Unlisted Resident Driver? Exclusions May Apply

In Safe Auto Ins. Co. v. Oriental-Guillermo, 170 A.3d 1170 (Pa.Super. 2017), the Pennsylvania Superior Court addressed the validity of an Unlisted Resident Driver Exclusion contained in an automobile insurance policy, concluding that the language of the provision was clear and unambiguous and not contrary to public policy. As a result, the court affirmed the trial court’s decision that an insurance company had no duty to defend or indemnify the driver of a vehicle who was unrelated to the policyholder and not specifically listed on his policy, despite the fact that the driver resided with the policyholder.

On April 29, 2013, Rachel Dixon was involved in a two-car accident in Allentown, Pennsylvania. Her vehicle was owned by her boyfriend, Rene Oriental-Guillermo, and insured by Safe Auto Insurance Company. The passenger of the other vehicle, Priscila Jimenez, brought suit against Dixon, Oriental-Guillermo and the driver of the other vehicle for personal injuries arising out of the accident.

In response to the underlying action, Safe Auto filed a complaint on May 13, 2015, seeking declaratory judgment on the enforceability of the Unlisted Resident Driver Exclusion, to which the appellants, Priscila Jimenez and Luis Jimenez, responded ten months later. The relevant portion of this exclusion read as follows:

PART 1 - LIABILITY COVERAGE, EXCLUSIONS, LIABILITY COVERAGE AND OUR DUTY TO DEFENDANT DO NOT APPLY TO BODILY INJURY OR PROPERTY DAMAGES:

• That occurs while your covered auto is being operated by a resident of your household or by a regular user of your covered auto, unless that person is listed as an additional driver on the Declarations page . . .

Safe Auto subsequently filed a motion for summary judgment, asserting that the exclusion absolved them of any duty to defend or indemnify Dixon because she was unrelated to Oriental-Guillermo and she was not listed as a household member on his policy. The trial court granted Safe Auto’s motion, concluding that the exclusion was valid and enforceable because its was clear and unambiguous and in accord with the public policy embodied in the Motor Vehicle Financial Responsibility Law.

On appeal, the Superior Court of Pennsylvania quickly discarded with any concerns regarding the language of the exclusion, agreeing with the lower court’s finding that it “[e]xcludes from coverage non-relatives of the policyholder who drive the policyholder’s car, live in the policyholder’s household, and who the policyholder does not list as an additional driver.” This clear and unambiguous language absolved Safe Auto of any duty to defend or indemnify Dixon, unless the exclusion violated public policy.

The appellants proffered three grounds on which to void the exclusion as against public policy: (1) Section 1786(f) of the MVFRL; (2) Section 1718(c) of the MVFRL; and (3) Williams v. GEICO Gov’t Employees Ins. Co., 32 A.3d 1195 (Pa. 2011). In each instance, the appellants averred that the lower court’s decision ran contrary to the policy envisioned by the respective statutes and case law.

The appellants claimed that Section 1786(f) of the MVFRL placed the onus on the owner of a motor vehicle to insure all drivers of that vehicle. See, 75 P.S. § 1786(f) (“Any owner of a motor vehicle for which the existence of financial responsibility is a requirement for its legal operation shall not operate the motor vehicle or permit it to be operated upon a highway of this Commonwealth without the financial responsibility required by this chapter.”). The court, however, opined that when the legislature enacted the MVFRL, it did not intend to shift the risk to insurance companies of insuring unidentified, unrelated drivers residing with a policyholder. Therefore, the appellants’ interpretation of Section 1786(f) could not be reconciled with divergent legislative intent.

Next, the appellants likened the exclusion to the MVFRL’s “Named Driver Exclusion,” which provides for situations in which a policyholder may elect to exclude certain individuals from his policy. See, 75 P.S. § 1718(c) (“An insurer or the first named insured may exclude any person or his personal representative from benefits under a policy enumerated in section 1711 or 1712 when any of the following apply: (1) The person is excluded from coverage while operating a motor vehicle in accordance with the Act of June 5, 1968 (P.L. 140, No. 78), relating to the writing, cancellation of or refusal to renew policies of automobile insurance.”). More specifically, the appellants reasoned that both exclusions oblige insurance companies to insure every driver of an insured vehicle, absent an insured’s request not to provide coverage for a particular individual. Again, the court rejected this argument, instead reasoning that it is the insured—not the insurance company—who is in the best position to identify who will be driving an insured vehicle.

The appellants’ final argument was that the exclusion subverted the Commonwealth’s “goal of maximum feasible restoration to accident victims.” The court reasoned that this goal, one of many embraced by the MVFRL, could not be construed to shift the risk of insuring unidentified, unrelated drivers residing with a policyholder to insurance companies. Such an interpretation conflicted with the established public policy of the MVFRL: encouraging insureds to fulfill their duty to acquire and maintain proper insurance coverage for all expected drivers of the insured vehicle.

The Honorable Kate Ford Elliott dissented, opining that the enforcement of the exclusion ran “contrary to Section 1786(f) of the MVFRL, which requires that permissive users be covered under the owner’s insurance.” The judge further offered that enforcing the exclusion may be contrary to the MVFRL’s public policy goals of “protect[ing] Pennsylvania motorists from uninsured/underinsured drivers and to expand coverage.”

The majority opinion is a reminder of the importance of carefully reading insurance policies and of the possible implications of exclusions they contain. It is also important to be aware of the court’s conclusion that the MVFRL shifts the risk away from insurance companies and onto insureds to ensure that their vehicles and potential drivers are properly insured. Such a policy may be of consequence in determining the enforceability of other auto insurance provisions.

*Shannon is an associate in our Philadelphia, Pennsylvania office. She can be reached at 267.295.4033 or scdaniels@mdwcg.com.

_{Defense Digest, Vol. 24, No. 2, June 2018. Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2018 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}