Draper v. Draper

772 P.2d 180, 115 Idaho 973, 1989 Ida. LEXIS 41

• Court: Idaho Supreme Court
• Decided: March 24, 1989
• Docket: 17199
• Status: Published

Opinions

JOHNSON, Justice.

This is an automobile liability insurance case. The primary issue presented is whether the household exclusion clause contained in the insurance policy was void, allowing a wife (Barbara) to'maintain an action against her husband (Van) up to the limits of the policy. The trial court granted summary judgment to Barbara and denied the motions of the insurance company (State Farm) to dismiss, for summary judgment, or for judgment on the pleadings. We hold that Oregon law applies and that the household exclusion is enforceable. We reverse the summary judgment of the trial court and remand with directions to enter summary judgment in favor of State Farm.

I.

THE FACTS AND BRIOR PROCEEDINGS.

Van and Barbara were residents of Nys-sa, Oregon. State Farm insured a 1979 automobile (the insured vehicle) owned by Van and Barbara. The insured vehicle was registered in Oregon, and the insurance policy (the policy) was issued by State Farm, in Oregon. The policy contained the following provision (the household exclusion):

There is no coverage:

2. For any bodily injury to:

c. Any insured or any member of an insured’s family residing in the insured’s household.

The policy also included another provision (the out-of-state coverage):

If an insured under the liability coverage is in another state or Canada and, as a non-resident, becomes subject to its motor vehicle compulsory insurance, financial responsibility or similar -law:

a. the policy will be interpreted to give the coverage required by the law;

On July 29, 1984, Van and Barbara were involved in an accident in Idaho while they were riding in the insured vehicle. Van was driving the vehicle. Barbara was injured in the accident.

Barbara brought this action against Van for damages due to her injuries, alleging his negligence. Barbara also included in the action a claim against State Farm and Van, requesting a declaratory judgment that the household exclusion was void and that there was coverage for her injuries under the policy. State Farm filed a counterclaim against Barbara and a cross-claim against Van, requesting a declaratory judgment that the household exclusion was valid and that State Farm had no liability to Barbara under the policy. Barbara moved for summary judgment against State Farm. State Farm moved to dismiss, for summary judgment, or for judgment on the pleadings with regard to the claim against it by Barbara on the ground that the household exclusion was valid under either Idaho law or Oregon law.

The trial court concluded that Idaho law was applicable and granted summary judgment to Barbara, declaring that the household exclusion was void and that Barbara could maintain an action against Van up to the limits of the policy. In rendering its decision the trial court stated that “when non-residents from a state recognizing a household exclusion have an auto accident in Idaho, the courts of Idaho shall apply Idaho law for public policy reasons so that such exclusion is held void.” The trial court said it applied this “new law” under the modified prospective rule of Farmers Insurance Group v. Reed, 109 Idaho 849, 712 P.2d 550 (1985). The trial court denied State Farm’s motions. State Farm appealed all these decisions.

II.

OREGON LAW APPLIES.

In Unigard Insurance Group v. Royal Globe Insurance Co., 100 Idaho 123, 594 P.2d 633 (1979) this Court held that Idaho law applied in a case that was the converse of this one. In Unigard two Idaho residents were involved in an automobile accident in Oregon in which one of them was killed. The case was brought to determine which of three insurance policies would be treated as providing the primary coverage for the accident. After reaffirming the “most significant relationship” test for determining whether Oregon or Idaho law would apply, the opinion reviewed the “choice-influencing considerations.” Among these considerations were that Idaho was the place of negotiation and issuance of the policies, the place where the insured automobiles were located, and the domicile, residence, and place of business of the driver and the deceased passenger. The opinion concluded the discussion of this issue by stating:

Regarding the accident which occurred in Oregon, the needs of the interstate system require that persons who travel from their residence into another state have protection of the laws equal to that afforded to persons who have not crossed state lines. Rungee v. Allied Van Lines, Inc., [92 Idaho 718, 449 P.2d 378 (1968)]. In negotiating and executing the respective insurance contracts, both [of the insurance companies] justifiably expected that the laws of Idaho would apply. The combined weight of all these considerations leads us to the conclusion that Idaho has the most significant relationship with the transaction and parties here involved. We therefore hold that the district court was correct in applying Idaho law to this action.

100 Idaho at 126-27, 594 P.2d at 636-37.

Here, the trial court acknowledged that Oregon was the principal location of the risk “and the state with the most significant relationship.” However, the trial court concluded that “these factors are outweighed by Idaho’s public policy concerning family members and uniformity in requiring the same mandatory insurance of persons using Idaho’s highways.”

This case calls for the application of the choice of law principle established in Uni-gard. We agree with the trial court that Oregon was the state with the most significant relationship to the facts of this case. We are unable to agree that there is any public policy that overrides this choice. Apparently, the trial court considered that the new law declared in its decision was a modification of the “public policy” announced in Reed. However, the trial court’s analysis breaks down when it attempts to use Reed to establish this public policy.

In Reed a father and mother sued their son, who hád been the driver of a vehicle involved in an accident that caused the death of their other child. The insurance company that insured the vehicle sought to avoid coverage under the policy on the basis of a household exclusion clause similar to the one in this case. This Court held that the household exclusion did not shield the company from liability under the policy, because of the requirements of I.C. § 49-233 (1978). The pertinent portion of this statute, as it existed at the time of the decision in Reed, provided:

49-233. Required Motor Vehicle Insurance. — (a) Every owner of a motor vehicle which is registered and operated in Idaho by the owner or with his permission shall continuously provide insurance against loss resulting from liability imposed by law for bodily injury or death or damage to property suffered by any person caused by maintenance or use of motor vehicles described therein in an amount not less than that required by section 49-1521, Idaho Code, and shall demonstrate the existence of any other coverage required by title 49, Idaho Code, or a certificate of self-insurance issued by the department pursuant to section 49-1534, Idaho Code, for each motor vehicle to be registered.

I.C. § 49-233 (1978). In measuring the household exclusion in Reed against the requirements of I.C. § 49-223, this Court said:

However, unlike the statute, the insurance contract contains a clause which excludes coverage for household members. This is in spite of the clear legislative mandate ordering coverage extended for damage, injury or death suffered “by any person.” This type of exclusion in a liability insurance policy leaves completely unprotected those family members injured when another family or household member is at the wheel in a negligently caused automobile accident. Unless the [company] can show that something shields it from the statutory obligation “imposed by law” to pay damages caused by the policy holder to “any person,” the household exclusion clause is flatly and unmistakably in violation of Idaho’s compulsory insurance law.

109 Idaho at 851, 712 P.2d at 552.

In declaring the household exception to be unenforceable in Reed this Court applied the decision to that action, “all actions pending as of December 31, 1984, and all actions arising subsequent to that date.” Id. at 854, 712 P.2d at 555. Here, the trial court agreed that this action was not pending as of December 31,1984, and that it did not arise subsequent to that date. However, the trial court stated that “the analysis does not end with these conclusions.” The trial court then weighed “Conflict of Laws, principles and public policy considerations” to determine whether to apply Oregon law or Idaho law. Among the reasons stated by the trial court for its decision to grant summary judgment in Barbara’s favor was that “[t]his case is breaking new ground and making new law on how Idaho deals with non-residents who have accidents in Idaho.” The trial court also referred to the out-of-state coverage provision as indicating that State Farm was not entitled to rely on Oregon’s interpretation of the household exclusion.

We are not able to accept the public policy considerations that the trial court weighed against the choice of Oregon law dictated by Unigard. These public policy considerations are contradicted by Reed, rather than supported by it. If the vehicle driven by Van in which Barbara was a passenger at the time of the accident in this case had been registered in Idaho, Reed would not have permitted Barbara to maintain an action against Van. The action was not pending as of December 31, 1984, and it did not arise subsequent to that date. There is no public policy of this state that would cause us to treat Barbara more favorably than we would have if the vehicle in this case had been registered in Idaho. A public policy that would be necessary to support that result would favor coverage in accidents involving foreign vehicles over those involving Idaho vehicles. We are unable to accept this as a public policy of this state. Without any public policy to counterbalance the choice of Oregon law under the most significant relationship test, we can only conclude that Oregon law applies here.

With regard to the effect of the out-of-state coverage provision, we point out that the compulsory insurance provided for by I.C. § 49-233 is required only if the vehicle is registered in Idaho. There is no ambiguity in this portion of the statute. We will not search other statutes in the motor vehicle code for evidence of legislative intent, as Barbara would have us do. Ottesen v. Board of Commissioners of Madison County, 107 Idaho 1099, 695 P.2d 1238 (1985). If it were not for the household exclusion, the out-of-state coverage provision would be applicable under the Idaho Motor Vehicle Safety Responsibility Act (the Act) to insure that Van satisfies any liability he may have to Barbara or to furnish security as required by the law. I.C. § 49-1501, et seq. (1980, Supp.1987). This Court has clearly stated that a household exclusion is not in violation of the Act. Porter v. Farmers Ins. Co. of Idaho, 102 Idaho 132, 627 P.2d 311 (1981). Therefore, considering the out-of-state coverage provision in conjunction with the Act does not dictate that we reject the choice of Oregon law under the most significant relationship test of Unigard.

III.

THE HOUSEHOLD EXCLUSION WAS NOT UNENFORCEABLE UNDER OREGON LAW.

Until August 1988, Oregon retained spousal immunity for unintentional injury of one spouse caused by the negligence of the other. Chaffin v. Chaffin, 239 Or. 374, 397 P.2d 771, 779 (1964); Moser v. Hampton, 67 Or.App. 716, 679 P.2d 1379, 1381 (1983), aff'd by equally divided court, 298 Or. 171, 690 P.2d 505 (1984); Heino v. Harper, 306 Or. 347, 759 P.2d 253 (1988). Under Oregon law before Heino v. Harper was decided Barbara could not sue Van for the injuries she sustained in the accident that is the subject of this case. The change of law by the Oregon Supreme Court is usually applied only prospectively. Dean v. Exotic Veneers, Inc., 271 Or. 188, 531 P.2d 266, 272 (1975). We will treat the change of law announced in Heino as applying only prospectively. The question then becomes whether, despite spousal immunity under Oregon law as it existed before Heino, Barbara may maintain an action against Van to the extent of the liability coverage provided in the policy.

The Oregon appellate courts have on several occasions considered the validity of household exclusion clauses similar to the one at issue here. In Lee v. State Farm Mutual Automobile Insurance Co., 265 Or. 1, 507 P.2d 6 (1973) the Oregon Supreme Court held that a “family-household exclusion” applied to an insured who was injured while she was a passenger in her own automobile that was being driven by her sister-in-law. The court pointed out: “The primary purpose of the family-household exclusion clause is to protect the insurer against collusive or friendly lawsuits. ... [T]he need for this exclusion clause is most obvious in cases where the insured had injured a member of his own family and household_” Id. 507 P.2d at 8.

In State Farm Mutual Automobile Insurance Co. v. Baughman, 57 Or.App. 576, 646 P.2d 102 (1982) the Oregon Court of Appeals commented on Lee and Chaffin in the context of a case involving a similar household exclusion clause. In Baughman a child and a stepchild had been injured when an automobile driven by the man who was their father and stepfather was involved in an accident. The court held that California law was applicable, but also said:

Although Lee involved a claim by a named insured who was a passenger in her own vehicle, we see nothing in the language of the opinion to suggest that the exclusion bears different interpretations depending on the relationship of the claimant to the named insured. Moreover, given the fact that claims by a child against a parent for negligent acts are not favored in this state, [citing Chaf-fin], we see no policy reason for abrogating that immunity by interpreting an unambiguous clause in an insurance policy to afford coverage to a minor child.

Id. 646 P.2d at 104.

In Dowdy v. Allstate Insurance Co., 68 Or.App. 709, 685 P.2d 444 (1984), rev. den. 298 Or. 172, 691 P.2d 481 (1984) the Oregon Court of Appeals considered the enforceability of a household exclusion clause under Oregon’s Financial Responsibility Law (the FRL). In Dowdy the plaintiff was injured when she was a passenger in an automobile driven by her sister, who was the insured under the policy. The plaintiff and her sister lived in the same household. In Dowdy the court held that Lee and Baughman were not in point, since they did not address the enforceability of a household exclusion clause under the FRL. The court held that the household exclusion was not enforceable under the FRL. Id. 685 P.2d at 449.

Recently, the Oregon Supreme Court has addressed the enforceability of a household exclusion under the FRL. State Farm and Casualty Co. v. Jones, 306 Or. 415, 759 P.2d 271 (1988). In Jones a woman was injured while riding as a passenger in her own automobile while it was being operated by a driver with her permission. There was no family relationship between the injured woman and the driver, and they did not live in the same household. The basis for applying the household exclusion was that the injured party was the insured. By the terms of the household exclusion, it excluded coverage for “any insured” as well as “any member of an insured’s family residing in the insured’s household.” The same is true of the household exclusion in this case. In Jones the court construed prior decisions concerning household exclusion clauses decided by the appellate courts in Oregon, including Lee and Dowdy. The court held that the FRL required the policy to provide liability coverage for bodily injury to an insured that is occasioned by a permissive user of an insured’s automobile.

As we read these decisions of the Oregon appellate courts, spousal immunity remained intact until Heino v. Harper was decided last year. The decisions that have held household exclusion clauses to be unenforceable under the FRL have not involved a spouse who was' injured by the unintentional,, negligent act of the other spouse. We note that in April 1984 the Oregon Supreme Court unanimously abolished parental immunity. Winn v. Gilroy, 296 Or. 718, 681 P.2d 776 (1984). Eight months later in Moser the same court upheld spousal immunity, although by an equally divided vote affirming the decision of the court of appeals. This convinces us that under Oregon law prior to Heino v. Harper the household exclusion was enforceable where one spouse was injured by the negligence of the other spouse. We find no precedent in Oregon prior to Heino v. Harper that would render spousal immunity ineffective to the extent of the insurance coverage provided by the policy here.

IV.

CONCLUSION.

The summary judgment of the trial court is reversed. The case is remanded with directions to enter summary judgment in favor of State Farm.

Costs to appellant.

No attorney fees on appeal.

SHEPARD, C.J., and BAKES, and HUNTLEY, JJ., concur.