State Farm Mutual Automobile Insurance v. Ruuska

Cynar, J.

Plaintiff appeals as of right from an entry of summary judgment declaring void an exclusion in a policy issued to Gloria Carlson. Plaintiff contends that it was entitled to summary judgment on the basis of the policy exclusion.

The relevant facts are not in dispute. In June of 1975 Gloria Carlson resided in the household of Arvid Carlson, her father. Each of them owned an automobile and each was insured by plaintiff.

On June 19, 1975, while driving her father’s car, Gloria Carlson collided with a motorcycle driven by Dale Ruuska. Ruuska sustained serious injuries and filed suit against Gloria Carlson. Plaintiff does not dispute coverage of Gloria Carlson under her father’s policy, as she was driving his car with his consent. However, as it appeared that the judgment for Ruuska might exceed the limits on that policy, plaintiff sought a declaratory judgment to determine its liability for any residual amount under the policy issued to Gloria Carlson.

Gloria Carlson’s policy provides that if she owns a motor vehicle covered by the policy, such liability insurance as is afforded by the policy with respect to the owned motor vehicle is also provided when using a non-owned vehicle, with the permission of the owner. Under the section labeled "Exclusions,” none of the exclusions apply to the present situation. In the definitional section of the policy is the following:

"Non-Owned Automobile — means an automobile, trailer or detachable living quarters unit, not (1) owned *771by, (2) registered in the name of, or (3) furnished or available for the frequent or regular use of the named insured, his spouse, or any relative of either residing in the same household, other than a temporary substitute automobile. ”

The effect of this definition is to provide an exception to liability coverage when the insured is operating an automobile that is owned by another member of her household or which is available for her frequent use. Plaintiff claims that this type of exclusion is valid and acts to eliminate liability coverage for Floria Carlson under her policy in the circumstances of this case.

In declaring the policy exclusion void, the trial judge relied solely upon provisions of the no-fault insurance act. MCL 500.3101 et seq.; MSA 24.13101 et seq. He noted that MCL 500.3101; MSA 24.13101 requires that the owner or registrant of a motor vehicle maintain security for payment of benefits under residual liability insurance. He further noted that residual liability coverage is covered by MCL 500.3131; MSA 24.13131 which reads:

"Residual liability insurance shall cover bodily injury and property damage which occurs within the United States, its territories and possessions or in Canada. This insurance shall afford coverage equivalent to that required as evidence of automobile liability insurance under the financial responsibility laws of the place in which the injury or damage occurs. In this state this insurance shall afford coverage for automobile liability retained by section 3135.”

He also referred to MCL 500.3135; MSA 24.13135, which sets out those instances where tort liability is retained in Michigan. The trial judge read these sections together and concluded that residual lia*772bility coverage for tort liability was required under the act.

Although somewhat appealing, we cannot concur in the trial court’s analysis. MCL 500.3101; MSA 24.13101 requires only that the owner or registrant of the vehicle maintain security for payment of residual liability insurance benefits. Such benefits are provided for in the policy of Arvid Carlson, the owner of the vehicle involved in the accident. Similarly, Gloria Carlson’s policy provides liability coverage when operating her car. There is nothing in the no-fault act which requires one to have residual liability coverage for injuries occurring when one is driving another’s vehicle.

According to the second-to-last sentence of MCL 500.3131; MSA 24.13131, the financial responsibility laws of the place where the injury occurs should be referred to in determining the scope of the liability coverage required in the policy. Plaintiff argues that this provision is inapplicable to injuries incurred in this state. However, in State Farm Mutual Automobile Ins Co v Sivey, 404 Mich 51, 56; 272 NW2d 555 (1978), the Court looked to the Michigan financial responsibility laws to determine the required scope of liability coverage with respect to an injury incurred in this state. Furthermore, in Ziehm v State Farm Mutual Automobile Ins Co, 88 Mich App 576; 278 NW2d 678 (1979), a panel of this Court concluded that a portion of Michigan’s financial responsibility act had not been impliedly repealed by the enactment of the no-fault act and that the financial responsibility laws determined the extent of liability coverage required under no-fault. Therefore, plaintiff’s argument is without merit.

The financial responsibility laws of Michigan are contained in the financial responsibility act, MCL *773257.501 et seq.; MSA 9.2201 et seq. MCL 257.517; MSA 9.2217 states that proof of financial responsibility may be given by filing a certificate of insurance, a bond, or a certificate of deposit of money or securities. MCL 257.518; MSA 9.2218 deals with the filing of certificates of insurance. It reads:

"(a) Proof of financial responsibility may be furnished by filing with the secretary of state the written certificate of any insurance carrier duly authorized to do business in this state certifying that there is in effect a motor vehicle liability policy for the benefit of the person required to furnish proof of financial responsibility. Such certificate shall give the effective date of such motor vehicle liability policy, which date shall be the same as the effective date of the certificate, and shall designate by explicit description or by appropriate reference all motor vehicles covered thereby, unless the policy is issued to a person who is not the owner of a motor vehicle.
"(b) No motor vehicle shall be or continue to be registered in the name of any person required to file proof of financial responsibility unless such motor vehicle is so designated in such a certificate.” (Emphasis added.)

The last part of subsection (a) notes that the policy need not describe the vehicles covered when it is issued to one who does not own an automobile. This distinction between one who does not own an automobile and one who does is also carried over to MCL 257.519; MSA 9.2219, which deals with a nonresident’s insurance.

MCL 257.520; MSA 9.2220 sets out the scope of coverage required in a "motor vehicle liability policy”. That section distinguishes between an "operator’s” policy of liability insurance and an "owner’s” policy of liability insurance. However, it fails to define these terms. We believe the distinction noted in MCL 257.518; MSA 9.2218 and MCL *774257.519; MSA 9.2219 was again carried forward to MCL 257.520; MSA 9.2220. When one does not own a car, the liability policy issued is an "operator’s policy”; when one does own a car, an "owner’s policy” is issued.

It is undisputed that Gloria Carlson owns a motor vehicle covered by a policy issued by plaintiff. Therefore, the requirements of her liability coverage are governed by the requirements of an "owner’s policy”. MCL 257.520(b); MSA 9.2220(b) states:

"Such owner’s policy of liability insurance:
"(1) Shall designate by explicit description or by appropriate reference all motor vehicles with respect to which coverage is thereby to be granted; and
"(2) Shall insure the person named therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such- named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle or motor vehicles within the United States of America or the Dominion of Canada, subject to limits exclusive of interest and costs, with respect to each such motor vehicle, as follows: $20,000.00 because of bodily injury to or death of 1 person in any 1 accident and, subject to said limit for 1 person, $40,000.00 because of bodily injury to or death of 2 or more persons in any 1 accident, and $10,000.00 because of injury to or destruction of property of others in any 1 accident;
"(3) When a certificate is filed showing that a policy or policies have been issued covering all motor vehicles owned by the insured but not insuring such person when operating any motor vehicle not owned by him, it shall be unlawful for such person to operate any motor vehicle not owned by him or not covered by such certificate.”

We believe that the exclusion created in plain*775tiff’s policy is in conformity with the requirements of an owner’s liability policy. Subsection (1) of MCL 257.520(b); MSA 9.2220(b) requires that those vehicles covered by the policy be expressly designated. By implication, this provision indicates that liability coverage need not be provided for the insured when she is driving a particular automobile or class of automobiles. This conclusion is further supported by subsection (3) which contemplates a situation involving a certificate of insurance covering only motor vehicles owned by the insured. If such a policy could not be issued, this subsection would have been mere surplusage. However, in interpreting statutes no provision is to be treated as surplusage if at all possible. Baker v General Motors Corp, 74 Mich App 237, 246; 254 NW2d 45 (1977), lv gtd 402 Mich 828 (1977), Scott v Budd Co, 380 Mich 29, 37; 155 NW2d 161 (1968).

Therefore, we hold that an exclusion to liability coverage when driving a particular vehicle or class of vehicles is valid. An owner’s policy need only provide liability coverage for those cars owned by the insured. The policy in this case satisfies this requirement and also provides coverage when the insured is driving an automobile not owned by him or by a member of the household and not available for their frequent use. This additional coverage, although not required, is permissible as an insurer may provide liability coverage in excess of that required. See MCL 257.520(g); MSA 9.2220(g).

We further note that an identical clause has been upheld as applied to uninsured motorist insurance in Garrison v Farm Bureau Mutual Ins Co, 84 Mich App 734; 270 NW2d 678 (1978), and Detroit Automobile Inter-Ins Exchange v Reynolds, 81 Mich App 710; 265 NW2d 799 (1978). As noted in Garrison, supra, at 738:

*776"The purpose of the 'drive other cars’ provision in an automobile liability policy is to cover occasional or incidental use of other cars without the payment of an additional premium, but to exclude the habitual use of other cars, which would increase the risk on the insurer without a corresponding increase in the premium. The policy is not intended to cover the insured against personal liability with respect to his use of another automobile which he frequently uses or has the opportunity to use. More specifically, the evident intention of the limitation with respect to other automobiles is to prevent a situation in which the members of one family or household may have two or more automobiles actually or potentially used interchangeably but with only one particular automobile insured.”

This function of the exclusion is equally applicable in the case of liability insurance. Furthermore, such an exclusion would tend to prevent the "stacking” of the policy limit of the owner of a vehicle with that of the driver’s policy. We have no difficulty concluding that liability policies may be drafted with such goals in mind.

Having determined that an exclusion to liability coverage when the insured is driving particular vehicles is valid, we now turn to the form of the exclusion in plaintiffs policy.

Defendant Ruuska first contends that the language creating the exclusion is ambiguous. Specifically, he challenges the language defining "non-owned vehicle” and notes that similar language was deemed ambiguous in Travelers Indemnity Co v Pray 204 F2d 821 (CA 6, 1953).

"Non-owned vehicle” is defined in the policy as follows:

"Non-Owned Automobile — means an automobile, trailer or detachable living quarters unit, not (1) owned by, (2) registered in the name of, or (3) furnished or *777available for the frequent or regular use of the named insured, his spouse, or any relative of either residing in the same household, other than a temporary substitute automobile. ”

Unlike the clause in Travelers Indemnity, supra, the definition is drafted so that it is clear that its last three lines apply to all three subsections of the definition. Therefore, we conclude that this definition is not ambiguous.

Defendant’s final argument is that the exclusion created by the definition is improperly designated and should not be given effect. He claims that, to be valid, this "exclusion” must have been included in the list of exclusions to liability coverage contained in the policy.

In addressing this issue, we are guided by some general rules. Insurance policies must be construed in accord with the ordinary and popular sense of the language used therein. Michigan Mutual Liability Co v Mesner, 2 Mich App 350, 353; 139 NW2d 913 (1966). Insurance policies drafted by the insurer must also be construed in favor of the insured to uphold coverage. Shepard Marine Construction Co v Maryland Casualty Co, 73 Mich App 62, 64; 250 NW2d 541 (1976). This same rule applies to exclusion provisions in the policy. Kalamazoo Aviation, Inc v Royal Globe Ins Co, 70 Mich App 267, 270; 245 NW2d 754 (1976). To be given full effect, an insurer has a duty to clearly express the limitations in its policy. Francis v Scheper, 326 Mich 441, 447-448; 40 NW2d 214 (1949), Union Investment Co v Fidelity & Deposit Co of Maryland, 549 F2d 1107, 1110 (CA 6, 1977), and Ornamental Iron & Stair Co v General Accident & Life Assurance Corp, Ltd, 68 Mich App 259, 263; 242 NW2d 544 (1976). A technical construction of policy language which would defeat a reasonable *778expectation of coverage is not favored. Crowell v Federal Life & Casualty Co, 397 Mich 614, 623; 247 NW2d 503 (1976).

The deposition testimony of Gloria Carlson established that she believed her policy provided coverage under these circumstances. Such a conclusion is not surprising, in light of the provision in the policy providing coverage when driving a "non-owned vehicle”. To the layperson "non-owned vehicle” would naturally include a vehicle owned by one’s father. Thus, by defining the phrase "non-owned vehicle” by reference to its ordinary, commonly-used meaning, liability coverage would be provided under Gloria Carlson’s policy. In order to determine that coverage was not provided under the circumstances of this case, it would have been incumbent upon one to read the definition of "non-owned vehicle” provided in another part of the policy in conjunction with the provision providing coverage when operating such "non-owned vehicles”.

According to MCL 257.520(b)(1); MSA 9.2220(b)(1), an owner’s policy of liability coverage must designate "by explicit description or by appropriate reference” all motor vehicles covered by the policy. We believe that plaintiffs policy fails to meet this standard. The definition used for "non-owned vehicle” is in conflict with its normal usage. Moreover, the exclusion created by the definition is hidden among the provisions of the policy. It is not highlighted in any way by boldface type or by a warning. See MCL 500.3009(2); MSA 24.13009. Nor is it included in the lengthy list of exclusions provided in the policy. Under the doctrine of ex-pressio unius est exclusio alterious, the failure to include this exclusion in the list of exclusions implies that no other exclusions to liability coverage exist.

*779Therefore, under the circumstances of this case, we hold that the exclusion created by the definition is void. Although such an exclusion is theoretically sound, we refuse to enforce it as written in Gloria Carlson’s liability policy. Since the common meaning of the phrase "non-owned vehicle” would include the vehicle in question here, we conclude that Gloria Carlson’s policy provided liability coverage in the present case.

Affirmed. No costs, interpretation of statutes being involved.

D. E. Holbrook, Jr., J., concurred.