Opinion ID: 2586252
Heading Depth: 4
Heading Rank: 1

Heading: The named driver exclusion is a valid exception to statutorily mandated liability coverage.

Text: Nelson's first argument is that application of the named driver exclusion to her claims against the Uliseses improperly negates the Uliseses' statutorily mandated minimum liability coverage. [46] Alaska Statute 28.22.101 requires an owner's automobile policy to insure the person named against loss from the liability imposed by law for damages that arise from the ownership, maintenance, or use of a designated motor vehicle. It provides for a named insured's liability coverage up to statutorily mandated limits. [47] Lilii and Anita Ulisese, as the named insureds, maintained liability coverage under the Progressive policy. Alaska Statute 28.20.440(b)(2), part of the MVSRA, also requires that an owner's automobile insurance policy insure the named insured and every other person using the vehicle with their permission against loss for damages arising out of the ownership, maintenance, or use of the vehicle. The stated policy behind the MVSRA is to ensure that motorists 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. [48] However, subsection .440( l ), which provides for a specific exception from policy coverage for a named driver, can be read in harmony with the more general provisions of AS 28.20.440 and AS 28.22.101. [49] The inclusion of the phrase [n]otwithstanding any other provisions of law plainly indicates that subsection .440( 1 ) was intended to be an exception to other potentially conflicting laws. Insurers commonly allow their insureds to use named driver exclusions to avoid covering high-risk drivers where the premium for such coverage would be cost prohibitive to the named insured. [50] Where the loss giving rise to damages arises from Siuleo's driving, subsection .440( l ) precludes coverage under the Uliseses' own liability policy for their negligent entrustment. The minimum liability coverage otherwise required of the Uliseses is thus circumscribed, but only to the extent that the claim arose out of Siuleo's operation of a vehicle. Other jurisdictions have upheld named driver exclusions as permissible exemptions to statutorily mandated minimum liability coverage. [51] In upholding the validity of named driver exclusions, courts have relied on public policy rationales that balance cost reduction with the desire to encourage the procurement of insurance coverage. [52] The legislative history of House Bill 218, which became subsection .440( l ), indicates that the legislature was aware of the potential dangers of the named driver exclusion. Minutes of a House Labor and Commerce Committee meeting considering HB 218 reveal the committee's concern that parents who elected to exclude a child from coverage might be held personally liable with no insurance protection for the child's auto accident. [53] Committee testimony in favor of the exclusion noted, however, that the exclusion would enable a household with a high-risk driver to maintain auto coverage by excluding the high-risk driver, while encouraging the excluded driver to obtain his or her own policy. [54] In providing for the exclusion, the legislature offered insureds a chance to avoid excessive premiums they would otherwise be required to pay if they could not exclude a high-risk driver. Ultimately, this helps to minimize the risk that a policyholder may elect to forgo coverage altogether. [55] It also encourages responsibility on the part of policyholders and excluded drivers: Policyholders are given a powerful economic incentive to ensure that an excluded driver does not operate a policyholder's vehicle, while the excluded driver is encouraged to obtain his own insurance. [56] Forcing an insurer to provide liability coverage for claims arising out of the excluded driver's use of the vehicle also obviates the practical effect of the exclusion. It skirts a reasonable reading of the exclusion's plain language and give insureds the benefit of a bargain for which they did not pay. As the Arizona Court of Appeals noted in an analogous case: [I]t is inconceivable that the legislature would purposely enact statutory language that authorized the insurer to exclude coverage for personal liability incurred by the unacceptable driver and to exclude vicarious liability incurred due to the unacceptable driver's conduct, but not to exclude coverage for the named insured's personal liability for negligently entrusting a vehicle to the same unacceptable driver.[ [57] ] In light of the countervailing legislative policies at issue, the legislature's concern with enabling households to secure affordable insurance, and the plain language of subsection .440( l ), we hold that the named driver exclusion is a permissible exception to Alaska's minimum liability coverage provisions. [58]