Federated American Ins. Co. v. Raynes

• Decision Date: 14 April 1977
• Docket Number: No. 44585,44585
• Parties: FEDERATED AMERICAN INSURANCE COMPANY, Appellant, v. David C. RAYNES and Jane Doe Raynes, his wife, Respondents.
• Court: Washington Supreme Court

Page 439

88 Wn.2d 439

563 P.2d 815

FEDERATED AMERICAN INSURANCE COMPANY, Appellant, v. David C. RAYNES and Jane Doe Raynes, his wife, Respondents.

No. 44585.

Supreme Court of Washington, En Banc.

April 14, 1977.

Murray, Dunham & Waitt, Matt Murray, Seattle, for appellant.

Dale J. Galvin, Seattle, for respondents.

HAMILTON, Associate Justice.

This appeal concerns the validity of certain provisions in the uninsured motorist section of an insurance policy which appellant, Federated American Insurance Company (FAI), had issued to David Raynes, respondent.

Respondent was injured in an accident while driving his motorcycle. For the purposes of this action, the parties stipulated that the driver of the car which struck respondent was at fault and was an uninsured motorist. The driver of the car is not a party in this suit. FAI is not the insurer of the motorcycle. Respondent insured his motorcycle through another insurance company which is not a party to this suit. However, respondent also owned two cars which were insured under a single policy issued by FAI. This policy contained uninsured motorist coverage of $15,000 per person and $30,000 per accident for each car, for which respondent paid a $15 premium for the first car and a $10 premium for the second car. The present controversy arose because respondent filed a claim with FAI under his uninsured motorist coverage in FAI's policy. When FAI denied liability, respondent sought arbitration. FAI then instituted this action seeking a declaratory judgment that it was not liable to respondent under the facts of this case.

There are two issues for our resolution: (1) Is exclusion (b) ¹ in FAI's uninsured motorist coverage invalid under Washington's uninsured motorist statute, RCW 48.22.030? ² (2) If exclusion (b) is invalid, does FAI's policy afford respondent $15,000 or $30,000 in coverage, I.e., can the two uninsured motorist coverages for respondent's two cars be combined so as to afford him double coverage? The trial court found against FAI on both issues and granted summary judgment for respondent. It ordered that respondent could proceed to arbitration and that FAI was liable, if the arbitration so determined, ³ to pay all sums by which the arbitration award exceeded $15,000--the first $15,000 being the obligation of the other insurance company as primary insurer--up to the $30,000 limit of FAI's policy. We will discuss these issues in the order presented above.

In Touchette v. Northwestern Mut. Ins. Co., 80 Wash.2d 327, 494 P.2d 479 (1972), we held that the public policy regarding uninsured motorist coverage as set forth in RCW 48.22.030 governs the express terms of an insurance contract. Thus, the outcome of the first issue depends on whether exclusion (b) conflicts with RCW 48.22.030.

The effect of FAI's exclusion (b) is to deny uninsured motorist coverage to an insured when he is occupying a vehicle owned by him but not insured by FAI. Other state courts have split over whether similar exclusion provisions are invalid. Some courts have invalidated these exclusion provisions, because they conflict with the public policy of providing uninsured motorist coverage. See State Farm Auto. Ins. Co. v. Reaves, 292 Ala. 218, 292 So.2d 95 (1974); Mullis v. State Farm Mut. Auto. Ins. Co., 252 So.2d 229 (Fla.1971); Bass v. State Farm Mut. Auto. Ins. Co., 128 Ga.App. 285, 196 S.E.2d 485 (1973), Modified, 231 Ga. 269, 201 S.E.2d 444 (1973); Doxtater v. State Farm Mut. Auto. Ins. Co., 8 Ill.App.3d 547, 290 N.E.2d 284 (1972); State Farm Mut. Auto. Ins. Co. v. Robertson, 156 Ind.App. 149, 295 N.E.2d 626 (1973); Cannon v. American Underwriters, Inc., 150 Ind.App. 21, 275 N.E.2d 567 (1971); Elledge v. Warren, 263 So.2d 912 (La.App.1972); Nygaard v. State Farm Mut. Auto. Ins. Co., 301 Minn. 10, 221 N.W.2d 151 (1974); State Farm Mut. Auto. Ins. Co. v. Hinkel, 87 Nev. 478, 488 P.2d 1151 (1971); Bell v. State Farm Mut. Auto. Ins. Co., W.Va., 207 S.E.2d 147 (1974).

Other courts have upheld the exclusion provision on the basis that the insurer is not a gratuitous guarantor or that the exclusion is a reasonable one. See Rodriquez v. Maryland Indem. Ins. Co., 24 Ariz.App. 392, 539 P.2d 196 (1975); Chambers v. Owens, 22 Ariz.App. 175, 525 P.2d 306 (1974); Holcomb v. Farmers Ins. Exch., 254 Ark. 514, 495 S.W.2d 155 (1973); Barton v. American Family Mut. Ins. Co., 485 S.W.2d 628 (Mo.App.1972); Shipley v. American Standard Ins. Co., 183 Neb. 109, 158 N.W.2d 238 (1968); Stagg v. Travelers Ins. Co., 486 S.W.2d 399 (Tex.Civ.App. 1972).

Although we have not been faced with this exact issue before, we believe our decisions in Farmers Ins. Co. v. Miller, 87 Wash.2d 70, 549 P.2d 9 (1976); Cammel v. State Farm Mut. Auto. Ins. Co., 86 Wash.2d 264, 543 P.2d 634 (1975), and Touchette v. Northwestern Mut. Ins. Co., supra, point to the invalidation of exclusion (b).

Touchette also involved an exclusion provision similar to the one in the present case. In Touchette, the son of the named insured was injured in an accident with an uninsured motorist. The son was driving a car owned by him and not named in his father's policy. However, the son was an insured under the definition of insured in his father's policy. The insurance company contended that the exclusion provision cut off the son's entitlement to uninsured motorist coverage, because his car was not a named vehicle in the policy. We found that because the son was an insured under the policy, RCW 48.22.030 required that he be entitled to uninsured motorist coverage. In a concurring opinion, Justice Neill interpreted the majority opinion to mean that the statutory policy of RCW 48.22.030 vitiates any attempt to make the meaning of insured for purposes of uninsured motorist coverage narrower than the meaning of that term under the primary liability section of the policy.

The policy of RCW 48.22.030 requires that insurers make available uninsured motorist coverage to a class of 'insureds' that is at least as broad as the class in the primary liability sections of the policy. It does not preclude the parties from reaching agreement as to the scope of that class in the first instance.

Touchette v. Northwestern Mut. Ins. Co., supra, 80 Wash.2d at 337, 494 P.2d at 485.

We followed Justice Neill's reasoning in Farmers Ins. Co. v. Miller, supra. In that case the named insured's son was killed in an accident with an uninsured motorist. The insurance policy defined "insured" as "the named insured or a relative." "(R)elative" was defined as "a relative of the named insured . . . who is a resident of the same household, provided neither such relative nor his spouse owns an automobile." Farmers Ins. Co. v. Miller, supra, 87 Wash.2d at 71--72, 549 P.2d at 10. Because the son owned an automobile, he was not an insured under the insurance policy and was not entitled to uninsured motorist coverage. We held that the public policies expressed in Touchette were not violated, because the definition of insured was applied consistently throughout the contract.

FAI attempts to bring exclusion (b) within the rules of Touchette and Miller by arguing that the primary liability section of its policy also excludes coverage when the insured is occupying a vehicle owned by him but not insured by FAI. Therefore, the argument goes, exclusion (b) does not violate the policy of RCW 48.22.030, because coverage is not narrower under the uninsured motorist section than under the primary liability section. This argument misconceives the rules of Touchette and Miller. RCW 48.22.030 mandates uninsured motorist coverage 'for the protection of persons insured' under the policy, unless the named insured rejects such coverage. Touchette and Miller stand for the proposition that the parties may agree to a narrow definition of insured so long as that definition is applied consistently throughout the policy, but once it is determined that a person is an insured under the policy, that person is entitled to uninsured motorist coverage. Respondent is the named insured in FAI's policy. Exclusion (b) does not narrow the definition of insured so as to exclude respondent from being an insured under the policy. Rather, the exclusion merely excludes coverage when the insured is injured in a certain situation, I.e., occupying a car owned by him but not insured by FAI. This attempt to exclude coverage for an insured is impermissible under RCW 48.22.030.

Further, an examination of Cammel v. State Farm Mut. Auto. Ins. Co., supra, leads to the conclusion that exclusion (b) is invalid. In Cammel, two insureds were killed while occupying one of their three cars. Each car was insured through a separate policy, although the same insurer issued all three policies. Each policy contained uninsured motorist coverage of $30,000 per accident for which separate premiums had been paid. The pro rata clause of the "Other Insurance" exclusion found in each policy limited the insurer's liability when the insured had other similar insurance available to him. The insurer asserted that under the pro rata clauses of the three policies its total liability was limited to $30,000 with each of the three policies contributing $10,000. We disagreed, and held that RCW 48.22.030 and RCW 48.18.130(2) ⁴ require the minimum uninsured motorist coverage of $15,000 per person and $30,000 per accident for each policy issued to the insured.

The requirement of RCW 48.22.030 and RCW 48.18.130(2), that each automobile liability insurance policy issued in Washington shall offer uninsured motorist coverage of $15,000 per person and $30,000 per accident, is unambiguous and mandatory. A literal reading of the statute precludes any suggestion this requirement is satisfied by a single uninsured motorist coverage in these amounts when the injured person is insured under more than one policy applicable to the accident. We conclude, therefore, that the pro rata clause of the 'Other Insurance' exclusion in each of the three policies...