Nation v. State Farm Insurance Co.

SUMMERS, Justice,

concurring:

I agree that the household exclusion clause violates the legislature’s mandate of compulsory liability insurance. I would hold the clause invalid up to the amount of the statutorily required minimum coverage. Above that required amount I would permit the application of principles governing insurance contracts generally to determine the coverage in effect.

I. COMPULSORY LIABILITY INSURANCE AND THE HOUSEHOLD EXCLUSION

In 1976, Oklahoma joined the majority of states by enacting a Compulsory Insurance Law. This law, as amended in 1983, requires liability insurance as follows:

*879On an after January 1, 1983, every owner of a motor vehicle registered in this state, other than a licensed used motor vehicle dealer, shall, at all times, maintain in force with respect to such vehicle security for the payment of loss resulting from the liability imposed by law for bodily injury, death and property damage sustained by any person arising out of the ownership, maintenance, operation or use of the vehicle. Every person, while operating or using a motor vehicle registered in this state which is not owned by such person, shall maintain in force security for the payment of loss resulting from the liability imposed by law for bodily injury, death or property damage sustained by any person arising out of the operation or use of the vehicle, unless such security has been provided by the owner in accordance with this section which does not exclude said person from coverage. 47 O.S.1991 Section 7-601(B). (emphasis mine)

The minimum required coverage, under Section 7-204, is $10,000.00 per person, $20,-000.00 per accident, and $10,000.00 for property damage. The purpose behind this legislation was to mandate that “any vehicle operated on the highways of Oklahoma be secured against liability to innocent victims of the negligent operation or use of the insured vehicle.” Young v. Mid-Continent Cas. Co., 743 P.2d 1084, 1088 (Okla.1987). This statute embodies a public policy that innocent victims of the negligent operation of a motor vehicle should be compensated for their injuries. Id. at 1987. Clearly, the legislature contemplated that no vehicle should be permitted to operate on the roads of Oklahoma unless the vehicle is insured or “secured” according to the requirements set out in the Act. Beavin v. State ex rel. Dept. of Public Safety, 662 P.2d 299, 302 (Okla.1983).

This legislative intent is the driving force behind our interpretation of the statute. “When a policy expressly states that it provides coverage required by Oklahoma’s compulsory liability insurance laws, the policy must be strictly construed against the insurer by a standard consistent with its terms and with the statutory policy it embodies. Equity Mut. Ins. Co. v. Spring Valley Wholesale Nursery, 747 P.2d 947, 952 (Okla.1987). While strictly construed against the insurer, the statute must be broadly construed to accomplish the legislative goal. Id.

The administrator asserts that the legislative intent of providing compensation to injured victims, together with this Court’s partial abrogation of the doctrine of parental immunity, leads to the conclusion that the household exclusion is invalid. He asserts that by allowing a child to recover from the parent to the extent of liability coverage, this Court has recognized the trend toward compensation for tortious acts by a parent against a child. This idea, when considered in light of the strong policy of the compulsory liability insurance laws, leads to the inevitable conclusion that the household exclusion is at least partially invalid.

A. PARENTAL IMMUNITY

At common law the doctrine of family, or parental, immunity was a defense to lawsuits between spouses and between parents and children. This doctrine prevented the child or spouse from collecting damages for torts committed by another family member. The trend, however, is to abolish this immunity. Oklahoma has abrogated spousal immunity both by statute and case law. 43 O.S.Supp. 1989 § 214; Fiedeer v. Fiedeer, 42 Okla. 124, 140 P. 1022 (1914). We have also partially abrogated the doctrine as between children and parents. Unah v. Martin, 676 P.2d 1366, 1370 (Okla.1984).

In Unah an unemancipated minor brought suit against his father for injuries sustained in an automobile accident. After noting that the modern trend in sister jurisdictions is to abolish the doctrine1, we agreed that it should be abrogated to the extent of the parent’s liability insurance. To reach this conclusion we addressed the reasoning behind the creation of the immunity: the pro*880tection of the family congeniality,2 and the protection of insurance companies from collusion. As for the interests of the family, we agreed with the Arizona Supreme Court that the “domestic tranquility argument is hollow, for in reality the sought after litigation is not between child and parent but between child and parent’s insurance carrier.” Streenz v. Streenz, 106 Ariz. 86, 88, 471 P.2d 282, 284 (1970). The argument as to fraud and collusion is counteracted by the notion that the trier of fact is responsible for detecting such things.

However, we did limit this abrogation of parental immunity by stating that the child may recover only to the extent of the liability insurance in effect. In so holding, we honored the “domestic tranquility” argument by providing that only the insurer, and not the parent, is required to pay.

B. THE HOUSEHOLD EXCLUSION

Although State Farm admits that parental immunity has been modified, it urges that this new development does not require invalidation of the exclusion. As support State Farm relies on Looney v. Farmers Ins. Group, 616 P.2d 1138 (Okla.1980) overruled in part, Young v. Mid-Continent Cas. Co., 743 P.2d 1084 (Okla.1987). In Looney a wife brought suit against her husband for damages sustained in an automobile accident. The insurer denied coverage based on the household exclusion. Both the husband and wife were named insureds under the policy. We denied recovery because Looney was a named insured on the policy and the policy excluded coverage for the named insureds.

Aside from the Looney decision the Oklahoma courts have repeatedly struck down provisions that interfere with the legislature’s policy of mandating liability insurance to protect innocent victims. In Hibdon v. Casualty Corp. of America, Inc., 504 P.2d 878 (Okla.Ct.App.1972) (Released for publication by the Oklahoma Supreme Court), the Court struck down an exclusion in a liability policy which excluded from coverage the passengers in a vehicle. It held that the legislature intended to include passengers within the scope of mandatory coverage. Id. at 882.

This Court held that a policy exclusion violated the compulsory liability insurance statutes in Young v. Mid-Continent Cas. Co., 743 P.2d 1084 (Okla.1987). The policy there excluded coverage if the insured vehicle was operated by anyone under twenty-five except the named insured or a resident/relative. We observed that Section 7-601 required mandatory coverage for injury caused to “any person.” We noted that Looney had upheld a provision excluding coverage for household members, but also recognized that part of the underlying rationale for Looney had been undermined in the later case of Beavin v. State ex. Rel. Dept. of Public Safety, supra. In holding the exclusion invalid, we stated “the provisions of our compulsory liability insurance legislation, as it stood at the time of this ease, contained no indications of an intent to allow any differentiation as to coverage available to any victim of an insured vehicle’s operation or use.” Young, 743 P.2d at 1088.

Later, in Equity Mutual, supra, we again held a policy exclusion invalid in light of the compulsory liability insurance statutes. There the policy exclusion limited coverage to a two hundred mile radius from the permissive user’s address. Reiterating that the purpose behind Section 7-601 was to “provide compensation for injury or loss to members of the public with claims that are actionable,” we ruled that statutory policy required, at the very minimum, coverage for all claims which arise within the state, and that the exclusion was invalid.3

The Tenth Circuit in State Farm Mut. Ins. Co. v. Schwartz, 933 F.2d 848 (10th Cir.1991), has recently addressed this exact question. State Farm sought declaratory judgment *881that it was not obligated to defend or indemnify the insured in an action brought by her children. The basis of State Farm’s claim was the household exclusion. The Court framed the issues as: (1) whether the policy definition of the children as “insureds” precludes recovery, and (2) whether the household exclusion in the policy offends Oklahoma public policy. As to the first question, the Court found it important that the children were insureds as defined by the policy, but were not named insureds:

While the linguistic distinction between a “named insured” and an “insured” may not be significant, it does point to a more serious problem. The spouse of the policy holder is much more likely than the children of the policyholder to be a true consenting party to the contract. It is highly unlikely that household members such as minor, unemancipated children will have consented, or are legally able to consent, to the terms of the insurance contract.4

The Circuit Court held that to permit insurers to prevent suits by children against their parents simply by defining the children as “insureds” would undermine the holding of Unah and its partial abrogation of parental immunity. It went on to hold that the exclusion, in light of Young and Equity Mutual, offended Oklahoma public policy.

Most states which have considered this exclusion in light of their own compulsory insurance laws have held it to be against public policy.5 Some have held it invalid only as to household members other than the spouse. See Allstate Ins. Co. v. Anzalone, 119 Misc.2d 222, 462 N.Y.S.2d 738, 740 (N.Y.App.Div.1983). Some have held it invalid only to the statutorily-required limits rather than to the extent of insurance coverage. See Bishop v. Allstate Ins. Co., 623 S.W.2d 865, 866 (Ky.1981) and Farmers Ins. Exchange v. Young, 108 Nev. 328, 331, 832 P.2d 376, 379 (1992). But to one degree or another, at least twenty-two states have held it invalid.

I agree that the household exclusion is invalid as contrary to public policy, at least to *882the extent of the statutorily mandated coverage requirements. I support the Montana Supreme 'Court’s statement that the compulsory liability insurance laws “establish[ ] that when policy language excludes coverage otherwise statutorily mandated then that policy language is void as contrary to public policy.” Allstate Ins. Co. v. Hankinson, 244 Mont. 1, 795 P.2d 480, 482 (1990). See also Farmers Ins. Group v. Reed, 109 Idaho 849, 853, 712 P.2d 550, 554 (1986).

Our Looney decision is not determinative of this controversy. There the policy provided that the term “named insured” included, by definition, the spouse, if the spouse resided in the household. A major basis of our holding was the finding that the wife was thus a named insured in the insurance policy. We said:

The appellant [injured wife] was more than a mere member of the family of the insured; she was the insured. Her relationship with the defendant Looney surpasses mere household member status. Her relationship places her within the policy definition of named insured. Surely the legislature, in amending Section 521(e), did not intend to allow the named insured, although a passenger, coverage under this section. (Court’s emphasis.) id. at 1141.

As such we concluded that the legislative purpose behind the enactment of compulsory liability insurance laws was not to protect the injured policy holder, but rather to protect innocent third persons injured by the insured.

Looney simply does not apply here, where the injured passenger was not a named insured. Here the child of an insured was injured and killed. The child was obviously not a party to the contract, nor the tortfea-sor. Based on our compulsory liability insurance law, innocent victims like the child here are to be protected by liability insurance.6 Thus, this exclusion — which would preclude recovery for innocent victims if they are family members — is directly contrary to the Oklahoma statutes as applied to this case.

II. THE EXTENT OF LIABILITY

State Farm urges that if the exclusion is invalid, its invalidity is limited to the statutory minimum required coverage. I agree. In Equity Mutual, supra, a policy exclusion was held invalid to the extent of the minimum statutory coverage. Likewise, in Young v. Mid-Continent, supra, we held that an exclusion was invalid because the statute’s intent “required] a minimum of protection to any party who is not at party to the contract.” (Emphasis Added). Id. at 1088.

There is no public policy which requires our interference with the insurance contract between the parties as long as the insurance statutes are complied with. Several states have made the same distinction when considering the extent to which the household clause is invalid. In Farmers Ins. Exch. v. Young, 108 Nev. 328, 331, 832 P.2d 376, 379 (1992), the Nevada Supreme Court held the exclusion invalid only to the extent of statutorily required coverage. The court pointed out that such a holding permitted the innocent victims to recover as intended by the legislature, but also allowed for the insurer to plan for the risks imposed.

In Arceneax v. State Farm Mut. Auto. Ins. Co., 113 Ariz. 216, 218, 550 P.2d 87, 89 (1976), the Arizona Supreme Court adopted a similar rule. There, the exclusion was held invalid in light of the public policy evidenced by legislation. However, the court stated “[i]t seems logical that the contract of insurance here need provide for members of the household nothing more than the Act requires, and thereafter the exclusionary clause is viable.”7

I find this to be a simple and logical rationale. Rather than interfering with the con-*883traetual rights of the insured and insurer beyond what is required by statute, I would confine the household exclusion’s invalidity to only that which is required by our compulsory liability insurance laws. This construction of the exclusion is consistent with the policies behind the statutes. Above this limit the parties are free to contract without judicial interference. Where insurance coverage is not mandated the parties are free to contract for insurance to cover such risks, or not, as they see fit. See State Farm v. Greer, 777 P.2d 941, 948 (Okla.1989); Wiley v. Travelers Ins. Co., 534 P.2d 1293 (Okla.1974). Apart from the public policy as enunciated by the legislature in its Compulsory Insurance Law there is no reason for the courts to rewrite the contract between the parties.

I therefore concur in the Court’s opinion and in its judgment to award Plaintiff the statutorily required coverage on each liability policy.

I am authorized to state that V.C.J. LAVENDER joins in these views.

. Unah, 676 P.2d at 1367, fa. 2, lists the jurisdictions which have abolished or modified the doctrine of parental immunity.

. See Tucker v. Tucker, 395 P.2d 67, 68 (Okla.1964), later overruled by Unah, wherein we expressed concern for the preservation of the family unit and refused to permit a suit by a child against his parent.

. We noted that other jurisdictions had held similar provisions invalid. Pennsylvania Nat. Mut. Cas. Ins. v. Parker, 282 S.C. 546, 320 S.E.2d 458 (Ct.App.1984); DeWitt v. Young, 229 Kan. 474, 625 P.2d 478 (1981); Kasson & Keller, Inc. v. Centennial Ins. Co., 79 Misc.2d 450, 359 N.Y.S.2d 760 (N.Y.1974).

. This rationale was based on Young v. Mid-Continent, supra, and Unah, supra.

. The following states have held the household exclusion invalid: Arizona in Arceneaux v. State Farm Mut. Auto. Ins. Co., 113 Ariz. 216, 550 P.2d 87 (1976) (void to extent of minimum statutory coverage); Colorado in Meyer v. State Farm Mut. Auto. Ins. Co., 689 P.2d 585 (Colo.1984); Delaware in State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d 557 (Del.1988); Georgia in Stepho v. Allstate Ins. Co., 259 Ga. 475, 383 S.E.2d 887 (1989); Idaho in Farmers Ins. Group v. Reed, 109 Idaho 849, 712 P.2d 550 (1985); Kansas in DeWitt v. Young, 229 Kan. 474, 625 P.2d 478 (1981); Kentucky in Beacon Ins. Co. v. State Farm Mut. Ins. Co., 795 S.W.2d 62 (Ky.1990) and Bishop v. Allstate Ins. Co., 623 S.W.2d 865 (Ky.1981); Maryland in Jennings v. Government Empl. Ins. Co., 302 Md. 352, 488 A.2d 166 (1985); Michigan in State Farm Mut. Auto. Ins. Co. v. Sivey, 404 Mich. 51, 272 N.W.2d 555 (1978); Missouri in Halpin v. Amer. Family Mut. Ins. Co., 823 S.W.2d 479 (Mo.1992); Montana in Allstate Ins. Co. v. Hankinson, 244 Mont. 1, 795 P.2d 480 (1990) and Transamerica Ins. Co. v. Royle, 202 Mont. 173, 656 P.2d 820 (1983); Nevada in Farmers Ins. Exch. v. Young, 108 Nev. 328, 832 P.2d 376 (1992) and Neal v. Farmers Ins. Exch., 93 Nev. 348, 566 P.2d 81 (1977); New Jersey in Kish v. Motor Club of America Ins. Co., 108 N.J.Super. 405, 261 A.2d 662 (N.J.1970), cert. denied, 55 N.J. 595, 264 A.2d 68 (1970); New Mexico in Estep v. State Farm Mut. Auto. Ins. Co., 103 N.M. 105, 703 P.2d 882 (1985); New York in Allstate Ins. Co. v. Anzalone, 119 Misc.2d 222, 462 N.Y.S.2d 738 (1983); North Dakota in Hughes v. State Farm Mut. Auto. Ins. Co., 236 N.W.2d 870 (N.D.1975); Oregon in Dowdy v. Allstate Ins. Co., 68 Or.App. 709, 685 P.2d 444 (1984), review denied, 298 Or. 172, 691 P.2d 481 (1984); South Carolina in Jordan v. Aetna Cas. & Surety Co., 264 S.C. 294, 214 S.E.2d 818 (1975); South Dakota in Cimarron Ins. Co. v. Croyle, 479 N.W.2d 881 (S.D.1992); Texas in National County Mut. Fire Ins. Co. v. Johnson, 829 S.W.2d 322 (Tex.Ct.App.1992); Utah in State Farm Mut. Auto. Ins. Co. v. Mastbaum, 748 P.2d 1042 (Utah 1987) and Farmers Ins. Exch. v. Call, 712 P.2d 231 (Utah 1985); Washington in Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wash.2d 203, 643 P.2d 441 (1982); and Wyoming in Allstate Ins. Co. v. Wyoming Ins. Dept., 672 P.2d 810 (Wyo.1983).

The following states have upheld the exclusion: Massachusetts in Hahn v. Berkshire Mut. Ins. Co., 28 Mass.App. 181, 547 N.E.2d 1144 (1989); Florida in Arnica Mut. Ins. v. Wells, 507 So.2d 750 (Fla.Ct.App.1987); Indiana in Allstate Ins. Co. v. Boles, 481 N.E.2d 1096 (Ind.1985); Rhode Island in Faraj v. Allstate Ins. Co., 486 A.2d 582 (R.I.1984); Iowa in Walker v. American Family Mut. Ins. Co., 340 N.W.2d 599 (Iowa 1983); Alabama in Hutcheson v. Alabama Farm Bureau Mut. Ins. Co., 435 So.2d 734 (Ala.1983); Illinois in Severs v. Country Mut. Ins. Co., 89 Ill.2d 515, 61 Ill.Dec. 137, 434 N.E.2d 290 (1982); Pennsylvania in Paiano v. Home Ins. Co., 253 Pa.Super. 519, 385 A.2d 460 (1978).

. Because we answer only the question briefed, and not hypothetical ones, I leave for another day the question that will arise should an insurer define or include small children as named insureds.

. See also Halpin v. American Family Mut. Ins. Co., 823 S.W.2d 479, 482 (Mo.1992); Cimmarron Ins. Co. v. Croyle, 479 N.W.2d 881, 884 (S.D.1992); Farmers Ins. Exch. v. Call, 712 P.2d 231, 236 (Utah 1985); Allstate Ins. Co. v. Wyoming Ins. Dept., 672 P.2d 810, 823 (Wy.1983); Bishop v. Allstate Ins. Co., 623 S.W.2d 865, 866 (Ky.1981); DeWitt v. Young, 229 Kan. 474, 625 P.2d 478, 483 (1981).