PRESENT: All the Justices 

FRANK JONES, ET AL. 

 OPINION BY 

v. Record No. 032632 JUSTICE G. STEVEN AGEE 

 September 17, 2004 

STATE FARM MUTUAL AUTOMOBILE 

INSURANCE COMPANY, ET AL. 

FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK 

Everett A. Martin, Jr., Judge 

The sole issue in this appeal is whether territorial 

restrictions on coverage for medical expenses under certain 

insurance policies violate Code § 38.2-2201(A)(1). 

I. BACKGROUND AND PROCEEDINGS BELOW 

 Frank Jones, Kathy Jones, Joanne Bangle, James R. Greer, 

Henry Hankins, and Patricia Hankins (“plaintiffs”) were involved 

in a motor vehicle accident in St. Maarten in the Netherlands 

Antilles where all sustained physical injuries. The plaintiffs 

incurred significant medical expenses both in St. Maarten and in 

the United States. They were covered by their respective 

automobile insurance policies issued by one of three insurers: 

State Farm Mutual Automobile Insurance Company (“State Farm”), 

United Services Automobile Association (“USAA”), or Allstate 

Insurance Company (“Allstate”). 

 Each insurance policy contained nearly identical clauses 

limiting coverage for medical expenses to accidents that occur 

within certain territorial limits. The State Farm policy, for 
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example, contained a condition limiting coverage to “accidents, 

occurrences and loss . . . while the automobile is within the 

United States of America, its territories or possessions, or 

Canada, or is being transported between ports thereof.” The 

USAA and Allstate policies have similar conditions. 1

 The plaintiffs filed claims for medical expense benefits, 

which each insurance company denied because the accident 

occurred outside the territories covered by the respective 

policies. The plaintiffs then each filed motions for judgment, 

which were consolidated for trial, alleging breach of contract 

on the grounds that the territorial limitations within each 

policy failed to provide the minimum coverage required by Code 

§ 38.2-2201(A)(1).2 This code section provides in pertinent part 

 1

 USAA’s territorial limitation provides in pertinent part: 

“This policy applies only to accidents and losses which occur: 

2) Within the policy territory. The policy territory is: a. 

The United States of America, its territories or possessions; b. 

Puerto Rico; or c. Canada.” Allstate’s territorial limitation 

provides, “[t]his insurance applies only to accidents which 

occur during the policy period within the United States of 

America, its territories or possessions, or Canada.” 

2

 In its entirety, Code § 38.2-2201(A)(1) provides: 

A. Upon request of an insured, each insurer 

licensed in this Commonwealth issuing or 

delivering any policy or contract of bodily 

injury or property damage liability 

insurance covering liability arising from 

the ownership, maintenance or use of any 

motor vehicle shall provide on payment of 

the premium, as a minimum coverage (i) to 

persons occupying the insured motor vehicle; 

and (ii) to the named insured and, while 
3

that “each insurer licensed in this Commonwealth . . . shall 

provide on payment of the premium, as a minimum coverage . . . 

[a]ll reasonable and necessary expenses for medical [services].” 

Code § 38.2-2201(A). The plaintiffs argue that since the Code 

does not expressly authorize a territorial limitation on 

coverage, the insurance policies do not provide the statutorily 

mandated minimum medical expense benefits. Therefore, the 

plaintiffs contend, the limitations are invalid because they are 

inconsistent with the statutory requirement. 

 The trial court determined that the territorial limitations 

were “reasonable”, not in violation of Code § 38.2-2201 and 

entered final judgment in favor of the insurance companies. We 

awarded the plaintiffs an appeal. 

 

resident of the named insured's household, 

the spouse and relatives of the named 

insured while in or upon, entering or 

alighting from or through being struck by a 

motor vehicle while not occupying a motor 

vehicle, the following health care and 

disability benefits for each accident: 

1. All reasonable and necessary expenses for 

medical, chiropractic, hospital, dental, 

surgical, ambulance, prosthetic and 

rehabilitation services, and funeral 

expenses, resulting from the accident and 

incurred within three years after the date 

of the accident, up to $2,000 per person; 

however, if the insured does not elect to 

purchase such limit the insurer and insured 

may agree to any other limit; 
4

II. Analysis 

 This Court has previously answered the inquiry as to 

whether an insurer and its insured can contractually limit the 

medical expense provisions of Code § 38.2-2201(A)(1). That 

statute does not prohibit limitations and we have previously set 

forth parameters for such limitations. See State Farm Mutual 

Auto. Ins. v. Gandy, 238 Va. 257, 383 S.E.2d 717 (1989); Cotchan 

v. State Farm Fire & Casualty Co., 250 Va. 232, 462 S.E.2d 78 

(1995). We see no reason why a territorial limitation should 

not be considered a permissible contractual limitation under the 

facts of this case. 

 In Gandy we held that “reasonable exclusions not in 

conflict with statute in an insurance contract will be enforced, 

but it is incumbent upon the insurer to employ exclusionary 

language that is clear and unambiguous.” 238 Va. at 261, 383 

S.E.2d at 719. Therefore, “an exclusion is valid if it is 

reasonable, clear, and unambiguous.” Cotchan, 250 Va. at 235, 

462 S.E.2d at 80. The plaintiffs concede that the territorial 

limitations of the policies are clear and unambiguous. They 

argue that it is unreasonable to limit the medical expense 

coverage based upon the location of the accident, particularly 

when some medical expenses are incurred with health care 

providers within the territory covered under the policy. 
5

 This argument misses the point of the territorial 

limitation for at least two distinct reasons, either of which 

establishes the reasonableness of the limitation. First, an 

insurance company measures the actuarial risk for its policies 

by experience and data collected within the area for which 

coverage is contractually bound (i.e., the United States and 

Canada), and not by the wide variations found in foreign 

countries. The premium the insured contracts to pay for the 

policy coverage is based on that actuarial risk assumed by the 

insurer under the terms of the insurance contract. The premium 

payment and coverage terms of the contract between the insurer 

and insured are fundamentally based on these identifiable risks. 

It would be manifestly unreasonable to alter the terms of the 

insurance contract by judicial fiat and arbitrarily add to the 

policy additional and unmeasured insurance risks involved for 

driving in St. Maarten or any other foreign country or territory 

which is not a part of the insurance contract. 

 Second, even if an insured’s medical care is actually 

rendered within the territorial limits of coverage for an 

accident outside those limits, the insurance company would often 

be required, contrary to the plaintiffs’ assertions, to verify 

and investigate the reasonableness and necessity of that care. 

Making this determination could require investigating the actual 

injury and the foreign medical care provided in order to 
6

determine which medical expenses were reasonable and necessary 

and causally related to the accident. Reformulating the 

insurance contract to require the insurance company to engage in 

verification and investigation procedures around the globe would 

be a substantial expense not contemplated by the parties’ 

contract of insurance. Imposing such a burden on the insurance 

company is plainly unreasonable. 

 The territorial limitations of the insurance policies in 

the case at bar are thus reasonable exclusions which are clear 

and unambiguous. The trial court did not err in its findings in 

this regard. 

 Plaintiffs also make the vague and undefined argument that 

the insurance policy limitations on territorial coverage violate 

the public policy of the Commonwealth. This Court has 

previously determined that Code § 38.2-2201(A)(1) does not 

prohibit policy exclusions that are clear, unambiguous and 

reasonable. The policies in this case meet that criteria as 

just noted above. 

 The General Assembly has revisited and amended Code § 38.2-

2201 several times since our decisions in Gandy and Cotchan. If 

the foregoing standard were deemed contrary to public policy, 

the General Assembly has had multiple occasions to act and it 

has not. “Where a statute has been construed by the courts, and 

is then re-enacted by the legislature, the construction given to 
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it is presumed to be sanctioned by the legislature, and 

thenceforth becomes obligatory upon the courts.” Miller v. 

Commonwealth, 180 Va. 36, 43, 21 S.E.2d 721, 724 (1942). The 

plaintiff’s public policy argument is without merit. 3

III. Conclusion 

 The territorial limitations of the insurance policies in 

the case at bar are clear, unambiguous and reasonable and thus 

do not violate Code § 38.2-2201. Accordingly, the judgment of 

the trial court will be affirmed. 

Affirmed. 

 3

 The General Assembly has recognized the validity of 

similar territorial limitations in other insurance statutes. 

See Code § 46.2-472(3) (limiting mandated coverage to accidents 

within the Commonwealth, the United States, or Canada). 

Additionally, many other jurisdictions have upheld the validity 

of similar territorial limitations. See, e.g., Kvalheim v. Farm 

Bureau Mutual Ins. Co., 195 N.W.2d 726, 729 (Iowa 1972); Clark 

v. State Farm Mutual Auto. Ins. Co., 725 So.2d 779 (Miss. 1998); 

Hall v. Amica Mutual Ins. Co., 648 A.2d 755 (Pa. 1994); Ruiz v. 

Government Employees Ins. Co., 4 S.W.3d 838, 841-42 (Tex. Ct. 

App. 1999).