The estate argued that it was entitled to stack the coverage of each aircraft's per-passenger limit, for a total of $300,000.

USSIC filed a declaratory judgment action in the U.S. District Court for the District of Montana, seeking a declaration that it was under no duty or obligation to pay more than $100,000 to Ward's estate under the terms of the policy and that USSIC's aircraft policy coverage for passengers could not be stacked.

The estate and USSIC moved for summary judgment, and the district court asked the Supreme Court of Montana to decide whether stacking was permitted.

The U.S. Specialty Insurance Policy

The U.S. Specialty Insurance policy provided:

We will pay damages you, and anyone we protect, are legally required to pay for bodily injury or property damage caused by an occurrence during the policy period. . . .

Coverage DL covers bodily injury to passengers and others and property damage in a combined limit of liability for each occurrence which includes a lower limit for each passenger.

The most we will pay for bodily injury to each passenger is shown in item 6DL opposite “each person”. The most we will pay for all bodily injury and property damage is shown in item 6DL opposite “each occurrence”.

The policy identified each aircraft on the coverage identification page in item 6 with a $100,000 limit for “each person,” and a $1,000,000 limit for each “occurrence,” defined as:

a sudden event . . . involving the aircraft during the policy period, neither expected nor intended by you, that causes bodily injury.

The Montana Supreme Court's Decision

The court reformulated the certified question as:

Is the Estate of Darrell L. Ward entitled to stack the limits of liability coverage for three separate aircraft under the terms of an insurance policy issued to the pilot of an aircraft in which Ward was a passenger at the time it crashed?

It answered the reformulated question “no.”

In its decision, the court ruled that the word “involving” in the definition of “occurrence” referred to the aircraft that was a part of the sudden event that caused bodily injury – N9936T. Indeed, the court continued, it was “unambiguous” that the aircraft had to be “involved” to be part of an occurrence.

Having determined that the USSIC policy unambiguously included only the aircraft that was part of the sudden event, the court then rejected the estate's argument that public policy required the stacking of the third-party liability coverage.

The court pointed out that there was no Montana statute that applied specifically to aviation policies and that Montana did not statutorily regulate aviation insurance “in any manner.” The court also noted that the aircraft liability insurance requirements set forth by Congress applied “only to air carriers and charter air carriers, not to general aviation aircraft.” Therefore, the court found, the USSIC insurance policy did not contravene any public policy set by statute.

The court then ruled that the USSIC insurance policy violated no other public policy; not allowing the three coverages to be stacked did not render the coverage illusory; and the “reasonable expectations” doctrine did not apply because the liability coverage was tied to the involvement of a particular aircraft and it was not reasonable to expect that the policy would pay more than the limits provided for that aircraft.

Accordingly, the court concluded that the USSIC policy was not subject to stacking of its passenger liability coverages.

The case is United States Specialty Ins. Co. v. Estate of Ward, No. OP 18-0373 (Mont. March 26, 2019). Attorneys involved include: For Plaintiff and Counter-Defendant: Randall G. Nelson, Nelson Law Firm, P.C., Billings, Montana. For Defendant and Counter-Claimant Estate of Darrell L. Ward: Cory R. Laird, Robert T. Bell, Reep, Bell, Laird & Jasper, P.C., Missoula, Montana. For Defendant Estate of Mark Melotz: Timothy E. Dailey, Milodragovich, Dale & Steinbrenner, P.C., Missoula, Montana. For Amicus Curiae Aviation Insurance Association: James E. Ramsey, Cooling & Herbers, P.C., Kansas City, Missouri; Jacqueline T. Lenmark, Keller Law Firm, P.C., Helena, Montana.