Dowdy v. Allstate Ins. Co., 16-83-00596

• Decision Date: 06 November 1984
• Docket Number: No. 16-83-00596,16-83-00596
• Parties: Connie DOWDY, Appellant, v. ALLSTATE INSURANCE COMPANY, Respondent. ; CA A29401.
• Court: Oregon Court of Appeals

Page 444

685 P.2d 444

68 Or.App. 709

Connie DOWDY, Appellant, v. ALLSTATE INSURANCE COMPANY, Respondent.

No. 16-83-00596; CA A29401.

Court of Appeals of Oregon.

Argued and Submitted March 12, 1984.

Decided June 27, 1984.

Review Denied Nov. 6, 1984.

Robert L. Ackerman, Springfield, argued the cause for appellant. With him on the briefs was Ackerman, DeWenter & Huntsberger, Springfield.

Frank E. Bocci, Eugene, argued the cause and filed the brief for respondent.

Before RICHARDSON, P.J., and WARDEN and NEWMAN, JJ.

RICHARDSON, Presiding Judge.

Plaintiff appeals from a judgment for the defendant automobile liability insurer in this action to recover on an underlying judgment against defendant's insured. Plaintiff assigns error to the granting of defendant's and the denial of her own motion for summary judgment. We reverse.

The insured is plaintiff's sister. Plaintiff was injured in a motor vehicle accident that resulted from the insured's negligence. At the time of the accident, plaintiff and the insured resided in the same household. Defendant contends that plaintiff is barred from recovery by the family exclusion clause of defendant's policy. That clause provides, as material, that the policy's liability coverage does not insure against bodily injury to a person who is related to the insured and who resides in the insured's household. The policy was issued pursuant to the Financial Responsibility Law, ORS chapter 486, and it provides that its liability coverage

" * * * will comply to the extent * * * and limits required by the law. This liability coverage is in accordance with the coverage defined in, and subject to the provisions of [ORS chapter 486]."

See ORS 486.551, 486.011(11).

Plaintiff argues that the family exclusion clause, as applied to these facts, violates the Financial Responsibility Law and is therefore unenforceable. ¹ Her principal point is that ORS 486.546 specifies the risks against which the "liability insurance policy required by [ORS chapter 486] need not insure" and that liability to resident relatives of the insured is not among the excludable risks enumerated in that section. ²

Defendant responds:

"Plaintiff apparently maintains that ORS 486.546, as to liabilities not covered, is mandatory instead of permissive. The language of the statute, i.e. 'need not insure worker's compensation law, etc. [sic]

* * * ' is clearly permissive. If the legislature had intended that policies could only exclude, as opposed to need not, it would, and could have, clearly said so."

Defendant also argues that the Supreme Court in Lee v. State Farm Auto Ins., 265 Or. 1, 507 P.2d 6 (1973), and this court in State Farm v. Baughman, 57 Or.App. 576, 646 P.2d 102 (1982),

" * * * determined that the family exclusion clause is valid and enforceable, and that its application, as in the case at bar, is reasonable and consistent with the reasons for its inclusion in the policy."

As far as we or the parties can find, the specific question defendant raises is one of first impression in Oregon. The appellate courts have dealt with the related question of whether an insured who is injured while a passenger in his own vehicle by the negligence of an uninsured permissive driver and who is subject to a family exclusion in his policy's liability coverage is entitled to recover under the policy's uninsured motorist coverage. In Bowsher v. State Farm Fire Co., 244 Or. 549, 419 P.2d 606 (1966), the Supreme Court answered that question affirmatively. However, we later reached the opposite conclusion in State Farm Mut. Ins. v. Whitlock, 59 Or.App. 303, 650 P.2d 1042 (1982), rev. den. 294 Or. 461, 658 P.2d 1163 (1983). The facts there were materially identical to those in Bowsher, but we explained:

"In reaching its decision [in Bowsher ], the court held that a policy definition defining Bowsher's vehicle as an 'insured automobile' did not avoid uninsured motorist coverage, because

" ' * * * [n]othing in ORS 736.317(2) suggests an intent to treat an owner of an insurance policy differently when he is injured riding in his own automobile than when he is injured riding in another automobile.' 244 Or. at 552, 419 P.2d 606.

"Defendant maintains that this court is bound by the holding in Bowsher. However, since Bowsher was decided, the legislature has repealed the statute which the Supreme Court construed in Bowsher and has spoken to the question addressed in the insurance policy in Bowsher that was not covered by former ORS 736.317. Unlike former ORS 736.317, the current statute now defines 'uninsured motor vehicle' for the purposes of uninsured motorist coverage. * * *

" * * *

"It is now clear that, under ORS 743.792, unlike former ORS 736.317(2), the focus is on the vehicle involved in the accident, not the resulting injury and claim. We therefore conclude that the holding in Bowsher v. State Farm Fire Co., supra, is no longer controlling. * * *

"ORS 743.792(2)(e) clearly authorizes an insurer to exclude from uninsured motorist coverage an insured who occupies a vehicle as to which the insured has procured liability insurance satisfying the financial responsibility law." 59 OR.APP. AT 307-08, 650 P.2D 1042³. Footnote omitted; emphasis in original.)

As noted, the question plaintiff raises is not whether she is entitled to uninsured motorist coverage because she is excluded from liability coverage, but whether the Financial Responsibility Law permits defendant to exclude her from liability coverage. Nevertheless, the threshhold issue is whether Whitlock answers the second question as well as the first. The Financial Responsibility Law and the uninsured motorist statutes are interrelated: The latter require automobile liability insurers to offer insureds coverage for injuries they sustain as a result of the negligence of motorists who do not have liability insurance that satisfies the Financial Responsibility Law. See ORS 743.786(1), 743.792(2)(d)(A); Lund v. Mission Ins. Co., 270 Or. 461, 467, 528 P.2d 78 (1974). We reasoned in Whitlock that, notwithstanding the facts that the permissive user of the insured's car had no liability insurance of his own and that liability coverage under the owner's own policy was unavailable because of the family-household exclusion, the insured's survivor had no recourse to the uninsured motorist provisions of her policy, because ORS 743.792(2)(e) permits insurers to exclude uninsured motorist coverage of "an insured who occupies a vehicle as to which the insured has procured liability insurance satisfying the financial responsibility law." 59 Or.App. at 308, 650 P.2d 1042.

There is no doubt that, in the light of Whitlock, plaintiff's sister could not have recovered either liability or uninsured motorist coverage under the policy if plaintiff had been the driver and the sister had been the injured passenger. Whitlock holds expressly that an insured is not statutorily entitled to uninsured motorist coverage under such circumstances, ⁴ and it says implicitly that the exclusion of the insured from liability coverage does not mean that the insured has not "procured liability insurance satisfying the financial responsibility law." ⁵ However, it does not follow from our reasoning in Whitlock that a policy satisfies the Financial Responsibility Law if it excludes relatives of the insured as well as the insured from liability coverage. The purpose of the law is to assure that vehicle owners and drivers have "the ability to respond in damages for liability," ORS 486.011(7) (emphasis supplied), arising from their ownership or operation of vehicles. The exclusion of the insured from coverage is not inconsistent with that purpose, because the insured can establish financial responsibility without demonstrating an ability to respond in damages to herself; the same is not logically or necessarily true of the exclusion of relatives of the insured to whom the insured can--and in this case did--become liable.

We recognize that that distinction can give rise to anomalies. For example, if plaintiff and her sister were co-owners of the car and were the named insureds in the policy, Whitlock would clearly permit the insurer to preclude plaintiff's recovery under the policy's liability provisions. However, anomalies are not novelties in insurance law. Fortuities of various kinds can affect coverage. For example, if plaintiff had moved out of her sister's home the day before the accident, the family exclusion clause would have no arguable bearing on defendant's responsibility. We decline to extend our reasoning in Whitlock from exclusions of insureds to exclusions of family members, and we therefore conclude that Whitlock does not answer the question plaintiff raises.

As noted above, plaintiff's principal point is that injuries to family members are not among the risks that ORS 486.546 says the liability insurance required by the Financial Responsibility Law "need not insure." See n. 2, supra. Defendant's arguments, which were also described above, are unpersuasive. Defendant interprets ORS 486.546 as being "permissive," i.e., that the words "need not insure" do not mean the same thing as "must insure everything but." The distinction is spurious. In the context of ORS 486.546, it is obvious that the words "need not insure" are meant to differentiate between the risks the statute enumerates and risks that policies required by the law do need to insure.

Lee v. State Farm Auto Ins., supra, and State Farm v. Baughman, supra, on which defendant relies, are not in point. The only relevant similarity those cases have to this one is that they involved family exclusion clauses. Neither Lee nor Baughman addressed any issue related to the issue here, and neither case says anything that provides guidance for our disposition of the issue.

Although plaintiff demonstrates that the Financial Responsibility Law provides no authority for the exclusion of family coverage, she does not identify what in the law...