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

2017 MT 246, 403 P.3d 664, 389 Mont. 48, 2017 Mont. LEXIS 608

• Court: Montana Supreme Court
• Decided: October 10, 2017
• Docket: DA 17-0162
• Status: Published

Opinion

JUSTICE 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.

¶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

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....

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):

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 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).

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)).

¶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 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 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.

JUSTICES WHEAT, SANDEFUR, BAKER and RICE concur.