ins. Co., 142 Mont. 155, 382 P.2d 174;Ostermiller v. Parker, 152 Mont. 337, 451 P.2d 515;andIrion v. Glenn Falls Ins. Co., 154 Mont. 156, 461 P.2d 199, established the rule that if a car dealer fails to comply with section 53-109(c), R.S.M.1947, by failing to send to the registrar of motor vehicles a certificate of ownership, certificate of registration, plus an application for registration upon the sale of a car, and that car is involved in an accident, the automobile dealer's liability insurance policy covers the person driving the car, regardless of the language or limitations regarding coverage contained in the insurance policy.

This seems to go to the question of liability of the garage owner which is not at issue here.Here, the sole question to be determined is whether or not the 'garage' liability policy issued by Universal to Cislo Cheverolet-Olds, Inc.(formerly Courtesy) also insures the D'Orazis; which is a question of coverage.

The confusion arises because the three cases cited by appellants all had 'omnibus' clauses and coverage was not in issue but rather ownership was the central question to be determined.The three cases held, as a matter of law, that if the car dealer failed to comply with section 53-109(c), R.C.M.1947, then the title to that automobile remains with the car dealer, as in the case here.However, as in all cases of this nature, once ownership is established the language of the insurance contract in force governs the coverage available to a person claiming coverage, if any.The statute under consideration is not penal.

Appellant's issue No. 3 is no well taken inasmuch as public policy and this Court's interpretation of section 53-438, R.C.M.1947, are laid to rest in Northern Assurance Co. v. Truck Insurance Exchange, 151 Mont. 132, 439 P.2d 760, andinBoldt v. State Farm Mutual Auto. Ins. Co., 151 Mont. 337, 443 P.2d 33.Interestingly, counsel here for appellants Solle and State Farm were involved in Northern Assurance.There has been no showing in the instant case that the policy...