Farmers Alliance Mutual Insurance Company v. Robert E. Miller Carole J. Miller, the Estate of Richard Miller, Deceased

On February 23, 1986, Richard Miller was a passenger in a car driven by Richard Dean Smith. Smith ran a red light and crashed into another vehicle, killing Miller.

Three years later, the amount Miller’s parents will recover from their insurance company turns on our resolution of two questions of Montana insurance law: Is an offset provision in an underinsured motorist policy either ambiguous or contrary to public policy? We hold that the provision is neither.

I

At the time of the accident, Miller and his parents, appellees Robert and Carole Miller, were named insureds under a “Business Auto Policy” issued by appellant Farmers Alliance. The policy included an uninsured/underinsured motorist endorsement providing up to $50,000 of coverage for accidents where the party at fault had no insurance or insurance amounting to less than $50,000. The endorsement contained an offset clause: “Any amount payable under the insurance shall be reduced by ... [a]ll sums paid by or for anyone who is legally responsible....”

Colonial Insurance Company, Smith’s insurer, concedes that Smith negligently caused the accident. Pursuant to Smith’s policy, the Millers received only $22,500 from Colonial.…