State Farm Mutual Automobile Insurance v. Ruuska

314 N.W.2d 184, 412 Mich. 321

• Court: Michigan Supreme Court
• Decided: January 8, 1982
• Docket: 63553, (Calendar No. 3)
• Status: Published

Opinions

Williams, J.

This case tests the validity of an "owned vehicle” exclusion¹ to residual liability coverage required under the no-fault act.² The automobile insurance policy in question provides coverage for the named insured while driving a "non-owned” vehicle; however, a subsequent definition of the term "non-owned automobile”, as relevant to the facts of this case, provides that a car owned by or registered in the name of a relative residing in the same household as the named insured or a car furnished or available for the frequent or regular use of the named insured is excluded from the category of a "non-owned automobile”.

The appellant insurer sold insurance policies on the cars of both a father and a daughter living in the same household. The daughter drove the father’s car with his permission and got into an accident. The insurer admits liability under the father’s policy since it was being driven with his permission, but seeks a declaratory judgment to establish that the so-called "owned vehicle” exclusion lawfully precludes coverage under the daughter’s policy.

Michigan’s no-fault act requires an insurer to provide its insured with residual liability coverage for certain losses caused by "the use of a motor vehicle”. Therefore, we interpret the no-fault act to preclude an insurer from denying liability coverage to its insured on the basis that the accident involved the insured’s use of a vehicle owned by or registered in the name of a relative residing in the same household or on the basis that the vehicle was furnished or available for the frequent or regular use of the named insured.

We affirm the Court of Appeals but for different reasons and the circuit court for similar reasons.

I. Facts

On June 19, 1975, Gloria Carlson, while driving an automobile owned by her father, Arvid Carlson, with whom she then resided, collided with a motorcycle being driven by appellee Dale Ruuska, which resulted in serious injury to him. Appellee Ruuska later filed a negligence suit against Gloria Carlson, her father, Arvid, who had given his consent to Gloria’s use of the car, and a bar owner at whose establishment Gloria Carlson had allegedly become intoxicated earlier.

Arvid Carlson and Gloria Carlson each owned automobiles covered by separate policies of insurance with State Farm Mutual Automobile Insurance Company ("State Farm”). Each policy contained a liability limit of $25,000 respecting the bodily injury claims of any one person. State Farm does not dispute coverage of Gloria Carlson under her father’s policy, as she was driving his car with his consent at the time of the accident. Rather, the present controversy centers on the question of the applicability to this accident of the added coverage of Gloria Carlson’s separate policy of insurance with State Farm covering her own non-involved automobile.

Appellee Ruuska bases his contention that Gloria Carlson’s own automobile insurance policy is applicable on a provision in that policy extending liability coverage to the use of a "non-owned automobile”. Specifically, the policy provides:

"Use of Non-Owned Automobiles:

"* * * [S]uch insurance as is afforded by this policy with respect to the owned motor vehicle under:

"(1) Coverages A [bodily injury liability] and B [property damage liability] applies to the use of a non-owned automobile by:

"(a) the first person named in the declarations” (emphasis in original).

Thus since Gloria Carlson was the named insured, liability coverage would seem to be indicated.

Appellant State Farm, on the other hand, points to the policy’s definition of a "non-owned automobile” as the premise for its denial of coverage under Gloria Carlson’s policy with respect to her use of her father’s car. This definition provides as follows:

"Non-Owned Automobile — means an automobile, trailer, or detachable living quarters unit, not (1) owned by, (2) registered in the name of, or (3) furnished or available for the frequent or regular use of the named insured, his spouse, or any relative of either residing in the same household, other than a temporary substitute automobile, ”³ (emphasis in original).

"Reside”, when used with reference to the named insured’s household, is defined in the policy to mean bodily presence in such household and an intention to continue to dwell therein. Thus since it is undisputed that Gloria Carlson, at the time of the accident, was driving an automobile owned by her father, with whom she had lived all her life, the exclusionary clause in Gloria Carlson’s policy would ostensibly seem to deny coverage in this instance.

Due to this dispute and because it appeared that any judgment for Ruuska in the negligence suit might exceed the limits of Arvid Carlson’s policy, State Farm sought a declaratory judgment to determine its liability for any residual amount under the policy issued to Gloria Carlson.

The circuit court granted appellee Ruuska’s motion for summary judgment holding that while the definition of a "non-owned automobile” was not ambiguous, it did contravene the provisions of the no-fault act and was therefore void and of no effect.

The Court of Appeals⁴ unanimously affirmed the trial court’s result, but it did so on different and divided reasoning. The majority of that panel determined that based on Michigan’s financial responsibility act, MCL 257.501 et seq.; MSA 9.2201 et seq., an exclusion to liability coverage of the type provided was theoretically valid. It found, however, that while the language creating the exclusion was not ambiguous, the limitation on the otherwise applicable coverage of "non-owned automobiles” was not designated explicitly enough— indeed the majority felt it was hidden among the policy provisions — and was therefore unenforceable as written.

The other member of the panel agreed with the rationale of the trial court, as well as opining that the instant exclusion was void because unauthorized by MCL 500.3009(2); MSA 24.13009(2)⁵ which provides for only one exclusion from liability coverage not here applicable.

We granted leave to appeal in both this case and Raska v Farm Bureau Mutual Ins Co of Michigan (Docket No. 63507), ordering that they be argued and submitted together, one immediately following the other.

II. Discussion

The no-fault act states that the owner or registrant of a motor vehicle required to be registered in this state

"shall maintain security for payment of beneñts under personal protection insurance, property protection insurance, and residual liability insurance. ” (Emphasis supplied.) MCL 500.3101(1); MSA 24.13101(1).

Under the terms of § 3131 such residual liability insurance

"shall cover bodily injury and property damage which occurs within the United States, its territories and possessions, or in Canada. * * * In this state this insurance shall afford coverage for automobile liability retained by section 3135.” (Emphasis supplied.) MCL 500.3131; MSA 24.13131.

Subsections 3135(1) and (2) of the no-fault act, which concern the circumstances under which a person remains subject to tort liability, provided as follows at the time of the accident:

"A person remains subject to tort liability for non-economic loss caused by his ownership, maintenance, or use of a motor vehicle only if the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement” (emphasis supplied);

and that

"[notwithstanding any other provision of law, tort liability arising from the ownership, maintenance or use within this state of a motor vehicle with respect to which the security required by subsections (3) and (4) of section 3101 was in effect is abolished except as to:

"(a) Intentionally caused harm to persons or property. Even though a person knows that harm to persons or property is substantially certain to be caused by his act or omission, he does not cause or suffer such harm intentionally if he acts or refrains from acting for the purpose of averting injury to any person, including himself, or for the purpose of averting damage to tangible property.

"(b) Damages for noneconomic loss as provided and limited in subsection (1).

"(c) Damages for allowable expenses, work loss, and survivor’s loss as defined in sections 3107 to 3110 in excess of the daily, monthly, and 3 year limitations contained in those sections. The party liable for damages is entitled to an exemption reducing his liability by the amount of taxes that would have been payable on account of income the injured person would have received if he had not been injured.” (Emphasis supplied.) MCL 500.3135(1), (2); MSA 24.13135(1), (2).⁶

Sections 3101, 3131 and 3135 of the no-fault act, when construed together, make, it plain that at the time of the accident the Legislature intended that

1. A person using a motor vehicle that causes certain types of damages shall remain liable in tort (§ 3135);

2. An insurance policy in this state shall afford coverage for such liability (§ 3131);

3. An owner or registrant of a motor vehicle shall purchase such a policy (§ 3101).

In this case, Gloria Carlson purchased an insurance policy which specifically provided that she was covered when she used a "non-owned automobile”, which, of course, she did. However, in its motion for summary judgment in the trial court, appellant State Farm contended solely that since her policy defined "non-owned automobile” to exclude "an automobile owned by any relative * * * residing in the same household”, which exclusion her father’s car unquestionably met, Gloria Carlson could not recover under her own insurance policy (emphasis in original).

We find such an exclusion repugnant to the clear directive of the no-fault act requiring that a policy purchased pursuant to that act provide residual liability coverage for the use of a motor vehicle. Nowhere in the no-fault act is provision made for the exclusion sought to be enforced by appellant State Farm in its motion for summary judgment. Section 3131 provides that liability insurance "shall afford coverage for automobile liability retained in section 3135”, to wit, tort liability for certain enumerated types of loss caused by or arising from the "use of a motor vehicle”. In a word, the Legislature has by section 3101(1) required the maintenance of insurance covering the type pf liability here incurred, whereas the insurer has specifically sought by policy exclusion to thwart the,Legislature’s prescription. This it cannot lawfully do.⁷ Therefore, since the exclusionary clause in Gloria Carlson’s policy is in conflict with the liability coverage required by the no-fault act, the language of the statute must prevail with the result that the attempted exclusion is invalidated and the policy must be read so as to provide the required coverage. See MCL 500.3101(3); MSA 24.13101(3); cf. Boettner v State Farm Mutual Ins Co, 388 Mich 482, 487; 201 NW2d 795 (1972); Allstate Ins Co v DeFrain, 81 Mich App 503, 506; 265 NW2d 392 (1978).

Appellant State Farm also alleged in its complaint that coverage was precluded in this instance due to the additional fact that the exclusionary clause eliminated from the definition of a "non-owned automobile” an automobile "furnished or available for the frequent or regular use of the named insured”. Although as a factual matter Gloria Carlson’s access to and use of her father’s car may or may not have been sufficient to be characterized as "furnished or available for [her] frequent or regular use”, we find that as a matter of law this particular phrase of the exclusionary clause is repugnant to the no-fault act and that summary judgment was properly granted to appellee Ruuska. The same reasoning that served to invalidate the "owned by a relative residing in the same household” phrase of the exclusionary clause also compels us to render the "frequent or regular use” phrase invalid. The Legislature chose to speak in broad language when it enunciated the circumstances under which a person remained subject to tort liability. It said simply, as here relevant, that the use of a motor vehicle, not either the infrequent or irregular use, or the frequent or regular use of a motor vehicle, could subject a person to tort liability under certain circumstances which would require a policy of insurance meeting certain standards. See § 3131. Thus this part of the exclusionary clause must also fall because it seeks to raise limitations on automobile use not sanctioned by the statute.⁸

Our decision today is limited to the facts of this case. We do not consider, for example, whether an insurer, consistent with the terms of the no-fault act, may exclude the owner of an insured automobile from liability coverage during his or her use of an uninsured automobile he or she also owns. Cf. §§ 3101, 31130b). Additionally, because we have invalidated the exclusionary clause as contrary to the public policy of the no-fault act, we need not reach the issues of whether the clause was ambiguous or hidden within the policy.

III. Conclusion

Gloria Carlson paid a premium on her own automobile for statutorily required residual liability coverage. Her insurer State Farm has attempted to circumscribe this liability coverage as to her use of non-owned automobiles through a restrictive definition of the term "non-owned automobile”. This definitional limitation, however, is contrary to the plain meaning of the no-fault act that requires residual liability coverage as to certain damages stemming from "use of a motor vehicle” and must be voided. Accordingly, we affirm the trial court’s grant of summary judgment to appellee Ruuska. The Court of Appeals is also affirmed, but for different reasons.

Fitzgerald and Blair Moody, Jr., JJ., concurred with Williams, J.

1 Although in our order of December 21, 1979, granting leave to appeal in this case, 407 Mich 948, we referred to the particular exclusion as a "non-owned automobile” exclusion, such exclusion is for all relevant purposes identical in form and purport to that which we refer to here, as well as in our order of the same date granting leave to appeal in Raska v Farm Bureau Mutual Ins Co of Michigan, 407 Mich 946, as an "owned automobile” exclusion.

2 1972 PA 294; MCL 500.3101 et seq.; MSA 24.13101 et seq.

3 A "temporary substitute automobile” is defined in the policy as an automobile "not owned by the named insured or his spouse while temporarily used with the permission of the owner as a substitute for the described motor vehicle when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction”. The situation envisaged by this definition is inapplicable to the case at bar since Gloria Carlson stated in her deposition that on the date of the accident her car was used by her father and mother.

4 90 Mich App 767; 282 NW2d 472 (1979).

5 This section provides in full as follows:

"When authorized by the insured, automobile liability or motor vehicle liability coverage may be excluded when a vehicle is operated by a named person. Such exclusion shall not be valid unless the following notice is on the face of the policy or the declaration page or certificate of the policy and on the certificate of insurance referred to in subsection (3) of section 4 of Act No. 198 of the Public Acts of 1965, as amended, being section 257.1104 of the Compiled Laws of 1948: Warning — when a named excluded person operates a vehicle all liability coverage is void — no one is insured. Owners of the vehicle and others legally responsible for the acts of the named excluded person remain fully personally liable.”

6 A fourth instance of retained tort liability pertaining to damages of up to $400 to motor vehicles was added to § 3135 in 1979 and made effective July 1, 1980. MCL 500.3135(2)(d), (6); MSA 24.13135(2)(d), (6).

7 Had the Legislature wanted to limit the portability of liability coverage it could easily have done so by less broad language, as it did, for example, in § 520(b) of the financial responsibility act. MCL 257.520(b); MSA 9.2220(b). There, in discussing the requisites for an automobile liability policy issued as proof of future financial responsibility, the Legislature, after requiring an owner’s policy to designate by explicit description or appropriate reference all covered motor vehicles, limited the liability coverage to only those automobiles listed in the policy by speaking in terms of the use of "such” vehicle(s)..

8 Although we have not explicitly considered subpart two of the "non-owned automobile” definition, supra, which would purport to limit liability coverage in this case because the non-owned automobile was "registered in the name of ** * * any relative * * * residing in the same household”, i.e., it was registered to Gloria Carlson’s father, such a limitation is so close in purpose and effect to the "owned by * * * any relative * * * residing in the same household” language that it too must be invalidated.