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Safe Auto Insurance Co. v. Oriental-Guillermo

Supreme Court of Pennsylvania

August 20, 2019

SAFE AUTO INSURANCE COMPANY
v.
RENE ORIENTAL-GUILLERMO, RACHEL DIXON, PRISCILA JIMENEZ, LUIS JIMENEZ, ALLI LICONA AVILA AND IRIS VELAZQUEZ APPEAL OF: PRISCILA JIMENEZ & LUIS JIMENEZ

          ARGUED: December 6, 2018

          Appeal from the Order of the Superior Court dated September 18, 2017 at No. 3226 EDA 2016 affirming the Order of the Court of Common Pleas of Lehigh County, Civil Division, dated September 13, 2016 at No. 2015-C-1547

          SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

          OPINION

          TODD JUSTICE

         In this appeal by allowance, we consider the enforceability of an unlisted resident driver exclusion ("URDE") in a personal automobile insurance policy. For the reasons that follow, we conclude that the URDE at issue in this case is enforceable. Accordingly, we affirm the order of the Superior Court.

         On April 29, 2013, Rachel Dixon was driving a car owned by her boyfriend, Rene Oriental-Guillermo ("Policyholder"), when she was involved in an accident with a vehicle in which Priscila Jimenez was a passenger, and which was owned by Iris Velazquez, and operated by Alli Licona-Avila. At the time of the accident, Dixon resided with Policyholder, who had purchased a personal automobile insurance policy ("Policy") for his vehicle through Safe Auto Insurance Company ("Safe Auto"). The Policy contains a URDE, which excludes from coverage any individuals who live with, but are not related to, the policyholder, and whom the policyholder does not specifically list as an additional driver on the insurance policy. Specifically, the URDE at issue provides:

PART 1 - LIABILITY COVERAGE
EXCLUSIONS
LIABILITY COVERAGE AND OUR DUTY TO DEFEND DO NOT APPLY TO BODILY INJURY OR PROPERTY DAMAGE:
1. 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.

         Policy, at 6 (Reproduced Record ("R.R.") at 43a). It is undisputed that Dixon was not listed as an additional driver on the Policy.

         Jimenez and her husband Luis (collectively, "Appellants") filed a personal injury lawsuit against Dixon, Policyholder, and Licona-Avila. On May 13, 2015, Safe Auto filed a complaint against Dixon, Policyholder, and Appellants, seeking a declaratory judgment regarding the enforceability of the URDE with respect to Dixon. The trial court granted summary judgment in favor of Safe Auto, finding the URDE unambiguous, valid, and enforceable, and concluding that Safe Auto has no duty under the Policy to defend or indemnify Dixon in the underlying personal injury lawsuit. Appellants timely appealed to the Superior Court, arguing (1) that the trial court erred in holding the URDE is valid and enforceable; (2) that the URDE violates the provisions of the Pennsylvania Motor Vehicle Financial Responsibility Law ("MVFRL")[1]; and (3) that the URDE violates public policy.[2]

         The Superior Court affirmed the order of the trial court in a divided, published opinion authored by Judge Alice Dubow. Safe Auto Ins. Co. v. Oriental-Guillermo, 170 A.3d 1170 (Pa. Super. 2017). Concluding that the language of the Policy is unambiguous, and noting there is no dispute as to the material facts, the court first held that the trial court properly determined that the exclusion applies and that Safe Auto is not obligated to defend Dixon.

         The court next considered Appellants' argument that the URDE contravenes the language of the MVFRL mandating that an owner of a motor vehicle ensure that all drivers of his vehicle are covered by insurance. Specifically, Section 1786(f) of the MVFRL provides:

Operation of a motor vehicle without required financial responsibility.-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.

75 Pa.C.S. § 1786(f).

         Upon review of Section 1786(f), the court concluded that the provision "places the obligation on the owner of a vehicle, and not the insurance company, to ensure that anyone who drives the owner's car has insurance." Safe Auto, 170 A.3d at 1175. The court opined that holding an insurance company "automatically responsible for providing insurance to the otherwise uninsured driver" would "shift to the insurance company unidentified risks," when there is no provision in the MVFRL suggesting that the legislature, in enacting the MVFRL, intended to do so. Id. Thus, the court rejected Appellants' argument that the URDE is contrary to the language of Section 1786(f).

         The court further rejected Appellants' claim that the URDE is contrary to the provisions of the MVFRL in light of its alleged similarity to a "named driver exclusion" ("NDE").[3] Appellants argued that the public policy underlying the NDE provisions of the MVFRL is "that the insurance company must insure every individual who uses an insured's vehicle unless the insured specifically asks the insurance company not to provide coverage for that driver." Id. at 1176. However, observing that, similar to the URDE at issue herein, an NDE permits a policyholder, in certain instances, to exclude from his policy certain individuals for whom the policyholder does not want to provide coverage, the court found the policy implications of the NDE and the URDE were consistent. Specifically, both an NDE and a URDE allow the insured, in certain instances, to "determine[] those drivers of the insured's car for which the insured will purchase insurance. If the insured chooses not to purchase insurance for those drivers of his car, the insurance company is not required to provide insurance." Id. The court found this principle consistent with Section 1786(f) of the MVFRL, in which the legislature placed the burden on the insured to make sure that the individuals who drive the insured's vehicle have insurance.

         Finally, the court rejected Appellants' argument that the URDE is void against public policy because it undermines the goal of maximum feasible restoration to accident victims. The court noted that maximum feasible restoration is "just one of many goals of the MVFRL." Id. Ultimately, the court concluded that the MVFRL "does not anticipate always shifting the burden [to] insurance companies to discover the identities of resident, non-family member insureds, who have access to an insured's vehicle; that is a burden more appropriately placed in the hands of the insured." Id. at 1177.

         President Judge Emeritus Ford Elliott authored a dissenting opinion wherein she concluded that the URDE is contrary to Section 1786(f) of the MVFRL and "very possibly contrary to public policy." Id. at 1180 (Ford Elliott, P.J.E., dissenting). She suggested that the MVFRL serves the dual purposes of (1) lowering the cost of insurance, which allows those who operate a vehicle in the Commonwealth to do so affordably, and (2) protecting victims who are injured due to the operation of those vehicles. In her view, the insurer is in a better position to accept the risk related to its insured than is "the innocent injured victim." Id. at 1177. Quoting at length the Superior Court's decision in Progressive Northern Ins. Co. v. Universal Underwriters Ins. Co., 898 A.2d 1116 (Pa. Super. 2006), Judge Ford Elliott opined that the legislature intended that insurance "follow the vehicle," rather than intending that policies covering a vehicle be limited by who is operating the vehicle. Safe Auto, 170 A.3d at 1179 (Ford Elliott, P.J.E., dissenting). She further suggested that Section 1786 "implicitly directs that all permissive users of a vehicle be insured under the owner's insurance." Id.

         Finally, to the extent that cost control has been viewed as the overriding goal of the MVFRL, Judge Ford Elliott suggested that this Court has signaled a willingness to depart from that principle, noting that, in Heller v. Pa. League of Cities and Municipalities, 32 A.3d 1213 (Pa. 2011), we held that a workers' compensation exclusion to underinsured motorist ("UIM") coverage in an employer-purchased automobile insurance policy violated public policy, and, in doing so, cautioned that the cost containment objective underlying the MVFRL has limits, and "cannot be mechanically invoked as a justification for every contractual provision that restricts coverage and purportedly lessens the cost of insurance." Id. at 1222.

         Appellants filed a petition for allowance of appeal, and this Court granted review to consider the following issues, as framed by Appellants:

a. Did the Superior Court err as a matter of law in finding that the [URDE] in a Personal Auto Policy is valid and enforceable and not violative of the terms and provisions of the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa.C.S.A. § 1701, et. seq.?
b. Did the Superior Court err as a matter of law in finding that the [URDE] in a Personal Auto Policy is valid and enforceable and not violative of the public policy of the Commonwealth of Pennsylvania as embodied in § 1786 of the [MVFRL], 75 Pa.C.S.A. § 1786, which implicitly directs that all permissive users of an insured vehicle be insured under the owner's insurance policy?

Safe Auto Ins. Co. v. Oriental-Guillermo, 187 A.3d 204 (Pa. 2018) (order).

         As a preliminary matter, we note that the questions raised by Appellants present questions of law; thus, our scope of review is plenary and our standard of review is de novo. Heller, 32 A.3d at 1220. Additionally, it is well established that, in construing a policy of insurance, a court is required to give plain meaning to a clear and unambiguous contract provision unless such provision violates the law or a clearly expressed public policy. Eichelman v. Nationwide Ins. Co., 711 A.2d 1006, 1008 (Pa. 1998).

         When considering whether a contract violates public policy, we are mindful that public policy is more than a vague goal which may be used to circumvent the plain meaning of the contract. Rather,

[p]ublic policy is to be ascertained by reference to the laws and legal precedents and not from general considerations of supposed public interest. As the term "public policy" is vague, there must be found definite indications in the law of the sovereignty to justify the invalidation of a contract as contrary to that policy[.] . . . Only dominant public policy would justify such action. In the absence of a plain indication of that policy through long governmental practice or statutory enactments, or of violations of obvious ethical or moral standards, the Court should not assume to declare contracts . . . contrary to public policy. The courts must be content to await legislative action.
* * *
It is only when a given policy is so obviously for or against the public health, safety, morals or welfare that there is a virtual unanimity of opinion in regard to it, that a court may constitute itself the voice of the community in so declaring [that the contract is against public policy].

Heller, 32 A.3d at 1220-21 (citations omitted and second alteration original).

         With the above standards in mind, we turn to the questions before us. With respect to their first issue, Appellants claim that the URDE in the Policy violates the terms and provisions of the MVFRL. Specifically, they contend that the URDE is inconsistent with Sections 1786(a) and (f), which provide:

§ 1786. Required financial responsibility
(a) General rule.-Every motor vehicle of the type required to be registered under this title which is operated or currently registered shall be covered by financial responsibility.
* * *
(f) Operation of a motor vehicle without required financial responsibility.-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 ...

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