Mulford v. Neal

264 P.3d 1173

2011 OK 20

Sheila MULFORD and Dewey Dover, Plaintiffs/Appellees,

v.Benjamin H. NEAL, Defendant,andAmerican Farmers and Ranchers Mutual Insurance Company, Garnishee/Appellant.

No. 108179.

Supreme Court of Oklahoma.

March 15, 2011.Rehearing Denied Oct. 17, 2011.

ON APPEAL FROM OKFUSKEE COUNTY DISTRICT COURT¶ 0 The Okfuskee County District Court entered a default judgment awarding damages to plaintiffs for bodily injuries and property damage suffered in an automobile collision. Plaintiffs, the judgment creditors, filed a post-judgment garnishment proceeding against the insurer of the automobile driven by the defendant. The garnishee admitted that it issued automobile liability insurance policies to the teenage defendant's parents and that the policies were in effect at the time of the collision, but the garnishee denied any liability based primarily on the named driver exclusion endorsements. The Honorable Lawrence W. Parish, presiding, found the named driver exclusions to be contrary to the Oklahoma compulsory insurance law and summarily adjudicated the garnishment in favor of plaintiffs and against the garnishee in amounts equal to the combined limits of liability insurance under both policies for the personal injury damages and interest and for the property damage plus interest, costs, and attorney fees. The garnishee appealed, and we retained the appeal.DISTRICT COURT JUDGMENT AFFIRMEDMort G. Welch, Oklahoma City, Oklahoma, for garnishee/appellant.Jack Mattingly, Jr., Seminole, Oklahoma, for plaintiffs/appellees.PER CURIAM.

¶ 1 This dispute arose out of an automobile collision that occurred on April 27, 2007. The trial court awarded damages to the plaintiffs in a default judgment, and plaintiffs proceeded with a post-judgment garnishment against the insurer of the automobile driven by defendant. In the garnishment proceeding, the trial court entered summary judgment in favor of plaintiffs. The primary issue presented in this appeal from the garnishment judgment is whether there is a conflict between the endorsements to automobile liability insurance policies of defendant's mother and father specifically excluding their teenage son from coverage and the public policy expressed in Oklahoma's compulsory automobile liability insurance law. We conclude that the named driver exclusions in this case conflict with the public policy expressed in Oklahoma's compulsory insurance law and hold that the named driver exclusion may not be enforced against plaintiffs/appellees to defeat compulsory omnibus coverage. ¹

¶ 2 Additional questions presented on appeal are 1) did the trial court err in ruling that the vehicle driven by the defendant was covered by the mother's policy, and 2) did the trial court abuse its discretion in allowing plaintiffs to take issue with the garnishee's answer out of time. We answer these questions in the negative.

I. The Case

¶ 3 The following facts are gleaned from the summary judgment record on appeal. In February of 2007, Oklahoma Farmers Union Mutual Insurance Company, now named American Farmers and Ranchers Mutual Insurance Company (AFR), issued automobile liability insurance policies to Hank Neal and to Diann Neal, to be in effect until August of 2007. Hank Neal's policy covered a 1992 GMC Sierra truck and a 1999 GMC Sierra truck, and it included two endorsements naming two children of Hank and Diann Neal, Benjamin and Emily, and stated that any claim would excluded from coverage when one of these two children was a driver. Benjamin's endorsement provided, in part:

in consideration of the premium for which the policy designated above is issued, it is agreed:

(1) that BENJAMIN NEAL shall not be permitted to drive any automobile insured thereunder, and

(2) that, in the event, the insurance afforded by this policy shall not apply with respect to any claim arising out of any accident which occurs while any automobile is being used by BENJAMIN NEAL as the driver of such automobile.

Diann Neal's policy covered a 1995 BMW sedan and included a nearly identical endorsement excluding any claim where Benjamin Neal is the driver. Her policy excluded three drivers, Emily, Benjamin, and Aubree, and the record indicates that all are minor children of Diann and Hank Neal.

¶ 4 The record shows that Benjamin Neal, born in September of 1989, is the son of Hank and Diann Neal, and was seventeen years old on the date of the collision. Hank and Diann Neal were divorced. While AFR asserted that Benjamin resided with his mother, at the summary judgment phase of the litigation the plaintiffs state that this fact is disputed and that “No reason exists why a minor cannot be a resident of both parents' homes.” The decree of divorce states that Diann has custody of Benjamin.² Hank permitted his son, Benjamin, to drive his 1992 GMC Sierra truck, and Benjamin had use of the truck in February of 2007 when Hank purchased the automobile liability insurance policy covering the truck and which stated that Benjamin was excluded as a covered driver.

¶ 5 The automobile liability insurance policies contained the following statement:

Required Oklahoma Statement: Unless this is a certified policy issued in compliance with Section 7–324 of Title 47 of the Oklahoma Statutes, the following statement, required by Oklahoma law, applies: “Liability insurance is provided in this policy in accordance with coverage required by the Compulsory Insurance Law of Oklahoma.”

Neither of the policies nor any other summary judgment filings indicate that the involved liability insurance was issued as proof of financial responsibility under § 7–324 of Title 47 of the Oklahoma Statutes.

¶ 6 Diann Neal's liability insurance policy extended coverage to the named insured and residents of the named insured's household while using the covered automobile and non-owned automobiles. Diann Neal's policy defined a non-owned automobile to mean “an automobile or trailer not owned by or furnished for the regular use of any named insured or any resident of the same household, other than a temporary substitute automobile.”

¶ 7 As to the use of the 1992 GMC Sierra truck, Benjamin Neal's affidavit states that, in February of 2007, his father gave him the truck to use as his personal vehicle and that he was the only driver after his father gave him the truck. Hank Neal's affidavit states that he gave the truck to his son Benjamin on April 15, 2005, for his own personal transportation and thereafter Benjamin was the only driver of the truck.

¶ 8 On April 27, 2007, seventeen-year-old Benjamin Neal was driving his father's 1992 GMC Sierra truck when it collided with a 1987 Nissan Maxima owned by Dewey Dover and driven by Sheila Mulford. The accident report in the summary judgment record allows inferences that the AFR insurance verification form issued for Hank Neal's policy was the proof of compulsory insurance on the 1992 GMC Sierra truck at the scene of the collision and that AFR's insurance verification form did not name Benjamin Neal as an excluded driver.³

¶ 9 On May 14, 2007, Sheila Mulford and Dewey Dover sued Benjamin Neal in Okfuskee County District Court. AFR did not defend Benjamin. However, the summary judgment record includes the correspondence between AFR and plaintiffs' counsel in July of 2007 wherein AFR denied any liability because Benjamin was an excluded named driver and plaintiffs' counsel asserted that such an exclusion is contrary to the compulsory insurance law. On October 15, 2007, the trial court granted a default judgment against Benjamin Neal in the amount of $75,000.00 for personal injury damages in favor of plaintiff Mulford and $15,000.00 in favor of plaintiff Dover, plus attorney fees and costs.

¶ 10 In February 2008, plaintiffs initiated a post-judgment garnishment against AFR to collect on their default judgments, and AFR answered the garnishment. AFR admitted that it issued the automobile liability insurance policies to Hank Neal and Diann Neal and that the policies were in effect at the time of the April 27, 2007 accident. AFR alleged that the policies provided no coverage when Benjamin Neal was the driver based on the named driver exclusion endorsements. AFR also alleged that Benjamin Neal was driving the 1992 GMC Sierra truck without permission and that the truck was not covered by Diann Neal's policy.

¶ 11 In August 2009, plaintiffs filed a motion for summary judgment, a motion to compel, and a supplement to their motion for summary judgment which admitted that Benjamin Neal was seventeen years old at the time of the collision. AFR filed a counter motion for summary judgment in September 2009, and the parties filed their respective responses and replies.

¶ 12 The plaintiffs argued in support of their motion for summary judgment that 1) the named driver exclusion frustrates the public policy expressed in the compulsory insurance law, 2) extant jurisprudence holds such exclusions invalid to the extent they deny the minimum compulsory coverage to innocent third parties, and 3) the Oklahoma Legislature has not plainly and unambiguously enacted the named driver exclusion as part of the compulsory insurance law. AFR argued in support of its motion for summary judgment that 1) the named driver exclusion is authorized by Oklahoma's compulsory insurance law and enforceable, 2) even without the named driver exclusion, the 1992 GMC Sierra truck was not an owned or non-owned vehicle covered by Diann Neal's policy, and 3) plaintiffs failed to take issue with the garnishment answer, thereby making AFR's non-liability conclusive under 12 O.S.2001 § 1177.

¶ 13 The district court granted summary judgment in favor of plaintiffs. In the journal entry of judgment, the district court 1) sustained plaintiffs' previous request to file out of time its notice of election to take issue with the garnishee's answer; 2) concluded that, as a matter of law, the named driver exclusion endorsements to the automobile liability...