Unpublished Disposition, 914 F.2d 263 (9th Cir. 1990)

MEMORANDUM^*** 

Steven Lyons appeals the district court's grant of summary judgment in favor of State Farm Mutual Auto Insurance Co., in an insurance coverage declaratory judgment action. Lyons' wife, Kathryn J. Lyons, was killed in a single vehicle accident in an automobile insured by State Farm. Their daughter, Tammie Lyons was driving the vehicle. The Estate of Kathryn Lyons is attempting to recover damages from Tammie Lyons and her insurer, State Farm. State Farm refused coverage under the policy because of the household exclusion in the automobile liability policy and the insured vehicle exclusion in the uninsured/underinsured motor vehicle policy. State Farm then filed this declaratory judgment action. The district court held that under Alaska law, (1) State Farm's household exclusion in a motor vehicle liability insurance policy was valid and did not provide coverage, and (2) State Farm's insured vehicle exclusion in an uninsured/underinsured motor vehicle insurance policy was also valid and did not provide coverage. We reverse.

Lyons does not dispute that both the liability and UM/UIM policies exclude coverage for this accident. Rather, he argues that these exclusions conflict with Alaska law in effect at the time of the accident.¹  In August, 1986, Alaska had a comprehensive mandatory insurance statute for all motor vehicles. Alaska Stat. Sec. 28.22.010, (1985) (repealed 1986). That statute established the minimum coverage requirements for liability and UM/UIM policies. Alaska Stat. Sec. 28.22.010(a) (2), (3). An insurer could only include in a policy exclusions or limitations "that do not violate the requirements of this chapter [Alaska Stat. Sec. 28.22.010 et seq.] or other applicable laws." Alaska Stat. Sec. 28.22.500 (1985) (repealed 1986). Lyons argues that State Farm's policy violated the requirements of Alaska Stat. Sec. 28.22.010.

Lyons argues that the household exclusion under the liability policy conflicts with Alaska Stat. Sec. 28.22.010(a) (2). That section provided, in pertinent part:

(a) The owner's policy of liability insurance shall

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(2) insure the person named against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the vehicle ... as follows:

(A) $50,000 because of bodily injury to or death of one person....

Id. (emphasis added). Thus, if the individual who is liable for the accident is a "person named" in the policy, then Alaska law required insurers to provide that person with the prescribed amount of liability coverage. The question presented is the meaning of the phrase "person named," an undefined term in the statute. We construe statutory terms in accordance with their common usage. Wilson v. Municipality of Anchorage, 669 P.2d 569, 572 (Alaska 1983); see also Alaska Stat. Sec. 01.10.040 (construction of words and phrases). We also construe language so as to fulfill the Legislature's purpose in enacting the statute. North Slope Borough v. Sohio Petroleum Corp., 585 P.2d 534, 540 (Alaska 1978).

The district court read the statute narrowly and held that only the "named insured," in this case Kathryn Lyons, is the "person named" under the policy. Her daughter Tammie was not the named insured and so the court concluded that the statute does not apply. The court stated:

AS 28.22.010(a) (2) does not preclude the household exclusion as to permissive drivers covered by an automobile insurance policy. It prohibits such an exclusion as to "the person named" in the policy. Accordingly, the State Farm policy issued in the name of the decedent, Kathryn J. Lyons, does not afford coverage for a claim by this decedent against her daughter.

Dist.Ct.Order, p. 6. According to the district court's interpretation, if the roles had been reversed and Kathryn Lyons had been driving instead of Tammie, the statute would preclude the household exclusion and require State Farm to afford coverage for a claim by the daughter against the mother. Id. (citing State Farm Mutual Auto. Ins. Co. v. Marqua, No. A87-574 Civil, Order at 5 (D. Alaska, November 8, 1989)).

Lyons argues that "person named" has broader meaning than "named insured": If the Alaska Legislature had intended to limit coverage to the "named insured" it would have used that language. Instead, the Legislature used the term "person named." The term "named insured" includes only the purchaser of the policy, while "person named" includes all permissive users who are "named" in the policy. According to this interpretation, Tammie would be a named insured, and the statute would therefore require coverage.

State Farm argues on the contrary that if the Legislature had meant to include permissive users together with named insureds under the coverage of the statute, it would have said so. The legislature did use such specific language in another statute, the Motor Vehicle Safety Responsibility Act.²  However, this statute was passed in 1959, 25 years before the act in question, lessening the force of this claim. The failure of the Legislature to include more specific language in 1984 does not indicate that it had the 1959 Act in mind.

This textual analysis of the word "named" does not conclusively support one interpretation over the other. The legislative purpose does, however, support the broader interpretation of the meaning of "person named." See North Slope Borough, 585 P.2d 534, 540 (courts should look to legislative purpose to construe statutes). The legislative purpose in passing the mandatory insurance act was to require "motorists [to] be financially responsible for their negligent acts so that innocent victims of motor vehicle accidents may be recompensed for the injury and financial loss inflicted upon them." Alaska Temporary and Special Acts 1984, ch. 70, Sec. 1. This legislative purpose would not sanction a loophole for liability coverage when one member of a family is driving rather than another. Tammie Lyons is a "person named" under the policy, as a relative of the "named insured." This interpretation best fulfills the legislative purpose of the statute. See City of Anderson v. Thomas, 624 P.2d 271, 273 (Alaska 1981) ("an ambiguous statute should be construed in the most beneficial way the language will permit to avoid hardship, forfeiture or injustice"). We hold that under Alaska law "person named" includes the named insured and all categories of permissive drivers listed in the policy.

We must now decide what level of liability benefits should be awarded: the statutory minimum or the full policy amount. Lyons argues that if we find either of the policy exclusions invalid we should hold that the full policy amount of $100,000 will be due upon a proper showing of liability. He relies on three state cases in which courts ordered coverage for the full policy amounts. See Meyer v. State Farm Mutual Auto Ins. Co., 689 P.2d 585 (Colo.1984); Kish v. Motor Club of America Ins. Co., 108 N.J.Super. 405, 261 A.2d 662, certification denied 55 N.J. 595, 264 A.2d 68 (N.J.Super.1970); State Farm Mut. Auto Ins. Co. v. Wagamon, 541 A.2d 557, 561 (Del.1988).

These cases are inapposite for Alaska law. The Alaska Legislature provided specific statutory direction that only the statutory minimum liability should be awardeD. Alaska Stat. Sec. 28.22.030(a) (1985) (repealed 1986) provided, in pertinent part,

A policy that grants the coverage required for a motor vehicle liability policy may also grant lawful coverage in excess of or in addition to the coverage specified for a policy and the excess or additional coverage is not subject to the provisions of this chapter. With respect to a policy that grants excess or additional coverage, the term "motor vehicle liability policy" applies only to that part of the coverage that is required by this chapter.

Alaska law required only $50,000 of liability coverage. Alaska Stat. Sec. 28.22.010.

Kathryn Lyons' policy provided $100,000 underinsured vehicle coverage in the event she was injured by a vehicle whose liability coverage was less than $100,000. The underinsured vehicle provision excluded any vehicle covered under her liability policy. Lyons contends that the exclusion is invalid under Alaska law.

In Burton v. State Farm Fire and Casualty Co., No. 3625, slip op. at 7, 9 (Alaska Aug. 10, 1990), the Alaska Supreme Court invalidated the insured vehicle exclusion in the plaintiff's underinsured vehicle policy, and required the insurer to pay the full policy amount less its payments under the liability coverage. The basis for the decision was Alaska Stat. Sec. 21.89.020(c), which provides:

An insurance company offering automobile liability insurance in this state for bodily injury or death shall offer coverage prescribed in AS 28.20.440 and 28.20.445, or AS 28.22.010--28.22.130, with limits equal to at least the limit purchased voluntarily to cover the insured person's liability for bodily injury or death, for the protection of the persons insured under the policy who are legally entitled to recover damages for bodily injury or death from owners or operators of uninsured or underinsured motor vehicles. The limit written may not be less than the limit in AS 28.20.440 or AS 28.22.010.

Under Burton Lyons is entitled to $100,000 on the underinsured vehicle policy, less the $50,000 statutory minimum liability amount.

The court in Burton also subtracted payments made under the plaintiff's medical coverage because his underinsured motorist policy provided that payments "shall be reduced by any amount paid or payable to or for the insured under ... the liability coverage ... [or] the medical payments coverage...." Burton, No. 3625, slip. op. at 10. If this is found to be applicable in Lyons' case, the appropriate deduction should be made.

CONCLUSION

Based on available Alaska precedents and the policies

underlying the Alaska Mandatory Motor Vehicle Insurance Act,

we hold the household and insured vehicle exclusions invalid

under Alaska law where the driver was a permissive user

named under the policy. Lyons' recovery, if liability is

properly established, will be up to $100,000: the statutory

minimum liability of $50,000, plus underinsured vehicle

coverage of $50,000, less such other reductions as are

discussed in Burton.

REVERSED AND REMANDED.