Looney v. Farmers Ins. Group, 53346

• Decision Date: 15 July 1980
• Docket Number: No. 53346,53346
• Citation: 1980 OK 111,616 P.2d 1138
• Parties: Nita LOONEY, Appellant, v. FARMERS INSURANCE GROUP, Appellee.
• Court: Oklahoma Supreme Court

Page 1138

616 P.2d 1138

1980 OK 111

Nita LOONEY, Appellant, v. FARMERS INSURANCE GROUP, Appellee.

No. 53346.

Supreme Court of Oklahoma.

July 15, 1980.

Rehearing Denied Sept. 15, 1980.

Appeal from Judgment of the District Court, Oklahoma County; Charles L. Owens, District Judge.

Judgment creditor brought garnishment proceedings against insurance company alleging judgment arose from bodily injury covered by contract of insurance. Trial court rendered judgment for insurer, ruling that debtor was a named insured and household member, therefore excluded under the terms of the automobile liability contract. Allegations of error raised by appellant discussed and refused; trial court affirmed.

AFFIRMED

Laird & Laird by Jeff R. Laird, Jr., Oklahoma City, for appellant.

Roger L. Heath, Culp, Heath & Sushnik, Oklahoma City, for appellee.

HARGRAVE, Justice.

On June 19, 1977, the appellant, Nita Looney, sustained personal injury as the result of an automobile accident. The automobile in which the appellant was a passenger and her husband, James Looney, was the driver, collided with an automobile driven by Robert Berry. The Looneys' automobile had been purchased by Mr. Looney prior to his marriage with the appellant, and at the time of the accident it was insured by Farmers Insurance Co., Inc. (Farmers), a Kansas corporation. On August 17, 1977, the appellant filed suit against Robert Berry and her husband seeking $1,000,000.00 in damages.

The defendant Looney, on August 19, 1977, notified Farmers and requested that it defend him in the pending lawsuit, attempt to settle within the policy limits, ¹ or stand the excess of any judgment rendered against him. Farmers, the appellee herein, denied coverage because of certain exclusion provisions ² in the insurance policy and refused to defend.

On October 27, 1977, an evidentiary hearing was held in the District Court of Oklahoma County at which the appellant sought to obtain a default judgment against her husband. The decision on the default judgment was stayed until December 30, 1977, during which time the appellant was instructed to notify Farmers of the continued hearing.

Although notified, Farmers again did not appear on December 30, 1977, and the trial court granted the default judgment against the defendant Looney in the amount of $400,000.00. On January 18, 1978, the appellant filed a garnishment action against Farmers in District Court seeking to recover the full amount of the judgment granted in her favor. Farmers responded by denying that it owed any money to the appellant.

After reviewing the stipulations entered into by the parties and their respective briefs, the trial court, on January 30, 1979, ruled that due to the validity of the named insured and household member exclusions in the insurance policy issued to the defendant Looney by the appellee Farmers, judgment should be rendered for the appellee relieving it of any indebtedness or liability.

The appellant has applied to this Court seeking a reversal of the trial court based on the following major contentions: (1) the exclusions in the insurance policy violate 47 O.S. (1971) § 7-324(e) and 47 O.S. (Supp.1978 ) § 7-601; (2) the exclusions in the insurance policy deny married women equal protection under the law; (3) the conformation clause in the insurance policy amends the policy terms and thereby voids the exclusions; (4) the appellant did not freely enter into a private contract wherein she was a named insured; and (5) the appellee acted in bad faith in refusing to defend and therefore is liable for the full amount of the judgment rendered against its insured.

Appellee filed, without prior approval, a brief in response to appellant's reply brief. Our Rules of Appellate Procedure do not provide for such a document and appellant has asked that same be stricken, and accordingly that document has not been considered in the determination of this cause.

Farmers denied coverage to the defendant Looney on the grounds that the insurance policy in question provides in part that there is no liability of any insured for bodily injury to (a) any member of the same household of such insured, or (b) the named insured. The policy provides further that the term "named insured" includes in its definition the spouse, if the spouse is a resident of the same household. The appellate, who qualifies by definition as both a named insured and household member, contends that these exclusions violate 47 O.S. (1971) § 7-324(e) and 47 O.S. (Supp. 1978) § 7-601.

In order to determine if a violation has indeed occurred, it is necessary to examine both the development of the statutes and the legislative intent they embody. Title 47, Section 7-324(e) can be traced to the Safety Responsibility Act, 47 O.S. (1951) § 521(e), which expressly permitted passenger-guest or family member exclusion from a policy of liability. Section 521(e) stated in part that

(s)uch motor vehicle liability policy need not insure . . . any liability on account of bodily injury to or death of a guest passenger or member of the family of the insured residing in the same household.

In 1961 subsection (e) was amended although the other subsections of 521 were left intact. The 1961 revision deleted the guest passenger and family member language. This revision has been recodified and is found as part of the Financial Responsibility Act at 47 O.S. (1971) § 7-324(e). By comparing both versions of the statute, it can be concluded that "the legislature only intended to exclude that group of persons set forth in (Section) 7-324(e). To place any other interpretation upon (Section) 7-324 would be to read a group of persons (passengers) into that category which can be excluded." Hibdon v. Casualty Corp. of America, Inc., 504 P.2d 878, 882 (Okl.App.1972). The Court of Appeals states further that "when expressing that a group or groups of persons can be excluded in a policy (as so expressed in Section 7-324(e)), by such expression the legislature intended to prevent the insurer from excluding other groups." Id.

Although the factual situation in Hibdon differs from the present case in that in Hibdon the injured passenger was a guest unrelated to the driver, the language used by the Hibdon court is still important in analyzing the legislative intent of Section 7-324(e).

The intention of the legislature in passing the (Oklahoma Financial Responsibility) Act was to make drivers and owners responsible for injury or loss they cause to any person, including passengers (and) therefore . . . the passenger exclusion in the motor vehicle liability policy is contrary to the intention of the (Oklahoma Financial Responsibility) Act and is therefore void. Id. (Emphasis added.)

It is important to note that when the legislature amended Section 521(e) it eliminated both the guest passenger and the family member passenger language. It could have retained one category or both categories but it chose to delete them both. However, to use the absence of this statutory language as a basis for allowing the present appellant to recover is to ignore the meaning of the language omitted in 1961.

The language deleted in 1961 read as follows: guest passenger or member of the family of the insured residing in the same household. The appellant was more than a mere member of the family of the insured ; she was the insured. Her relationship with the defendant Looney surpasses mere household member status. Her relationship places her within the policy definition of named insured. Surely the legislature, in amending Section 521(e) did not intend to allow the named insured, although a passenger, coverage under this section.

As stated in Wheeler v. State Farm Mutual Automobile Insurance Co., 438 F.2d 730 (10th Cir. 1971), if the driver

were being sued by persons other than the 'named insured,' there could be no question but that State Farm (the insurance company) would be obligated to defend and indemnify him. When, however, the suit is brought against him by the named insured in the policy it is a different case. Here he (the driver) is indeed embraced within the term insured as it is defined in the policy, but it does not follow that he is entitled to the protection of the policy when he is being used by the named insured.

As we read the policy as a whole, it is our conclusion that it was designed to protect the named insured and others within the definition of insured against actions by third persons. Id. at 732.

Although the specific fact situation in Wheeler differs in that Wheeler's driver was operating the automobile with the permission of the owners and was sued by the injured owner-passenger, the basic fact pattern is the same: policy defined insureds were injured and the insurance companies denied liability because of exclusions in the insurance policies.

In 1976, the Oklahoma legislature enacted the Compulsory Liability Insurance provisions of the Financial Responsibility Act at Title 47, Sections 7-601 through 7-606. Section 7-601 provides in part that

(e)very owner of a motor vehicle registered in this state . . . shall, at all times, maintain in force with respect to such vehicle security for the payment of loss resulting from the liability imposed by law for bodily injury . . . sustained by any person arising out of the ownership, maintenance, operation or use of such vehicle. 47 O.S. (Supp.1978) § 7-601. (Emphasis added.)

The purpose of this section is, as its title denotes, to compel motor vehicle owners to maintain liability insurance. The purpose is not to determine proper policy exclusions. To focus on two words (any person) as the appellant has done to find statutory authorization for the appellee's indebtedness is to misconstrue the intent of the statute and to ignore the language of Section 7-324, the proper statute for determining exclusion validity.

Based on this analysis, we therefore agree with the decision reached in Farmers Insurance Co....