McCARTER v GLACIER GEN ASS CO
Annotate this Case
Download PDF
No. 13123 I N THE SUPREME C U T O THE STATE O M N A A OR F F OTN 1975 BILL McCARTER, P l a i n t i f f and Respondent, GLACIER GENERAL ASSURANCE COMPANY, Defendant and Appellant. Appeal from: D i s t r i c t Court of t h e Ninth J u d i c i a l D i s t r i c t , Honorable Frank B l a i r , Judge p r e s i d i n g . Counsel of Record : For Appellant : Alexander, Kuenning, M i l l e r & Ugrin, Great F a l l s , Montana John H. Kuenning argued, Great F a l l s , Montana For Respondent: Morrow, Nash and Sedivy, Bozeman, Montana Edmund P. Sedivy argued, Bozeman, Montana Submitted: December 3, 1975 ., ' Decided : FEfj 1 0 'lQ-76 Mr. J u s t i c e Frank I . Haswell d e l i v e r e d t h e Opinion of t h e C o u r t . An i n s u r e d f a r m e r sued h i s i n s u r a n c e company t o r e c o v e r payment f o r l o s s e s a l l e g e d l y d u e under two c r o p i n s u r a n c e p o l i c i e s . The d i s t r i c t c o u r t of Toole County, Hon. Frank E . B l a i r , d i s t r i c t judge p r e s i d i n g w i t h o u t a j u r y , awarded judgment t o t h e i n s u r e d f a r m e r i n t h e amount o f $121,640.20, i n t e r e s t and c o s t s . Defend- a n t i n s u r e r a p p e a l s from t h i s judgment. P l a i n t i f f i s B i l l McCarter, a f a r m e r who r a i s e s w i n t e r and s p r i n g wheat on l a n d s i n T o o l e County, Montana. For s e v e r a l y e a r s p r i o r t o and i n c l u d i n g 1973, h e i n s u r e d h i s c r o p s a g a i n s t h a i l damage and o t h e r r i s k s w i t h t h e F e d e r a l Crop I n s u r a n c e Cora poration. I n l a t e 1972 and e a r l y 1973 he a p p l i e d f o r and purchased a d d i t i o n a l c r o p i n s u r a n c e from t h e d e f e n d a n t , G l a c i e r G e n e r a l Assurance Company. I n h i s a p p l i c a t i o n f o r t h e a d d i t i o n a l Glacier Insurance, McCarter d i s c l o s e d t h a t he had o t h e r c r o p i n s u r a n c e c o v e r i n g t h e same p e r i l s , v i z . F e d e r a l Crop I n s u r a n c e . The G l a c i e r I n s u r a n c e was r e f e r r e d t o a s M u l t i p l e P e r i l Crop I n s u r a n c e . I t covered n o t o n l y t h e s t a n d a r d h a i l and f i r e r i s k s ( d e s i g n a t e d "A" p e r i l s ) , b u t a l s o l o s s e s due t o weather c o n d i t i o n s such as drought, floodi n g , f r e e z i n g , windstorms and t h e l i k e ( d e s i g n a t e d "B" p e r i l s ) . McCarter p a i d a s e p a r a t e premium f o r c o v e r a g e of "B" p e r i l s . "B" p e r i l s , u n l i k e "A" p e r i l s , were s u b j e c t t o a p r o r a t a c l a u s e l i m i t i n g t h e i n s u r e r ' s l i a b i l i t y t o t h a t p r o p o r t i o n of t h e l o s s t h a t t h e amount of i t s i n s u r a n c e b e a r s t o t h e t o t a l i n s u r a n c e . G l a c i e r i s s u e d two M u l t i p l e P e r i l Crop I n s u r a n c e p o l i c i e s t o McCarter. One p o l i c y c o v e r e d w i n t e r wheat and t h e o t h e r c o v e r e d s p r i n g wheat. Each p o l i c y c o v e r e d b o t h "A" and "B" p e r i l s . McCarter p a i d a l l premiums f o r b o t h p o l i c i e s . H e w a s charged t h e same premium he would have been charged had he n o t c a r r i e d t h e F e d e r a l Crop I n s u r a n c e . I n 1973 McCarter s u f f e r e d s e v e r e l o s s e s t o h i s w i n t e r and s p r i n g wheat from d r o u g h t . S e t t l e m e n t f o r t h e s e l o s s e s under h i s G l a c i e r p o l i c i e s c o u l d n o t be e f f e c t e d , however, and t h e instant action resulted. The c a s e w a s s u b m i t t e d t o t h e d i s t r i c t c o u r t f o r d e c i s i o n on t h e b a s i s of a n a g r e e d s t a t e m e n t o f f a c t s , f o u r d e p o s i t i o n s , and t h e t e s t i m o n y o f McCarter and a n o t h e r a r e a f a r m e r a t t h e t r i a l . The m a t e r i a l f a c t s a r e l a r g e l y u n d i s p u t e d . The c h i e f b a t t l e - ground c o n c e r n s e s s e n t i a l l y l e g a l q u e s t i o n s , p r i n c i p a l l y t h e v a l i d i t y and c o n s t r u c t i o n o f t h e p r o r a t a c l a u s e i n t h e Glacier policies. The d i s t r i c t c o u r t h e l d t h e p r o r a t a c l a u s e i n t h e p o l i c i e s u n l a w f u l , v o i d and u n e n f o r c e a b l e . M c C a r t e r was awarded judgment a s though t h e p o l i c i e s c o n t a i n e d no p r o r a t a c l a u s e . o f t h e judgment was $121,640.20. The amount The d i s t r i c t c o u r t made a n a d d i t i o n a l and a l t e r n a t i v e c o n c l u s i o n o f law t h a t i f t h e p r o r a t a c l a u s e s i n t h e two p o l i c i e s were v a l i d , t h e c l a u s e s s h o u l d be i n t e r p r e t e d and c o n s t r u e d t o r e q u i r e a t o t a l payment o f $112,213.70. G l a c i e r a p p e a l s from t h e judgment. The i s s u e s o n a p p e a l c a n be summarized i n t h i s f a s h i o n : (1) I s t h e p r o r a t a c l a u s e i n t h e G l a c i e r p o l i c i e s v o i d and u n e n f o r c e a b l e ? ( 2 ) I f n o t , how s h o u l d it b e i n t e r p r e t e d , c o n s t r u e d and applied? G l a c i e r c o n t e n d s t h a t t h e p r o r a t a c l a u s e c o v e r i n g "13" p e r i l s i s v a l i d and e n f o r c e a b l e f o r a v a r i e t y of r e a s o n s : (1) I t does n o t contravene Montana's u n f a i r d i s c r i m i n a t i o n s t a t u t e o r p u b l i c policy, ( 2 ) p r o r a t a c l a u s e s a r e n o t u n l a w f u l p e r se, (3) the p o l i c y f o r m s , r a t e s t r u c t u r e s and b e n e f i t s c h e d u l e s w e r e approved by t h e i n s u r a n c e commissioner, and ( 4 ) McCarter h a s f a i l e d t o c a r r y h i s burden o f p r o o f t h a t t h e c l a u s e i s i n v a l i d . Addition- a l l y G l a c i e r a r g u e s t h a t t h e i n s u r a n c e would n o t have been w r i t t e n w i t h o u t t h e p r o r a t a c l a u s e , and t h e c o u r t s h o u l d n o t r e w r i t e t h e p o l i c y c o n t r a r y t o t h e i n t e n t i o n of t h e p a r t i e s . S e c t i o n 40-3512 ( 3 ) , R.C.M. 1947, Montana's u n f a i r d i s - crimination s t a t u t e provides i n p e r t i n e n t p a r t : "No s u c h i n s u r e r s h a l l make o r p e r m i t any u n f a i r d i s c r i m i n a t i o n e i t h e r between i n s u r e d s o r p r o p e r t y having l i k e i n s u r i n g o r r i s k c h a r a c t e r i s t i c s * * * i n t h e premium o r r a t e s c h a r g e d f o r i n s u r a n c e , o r i n t h e dividends o r o t h e r b e n e f i t s payable thereon, o r i n any o t h e r o f t h e t e r m s and c o n d i t i o n s o f t h e insurance." The p u r p o s e o f such u n f a i r d i s c r i m i n a t i o n s t a t u t e s i s t o e s t a b l i s h and m a i n t a i n uniform r a t e s of i n s u r a n c e . I n s u r a n c e , g 342, p. 1308. The c h a r g i n g o f e x c e s s i v e premiums c o n s t i t u t e s discrimination against t h e insured. P l a n I n s . Soc., 188 N.Y.S. p. 579; 43 Am J u r 2d 559. 4 4 C.J.S., Fogg v . M o r r i s 867; 5 Couch on I n s u r a n c e 2d, 5 30:60, Here McCarter was c h a r g e d t h e same premium a s a n o t h e r i n s u r e d who c a r r i e d no o t h e r c r o p i n s u r a n c e , b u t t h e b e n e f i t s p a y a b l e t o him would be o n l y a p a r t o f t h o s e payable t o another insured without o t h e r crop insurance. There i s a c l e a r v i o l a t i o n o f t h e u n f a i r d i s c r i m i n a t i o n s t a t u t e under s u c h c i r c u m s t a n c e s and t h e d i s t r i c t c o u r t s o found: "5. T h a t a s between McCARTER, who c a r r i e d o t h e r m u l t i p l e p e r i l c r o p i n s u r a n c e upon h i s c r o p s , and any o t h e r i n s u r e d f a r m e r l i k e McCARTER, b u t who did not c a r r y other multiple p e r i l crop insurance upon h i s c r o p s , t h e two i n s u r e d s had l i k e i n s u r i n g and r i s k c h a r a c t e r i s t i c s , and GLACIER d i d c a u s e t o be made and p e r m i t t e d u n f a i r d i s c r i m i n a t i o n between such i n s u r e d i n o f f e r i n g t o pay s u b s t a n t i a l l y l e s s b e n e f i t s t o McCARTER t h a n t h o s e t o b e p a i d t o o t h e r i n s u r e d s f o r t h e same l o s s e s , b u t who had no o t h e r m u l t i p l e p e r i l c r o p i n s u r a n c e , a l l by v i r t u e o f t h e inclusion of t h e pro-rata c l a u s e i n t h e p o l i c i e s of insurance i n question." T h i s makes t h e p r o r a t a c l a u s e u n l a w f u l i n t h e i n s t a n t c a s e a s it i s " C o n t r a r y t o t h e p o l i c y o f e x p r e s s l a w , though n o t e x p r e s s - l y prohibited. " S e c t i o n 13-801 ( 2 ) , R.C.M. 1947. G l a c i e r n e x t a r g u e s t h a t p r o r a t a c l a u s e s a r e n o t unlawf u l p e r s e t b u t on t h e c o n t r a r y a r e v a l i d and e n f o r c e a b l e . This is clearly the law. 16 Couch on I n s u r a n c e 2d, 5 62:26, and cases cited therein. But t h i s argument i s i r r e l e v a n t . The v i c e h e r e i s t h a t McCarter w a s c h a r g e d a premium based on " f u l l r i s k " insurance while t h e p o l i c y provided only f o r p r o p o r t i o n a l o r p r o r a t a payment o f t h e l o s s . G l a c i e r ' s agent, Russell, testi- f i e d t h a t t h e premium s t r u c t u r e f o r m u l t i p l e p e r i l c r o p i n s u r a n c e was e s t a b l i s h e d by company a c t u a r i e s t o c o v e r a f u l l l o s s t o t h o s e i n s u r e d s who had no o t h e r i n s u r a n c e . The a g r e e d f a c t s s t a t e t h a t G l a c i e r c h a r g e d t h e same premium t o a n i n s u r e d r e g a r d l e s s o f whether o r n o t he had o t h e r c r o p i n s u r a n c e , and t h a t McCarter w a s c h a r g e d t h e same premium t h a t he would have been c h a r g e d had h e n o t c a r r i e d F e d e r a l Crop I n s u r a n c e . The d i s t r i c t c o u r t p r o v i d e d as a finding of f a c t : "4. T h a t t h e premium c h a r g e d McCARTER by GLACIER on t h e i n s u r a n c e p o l i c i e s i n q u e s t i o n was f i x e d and d e t e r m i n e d by GLACIER'S a c t u a r i e s i n a n amount s o a s t o c o v e r a f u l l r i s k of l o s s t o a n i n s u r e d under t h e p o l i c i e s , who had no o t h e r i n s u r a n c e c o v e r a g e , i n c l u d i n g F e d e r a l Crop I n s u r a n c e c o v e r a g e , t o p r o - r a t e w i t h GLACIER'S p o l i c i e s . " Although p r o r a t a c l a u s e s a r e n o t u n l a w f u l p e r s e , s u c h c l a u s e i s u n l a w f u l h e r e b e c a u s e a " f u l l r i s k " premium was p a i d and o n l y a p a r t i a l r e c o v e r y was p o s s i b l e under t h e p r o r a t a c l a u s e . The a p p r o v a l of t h e p o l i c y forms, r a t e s t r u c t u r e , and b e n e f i t s c h e d u l e by t h e o f f i c e of t h e i n s u r a n c e commissioner d o e s not v a l i d a t e an otherwise invalid pro rata clause. Sullivan and M i l l e r v . Doe, 159 Mont. 50, 495 P.2d 193. F i n a l l y G l a c i e r a r g u e s t h a t McCarter h a s n o t c a r r i e d h i s burden of p r o v i n g t h e p r o r a t a c l a u s e i n v a l i d h e r e . The b a s i s o f t h i s c o n t e n t i o n i s t h a t M c C a r t e r produced no e v i d e n c e of t h e a b s e n c e of a r a t i o n a l b a s i s f o r d i f f e r e n t i a t i n g between i n s u r e d s who have no o t h e r c r o p i n s u r a n c e and i n s u r e d s h a v i n g a d d i t i o n a l c r o p i n s u r a n c e , and a c c o r d i n g l y t h e r e may w e l l be a r e a s o n a b l e b a s i s f o r c h a r g i n g b o t h t h e same premium. Suffice it t o s a y t h a t t h e r e c o r d d i s c l o s e s t h e same premium c h a r g e d both c l a s s e s of i n s u r e d s w i t h one class being p a i d s u b s t a n t i a l l y higher l o s s benefits than t h e other. T h i s c o n s t i t u t e s prima f a c i e e v i d e n c e o f e x c e s s i v e premium c h a r g e s t o i n s u r e d s w i t h l i k e i n s u r i n g o r r i s k c h a r a c t e r i s t i c s and t h e d i s t r i c t c o u r t s o found . Our h o l d i n g on t h e f i r s t i s s u e r e n d e r s c o n s i d e r a t i o n o f t h e second i s s u e u n n e c e s s a r y . Judgment a f f i r m e d . Justice
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
