Unpublished Disposition, 902 F.2d 39 (9th Cir. 1987)

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US Court of Appeals for the Ninth Circuit - 902 F.2d 39 (9th Cir. 1987)

Rita Unpingco HOUCK, Leroy Houck, Plaintiffs-Appellants,v.YASUDA FIRE AND MARINE INSURANCE COMPANY, Richard J.Landgraf, Defendants-Appellees.

No. 89-15000.

United States Court of Appeals, Ninth Circuit.

Submitted April 11, 1990.* Decided April 25, 1990.

Before FARRIS, PREGERSON, and RYMER, Circuit Judges.


Rita and Leroy Houck appeal from the district court's affirmance of the Guam Superior Court's partial summary judgment in favor of Yasuda Fire and Marine Insurance Co. ("Yasuda"). We affirm.

* On April 4, 1987, Richard Landgraf hit the Houcks' car from behind. Landgraf had an automobile insurance policy from Yasuda which included a provision stating: "This policy does not apply ... (p) under any of the coverages if the insured or any person authorized to drive the automobile does not hold a valid driver's license to drive the automobile."

At the time of the accident, Landgraf was cited for following too closely and for not having a driver's license in his possession. He appeared in traffic court and paid a fine for following too closely. The citation for his failure to have a driver's license in his possession was dropped when Landgraf showed the court his license.

In June, as a result of inquiries by Yasuda, Landgraf discovered that his driver's license had expired in February--prior to both the accident and his court appearance. Under the Department of Motor Vehicles policy relating to licenses which had been expired for less than one year, he was able to renew his license immediately and was not required to pay a penalty or take a driving or written test.

The Houcks sued both Landgraf and Yasuda in superior court for damages arising from the accident. Yasuda moved for summary judgment based on the clause in the policy excluding unlicensed drivers from coverage. The superior court granted the motion, and the Houcks appealed to the Appellate Division of the District Court of Guam. The district court affirmed, and the Houcks now appeal from that ruling.


We review a grant of summary judgment de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989); State Farm Fire & Casualty Co. v. Martin, 872 F.2d 319, 320 (9th Cir. 1989). We similarly review de novo interpretations of local law by the Appellate Division of the District Court of Guam. Territory of Guam v. Yang, 850 F.2d 507, 511 (9th Cir. 1988) (en banc).


No material facts are at issue in this appeal from a summary judgment. The Houcks contest only the court's legal conclusion that the policy provision excluding unlicensed drivers from coverage was valid, thereby relieving Yasuda from liability for damages. They argue that the policy conflicts with a strong public policy in Guam supporting compensation of victims, and is thus void.

As evidence of the asserted public policy, the Houcks point to Guam's "Financial Responsibility Law," 16 Guam Code Ann. Sec. 19101-19111, and Guam's "Direct Action" statute, Guam Gov't Code Sec. 43354. Although these statutes do show a legislative concern that victims be compensated, the public policy asserted does not override the contractual provision at issue in this case.

* The Guam Financial Responsibility Law requires a driver who is involved in an accident to "deposit security with the Department [of Motor Vehicles] sufficient in the judgment of the Department to satisfy any final judgment in any amount for property damage or bodily injury resulting from such accident." 16 Guam Code Ann. Sec. 19103. A driver can establish his exemption from the requirement by proving that he had "an automobile liability policy or bond in effect at the time of the accident with respect to the driver or the motor vehicle involved in the accident." 16 Guam Code Ann. Sec. 19104(f).

Guam patterned some of its legislation relating to liability from the negligent operation of motor vehicles after California legislation. Compare Guam Gov't Code Ann. Sec. 23504(a) with Cal.Veh.Code Sec. 16430 (West Supp.1990). See National Union Fire Ins. Co. v. Taitague, No. 85-0033A (D. Guam App.Div. Dec. 16, 1986). However, the Guam legislation is not identical to the California legislation. California has adopted a mandatory insurance law which requires all drivers to furnish proof of insurance even before they are involved in an accident. Cal.Veh.Code Secs. 16430-16436. Furthermore, California law includes an "omnibus clause" which provides that to fulfill the mandatory insurance requirement, an automobile liability policy "shall insure the named insured and any other person using any motor vehicle registered to the named insured with the express or implied permission of the named insured." Cal.Veh.Code Sec. 16451.

In National Union Fire Ins. Co. v. Taitague, No. 85-0033A (D. Guam App.Div. Dec. 15, 1986), on which the Houcks rely, the court held that an unlicensed driver exclusion in an insurance policy is void as against public policy when an owner, not knowing that the driver is unlicensed, permits that unlicensed driver to operate his automobile. Id. at 8. However, the foundation of the court's analysis was the fact that the Guam Financial Responsibility Law was patterned after California law. Id. at 5-6. While the court acknowledged that Guam did not include an omnibus provision, it reasoned that Guam "impliedly required such inclusion" of the provision in its law. Id. at 6-7.

When a territory "borrows" statutes from a state, state cases "which predate the enactment of the Territorial Laws are controlling authority on issues of the statutory construction and effect of Guam laws." Roberto v. Aguon, 519 F.2d 754, 755 (9th Cir. 1975); see also Guam Economic Dev. Auth. v. Ulloa, 841 F.2d 990, 992 (9th Cir. 1988). State cases subsequent to territorial enactment, "while not binding, are persuasive." Roberto, 519 F.2d at 755. If a territory is presumed to have intended to adopt the state's interpretation of the state statutes the territory adopts, then the converse is also true: a territory which chooses not to adopt certain portions of a state statutory scheme does not intend to follow the state's legislative or judicial lead in that area. Cf. Guam Economic Dev. Auth., 841 F.2d at 992.

Thus, despite the court's holding in National Union, Guam's public policy of compensating victims cannot be interpreted to extend as far as California's.1  A more accurate statement of Guam's public policy with respect to accident victims appears in Picini v. Government of Guam, No. 83-0073A (D. Guam App.Div. Nov. 13, 1984). The court recognized that "insurance is for the protection of the public." Id. at 7. Nevertheless, it stated, " [W]e do not believe that an insurance company should be held liable to provide insurance coverage when it has specifically excluded such coverage from its policy." Id. It therefore enforced a provision in an insurance policy excluding from coverage a vehicle furnished to the named insured for his regular use, thereby excusing the insurer from liability. Id.

The enforcement of the unlicensed driver provision in this case does not defeat the public policy expressed in Guam's financial responsibility statute. The statute merely requires proof of the driver's financial resources after an accident. One method of proof is a valid insurance policy. However, if an existing policy does not cover the accident, the driver must post bond. Under either scenario, the goals of the financial responsibility statute are achieved.


Guam's direct action statute, Guam Gov't Code Sec. 43354, does not support the Houcks' argument. It gives the victim "a right of direct action against the insurer within the terms and limits of the policy." Id.

The Guam legislature "borrowed" this statute from Louisiana. Kelly v. Capital Ins. & Surety Co., 241 F. Supp. 605 (D. Guam 1965), rev'd on other grounds, 361 F.2d 567 (9th Cir. 1966), cert. denied, 385 U.S. 1025 (1967). Louisiana courts have upheld the validity of unlicensed driver exclusions under this statute. See Phillips v. New Amsterdam Casualty Co., 193 La. 314, 190 So. 565 (1939); see also Guam Economic Dev. Auth. v. Ulloa, 841 F.2d 990, 992 (9th Cir. 1988); Roberto v. Aguon, 519 F.2d 754, 755 (9th Cir. 1975). Thus, acknowledging the validity of the exclusion in this case does not conflict with Guam's direct action statute.


The public policy of compensating victims is simply not as strong, or as pervasive, as the Houcks would have us believe. As a result, it is outweighed by two countervailing policies: preventing unlicensed drivers from operating automobiles, see 16 Guam Code Ann. Sec. 3101(a), and upholding parties' rights to negotiate the terms of a contract, see Morta v. Korea Ins. Co., 840 F.2d 1452, 1460 (9th Cir. 1988); Picini v. Government of Guam, No. 83-0073A at 10-11 (D. Guam App.Div. Nov. 13, 1984).

Summary judgment for Yasuda based on the valid unlicensed driver exclusion in Landgraf's insurance policy was correctly granted, and the district court correctly affirmed.


PREGERSON, Circuit Judge, dissenting:

I respectfully dissent. I agree with the views expressed by Judge Samuel P. King in his District Court of Guam, Appellate Division, dissenting opinion. Under the policy of the Division of Motor Vehicles of Guam, Landgraf's driver's license was automatically renewable, without proof of qualification. He possessed, therefore, a constructively valid driver's license at the time of the collision.

Allowing the insurance company to exclude coverage for a driver whose license had technically expired, but who was otherwise qualified to drive under the laws of Guam, contravenes the important public policy of requiring financial responsibility of those who use the public highways.


The panel unanimously finds this case suitable for decision without oral argument. Fed. R. App. P. 34(a); 9th Cir.R. 34-4


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.R. 36-3


In fact, states with statutory schemes more similar to Guam's have determined that exclusionary clauses in insurance contracts are valid. See, e.g., Miller v. State Farm Mutual Auto. Ins. Co., 204 Kan. 694, 466 P.2d 336 (1970); Lewis v. Mid-Century Ins. Co., 152 Mont. 328, 449 P.2d 679 (1969); Royse v. Boldt, 80 Wash. 2d 44, 491 P.2d 644 (1971) (en banc)