Opinion ID: 2636721
Heading Depth: 1
Heading Rank: 4

Heading: the compulsory liability insurance law displaces insurance policy provisions only to the extent they are incompatible with the law's intent to provide minimal compensation to an injured third party

Text: ¶ 15 Ball argues that the Compulsory Liability Insurance Law completely nullifies an exclusionary clause that violates its mandate of minimum liability coverage. She argues that if a person would have been a policy-defined insured under the terms of the omnibus clause but for the exclusion, he or she becomes such by reason of the exclusion's nullification. [26] The policy must then be treated as if the exclusion never existed and the wrongly excluded person becomes entitled to the performance of the insurer's other contractual obligations to its insured, including a defense. We disagree. ¶ 16 An insurer's duty to defend claims against its insured is an ex contractu obligation. [27] The defense duty is measured by the nature and kinds of risks covered by the policy as well as by the reasonable expectations of the insured. [28] Ordinarily the duty to defend accompanies the duty to indemnify, but the parties may provide otherwise. [29] ¶ 17 No public policy requires our interference with an insurance contract hammered out by the parties as long as all applicable legislative mandates are met. [30] It is  the intent of the compulsory liability insurance law that, to the minimum amount of liability coverage required by statute, the innocent plaintiff should be entitled to recover.  [31] Our decisions invalidating exclusionary clauses have been narrowly crafted to achieve this purpose. Where an offending exclusion has diluted the omnibus coverage required by statute, we have treated the policy as providing the required coverage for the benefit of the innocent plaintiff. [32] We have never held, nor do our decisions suggest, that the exclusion is nullified beyond achieving that purpose. Thus, in O'Neill v. Long, [33] we held that while the Compulsory Liability Insurance Law requires an insurer to provide liability insurance in the minimum statutory amount, the unauthorized driver of the insured vehicle was not an insured under the terms of [the insurer's] policy for of liability coverage in excess of the statutory minimum compulsory insurance. [34] (emphasis added). We said instead that the Law requires liability insurance must continue to cover the insured vehicle even though the permittee exceeds the scope of the named insured's consent. [35] (emphasis added) ¶ 18 Our Compulsory Liability Insurance Law mandates that vehicles be secured against liability to innocent victims where harm occurs from a vehicle's negligent operation. It does not mandate an insurer-provided defense of persons driving vehicles that are secured by operation of the Compulsory Liability Insurance Law. [36] The statutory omnibus clause displaces only those insurance policy provisions that are incompatible with the law's intent to provide minimal compensation to an injured third party. The person whose minimal coverage is law-mandated is not entitled to the insurer's performance of purely contractual obligations that stand outside the law's mandate. This rule gives effect to the public policy underlying the Compulsory Liability Insurance Law while refraining from unduly interfering with the parties' freedom to contract, which can be restricted only in the name of articulated public policy. [37] ¶ 19 Oklahoma's decisional law is by now firmly established that liability exclusions, no matter the identity of the class of persons excluded, which diminish the protection afforded by the Compulsory Liability Insurance Law will not be enforced as to minimal statutory liability coverage, except as permitted by existing law. Today's pronouncement, recognizing that the duty to defend is not a part of the Law's mandate, should not be taken by the insurance industry as a license to place or leave in place unenforceable exclusions in policies in a manner that misleads insureds as to the insurer's other, dependent contractual obligations. Should flagrant and persistent abuses arise, the court might find itself impelled to reconsider the point addressed by today's decision. It would be advantageous for all concerned if insurers would draft their policies to take into account today's pronouncement.