Summary
concluding that owned-but-unscheduled-vehicle exclusion is valid and explaining that "[t]he public policy of this state . . . does not require that a person be allowed to insure and pay premiums based solely on the risks attendant to one vehicle, and then recover from the insurer for injuries sustained in or because of a different, unscheduled vehicle owned by the insured or a family member"
Summary of this case from Progressive Cnty. Mut. Ins. Co. v. EmenikeOpinion
No. 3-91-329-CV.
April 8, 1992. Rehearing Overruled May 6, 1992.
Appeal from 146th Judicial District Court, Bell County, Rick Morris, J.
William T. Wilson, Temple, for appellant.
Beverly Willis Bracken, Waco, for appellee.
Before CARROLL, C.J., and JONES and KIDD, JJ.
This case presents the question of the validity of an "owned-but-unscheduled-vehicle" exclusion contained in the uninsured/underinsured-motorist section of an automobile insurance policy. Patricia Anne Conlin, appellant, brought suit against State Farm Mutual Automobile Insurance Company (State Farm) pursuant to the Uniform Declaratory Judgments Act, Tex.Civ.Prac. Rem. Code Ann. § 37.004 (1986), for a declaration of State Farm's legal obligations under the uninsured/underinsured-motorist coverage of her policy. State Farm defended on the basis of an owned-but-unscheduled-vehicle exclusion in Conlin's policy. The trial court ruled that the exclusion was valid and rendered a take-nothing judgment. Conlin perfected this appeal. We will affirm.
BACKGROUND
The parties stipulated to the relevant facts. On August 31, 1987, State Farm issued an automobile insurance policy to Conlin; the only vehicle listed on the declaration page of the policy was a 1985 Mercury that Conlin had leased for her personal use. Two months later State Farm issued an automobile insurance policy to Conlin's eighteen-year-old daughter, Shauna; the only vehicle listed on that policy was a 1979 American Motors "Concord" that Conlin had purchased for her daughter's personal use. Conlin considered the Concord to be Shauna's because Shauna was purchasing the car from her by making periodic payments.
On December 25, 1987, Shauna was killed in an accident while riding as a passenger in her Concord. Robert Machado, Jr., who was driving the Concord with Shauna's permission at the time of the accident, was an underinsured motorist.
On behalf of Shauna's estate, Conlin made a claim for and recovered underinsured motorist benefits under Shauna's policy in the sum of $45,000. She also recovered $25,000 under the liability portion of Shauna's policy and $25,000 under the liability portion of Machado's policy. Conlin subsequently made a claim for underinsured motorist benefits under her own policy. Although Shauna was not a named insured on her mother's policy, she was a "covered person" as that term was defined in the insurance contract for purposes of underinsured-motorist benefits. Therefore, Shauna's estate was entitled to recover underinsured-motorist benefits under Conlin's policy unless precluded by a valid exclusion.
State Farm denied Conlin's claim on the basis of the following exclusion contained in her policy:
A. We do not provide Uninsured/Underinsured Motorists Coverage for any person:
1. For bodily injury sustained while occupying, or when struck by, any motor vehicle or trailer of any type owned by you or any family member which is not insured for this coverage under this policy.
Conlin filed a declaratory judgment action seeking a judicial declaration that she was entitled to recover under the policy. The trial court rendered a take-nothing judgment against Conlin.
The stipulated facts show that Shauna was fatally injured while riding as a passenger in a car owned by Conlin or a family member. Further, there is no question that Shauna's car was not insured for uninsured/underinsured-motorist coverage under Conlin's policy; the only car listed on Conlin's policy was the leased 1985 Mercury. Therefore, the above policy exclusion, if valid, precludes Shauna's estate from recovering underinsured-motorist benefits under Conlin's insurance policy. In two points of error, Conlin argues that the exclusion is an invalid restriction of coverage and operates to deprive an insured of protection required by Tex.Ins. Code Ann. art. 5.06-1 (1981).
DISCUSSION
Article 5.06-1 of the Insurance Code provides:
No automobile liability insurance . . . covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be delivered or issued for delivery in this state unless coverage is provided therein or supplemental thereto . . . for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles because of bodily injury, sickness, or disease, including death, or property damage resulting therefrom.
Tex.Ins. Code Ann. art. 5.06-1 (1981).
In construing the scope and meaning of this statute in the context of the exclusion at issue here, we start with the 1974 Texas Supreme Court decision in Westchester Fire Insurance Co. v. Tucker, 512 S.W.2d 679 (Tex. 1974). In Westchester the insured claimed benefits under his uninsured-motorist insurance coverage for injuries sustained in an owned and scheduled vehicle. Nevertheless, the supreme court stated in dictum that "the policy exclusion of injuries sustained by an insured while occupying an owned but unscheduled vehicle is ineffectual to the extent that it deprives a person of coverage required by Article 5.06-1 of the Insurance Code, V.A.T.S." Id. at 686 (emphasis added). Therefore, at least in dictum, the Supreme Court seemed to cast serious doubt on the validity of owned-but-unscheduled-vehicle exclusions.
The following year, the United States Court of Appeals for the Fifth Circuit was presented with the task of predicting how the Texas Supreme Court would rule on the validity of such an exclusion if squarely presented with the issue. In Stephens v. State Farm Mutual Automobile Insurance Co., 508 F.2d 1363 (5th Cir. 1975), Mr. and Mrs. Stephens, while riding in a car owned and driven by Mrs. Stephens, were involved in an accident caused by an uninsured motorist. As a result of the accident, Mrs. Stephens was killed and Mr. Stephens severely injured. At the time of the accident, the car in which they were riding, Mrs. Stephens's car, was insured by Royal Indemnity Company. The policy, procured by Mrs. Stephens in her maiden name, was a standard Texas automobile insurance policy carrying an uninsured-motorist endorsement. Mr. Stephens also owned a car, which was insured by a State Farm Mutual Automobile Insurance Company policy carrying the same uninsured-motorist endorsement. Therefore, the only car listed on the Royal policy was Mrs. Stephens's car, the car in which the accident occurred. The only car listed on the State Farm policy was Mr. Stephens's car. See id. at 1364-65.
Mr. Stephens, individually and as the personal representative of Mrs. Stephens, settled with Royal Indemnity Company, the company insuring his wife's car. State Farm, however, refused to pay uninsured-motorist benefits based on the following exclusion in Mr. Stephens's insurance policy:
This policy does not apply under Part IV:
(a) to bodily injury to an insured while occupying an automobile (other than an insured automobile) owned by the named insured or a relative, or through being struck by such an automobile.
Id. at 1367. There was no question that both Mr. and Mrs. Stephens suffered bodily injury while occupying an automobile owned by a relative of the named insured and that was not listed as an insured vehicle under the State Farm policy. Therefore, the Stephens court concluded that, if valid, the above provision would preclude recovery by the Stephens. The court held, however, that under Texas law the provision was an invalid restriction of coverage required by article 5.06-1. Id. In so holding, the court relied primarily on the supreme court's dictum in Westchester. Id. at 1367-68.
Following Westchester and Stephens, the Texarkana Court of Civil Appeals was asked to determine the validity of a similar exclusion in the context of personal-injury-protection (PIP) coverage required by Tex.Ins. Code Ann. art. 5.06-3 (1981). In Western Alliance Insurance Co. v. Dennis, 529 S.W.2d 838 (Tex.Civ.App. 1975, no writ), the insurance company had issued an automobile liability insurance policy to Dennis that contained a PIP endorsement. The only vehicle listed on the policy was a 1968 Buick. Subsequently, Dennis's two minor sons were injured when the motorcycle they were riding was struck by a truck. The motorcycle was owned by one of the sons, but was not listed as an "insured vehicle" under Dennis's policy. When Western Alliance refused to pay PIP benefits on the basis of the exclusion, Dennis challenged its validity as being an unauthorized limitation of protection required by article 5.06-3. Relying exclusively on the supreme court's dictum in Westchester, the court of civil appeals held that the exclusion was invalid. Id. at 839-40.
We note that articles 5.06-1 and 5.06-3 are almost identical in their wording. Article 5.06-1 makes it mandatory that uninsured/underinsured-motorist protection be offered to the insured on any automobile liability policy issued in Texas, while article 5.06-3 contains a similar requirement for PIP coverage. Both coverages may be rejected by the insured. Charges may be made for both coverages. We see no reason why the rationale used by courts in determining the validity of an owned-but-unscheduled-vehicle exclusion should not be the same whether in the context of article 5.06-1 or article 5.06-3.
Were this the state of the law today, we might be inclined to hold the present exclusion invalid; however, that is not the case. In 1978 the Dallas Court of Civil Appeals was asked to determine the validity of such an exclusion in the context of article 5.06-3. In Holyfield v. Members Mutual Insurance Co., 566 S.W.2d 28 (Tex.Civ.App.), writ ref'd n.r.e., 572 S.W.2d 672 (Tex. 1978), Holyfield's son was injured while riding a motorcycle owned by Holyfield. Members Mutual had issued an automobile insurance policy to Holyfield that listed two of his automobiles as "insured vehicles" but failed to list the motorcycle that his son was riding when injured. PIP premiums were paid for the two automobiles, but no premiums were paid regarding the motorcycle. Therefore, Members Mutual refused to pay PIP benefits based on the exclusion in Holyfield's policy. Holyfield argued that the exclusion was an invalid restriction of coverage required by article 5.06-3. Id. at 29.
In concluding that the exclusion was valid, the Holyfield court first noted that the supreme court's statement in Westchester, relied on by the courts in Stephens and Western Alliance, was dictum and, therefore, not controlling. Id. The court then disagreed with the Texarkana court's holding that providing coverage only for scheduled vehicles denies coverage mandated by article 5.06-3:
While we agree that Article 5.06-3 dictates the type of coverage which must be provided, it does not, by its terms, dictate which vehicles the policy must cover or prevent the insurer and insured from agreeing that only certain vehicles will be covered. An insurer is entitled to accurately reflect in the policy the risks being insured and to charge premiums based upon those risks. See Vaughn v. Atlantic Insurance Company, 397 S.W.2d 874 (Tex.Civ.App. — Tyler 1966, writ ref'd n.r.e.) quoting Lumbermens Mutual Casualty Co. v. Pulsifer, 41 F. Supp. 249 (D.C.Me. 1941) (purpose of policy exclusion of nonscheduled vehicles is to allow premiums to be based upon known risks, thereby protecting insurer from increased liability occasioned by risks of which it might not be aware). This right would be frustrated if, as Holyfield argues, an insured who owns more than one vehicle could insure and pay premiums based solely on the risk attendant to that vehicle, and thereby render the insurer liable for injuries sustained in or because of other vehicles owned by him. We cannot presume that such a result was intended.
Holyfield, 566 S.W.2d at 29-30 (emphasis in original).
In a per curiam opinion refusing Holyfield's application for writ of error, the supreme court expressly disapproved of the Western Alliance court's construction of the Insurance Code and its interpretation of Westchester. Holyfield v. Members Mut. Ins. Co., 572 S.W.2d 672 (Tex. 1978).
Shortly thereafter, this Court followed Holyfield in holding an owned-but-unscheduled-vehicle exclusion valid as to PIP coverage. See Springfield v. Aetna Cas. Sur. Ins. Co., 612 S.W.2d 285 (Tex.Civ.App.), writ ref'd n.r.e., 620 S.W.2d 557 (Tex. 1981). In refusing the application for writ of error in Springfield, the supreme court stated that the plaintiff's claim that the exclusion was invalid "was correctly denied by the courts below by reason of this court's decision in Holyfield v. Members Mutual Insurance Co., 572 S.W.2d 672 (Tex. 1978)." Springfield, 620 S.W.2d at 558.
In 1981 the Dallas Court of Civil Appeals was again asked to determine the validity of an owned-but-unscheduled-vehicle exclusion, this time in the context of article 5.06-1. In Equitable General Insurance Co. v. Williams, 620 S.W.2d 608 (Tex.Civ.App. 1981, writ ref'd n.r.e.), Williams purchased a standard family automobile policy from Equitable General that contained an uninsured-motorist endorsement, for which Williams paid a premium of $8.00. The only vehicle listed on the policy was a 1974 Chevrolet automobile. Williams was injured while riding a motorcycle that he owned; however, the motorcycle was not listed as an insured vehicle under the policy. When Equitable General refused to pay uninsured-motorist benefits based on the exclusion in his policy, Williams argued that the exclusion was an invalid restriction of coverage required by article 5.06-1. Id. at 609. Relying on its opinion in Holyfield and the supreme court's express disapproval of Western Alliance, the Dallas court rejected Williams's argument and held that the exclusionary clause in the uninsured-motorist endorsement was valid. Id. at 610-11.
Since the Dallas court's decision in Equitable General, at least six appellate decisions have upheld the validity of such an exclusion in the context either of article 5.06-1 or of article 5.06-3 of the Insurance Code. See Texas Farmers Ins. Co. v. McKinnon, 823 S.W.2d 345 (Tex.App. — Beaumont 1991, writ requested); Moore v. State Farm Mut. Auto. Ins. Co., 792 S.W.2d 818 (Tex.App. 1990, no writ); Harwell v. State Farm Mut. Auto. Ins. Co., 782 S.W.2d 518 (Tex.App. 1989, no writ); Berry v. Texas Farm Bureau Mut. Ins. Co., 782 S.W.2d 246 (Tex.App. 1989, writ denied); Beaupre v. Standard Fire Ins. Co., 736 S.W.2d 237 (Tex.App. 1987, writ denied); Broach v. Members Ins. Co., 647 S.W.2d 374 (Tex.App. 1983, no writ). Despite this plethora of case law against her position, Conlin argues that the exclusion in her policy is an invalid restriction on coverage required by article 5.06-1.
In support of her argument, Conlin relies in part on the Stephens case decided by the Fifth Circuit. See 508 F.2d at 1363. The Stephens court, however, relied primarily on the supreme court's dictum in Westchester for the proposition that owned-but-unscheduled-vehicle exclusions are invalid. Id. at 1367-68. As discussed above, the supreme court has expressly disapproved of such an interpretation of Westchester. See Holyfield, 572 S.W.2d at 673. Therefore, Stephens does not represent current Texas law on this issue.
Conlin also points us to three Texas Supreme Court opinions as support for her argument: Stracener v. United Serv. Auto. Ass'n, 777 S.W.2d 378 (Tex. 1989); American Motorists Ins. Co. v. Briggs, 514 S.W.2d 233 (Tex. 1974); and American Liberty Ins. Co. v. Ranzau, 481 S.W.2d 793 (Tex. 1972). All three cases are distinguishable. None of the three involved an owned-but-unscheduled-vehicle exclusion. Indeed, none involved an exclusionary provision at all. Further, the supreme court has had several opportunities to correct any misstatement of the law as set out by the intermediate appellate courts of this state, yet has not done so.
Conlin also relies on a recent case decided by the San Antonio Court of Appeals. In Briones v. State Farm Mutual Automobile Insurance Co., 790 S.W.2d 70 (Tex.App. 1990, writ denied), Briones was injured in a one-vehicle automobile accident while riding as a passenger in the sleeping compartment of a tractor-trailer truck owned by his employer. The truck in question was only one of five that Briones's employer could assign him to drive, but the evidence was that Briones had driven it regularly for four years. Briones sought to recover under the uninsured-motorist clause of his family automobile insurance policy issued by State Farm. A provision in Briones's policy defined "uninsured motor vehicle" to exclude any vehicle "furnished or available for the regular use of you or any family member." On the basis of this language, State Farm refused to pay uninsured-motorist benefits on the ground that the tractor-trailer was a vehicle regularly furnished by Briones's employer for his use. The appellate court concluded that the tractor-trailer was indeed furnished for the regular use of Briones; however, relying primarily on Stracener, the court held that the exclusion was an invalid restriction on coverage required by article 5.06-1 of the Insurance Code. Id. at 72-74.
We conclude that Briones, too, is distinguishable from the present case. Briones involved a vehicle owned by his employer, not by Briones or a family member. In those circumstances, Briones could not be expected to insure every vehicle that his employer chose to assign him to drive; indeed, as stated by the Briones court, it is doubtful that Briones anticipated that he would be unprotected if involved in an accident while a passenger in an uninsured vehicle owned by his employer. 790 S.W.2d at 73.
In the present case, however, Conlin's policy clearly excluded recovery for injuries sustained while riding in Shauna's car unless Shauna's car was listed on Conlin's policy and a premium paid for such coverage. Further, Conlin had the opportunity to include Shauna's car on her policy as an insured vehicle and pay a premium for that coverage, but she apparently chose not to do so. We agree with the Holyfield court that an insurer is entitled to have a policy accurately reflect the risks being insured against and to charge premiums based on those risks. The public policy of this state, as embodied in article 5.06-1 of the Insurance Code, does not require that a person be allowed to insure and pay premiums based solely on the risks attendant to one vehicle, and then recover from the insurer for injuries sustained in or because of a different, unscheduled vehicle owned by the insured or a family member. See Harwell, 782 S.W.2d at 518; Beaupre, 736 S.W.2d at 237; see generally 8C J. Appleman J. Appleman, Insurance Law and Practice § 5078.35 (1982).
CONCLUSION
Based on our foregoing discussion, we conclude that the owned-but-unscheduled-vehicle exclusion in Conlin's automobile liability insurance policy is valid and enforceable. Therefore, we affirm the trial court's judgment.
Affirmed