Opinion ID: 1834936
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Heading: Effect of the Rental Agreement Between Budget and the Lessee

Text: Although our analysis supports the conclusion that Budget, as a self-insured, is not required to provide omnibus coverage, the plaintiffs contend Budget is required to provide omnibus coverage in its capacity as an automobile liability insurer. We agree with the plaintiffs that the lease agreement between Budget and the lessee clearly constitutes a contract to provide liability coverage. [13] However, an insurer has a right to restrict his liability unless such restriction conflicts with statutory requirements or is contrary to public policy. Pareti v. Sentry Indem. Co., 536 So.2d 417 (La. 1988); Oceanonics, Inc. v. Petroleum Distrib. Co., 292 So.2d 190 (La. 1974); Muse v. Metropolitan Life Ins. Co., 193 La. 605, 192 So. 72, 75 (1939).
The plaintiffs contend the prohibitory clauses contained in the Budget rental contract conflict with La.R.S. 32:900(B)(2), which mandates the inclusion of specific omnibus provisions in a Motor Vehicle Liability Policy, as defined. For the following reasons, we find no merit in the plaintiffs' argument. The plaintiffs fail to discern the distinction between a motor vehicle liability policy and an automobile liability policy. [14] The term motor vehicle liability policy is defined by La.R.S. 32:900(A) as an owner's or an operator's policy of liability insurance, certified as provided in R.S. 32:898 or 32:899 as proof of financial responsibility, and issued ... by an insurance carrier duly authorized to transact business in this state.... By purchasing a motor vehicle liability policy an owner or operator satisfies the requirements of the LMVSRL. In contrast, an automobile liability policy is a voluntary policy which has not been certified as proof of a motorist's financial responsibility and does not therefore satisfy the requirements of the LMVSRL. A language of La.R.S. 32:900(B)(2) clearly indicates the mandatory omnibus clause requirement applies only when the liability policy in question is certified and used as proof of financial responsibility. New Zealand Ins. Co. v. Holloway, 123 F.Supp. 642 (W.D.La.1954); Gotreaux v. Travelers Ins. Co., 299 So.2d 466 (La.App. 3rd Cir.), writ denied, 302 So.2d 309 (La. 1974); Johnson v. Universal Automobile Ins. Ass'n, 124 So.2d 580 (La.App. 3rd Cir. 1960). La.R.S. 32:900(B)(2) does not affect the terms of a voluntary automobile liability policy which was not obtained to comply with the requirements of the LMVSRL. [15] We believe La.R.S. 32:900(B)(2), which mandates the inclusion of omnibus coverage in all motor vehicle liability policies, is not applicable to the lease agreement between Budget and the lessee. [16] At the crux of our determination is the idea that the insured/lessee is not the owner of the vehicle but is merely the operator. Unlike owners of motor vehicles, who are required to provide proof of financial responsibility prior to registration, [17] the LMVSRL does not require operators of motor vehicles to furnish evidence of financial responsibility prior to obtaining a driver's license. Proof of financial responsibility is required of operators only if a judgment against them arising out of a previous accident is unsatisfied or if they have been convicted of violating one of certain named offenses. [18] Thus, unless an insured operator has by previous conduct brought himself within the purview of the LMVSRL, he is not required to carry liability insurance, nor does any voluntary automobile liability policy which he may choose to purchase have to contain particular provisions required by La.R.S. 32:900. Because there is no allegation of prior conduct which would have required the lessee to provide proof of financial responsibility under the LMVSRL, we find the contract of insurance between Budget and the lessee to be a voluntary automobile liability policy to which La.R.S. 32:900 has no application. [19] Furthermore, the only means by which an insurance policy may serve as proof of financial responsibility sufficient to satisfy the requirements of the LMVSRL is when it has been officially certified and issued by an insurance carrier duly authorized to transact business in this state. The lease agreement provided by Budget was not certified as provided by La.R.S. 32:898 or 32:899 and was not intended to satisfy the requirements of the LMVSRL. In support of their argument that La. R.S. 32:900(B)(2) mandates the inclusion of an omnibus clause in the lease agreement, the plaintiffs cite Jones v. King, 549 So.2d 350 (La.App. 5th Cir.1989) and Pollard v. Champion Ins. Co., 532 So.2d 838 (La.App. 4th Cir. 1988). In Jones and Pollard the appellate courts correctly held that the lease agreement, which provided liability insurance to the lessee, was deemed to provide uninsured motorist coverage because La.R.S. 22:1406(D) requires all automobile liability policies to include uninsured motorist coverage unless specifically rejected in writing. These cases are clearly distinguishable from the instant case because while La.R.S. 22:1406(D) requires the inclusion of UM coverage in every insurance policy written in the state, La.R.S. 32:900 requires the inclusion of an omnibus clause only in those policies used as proof of financial responsibility. The plaintiffs also rely on an opinion of the Louisiana Attorney General [20] to buttress their argument that prohibitory clauses such as the one contained in the Budget rental contract restrict the required omnibus provisions of auto insurance policies written in Louisiana in violation of La.R.S. 32:900. Although the referenced opinion indicates all liability policies written in Louisiana are controlled by the statutory omnibus coverage provision contained in La.R.S. 32:900, we note the Attorney General based his opinion on Fields v. Western Preferred Casualty Co., 437 So.2d 344 (La.App. 2nd Cir.), writ denied, 440 So.2d 754 (La. 1983). In Fields, the court correctly distinguished between a compulsory liability policy required under the LMVSRL by La.R.S. 32:861 and a voluntary liability policy and held the statutory omnibus coverage provision of La.R.S. 32:900 would override or supersede a provision in a compulsory liability policy which excluded a named driver. Thus, because the Attorney General's opinion fails to make this distinction, it erroneously extends the holding of Fields beyond that intended by the Second Circuit Court of Appeal. In conclusion, because the LMVSRL does not normally require the operator of a vehicle to carry public liability insurance, we find the contract of insurance between Budget and the lessee to be a voluntary automobile liability policy to which La. R.S. 32:900 has no application. Therefore, we hold the insurance coverage created by the lease agreement is not subject to the requirements of La.R.S. 32:900. [21]
We find the plaintiffs' argument that the Budget rental agreement should provide mandatory omnibus coverage to a permissive user pursuant to La.R.S. 22:655 equally unpersuasive. [22] La.R.S. 22:655, which sets forth the general requirements of liability policies delivered or issued in Louisiana, states in pertinent part: [I]t is the purpose of all liability policies to give protection and coverage to all insureds, whether they are named insured or additional insureds under the omnibus clause, for any legal liability said insured may have as or for a tort-feasor within the terms and limits of said policy. Our reading of the statute does not support the plaintiffs' allegation that La.R.S. 22:655 requires omnibus coverage in all liability policies written in Louisiana. The language of the statute merely promotes a broad interpretation of omnibus provisions if they are contained in a liability policy. La.R.S. 22:655 does not in any way mandate omnibus coverage in all liability policies. Furthermore, the Louisiana jurisprudence has never indicated that La.R.S. 22:655 requires mandatory omnibus coverage in all liability policies. Indeed, the Fifth Circuit Court of Appeals in Jones v. Mid-South Ins. Co., 358 F.2d 887 (5th Cir. 1966), specifically held La.R.S. 22:655 does not imply a mandatory omnibus provision.
Absent an existing statutory provision mandating the inclusion of an omnibus clause in the insurance contract between Budget and the lessee, the issue becomes whether the provisions of the lease agreement, which attempt to terminate and cancel insurance coverage if the rented vehicle is operated by one not named in the agreement, are unenforceable as contrary to public policy. Louisiana courts have consistently held exclusions of specific drivers in automobile liability policies are permitted and are not against public policy. Smith v. Western Preferred Casualty Co., 424 So.2d 375 (La.App. 2nd Cir. 1982), writ denied, 427 So.2d 1212 (La.1983); Hudson v. Thompson, 422 So.2d 640 (La.App. 3rd Cir. 1982); Washington v. Dixie Leasing of New Orleans, Inc., 352 So.2d 363 (La.App. 4th Cir.1977), writ denied, 354 So.2d 210 (La. 1978). Although we acknowledge that automobile liability policies are issued primarily for the protection of the public rather than the insured, it is not the public policy of this state to protect and provide compensation to injured persons at all times. Consequently, we believe it is not against public policy for an automobile rental agency to restrict liability coverage to certain named drivers. The agency has an interest in protecting its property and the right, as the owner of the vehicle, to impose restrictions on the operation and use of the vehicle. This comports with the freedom to contract [23] and the constitutional protection against the impairment of contracts. [24]