Opinion ID: 1122980
Heading Depth: 2
Heading Rank: 3

Heading: Enforceability of Step-Down Provision

Text: National relies on our holding in Cullum v. Farmers Insurance Exchange, 857 P.2d 922, 923 (Utah 1993), for its argument that an insurance limitation incorporated by reference is unenforceable in Utah. In Cullum, we examined a Utah insurance contract which contained a step-down provision incorporating the limits of the Utah Financial Responsibility law by reference. We held that the provision violated Utah Code Ann. § 31A-21-106, which requires that all provisions of an insurance contract appear on the face of the policy or in an accompanying document. Since Cullum applied Utah law to a Utah contract and the instant case involves an Idaho contract under Idaho law, National's reliance on that analysis is misplaced. In addition, contrary to National's reading of the case, our holding did not prohibit properly drafted step-down coverage for permissive users. We next examine whether the step-down provision in the Farmers policy is enforceable under Idaho law. As previously noted, Idaho has no statute which requires all insurance contract provisions to be set forth in the policy or accompanying documents. In fact, Idaho Code Ann. § 49-1212(5) (1994) provides that every motor vehicle liability policy shall be subject to the following provisions which need not be contained therein. There follows a list of four provisions which automatically become part of every motor vehicle liability insurance policy irrespective of whether they are expressed in the policy itself. While this is not incorporation by reference per se, it does illustrate that the Idaho legislature has not required all provisions to be set forth in the policy itself. There is no indication in the Idaho Code, and National does not contend, that insurance companies in Idaho are not free to incorporate the requirements and coverage limits contained in the Idaho Financial Responsibility law into their policies by reference. National asserts, however, that although no Idaho statute forbids incorporation by reference, it should be prohibited as a matter of public policy. However, in Meckert v. Transamerica Insurance Co., 108 Idaho 597, 701 P.2d 217 (1985), the Idaho Supreme Court refused to invalidate an exclusion of coverage in an underinsured motorist coverage provision contained in an automobile insurance policy, pointing out that Idaho statutes do not regulate underinsured motorist coverage. The court wrote: Neither the Idaho legislature nor the courts have declared that there exists a public policy applicable to underinsured motorist coverage. While such a policy might be desirable that policy should be enunciated by our legislature and not by this court. Hence, we hold that there is no public policy basis upon which to rule that the language of the exclusion clause presented here is invalid. Id. 701 P.2d at 220 (citations omitted). Later, in Farmers Insurance Co. of Idaho v. Buffa, 119 Idaho 345, 806 P.2d 438, 440 (1991), the court again refused to void an underinsured motorist provision, stating, Underinsured coverage in this state is a matter of contract law, not public policy. These cases evince a refusal by the highest court in Idaho to interfere with the right of the parties to freely contract with regard to automobile insurance except in instances where the legislature has expressly curtailed that right. Consequently, we reject National's argument that the step-down provision in the instant case violates the public policy of Idaho.