American Family Mut. Ins. Co. v. Ward

• Decision Date: 15 May 1990
• Docket Number: No. 71998,71998
• Citation: 789 S.W.2d 791
• Parties: AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Respondent, v. Larry WARD, Karen Ward, and Kenneth Rauscher, Appellants.
• Court: Missouri Supreme Court

Page 791

789 S.W.2d 791

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Respondent, v. Larry WARD, Karen Ward, and Kenneth Rauscher, Appellants.

No. 71998.

Supreme Court of Missouri En Banc.

May 15, 1990.

James P. Leonard St. Louis, for appellants.

Joseph L. Leritz, Richard C. Homire and Edward Roth, St. Louis, for respondent.

Michael A. Dallmeyer, Jefferson City, for amicus curiae.

HOLSTEIN, Judge.

This is an appeal from a declaratory judgment. The trial court determined that a family exclusion clause in an automobile liability insurance policy relieved the insurer of any obligation to defend or pay a claim by the insured's wife who was injured in a collision in which the insured was the driver. Consequently, the trial court absolved the insurer of any obligation to defend or pay a claim for contribution derivative of the wife's claim brought against the insured by a joint tort-feasor. The appeal was filed initially in the Missouri Court of Appeals, Eastern District. Following the filing of that court's opinion, the appeal was transferred to this Court. Rule 83.02. ¹ The single question presented on appeal is whether the household exclusion clause in a policy of motor vehicle liability insurance issued in Missouri is void because it violates the public policy of this state as expressed in the Safety Responsibility Law.

Larry Ward purchased a policy of liability insurance from American Family Mutual Insurance Company effective for six months beginning December 1, 1984. The policy limits for bodily injury were $50,000 for each person and $100,000 for each occurrence. Within those limits, the policy promises that American Family will pay damages for which Larry is legally liable arising out of the use of an automobile. The pertinent exclusionary clause states:

EXCLUSIONS. This coverage does not apply to:

. . . . .

10. Bodily injury to any person injured while operating your insured car or for bodily injury to any person related to and residing in the same household with the operator.

The above provision is herein referred to as the "family exclusion clause." The contract of insurance also provides:

When we [American Family] certify this policy as proof under any financial responsibility law, it will comply with the law to the extent of the required coverage. You [Larry Ward] agree to repay us for any payment we would not have had to make except for this agreement.

The policy concludes by stating:

Terms of this policy which are in conflict with the statutes of the state in which this policy is issued are changed to conform to those statutes.

On March 16, 1985, while the policy was in force, Larry Ward was driving a vehicle which was involved in an automobile accident. Karen Ward, as a passenger, sustained bodily injuries in the collision. On the date of the collision, Larry and Karen Ward were married and had the same residence. Suit was brought by the Wards against Kenneth Rauscher and Renato Aves, two other drivers involved in the collision. A hit and run driver was also involved in the accident, but he was never identified. American Family was joined as a defendant pursuant to the uninsured motorist provisions of Karen's liability insurance policy to defend the liability of the unidentified driver. Rauscher and Aves filed counterclaims against Larry Ward seeking contribution for any damages they might be required to pay to Karen attributable to Larry's negligence.

Following a jury trial, a verdict was returned assessing fault at 55% to the uninsured motorist, 25% to Kenneth Rauscher, and 20% to Larry Ward. The verdict assessed Karen's damages at $1,500,000. A judgment entered on the verdict was thereafter affirmed on appeal. See Ward v. American Family Ins. Co., 783 S.W.2d 921 (Mo.App.1989).

This action was filed prior to the jury trial, but was tried after that case. In its petition, American Family asserted that the family exclusion clause relieved it of a duty to pay damages to Karen or contribution for Karen's damages attributable to Larry which Rauscher might be required to pay. Judgment was entered relieving American Family of liability. Rauscher and the Wards appeal.

The appellants argue that the adoption of contribution and apportionment among tort-feasors in Missouri Pac. R.R. Co. v. Whitehead & Kales Co., 566 S.W.2d 466 (Mo. banc 1978), and the abrogation of spousal immunity for negligent torts in S.A.V. v. K.G.V., 708 S.W.2d 651 (Mo. banc 1986), have created new classes of persons to whom one may be legally responsible for damages arising out of the use of automobiles. Appellants point out that § 303.190.2(2) requires that a "motor vehicle liability policy" must protect the insured "against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle." Appellants admit that the Safety Responsibility Law in effect at the time of the collision did not mandate insurance. However, the argument continues, the purpose of the statutes in effect at the time of the accident were to provide a remedial system designed to permit injured members of the public to recover from tort-feasors who caused injury in a vehicle accident. Given that purpose and the new classes of persons now entitled to recover, appellants conclude, the Safety Responsibility Law mandates that the family exclusion clause be declared void as against public policy.

American Family relies primarily on State Farm Mut. Auto. Ins. Co. v. Ward, 340 S.W.2d 635 (Mo.1960). There, the insured was operating a motor vehicle when it was involved in a collision. The insured was killed. His wife and daughter were injured. The wife and daughter sued the insured's estate seeking damages. The insurer brought a declaratory judgment action to determine if a clause in the liability insurance policy excluding "any member of the family of the insured residing in the same household as the insured" from coverage was valid as against the public policy expressed in the Safety Responsibility Law, § 303.010, et seq. The Court noted that the provisions of § 303.190.2(2) mandate the coverage required in a "motor vehicle liability policy." Id. at 637. However, a "motor vehicle liability policy," as used in the Safety Responsibility Law, meant an insurance policy "certified" as proof of financial responsibility under the provisions of § 303.170 or § 303.180. Id. at 638. The Court said, " 'We cannot read into the insurance contract, under the guise of public policy, provisions which are not required by law and which the parties thereto clearly and plainly have failed to include.' " Id. at 639 (quoting Barkley v. Int'l Mut. Ins. Co., 227 S.C. 38, 86 S.E.2d 602, 605 (1955)). Even though a provision in an insurance policy is restrictive, the Court reasoned, such provision must be given its plain meaning. The Court held that in the absence of certification of the policy, an unambiguous and unequivocal family exclusion clause is effective and does not violate public policy. Id. That holding was reaffirmed in Harrison v. MFA Mut. Ins. Co., 607 S.W.2d 137, 142 (Mo. banc 1980).

In MFA Mut. Ins. Co. v. Howard Const. Co., 608 S.W.2d 535 (Mo.App.1980), decided after Whitehead & Kales Co., the question arose as to what effect a family exclusion provision in an automobile liability insurance policy would have on a claim for contribution. There, the insured was operating a vehicle when it was involved in an accident. The insured was killed, and two of the insured's children were injured in the collision. One of the children brought suit against Howard Construction Company which was engaged in highway repair work near the scene of the accident. The suit claimed Howard had negligently failed to post warning signs of the repair work. Howard filed a third-party claim against the insured's estate seeking contribution for any negligence attributable to the deceased insured. A declaratory judgment action was brought by the insurer to determine the extent of its liability for contribution. The court began by pointing out that because the insured was deceased, the child could maintain an action against the insured's estate. Therefore, Howard was permitted to maintain the derivative third-party action for contribution under Whitehead & Kales. Id. at 538. However, "Insurance policy exposure is neither enhanced nor reduced by [the apportionment and contribution] aspect of Whitehead and Kales." Id. After reciting the family exclusion clause, the court stated that the clause was plain and unambiguous. Accordingly, the court gave effect to the intent of the parties as expressed in the contract. The court deemed it unnecessary to decide the public policy issue.

In Cameron Mut. Ins. Co. v. Proctor, 758 S.W.2d 67 (Mo.App.1988), decided after S.A.V. v. K.G.V., a husband and wife were named insureds in a liability policy issued on a 1984 Blazer. The husband, as driver, and the wife, as passenger, were involved in a collision on March 10, 1986. The husband was killed and the wife was injured. Again, the insurer sought a declaration that it was not liable under an exclusionary clause in the policy. The exclusion relied on read as follows, "This policy does not apply: (g)(2) to bodily injury to the insured...." Id. at 69. The court noted the abrogation of interspousal immunity but concluded that no public policy considerations prohibit an insurance policy provision excluding a named insured from coverage under the policy. Id. at 70. The exclusionary clause was upheld.

Very recently, in Hussman v. Gov't. Employees Ins. Co., 768 S.W.2d 585 (Mo.App.1989), the Eastern District of the Missouri Court of Appeals decided almost the precise question presented here. In that case, the insured was the driver of a vehicle involved in an accident. The insured's wife was a passenger and sustained injuries. The question raised on appeal was whether the family exclusion clause was void after abolition of spousal immunity. Based upon an...