In Safe Auto Insurance Co. (Safe Auto) v. Rene Oriental-Guillermo, et al. the Pennsylvania considered the enforceability of an unlisted resident driver exclusion (“URDE”) in a personal automobile insurance policy.
Mr. Oriental-Guillermo (“Guillermo”) owned a car, which he insured through Safe Auto. The Safe Auto insurance policy contained a URDE, which excluded coverage for any individuals who lived with, but were not related to, Mr. Oriental-Guillermo, and whom Mr. Oriental-Guillermo did not specifically list as an additional driver on the insurance policy.
Mr. Oriental-Guillermo allowed his girlfriend, Rachel Dixon (“Dixon”), with whom he resided, to operate his vehicle, at which time she was involved in an accident with another vehicle, owned by Iris Velazquez (“Velazquez”), and operated by Alli Licona-Avila (“Avila”). Priscila Jimenez (“Jimenez”), a passenger in the vehicle operated by Avila, was injured, and she brought suit against Guillermo, Dixon and Avila. Shortly thereafter, Safe Auto sought a declaratory judgment to support its position to deny coverage based upon the URDE, since Dixon, lived with Guillermo, but was not related to him, nor was she listed as an additional driver on the insurance policy.
The trial court determined that the URDE was unambiguous, valid and enforceable; and, concluded that Safe Auto had no duty under the Policy to indemnify or defend Dixon. Jimenez appealed to the Pennsylvania Superior Court and argued that: (1) the trial court erred in holding the URDE was valid and enforceable; (2) the URDE violates the provisions of the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”); and, (3) that the URDE violates public policy because it “undermines the goal of maximum feasible restoration to accident victims.” The Superior Court affirmed the trial court’s decision, concluding that the language of the Policy, including the URDE, was unambiguous; and, therefore, enforceable. Second, the Court determined that the URDE did not violate Section 1786(f) of the MVFRL because it is the “owner” of a vehicle, and not the insurer, who must ensure that all drivers of his/her vehicle are covered by insurance. Finally, the Court concluded that the URDE in question was not against public policy because the MVFRL does not anticipate always shifting the burden [to] insurance companies to discover the identities of resident, non-family member insureds, who have access to an insured’s vehicle, which in the Court’s view, was a burden more appropriately placed in the hands of the insured. Jimenez appealed to the Pennsylvania Supreme Court contending that the URDE was inconsistent with Sections 1786(a) and (f), which provides:
(a) General rule.− Every motor vehicle of the type required to be registered under this title which is operated or currently registered shall be covered by financial responsibility.
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(f) Operation of a motor vehicle without required financial responsibility.–Any owner of a motor vehicle for which the existence of financial responsibility is a requirement for its legal operation shall not operate the motor vehicle or permit it to be operated upon a highway of this Commonwealth without the financial responsibility required by this chapter.
At the onset, the Court determined that there is no requirement in the MVFRL that an owner of a vehicle identify all permissive users of his/her vehicle when obtaining insurance coverage. Therefore, Jiminez argued that the URDE improperly shifted the burden of identifying all permissive users of a vehicle to the owner. In response, Safe Auto argued that if Jiminez’ interpretation of the MVFRL was accepted, all possible coverage exclusions would be invalid, which would have the effect of nullifying an insured’s calculated decision to reject coverage in exchange for reduced premiums.
The Supreme Court did not accept Jiminez’ public policy argument, stating “[r]equiring an insurer to provide coverage for an unlimited number of permissive users, including those who may be operating the vehicle on a regular basis, but whom the insured has neither disclosed nor paid to insure, contravenes the accepted principle that insureds are not entitled to receive gratis coverage. Further, such an interpretation would almost certainly result in an increase in the cost of insurance, as insurers would be forced to insure unknown risks.” Finally, the Court determined that the “clear and unambiguous” URDE did not violate the MVFRL because Section 1786 speaks to the obligations of the owner of the vehicle, and not the insurer. The Court reasoned that the Guillermo had the option of adding Dixon to the Policy, but he chose not to do so, which resulted in a reduced insurance premium.