Western Cas. & Sur. Co. v. General Cas. Co. of Wis.

• Decision Date: 19 September 1972
• Docket Number: No. 54962,54962
• Citation: 200 N.W.2d 892
• Parties: The WESTERN CASUALTY AND SURETY COMPANY, Appellant, v. GENERAL CASUALTY COMPANY OF WISCONSIN, Appellee.
• Court: Iowa Supreme Court

Page 892

200 N.W.2d 892

The WESTERN CASUALTY AND SURETY COMPANY, Appellant, v. GENERAL CASUALTY COMPANY OF WISCONSIN, Appellee.

No. 54962.

Supreme Court of Iowa.

Sept. 19, 1972.

McDonald & McDonald, Davenport, for appellant.

McCracken & Carlin, Davenport, for appellee.

HARRIS, Justice.

The question is whether all automobile liability insurance policies written in this state must conform with the provisions of the motor vehicle financial responsibility chapter of The Code. The trial court ruled they must. We reverse.

On August 11, 1969, John J. Montroni, hereafter the insured, loaned his automobile to Yvette Dorsey, hereafter the driver. The driver was not related to the insured; neither had she attained the age of twenty-five years. While so driving the insured's automobile, the driver was involved in an accident with another vehicle. Action has been commenced as a result of the accident.

The policy contains a young driver endorsement. This provision excludes from coverage '* * * any person under twenty-five years of age while operating the automobile unless such person is a relative of the named insured; * * *.'

This exclusion is not consistent with the provisions of section 321A.21(2)(b), The Code. That section requires a policy of insurance to contain the omnibus clause: '* * * insure the person * * * and any other person, as insured, using any such motor vehicle * * * with * * * permission * * * against loss * * *.'

Obviously, if the omnibus clause just quoted is to be given effect in the policy in question it would void the young driver endorsement.

I. Most of the states have adopted 'so-called 'financiall responsibility' or 'first bite' laws designed to require liability insurance, as a precondition to continued permission to use the highways, only after the driver had been involved in an accident, convicted of various traffic offenses, or been held liable for damages.' 8 A.L.R.3d 388, 390. The 'financial responsibility' statutes which prevail in the vast majority of the American jurisdictions are in contrast with the much rarer compulsory insurance laws. Chapter 321A, The Code, is a financial responsibility statute.

'The kind of policy referred to in Sec. 321A.21(6)(a) is a 'motor-vehicle liability policy' which has been certified as proof of future financial responsibility. The words 'motor-vehicle liability policy' are used in the Act as a term of art, having reference only to policies Certified as Proof under the proof section of the Act. This is to distinguish such a policy from the 'automobile liability policy' which can exempt an operator or owner from furnishing security under Sec. 321A.5 of the Act.' (Emphasis in the original.) Hoosier Cas. Co. of Indianapolis, Ind. v. Fox, D.C., 102 F.Supp. 214, 232. The basis for the decisions interpreting financial responsibility laws was aptly described in United States Casualty Co. v. Brock (Tex.Civ.App.), 345 S.W.2d 461, 464:

'The rationale of these cases is that the safety responsibility laws do not provide for compulsory motor vehicle liability insurance; that they are prospective in intendment, operating in futuro and are based upon the philosphy that every dog is allowed by the law one free bite; that such laws apply only to a second accident and not to a first accident; that there is no requirement that the owner or operator of a motor vehicle carry a policy of liability insurance or that it contain any particular provisions unless and until the safety responsibility law has been invoked by the occurrence of some event resulting in the order of a state official that security be deposited or that proof of financial responsibility be made; that the policy must be a 'required' policy before the provisions of the safety responsibility law are to be incorporated therein.'

II. The question presented in this appeal is not answered by the distinction between compulsory insurance and financial responsibility laws.

'With the widespread adoption of financial responsibility laws, many insurers began including in their policies, even in those not issued to motorists required to post financial security, a provision that it should comply with the terms of applicable financial responsibility laws. When motorists carrying such policies became involved in their initial accident, under circumstances in which the insurer would have had a defense to liability under the ordinary terms of the policy but not if the policy were read as containing the statutory provisions, * * * (this) question * * * arose.' 8 A.L.R.3d 388, 391.

From the annotation just cited it appears the majority and growing view is 'that the statutory conformity operated only prospectively and that the insurer was entitled to rely upon ordinary policy defenses as to liability arising from the first accident.' 8 A.L.R.3d 388, 391. There is a minority view, prevailing principally in California and Arizona.

We are required by the Iowa chapter to adhere to the majority view. Section 321A.21, the Code, containing the omnibus clause upon which insured relies, expressly limits the definition of the term 'motor vehicle liability policy' to those situations where the '* * * term is used in this chapter * * *'

The legislature, in other situations, has chosen to extend application of an insurance policy requirement beyond the chapter in which the requirement is listed. We cannot consider this accidental. Both chapter 516, The Code, dealing with liability policies covering unsatisfied judgments and 516A, The Code, dealing with protection against uninsured motorists, are unequivocal. Policy provisions required in both of the latter mentioned chapters expressly apply to all policies issued in this state by any company.

We are forced to adhere to the majority view prevailing among the states. The provisions of our financial responsibility act do not void the provisions of a voluntary insurance contract, in those situations beyond the contemplation of the act. We regret this holding to some extent may seem in conflict with a hope previously expressed by a legion of authorities including our own. See Motor Vehicle Cas. Co. v. LeMars Mut. Ins. Co., 254 Iowa 68, 76, 116 N.W.2d 434, 439. The hope is the public would be protected from financial irresponsibility of motorists upon our streets and highways. In the pursuit of this end we cannot substitute a compulsory insurance law for a financial responsibility law. Neither can we arrogate to ourselves authority to remove or to alter an express limitation given by the legislature upon the extent of insurance protection they wished the public to have. The case must be and is hereby

Reversed.

All Justices concur, except LeGRAND, MASON, REYNOLDSON and McCORMICK, JJ., who dissent.

LeGRAND, Justice (dissenting).

This case of first impression involves an interpretation of chapter 321A, the Code, with reference to its effect on the omnibus clause in insurance policies issued before an insured has been involved in an accident. The question is this: Must such policies be drawn to comply with chapter 321A or does that chapter become effective only in futuro after an accident has occurred?

There are two lines of authorities, and I believe the majority has chosen the one which, though numerically superior, had nothing else to recommend it, leading as it does to a result which is both unjustified and unfair.

The majority distinguishes between financial responsibility statutes and compulsory insurance laws. It is said our chapter 321A is a financial responsibility statute which requires nothing of an owner of an automobile until he has been involved in an accident. Only then must he furnish evidence of financial responsibility. By following this one step further, the majority finds insurance policies issued to those who have not yet met with misfortune need not comply with chapter 321A.

The case at hand involves a claim against the owner of an automobile whose car was being driven by a person under 25 years of age. The omnibus clause of the owner's policy excluded coverage for young drivers unless related to the insured. There is no relationship here. If chapter 321A applies, this exclusion is void because it is not consistent with the provisions of section 321A.21(2)(b); if it does not, the defense raised is good and there is no insurance coverage for the owner, driver, or, more important, the accident victims.

I believe the result reached by the majority is frustrative of the legislative intent in the enactment of chapter 321A and it fails to recognize the overriding...