AREAS OF INTEREST:   Automobile insurance; uninsured motorist coverage.

LEGAL IMPACT:  Owned vehicle exclusion violated RSA 264:15 when its application would have resulted in denial of uninsured motorist coverage to insured driver whose passenger caused accident by engaging in conduct that fell within liability coverage exclusion.

CASE CAPTION: Rebecca Rivera v. Liberty Mutual Insurance Company, No. 2011-406 (May 11, 2012)

FACTUAL SUMMARY:

          The plaintiff, Rebecca Rivera, was driving a Toyota Matrix when her front seat passenger, Timothy Chateauneuf, grabbed the steering wheel, causing the vehicle to leave the roadway and strike a tree.  Chateauneuf was convicted of assault by means of a deadly weapon.

            At the time of the accident the Toyota was insured under a policy issued by Liberty Mutual to Rivera’s parents.  Under the policy’s liability coverage, the insurer was obligated to pay damages for bodily injury for which any “insured” becomes legally responsible because of an automobile accident.  It was undisputed that Chateauneuf was an “insured” under the policy.  However, the policy excluded liability coverage for any insured who intentionally causes injury or who uses a vehicle without a reasonable belief that he was entitled to do so.

            The policy’s uninsured motorist provisions required Liberty Mutual to pay damages which an insured is legally entitled to recover from the operator of an uninsured motor vehicle arising out of the ownership, maintenance or use of the uninsured motor vehicle.  For purposes of uninsured motorist coverage “insured” was defined as “you or any family member” and “any other person occupying your covered auto.”  The policy defined “uninsured motor vehicle” as including a vehicle to which a liability policy applies, but the insuring company denies coverage.  The policy also provided that “uninsured motor vehicle” does not include “any vehicle…owned by or furnished for the regular use of you or any family member.” 

            After Rivera was denied coverage for her injuries by Chateauneuf’s insurance carrier she submitted a claim to Liberty Mutual.  Liberty Mutual denied the claim based on the owned vehicle exclusion.  Rivera filed a declaratory judgment action seeking a ruling that she was entitled to coverage under either the uninsured motorist provisions or the liability provisions of her policy. 

          Both parties filed summary judgment motions.  The trial court ruled that the liability coverage did not apply because Chateauneuf could not have a reasonable belief that he was entitled to use the car as he did.  However, it found that Rivera was entitled to uninsured motorist coverage because the vehicle fit within the policy definition of “uninsured motor vehicle.”   Liberty Mutual appealed and Rivera filed a cross appeal.

HOLDING:  Affirmed.

            The Court found that the Toyota was insured for liability coverage, but since Liberty Mutual denied such coverage pursuant to the entitlement exclusion, the Toyota was an “uninsured motor vehicle” as defined in the policy.  It went on to rule that even if the owned vehicle exclusion was interpreted as excluding uninsured motorist coverage, that interpretation would be inconsistent with the purpose of the uninsured motorist statute, RSA 264:15, which is intended to provide innocent victims a source of  restitution when the full amount of damages cannot be recovered from the tortfeasor.  The goal of the statute is to place insured persons in the same position that they would have been in if the uninsured motorist had possessed comparable liability insurance.

            If Liberty Mutual’s position that Chateauneuf was not entitled to liability coverage was correct, then he was a driver of an “uninsured motor vehicle” from whom Rivera was “legally entitled to recover” under RSA 264:15.  Although an insurer can limit its coverage through an exclusion, such as the owned vehicle exclusion within the policy’s uninsured motorist provisions, it cannot do so if the result violates the statute or public policy.  The Court held that the plain language of RSA 264:15 prohibited the exclusion from applying under the facts before it.  As to Rivera, both the driver and the vehicle were effectively uninsured and, therefore, the uninsured motorist coverage applied.  To apply the owned vehicle exclusion under the circumstances of this case would violate the statutory requirements. 

            The Court distinguished an earlier decision, Wegner v. Prudential Property & Casualty Ins. Co., 148 N.H. 107 (2002) in which it held that a passenger who was killed in an accident while riding in a vehicle operated by a driver with a suspended license was not entitled to uninsured motorist coverage under the driver’s policy.  The policy in that case excluded uninsured motorist coverage to any person claiming that a car was uninsured under the policy because coverage was excluded or denied under another provision in the policy, and the policy excluded coverage for the insured while his license was suspended.  The Court ruled that, unlike Rivera, the plaintiff in Wegner was a passenger and, therefore, he did not fall within the express terms of RSA 264:15.  Rivera was an authorized operator of the vehicle and, therefore, fell within the policy’s liability coverage.  As a result, RSA 264:15, I required that she be afforded uninsured motorist coverage regardless of any contrary policy exclusions.

            The Court concluded that although there is a split among jurisdictions as to the validity of policy provisions excluding the insured automobile from the definition of “uninsured motor vehicle”, the owned vehicle exclusion as applied to these facts violated RSA 264:15.  Having decided that Rivera was entitled to uninsured motorist coverage, the Court declined to consider whether she was entitled to recover under the liability portion of the policy.