Detroit Auto. Inter-Insurance Exchange v. Commissioner of Ins.

• Citation: 272 N.W.2d 689,86 Mich.App. 473
• Decision Date: 17 October 1978
• Docket Number: INTER-INSURANCE,Docket No. 77-2469
• Parties: DETROIT AUTOMOBILEEXCHANGE, Motor Land Insurance Co. and Group Insurance Company of Michigan, Plaintiffs-Appellees-Cross Appellants, v. COMMISSIONER OF INSURANCE, Defendant-Appellant-Cross Appellee.
• Court: Court of Appeal of Michigan (US)

Page 689

272 N.W.2d 689

86 Mich.App. 473

DETROIT AUTOMOBILE INTER-INSURANCE EXCHANGE, Motor Land

Insurance Co. and Group Insurance Company of

Michigan, Plaintiffs-Appellees-Cross Appellants, v. COMMISSIONER OF INSURANCE, Defendant-Appellant-Cross Appellee.

Docket No. 77-2469.

Court of Appeals of Michigan.

Oct. 17, 1978.

Released for Publication Jan. 3, 1979.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., Harry G. Iwasko, Jr., Asst. Atty. Gen., for defendant-appellant-cross appellee.

William H. Morman, Gen. Counsel by Forrest G. Shaw, Dearborn, for plaintiffs-appellees-cross appellants.

Before BASHARA, P. J., and ALLEN and KELLY, JJ.

ALLEN, Judge.

For many years plaintiffs provided optional, named driver exclusion provisions for its automobile insurance policies. These exclusions permitted an insured to obtain automobile insurance at rates calculated on the exclusion of a certain person. The excluded person would typically be a high-risk driver in the insured's household, and the resultant rate without the excluded driver would be considerably less than with the high-risk driver included. The Commissioner of Insurance approved of the named driver exclusion provisions by approving the forms through which the exclusions were provided.

On March 13, 1975, defendant commissioner issued notices of withdrawal of approval of forms which contained such exclusions. After the issue had proceeded through the administrative process, defendant commissioner issued a decision and order on March 2, 1976, which declared that policy forms containing named driver exclusion clauses violated the No-Fault Act, M.C.L. § 500.3101 Et seq.; M.S.A. § 24.13101 Et seq. The circuit court subsequently found that named driver exclusions did not violate the No-Fault Act, and, on June 14, 1977, ordered the defendant commissioner to set aside its withdrawal of approval. Defendant commissioner now appeals from the circuit court's decision. Plaintiffs cross-appeal challenging the defendant commissioner's authority to make its decision and also challenging the constitutionality of the defendant's interpretation.

In 1972 the Legislature passed the No-Fault Automobile Insurance Act, 1972 P.A. 294, M.C.L. § 500.3101 Et seq.; M.S.A. § 24.13101 Et seq. This was a major piece of legislation constituting a fundamental change in the nature of automobile insurance in Michigan. Our Supreme Court has recognized the innovative and experimental nature of the No-Fault Act. Shavers v. Attorney General, 402 Mich. 554, 578-579, 615, 627, 267 N.W.2d 72 (1978).

In pertinent part the No-Fault Act provides:

"Sec. 3101. (1) The owner or registrant of a motor vehicle required to be registered in this state shall maintain security for payment of benefits under personal protection insurance, property protection insurance, and residual liability insurance. Security shall be in effect continuously during the period of registration of the motor vehicle." M.C.L. § 500.3101(1); M.S.A. § 24.13101(1).

"Sec. 3131. Residual liability insurance shall cover bodily injury and property damage which occurs within the United States, its territories and possessions or in Canada. This insurance shall afford coverage equivalent to that required as evidence of automobile liability insurance under the financial responsibility laws of the place in which the injury or damage occurs. In this state this insurance shall afford coverage for automobile liability retained by section 3135." M.C.L. § 500.3131; M.S.A. § 24.13131.

Section 3135, M.C.L. § 500.3135; M.S.A. § 24.13135, provides for tort liability in certain specified instances, such as noneconomic loss for death or permanent serious disfigurement, intentionally caused harm, and work loss benefits exceeding those provided elsewhere by No-Fault.

It is defendant's position that since the Legislature enacted a comprehensive, compulsory insurance scheme, it would be inconsistent to permit named driver exclusions, as this would force accident victims to obtain a recovery from the personal holdings of those responsible. Defendant contends that the Legislature would not permit a class of drivers, named excluded drivers, to drive totally uncovered by some residual liability insurance. While such a class might have existed before No-Fault, that situation was remedied by the requirement of uninsured motorist coverage. ¹

Defendant's position is appealing until one confronts M.C.L. § 500.3009(2); M.S.A. § 24.13009(2). That statute expressly permits the exclusion from coverage of a named person, and provides that the vehicle owner and others legally responsible for the excluded section remain fully, personally liable. Section 3009(1) (which provides for minimum policy limitations) and (2) were adopted in December 1971, 1971 P.A. 210, less than a year before the No-Fault scheme was adopted. ² The named driver exclusion provision was adopted by the Legislature in response to a Court decision, Allstate Ins. Co. v. Motor State Ins. Co., 33 Mich.App. 469, 190 N.W.2d 352 (1971), which in May, 1971, had held such exclusions to be contrary to public policy and void. Thus, the Legislature specifically permitted named driver exclusions. No part of section 3009 was expressly repealed by the No-Fault Act, and section 3009(1) is expressly referred to in section 3103 of the No-Fault Act.

Since the adoption of No-Fault, the Motor Vehicle Accident Claims Act, M.C.L. § 257.1101 Et seq; M.S.A. § 9.2801 Et seq. has been amended, 1975 P.A. 322, by the Legislature, and section 4(2), M.C.L. § 257.1104(2); M.S.A. § 9.2804(2), of this act alludes directly to named driver exclusions:

"The certificate (of insurance) shall state the name of each person named on the policy, policy declarations or declaration certificate whose operation of the vehicle causes the liability coverage to become void."

The 1975 amendment also added a section making the act inapplicable to accidents after January 1, 1976, M.C.L. § 257.1133; M.S.A. § 9.2833, but there was no mention of repealing § 3009(2).

The history of and concerning § 3009 makes defendant's contention that § 3009(2) was impliedly repealed by the passage of No-Fault difficult to accept. The passage of § 3009(2) was a legislative response of major significance and took place within a year of the passage of No-Fault. Furthermore, the No-Fault Act, itself a major legislative undertaking, refers to § 3009(1), albeit not to § 3009(2). M.C.L. § 500.3103; M.S.A. § 24.13103.

Defendant counters with the argument that the section was retained to cover motorcyclists who were not initially covered by No-Fault. This argument is somewhat weakened in light of the approval of M.C.L. § 500.3103; M.S.A. § 24.13103, in early 1976, 1975 P.A. 329. But it is true that § 3103 does not require residual liability coverage for motorcyclists (who have a far lower potential for incurring such liability to others than an automobile driver), and it is arguable that § 3009(2) and § 4(2) of the Motor Vehicle Accident Claims Act, M.C.L. § 257.1104(2); M.S.A. § 9.2804(2), have been retained to cover residual liability for excluded drivers of motorcycles.

Ultimately, the strongest argument defendant has to support its theory of implied repeal of § 3009(2) is based on public policy. That is, named driver exclusions are inconsistent with a policy of compulsory insurance designed to provide accident victims with assured, adequate, and prompt reparation for certain economic losses. The exclusions are intended to reduce premiums, and the excluded drivers are generally the highest risk drivers. Once excluded, these drivers would have to pay the highest rates for residual liability insurance, and this would not encourage such drivers to maintain their own insurance.

On the other hand, named driver exclusions do bring the cost of insurance down for some automobile owners and thereby make insurance feasible when it would otherwise be prohibitively expensive. Such a situation might exist where a family has a teenage driver with a poor driving record. Hence, there are countervailing policy considerations favoring named driver exclusions. In this regard the scope of the exclusion should be noted. It is an exclusion only for residual liability personal protection insurance and property protection insurance should be provided by the victim's own No-Fault insurance. Moreover, § 3009(2) expressly makes the...