Shepard v. Farmers Ins. Co., Inc.

• Decision Date: 01 November 1983
• Docket Number: No. 59506,59506
• Citation: 1983 OK 103,678 P.2d 250
• Parties: Leon SHEPARD, father, Deronda Shepard, mother, individually and as the personal representatives of the Estate of Leonda Lynn Shepard, Deceased, Plaintiffs, v. FARMERS INSURANCE COMPANY, INC., Defendant.
• Court: Oklahoma Supreme Court

Page 250

678 P.2d 250

1983 OK 103

Leon SHEPARD, father, Deronda Shepard, mother, individually and as the personal representatives of the Estate of Leonda Lynn Shepard, Deceased, Plaintiffs, v. FARMERS INSURANCE COMPANY, INC., Defendant.

No. 59506.

Supreme Court of Oklahoma.

Nov. 1, 1983.

Rehearing Denied April 10, 1984.

Certified questions from the United States District Court for the Western District of Oklahoma.

The United States District Court for the Western District of Oklahoma certified the following question pursuant to the Oklahoma Uniform Certification of Questions of Law Act, 20 O.S. 1973 § 1601 et seq.:

Is a clause in a contract of automobile insurance which denies coverage for a relative of the insured living in the same household if such relative or his/her spouse owns an automobile void as unconscionable or against the public policy expressed in Oklahoma's Uninsured Motorist Act, 36 O.S. 1981 § 3636?

M. Blake Yaffe, Oklahoma City, for plaintiffs.

John F. Percival, Buford & Percival, Oklahoma City, for defendant.

BARNES, Chief Justice:

We answer the question in the negative, holding that the exclusionary language is consistent with sound principles of contract law and further that it is neither unconscionable nor violative of the public policy expressed in Oklahoma's Uninsured Motorist Act. 36 O.S. 1981 § 3636.

Under Oklahoma law, insurance policies are issued pursuant to statutes, and the provisions of those statutes are given force and effect as if written into the policy. Markham v. State Farm Insurance Co., 326 F.Supp. 39; rev'd 464 F.2d 703 (10th Cir.1972). The parties to an insurance contract agree upon the terms of the contract and are free to limit or restrict an insurer's liability. The court will interpret the policy in light of the statute, but will not rewrite the contract. American Iron and Machine Works Co. v. Insurance Company of North America, 375 P.2d 873 (Okl.1962); Wiley v. Travelers Insurance Co., 534 P.2d 1293 (Okl.1974). The exclusionary language at issue does not violate the express statutory provisions of 36 O.S. 1979 § 3636(B), rather it exists as an unambiguous contract provision. To interpret the contract or the statute differently would be to rewrite one or both, which we decline to do.

The plaintiff would have us go beyond the express statutory language and hold the contract language void as against public policy. In Oklahoma, a contract violates public policy only if it clearly tends to injure public health, morals or confidence in administration of law, or if it undermines the security of individual rights with respect to either personal liability or private property. Anderson v. Reed, 133 Okl. 23, 270 P. 854 (1928). Courts will exercise their power to nullify contracts made in contravention of public policy only rarely, with great caution and in cases that are free from doubt. Camp v. Black Gold Petroleum Co., 189 Okl. 692, 119 P.2d 815 (1942); Johnston v. J.R. Watkins Co., 195 Okl. 341, 157 P.2d 755 (1945).

Notwithstanding the strict criteria for invalidating a contract upon policy grounds, the plaintiff contends that the exclusionary language at issue contravenes public policy because it runs counter to our decisions regarding "other insurance" clauses in automobile insurance contracts. We disagree. In cases construing our uninsured motorist statute we have held "other insurance" clauses void because they precluded stacking of coverage to obtain compensation under multiple policies to which the plaintiff had recourse as an "insured." Keel v. MFA Insurance Co., 553 P.2d 153 (Okl.1976); Richardson v. Allstate Insurance Co., 619 P.2d 594 (Okl.1980); Lake v. Wright, 657 P.2d 643 (Okl.1982). Each of these cases involved the stacking of insurance policies to determine priority of payment, and permitted aggregation of policy benefits to satisfy the total claim. In each case the claimant was an "insured" by virtue of the policy terms as well as the fact that the claimant was the person paying the insurance premiums.

The instant case presents a dissimilar fact situation. Here, the plaintiff attempts to aggregate claims in order to obtain benefits under policies for which she has not paid premiums. Had Leonda Shepard been injured in a collision with an uninsured motorist while driving one of the vehicles insured under either active policy issued to her father, a stacking issue would have been presented under the permissive use clause of either of those policies.

This precise...