Summary
holding that a named insured exclusion in an automobile liability insurance contract was contrary to the public policy of the No-Fault Act
Summary of this case from CANAL INSURANCE COMPANY v. NIXOpinion
No. 95SC122
Decided March 18, 1996
Certiorari to the Colorado Court of Appeals
JUDGMENT AFFIRMED AND CASE REMANDED WITH DIRECTIONS
Levy Lambdin, P.C., Marc R. Levy, Linda A. Battalora, Englewood, Colorado, Attorneys for Petitioner.
Michael R. Bromley, P.C., Michael R. Bromley, Colorado Springs, Colorado, Attorneys for Respondent.
Wilcox Ogden, P.C., Ralph Ogden, Denver, Colorado, Attorneys for Amicus Curiae Colorado Trial Lawyers, Association.
We granted certiorari to review the court of appeals opinion in Dotson v. Estate of Pearson, 903 P.2d 19 (Colo.App. 1994), holding that a named insured exclusion in an automobile liability insurance contract is contrary to the public policy of the Colorado Auto Accident Reparations Act, sections 10-4-701 to -725, 4A C.R.S. (1994 1995 Supp.), and therefore, void. We affirm the judgment of the court of appeals.
In general, a named insured exclusion in an insurance policy excludes liability coverage for bodily injury to an individual who is a named insured under the policy when such injury is caused by another insured under the policy.
I.
We derive the following facts from the parties' summary judgment motions before the trial court.
Rhonda Dotson and Robert Pearson purchased an automobile insurance policy from Farmers Insurance Exchange (Farmers), the petitioner in this action. The policy listed both Rhonda Dotson and Robert Pearson as named insureds and had an effective date of May 15, 1991 and an expiration date of June 9, 1991. The policy insured an automobile registered to and owned by Rhonda Dotson.
A named insured is usually the primary beneficiary under the insurance policy.
On June 8, 1991, Pearson was driving the insured vehicle. At the time, Rhonda Dotson was riding as a passenger in the car. For unknown reasons, Pearson lost control of the vehicle and crashed into a guard rail. Both Pearson and Rhonda Dotson were killed.
Trent Dotson, Rhonda Dotson's husband, brought suit against Robert Pearson's estate to recover for the wrongful death of his wife. On summary judgment, the trial court found Pearson liable for Rhonda Dotson's death under a theory of res ipsa loquitur. Ultimately, the trial court entered a judgment against Pearson's estate in the amount of $300,000: $50,000 represented the solatium amount pursuant to section 13-21-203.5, 6A C.R.S. (1993 Supp.), and $250,000 represented economic damages.
Trent Dotson filed a writ of garnishment against Farmers to collect under Pearson's automobile liability policy based on his judgment against Pearson's estate. The Farmers' policy provided that Farmers would pay "damages for which any insured person is legally liable because of bodily injury to any person . . . arising out of the ownership, maintenance or use of a private passenger car . . . ." Farmers filed an answer disclaiming any responsibility for Pearson's debt and Dotson filed a traverse.
Farmers then filed a motion for summary judgment claiming that the terms of the insurance policy precluded Rhonda Dotson from collecting benefits as a result of the negligence of Pearson. The policy excluded from coverage: "liability for bodily injury to an insured person." The policy defined the term "insured person" as a named insured or any family member of a named insured. Under this exclusion, Rhonda Dotson, as a named insured under the insurance policy, was precluded from recovering damages for which another individual insured under the contract was liable. Since Trent Dotson's claims against Pearson were derivative of his wife's claims and his wife was excluded from coverage, Farmers denied responsibility for Dotson's judgment against Pearson's estate.
Dotson filed a response to Farmers' motion for summary judgment and a cross motion for summary judgment. Dotson argued that the insurance policy's exclusion from liability coverage for insured persons was void as against public policy. Dotson further claimed that our decision in Meyer v. State Farm Mutual Automobile Insurance Co., 689 P.2d 585 (Colo. 1984), invalidated such exclusions as void under the Colorado Auto Accident Reparations Act, §§ 10-4-701 to -725, 4A C.R.S. (1994 1995 Supp.) (No-Fault Act). Therefore, Rhonda Dotson's claims were not precluded and Dotson was entitled to recover from Farmers under the insurance policy.
The trial court granted summary judgment for Farmers, on the grounds that Rhonda Dotson was a named insured and was not entitled to recover liability benefits under the policy. Because Trent Dotson's claims were derivative of Rhonda Dotson's, Trent Dotson was also precluded from recovery.
Trent Dotson appealed the trial court's ruling to the court of appeals. Relying on our decision in Meyer, the court of appeals reversed the trial court's entry of summary judgment for Farmers. Dotson v. Estate of Pearson, 903 P.2d 19 (Colo.App. 1994). The court of appeals in a two to one decision interpreted Meyer as holding that named insured exclusions like the one in the Farmers' policy are contrary to the No-Fault Act and therefore void as against public policy. Id. at 20. The court of appeals further held that the General Assembly's enactment of section 10-4-418(2)(b), 4A C.R.S. (1994), permitting household exclusions in insurance contracts did not change the public policy of the state. Rather, the statute created a narrow exception for certain household exclusions to the general public policy of the No-Fault Act disfavoring exclusions from coverage. Id. at 21. Disagreeing with the majority's interpretation of Meyer, Judge Plank dissented. Id.
Farmers petitioned this court for certiorari to determine:
Whether an exclusion from liability coverage for bodily injury caused to any named insured ("named insured exclusion") is consistent with the public policy underlying the Colorado Auto Accident Reparations Act, sections 10-4-701 to -725, 4A C.R.S. (1994).
We hold that named insured exclusions are contrary to the public policy of this state as reflected in the Colorado Auto Accident Reparations Act, §§ 10-4-701 to -725, 4A C.R.S. (1994 1995 Supp.). We therefore affirm the court of appeals' reversal of the trial court's summary judgment for Farmers and return this case to the court of appeals with directions to remand to the trial court for further proceedings consistent with this opinion.
II.
The Farmers insurance policy at issue in this case states that "liability coverage does not apply to liability for bodily injury to an insured person." The policy defines an insured person as either a named insured or a member of the named insured's family. Because Rhonda Dotson was a named insured under the insurance policy, this exclusion precludes her and all those whose rights are derivative of hers from recovering damages based on the liability of an insured under the policy. The question we must resolve is whether this exclusion violates the public policy of this state as expressed in the No-Fault Act.
There is a factual dispute between the parties as to whether Rhonda Dotson was a member of Robert Pearson's household. Farmers does not argue here and did not argue below that Rhonda Dotson was excluded from coverage as a member of Robert Pearson's household. Thus, we do not consider such an exclusion in this opinion.
A.
Farmers argues that the named insured exclusion in the insurance policy does not violate public policy. Farmers further argues that our decision in Meyer v. State Farm Mutual Automobile Insurance Co., 689 P.2d 585 (Colo. 1984), is not dispositive of this case. We disagree.
In the absence of ambiguity, an insurance policy must be given effect according to the plain and ordinary meaning of its terms. Matter of Estate of Daigle, 634 P.2d 71, 79 (Colo. 1981). However, even if a policy provision is unambiguous, a provision may be void and unenforceable if it violates public policy by attempting to "dilute, condition, or limit statutorily mandated coverage." Aetna Casualty Sur. Co. v. McMichael, 906 P.2d 92, 100 (Colo. 1995). Thus, this court has refused to enforce provisions in automobile insurance policies that are against public policy. See, e.g., Kral v. American Hardware Mut. Ins. Co., 784 P.2d 759, 765 (Colo. 1989) (subrogation clause and release trust agreement unenforceable because would result in inability to obtain full compensation for loss and would violate public policy).
The public policy of the No-Fault Act is expressed in the legislative declaration included in the Act. See 10-4-702, 4A C.R.S. (1994). This declaration states:
Legislative declaration. The general assembly declares that its purpose in enacting this part 7 is to avoid inadequate compensation to victims of automobile accidents; to require registrants of motor vehicles in this state to procure insurance covering legal liability arising out of ownership or use of such vehicles and also providing benefits to persons occupying such vehicles and to persons injured in accidents involving such vehicles.
It is clear from this declaration that by enacting the No-Fault Act the legislature intended to "avoid inadequate compensation to victims of automobile accidents, and to require that motor vehicle owners purchase insurance policies which provide coverage for both liability and no-fault benefits." Meyer, 689 P.2d at 588 (emphasis in original).
In Meyer, we considered whether household exclusions in automobile insurance policies violated the public policy of the No-Fault Act. Meyer involved three consolidated cases. In two of the cases, the injured individuals were attempting to recover benefits under liability coverage provided to a member of the same household. 689 P.2d at 587-88. In a third case, the Adcock case, the plaintiff was injured while riding as a passenger in a car she owned and insured. Id. at 588. The driver of the car was a permissive user of the car and thus, an insured under the terms of plaintiff's insurance policy. The driver was not a member of the plaintiff's household. Id. In all three cases, the trial court dismissed the injured parties' claims because of liability exclusions in the respective insurance policy. The exclusion clause relied upon by State Farm Mutual Auto Insurance Company in the Adcock case is typical. It stated that liability coverage did not apply to "`any insured or any member of the family of an insured residing in the same household as an insured.'" Id.
In the Meyer group of cases, we granted certiorari to determine: "Whether the insured or a member of the insured's household may recover under the insured's liability coverage, notwithstanding the existence of a clause in the policy which purports to exclude such coverage." Id. We referred to these exclusions collectively as the "household exclusion." Despite the use of the term "household exclusion," Meyer in fact considered both whether an insurance policy may exclude insureds from recovering liability benefits under their own insurance contract and whether members of an insured's household may be similarly precluded.
After considering the public policy underlying the No-Fault Act, we held the "household exclusion," including the "named insured" exclusion at issue in Adcock, to be void as against public policy. Id. at 592. We stated: "The exclusion is neither authorized by statute nor in harmony with the legislative purpose mandating liability insurance to provide coverage for bodily injury and property damages to avoid inadequate compensation to victims of automobile accidents." Id. Thus, in Meyer, as is clear from the foregoing discussion, we invalidated named insured exclusions along with general household exclusions as against public policy and void.
In Meyer, we defined the term "household exclusion" as follows:
Generally, the household exclusion operates to relieve an insurance carrier from making payments for loss from bodily injury or death under the terms of a liability policy where the named insured or any family or household member is injured in a motor vehicle accident caused by the negligent operation of the vehicle by the insured or a member of his/her family or household.
Meyer, 689 P.2d at 587 n. 1 (emphasis added and citations omitted). It is clear from this definition that we used the term "household exclusion" to apply to two distinct situations. The first is where an injured individual is precluded from coverage because that individual is a member of the same household as the insured under the policy. This is referred to as a household exclusion throughout the remainder of this opinion. The second is where an individual is precluded from coverage because the individual is either an insured or a named insured under the policy. This is referred to as a named insured exclusion throughout this opinion. We considered the validity of both in Meyer.
The named insured exclusion precludes an insured from collecting liability damages from an individual insured under the same insurance policy. We addressed this general exclusion when we resolved the Adcock case in the Meyer decision. In Adcock, the named insured was attempting to recover for injuries caused by a permissive user of the named insured's car. Under the insurance policy at issue, a permissive user was an insured under the policy. In the present case, the named insured is attempting to recover for injuries caused by another named insured under the policy. Like the Adcock case, the tortfeasor is insured under the same policy as the victim. In Adcock the tortfeasor was insured as a permissive user of the car while in the present case the tortfeasor is a named insured under the policy. However, because in both cases the tortfeasor is insured under the same policy as the victim, we do not find the distinction to be of significance.
B.
Farmers argues that even if our holding in Meyer invalidated the named insured exclusion present in their insurance policy, the legislature's enactment of section 10-4-418(2)(b), 4A C.R.S. (1994), revived and legalized such exclusions. Farmers further argues that the enactment of section 10-4-418(2)(b) changed the public policy of the No-Fault Act, thus, allowing certain limited exclusions in addition to the household exclusion.
To determine whether section 10-4-418(2)(b) permits insurers to include named insured exclusions in their automobile liability insurance contracts, we are guided by long established rules of statutory construction. When interpreting statutes we must give full effect to the intent of the legislature. Passamano v. Travelers Indem. Co., 882 P.2d 1312, 1318 (Colo. 1994). To do so, courts interpret statutory terms in accordance with their plain and ordinary meaning. Bertrand v. Board of County Comm'rs, 872 P.2d 223, 228 (Colo. 1994); Scoggins v. Unigard Ins. Co., 869 P.2d 202, 205 (Colo. 1994); see § 2-4-101, 1B C.R.S. (1980). When the language of a statute is clear, there is no need to employ interpretive rules of statutory construction. Resolution Trust Corp. v. Heiserman, 898 P.2d 1049, 1054 (Colo. 1995).
The legislature enacted section 10-4-418(2)(b) in 1986. See ch. 83, sec. 5, § 10-4-418(2)(b), 1986 Colo. Sess. Laws 578, 580. It states:
The commissioner shall not find that a policy form, certificate, or contract of insurance or rider does not comply with the applicable requirements and standards of this title on the ground that it excludes coverage of claims made by a member of a household against another member of the same household. Such exclusions are in conformity with the public policy of this state.
(Emphasis added.)
The plain meaning of section 10-4-418(2)(b) is that insurers may exclude household members from claiming liability benefits under an insurance policy issued to another household member in an automobile insurance policy. The statute makes no mention of whether a general insured may similarly be excluded from coverage for claims made by another insured. The legislature specifically used the more limited phrase "member of a household" rather than the more generic term "insured" for purposes of delineating who may be excluded from coverage. Because the statute on its face only validates household exclusion clauses and not named insured exclusion clauses there is no need to make further inquiry into the legislative intent of the act.
We further find no support in the language of section 10-4-418(2)(b) for Farmers' contention that the General Assembly intended to change the public policy of the state and allow exclusions from coverage in addition to the household exclusion. The legislature must be presumed to have acted with full knowledge of relevant judicial precedent. Heiserman, 859 P.2d at 1054. In Meyer, we held that excluding household members or insureds from liability coverage was contrary to the public policy of the Act. 689 P.2d at 592. If the General Assembly had intended to broaden the class of valid exclusions beyond household members, it would have explicitly said so. In contrast, the General Assembly expressly limited the scope of section 10-4-418(2)(b) and made no pronouncements regarding a broad sea change in the public policy of the No-Fault Act. We therefore decline to infer one.
C.
Relying on Schlessinger v. Schlessinger, 796 P.2d 1385 (Colo. 1990), and Mayo v. National Farmers Union, 833 P.2d 54 (Colo. 1992), Farmers further argues that this court has interpreted section 10-4-418(2)(b) as repealing our decision in Meyer. In making this argument, Farmers concedes that our decision in Meyer had the effect of invalidating both the household exclusion clause and the named insured exclusion clause. Since we have concluded that the legislature did not revive the named insured exclusion, we must next determine whether Meyer has been otherwise overruled.
Although in Schlessinger and Mayo we did state that section 10-4-418(2)(b) repealed our decision in Meyer, we never held as Farmers implies that Meyer was rendered void by the enactment of section 10-4-418(2)(b). Furthermore, a close reading of Schlessinger and Mayo does not support Farmers' contention that section 10-4-418(2)(b) revived the validity of the named insured exclusion.
In Schlessinger, we considered whether the No-Fault Act rendered the parental immunity doctrine inapplicable to a child's claim against a parent for injuries sustained in an automobile accident. 796 P.2d 1385. Because the court of appeals relied on Meyer in holding the parental immunity doctrine void, we discussed our decision in Meyer. After doing so, we held that Meyer was not dispositive of the case because it did not involve the parental immunity doctrine. Id. at 1388.
We next considered whether the parental immunity doctrine violated the public policy of the No-Fault Act. In doing so, we stated that we considered it significant that "the General Assembly legislatively repealed the Meyer decision in 1986, by enacting section 10-4-418(2)(b), 4A C.R.S (1987)." Id. at 1389. We further stated:
In our view, the General Assembly's enactment of section 10-4-418(2)(b) is a clear signal that this court's interpretation of the legislative declaration of purpose in the Auto Accident Reparations Act did not correspond to the purpose actually intended by the General Assembly.
Id. Because we found the reasons justifying the parental immunity doctrine to be similar to those justifying the household exclusion, we found no indication that the General Assembly intended to repeal the parental immunity doctrine. Id. Thus, although we indicated that section 10-4-418(2)(b) altered the public policy of the No-Fault Act, we made no determination as to whether named insured exclusions were proper under the act.
The parental immunity doctrine prohibits a child from suing a parent for simple negligence. Schlessinger, 796 P.2d at 1387-88. The rationale for this doctrine includes the preservation of family harmony, the maintenance of legitimate parental authority and control, and the safeguarding of family assets. Id. at 1389. These reasons are similar to those justifying the household exclusion such as the avoidance of possible disruption of the family, the avoidance of possible collusive suits among family members, and the containment of insurance costs. Allstate Ins. Co. v. Feghali, 814 P.2d 863, 866-67 (Colo. 1991). Because of this similarity, to the extent we discussed the household exclusion in Schlessinger we were referring to the exclusion that precludes household members from pursuing benefits based on the liability of another household member and not the named insured exclusion.
In Mayo, an insurance company brought a declaratory judgment action seeking a determination that the automobile insurance policy provided no coverage for a wife's claims against her husband. 833 P.2d at 56. The policy excluded coverage for the wife as both the named insured and as a spouse of a named insured living in the same household. Id. Relying on Schlessinger, we indicated that section 10-4-418(2)(b) repealed our decision in Meyer. Id. at 57. Although in Mayo, the wife was precluded from coverage because of both a named insured exclusion and a household exclusion clause, the parties elected to treat the matter as presenting the sole issue of the validity of a household exclusion clause. Id. at 56 n. 2. We specifically stated that we would limit our inquiry to the household exclusion and "not the more detailed classifications contained in the policy." Id.
From this discussion it is clear that since our decision in Meyer we have not considered whether a named insured exclusion in an insurance policy violates the public policy of the No-Fault Act. Our statements in Schlessinger and Mayo that the legislature repealed Meyer by enacting section 10-4-418(2)(b) were limited to the validity of a household exclusion clause in situations where one family member attempts to collect damages from another family member who lives in the same household. See also Allstate Ins. Co. v. Feghali, 814 P.2d 863, 866 (Colo. 1991) (holding Schlessinger is dispositive of plaintiffs' claims that household exclusion clause violates policy and purpose of the act). These cases did not relate to and have no bearing on the named insured exclusion.
Our decision in Coffman v. State Farm Mutual Auto Ins. Co., 884 P.2d 275 (Colo. 1994), further supports our conclusion that the rationale of Meyer as it pertains to the named insured exclusion is still viable law. In Coffman, State Farm argued that in Schlessinger we overruled Meyer and in effect nullified the rule of law announced therein such that at no time were household exclusions invalid. Coffman, 884 P.2d at 280. Thus, State Farm claimed that a policy issued after Meyer but prior to the enactment of section 10-4-418(2)(b) could have a valid household exclusion clause. We rejected both these contentions. We first noted that in using the word "repeal," we simply recognized that: "[T]he General Assembly may at any time establish a rule of law contrary to a nonconstitutional rule of law previously articulated by this court." Coffman, 884 P.2d at 281. We further held that although the enactment of section 10-4-418(2)(b) changed the public policy of the state with respect to household exclusions, Meyer was not rendered void. Id. Thus, a policy issued prior to the enactment of section 10-4-418(2)(b) could not have had a valid household exclusion.
We note that in exercising its legislative power the General Assembly neither repeals nor overrules cases decided by this court. The use of such terms in this or other opinions merely recognizes the practical effect that particular legislation may have. See Coffman, 884 P.2d at 279 n. 10.
After our decision in Coffman, it is clear that the General Assembly's enactment of section 10-4-418(2)(b) did not make our decision in Meyer void. Rather, section 10-4-418(2)(b) merely created a narrow exception to the holding in Meyer. Our holding that named insured exclusions are void as against the public policy of the No-Fault Act is still in effect.
III.
In conclusion, we hold that our decision in Meyer v. State Farm Mutual Automobile Insurance Co., 689 P.2d 585 (Colo. 1984), invalidated named insured exclusions in automobile insurance policies as contrary to the public policy of the No-Fault Act. Neither the General Assembly's enactment of section 10-4-418(2)(b), 4A C.R.S. (1994), nor subsequent case law has changed the public policy of the No-Fault Act with respect to named insured exclusions. Thus, named insured exclusions remain invalid.
In this case, Trent Dotson as the personal representative of Rhonda Dotson is eligible to collect damages under the Farmers' policy. Because the named insured exclusion in the policy is invalid, Rhonda Dotson's status as a named insured does not preclude her or derivatively, Trent Dotson, from recovery. Therefore, we affirm the decision of the court of appeals and return the case to the court of appeals with directions to remand to the trial court for further proceedings consistent with this opinion.
CHIEF JUSTICE VOLLACK dissents, and JUSTICE ERICKSON joins in the dissent.