Montana Borrowed, Non-Owned, Newly Acquired & Rental Vehicles

Begin with the vehicle relationship—not the insurance card

A borrowed-car crash can involve insurance that follows the vehicle, insurance that follows the driver, or both.

Borrowed vehicles: start with the owner's required liability insurance

MCA § 61-6-103 requires a qualifying owner's motor-vehicle liability policy to insure the named insured and other persons using the covered vehicle with the named insured's express or implied permission.

Bill Atkin Volkswagen: a loaner driver's separate insurance did not excuse the owner

In Bill Atkin Volkswagen, Inc. v. McClafferty, 213 Mont. 99, 689 P.2d 1237 (1984), a dealership customer was driving a dealership loaner while his own vehicle was being repaired.

Montana held that the dealership was required to maintain liability protection extending to a customer using the loaner with permission. The fact that the driver had a separate personal automobile policy did not eliminate the owner's statutory insurance obligation.

Swank: a vehicle owner cannot contract away mandatory permissive-user protection

In Swank v. Chrysler Insurance Corp., 282 Mont. 376, 938 P.2d 631 (1997), Montana again emphasized the mandatory nature of owner's liability protection for permissive vehicle users.

A dealer-policy provision could not exclude or reduce the statutorily required protection merely because the permissive customer had other insurance.

Permission can be express or implied

Cascade: permission can extend beyond the first permittee

Cascade Insurance Co. v. Glacier General Insurance Co., 156 Mont. 236, 479 P.2d 259 (1971), involved a vehicle supplied by a mother for her son's principal use while he attended college.

Although the mother had told her son not to loan the car, Montana examined the son's broad dominion, the family relationship and the foreseeability of the use. The second driver was treated as a permitted user under the facts before the Court.

The driver's own policy may separately cover a non-owned vehicle

MCA § 61-6-103 separately recognizes an operator's liability policy covering the named person for liability arising from use of a motor vehicle the person does not own.

Personal automobile policies also commonly extend some liability coverage to occasional use of non-owned vehicles.

Hankinson: permission under the driver's own policy can be a separate requirement

The two Allstate v. Hankinson appeals illustrate why permission under a driver's separate non-owned-auto coverage must be analyzed carefully.

In the first appeal, Allstate Insurance Co. v. Hankinson, 244 Mont. 1, 795 P.2d 480 (1990), the Court focused the inquiry on whether the named insured under the driver's Allstate policy had granted the permission required to trigger that policy's non-owned vehicle protection.

On remand, the evidence failed to establish express or implied permission from that named insured. The Montana Supreme Court therefore affirmed judgment for Allstate in the second appeal, Allstate Insurance Co. v. Hankinson, 249 Mont. 237, 815 P.2d 145 (1991).

Occasional borrowing and regular use are different risks

Personal automobile policies commonly extend broad protection to occasional non-owned vehicles while excluding vehicles:

• owned by the insured;
• owned by a household resident;
• furnished for the insured's regular use; or
• available for regular use.

The purpose is to prevent insurance purchased for one automobile from functioning as continuing insurance on another vehicle that the insured regularly uses but did not insure under the policy.

Ostermiller: regular-use exclusion enforced

In Ostermiller v. Parker, 451 P.2d 515 (Mont. 1968), the policy extended non-owned-auto coverage only when the other vehicle was not furnished for regular use to the policyholder or a household member.

Montana concluded that the vehicle at issue had been furnished for regular use and therefore fell outside that non-owned coverage.

Livengood: household non-owned exclusion can be valid

American Family Mutual Insurance Co. v. Livengood, 1998 MT 329, 292 Mont. 244, 970 P.2d 1054, enforced a clear limitation concerning a vehicle owned by another household resident where required liability insurance was otherwise supplied by the vehicle owner's policy.

When more than one policy applies, determine priority

MCA § 61-6-103 permits a motor-vehicle liability policy to prorate with other valid and collectible insurance and provides that Montana's required protection may be fulfilled by policies from one or more insurance carriers that together satisfy the statutory requirement.

The policies themselves may contain:

• primary-insurance clauses
• excess clauses
• other-insurance provisions
• proration clauses
• escape clauses
• temporary-substitute provisions
• non-owned-auto provisions

Cascade illustrates owner-primary / driver-excess allocation

In Cascade, the owner's policy supplied primary protection to the permissive driver and the driver's family policy operated as excess coverage under the policies involved.

Temporary substitute vehicles are a separate contractual category

Many policies separately define a temporary substitute vehicle used because the scheduled insured vehicle is unavailable due to:

• breakdown
• repair
• servicing
• loss
• destruction
• another policy-defined circumstance

Newly acquired vehicle coverage is policy-specific

Personal auto policies frequently provide automatic interim insurance for an automobile newly acquired by the named insured, followed by a contractual notice or premium requirement.

Glacier General: automatic interim coverage under the policy before the Court

Glacier General Assurance Co. v. State Farm Mutual Automobile Insurance Co., 152 Mont. 432, 436 P.2d 533 (1968), construed a policy under which a newly acquired replacement automobile received automatic coverage during a 30-day notice period.

The Court also held that “ownership” under that particular clause was broad enough to include joint ownership.

Christensen: separate insurance did not erase qualifying after-acquired coverage

In Christensen v. Mountain West Farm Bureau Mutual Insurance Co., 2000 MT 378, Montana rejected the argument that obtaining a separate policy on the newly acquired vehicle automatically terminated otherwise qualifying after-acquired protection under an existing policy.

The Court enforced the language of the existing contract and held that the vehicle satisfied the policy's after-acquired requirements under the record before it.

Rental vehicles create four separate questions

Montana specifically regulates rental vehicle insurance

MCA § 33-1-220 defines rental car insurance as short-term insurance applying only to the rented vehicle and limits the product to specified types of protection, including personal accident, liability for renters and authorized drivers, personal effects, and specified motor-club services.

MCA Title 33, Chapter 17, Part 15 separately regulates rental vehicle entities and the customer service representatives who present rental vehicle insurance information.

Rental-counter disclosures

Before offering rental vehicle insurance, Montana requires written information that includes:

• material terms of the offered insurance
• exclusions
• limitations
• conditions
• identity of the insurer
• claim-reporting procedure
• rental entity's license information
• warning that coverage may duplicate existing auto insurance
• statement that purchase is not required to rent the vehicle
• statement that rental personnel cannot evaluate existing coverage adequacy

Authorized-driver status can matter

Montana's statutory definition of rental car liability insurance includes protection for renters and other authorized drivers within the rental period.

The rental agreement may separately define which persons may operate the vehicle.

Rental-company ownership alone generally does not create tort liability

The federal Graves Amendment, 49 U.S.C. § 30106, generally prevents a qualifying rental or leasing company from being held liable under state law merely because it owns the rented or leased vehicle when:

• the owner is engaged in the business of renting or leasing vehicles; and
• there is no negligence or criminal wrongdoing by the owner or affiliate.

The federal statute expressly preserves state financial-responsibility or insurance standards imposed on owners and preserves liability associated with failure to satisfy applicable financial-responsibility requirements.

Liability insurance and damage to the borrowed vehicle are different coverages

Liability insurance primarily responds to legal liability for injury or property damage suffered by others.

MCA § 61-6-103 expressly permits the required motor-vehicle liability policy to exclude liability for damage to property owned by, rented to, in the charge of, or transported by the insured.

Borrowed and rental vehicle coverage workflow

Documents and evidence to preserve

• vehicle registration
• certificate of title
• VIN
• owner's complete insurance policy
• driver's complete insurance policy
• household policies
• commercial or employer policies
• umbrella and excess policies
• declarations pages
• all endorsements
• permission communications
• owner testimony
• driver testimony
• prior vehicle use
• household relationship
• regular-use facts
• access to keys
• temporary-substitute circumstances
• date newly acquired vehicle purchased
• date vehicle delivered
• notice to insurer
• premium request
• premium payment
• rental agreement
• authorized-driver list
• rental insurance election
• rental-counter disclosures
• damage-waiver documents
• physical-damage estimates
• other-insurance clauses

Common borrowed and rental vehicle mistakes

• Looking only at the driver's insurance card.
• Ignoring the vehicle owner's policy.
• Assuming an unlisted driver has no coverage.
• Assuming a driver's separate policy relieves the owner of mandatory coverage.
• Failing to investigate express or implied permission.
• Assuming permission under one policy satisfies every other policy.
• Confusing occasional non-owned use with regular use.
• Ignoring a household-vehicle exclusion.
• Using “borrowed car” and “temporary substitute” interchangeably.
• Assuming every Montana policy has a universal 30-day new-car grace period.
• Ignoring after-acquired coverage because a separate policy was later issued.
• Assuming rental-counter insurance is mandatory.
• Relying on a rental employee to evaluate existing insurance.
• Ignoring authorized-driver provisions in the rental agreement.
• Assuming rental-company ownership automatically creates tort liability.
• Using the Graves Amendment to erase claims based on the rental company's own negligence.
• Assuming bodily-injury liability coverage pays for damage to the borrowed vehicle.
• Failing to compare primary, excess and other-insurance clauses.

Montana authority map