Commercial Union Insurance Co. v. Delaney

LUKOWSKY, Justice. The question presented is whether an automobile liability insurer may contractually exclude a truck owned by the Commonwealth from the definition of “uninsured automobile” in a policy issued pursuant to the provisions of KRS 304.20-020. We answer the question in the affirmative. Delaney suffered bodily injuries when the automobile he was driving collided with a truck owned by the Commonwealth. The truck was being driven by Harrison. It is not disputed that Harrison’s negligence caused the collision nor that he was acting within the scope of his employment by the Commonwealth. When Delaney discovered that Harrison did not have liability coverage he joined Commercial Union as a party defendant. Commercial Union was the automobile liability insurance carrier for both Delaney and his employer who was the owner of the automobile that Delaney was driving. Commercial Union moved for a summary judgment dismissing Delaney’s claim because the uninsured motorist provisions of its policies provided: “The term, ‘uninsured automobile’ shall not include: . (3) An automobile or trailer owned by the United States of America, Canada, a state, a political subdivision of any such government, or an agency of any of the foregoing.” The trial judge granted the motion and entered an appropriate summary judgment. The trial judge retired from active service and his successor set aside the summary judgment. Commercial Union appeals. Delaney’s position is that KRS 304.20-020 requires uninsured motorist coverage for the protection of persons insured under the liability policy who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury and that the carrier may not *500 restrict its obligation to furnish the broad, undefined coverage required by statute by definitions, limitations, terms and conditions in the contract. He relies on Higgins v. Nationwide Mutual Insurance Co., 291 Ala. 462, 282 So.2d 301 (1973) which declared void, as against public policy and legislative intent, an identical exclusion under a statute identical to KRS 304.20-020(1). If our statute consisted, as does Alabama’s, of no more than subsection (1) and if we had not decided Allen v. West American Insurance Company, Ky., 467 S.W.2d 123 (1971), we might find his argument more persuasive. In answering the question presented we cannot help but notice the opening words of KRS 304.20-020(2) which are: “For the purpose of this coverage (uninsured motorist) the term ‘uninsured motor vehicle’ shall, subject to the terms and conditions of such coverage, be deemed to include . . ..” (Emphasis supplied). In Allen, supra, we said: “In using the italicized language, the Legislature recognized that there would be ‘terms and conditions of such coverage’ to which the statute’s application would be subject. ... If the solons had intended that the UM provisions should become applicable ... regardless of the policy provisions, it is difficult to discern why the words ‘subject to the terms and conditions of such coverage’ were employed. What terms and what conditions are permissible?” In adopting uninsured motorist coverage the Legislature did not specify what exclusions would be either valid or invalid. Had it so desired, the General Assembly easily could have included a list. Its failure to do so affords basis for the construction that the statute does not invalidate all exclusions but only those which are unreasonable. The question then becomes whether the exclusion of government owned vehicles is reasonable. In Allen, supra, we upheld the household exclusion on the basis that it was reasonable to eliminate “overly friendly” lawsuits. See Orange v. State Farm Mutual Insurance Co., Ky., 443 S.W.2d 650 (1969). Taking into consideration the existence of the Federal Tort Claims Act, our Board of Claims Act and the abandonment of the doctrine of governmental immunity as it applies to municipal corporations, we are of the opinion that it is equally reasonable to leave a person in Delaney’s situation to seek direct compensation from the governmental entity involved rather than from his uninsured motorist carrier, even though that relief might not provide for trial by jury or damages as at common law. If the doctrine of sovereign immunity was applicable or if Harrison was a thief or an unauthorized interloper or operating the truck without the scope of his employment another result might well be mandated. Downey v. MVAIC, 43 A.D.2d 168, 350 N.Y. S.2d 821, 829 (1973). But that is not this case. Our view of the case is further fortified by the fact that in 1970 when the General Assembly passed KRS 304.20-020 and referred to “terms and conditions” the Standard Family Combination Automobile Policy, 1963, Revised, Part IV, Definitions, contained the exact exclusion that is in issue here. It is not unfair to assume that the Legislature knew of the terms of the standard policy and deliberately chose not to write them out of Kentucky contracts. No doubt the underwriters fixed rates for the coverage based upon the exclusion and neither Delaney nor his employer paid for coverage beyond the exclusion. There is no claim that these policies are contracts of adhesion. Presumably persons who desire to be insured against possible injury from negligently operated governmental vehicles can obtain such coverage by paying a higher premium. The judgment is reversed with directions to reenter the original summary judgment. All concur.