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No. 12692 I N T E SUPREME C U T O THE STATE O M N A A H OR F F OTN 1974 UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a c o r p o r a t i o n , P l a i n t i f f and Respondent, STATE F R M T A AUTOMOBILE INSURANCE A M UU L COMPANY, a c o r p o r a t i o n ; HERBERT SOLLE, i n d i v i d u a l l y and a s Administrator of t h e E s t a t e s of DAVID SOLLE and GREGORY SOLLE, Deceased, e t a l . , Defendants and A p p e l l a n t s . Appeal from: D i s t r i c t Court of t h e Fourth J u d i c i a l D i s t r i c t , Honorable Jack L. Green, Judge p r e s i d i n g . Counsel of Record : For Appellants : G a r l i n g t o n , Lohn and Robinson, Missoula, Montana Sherman V. Lohn argued, Missoula, Montana Worden, Thane, Haines and Williams, Missoula, Montana S h e l t o n C. Williams argued and Ronald A . Bender argued, Missoula, Montana Longan, Holmstrom and Cebull, B i l l i n g s , Montana For ~ e s p o n d e n: t Anderson, Symmes, Forbes, P e e t e & Brown, B i l l i n g s , Montana Rockwood Brown, Jr. argued, B i l l i n g s , Montana Submitted : Decided : September 11, 1974 - 5 1975 M r . J u s t i c e Gene B. Daly d e l i v e r e d t h e Opinion of t h e Court. P l a i n t i f f Universal Underwriters Insurance Company f i l e d i t s complaint June 12, 1973, i n t h e d i s t r i c t c o u r t , Missoula County, seeking declaratory r e l i e f . f i l e d answers. A l l of t h e defendants appeared and It was agreed between t h e p a r t i e s t h a t t h e m a t t e r would be submitted upon an agreed statement of f a c t s . The c o u r t on November 1 3 , 1973, e n t e r e d i t s f i n d i n g s of f a c t , c o n c l u s i o n s of law and judgment d e c l a r i n g t h a t defendants John i, ~ ' O r a z i , S r . , Darlyene ~ ' O r a z iand John Zachary ~ ~ O r a z Jr., were n o t persons i n s u r e d under t h e garage l i a b i l i t y i n s u r a n c e p o l i c y i s s u e d by Universal Underwiters Insurance Company t o C i s l o ChevroletOlds, I n c . , and t h a t p l a i n t i f f was n o t l i a b l e f o r any a c t s o r omissions of t h e DtOrazis p e r t a i n i n g t o an a c c i d e n t which occurred on October 19, 1971, n o r any damages o r claims a r i s i n g therefrom. It f u r t h e r d e c l a r e d t h a t p l a i n t i f f was n o t l i a b l e t o defend D t O r a z i s , o r any t h e r e o f , a g a i n s t t h e c i v i l a c t i o n brought by Herbert S o l l e a g a i n s t t h e ~ ' 0 r a z i sp e r t a i n i n g t o t h e d e a t h s of David and Gregory S o l l e , n o r pay t h e c o s t s of defense t h e r e o f . Defendant S o l l e f i l e d exceptions t o t h e f i n d i n g s of f a c t , conclus i o n s of law and t h e judgment and was j o i n e d i n such f i l i n g by defendant S t a t e Farm Mutual Automobile Insurance Co. o v e r r u l e d S o l l e ' s and S t a t e arm's e x c e p t i o n s . The c o u r t T h e r e a f t e r a l l de- f endan t s appealed. The agreed f a c t s a r e : O o r about A p r i l 1970, one J a n e Howard n purchased an automobile from Courtesy Chevrolet-Olds, I n c . of Polson, Montana, and t r a d e d i n a 1962 Mercury Monterey autombile, i d e n t i f i c a t i o n number 22672518891,. She d e l i v e r e d t h e t i t l e c e r t i f i c a t e f o r t h e 1962 Mercury, n o t a r i z e d and endorsed i n b l a n k , t o Courtesy. Around June 1970, Courtesy s o l d t h e Mercury t o one Don Tidwell and d e l i v e r e d t h e t i t l e c e r t i f i c a t e t o T i d w e l l , without e x e c u t i n g t h e assignment, n o t a r i z i n g i t , o r forwarding t h e c e r t i f i c a t g o f owners h i p , c e r t i f i c a t e of r e g i s t r a t i o n , and an a p p l i c a t i o n f o r r e g i s t r a t i o n t o t h e s t a t e r e g i s t r a r of motor v e h i c l e s a s r e q u i r e d by s e c t i o n 53-109, R.C.M. 1947. - 2 - I n August 1970, Tidwell t r a d e d t h e 1962 Mercury t o John ~ ' ~ r a z i , S r . , g i v i n g DtOrazi a b i l l of s a l e . O October 1 9 , 1971, John n DtOrazi, J r . , was d r i v i n g t h e Mercury automobile i n t h e c i t y of Missoula when i t c o l l i d e d w i t h a motorcycle r i d d e n by David S o l l e and h i s b r o t h e r , Gregory S o l l e . A s a r e s u l t of t h e a c c i d e n t b o t h David and Gregory S o l l e d i e d . Herbert S o l l e , i n d i v i d u a l l y and a s a d m i n i s t r a t o r of t h e e s t a t e s of David and Gregory S o l l e , f i l e d i n t h e d i s t r i c t c o u r t , Missoula County, a combined wrongful d e a t h s u r v i v a l a c t i o n . He named John Zachary DtOrazi, J r . , a s a defendant based upon h i s n e g l i g e n t d r i v i n g of t h e Mercury automobile and a l s o named John ~ ' O r a z i , S r . , and Darlyene DtOrazi, t h e p a r e n t s of John, J r . , on t h e b a s i s of n e g l i g e n t entrustment a s defendants. He claimed g e n e r a l , s p e c i a l , and p u n i t i v e damages. A t t h e time of t h e f a t a l a c c i d e n t defendant S t a t e Farm Mutual Automobile Insurance Company i n s u r e d Herbert S o l l e under t h r e e automobile l i a b i l i t y p o l i c i e s . Included i n t h e coverage under each p o l i c y i s uninsured m o t o r i s t coverage. S t a t e Farm has agreed t o pay S o l l e t h e sum of $40,000, a l l o c a t i n g $30,000 t o Gregory and $10,000 t o David, i n compromise of S o l l e ' s d e a t h claims under t h e uninsured m o t o r i s t coverage p r o v i s i o n s of t h e t h r e e p o l i c i e s which S o l l e c a r r i e d w i t h S t a t e Farm. The agreement a l s o provides t h a t S o l l e may pursue d e a t h claims a g a i n s t t h e D t O r a z i s , and i n t h e e v e n t of judgment and recovery under t h e Universal Underwriters garage l i a b i l i t y p o l i c y , S t a t e Farm would be e n t i t l e d t o subrogation a g a i n s t any recovery up t o t h e amount of i t s $40,000 payment. A t t h e time of t h e a c c i d e n t t h e r e was i n f u l l f o r c e and e f f e c t a garage l i a b i l i t y p o l i c y i s s u e d by U n i v e r s a l Underwriters t o C i s l o Chevrolet-Olds, I n c . ( C o u r t e s y ' s s u e c e s s o r ) . On o r about March 2 , 1973, Universal Underwriters r e c e i v e d n o t i c e from defendants ~ ' 0 r a z i t e n d e r i n g defense of t h e S o l l e c a s e and c l a i m i n g coverage under u n i v e r s a l ' s garage l i a b i l i t y p o l i c y on t h e grounds t h e 1962 Mercury automobile was s t i l l owned by Universal Underwriters' i n s u r e d , 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 ~'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 any other person or organization legally "b () 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. 11 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. R.C.M. Whether under the Cbner's Responsibility Law (section 53-438, 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 limitatation or exclusion in an insurance contract which is unenforceable as being violative of public policy? Appellants i n t h e i r f i r s t i s s u e contend t h i s c o u r t ' s d e c i s i o n s i n Sazeco I n s . Co. v. Northwestern Mutual I n s . Co., 142 Mont. 155, 382 P.2d 174; O s t e r m i l l e r v. P a r k e r , 152 Mont. 337, 451 P.2d 515; and I r i o n v. Glenn F a l l s I n s . Co., 154 Mont. 156, 461 P.2d 199, e s t a b l i s h e d t h e r u l e t h a t i f a c a r d e a l e r f a i l s t o comply w i t h s e c t i o n 53-109(c), R.C.M. 1947, by f a i l i n g t o send t o t h e r e g i s t r a r of motor v e h i c l e s a c e r t i f i c a t e of ownership, c e r t i f i c a t e of r e g i s t r a t i o n , p l u s an a p p l i c a t i o n f o r r e g i s t r a t i o n upon t h e s a l e of a c a r , and t h a t c a r i s involved i n an a c c i d e n t , t h e automobile d e a l e r ' s l i a b i l i t y i n s u r a n c e p o l i c y c o v e r s t h e person d r i v i n g t h e c a r , r e g a r d l e s s of t h e language o r l i m i t a t i o n s r e g a r d i n g coverage contained i n t h e i n s u r a n c e p o l i c y . T h i s seems t o go t o t h e q u e s t i o n of l i a b i l i t y of t h e garage owner which i s n o t a t i s s u e h e r e . Here, t h e s o l e q u e s t i o n t o be determined i s whether o r n o t t h e "garage" l i a b i l i t y p o l i c y i s s u e d by Universal t o C i s l o Chevrolet-Olds, I n c . (formerly Courtesy) a l s o i n s u r e s t h e ~ ' O r a z i s ;which i s a q u e s t i o n of coverage. The confusion a r i s e s because t h e t h r e e c a s e s c i t e d by a p p e l l a n t s a l l had "omnibus" c l a u s e s and coverage was n o t i n i s s u e b u t r a t h e r ownership was t h e c e n t r a l q u e s t i o n t o be determined. The t h r e e c a s e s h e l d , a s a m a t t e r of law, t h a t i f t h e c a r d e a l e r f a i l e d t o comply w i t h s e c t i o n 53-109(c), R.C.M. 1947, then t h e t i t l e t o t h a t automo- b i l e remains w i t h t h e c a r d e a l e r , a s i n t h e c a s e h e r e . However, a s i n a l l c a s e s of t h i s n a t u r e , once ownership i s e s t a b l i s h e d t h e language of t h e i n s u r a n c e c o n t r a c t i n f o r c e governs t h e coverage available t o a person claiming coverage, if any. The s t a t u t e under c o n s i d e r a t i o n i s n o t penal. A p p e l l a n t s ' i s s u e No. 3 i s n o t w e l l taken inasmuch a s p u b l i c p o l i c y and t h i s C o u r t ' s i n t e r p r e t a t i o n of s e c t i o n 53-438, R.C.M. 1947, a r e l a i d t o r e s t i n Northern Assurance Co. v . Truck Insurance Exchange, 151 Mont. 132, 439 P.2d 760, and i n Boldt v. S t a t e Farm Mutual Auto. I n s . Co., 151 Mont. 337, 443 P.2d 33. Interestingly, counsel h e r e f o r a p p e l l a n t s S o l l e and S t a t e Farm were involved i n Northern Assurance. There has been no showing i n t h e i n s t a n t c a s e t h a t t h e p o l i c y i n q u e s t i o n was i s s u e d t o show proof of f i n a n c i a l r e s p o n s i b i l i t y a s r e q u i r e d by s e c t i o n s 53-418 through 53-458, R.C.M. 1947. A p p e l l a n t s ' i s s u e s 2 and 4 w i l l be d i s c u s s e d h e r e i n a f t e r i n t h e c o n t e x t of t h e l i m i t a t i o n s on t h o s e i n s u r e d under Paragraph V , h e r e t o f o r e c i t e d , of t h e garage l i a b i l i t y p o l i c y . The e x c l u s i o n s a r e n o t a t i s s u e here. The p o l i c y under c o n s i d e r a t i o n h e r e does n o t c o n t a i n an 11 omnibus" c l a u s e b u t a l i m i t a t i o n of t h o s e i n s u r e d and hence i s n o t a s t a n d a r d A p p e l l a n t s contend t h i s i s v i o l a t i v e of p u b l i c l i a b i l i t y policy. policy. S e c t i o n 13-801, R.C.M. 1947, on unlawful c o n t r a c t s provides: hat i s n o t l a w f u l which i s : It (1) Contrary t o a n e x p r e s s p r o v i s i o n of law; "(2) Contrary t o t h e p o l i c y of e x p r e s s law, though not expressly prohibited; or, "(3) Otherwise c o n t r a r y t o good mcrals. " Many o u t of j u r i s d i c t i o n c a s e s have examined e x c l u s i o n s and l i m i t a t i o n s of coverage c a s e s s i m i l a r t o t h e i n s t a n t one and have n o t been moved t o d e c l a r e t h e absence of "omnibus" coverage a g a i n s t public policy. T h i s Court i n Northern Assurance found e x c l u s i o n s n o t v i o l a t i v e of p u b l i c p o l i c y i f n o t i n v i o l a t i o n o f s t a t u t e , and t h e same would apply t o l i m i t a t i o n s . W have disposed of t h e e s t a t u t o r y argument concerning s e c t i o n 53-438, R.C.M. 1947, and w i l l only comment t h a t t h e claimed a p p l i c a t i o n of s e c t i o n 40-4403, R.C.M. 1947, concerning 1I omnibus" coverage t o be contained i n "uninsured m o t o r i s t p o l i c i e s " has no a p p l i c a t i o n t o t h e problem h e r e presented t o t h i s Court i n t h e agreed statement of f a c t s . Two p a r t i e s may c o n t r a c t i n any manner t h e y s o choose w i t h any i n s u r a n c e coverage t h e y d e s i r e , a s long a s t h a t c o n t r a c t i s n o t c o n t r a r y t o an e x p r e s s p r o v i s i o n of law; c o n t r a r y t o t h e p o l i c y of e x p r e s s law, though n o t e x p r e s s l y p r o h i b i t e d ; o r , o t h e r w i s e c o n t r a r y t o good morals. ~ p p e l l a n t s ' i s s u e 2 a r g u e s t h e "persons insured" p r o v i s i o n contained i n Paragraph V of t h e p o l i c y i n q u e s t i o n i s ambiguous and should be construed a g a i n s t t h e i n s u r e r . The p o l i c y of i n s u r a n c e between Universal and C i s l o Chevrolet i s a c o n t r a c t , and s u b j e c t t o a p p l i c a b l e c o n t r a c t law of Montana. The language of a c o n t r a c t governs i t s i n t e r p r e t a t i o n , i f t h e language i s c l e a r and e x p l i c i t . S e c t i o n 13-704, R.C.M. 1947. The i n t e n t i o n of t h e c o n t r a c t i n g p a r t i e s i s t o be a s c e r t a i n e d from t h e contract i t s e l f , i f possible. S e c t i o n 13-705, R.C.M. 1947. Where t h e language of an i n s u r a n c e p o l i c y admits of only one meaning t h e r e i s no b a s i s f o r i n t e r p r e t a t i o n of t h e p o l i c y coverage under t h e g u i s e of ambiguity. Nelson v. Combined Insurance Co. of America, 155 Mont. 105, 467 P.2d 707. I n Kansas C i t y F i r e and Marine Insurance Company v. C l a r k , 217 F. Supp. 231, 235, (D.C.Mont. 1963), Judge Jameson noted t h e g e n e r a l r u l e t h a t ambiguous o r u n c e r t a i n p r o v i s i o n s of an i n s u r a n c e p o l i c y s h a l l be construed i n f a v o r o f t h e i n s u r e d and a g a i n s t t h e i n s u r e r , b u t he c a u t i o n e d : . "On t h e o t h e r hand, i f t h e i n t e n t i o n of t h e p a r t i e s i s c l e a r , t h e c o u r t s have no a u t h o r i t y t o change t h e c o n t r a c t i n any p a r t i c u l a r , o r t o d i s r e g a r d t h e e x p r e s s language t h e p a r t i e s have used. I n James v. P r u d e n t i a l I n s . Co., 1957, 131 Mont. 473, 477, 312 P.2d 125, 127, 1 the court said: But even though i t i s a c a r d i n a l p r i n c i p l e of i n s u r a n c e law t h a t a c o n t r a c t of i n s u r a n c e i s t o be construed l i b e r a l l y i n f a v o r o f t h e i n s u r e d and s t r i c t l y a g a i n s t t h e i n s u r e r , c o n t r a c t s of i n s u r a n c e should be given a f a i r and r e a s o n a b l e c o n s t r u c t i o n . Park Saddle Horse Co. v. Royal Indemnity Co., 8 1 Mont. 99, 111, 261 P. 880. I n a r r i v i n g a t such c o n s t r u c t i o n , no m a t t e r how s t r i c t l y c o n s t r u e d a g a i n s t t h e i n s u r e r , t h e i n t e n t i o n of both i n s u r e r and i n s u r e d i s t o be a s c e r t a i n e d from t h e language of t h e p o l i c y . R.C.M. 1947, !$ 13-704. E f f e c t must be given t o every p a r t of t h e p o l i c y c o n t r a c t . R.C.M. 1947, $13-707. The words of t h e c o n t r a c t a r e t o b e understood i n t h e i r u s u a l meaning. R.C.M. 1947, !$ 13-710. Common sense c o n t r o l s . 1 Moreover, ' [ a l m b i g u i t y does n o t e x i s t j u s t because a claimant s a y s so. It can only e x i s t where t h e wording o r phraseology o f a c o n t r a c t i s reasonHolmstrom v. a b l y s u b j e c t t o two d i f f e r e n t i n t e r r e t a t i o n s . ' MI1 B e n e f i t Health & Accident A s s ?n , 1961, 139 Mont. 426, 364 P.2d 1065, 1066." To t h e same e f f e c t t h e Ninth C i r c u i t Court of Appeals i n National Farmers Union P r o p e r t y and Casualty Company v. Colbrese, 368 F.2d 405, 411, commented t h a t t h e foregoing r u l e : "* * * does n o t prevent a p p l i c a t i o n of t h e more g e n e r a l p r i n c i p l e t h a t an i n s u r a n c e p o l i c y , l i k e any o t h e r c o n t r a c t , must be given an i n t e r p r e t a t i o n which i s r e a s o n a b l e and which i s consonant w i t h t h e manifest o b j e c t and i n t e n t of t h e p a r t i e s . " Paragraph V , s e c t i o n ( 3 ) ( a ) , of t h e p o l i c y provides t h a t i n a d d i t i o n t o t h e named i n s u r e d , C i s l o Chevrolet-Olds I n c . , any p a r t n e r , paid employee, d i r e c t o r o r s t o c k h o l d e r of t h e named i n s u r e d , o r any member of t h e household of any of t h e f o r e g o i n g a r e covered under t h e i n s u r a n c e p o l i c y i n q u e s t i o n . This s e c t i o n and c l e a r l y does n o t i n c l u d e t h e ~ ' 0 r a z i . s i s c l e a r and unambiguous under t h e f a c t s . S e c t i o n ( 3 ) ( b ) of Paragraph V of t h e p o l i c y provides t h a t i n a d d i t i o n t o t h e named i n s u r e d , any o t h e r person o r o r g a n i z a t i o n l e g a l l y r e s p o n s i b l e f o r t h e u s e of a n owned automobile w i l l b e an a d d i t i o n a l i n s u r e d under t h e p o l i c y provided t h a t such automobile i s physically operated by t h e named i n s u r e d o r any such p a r t n e r o r paid employee o r d i r e c t o r o r s t o c k h o l d e r o r member of t h e household of t h e i n s u r e d , p a r t n e r , paid employee, d i r e c t o r o r s t o c k h o l d e r . Since t h e 1962 Mercury was n o t p h y s i c a l l y operated a t t h e time of t h e a c c i d e n t by t h e named i n s u r e d o r any p a r t n e r , paid employee, d i r e c t o r o r s t o c k h o l d e r , o r member of t h e household of any of t h e f o r e g o i n g s p e c i f i e d c a t e g o r y of persons, t h e ~ ' 0 r a z i sdo n o t come w i t h i n t h e d e f i n i t i o n o f an i n s u r e d under S e c t i o n ( 3 ) (b) . A p p e l l a n t s p r e s e n t c a s e law and a s t r o n g argument t h a t t h e term II p h y s i c a l l y operate" i s u n c l e a r and s u s c e p t i b l e of v a r i o u s con- s t r u c t i o n s and more s o when t h e named i n s u r e d i s a c o r p o r a t i o n . They r e l y on an Idaho c a s e , Mayflower I n s . Exchange v. K o s t e r i v a , 8 4 I d a . 25, 367 P.2d 5 7 2 , 5 7 4 (1961) f o r p r i n c i p a l s u p p o r t . However, 11 o p e r a t e " i n an e x c l u s i o n o f m i l i t a r y p e r s o n e l . t h e language t h e r e was The c o n t e n t i o n t h e r e was II a c t u a l p h y s i c a l c o n t r o l " o r "the r i g h t o f d i r e c t i o n and c o n t r o l " , and t h e c o u r t found t h e term "operate" a s used ambiguous and u n c e r t a i n . Here, o u r term i s II p h y s i c a l l y operated" and t k r e f o r e n o t i n p o i n t w i t h t h e Idaho c o u r t ' s a n a l y s i s . A b e t t e r a n a l y s i s of our problem, concerning t h e same p o l i c y p r o v i s i o n , a t a time when i t c o n t a i n e d only t h e term "operatet', by t h e Ninth C i r c u i t Court i s found i n Orth v. Universal Underwriters Insurance Co., 284 F.2d Orth involved a c o r p o r a t e i n s u r e d and t h e same argument was advanced t o t h e Ninth C i r c u i t Court a s h e r e and i n t h i s regard t h e Court concluded: "Having reached t h i s conclusion through an a n a l y s i s o f t h e c o n t r a c t language and f i n d i n g no ambiguity, t h e d e t e r m i n a t i o n i t h a t Aronson i s n o t i n s u r e d under t h e ~ o l i c v s one of law and n o t of f a c t . Since 1 o p e r a t e d ' a s Lsed i n c l a u s e (3) does n o t i n c l u d e t h e concept of d i r e c t i o n and c o n t r o l , no i s s u e of f a c t i s resented a s t o whether West S e a t t l e Motors d i r e c t e d and c o n t k o l l e d Aronson i n t h e u s e of t h e automobile. Having t h u s determined t h a t Arnson's o p e r a t i o n o f t h e a u t o mobile i s excluded i n any event from coverage under t h e p o l i c y , i t i s immaterial whether h i s u s e of t h e c a r was permissive, a s r e q u i r e d by t h e p r o v i s o a t t h e end of c l a u s e (3).11 (Emphasis added). The t r i a l c o u r t c o r r e c t l y h e l d a s a m a t t e r of law t h a t t h e DIOrazis were n o t p a r t i e s i n s u r e d under t h e garage l i a b i l i t y i n s u r a n c e p o l i c y i s s u e d by respondent U n i v e r s a l Underwriters Insurance Company t o C i s l o Chevrolet-Olds, here. The judgment of W Concur: e I . -*--------------------------------> - Chief J u s t i c e I n c . and i n q u e s t i o n

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