Unpublished Disposition, 877 F.2d 64 (9th Cir. 1985)

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U.S. Court of Appeals for the Ninth Circuit - 877 F.2d 64 (9th Cir. 1985)

GUARANTY NATIONAL INSURANCE COMPANY, Plaintiff-Appellee,v.KEMPER FINANCIAL SERVICES, John Hanna Robison, Defendants-AppellantsandLola ANDERSON, Barbara Anderson, Eric Smith, Defendants.

No. 88-3675.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 6, 1989.Decided June 13, 1989.

Before SCHROEDER, BEEZER, and BRUNETTI, Circuit Judges.


Kemper Financial Services ("Kemper") appeals a partial grant of summary judgment in favor of Guaranty National Insurance Co. ("Guaranty") in Guaranty's motion for declaratory relief limiting Guaranty's liability coverage to Kemper and Kemper's employee, John Robison, to $25,000, the statutory minimum. We affirm.


On January 19, 1985 John Robison rented a car from Dollar Rent-A-Car ("Dollar") in Great Falls, Montana, and executed a standard rental agreement. Paragraph 4 of the rental agreement provided that "DOLLAR agrees to provide a Primary automobile liability insurance policy, or SELF INSURE if they desire, for the benefit of the CUSTOMER, with limits of coverage equal to the statutory requirements in said jurisdiction." Dollar contracted with Guaranty to provide the insurance under this provision. Under Montana law the minimum permissible coverage is $25,000. See M.C.A. Sec. 61-6-103(2) (b) (1987).

Dollar was insured with Guaranty under a "business auto" policy covering Dollar's rental vehicles, with a coverage limit of $1 million. Part IV, Paragraph E., as amended, of the business auto policy provided in part as follows:

Regardless of the number of covered autos, insureds, claims made or vehicles involved in the accident, the most we will pay for all damages resulting from any one accident is the Liability Insurance Limit shown in the declarations.

The limit of our liability for the insurance provided by this endorsement for the rentee, is the minimum limit required by any applicable compulsory or financial responsibility law and shall not exceed any applicable compulsory or financial responsibility law, unless endorsed hereon."

While operating the rented vehicle Robison was involved in an accident with a motorcycle. The motorcycle's passenger, Barbara Anderson, sued Robison, Kemper, Dollar, and Guaranty for personal injury. Robison and Kemper demanded that Guaranty defend them in the action and provide $1 million in liability coverage, claiming that Guaranty's "two-tiered" coverage was contrary to public policy, or, in the alternative, that the language of the rental agreement was ambiguous and unenforceable because it failed to state the level of coverage. Guaranty filed a motion for partial summary judgment on the issue of its liability coverage, seeking a declaration that its maximum liability to Robison and Kemper was $25,000.

The district judge noted that the liability limit in the rental agreement satisfied the statutory minimum, finding the contractual language "clear and unambiguous." He then disposed of the public policy argument, being "unpersuaded that Montana law dictates that a policy of insurance be declared void simply because it provides a different level of coverage for an omnibus insured than a named insured." Accordingly, Guaranty's motion was granted. Kemper appeals.


Two-Tiered Coverage

Kemper claims that Guaranty's coverage of Dollar in the amount of $1 million while only insuring renters for $25,000 is contrary to public policy. There is no Montana case law directly on point. Guaranty claims that public policy cannot be violated when an insurer provides the minimum coverage required by law, in this case $25,000. Guaranty cites Iowa Mutual Insurance Co. v. Davis, 752 P.2d 166 (Mont.1988) for its proposition that the Montana courts have approved two-tiered coverage.

The Davis court held that the mandatory liability statutes prohibit the exclusion of named drivers from insurance policies, finding it to be against the public policy of protecting the general public from uninsured motorists. Id. at 169. After invalidating a named driver exclusion, the Montana Supreme Court stated, "Our ruling does not, however, prohibit an insurer from entering into agreements with their insureds to limit coverage to the statutory minimum amounts as set forth in Sec. 61-6-103 M.C.A." Id. at 170. This statement arguably allows the two-tiered coverage that Guaranty has provided to Dollar and its renters.

Even if the Davis court did not expressly approve of this type of coverage, we agree with the court below that there is nothing inherently wrong with an insurer providing different levels of coverage for an omnibus insured and a named insured. The public policy of protecting the public from uninsured motorists is satisfied when liability coverage is provided in the amount specified by law.


Kemper claims that the phrase limiting coverage to the "statutory limits of said jurisdiction" is misleading and ambiguous because it fails to state the dollar amount or that the statutory limit being referred to is the statutory minimum. Both parties rely on Williams v. Insurance Company of North America, 434 P.2d 395 (Mont.1967).

The Williams court found a disability clause that provided the insured with "60% of base weekly salary ... less any benefits collectible under the Workmen's Compensation Act" unambiguous. Id. at 397. The court set forth the rule applicable in Montana to the construction of insurance contracts:

When there is an uncertainty or ambiguity in the contract it will be construed liberally in favor of the insured and most strictly against the insurer. Ambiguity does not exist just because a claimant says so, but only when the contract taken as a whole in its wording or phraseology is reasonably subject to two different interpretations.

Id. Applying this rule we can see no ambiguity in the language of the rental agreement. The "statutory limits of said jurisdiction" clearly refers to the level of coverage required by law, which is specified in the Montana Code as $25,000. This language is not reasonably subject to any other interpretation.

Unlawful Exclusion Clause

Kemper's final argument is that because the rental agreement contains an allegedly illegal clause excluding guests and passengers from coverage, the stated policy limit as to Robison is void. This is without merit. The fact that the rental agreement contains a clause purporting to exclude guests and passengers from coverage is not relevant. There is no claim that a guest or passenger was in Robison's vehicle when the accident occurred.

Moreover, if this clause were found illegal it would not invalidate the entire contract. The appellants have cited cases from other jurisdictions as support for the rule that "insurance policies or rental agreements which illegally purport to provide limited or no protection to certain classes of person [sic] are unenforceable and are construed to provide full policy protection for those persons." Claiming that the rental agreement illegally purports to limit Robison's coverage, Kemper asserts that the "full protection" of the $1 million business policy should be available for its defense.

This argument fails because Guaranty did not attempt to illegally limit Robison's coverage; it specifically provided coverage in the amount required by law. The amount of coverage provided in the business policy should not be considered because Robison was not a party to it, nor can he be considered a third-party beneficiary.



This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Circuit Rule 36-3