Montana Supreme Voids UIM Exclusion For Motorcyles Owned By Policyholder

An insurer wrongly denied uninsured motorist coverage to a policyholder who was injured while riding his motorcycle even though the policy excluded damages caused by motorcycle accidents, the Montana Supreme Court ruled Tuesday.

The high court ruled that the insurance contract written by USAA Casualty Insurance Co. for policyholder Joseph Richard Goss violates public policy because Goss could not fulfill the terms. USAA does not insure motorcycles, but excludes UIM coverage for accidents that happen on motorcycles that it doesn’t insure, even if the policyholder had purchased UIM insurance for other vehicles.

“While USAA is free to decline to insure motorcycles, or to require that an owned vehicle be insured with USAA, it cannot then exclude coverage on the ground the insured failed to have his vehicle insured with USAA when that is impossible,” the 5-0 opinion says. “We conclude that such an exclusion of coverage by way of an unattainable condition precedent is contrary to public policy.”

The court reversed a ruling by Cascade County District Court Judge Gregory R. Todd granting summary judgment on that point in favor of USAA.

Goss was injured on May 21, 2015 when he crashed into a car driven by Diann Stevens, who turned left in front of his motorcycle at an intersection in Great Falls, Montana. Goss had separate uninsured motorist policies, each with a $300,000 limit for three vehicles. But he insured his motorcycle with Progressive, which has a partnership with USAA to provide motorcycle coverage for policyholders who insure their other vehicles through USAA.

After the accident, USAA paid Goss $25,000 in uninsured motorist benefits but refused to pay the limits of the policy, citing the exclusion. Goss, who suffers “severe and disabling” injuries, filed suit. The insurer argued that Goss could have purchased UIM coverage for his motorcycle through Progressive, but chose not to.

In a brief, Goss’ attorney said that he his client had paid premiums for uninsured motorist coverage in three policies that together provided up to $900,000 in coverage, but USAA was refusing to honor the contract only because it includes terms that Goss could never meet.

The high court agreed that the policy cannot stand because it made it impossible for Goss to meet the conditions for coverage. UIM coverage is “personal and portable” in Montana, the court said, meaning that claims can be made for coverage regardless of whether the insured was injured by an accident in his or her own vehicle or any other vehicle.

The court said “Goss was ‘without meaningful choice at the time the parties entered the insurance contract at issue’ because he was unable to satisfy USAA’s condition for coverage,'” the opinion says, citing a previous court decision.

“Goss had done all he could to satisfy the condition by insuring his other vehicles with USAA,” the opinion says.

A footnote in the opinion explains that the facts in Goss’ complaint are different than the circumstances in another case, where a U.S. District Court judge upheld a policy with a similar exclusion. In that case, the policyholder was able to purchase UIM coverage but had elected not to.

The decision wasn’t a total loss for USAA. The court affirmed dismissal of one count in the complaint that sought $15,000 in medical payment coverage because that coverage was clearly excluded for any motorcycle accident.