Aetna Cas. and Sur. Co. v. Craig, 60866

• Decision Date: 21 March 1989
• Docket Number: No. 60866,60866
• Citation: 771 P.2d 212,1989 OK 43
• Parties: AETNA CASUALTY AND SURETY COMPANY, Plaintiff, v. Dewayne Lee CRAIG, Defendant.
• Court: Oklahoma Supreme Court

Page 212

771 P.2d 212

1989 OK 43

AETNA CASUALTY AND SURETY COMPANY, Plaintiff, v. Dewayne Lee CRAIG, Defendant.

No. 60866.

Supreme Court of Oklahoma.

March 21, 1989.

FEDERAL CERTIFIED QUESTION.

United States District Court for the Western District of Oklahoma, Certified Questions of Law (2) By Ralph G. Thompson, District Judge Pursuant to the Oklahoma Uniform Certification of Questions of Law Act, 20 O.S. 1981, §§ 1601-1612, As Follows:

(1) May an injured person, a Class 1 insured, "stack" or aggregate the uninsured motorist coverage on a fleet of commercial vehicles covered by a single insurance policy?

(2) Whether the payment of punitive damages under uninsured motorist insurance coverage would contravene the public policy of the State of Oklahoma?

BOTH QUESTIONS ANSWERED IN THE AFFIRMATIVE.

Huckaby, Fleming, Frailey & Chaffin by Scott M. Rhodes, Oklahoma City, for plaintiff.

Berry & Berry, P.C. by Howard K. Berry, Jr., Oklahoma City, for defendant.

SIMMS, Justice:

The United States District Court for the Western District of Oklahoma has certified the following questions of law pursuant to the Uniform Certification of Questions of Law Act, 20 O.S. 1981, § 1601, et seq.:

(1) May an injured person, a Class 1 insured, "stack" or aggregate the uninsured motorist coverage on a fleet of commercial vehicles covered by a single insurance policy?

(2) Whether the payment of punitive damages under uninsured motorist insurance coverage would contravene the public policy of the State of Oklahoma?

That Court has provided the following summary of facts relating to the questions presented, which we reproduce here for clarity.

"Defendant Dewayne Lee Craig was an employee of Multi-Media Corporation. While riding in a vehicle owned by the Corporation, Craig suffered personal injuries when the vehicle in which he was riding was struck by an uninsured motorist, Peter Walley. The vehicle in which Craig was a passenger was owned by Multi-Media and was being driven by another Multi-Media employee.

"The defendant filed suit in the District Court of Oklahoma County against Walley. Judgment was entered on a jury verdict in favor of Craig. The court awarded Craig $5,000,000.00 in actual damages and $5,000,000.00 as punitive damages.

"In this case, Aetna Casualty is seeking a declaration that it is not liable to Craig for the damages under the uninsured motorist provisions of a policy it issued to Craig's employer, Multi-Media. The policy in question was a single policy of insurance providing coverage for Multi-Media's fleet of company vehicles. Multi-Media was charged a [separate] premium for each vehicle.

"The [United States District Court] has determined that Craig was an insured under subsection 1 of the policy which defined the covered insureds as:

(1) You (referring to the named insured) or any family member.

The policy contained a clause limiting liability, which provided:

E. Our Limit of Liability.

Regardless of the number of covered autos, insureds, claims made or vehicles involved in the accident, the most we will pay for all damages resulting from any one accident is the limit of Uninsured Motorist Insurance shown on the declarations.

"Both parties filed Motions for Summary Judgment, plaintiff, the insurer, arguing that stacking of uninsured motorist coverage in a commercial fleet policy is not permitted and that public policy precludes coverage for punitive damages under an uninsured motorist endorsement. Defendant, as an insured, asserts he is entitled to stack the uninsured motorist insurance coverages and to recover punitive damages."

I.

Our answers to these questions follow stare decisis. In the case of Babcock v. Adkins, Okl., 695 P.2d 1340 (1984), we held that only persons who qualified as "insureds" under a series of policies may stack the uninsured motorist coverage provided by those policies. We stated that "those qualifying as insured by reason of status as passengers or permissive users do not qualify as insureds beyond the policy covering the vehicle in which they are located when injured by an uninsured motorist." 695 P.2d at 1343.

Later, in Rogers v. Goad, Okl., 739 P.2d 519 (1987), we were presented with the question of who qualified as an insured under a single, commercial fleet insurance policy which provides coverage for a number of vehicles. There, we further defined the distinction between Class 1 and Class 2 insureds in deciding whether stacking is available to an employee/insured. That case presented a situation factually similar to that now facing the United States District Court in this case.

We note that the first question certified to us assumes the employee to have been a Class 1 insured. The correctness of the conclusion so reached by the federal court from the facts in this case has not been tendered either for our legal analysis or some responsive comment. It is plainly not subject to this Court's appellate review.

In deciding that an employee was a Class 2 insured, and thus not permitted to stack coverage for all vehicles covered in a fleet insurance policy, this Court cited with approval the rationale used by the Virginia Supreme Court in Cunningham v. Insurance Company of North America, 213 Va. 72, 189 S.E.2d 832 (1972). Paraphrasing the Cunningham Court, we remain committed to the the practice that courts cannot substitute the name of each of the many employees of a given company in place of the employer as the named insured and thus stretch the coverage of the policy to include each employee and all of the members of his household. To do so would rewrite the contract of the parties and distort the public policy as set out in our cases. See Cunningham, supra, 189 S.E.2d at 835.

As summarized in Rogers: "granting the same benefits to both the Class 1 insured and the Class 2 insured would place upon the insurer a risk not contemplated by the contracting parties." Rogers v. Goad, 739 P.2d at 522. In Rogers, we stated that the employee was a Class 2 insured and as such, was only entitled to the coverage provided by the specific vehicle he was occupying when he was injured. The rule that employees, as Class 2 insureds, are only entitled to the single vehicle coverage stated above was even more recently reaffirmed by our holding in Stanton v. American Mutual Liability Insurance Co., Okl., 747 P.2d 945 (1987). While not specifically stated in these cases, the clear answer to the first question certified must therefore be that ONLY Class 1 insureds may stack the uninsured motorist protection in a commercial fleet insurance policy.

Accordingly, we answer the first certified question in the AFFIRMATIVE.

II.

With respect to the second question certified, we rely on a previous decision by this Court on the related issue of whether an insurer can be held liable for punitive damages imposed against an insured. In Dayton Hudson Corporation v. American Mutual Liability Insurance Company, Okl., 621 P.2d 1155 (1980), our opinion closely examined the public policy considerations involved in requiring insurers to pay punitive damage awards.

In Dayton, this Court emphasized the primary purpose of punitive damages: "punishment of the offender and the deterrence of others, for the benefit of society, from the commission of like wrongs." 621 P.2d at 1158. Discussing the issue from a liability insurance standpoint, we recognized that the public policy concerns in support of awards of punitive damages, namely deterrence and punishment, require that the ultimate burden of such awards rest directly on the wrongdoer. By allowing one to insure against such awards, the burden is shifted from the wrongdoer to the otherwise innocent insurer. Ultimately, of course, the burden is then passed to the consuming public in the form of higher insurance rates, generally. The public policy in support of punitive damages is thwarted by such a practice.

The injustice to the public policy underpinnings of punitive damages would be increased even more if we were to sanction the position advocated here. In this case, the result advocated is to force the innocent insurer of an equally blameless insured to bear the burden of a wrong committed by a third person: a person who is unrelated in any way to the contracting parties. This rewards and protects the wrongdoer, rather than punishes and deters. As stated in an early case in the Fifth Circuit: "Where a person is able to insure himself against punishment, he gains a freedom of misconduct [which is] inconsistent with the establishment of sanctions against such misconduct." Northwestern National Casualty Company v. McNulty, 307 F.2d 432, 440 (5th Cir.1962). The suggestion that the innocent insurance company, through subrogation, can later recover the punitive damage assessment from the wrongdoer in this case is a rationalization that borders on the nonsensical. Quite obviously, if such a recovery were possible, this case would never have arisen.

In holding that it was against the public policy of the State of Oklahoma to allow a tortfeasor to escape the civil consequences of his wrong through insurance, we recognized one narrow exception to that rule, where the insured employer may be held vicariously liable for the tortious behavior of his employee. Under that limited exception, the employer's liability is imputable through operation of the doctrine of respondeat superior. Dayton Hudson Corporation v. American Mutual Liability Insurance Company, supra, at 1160.

Dayton is factually distinguishable from the instant case. There, the Court was faced with a tortious employee of an insured whose tortious acts were unauthorized by the employer. There is no public policy violated when an innocent master is protected by insurance from punitive damage liability arising out of the tortious, unauthorized, acts of a servant. In that factual framework, the blameless insured bears some limited responsibility for failure to take precautions against his employees' tortious...