National County Mutual Fire Insurance Co. v. Johnson

ENOCH, Justice,

dissenting.

With the stroke of a pen, the Court rips the family member exclusion endorsement out of every automobile liability insurance policy in this state. By this act, the Court creates contingent obligations for every insurance company which has a policy in force in this state, obligations for which these companies have neither assessed the risks nor charged and collected premiums. To do this, the Court asserts that a statute, enacted at a time when the common law of Texas did not recognize intra-family tort actions, dictates today, that an insurance policy provision which excludes coverage for intra-family tort liability is invalid and against public policy. I respectfully dissent.

The Court holds that Texas Personal Auto Policy Endorsement 575, the family member exclusion, is void because it conflicts with the Texas Motor Vehicle Safety-Responsibility Act (“the Act”) which requires that all motor vehicles operated in the state have at least a minimum amount of liability insurance coverage. In coming to this conclusion, the Court fails to acknowledge that this statute came into effect in 1982, at a time when Texas common law prohibited tort actions between family members. The statute is completely silent about extending the protections of the act to family members. Not until this Court’s decision in Price v. Price, 732 S.W.2d 316 (Tex.1987), did Texas permit lawsuits between spouses arising out of automobile accidents. Ignoring ten years of legal history, the Court jumps to the conclusion that the family member exclusion, promulgated in 1987 (no doubt prompted by this Court’s *7 holding in Price), is in conflict with the statute and against public policy. To the contrary, the legal history firmly supports the conclusion that the promulgated rules of the Insurance Commission allowing the exclusion of family members from the mandatory liability insurance provisions are consistent with the purposes of the statute and are not in derogation of the public policy underlying the Act.

The Texas Motor Vehicle Safety-Responsibility Act requires persons to obtain at least the minimum required liability insurance in order to operate a motor vehicle in the state. 1 See Tex.Rec.Civ.Stat.Ann. art. 6701h, § lA(a) (Vernon 1951 and Supp.1993). The Act seeks to assure that someone is financially responsible for each automobile on the road for any “potential losses which may arise out of the operation of that vehicle.” Id. The question in this case is whether the family member exclusion is inconsistent with the stated policy in the statute that there be financial responsibility for the operation of a motor vehicle. The Court’s answer to this question is troublesome in two respects.

I.

The Court abrogates a contractual provision. Adopted in 1987, the family member exclusion provides that the insurer will “not provide Liability Coverage for you or any family member for bodily injury to you or any family member.” See Texas Personal Auto Policy — Amendatory Endorsement 575; see also State Board of Insurance, 12 Tex. Reg. 1126 (1987) (noting that the new exclusion eliminates liability coverage afforded under a Texas Personal Auto Policy if the claimant is the spouse or other family member of the insured). This exclusion is a mandatory endorsement to the Texas Personal Auto Policy. See Tex.Ins.Code Ann. art. 5.06 (Vernon 1951 and Supp.1993) (noting that an “insurer may only use a form adopted by the Board under this section in writing motor vehicle insurance ... in this State.”). Regardless, the endorsement excluding family members is a contractual term. Of immediate concern is that invalidating the family member exclusion allows coverage for the insured’s misfeasance without the insured having paid for the coverage. Of greater concern, however, is that absent constitutional infirmity of the statute, or clear violation of statutory authority by the Board, this Court should not abrogate the express provisions of the insurance contract. See Boon v. Premier Ins. Co., 519 S.W.2d 703 (Tex.Civ.App.—Texarkana 1975, no writ). In this case there is no constitutional challenge to the Act, and it is surely questionable that a statute enacted in 1982, five years prior to this Court’s decision in Price , and which was silent on intra-family tort liability, clearly dictates that the Board cannot promulgate a family exclusion for automobile liability insurance policies. 2

II.

The Court is ill equipped to evaluate public policy implications of mandatory insurance. The Texas Legislature and the State Board of Insurance are the proper fora to determine the public policy of Texas as it relates to automobile insurance coverage. And, the Board of Insurance’s promulgation of the family member exclusion is entitled to weight. The legislature amended the Act in 1989 and 1991, after the family member exclusion was promulgated, and failed to address the family member exclusion. Since the legislature did not address the exclusion, the Texas Board of Insurance’s promulgation of Endorsement 575 should be given great deference. See Jones v. Houston Gen. Ins. Co., 736 S.W.2d 860, 863 (Tex.App.—Waco 1987, writ denied); see also Direlco, Inc. v. Bullock, 711 S.W.2d 360, 363 (Tex.App. *8 —Austin 1986, writ ref'd n.r.e.) (an agency’s statutory interpretation is deemed approved by the legislature where the legislature fails to amend a statute or disapprove an agency action subsequent to its interpretation). The family member exclusion is neither in conflict with the Act nor against the public policy of this state as expressed through the statute.

The Court relies, however, on language in Dairyland which purports to identify third parties as the intended beneficiaries of the Texas Motor Vehicle Safety-Responsibility Act. Dairyland County Mut. Ins. v. Childress, 650 S.W.2d 770, 773 (Tex.1983) (noting that the compulsory insurance requirements of the Texas motor vehicle safety laws imply that all potential claimants for damages resulting from automobile accidents are intended as beneficiaries of the statutorily required automobile liability coverage). However, that case did not address the effect of the family member exclusion which specifically denies coverage to an identifiable class of persons which the insurance was never intended to cover. The Dairyland case merely addressed Texas’ motor vehicle safety laws in the context of whether a judgment creditor in an automobile liability case could sue the insurer for attorneys’ fees under the insuring agreement. The coverage question was based upon a non-owner’s endorsement for which the insured had specifically contracted. Id. at 772 . Dairyland is inapplicable to this case.

Furthermore, the rationale in Dairyland does not apply to family member circumstances. First, where a family member is the adverse party, the insured does not have the same incentive to assist the insurer in its defense. This not only compounds defense costs, but compounds the difficulty of estimating the risk being insured. 3 Second, the family member, as part of the household, is in a position to know or inquire about insurance coverage. The household is in a position to know that the exclusion exists and to make other suitable insuring arrangements if they choose to do so. As an example, the household could be covered under the insured’s group health or other first party medical insurance. Finally, automobile liability policies must include personal injury protection for a member of the insured’s household, unless the insured rejects that coverage in writing. See Tex.Ins.Code Ann. art. 5.06-3(a). 4 Interestingly, by invalidating the family member exclusion in the insuring agreement, the Court allows Johnson to obtain coverage, neither contracted nor paid for, in addition to alternate coverage expressly provided for by another statute. 5

It is inconceivable that the legislature intended to force consumers to purchase liability insurance to cover a judgment of a family member given that at the time the legislature enacted the Texas Motor Vehicle-Responsibility Act family members could not obtain a judgment for injuries caused by the negligent driving of another family member. While intra-family tort immunity was later abolished for automobile cases by judicial intervention, that in and of itself does not automatically adjudge the family member exclusion in an insurance policy to be invalid as against public policy. Nor does it mean that insurance companies must be forced to sell or *9 consumers must be forced to buy liability insurance to cover their family.

On a final note, the Court has not evaluated, nor does it have the resources to evaluate, the impact of this decision. 6 We should refrain from affecting the public policy of our state in this manner. Subject to constitutional review, the better policy is to allow the State Board of Insurance or the legislature, both with much greater resources, the wide latitude necessary to evaluate the social benefits and economic costs associated with a state wide, system wide change in mandated insurance coverage. See Members Mut. Ins. Co. v. Cutaia, 476 S.W.2d 278 (Tex.1972); Ratcliff v. National County Mut. Fire Ins. Co., 735 S.W.2d 955, 958 (Tex.App.—Dallas 1987, writ dism’d w.o.j.).

III.

Today, the Court abrogates an express contractual provision without fully evaluating the public policy implications. I cannot join the Court’s opinion. I would reverse the judgment of the court of appeals and render that Mr. Johnson take nothing from National County Mutual Fire Insurance Company or Consumers County Mutual Insurance Company.

PHILLIPS, C.J., and GONZALEZ and HECHT, JJ., join in this dissenting opinion.

. The statute specifically provides that:

On or after January 1, 1982, no motor vehicle may be operated in this State unless a policy of automobile liability insurance in at least the minimum amounts to provide evidence of financial responsibility under this Act is in effect to insure against potential losses which may arise out of the operation of that vehicle.

Tex.Rev.Civ.Stat.Ann. art. 6701h, § lA(a) (Vernon Supp.1993).

. Contrary to the concurring opinion’s characterization of my dissent, my argument is not that this Court cannot void a Board exclusion or limitation. 879 S.W.2d at 5. Rather, it is that there is no “legislative mandate” requiring invalidation of the family member exclusion.

. See Maijorie Maguire Schultz, Reproductive Technology and Intent-Based Parenthood: An Opportunity for Gender Neutrality, 1990 Wis.L.Rev. 297, 327 n. 80 (1990) (noting that with the demise of intra-family tort immunity more suits for tortious injury by parents have been successful).

. Article 5.06-3 of the Insurance Code provides that:

No automobile liability insurance policy, including insurance issued pursuant to an assigned risk plan established under authority of Section 35 of the Texas Motor Vehicle Safety-Responsibility Act, 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 personal injury protection coverage is provided or supplemental thereto. The coverage required by this article shall not be applicable if any insured named in the policy shall reject the coverage in writing; provided, unless the named insured thereafter requests such coverage in writing

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Tex.Ins.Code Ann. art. 5.06-3(a) (Vernon 1973 and Supp.1993).

.The record does not indicate whether Johnson rejected the personal injury protection coverage. It would be a wry result if today’s decision creates coverage for Johnson which was neither contracted nor paid for under a policy in which he specifically rejected alternate mandated coverage and thereby reduced his premium payment.

. See Stout v. Grand Prairie Indep. Sch. Dist., 733 S.W.2d 290, 294 (Tex.App.—Dallas 1987, writ ref'd n.r.e.), cert. denied, 485 U.S. 907 , 108 S.Ct. 1082 , 99 L.Ed.2d 241 (1988) (citing to Sax v. Votteler, 648 S.W.2d 661 (Tex.1983) and noting that the legislative purpose of the statute in Sax , which shortened the statute of limitations for a child to bring a medical malpractice action, was legitimate and had the purpose of regulating insurance rates for health care providers in order to prevent the sky-rocketing costs of medical care).

The majority acknowledges that the Florida Supreme Court has refrained from declaring family exclusions void. See 879 S.W.2d at 3 (citing to Florida Farm v. Government Employees Ins. Co., 387 So.2d 932 (Fla.1980)). Instead, Florida has wisely chosen to allow the legislature to evaluate the implications of such a change, and we should do likewise. See Ch. 88-370, 1988 Fla. Laws 1906 , 1924 (the legislature created a task force to evaluate how to lower insurance rates, to evaluate the cost impact of compulsory property damage liability insurance on the cost of collision coverage and compulsory bodily injury coverage on the cost of uninsured motorists coverage, and to examine and evaluate methods of effectively enforcing the state’s mandatory insurance law); Robert A. Henderson & Patrick F. Maroney, Review of Florida Legislation: Motor Vehicle Insurance Reform — Revisiting the Uninsured Driver, 16 Fla.St.U.L.Rev. 789 (1988).