State Farm Mut. Auto. Ins. Co. v. Zumwalt
| Decision Date | 10 February 1992 |
| Docket Number | No. 17196,17196 |
| Citation | 825 S.W.2d 906 |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Respondent, v. Sandra Lee ZUMWALT, Nicholas Troy Franklin, Patricia Franklin, and Robert Franklin, Appellants. |
| Court | Missouri Court of Appeals |
David A. Childers, Lee Ann Miller, Woolsey, Fisher, Whiteaker & McDonald, Springfield, for appellants Sandra Lee Zumwalt, Patricia Franklin, and Robert Franklin.
Mark E. Fitzsimmons, Fitzsimmons, Schroeder & Nelson, P.C., Springfield, for appellant Nicholas Troy Franklin.
Ronald R. Holliger, Boland, McQuain, Block, DeHardt & Rosenbloom, Kansas City, for amicus curiae Missouri Ass'n of Trial Attys.
Warren S. Stafford, Taylor, Stafford, Woody, Cowherd & Clithero, Springfield, for respondent.
State Farm Mutual Automobile Insurance Company ("State Farm") brought this declaratory judgment action against: (1) Sandra Lee Zumwalt ("Sandra"), (2) Robert Franklin ("Robert"), (3) Robert's wife, Patricia Franklin ("Patricia"), and (4) Nicholas Troy Franklin ("Nicholas"), a son of Sandra and Robert. The action was precipitated by a one-vehicle accident November 26, 1987, in which a Nissan automobile owned by Patricia and insured by State Farm was being driven by Nicholas, with Patricia's permission. Corey Glen Franklin ("Corey"), another son of Sandra and Robert, was a passenger in the Nissan. Corey was killed in the accident.
On October 27, 1989, Sandra sued her son, Nicholas, for the wrongful death of her son, Corey. § 537.080, RSMo 1986. We henceforth refer to that case as "Sandra's suit."
The day Sandra's suit was filed, Mark Fitzsimmons, a lawyer representing Nicholas, sent a copy of the petition to State Farm, together with a letter requesting State Farm to tender a defense for Nicholas and indemnify him for any judgment against him, up to the policy limits. Fitzsimmons' letter warned State Farm that Nicholas "will not accept State Farm's defense with the reservation of rights."
State Farm hired a lawyer, James W. Newberry, to represent Nicholas in Sandra's suit. Newberry filed an answer on behalf of Nicholas on November 27, 1989.
By letter dated December 11, 1989, State Farm informed lawyer Fitzsimmons that State Farm had no duty to defend or indemnify Nicholas against Sandra's claim. In support of that proclamation, State Farm cited these provisions from a part of the policy captioned "SECTION I--LIABILITY--COVERAGE A":
Who Is an Insured
When we refer to your car, ... insured means:
1. you;
....
4. any other person while using such a car if its use is within the scope of consent of you ...
....
....
c. ANY INSURED OR ANY MEMBER OF AN INSURED'S FAMILY RESIDING IN THE INSURED'S HOUSEHOLD.
State Farm's letter explained that the above provisions, henceforth referred to as the "household exclusion clause," applied because at the time of the accident (a) Nicholas was driving Patricia's Nissan with her consent, thereby qualifying him as an "insured," and (b) Nicholas and Corey--brothers--were residing with their mother, Sandra, therefore Corey was a member of the insured's (Nicholas') family residing in the latter's household.
State Farm's letter expressed willingness to continue to provide a defense to Nicholas, but warned that by doing so it was not waiving or relinquishing its position "that there is no coverage to [Nicholas] for [Sandra's suit]."
Nicholas refused to accept the defense tendered by State Farm under those terms.
State Farm promptly commenced the instant case, seeking a declaratory judgment that the insurance policy provided no coverage to Nicholas for the claim asserted in Sandra's suit and that State Farm had no duty to defend Nicholas in that suit. Following discovery, State Farm moved for summary judgment, averring there was no factual dispute and Missouri courts had repeatedly upheld household exclusion clauses in automobile liability insurance policies.
The trial court, relying on American Family Mutual Insurance Company v. Ward, 789 S.W.2d 791 (Mo. banc 1990), and other authorities, found the household exclusion clause valid and granted State Farm's motion. The trial court declared the insurance policy provided no liability coverage to Nicholas for the claim in Sandra's suit and State Farm had no duty to indemnify or defend Nicholas in that suit.
The four defendants perfected this appeal. Their brief presents two points relied on: (1) State Farm, by initially assuming Nicholas' defense, waived "any policy defense that the loss was not covered," and (2) the household exclusion clause in State Farm's policy is void by reason of The Motor Vehicle Financial Responsibility Law ("the FRL") that took effect July 1, 1987.
While this appeal was pending, the Supreme Court of Missouri decided Halpin v. American Family Mutual Insurance Company, 823 S.W.2d 479 (Mo. banc 1992). There, a policy of automobile liability insurance stated coverage did not apply to bodily injury to, among other persons, anyone related to the operator and residing in the operator's household. The Supreme Court held the FRL, C.C.S.H.C.S.S.B. 424, Laws of Missouri 1986, pp. 824-32, effective July 1, 1987, codified as §§ 303.010-.370, RSMo 1986, "effects a partial invalidity" of such clauses.
The opinion explained that § 303.025, RSMo 1986 1 (a part of the 1986 legislation), and § 303.190, RSMo 1986 2 (unchanged by the 1986 legislation) require a contract of liability insurance to provide the coverage specified in § 303.190 so the insured will be in compliance with § 303.025. Halpin, 823 S.W.2d at 481.
The opinion declared the plain purpose of the 1986 legislation was to ensure that people injured on the highways may collect damage awards, within limits, against negligent motor vehicle operators, and this protection extends to occupants of the insured vehicle. Halpin, 823 S.W.2d at 482. Such purpose, said the opinion, would be incompletely fulfilled if the household exclusion clause were fully enforced. Id.
The opinion rejected the notion that because § 303.160, RSMo 1986, provides alternate methods for proving financial responsibility, the FRL is not a compulsory insurance law. Halpin, 823 S.W.2d at 481. Observing that the great majority of motor vehicle owners will undertake to maintain financial responsibility by means of motor vehicle liability insurance policies, the opinion stated, "The statute is, for all practical purposes, a compulsory insurance law." Id.
However, as we understand the opinion, the FRL did not render the household exclusion clause entirely void. Because § 303.190.2 3 requires motor vehicle liability insurance policies to provide coverage in only the amounts specified therein, insurers and their policyholders are free to make insurance contracts containing household exclusion clauses affecting coverage in excess of the amounts required by § 303.190.2. Halpin, 823 S.W.2d at 482-483. The opinion stated § 303.190.7, RSMo 1986, 4 manifests to insureds that they have no basis for expecting coverage in excess of the requirements of § 303.190.2. Halpin, 823 S.W.2d at 483.
We are constitutionally controlled by decisions of the Supreme Court of Missouri. Mo.Const. art. V, § 2 (1945); State v. Wilson, 795 S.W.2d 590, 591 (Mo.App.1990).
Here, State Farm's policy was issued August 25, 1987, after the effective date of the FRL. We glean from the dissent of Robertson, C.J., in Halpin that the policy there was likewise issued after the effective date of the FRL. If that be so, Halpin and the instant case are indistinguishable. If the policy in Halpin was issued before the effective date of the FRL and (as held in Halpin ) the FRL controlled the policy there, we are certain the Supreme Court of Missouri would hold the FRL applies to State Farm's policy here.
Applying Halpin, we hold the household exclusion clause in State Farm's policy is void insofar as it purports to deny coverage in the amounts mandated by § 303.190.2, but valid as to any coverage exceeding those amounts.
This ruling does not complete our task. As reported earlier, the defendants' first point avers State Farm waived the household exclusion clause by initially assuming Nicholas' defense. If that contention be meritorious, State Farm must pay any damages for which Nicholas becomes legally liable because of Corey's death, up to the policy limits. 5
In support of this point, the defendants cite Mistele v. Ogle, 293 S.W.2d 330, 334 (Mo.1956), where the Supreme Court of Missouri stated that defending an action against an insured with knowledge of noncoverage under a policy of liability insurance without a nonwaiver or reservation of rights agreement precludes the insurer from subsequently setting up the fact and defense. There, counsel hired by the insurer represented the insured some two years before withdrawing. The Supreme Court held the issue of whether the insurer was estopped to deny coverage was for the jury to resolve. Id. at 334.
Here, the defendants base their first point on waiver, not estoppel. Waiver is founded upon the intentional relinquishment of a known right. Brown v. State Farm Mutual Automobile Insurance Co., 776 S.W.2d 384, 386 (Mo. banc 1989). If waiver is implied from conduct, the conduct must clearly and unequivocally show a purpose to relinquish the right. Id. at 386-87.
Nicholas' personal lawyer (Fitzsimmons) evidently anticipated from the outset that State Farm would assert the policy did not cover Nicholas for the claim in Sandra's suit. The record contains a letter from State Farm to Sandra's lawyer dated March 3, 1988, stating the policy affords no liability coverage for claims arising from Corey's death. As we have seen, when Sandra's suit was filed Fitzsimmons warned State Farm that Nicholas would not accept a defense with...
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