Dairyland Ins. Corp. v. Smith

• Decision Date: 11 May 1982
• Docket Number: No. 17109,17109
• Citation: 646 P.2d 737
• Parties: DAIRYLAND INSURANCE CORP., Plaintiff and Respondent, v. Susan B. SMITH, Administratrix of the Estate of Jack Ellis, Patrick Hall,Robert Hall and Daniel F. Defriez, Defendants and Appellants.
• Court: Utah Supreme Court

Page 737

646 P.2d 737

DAIRYLAND INSURANCE CORP., Plaintiff and Respondent, v. Susan B. SMITH, Administratrix of the Estate of Jack Ellis, Patrick Hall,Robert Hall and Daniel F. Defriez,

Defendants and Appellants.

No. 17109.

Supreme Court of Utah.

May 11, 1982.

David S. Cook, Bountiful, for defendants-appellants.

Wendell D. Bennett, Salt Lake City, for plaintiff-respondent.

HOWE, Justice:

Defendants Patrick Hall and Robert Hall suffered serious injuries in an automobile accident which occurred when Jack Ellis, the owner and driver of an insured vehicle, collided with defendants Hall. Ellis was killed. The Halls appeal from a declaratory judgment adverse to them entered in an action brought by plaintiff Dairyland Insurance Corp. to void the automobile insurance policy of Ellis due to material misrepresentations by him.

Prior to the accident, in order to obtain insurance on his vehicle, Ellis went with Daniel Defriez to meet Howard Musselman who was authorized to write insurance for Dairyland. In response to questions on the application, Ellis represented to Musselman that he would not be driving the van because of his poor eyesight. Defriez would drive the van for him. Musselman noted this information in his handwriting on the application and also entered Ellis as the owner of the van and Defriez as the named insured. In the space where all other drivers were to be listed Musselman wrote "none". After Ellis signed the application, Musselman bound coverage.

In the normal course of business Dairyland requested and received a report on the driving record of Defriez, the named insured and only driver listed. No report on the driving record of Ellis, the owner, was requested. Observing no problems in the driving record of Defriez, Dairyland issued the policy. Dairyland claimed that it would not have issued the policy had it known that Ellis would drive the van.

After the accident, Dairyland filed this action seeking a declaratory judgment of its non-liability on the theory that the policy was void ab initio. The Halls counterclaimed against Dairyland and cross-claimed against the other defendants seeking: (1) declaratory judgment that the insurance policy was in full force and effect at the time of the accident; (2) judgment against the estate of Ellis for personal injury and property damage; and (3) judgment that if the insurance did not cover the accident, Defriez and the estate of Ellis were liable for all damage suffered by the Halls. The court dismissed the Halls' claims as being an improper joinder of actions. Thereafter, to avoid the running of the statute of limitations, the Halls filed a separate suit (against the estate of Ellis) which is presently pending the outcome of this case. The other defendants, Smith, administratrix for Ellis, and Defriez, the named insured, were not represented by counsel and presented no defense at trial.

After a trial, the court ruled that the insurance policy was void from its inception, finding that Ellis had falsely represented that Defriez would be the sole operator of the vehicle and that Dairyland had relied upon that misrepresentation. The court held that Dairyland, therefore, was not liable to the defendants. The Halls appeal seeking reversal of the judgment of the lower court and a determination that their counterclaim and cross-claim were improperly dismissed.

The Halls argue that § 41-12-21(f), U.C.A.1953 of the Utah Safety Responsibility Act precludes the rescission of an insurance policy after an accident has occurred. In other words, since the collision has already occurred, Dairyland may not now rely on earlier false statements by Ellis in order to avoid its possible liability to the Halls. Section 41-12-21(f) provides:

(f) Every motor vehicle liability policy shall be subject to the following provisions which need not be contained therein:

(1) the liability of the insurance carrier with respect to the insurance required by this act shall become absolute whenever injury or damage covered by said motor vehicle liability policy occurs; said policy may not be canceled or annulled as to such liability by any agreement between the insurance carrier and insured after the occurrence of the injury or damage; no statement made by the insured or on his behalf and no violation of said policy shall defeat or void said policy ; (Emphasis added.)

Dairyland counters with the argument that the provisions of the Utah Safety Responsibility Act are applicable only to policies required to be certified under § 41-12-19 of that Act. Since the policy of Ellis was not certified nor required to be certified, Dairyland contends that § 41-12-21(f) is erroneously relied upon by the Halls. For support Dairyland cites Allstate Insurance Co. v. United States Fidelity and Guaranty Co., Utah, 619 P.2d 329 (1980); Western Casualty and Surety Co. v. Transamerican Insurance Co., 26 Utah 2d 50, 484 P.2d 1180 (1971); and Utah Farm Bureau Insurance Co. v. Chugg, 6 Utah 2d 399, 315 P.2d 277 (1957). Both Western Casualty and Utah Farm Bureau are cases which are inapplicable here because they predate the enactment of the Utah Automobile No-Fault Insurance Act, § 31-41-1 et seq.

We find Allstate to be controlling-but in support of the Halls' position rather than Dairyland's. In Allstate, although we did not accept the argument that the enactment of the No-Fault Insurance Act established a "constructive compulsory liability insurance requirement," we expressly held that the requirements of § 41-12-21 of the Safety Responsibility Act were incorporated into the No-Fault Act. We stated:

Thus, the No-Fault Act, while ostensibly distinct from the Safety Responsibility Act, expressly incorporates provisions of the latter act, (those setting out the 'qualifications' of an insurance policy under that act) into its security requirements. We interpret this as evidence of the intent of the legislature, to require the minimum coverages outlined in the Safety Responsibility Act in all insurance policies used as security for the registration and subsequent operation of motor vehicles in Utah.

The qualifying language of the Safety Responsibility Act is found primarily in 41-12-21.... (Footnote omitted.) (619 P.2d at 332.)

First, because the application of the holding in Allstate is to "all insurance policies used as security for the registration and subsequent operation of motor vehicles in Utah," the classification of the...