Dairyland Ins. Co. v. East

• Decision Date: 18 December 1992
• Docket Number: No. 21171,21171
• Court: West Virginia Supreme Court
• Parties: DAIRYLAND INSURANCE COMPANY, Plaintiff Below, Appellee, v. Judy A. EAST, aka Judith Ann East, Defendant Below, Appellant.

Page 257

425 S.E.2d 257

188 W.Va. 581

DAIRYLAND INSURANCE COMPANY, Plaintiff Below, Appellee, v. Judy A. EAST, aka Judith Ann East, Defendant Below, Appellant.

No. 21171.

Supreme Court of Appeals of West Virginia.

Submitted Sept. 16, 1992.

Decided Dec. 18, 1992.

Syllabus by the Court

1. "A 'named driver exclusion' endorsement in a motor vehicle liability insurance policy in this State is of no force or effect up to the limits of financial responsibility required by W.Va.Code, 17D-4-2 [1979]; however, above those mandatory limits, or with regard to the property of the named insured himself, a 'named driver exclusion' endorsement is valid under W.Va.Code, 33-6-31(a) [1982]." Syllabus, Jones v. Motorists Mut. Ins. Co., 177 W.Va. 763, 356 S.E.2d 634 (1987).

2. A named insured exclusion endorsement is invalid with respect to the minimum coverage amounts required by the West Virginia Motor Vehicle Safety Responsibility Law, West Virginia Code §§ 17D-1-1 to 17D-6-7 (1991 & Supp.1992). Above the minimum amounts of coverage required by West Virginia Code § 17D-4-12 (1992), however, the endorsement remains valid.

3. An owner of a vehicle does not become a "guest" within the purview of West Virginia Code § 33-6-29 (Supp.1992) merely by occupying the passenger seat of a vehicle.

Anita R. Casey, Meyer, Darragh, Buckler, Bebenek & Eck, Charleston, for appellee.

David C. Smith, Princeton, for appellant.

WORKMAN, Justice:

This case arises upon the following two certified questions from the Circuit Court of Mercer County:

1. Whether the named insured exclusion endorsement in the Dairyland Insurance Company policy is valid and enforceable?

2. If the named insured exclusion endorsement is valid and enforceable, does the vehicle in which the named insured was riding as a passenger become an uninsured motor vehicle for purposes of recovering damages under the uninsured motorist coverage section of the policy?

In the declaratory judgment action initiated below by Dairyland Insurance Company ("Dairyland"), Appellee, the circuit court entered summary judgment against Appellant Judy East on the issue of coverage and then certified the above questions to this Court. We respond to the first certified question by determining that the named exclusion endorsement is invalid to the extent of the minimum coverage required by West Virginia Code § 17D-4-12(b)(2) (1991), but valid for any coverage exceeding the minimum statutory amount. We respond to the second certified question in the negative.

Mrs. East was injured in an automobile accident on April 26, 1988, in Mercer County, West Virginia. At the time of the accident, Mrs. East was a passenger in a vehicle that she owned which was being operated by her husband, Daniel East. Mr. East caused the accident by rear-ending an ambulance. Mrs. East initiated a civil action in the Circuit Court of Mercer County, alleging negligence against Mr. East in connection with the automobile accident. ¹

In effect at the time of the accident was a policy of insurance issued by Dairyland to Mrs. East which contained the following named insured exclusion endorsement:

NAMED INSURED EXCLUSION ENDORSEMENT [--] This endorsement modifies your policy in the following way: LIABILITY INSURANCE [--] The liability insurance provided by this policy doesn't apply to injuries to the person named on the declarations page. It ² doesn't apply to the husband or wife of that person if they are living in the same household. (footnote supplied)

Based on its position that it owed no coverage to Mrs. East ³ because of the named insured exclusion endorsement, Dairyland then filed a separate civil action seeking a declaratory judgment regarding its rights, duties, and obligations to Mrs. East. The circuit court resolved each of these certified questions against Mrs. East in an order entered on February 7, 1992.

Mrs. East urges this Court to find the named insured exclusion endorsement invalid and unenforceable on grounds that it violates the provisions of West Virginia Code § 33-6-29 (Supp.1992) as well as public policy. West Virginia Code § 33-6-29(a) provides in pertinent part: "An insurer shall not issue any policy of bodily injury or property damage liability insurance which excludes coverage to the owner or operator of a motor vehicle on account of bodily injury or property damage to any guest or invitee who is a passenger in such motor vehicle." Relying on West Virginia Code § 33-6-29, Mrs. East maintains that an insurer may not restrict availability of liability coverage to a guest passenger in a motor vehicle.

We note initially that the purpose and effect of the named insured exclusion endorsement in the Dairyland policy is to prevent Mrs. East from recovering for personal injuries to herself resulting from her own acts of negligence. Because of this endorsement then, had Mrs. East been driving the vehicle at the time of the accident, no coverage would have been extended to her under the subject policy. Appellant does not dispute this point, but instead argues that because she was occupying the passenger seat rather than the driver's seat when the accident occurred, her coverage should now be enhanced to cover her personal injuries. We further recognize, based on a representation made by Appellee during oral argument and not disputed by Appellant, that Mrs. East apparently paid a reduced premium because of the inclusion of the named insured exclusion endorsement in her policy. As a matter of policy, it seems unfair for the insured to receive coverage she did not contract for merely by switching seats in the automobile. Because we decide this case on grounds of law rather than policy, however, the outcome of this case is not determined by this observation.

This Court previously ruled in Jones v. Motorists Mutual Insurance Co., 177 W.Va. 763, 356 S.E.2d 634 (1987) that:

A 'named driver exclusion' endorsement in a motor vehicle liability insurance policy in this State is of no force or effect up to the limits of financial responsibility required by W.Va.Code, 17D-4-2 [1979]; however, above those mandatory limits, or with regard to the property of the named insured himself, a 'named driver exclusion' endorsement is valid under W.Va.Code, 33-6-31(a) [1982].

Id. at 764, 356 S.E.2d at 635, Syllabus. Based on the following comment in Jones, Dairyland argues that the Jones holding is inapplicable:

[A] common sense reading of these statutes [West Virginia Code §§ 17D-4-12(b)(2) and 33-6-31(a) ] in their entirety leads us to conclude that the legislature intended Chapter 17 to provide a minimum level of financial security to third-parties who might suffer bodily injury or property damage from negligent drivers.

177 W.Va. at 766, 356 S.E.2d at 637. Dairyland focuses on the use of the term "third-parties" in the above-quoted sentence and suggests that the holding of Jones should not apply to the named insured in this case because she is not a third-party.

Although Jones clearly pertained to third-party liability, factually and legally, the reasoning of Jones, is applicable analogously to the case at bar. In Jones, this Court first recognized that the legislative intent in enacting West Virginia Code § 17D-4-12(b)(2) was "to provide a minimum level of financial security to third-parties who might suffer bodily injury or property damage from negligent drivers." 177 W.Va. at 766, 356 S.E.2d at 637. Secondly, we recognized that "beyond the mandatory twenty thousand dollar bodily injury for one person, forty thousand dollar bodily injury for two or more persons, and ten thousand dollar property damage minimum coverage requirements, Code 33-6-31(a) [1982] allows an insurer and an insured to agree to a 'named driver exclusion' endorsement." Id. While we were not called upon to decide in Jones whether the statutory minimum amounts of coverage pertain to named insureds, we now conclude that the language in West Virginia Code § 17D-4-12(b)(2) was intended to provide a minimum level of financial security to named insureds as well as to third-parties. As support for this conclusion, we reference the statutory language that requires that an automobile owner's liability insurance policy "shall insure the person named therein ... against loss from the liability imposed by law for damages arising out of the ownership, operation, maintenance or use of such vehicle" subject to statutory limits. W.Va.Code § 17D-4-12(b)(2). For the same reasons that we concluded in Jones that a named driver exclusion was valid above the limits of financial responsibility imposed by West Virginia Code § 17D-4-2, a named insured exclusion endorsement is similarly valid above the statutorily-imposed minimum amounts of coverage.

A recent case decided by a federal district court in Kansas applying Missouri law addressed our specific issue, that is, whether a named insured exclusion clause violates public policy. The court in State Farm Mutual Automobile Insurance Co. v. Gengelbach, No. 91-2048-0, 1992 WL 88025 (D.Kan. March 3, 1992), extended the reasoning formerly relied upon to invalidate household exclusion clauses ⁴ to named insured exclusion clauses. Id. at 3. The court reasoned:

The court further finds that the named insured exclusion clause contained in the Gengelbach's policy is invalid to the same extent as the household exclusion clause [with respect to minimum coverage amounts required by the Missouri Motor Vehicle Financial Responsibility Law "MVFRL"]. Although Halpin does not address the validity of named insured exclusion clauses, this court believes that the policy reasons supporting the Halpin decision are equally applicable to named insured clauses. ... [T]his court believes that complete enforcement of the named insured exclusion clause in the instant case would thwart the purposes of the MVFRL by preventing Carolyn Gengelbach from recovering damages arising from the alleged negligence of her husband.... Stated differently, ...