A majority of the Montana Supreme Court affirmed a lower court's ruling that the $750,000 statutory cap did not apply, and an insurer must provide Gallatin County, Montana, its $6.5 million policy limits for an underlying negligence lawsuit arising from an injury caused by a snowplow owned by the county. The case is Daniels v. Gallatin Cty., 2022 MT 137.
On January 12, 2017 Sarah Daniels was severely injured when a snowplow operated by a Gallatin County employee, Rick Blackwood, ran a stop sign and collided with her vehicle. The County admitted liability for Blackwood's conduct, as Blackwood was negligent and acting within the scope of his employment. The County also admitted that Daniels suffered permanent and life-altering injuries and her damages exceeded $750,000.
When the crash occurred, ASIC provided insurance to the County, with a policy period from July 1, 2016, to July 1, 2017. ASIC does not dispute that the policy provides coverage for the snowplow and the occurrence in question. The policy's stated limits were $1.5 million in business auto coverage and $5 million in excess coverage. The policy failed to mention the Montana codified statutory cap, at §2-9-108 MCA. Following the crash, ASIC paid the Daniel's family the $750,000 limit according to the statutory cap, and not the policy limits.
Daniel's filed suit against Blackwood, the County and ASIC alleging declaratory relief against ASIC regarding insurance coverage available to indemnify the County for Daniels's claims, negligence against the County, and a challenge to the constitutionality of §2-9-108 MCA.
ASIC initially moved to dismiss the declaratory claim, and the District Court denied the motion. ASIC and Daniels then filed cross-motions for summary judgment. The court granted Daniels's motion and denied ASIC's declaring the statutory cap found in the statute did not apply and the policy's stated limits were available to indemnify the County for Daniel's claims. The court concluded that incorporating the statutory cap, as ASIC advocated, violated the requirement of §33-15-302 MCA, which required an insurance contract to contain all of the policy's terms, conditions, and limitations. The court then concluded that the scope of the coverage provision that ASIC relies on does not limit recovery under the Policy to $750,000 because under that provision ASIC must pay the amounts the County legally must pay as damages, and judgment could be entered against the County in excess of $750,000.
The court also concluded that ASIC specifically agreed to provide coverage in excess of statutory limits, as required by §2-9-108 MCA, by providing the County with coverage in excess of the cap specifically for the type of personal injuries at issue in this case, without referencing the statutory cap.
The court dismissed the constitutional challenge in a separate order, determined Blackwood caused over $12 million in damages to Sarah Daniels, and entered judgment against the County for $11,660,016 accounting for the $750,000 already paid. ASIC appealed, asking the state Supreme Court to find that the District Court's order declaring that the statutory cap does not apply.
ASIC argues that nothing in the policy specifically waived the statutory liability cap, and because the policy was silent on the matter, it could not waive the cap. Rather, it posits that the statute requires an insurer to agree specifically to waive the cap in a separate endorsement. ASIC argues that the only purpose of the statute is to allow insurers to write policies with limits exceeding the cap without automatically waiving the cap.
The statute states:
(1) The state, a county, municipality, taxing district, or any other political subdivision of the state is not liable in tort action for damages suffered as a result of an act or omission of an officer, agent, or employee of that entity in excess of $750,000 for each claim and $1.5 million for each occurrence.
. . .
3) An insurer is not liable for excess damages unless the insurer specifically agrees by written endorsement to provide coverage to the governmental agency involved in amounts in excess of a limitation stated in this section, in which case the insurer may not claim the benefits of the limitation specifically waived.
The court found that the insurer waived the benefits of the cap when it agreed to provide auto coverage to the County with limits in excess of the limitation and that ASIC now may not claim the benefit of the limitation when it was specifically waived in the policy.
Editor's Note: The insurer argued that it did not waive the statutory cap because it did not specifically mention the statute that imposes the cap. Unfortunately for the insurer, it drafted the policy, which named higher limits than the statutory cap. Because the insurer drafted the contract, and was or should have been well aware of the payout limits required by the statute and the limits listed in the policy, the court found that the insurer owed the full policy limits. As stated in State Farm Mutual Auto Insurance Company., v. Queen 212 Mont. 62, 65, 685, P.2d 935, 937 (1984), "[t]he insurer is responsible for the language which the policy contains." This is yet another warning to insurers to know and take into consideration the laws that they will be held to.
It is not uncommon for certain statutes to require insurers to include cancellation or other notices in particular size and type of font on certain policies as notices to insureds, or to attach certain amendatory endorsements. In this case, the statute clearly states that in order to waive the statutory requirement an endorsement must be added to the policy.