Employers Mut. Cas. Co. v. McKeon

• Decision Date: 22 September 1988
• Docket Number: No. CV-87-0312-PR,CV-87-0312-PR
• Citation: 765 P.2d 513,159 Ariz. 111
• Parties: EMPLOYERS MUTUAL CASUALTY COMPANY, Plaintiff/Appellant, v. Robert E. McKEON, an individual; Jay Edward McKeon, an individual; and Joan L. McKeon, Defendants/Appellees.
• Court: Arizona Supreme Court

Page 513

765 P.2d 513

159 Ariz. 111

EMPLOYERS MUTUAL CASUALTY COMPANY, Plaintiff/Appellant, v. Robert E. McKEON, an individual; Jay Edward McKeon, an individual; and Joan L. McKeon, Defendants/Appellees.

No. CV-87-0312-PR.

Supreme Court of Arizona, In Banc.

Sept. 22, 1988.

Jennings, Kepner & Haug by Craig R. Kepner, Randy L. Sassaman, Phoenix, for plaintiff/appellant.

Hofmann, Salcito, Stevens & Myers, P.A. by Robert D. Myers, Leroy W. Hofmann, Phoenix, for defendants/appellees.

FELDMAN, Vice Chief Justice.

Petitioners seek review of a decision denying insurance benefits under a policy's "named driver exclusion." We granted review to define the permissible application of such clauses to uninsured motorist coverage, a matter of first impression in Arizona. Rule 23(a), Ariz.R.Civ.App.P., 17B A.R.S. We have jurisdiction under Ariz. Const. art. 6, § 5(3) and A.R.S. § 12-120.24.

FACTUAL AND PROCEDURAL SUMMARY

The facts are undisputed. Joan and Robert McKeon purchased automobile insurance with Employers Mutual Casualty Company (Employers) with limits of $300,000 for liability and uninsured motorist coverage, plus $5,000 in medical payments coverage. The policy initially provided full coverage to their son Jay because he was a family member. However, from 1981 to 1983, Jay received a series of traffic citations for speeding and reckless driving. Employers finally refused to keep the policy in force unless Joan and Robert agreed to sign an endorsement excluding Jay from "all coverage" under the policy whenever he drove any automobile. Joan and Robert McKeon signed this "named driver exclusion" ¹ on December 20, 1983.

While driving his brother's car in 1985, Jay was severely injured in a crash with an uninsured motorist. Jay's brother had a separate insurance policy on his car. This insurer paid Jay its uninsured motorist limit of $20,000.

Jay and his father then demanded that Employers pay additional uninsured motorist benefits ² and $5,000 in medical pay coverage to compensate Jay for his injuries. Relying on the named driver exclusion, Employers refused to pay. Instead, Employers sued Jay and his parents (the McKeons), seeking a declaratory judgment that it was not obligated to provide benefits to Jay.

The parties both moved for summary judgment on an agreed statement of facts. Rule 4(f), Ariz.Unif.R.Prac.Super.Ct., 17B A.R.S. Employers argued that A.R.S. § 28-1170(B)(3) (allowing named driver exclusions) permitted Jay's exclusion from uninsured motorist coverage notwithstanding A.R.S. § 20-259.01 (requirements for uninsured motorist coverage). Employers also argued that if the exclusionary clause were contrary to A.R.S. § 20-259.01, Jay could receive only the $15,000 statutory minimum coverage. Minute Entry, Sept. 9, 1986.

The McKeons made two counterarguments. First, the language of the exclusionary clause was intended only to bar liability for harm to others "caused" by Jay's driving, not harm that Jay suffered from others. Under this reasoning, Jay could recover uninsured motorist benefits to the extent he was not responsible for the accident. Thus, the named driver exclusion did not preclude Jay's claim. Second, A.R.S. § 20-259.01 mandated uninsured motorist coverage in automobile insurance policies. The "named driver exclusion" permitted by A.R.S. § 28-1170(B)(3) applied only to liability coverage, not to uninsured motorist benefits.

The trial court granted summary judgment to the McKeons and denied Employers' motion. The court held that the policy benefits were not limited to $15,000, and instead covered Jay's entire loss to the applicable policy limits. By way of explanation, the trial court adopted "the reasoning of the [McKeons] as set forth in the pleadings and as stated in oral argument." Minute Entry, Sept. 9, 1986. Employers appealed.

The court of appeals reversed. It first determined that the named driver endorsement was an unambiguous attempt to exclude Jay from all coverage under the policy. Employers Mutual Casualty Co. v. McKeon, 154 Ariz. 411, 413, 743 P.2d 7, 9 (App.1987). The court then held that A.R.S. § 28-1170(B)(3) permitted the proposed exclusion from uninsured motorist and medical pay benefits in the absence of any specific prohibition in A.R.S. § 20-259.01. Because these statutes had to be read in pari materia, exclusion was proper. The fact that the policy fully covered Jay except when he drove did not impress the court. Id. at 413-14, 743 P.2d at 9-10. The court remanded in favor of Employers. Id. at 414, 743 P.2d at 10. We then granted the McKeons' petition for review.

THE ISSUES

This case presents three issues:

1. Does the named driver endorsement exclude only liability coverage?

2. If not, does A.R.S. § 20-259.01 invalidate the attempt to exclude jay?

3. If A.R.S. § 20-259.01 invalidates the attempt to exclude Jay, is Jay only entitled to the statutory uninsured minimum coverage of $15,000?

RESOLUTION

A. Scope of the Exclusion Clause

The named driver clause states that "under all coverage provided [Employers] shall not be liable for loss, damage, and/or liability caused while ... any automobile ... is being driven or operated by ... Jay Edward McKeon" (emphasis added).

The parties interpret this clause differently. The McKeons claim that it only excludes liability coverage for accidents caused by Jay. Employers asserts that the endorsement excludes all coverage for loss or damage caused while Jay is driving, regardless of Jay's fault.

We agree with the court of appeals that this clause clearly attempts to deny all coverage to Jay while he is driving. See McCullough v. Standard Fire Insurance Co. of Alabama, 404 So.2d 637, 637 (Ala.1981) (virtually identical named driver endorsement excluded permissive uninsured motorist benefits). Thus, the policy excluded Jay from the non-mandatory medical payments coverage. However, the question remains whether Arizona law permits the exclusion of mandatory uninsured motorist coverage by contractual arrangement.

B. Excluding Uninsured Motorist Coverage

Regardless of the policy, the McKeons argue that A.R.S. § 20-259.01 prohibits exclusion of uninsured motorist benefits. ³ This statute requires insurance companies writing motor vehicle liability policies to include a minimum level of uninsured motorist coverage and to offer insureds coverage at least equal to the policy's liability limits. The statute only excepts public livery, rental, or commercial transportation vehicles from this requirement. A.R.S. § 20-259.01(D). While this exception is irrelevant here, enumeration of exceptions in a statute creates a strong inference that the legislature intended no others. See, e.g., State v. Ault, 157 Ariz. 516, 759 P.2d 1320 (1988); Pima County v. Heinfeld, 134 Ariz. 133, 134, 654 P.2d 281, 282 (1982). The mandatory language of A.R.S. § 20-259.01, coupled with the narrow exceptions allowed in subsection (D), express a legislative design opposing other exclusions. See Pennsylvania National Mutual Casualty Insurance Co. v. Parker, 282 S.C. 546, 320 S.E.2d 458 (App.1984) (business and commercial use exclusion in policy contravened state insurance law). Cf. Garza v. Glen Falls Insurance Co., 105 N.M. 220, 731 P.2d 363 (1986) (specific, detailed New Mexico statute allowed exclusion of a named driver from uninsured motorist coverage).

Employers, however, contends that A.R.S. § 28-1170(B)(3) allows an insured to exclude any named person from uninsured motorist insurance coverage when driving. ⁴ According to Employers, we should construe this statute and A.R.S. § 20-259.01 in pari materia because both laws deal with motor vehicle liability policies. The exclusionary language of A.R.S § 28-1170(B)(3) should therefore carry over to A.R.S. § 20-259.01.

We disagree for several reasons. First, the term "motor vehicle liability policy" in A.R.S. § 28-1170 referred exclusively to liability coverage under the Arizona Uniform Motor Vehicle Safety Responsibility Act, A.R.S. §§ 28-1101 to -1225 (the Act). 1951 Ariz.Sess.Laws ch. 122, § 21. The legislature adopted the Act in 1951 to encourage motorists to purchase liability insurance. See generally id. The Act made no mention of uninsured motorist coverage, which the legislature did not require until 1966. See 1965 Ariz.Sess.Laws ch. 34, § 1 (enacting the first version of A.R.S. § 20-259.01).

Further, while both A.R.S. § 28-1170(B)(3) and A.R.S. § 20-259.01 deal with aspects of Arizona motor vehicle liability policies, the statutes approach the subject from different perspectives. The 1951 law centers on liability coverage--protection of those injured by the insured's negligence; the later statute concerns uninsured and now, also, underinsured benefits--protection of the insured. The laws were enacted at different times to protect different interests. Thus, an exclusion under liability protection does not require a similar result for uninsured motorist protection.

Therefore, in pari materia does not fit the statutory framework here. Moreover, no ambiguity in these statutes justifies resort to venerable doctrines of judicial construction. See, e.g., Frazier v. Terrill, 65 Ariz. 131, 135, 175 P.2d 438, 441 (1946) (in pari materia doctrine used with analogous statute prescribing penalty). There being no statutory conflict or ambiguity, application of the in pari materia doctrine to two statutes enacted at different times to deal with different problems, brings more confusion than enlightenment. See State v. Carter, 145 Ariz. 101, 111, 700 P.2d 488, 498 (1985).

Finally, and most importantly, narrowing uninsured motorist coverage contravenes a long-standing legislative policy to guarantee all insureds protection against uninsured motorists. See, e.g., Spain v. Valley Forge Insurance Co., 152 Ariz. 189, 192, 731 P.2d 84, 87 (1986) (evolution of legislation strengthening uninsured motorist insurance coverage). The statutes on the subject are remedial, and we have liberally construed them in the...