Stutzman v. Safeco Insurance Co. of America

96-699

No. 96-699

IN THE SUPREME COURT OF THE STATE OF MONTANA

1997

THERESA TURCOTTE STUTZMAN,

Plaintiff and Appellant,

v.

SAFECO INSURANCE COMPANY OF AMERICA,

Defendant and Respondent.

APPEAL FROM: District Court of the Eleventh Judicial District,

In and for the County of Flathead,

The Honorable Katherine R. Curtis, Judge presiding.

COUNSEL OF RECORD:

For Appellant:

Kenneth E. O'Brien (argued); Hash, O'Brien & Bartlett;

Kalispell, Montana

For Respondent:

Robert J. Phillips (argued); Phillips & Bohyer;

Missoula, Montana

Heard: June 24, 1997

Submitted: July 22, 1997

Decided: September 8, 1997

Filed:

______________________________________

Clerk

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Justice Jim Regnier delivered the opinion of the Court.

On October 11, 1995, plaintiff and appellant, Theresa Turcotte Stutzman,

formerly

Theresa Turcotte, filed an action in the District Court for the Eleventh Judicial

District

in Flathead County against Safeco Insurance Company of America to recover

underinsured motorist benefits pursuant to an automobile insurance policy issued by

Safeco in hers and her husband's names. Safeco subsequently moved for summary

judgment, and Stutzman filed a cross motion for partial summary judgment. On October

29, 1996, following review of the record, the District Court issued an order granting

Safeco's motion, and denying Stutzman's. Stutzman appeals the District Court's

order.

For the reasons stated below, we affirm.

This Court finds the following two issues dispositive on appeal:

1. Did the District Court err in concluding that the exclusionary language

contained in the Safeco policy's definition of an underinsured motor vehicle

effectively

precludes appellant from recovering underinsured motorist benefits?

2. Did the District Court err in determining that the definition of

underinsured

motor vehicle contained in the Safeco insurance policy does not violate public

policy or

the reasonable expectations of the insured?

FACTUAL BACKGROUND

The parties do not dispute the material facts in this case, as indicated by

their

respective motions for summary judgment. On November 5, 1992, Stutzman was injured

in a single-vehicle automobile accident near Marion, Montana. At the time of the

accident, Stutzman's husband, John Turcotte, was driving and Stutzman was a

passenger.

Due to Turcotte's negligence, the vehicle went off the road and overturned.

Stutzman

was injured as a result of the accident and claims damages in excess of $200,000.

Turcotte was the sole owner of the vehicle involved in the accident, and Stutzman had

never driven it herself.

At the time of the accident, Stutzman and Turcotte were the named insureds on an

automobile insurance policy issued by Safeco. The Safeco policy had a liability

coverage

limit of $100,000 and an underinsured motorist benefit limit of $100,000. In June

1993,

Safeco paid Stutzman the $100,000 liability limits provided for in the policy.

Stutzman

claims damages in excess of the $100,000 in liability coverage available, however,

and

is therefore seeking recovery of underinsured motorist benefits pursuant to the

Safeco

policy's underinsured motorist provision.

In October 1995, Stutzman filed the present action to recover underinsured

motorist benefits. On May 3, 1996, Safeco moved for summary judgment on the basis

that the policy's definition of underinsured motor vehicle precludes Stutzman from

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recovering underinsured benefits in this case. On May 20, 1996, Stutzman, in turn,

moved for partial summary judgment on a number of grounds, maintaining primarily that

the policy's definition of underinsured vehicle is unclear and ambiguous and stands

in

violation of public policy, as well as the reasonable expectations of the insured.

Following review of the record, the District Court granted Safeco's motion and denied

plaintiff's, concluding that the policy's exclusionary clause effectively prohibited

Stutzman

from recovering underinsured motorist benefits.

DISCUSSION

This Court's standard of review in appeals from summary judgment rulings is de

novo. Treichel v. State Farm Mut. Auto. Ins. Co. (Mont. 1997), 930 P.2d 661, 663,

54

St. Rep. 1, 2 (citing Motarie v. Northern Montana Joint Refuse Disposal Dist. (1995),

274 Mont. 239, 242, 907 P.2d 154, 156; Mead v. M.S.B., Inc. (1994), 264 Mont. 465,

470, 872 P.2d 782, 785). This Court reviews a summary judgment order entered

pursuant to Rule 56, M.R.Civ.P., based on the same criteria applied by the district

court.

Treichel, 930 P.2d at 663, 54 St. Rep. at 2 (citing Bruner v. Yellowstone County

(1995),

272 Mont. 261, 264, 900 P.2d 901, 903). See also Bartlett v. Allstate Ins. Co.

(Mont.

1996), 929 P.2d 227, 230, 53 St. Rep. 1300, 1301-02.

Moreover, in proving that summary judgment is appropriate:

The movant must demonstrate that no genuine issues of material fact exist.

Once this has been accomplished, the burden then shifts to the non-moving

party to prove by more than mere denial and speculation that a genuine

issue does exist. Having determined that genuine issues of material fact do

not exist, the court must then determine whether the moving party is

entitled to judgment as a matter of law. [This Court] reviews the legal

determinations made by a district court as to whether the court erred.

Bruner, 272 Mont. at 264-65, 900 P.2d at 903.

This Court has previously recognized that the "construction and interpretation

of

written agreements, including contracts" such as the one here, "is a question of law

for

the court to decide." Klawitter v. Dettmann (1994), 268 Mont. 275, 281, 886 P.2d

416,

420 (citing First Security Bank of Anaconda v. Vander Pas (1991), 250 Mont. 148,

152-

53, 818 P.2d 384, 387); see also Wellcome v. Home Ins. Co. (1993), 257 Mont. 354,

356, 849 P.2d 190, 192. This Court is bound to interpret the terms of this insurance

policy according to their usual, common sense meaning as viewed from the perspective

of a reasonable consumer of insurance products. See Duensing v. Traveler's Companies

(1993), 257 Mont. 376, 381, 849 P.2d 203, 206 (holding that "[i]n interpreting

insurance

contracts, the words of the policy are to be understood in their usual meaning;

common

sense controls.") Further, this Court may not rewrite the contract at issue, but

must

enforce it as written if its language is clear and explicit. Hurtt v. School Dist.

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No. 29,

Big Horn County (1986), 222 Mont. 415, 418-19, 723 P.2d 205, 207. This Court has

previously held that the interpretation of an insurance policy presents a question

of law.

Wellcome, 257 Mont. at 356, 849 P.2d at 192.

As noted above, the parties in the instant case do not dispute the relevant

facts.

Accordingly, this Court's review is limited to whether the District Court was

correct in

its interpretation of the terms of the Safeco insurance policy at issue and its

ruling upon

the parties' respective motions for summary judgment.

ISSUE 1

Did the District Court err in concluding that the exclusionary language

contained

in the Safeco policy's definition of an underinsured motor vehicle effectively

precludes

appellant from recovering underinsured motorist benefits?

Stutzman seeks a determination from this Court that she is entitled to recover

underinsured motorist benefits pursuant to the Safeco policy in effect at the time

of the

accident. With respect to underinsured motorist coverage, the policy provides that

Safeco will

pay all sums which the insured or his legal representative shall be legally

entitled to recover as damages from the owner or operator of an uninsured

or underinsured motor vehicle because of bodily injury, sickness or disease,

including death resulting therefrom, hereinafter called bodily injury,

sustained by the insured, caused by accident and arising out of the

ownership, maintenance or use of such uninsured or underinsured motor

vehicle . . . .

In other words, the policy provides underinsured motorist benefits if an insured

sustains

bodily injury caused by an underinsured motor vehicle. Here, Stutzman is an insured

who claims she sustained bodily injury in a single vehicle automobile accident

caused by

her husband, Turcotte's, negligent driving. Turcotte owned the vehicle involved in

the

accident and insured it with Safeco. Accordingly, in evaluating Stutzman's

entitlement

to underinsured motorist benefits in this case, this Court must next determine

whether the

vehicle involved in the accident qualifies as an underinsured motor vehicle pursuant

to

the terms of the policy.

The policy defines an underinsured motor vehicle as a

motor vehicle of any type to which a bodily injury liability bond or policy

applies at the time of the accident but the amount paid for bodily injury

under the bond or policy to an insured is not enough to pay the full amount

the insured is legally entitled to recover as damages.

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But underinsured motor vehicle does not include any motor vehicle: . . .

(3) owned by or furnished for the regular use of the named insured or any

relative . . . .

This third exclusion, which removes from the definition of an underinsured

vehicle

any vehicle "owned by or furnished for the regular use of the named insured or any

relative" proves critical to this Court's analysis. Indeed, the parties vigorously

dispute

the validity and applicability of this exclusionary provision.

Safeco contends that this exclusion clearly removes the vehicle involved in the

accident from the definition of underinsured motor vehicle on two grounds. First,

Safeco

argues the vehicle was "owned by the named insured" because it was owned by

Turcotte--

a named insured on the declarations page of the policy--and is thus excluded from the

definition of an underinsured motor vehicle. Second, Safeco argues that because

Stutzman and Turcotte, the vehicle's owner, were married at the time of the

accident, the

vehicle was owned by a relative of the named insured and is accordingly excluded from

the definition of an underinsured motor vehicle. Because we find Safeco's second

and

alternative argument dispositive, we need not address the question of whether the

vehicle

was owned by the named insured as contemplated by the policy's exclusionary clause.

We conclude, as did the District Court below, that the vehicle involved in the

accident was owned by a relative of the named insured and therefore cannot be

considered an underinsured motor vehicle pursuant to the terms of the policy. As

noted

above, the exclusion at issue provides that an underinsured motor vehicle does not

include

any motor vehicle owned by any relative of the named insured.

Safeco asserts that married persons are relatives within the clear and

unambiguous

terms of the Safeco policy, and that because the vehicle involved in the accident was

owned by Stutzman's husband, it was therefore owned by a relative of the named

insured.

In response, Stutzman argues that the Safeco policy fails to clearly define a spouse

as a

relative, and that the policy's definition of the term "relative" is ambiguous.

The policy defines a relative as follows: "'Relative' means a relative of the

named

insured who is a resident of the same household." As Stutzman correctly notes,

nowhere

does the policy specifically state whether Safeco intended the term "relative" to

include

blood relatives, relatives by marriage, or both. Stutzman argues that, had Safeco

intended to include married persons within its definition of "relative," it could

have

easily done so with explicit language to that effect. Safeco's failure to do so,

Stutzman

continues, creates an ambiguity which must be construed by this Court in her favor

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and

against the insurer.

Any ambiguity contained in an insurance policy will be strictly construed by

this

Court against the insurer. Leibrand v. National Farmers Union (1995), 272 Mont. 1,

6,

898 P.2d 1220, 1223. However, this Court will not create an ambiguity in an

insurance

contract where none exists. Canal Ins. Co. v. Bunday (1991), 249 Mont. 100, 106, 813

P.2d 974, 977-78; Farmers Alliance Mut. Ins. Co. v. Miller (9th Cir. 1989), 869 F.2d

509, 512. Rather, this Court will interpret the terms of an insurance policy, such

as the

one here, according to their usual, common sense meaning as viewed from the

perspective of a reasonable consumer of insurance products. See Leibrand, 272 Mont.

at 7, 898 P.2d at 1224 (holding this Court will examine language in an insurance

policy

from the viewpoint of a consumer of average intelligence and not trained in the law

or

in the insurance business).

Other courts which have interpreted insurance policies which similarly define

the

term "relative," or do not define it all, have concluded that a "relative,"

construed in its

ordinary sense, includes a spouse. See, e.g., Allstate Insurance v. Shelton (9th

Cir.

1997), 105 F.3d 514, 517 (holding term "'relative' requires a connection by blood or

affinity," of which marriage is one); Groves v. State Farm Life and Casualty Co.

(Ariz.

Ct. App. 1992), 829 P.2d 1237, 1238 (holding, in insurance cases, one not a relative

by

blood or marriage is not covered as a relative); Allstate Ins. Co. v. Hilsenrad

(Fla. Dist.

Ct. App. 1985), 462 So.2d 1202, 1204 (holding resident in insured's home not a

relative

where no connection to the insured by way of blood, marriage, or adoption); Liprie v.

Michigan Millers Mutual Ins. Co. (La. App. 1962), 143 So.2d 597, 601 (defining

relative

as "a person connected with another by blood or affinity" and finding daughter-in-

law a

relative of her husband's parents).

In accordance with prevailing case law, and applying a common sense

interpretation of the terms at issue, we conclude that the average consumer of

insurance

would, in reading the Safeco policy, conclude that the term "relative" includes

reference

to his or her spouse.

Based on the foregoing, we conclude that the term "relative," construed in its

ordinary sense and from the perspective of the average consumer of insurance, clearly

and unambiguously includes one's spouse. A person of average intelligence could

determine from a reading of the insurance policy that the term "relative" includes

one to

whom the insured is married.

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Regardless of any ambiguity, this Court will strictly construe exclusionary

language against the insurer. See Liebrand, 272 Mont. at 6, 898 P.2d at 1223.

Because

we have determined that the term "relative," as employed in the policy at issue in

this

case, is not ambiguous and clearly encompasses the spousal relationship, even when

strictly construed against the insurer, this unambiguous exclusionary language

clearly

removes the Turcotte vehicle from the definition of an underinsured motor vehicle.

Based on the foregoing discussion, we hold the District Court did not err in

concluding that the exclusionary language contained in the Safeco policy's

definition of

an underinsured motor vehicle effectively precludes appellant from recovering

underinsured motorist benefits in this case.

ISSUE 2

Did the District Court err in determining that the definition of underinsured

motor

vehicle contained in the Safeco insurance policy does not violate public policy or

the

reasonable expectations of the insured?

A. Public Policy

Stutzman argues this Court should void the exclusionary language contained in

the

Safeco policy's definition of an underinsured motor vehicle on public policy

grounds.

Specifically, Stutzman argues that, pursuant to Transamerica v. Doyle, (1983) 202

Mont.

173, 656 P.2d 820, household exclusion clauses in bodily injury liability policies

are

void. Although this Court may indeed invalidate a household exclusion clause which

violates Montana's mandatory insurance law, there is no statutory mandate for

underinsured motorist coverage in Montana. Pursuant to 61-6-103(8), MCA, optional

underinsured motorist coverage is not subject to the provisions of Montana's Motor

Vehicle Safety Responsibility Act. Therefore, the parties may freely contract to

produce

exclusions or limitations on underinsured motorist coverage.

Stutzman also argues that a policy provision which effectively prohibits her

from

recovering underinsured motorist benefits simply because she was injured by the

negligence of her husband rather than the negligence of a third party is

unconscionable.

She maintains that the Safeco policy is a contract of adhesion which unconscionably

prohibits her from receiving full coverage for her damages.

That the Safeco policy excludes "a vehicle owned by the insured or a relative"

is

not unconscionable. Stutzman was not without meaningful choice at the time the

parties

entered the insurance contract at issue. Rather, Stutzman and her husband were free

to

purchase liability coverage in excess of $100,000 but chose not to do so.

Further, as did the District Court below, we find the reasoning of the court in

Kim

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v. State Farm Mutual Automobile Ins. Co. (9th Cir. 1991), 952 F.2d 314, persuasive

and

conclude that public policy in fact supports the enforcement of the exclusionary

clause

at issue here. To invalidate an exclusion which prohibits recovery of underinsured

motorist benefits where the vehicle in question is "owned by or furnished for the

regular

use of the named insured or any relative," would, in effect, convert underinsured

motorist

coverage into liability coverage and "permit policyholders to substitute inexpensive

underinsured motorist coverage for more expensive liability coverage." Kim, 952 F.2d

at 316.

B. Reasonable Expectations Doctrine

Stutzman argues that the exclusionary language at issue in this case is void

because

it violated her reasonable expectations as an insured. However, the reasonable

expectations doctrine is inapplicable where, as we have found here, the terms of the

insurance policy clearly demonstrate an intent to exclude coverage. Wellcome, 257

Mont.

at 359, 849 P.2d at 194. Rather, "[e]xpectations which are contrary to a clear

exclusion

from coverage are not 'objectively reasonable'." Wellcome, 257 Mont. at 359, 849

P.2d

at 194.

As we have determined that the disputed exclusionary language appropriately

excluded vehicles from the definition of an underinsured motor vehicle if owned by a

relative, including a spouse, of the insured, any expectation by the insured to the

contrary

in this case would not be objectively reasonable.

In conclusion, we hold that the District Court properly concluded that the

vehicle

in question was excluded from the definition of an underinsured motor vehicle because

it was owned by a relative of the insured. We additionally hold that the District

Court

properly concluded the exclusionary clause did not violate public policy or the

reasonable

expectations of the insured.

On these bases we affirm the order of the District Court granting Safeco's

motion

for summary judgment and denying Stutzman's motion for partial summary judgment.

/S/ JIM REGNIER

We Concur:

/S/ J. A. TURNAGE

/S/ KARLA M. GRAY

/S/ JAMES C. NELSON

/S/ TERRY N. TRIEWEILER

Justice W. William Leaphart, dissenting.

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I concur in the Courtþs resolution of issue number two and dissent on issue

number

one.

Resolution of the question of whether the language of the policy excludes

Stutzman

from recovering underinsurance hinges upon an interpretation of the following

exclusionary language in the policyþs definition of an underinsured motor vehicle:

But underinsured motor vehicle does not include any motor vehicle: . . . (3)

owned by or furnished for the regular use of the named insured or any

relative . . . .

The Court holds that the term þrelative,þ when construed in its ordinary sense

by

an average consumer, is not ambiguous and that it clearly encompasses the spousal

relationship. Thus, since the vehicle involved was owned by a þrelative,þ

Stutzmanþs

husband, the Court concludes that the vehicle was not an þunderinsured motor vehicleþ

within the terms of the policy.

I disagree. Although no expert in the theory of relativity, I am of the

opinion that

ambiguity exists as to whether the term þrelativeþ denotes consanguinity only or

whether

it also includes relationship by affinity. I daresay that I am not alone in my

understanding that a spouse is not a þrelative.þ I note that A Dictionary of Modern

Legal Usage (2nd ed. 1995), defines "relative" as "a person who is kin." Kindred is

then defined as "relationship by consanguinity." Blackþs Law Dictionary (6th ed.

1990), defines þrelativeþ as follows: þWhen used generically, includes persons

connected

by ties of affinity as well as consanguinity, and, when used with a restrictive

meaning,

refers to those only who are connected by blood.þ

We have held that we will strictly construe exclusionary language against the

insurer. See Aetna Ins. Co. v. Cameron (1981), 194 Mont. 219, 221-22, 633 P.2d 1212,

1214. Likewise, an ambiguity contained in an insurance policy will be strictly

construed

against the insurer. Leibrand v. Nat. Farmers Union (1995), 272 Mont. 1, 6, 898 P.2d

1220, 1223. Accordingly, we should employ the restrictive meaning (consanguinity

only) rather than the more liberal or generic meaning. I would resolve the

ambiguity in

favor of Stutzman and hold that her spouse is not a þrelative.þ Thus, the spouseþs

ownership of the vehicle does not disqualify the vehicle as an underinsured motor

vehicle.

The exclusionary language not only excludes vehicles owned by a þrelativeþ but

also vehicles owned by þthe named insured.þ Safeco argues that Stutzmanþs husband,

who owns the vehicle, is not only a relative, but also a named insured under the

policy.

Although both he and appellant are þnamed insuredsþ under the policy, the

exclusionary

language in question refers to þtheþ named insured. In the context of a claim for

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underinsurance benefits, þthe named insuredþ logically refers to þtheþ named insured

making the claim for benefits, i.e., the appellant Stutzman. The reference to þthe

named

insuredþ does not reference a person, such as Stutzmanþs husband, who, although named

as an insured in the policy, is not making a claim for benefits. The husbandþs

ownership

of the vehicle does not come within either prong of the exclusionary provision. I

would

reverse the decision of the District Court and hold that Stutzman is entitled to

recover

underinsurance benefits.

/S/ W. WILLIAM LEAPHART

Justice William E. Hunt, Sr., joins in the foregoing dissent of Justice W. William

Leaphart.

/S/ WILLIAM E. HUNT, SR.

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