Opinion ID: 1881223
Heading Depth: 2
Heading Rank: 3

Heading: Government Vehicle Exclusion

Text: Nationwide argues that the language of the policy excludes underinsured motorist coverage for matters involving government-owned vehicles. The policy states: 3. We will not consider as an uninsured motor vehicle or underinsured motor vehicle: ... b) any motor vehicle owned by a government unit or agency. ... The purpose of this language is to avoid responsibility of underinsured claims where the company would not be able to recover subrogation from the tortfeasor who might be protected by sovereign immunity. The unfortunate inability of the company to recover subrogation claims from the wrongdoer is of no consequence to the person covered by an underinsured policy in Kentucky. All that is required is that the insured be able to establish fault and damages before obtaining underinsured motorist coverage. See KRS 304.39-320; Preston ; Puckett . The language urged by the company as applied to underinsured claims would violate the public policy and purpose of the Motor Vehicle Reparations Act and the underinsured motorist statute, KRS 304.39-320. Kentucky requires that automobile insurance companies make underinsured coverage available upon request. Once a request is made, it is mandatory that the insurance company provide the coverage for an additional premium. Any attempt to limit or exclude the extension of coverage is clearly contrary to the expressed intent of the underinsured motorist statute and is void and unenforceable. Reliance by Nationwide on Delaney , is misplaced. That case was not decided under the underinsured motorist statute and is not supportive of the position of the company here. There are significantly different policy considerations in cases involving underinsured motorist benefits which are materially different from the uninsured motorist laws. The intent of the Motor Vehicle Reparations Act in general and the underinsured motorist statute, KRS 304.39-320, in particular, is to ensure as much as possible that the victim of a motor vehicle accident is fully compensated. The policy exclusion which is the subject of this opinion is clearly contradictory to such a statutory purpose. Cf. Saxe v. State Farm Auto. Mut. Ins. Co., Ky.App., 955 S.W.2d 188 (1997). As stated in Preston , the public policy underlying the Kentucky statutes is the compensation of people who are injured by the negligence of uninsured motorists. The public policy regarding underinsured situations is even more compelling. Morris, supra , also supports the position of the insureds. As noted earlier, in Morris , this Court observed that a suit to recover underinsured motorist coverage is a direct action against the insurance carrier who alone is the real party in interest. Consequently, claims for underinsured motorist benefits would still exist against the underinsured motorist carrier even though the claim against the worker's compensation carrier itself might be barred by the exclusive remedy provisions of the Workers' Compensation Act. By comparison, claims against the insurance company here for underinsured coverage would not be barred even though the plaintiffs could be barred from any direct recovery against a municipality protected by sovereign immunity. Courts in other jurisdictions have consistently held that the government-owned vehicle exclusion is void even in policies of uninsured motorist coverage. Vaught v. State Farm Fire & Casualty Co., 413 F.2d 539 (8th Cir.1969); Higgins v. Nationwide Mut. Ins. Co., 291 Ala. 462, 282 So.2d 301 (1973); Transportation Ins. Co. v. Martinez, 183 Ariz. 33, 899 P.2d 194 (Ct.App.1995); McClellan v. Sentry Indemnity Co., 140 Ariz. 558, 683 P.2d 757 (Ct.App.1984); Cropper v. State Farm Mut. Auto. Ins. Co., 671 A.2d 423 (Del.Super.Ct.1995); Johns v. Liberty Mut. Fire Ins. Co., 337 So.2d 830 (Fla.Dist.Ct.App.1976); State Farm Mut. Auto. Ins. Co. v. Carlson, 130 Ga.App. 27, 202 S.E.2d 213 (1973); Franey v. State Farm Mut. Auto. Ins. Co., 5 Ill.App.3d 1040, 285 N.E.2d 151 (1972); Hillhouse v. Farmers Ins. Co., Inc., 226 Kan. 68, 595 P.2d 1102 (1979); Powell v. Allstate Ins. Co., 233 So.2d 38 (La.Ct.App.1970); Young v. Greater Portland Transit Dist., 535 A.2d 417 (Me.1987); Jennings v. City of Dayton, 114 Ohio App.3d 144, 682 N.E.2d 1070 (1996); Parrish v. Mid-American Fire & Casualty Co., 63 Ohio App.3d 1, 577 N.E.2d 1109 (1989); Watters v. Dairyland Ins. Co., 50 Ohio App.2d 106, 361 N.E.2d 1068 (1976); State Farm Auto. Ins. Co. v. Greer, 777 P.2d 941 (Okla.1989); Rueschemeyer v. Liberty Mut. Ins. Co., 673 A.2d 448 (R.I.1996). See also, Widiss, Uninsured and Underinsured Motorist Ins., § 8.8 (1992) and additional cases cited therein. Cases in other jurisdictions which have addressed the validity of the government-owned vehicle exclusion under policies of underinsured motorist coverage have also consistently held such exclusionary language void and unenforceable. Ronning v. Citizens Security Mut. Ins. Co., 557 N.W.2d 363 (Minn.Ct.App.1996); Parrish, supra ; Greer, supra ; Karlson v. City of Oklahoma City, 711 P.2d 72 (Okla.1985); Kyrkos v. State Farm Mut. Auto. Ins. Co., 121 Wash.2d 669, 852 P.2d 1078 (1993). It is of some interest to observe that in Missouri, the government-owned vehicle exclusion is void as against public policy. See Martin v. State Farm Mut. Auto. Ins. Co., 755 S.W.2d 638 (1988). See also Welch v. Automobile Club Inter-Insurance Exchange, 948 S.W.2d 718 (Mo.Ct.App.1997); Gibbs v. National General Ins. Co., 938 S.W.2d 600 (Mo.Ct.App.1997). The policy provision seeking to exclude government-owned vehicles is contrary to the express intent of KMVRA and the Underinsured Motorist Statute. The Kentucky Underinsured Motorist Statute is part of KMVRA and must be construed with the Act.