Kilby Butte Colony, Inc. v. State Farm Mutual Automobile Insurance Co.

10/10/2017
DA 17-0162
Case Number: DA 17-0162
IN THE SUPREME COURT OF THE STATE OF MONTANA
2017 MT 246
KILBY BUTTE COLONY, INC.,
Plaintiff and Appellant,
v.
STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
Defendant and Appellee.
APPEAL FROM: District Court of the Fourteenth Judicial District,
In and For the County of Musselshell, Cause No. DV-14-81
Honorable Randal I. Spaulding, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Torger S. Oaas, Attorney at Law, Lewistown, Montana
For Appellee:
Guy W. Rogers, Jon A. Wilson, Brown Law Firm, P.C., Billings, Montana
Submitted on Briefs: August 2, 2017
Decided: October 10, 2017
Filed:
__________________________________________
Clerk
Justice James Jeremiah Shea delivered the Opinion of the Court.
¶1 Plaintiff Kilby Butte Colony, Inc., (“Kilby Butte” or “Colony”) appeals the order
by the Fourteenth Judicial District Court, Musselshell County, denying its summary
judgment motion and granting summary judgment to Defendant State Farm Mutual
Automobile Insurance Company (“State Farm”). We address the following issue:
Whether the District Court erred by granting summary judgment to State Farm on
the grounds that the Stahls did not qualify as insureds under Kilby Butte Colony’s
State Farm Policy.
¶2 We affirm.
PROCEDURAL AND FACTUAL BACKGROUND
¶3 On December 15, 2013, Mary Ann and Ivan Stahl were injured in an automobile
accident when traveling in Saskatchewan, Canada. At the time of the accident, the
Stahls were passengers in a motor vehicle owned by a Canadian Hutterite Colony.
Another individual was at fault for the accident.
¶4 The Stahls are members of the Kilby Butte Hutterite Colony. Kilby Butte is a
Montana religious corporation with a community treasury that engages in business for the
common benefit of its members. Hutterite colony members own assets of the community
collectively; therefore, the Stahls cannot own a vehicle in their individual capacities.
Kilby Butte owns multiple vehicles all titled and insured in the Colony’s name. All of
the Colony’s auto insurance policies were purchased through State Farm at State Farm’s
agency office in Lewistown. No individual Colony members were listed as named
insureds on any vehicle owned by the Colony.
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¶5 The Colony submitted a claim to State Farm on behalf of the Stahls under its 2006
Freightliner Policy (“Policy”) that provided underinsured motorist coverage (“UIM
Coverage”) in the amount of $50,000 per person and $100,000 per accident. State Farm
declined the Stahls’ claim because the Stahls were not occupying the Freightliner at the
time of their accident and did not meet the definition of “insured” under the Policy. The
declaration page for the Policy listed the named insured as “Kilby Butte Colony.” The
UIM Coverage is detailed in Policy Form 9826A “State Farm Car Policy Booklet” as
follows (emphasis in the original):
Insuring Agreement
We will pay compensatory damages for bodily injury an insured is
legally entitled to recover from the owner or driver of an
underinsured motor vehicle. The bodily injury must be:
1. sustained by an insured; and
2. caused by an accident that involves the operation, maintenance, or
use of an underinsured motor vehicle as a motor vehicle.
Policy Form 9826A defines “insured” as follows in regards to UIM Coverage (emphasis
in the original):
Insured means:
1. you;
2. resident relatives;
3. any other person who is not insured for underinsured motor vehicle
coverage under another vehicle policy and only while that person is
occupying a car:
a. that is used within the scope of your consent;
b. the ownership, maintenance, or use of which is provided
liability coverage by one of the State Farm Companies; and
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c. that is either:
(1) owned by:
(a) the first person shown as a named insured on
the Declarations Page or that named insured’s
spouse who resides primarily with that named
insured; or
(b) any resident relative; or
(2) a temporary substitute car.
Such other person occupying a vehicle used to carry persons for a charge is
not an insured; and
4. any person who has not sustained a bodily injury but is entitled to
recover compensatory damages as a result of bodily injury to an
insured as defined in 1., 2., or 3. above.
Policy Form 6926A.2 “Amendatory Endorsement” amends the definition of “insured” in
regards to UIM Coverage as follows (emphasis in the original):
6. UNDERINSURED MOTOR VEHICLE COVERAGE
a. Additional Definitions
Item 3. of Insured is changed to read:
3. any other person who is not insured for
underinsured motor vehicle coverage under
another vehicle policy and only while that
person is occupying a vehicle that would
qualify as:
a. “your car”,
b. a “newly acquired car”, or
c. a “temporary substitute car”
as defined in Definitions of any vehicle policy
providing Liability Coverage issued by the
State Farm companies to you or any resident
relative. Such vehicle must be used within the
scope of your consent. Such other person
occupying a vehicle used to carry persons for a
charge is not an insured. . . .
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The Policy is also subject to Policy Form 6030BF.1 “Business Named Insured,” which
provides in pertinent part (emphasis in the original):
This endorsement is a part of the policy. Because of the type of named
insured shown on the Declarations Page of this policy and the changes
made below, all references to resident relatives and non-owned cars in
the policy are deleted. Except for the changes this endorsement makes, all
other provisions of the policy remain the same and apply to this
endorsement.
You or Your is changed to read:
You or Your means the named insured or named insureds shown on
the Declarations page.
Policy Form 6030BF.1 amends the definition of insured in regards to UIM Coverage as
(emphasis in the original):
4. UNINSURED MOTOR VEHICLE COVERAGE and
UNDERINSURED MOTOR VEHICLE COVERAGE
Additional Definitions
Insured is changed to read:
Insured means:
1. any person while occupying:
a. your car;
b. a newly acquired car; or
c. a temporary substitute car.
Such vehicle must be used within the scope of your
consent. Such person occupying a vehicle used to
carry persons for a charge is not an insured; and
2. you or any person entitled to recover compensatory
damages as a result of bodily injury to an insured
defined in item 1. above.
Policy Form 9826A defines “newly acquired car,” “occupying,” “owned by,” “temporary
substitute car,” and “your car” as (emphasis in the original):
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Newly Acquired Car means a car newly owned by you.
. . .
Occupying means in, on, entering, or exiting.
. . .
Owned By means:
1. owned by;
2. registered to; or
3. leased, if the lease is written for a period of 31 or more consecutive
days, to.
. . .
Temporary Substitute Car means a car that is in the lawful possession of
the person operating it and that:
1. replaces your car for a short time while your car is out of use due to
its:
a. breakdown;
b. repair;
c. servicing;
d. damage; or
e. theft; and
2. neither you nor the person operating it own or have registered.
. . .
Your Car means the vehicle shown under YOUR CAR on the Declarations
Page. Your Car does not include a vehicle that you no longer own or lease.
¶6 After State Farm declined the Colony’s UIM claim submitted on behalf of the
Stahls, the Colony filed suit. The parties filed cross-motions for summary judgment, and
the District Court held oral arguments on April 23, 2015. On March 1, 2017, the District
Court granted State Farm’s Motion for Summary Judgment, denied the Colony’s Motion,
and determined that the Stahls did not qualify for UIM Coverage because the Stahls did
not satisfy the definition of an “Insured” within the terms of the policy. Relying on
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Hanson v. Emp’rs Mut. Cas. Co., 336 F. Supp. 2d 1070 (D. Mont. 2004), Am. States Ins.
Co. v. Flathead Janitorial & Rug Servs., 2015 MT 239, 380 Mont. 308, 355 P.3d 735,
and Stonehocker v. Gulf Ins. Co., 2016 MT 78, 383 Mont. 140, 368 P.3d 1187, the
District Court held that “so long as an insurance policy is unambiguous, a claimant must
satisfy the policy definition of an insured in order to qualify for UIM Coverage. It is not
a violation of a claimant’s reasonable expectations for a corporate insurance policy to
restrict the class of insureds for which its policy provides coverage.”
STANDARDS OF REVIEW
¶7 We review a district court’s entry of summary judgment de novo. Stonehocker,
¶ 9 (citing McClue v. Safeco Ins. Co., 2015 MT 222, ¶ 8, 380 Mont. 204, 354 P.3d 604).
“Summary judgment is appropriate when the moving party demonstrates both the
absence of any genuine issues of material fact and entitlement to judgment as a matter of
law.” Stonehocker, ¶ 9 (citing M. R. Civ. P. 56). When there are cross-motions for
summary judgment, a district court must evaluate each party’s motion on its own merits.
Halenga v. Schwein, 2007 MT 80, ¶ 18, 336 Mont. 507, 155 P.3d 1242. On
cross-motions for summary judgment, where the district court is not called to resolve
factual disputes and only draw conclusions of law, we review the district court’s
conclusions of law to determine whether they are correct. Bud-Kal v. City of Kalispell,
2009 MT 93, ¶ 15, 350 Mont. 25, 204 P.3d 738.
¶8 The interpretation of an insurance contract is a question of law that we review de
novo to determine whether the district court is correct. Stonehocker, ¶ 10 (citing
Tidyman’s Mgmt. Servs. v. Davis, 2014 MT 205, ¶ 13, 376 Mont. 80, 330 P.3d 1139).
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DISCUSSION
¶9 Whether the District Court erred by granting summary judgment to State Farm on
the grounds that the Stahls did not qualify as “insureds” under Kilby Butte
Colony’s State Farm Policy.
¶10 We use the following approach to interpret insurance contracts:
General rules of contract law apply to insurance policies and we construe
them strictly against the insurer and in favor of the insured. Courts give the
terms and words used in an insurance contract their usual meaning and
construe them using common sense. Any ambiguity in an insurance policy
must be construed in favor of the insured and in favor of extending
coverage. An ambiguity exists where the contract, when taken as a whole,
reasonably is subject to two different interpretations. Courts should not,
however, seize upon certain and definite covenants expressed in plain
English with violent hands, and distort them so as to include a risk clearly
excluded by the insurance contract.
Mecca v. Farmers Ins, Exch., 2005 MT 260, ¶ 9, 329 Mont. 73, 122 P.3d 1190 (quoting
Travelers Cas. and Sur. Co. v. Ribi Immunochem Research, Inc., 2005 MT 50, ¶ 17,
326 Mont. 174, 108 P.3d 469). We read insurance policies as a whole and reconcile the
policy’s various parts to give each part meaning and effect. Section 33-15-316, MCA;
Newbury v. State Farm Fire & Cas. Co. of Bloomington, Ill., 2008 MT 156, ¶ 19, 343
Mont. 279, 184 P.3d 1021. We recognize the reasonable expectations doctrine and have
consistently held that the objectively reasonable expectations of insurance purchasers
regarding their policy terms should be honored, even if a painstaking study of the policy
negates expectations. When applying the doctrine, an insurance contract is to be
interpreted from the viewpoint of a consumer with average intelligence, with no training
in the law or insurance. Flathead Janitorial, ¶ 22 (citing Leibrand v. Nat’l Farmers
Union Prop. & Cas. Co., 272 Mont. 1, 7, 898 P.2d 1220, 1224 (1995)).
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¶11 Simply because a party claims a contract provision is ambiguous or disagrees with
the meaning of a provision does not make it so. Giacomelli v. Scottsdale Ins. Co., 2009
MT 418, ¶ 32, 354 Mont. 15, 221 P.3d 666. Courts will not distort the language of a
contract provision to create an ambiguity that does not exist. Giacomelli, ¶ 32.
¶12 The Colony contends that the Policy and its endorsements limit UIM Coverage to
injured persons who both own and occupy an insured motor vehicle. The Colony argues
that individual Colony members can never qualify for UIM Coverage because Colony
members cannot own Colony motor vehicles. Thus, the Colony contends the Policy’s
UIM Coverage is illusory. The Colony asserts the Stahls are entitled to the UIM
Coverage based on public policy considerations espoused in Chaffee v. U.S. Fidelity &
Guaranty Co., 181 Mont. 1, 591 P.2d 1102 (1979), and Bennett v. State Farm Mut. Auto.
Ins. Co., 261 Mont. 386, 389, 862 P.2d 1146, 1148 (1993) (“The public policy embodied
in these decisions is that an insurer may not place in an insurance policy a provision that
defeats coverage for which the insurer has received valuable consideration.”).
¶13 The Colony maintains UIM Coverage is “personal and portable” and is provided
even if the UIM claimant is not occupying an insured vehicle. See Mitchell v. State Farm
Ins. Co., 2003 MT 102, ¶ 40, 315 Mont. 281, 68 P.3d 703. An exception to this rule,
however, exists for corporate or business auto insurance policies that require occupancy
of the corporate owned vehicle as a condition of coverage. The problem with this
exception as applied to this case, the Colony argues, is that most individuals can purchase
UIM Coverage for themselves through their personal auto insurance policies. See
Stonehocker, ¶ 17; Flathead Janitorial, ¶¶ 18, 23; Chilberg v. Rose, 273 Mont. 414, 903
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P.2d 1377 (1995). Because Colony members, like the Stahls, cannot purchase personal
UIM Coverage, the Colony contends the Policy’s UIM Coverage remains illusory for
individual Colony members.
¶14 State Farm responds that the Stahls do not satisfy the Policy definition of
“insured” because they were not occupying a vehicle that satisfies the Policy definition of
“your car,” a “newly acquired car,” or a “temporary substitute car” at the time of their
accident. State Farm contends that corporate policies, such as the Colony’s, may restrict
the class of beneficiaries for which UIM Coverage is provided to individuals occupying
covered vehicles. See Stonehocker, ¶¶ 15-17; Flathead Janitorial, ¶¶ 18, 23; Hanson,
336 F. Supp. 2d at 1076. State Farm also contends this restriction is not a violation of the
Colony’s reasonable expectations under the plain language of the Policy. See Flathead
Janitorial, ¶ 22. Because the Stahls would be entitled to recover UIM Coverage had they
been occupying a vehicle that satisfies the Policy definition of “your car,” a “newly
acquired car,” or a “temporary substitute car” at the time of the accident, State Farm
argues the Policy does not provide illusory coverage. We agree.
¶15 The Stahls do not satisfy any definition of “insured” under the Policy. Nor were
the Stahls occupying a covered vehicle at the time of the accident. The Stahls would
qualify for UIM coverage under the Policy if they were occupying a Colony covered
vehicle at the time of the accident; thus, the Policy is not illusory, as the Colony claims.
The requirement that a Colony member occupy a covered vehicle to obtain UIM
Coverage is not a violation of its reasonable expectations of the Policy terms, even when
interpreting the Policy from the Colony’s viewpoint. Flathead Janitorial, ¶ 22. The
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Policy is a business or corporate policy, and “as long as it is legal for an insurer to sell an
automobile liability policy to a corporation, which is the named insured, it is legal for the
insurer to limit the class of covered individuals to those who are occupying covered
vehicles at the time they are injured.” Hanson, 336 F. Supp. 2d at 1076. “We have not
expanded coverage to injured persons involved in the corporation who are not occupying
vehicles covered under the policy at the time of the accident.” Stonehocker, ¶ 17
(quoting Lee v. Great Divide Ins. Co., 2008 MT 80, ¶ 16, 342 Mont. 147, 182 P.3d 41).
UIM Coverage is not so personal and portable that insurers are required to sell UIM
Coverage irrespective of an auto insurance policy. Hanson, 336 F. Supp. 2d at 1076.
CONCLUSION
¶16 The Colony contracted with State Farm for UIM Coverage to insure occupants of
its covered vehicles. The fact that the Stahls do not meet the definition of “insured”
because they were not in a covered vehicle at the time of their accident does not defeat
coverage and render any coverage State Farm promised to provide illusory. See
Newbury, ¶¶ 20, 27. The District Court did not err in finding the Stahls do not satisfy the
unambiguous definition of “insured” under UIM Coverage in the Policy and that they are
not entitled to those benefits. The District Court was correct in determining the Policy
did not provide illusory coverage. We affirm the District Court’s order granting State
Farm’s motion for summary judgment and denying the Colony’s motion for summary
judgment.
/S/ JAMES JEREMIAH SHEA
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We Concur:
/S/ MICHAEL E WHEAT
/S/ DIRK M. SANDEFUR
/S/ BETH BAKER
/S/ JIM RICE
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