Joseph v. Inter-Ocean Insurance Agency, Inc.

59 V.I. 820, 2013 WL 5397407, 2013 V.I. Supreme LEXIS 64

• Court: Supreme Court of The Virgin Islands
• Decided: September 25, 2013
• Docket: S. Ct. Civil No. 2011-0111
• Status: Published

Opinions

OPINION OF THE COURT

(September 25, 2013)

Hodge, Chief Justice.

Camira Joseph appeals the Superior Court’s order granting summary judgment in favor of Inter-Ocean Insurance Agency, Inc. We conclude that the endorsement in Joseph’s car insurance policy excluding liability coverage for anyone driving or operating her vehicle under the age of twenty-five is invalid, and that Inter-Ocean had no right to seek reimbursement from Joseph. Accordingly, the Superior Court erred in granting Inter-Ocean’s motion for summary judgment.

I. STATEMENT OF RELEVANT FACTS AND PROCEDURAL POSTURE

The facts of this case are not in dispute. On November 8, 2002, Joseph allowed her eighteen-year-old brother Sheldon Joseph to use her insured automobile. While driving Joseph’s vehicle on the Melvin H. Evans highway in St. Croix, Sheldon collided into the median. The collision caused injuries to two passengers riding in the car, as well as damage to government property. According to the Virgin Islands Police Department Uniform Traffic Accident Report, two passengers in the car sustained injuries and a guard rail was damaged. As a consequence, Sheldon was cited for reckless driving.

At the time of the accident Joseph’s vehicle was insured through Inter-Ocean.¹ The passengers and the Government filed claims with Inter-Ocean for damages sustained as a result of the accident. Inter-Ocean advised Joseph of its assessment of the damages and its intent to tender the policy limits.² After two months had elapsed without receiving a response from Joseph, Inter-Ocean paid $10,000 to satisfy the claims of one of the injured parties. Additionally, Inter-Ocean paid $287.25 to the Government to satisfy its claim for damages to the guard rail. Inter-Ocean subsequently sought reimbursement from Joseph for the money it paid the passenger and the Government. It alleged that Joseph breached her insurance policy by allowing her brother — who was under twenty-five years old — to operate her vehicle, and that under the policy, Joseph was required to reimburse Inter-Ocean. Joseph refused, claiming that because her liability insurance policy does not cover drivers under the age of twenty-five, Inter-Ocean had no obligation to pay the claim, and since Inter-Ocean had no obligation to pay the claim, it also has no right to seek indemnification. Inter-Ocean thus filed suit in the Small Claims Division of the Superior Court. Joseph subsequently filed a motion to transfer the matter to the Civil Division, which was granted on March 6, 2006. Once the matter was transferred to the Civil Division, both parties filed motions for summary judgment.

On October 17, 2011, the Superior Court entered a memorandum opinion and order granting Inter-Ocean’s motion for summary judgment and awarded Inter-Ocean $10,287.25 in damages.³ In the October 17, 2011 Order granting Inter-Ocean’s motion for summary judgment, the trial court noted that Joseph’s insurance policy included an endorsement which excluded coverage for drivers under the age of twenty-five. It further noted that Joseph’s policy included a provision that entitled Inter-Ocean to seek subrogation of any payment made under the policy where the policy holder was in breach of the contract. The trial court thus concluded that Joseph had breached the agreement by allowing her eighteen-year-old brother to operate her vehicle,⁴ and although Inter-Ocean was required under 20 Y.I.C. § 704(c) to pay the $10,287.25 in damages, it retained the right to seek subrogation of this payment from Joseph because she breached the insurance contract by allowing someone under the age of twenty-five to operate the covered vehicle. Accordingly, the trial court concluded that there was no genuine issue of material fact and Inter-Ocean was entitled to judgment as a matter of law. Joseph filed a timely notice of appeal on November 14, 2011.

II. DISCUSSION

A. Jurisdiction and Standard of Review

“The Supreme Court [has] jurisdiction over all appeals arising from final judgments, final decrees or final orders of the Superior Court, or as otherwise provided by law.” V.I. Code Ann. tit. 4 § 32(a). An order is considered to be “final” for purposes of this statute if it “ends the litigation on the merits, leaving nothing else for the court to do except execute the judgment.” Rodriguez v. Bd. of Corrs., 58 V.I. 367, 370 (V.I. 2013); Williams v. People, 55 V.I. 721, 727 (V.I. 2011). Because the Superior Court’s October 17, 2011 Order ended the litigation on the merits, it constitutes a final judgment; therefore, this Court possesses jurisdiction over this appeal.

We exercise plenary review of a Superior Court’s grant of summary judgment. Pollara v. Chateau St. Croix, LLC, 58 V.I. 455, 468 (V.I. 2013); United Corp. v. Tutu Park, Ltd., 55 V.I. 702, 707 (V.I. 2011); Williams v. United Corp., 50 V.I. 191, 194 (V.I. 2008) (citing Maduro v. Am. Airlines, Inc., S. Ct. Civ. No. 2007-0029, 2008 V.I. Supreme LEXIS 24, *7 (V.I. Feb. 28, 2008) (unpublished)). “On review, we apply the same test that the lower court should have utilized.” Pollara, 58 V.I. at 468; United Corp., 55 V.I. at 707. “Because summary judgment is a drastic remedy, it should be granted only when ‘the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.’ ” United Corp., 55 V.I. at 707 (quoting former wording of Fed. R. Civ. R 56(c)) (citations omitted); see also Anthony v. FirstBank V.I., 58 V.I. 224, 228 (V.I. 2013). Likewise, this Court’s review of the trial court’s construction of a statute is plenary. Billu v. People, 57 V.I. 455, 461 (V.I. 2012); PSC v. WAPA I, 49 V.I. 478, 483 (V.I. 2008).

B. Summary Judgment

The sole issue before this Court on appeal is whether the Compulsory Automobile Liability Insurance Act — 20 V.I.C. § 701 et seq. — should supersede the named driver exclusion in Joseph’s automobile liability insurance policy.⁵

Joseph’s automobile liability insurance policy contained an endorsement which excluded liability coverage for anyone under the age of twenty-five who was driving or operating Joseph’s vehicle. The endorsement states that “the insurance afforded by this policy shall not apply while any vehicle covered by this policy is being driven or operated by any person under the age of twenty-five (25) years.” The Virgin Islands Compulsory Automobile Liability Insurance Act, however, requires an owner of a motor vehicle to purchase a policy of liability insurance in specified amounts as a prerequisite to registering a motor vehicle in this Territory. See 20 V.I.C. § 701. Pursuant to title 20, section 703:

An owner’s policy of liability insurance, hereinafter referred to as the ‘motor vehicle liability policy’:

(a) shall designate by explicit description, or by other appropriate reference inclusive of the vehicle identification number, all vehicles with respect to which coverage is to be granted; and

(b) shall insure the person named therein and any other person, as an insured, using any such vehicle or vehicles with the express or implied permission of such named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of such vehicle or vehicles in the Virgin Islands, subject to minimum coverage, exclusive of interest and costs, with respect to each vehicle ....

Furthermore, this statutory omnibus clause supersedes and invalidates any conflicting policy provision. See 20 V.I.C. § 701 et seq. (requiring all liability insurance policies issued in this Territory to comply with the requirements of the Compulsory Automobile Liability Insurance Act); 20 V.I.C. § 704(c)(3) (“The policy, the written application therefor, if any, and any rider or endorsement which does not conflict with the provisions of this Chapter shall constitute the entire contract between the parties.”) (emphasis added); see also Auto Owners Ins. Co. v. Rollison, 378 S.C. 600, 663 S.E.2d 484, 490 n.5 (2008) (statute defining an insured under an automobile insurance policy is controlling if the terms of an insurance policy excluding coverage are in conflict with the requirements of the statute); Fields v. W. Preferred Cas. Co., 437 So.2d 344, 346-47 (La. Ct. App. 1983) (same); 7 Am. Jur. 2d Automobile Insurance § 225 (same) (collecting cases).

Here, the insurance contract between Inter-Ocean and Joseph is a compulsory liability policy to the extent of the mandatory minimum liability coverage set forth in title 20, section 703.⁶ And under section 703(b), drivers like Sheldon Joseph, who operate an insured vehicle with permission from the named insured, must be extended automobile insurance for the compulsory policy limits, regardless of whether that driver may be excluded from coverage by the terms of the insurance policy. The endorsement excluding any driver or operator under the age of twenty-five from coverage under the policy at issue in this case thus conflicts with the statutory omnibus clause and is invalid to the extent of the statutory minimum liability coverage.⁷ See Fields, 437 So.2d at . The policy must accordingly be reformed to provide the mandatory minimum liability coverage set forth in section 703 for the person named in the policy, as well as any other person using the insured vehicle with the express or implied permission of the named insured. See id. The claims arising from Sheldon Joseph’s operation of Joseph’s vehicle on November 8, 2002 are therefore covered under Joseph’s automobile liability insurance policy with Inter-Ocean.

Furthermore, Inter-Ocean had no right to seek reimbursement from Joseph under the insurance contract’s subrogation clause. Subrogation is an equitable right. “By definition, subrogation can arise only with respect to the rights of an insured against third persons to whom the insurer owes no duty. It follows and, indeed, is now well established that an insurer cannot recover by means of subrogation against its own insured.” Remy v. Michael D’s Carpet Outlets, 391 Pa. Super. 436, 571 A.2d 446, 447 (1990) (citations omitted). See 2 ALLAN D. Windt, Insurance Claims and Disputes § 10:7 (5th ed. 2012) (collecting cases); 46A C.J.S. Insurance § 1997; 16 Couch on Insurance (3d) § 224:1; 3 Law and Prac. of Ins. Coverage Litig. § 42:6. Similarly, since the policy endorsement excluding liability coverage for anyone under the age of twenty-five who drives or operates Joseph’s vehicle is invalid and unenforceable, Inter-Ocean had no right to seek reimbursement or indemnification from Joseph under a breach of contract theory. Section 704(c)(3) renders the exclusionary endorsement invalid to the extent that it is in direct conflict with section. 703(b), and section 703(b) mandates that an owner’s automobile insurance policy shall “insure . . . any other person . . . using any such vehicle with the express or implied permission” of the named insured. There is no question that Sheldon was driving the vehicle with Joseph’s permission. Accordingly, the policy endorsement — at least to the compulsory limits — was never effective or enforceable, and Joseph did not breach the insurance contract by allowing her eighteen year old brother to use her vehicle. See McIntyre Framing, Inc. v. Interstate Fire & Cas. Co., No. E052666, 2012 Cal. App. Unpub. LEXIS 636 at *23 (Cal. Ct. App. Jan. 26, 2012) (unpublished) (holding that party cannot succeed on breach of contract claim when endorsement allegedly breached is void and unenforceable). The trial court therefore erred in granting Inter-Ocean’s motion for summary judgment.⁸

Our conclusion is consistent with how courts in other jurisdictions have interpreted similar compulsory liability insurance statutes. In Fields, an insurer issued a motor vehicle liability policy to an insured which included an exclusion that said that no liability coverage shall be afforded while the insured’s vehicles were being driven by a particular person. 437 So.2d at 345. The particular person excluded from coverage under the insured’s policy was later involved in an accident while driving the insured’s vehicle. Id. The court concluded that the exclusion was invalid under the state’s Compulsory Motor Vehicle Liability Security Law, which requires all motor vehicle liability policies to insure the named insured, as well as any other person using the insured vehicle with the express or implied permission of the named insured.⁹ Id. at 346 (“A statutory omnibus clause supersedes conflicting policy provisions.”). Thus, the court held that when “a policy of liability insurance is written on a Louisiana motor vehicle, the minimal liability coverage is controlled by the statute and the statutory omnibus coverage provision will override or supersede a policy provision or endorsement excluding a named driver.”¹⁰ Id. at 346-47.

In Young v. Mid-Continent Casualty Co., 1987 OK 88, 743 P.2d 1084, 1085 (1987), an insured loaned his insured vehicle to his cousin, who was under the age of 25 and who subsequently was involved in an automobile accident. The insurer refused to defend or indemnify the insured, contending that the under-age exclusion was effective and enforceable and it, therefore, extinguished any duty on the part of the insurer to defend or indemnify the insured. Id. The court, however, concluded that since the legislature’s “intent [was] to require a minimum of protection to any party who is not a party to the contract... the exclusionary clause in question has the effect of limiting the insurer’s liability to an innocent victim who was not a party to the contract. . . [and is] violative of the public policy embodied.” Id. at 1088. The Young court thus struck down the exclusionary endorsement contained in the insurance policy on the grounds that “the .. . clause would have the effect of limiting the liability of the insurer to an innocent victim of the negligent operation of the insured vehicle .... [and] provisions of our compulsory liability insurance legislation ... contain[] no indications of an intent to allow any differentiation as to coverage available to any victim of an insured vehicle’s operation or use.” Id. (emphasis omitted). We agree with the analysis of these courts and conclude that the trial court erred in granting Inter-Ocean’s motion for summary judgment.¹¹

III. CONCLUSION

The endorsement in Joseph’s liability insurance policy which excluded coverage for anyone under the age of twenty-five who was driving or operating Joseph’s vehicle conflicts with the Virgin Islands Compulsory Automobile Liability Insurance Act’s omnibus clause. Accordingly, the exclusion is invalid and the damages arising out of Joseph’s brother’s use of her vehicle are covered under her policy. Moreover, Inter-Ocean has no right to seek reimbursement from Joseph. We therefore reverse the trial court’s order granting Inter-Ocean’s motion for summary judgment.

DISSENTING OPINION

1 The Underwriters at Lloyds insured Joseph’s vehicle.

2 The policy limits were $10,000 per person for bodily injury, with a cap of $20,000 per accident, and $10,000 for property damage per accident.

3 Inter-Ocean was also awarded reasonable costs and attorney fees.

4 There is some conflict in the record as to whether Sheldon Joseph is Joseph’s son or brother. His age at the time of the accident, however, is all that is relevant.

5 Neither party has properly framed this issue. Joseph argues that the trial court erred in granting Inter-Ocean’s motion for summary judgment because her liability insurance policy does not cover drivers under the age of twenty-five, and Inter-Ocean had no obligation to pay the claim because her eighteen year old brother was operating the vehicle at the time of the accident. Joseph thus argues that since Inter-Ocean had no obligation to pay the claim, it also has no right to seek indemnification. In contrast, Inter-Ocean argues that it was obligated to pay the claim because the mandatory insurance laws in the Virgin Islands rendered the named driver exclusion invalid and unenforceable. Oddly, Inter-Ocean also argues that it is entitled to indemnification based on this same supposedly invalid and unenforceable endorsement. Both of these arguments are flawed and misapply the applicable law.

6 Title 20, section 703(b) requires an automobile insurance liability policy for private passenger vehicles to provide minimum coverage of $ 10,000 for bodily injury caused to any one individual from a single accident, $20,000 per accident for bodily injury for two or more persons arising from a single accident, and $10,000 per accident for property damage. obligation to pay extra to have her brother insured under her policy — on the contrary it was Inter-Ocean, by attempting to charge Joseph additional money to provide coverage it was required to provide under section 703, which sought to receive a windfall in this case.

7 The partial dissent invokes section 711 of title 20, which provides that “[njothing in this chapter shall be construed as preventing the plaintiff in any action of law, from relying for relief upon any other remedy provided by law,” for the proposition that Inter-Ocean may nevertheless sue Joseph for subrogation. However, the obvious intent of section 711 is to clarify that collecting from a driver’s mandatory automobile insurance is not the only remedy available to an accident victim. Moreover, as noted above, subrogation is an action of equity, and thus we question whether it would constitute an “action of law.”

In any case, the partial dissent premises its holding that Inter-Ocean is entitled to subrogation entirely on the fact that “Joseph was given the option but purposefully chose not to purchase insurance coverage for persons under the age of 25.” (Dissent Op. 7.) As explained in greater detail above, section 703 mandates that a motor vehicle liability policy “insure the person named therein and any other person, as an insured, using any such vehicle or vehicles with the express or implied permission of such named insured....” 20 V.I.C. § 703(b). Thus, Joseph has not been unjustly enriched, since she was under absolutely no

8 We note that named driver exclusions are generally valid on any insurance purchased in excess or addition to the mandatory minimum liability coverage set forth in section 703.

9 Under Louisiana law, all motor vehicle liability policies are required to “insure the person named therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such named insured against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of such motor vehicle.” La. Rev. Stat. Ann. § 32:900(B). The statute — similar to its Virgin Islands counterpart — then goes on to set out the mandatory minimum liability coverage required for all covered motor vehicles. See id. The only significant difference between Louisiana’s statute and its Virgin Islands counterpart is subsection (B)(2)(d), which states:

An owner may exclude a named person as an insured under a commercial policy if the owner obtains and maintains in force another policy of motor vehicle insurance which provides coverage for the person so excluded which is equal to that coverage provided in the policy for which the person was excluded. The alternative coverage is required for both primary and excess insurance.

The Virgin Islands Compulsory Automobile Liability Insurance Act has no similar provision.

10 It is important to note, although it was not applicable in Fields, that Louisiana has a statute that allows insurance contracts to include a provision requiring the reimbursement to the insurer by the insured of amounts the insurer would not have been obligated to pay except for the statutory requirements. See La. Rev. Stat. Ann. § 32:900(H) (“Any motor vehicle liability policy may provide that the insured shall reimburse the insurance carrier for any payment the insurance carrier would not have been obligated to make under the terms of the policy except for the provisions of this Chapter.”). The Virgin Islands Compulsory Automobile Liability Insurance Act, however, has no similar provision.

11 The partial dissent notes that this Court “failfed] to address Joseph’s argument that subrogation is precluded by Inter-Ocean’s actions in paying a claim for which no coverage exists.” (Dissent Op. 4.) However, since we conclude that the subrogation clause is invalid because it is contrary to section 703, it is not necessary or proper for us to address Joseph’s alternate argument as part of this appeal.