APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF VIRGIN ISLANDS; DIVISION OF ST. CROIX (D.C. Civil No. 75-0961)
Before Seitz, Chief Judge, and Weis and Garth, Circuit Judges.
Under the Virgin Islands Code, may the issuer of an automobile insurance policy, by means of an endorsement attached to the policy, restrict the scope of coverage provided by the omnibus clause of the policy? We conclude that such a restrictive endorsement is legally permissible under the provisions of the Virgin Islands Code relevant for purposes of this case. We therefore affirm the June 7, 1976 order of the district court granting summary judgment in favor of the appellee, American Home Assurance Company ("American").
There is no dispute concerning the facts relevant to this appeal. On January 9, 1975 Zuhdi Abdallah ("Zuhdi") purchased a family combination automobile insurance policy from American which covered his 1969 Cadillac. The policy contained a standard omnibus clause which extended coverage, in the case of an owned automobile, to the named insurer, to any resident of the same household, and to all permissive users. In the case of a non-owned automobile, coverage was provided to the named insured and to any relative of the named insured driving with the permission of the owner. Attached to the policy, however, was an endorsement which excluded coverage for accidents which occurred while the automobile was being operated by a person under the age of twenty-five. This exclusionary endorsement itself contained an exception, expressed as follows: "It is agreed, however, that this exclusion shall not apply to the following persons, who are expressly covered under this policy:." Under this exception was listed only the name of Zuhdi's son, Sufian. Because Sufian was under the age of twenty-five, American was only willing to provide this additional coverage in exchange for a 30 percent premium surcharge.
The Cadillac was sold and replaced by a 1971 Buick in April, 1975. A substitution of automobile form was executed at this time in order to transfer coverage to the new automobile. Registration of the Buick was in Sufian's name, however, and not Zuhdi's. There are apparently disputed factual issues concerning whether the change in registration was ever made known to American. Also in dispute is whether Zuhdi or Sufian was the principal operator of the Buick, and whether American was informed of the identify of the principal operator.*fn1
Sufian's brother, Said, was involved in a serious automobile accident on September 9, 1975, while driving the insured Buick. Thereafter, the occupants of the other vehicle involved in the accident, including Cynthia Grouby, commenced a personal injury tort against Said. Prior to the filing of this tort action, American informed its insured that it would not furnish any coverage with respect to the accident or any defense to the action brought against Said.
Said, claiming coverage under the omnibus clause of the insurance policy and seeking reimbursement for any award in favor of Grouby as well as for costs incurred in defense of the action, brought a third-party action against American. In this action, two grounds were advanced by American in justification of its refusal to extend coverage to Said under the policy. First, it contended that the Abdallahs had given inadequate or inaccurate information at the time that the Buick was substituted for the Cadillac under the policy, and that this constituted a material misrepresentation which voided the policy. Second, it contended that the endorsement excluding coverage for persons under the age of twenty-five, except for Sufian, discharged American from any obligation to extend coverage to Said. It is conceded that only Sufian's name, and not Said's name, is listed under the exception to the exclusionary endorsement.
Both American and Said moved for summary judgment in the third-party action. The district court concluded that no disputed factual issues were involved concerning the effect of the exclusionary endorsement on Said's coverage under the policy. Determining that the exclusionary endorsement was valid under the Virgin Islands Code, and that its effect was to exclude Said from coverage under the policy, the district court granted summary judgment in favor of American.*fn2
Said raises three arguments in support of the position that he is an insured driver under the policy. First, he contends that the exclusionary endorsement is void because it conflicts with provisions of the Virgin Islands Code which require automobile insurance policies to include a provision insuring permissive users. Second, the endorsement is said to be invalid because it unreasonably affects the risk purported to be assumed in the general coverage of the policy. Third, any approval by the Insurance Commissioner of the exclusionary endorsement is claimed to be a nullity because the endorsement is specifically prohibited by statute. We do not read the Virgin Islands Code as supporting these arguments.
Until recently,*fn3 the Virgin Islands did not require the registered owners of automobiles to obtain automobile liability insurance. At the time of Said's accident, insurance coverage was voluntary and automobile insurance policies were subject to the general statutory ...