Opinion ID: 1952280
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Heading: Intoxication Exclusion

Text: Worldwide asserts that the intoxication exclusion provision in the rental agreement between International and Knoller is void as against public policy because it purports to restrict or limit statutorily mandated insurance coverage and that, as a result, Knoller is entitled to coverage under the Indemnity policy. We agree. In circumstances in which the purpose of statutorily required insurance coverage is intended for the protection of the public, that purpose may not be thwarted by permitting an insurer to avail itself of technical defenses included in its policy relating to conditions whose performance is wholly beyond the ability of the injured person to control. See, e.g., Royal Indemnity Co. v. Olmstead, 193 F.2d 451 (9th Cir.1951); John P. Ludington, Annotation, State Regulation of Motor Vehicle Rental (You-Drive) Business, 60 A.L.R.4th 784 (1988). The Rhode Island General Assembly has expressed a strong public policy in favor of insurance coverage for motor vehicle rental companies. Pursuant to G.L.1956 chapter 34 of title 31, owners of rental vehicles in Rhode Island must file proof of financial responsibility with the Registry of Motor Vehicles before the registry can register the rental vehicles and before the rental vehicle company can lawfully rent any of its motor vehicles. Section 31-34-1. A certificate of self-insurance issued pursuant to G.L.1956 § 31-33-9 is not sufficient to satisfy the requirements of § 31-34-1. See Miles-Un-Ltd., Inc. v. Fanning, 624 A.2d 843 (R.I.1993). That statutory scheme requiring proof of financial responsibility by rental vehicle companies demonstrates that the General Assembly chose to require owners of rental vehicles to comply with a more rigorous standard for proving financial responsibility than normal operators of motor vehicles, thereby expressing a policy in this state in favor of insurance coverage by rental vehicle companies. [1] Miles-Un-Ltd, 624 A.2d at 848. Permitting the enforcement of an intoxication exclusion provision would be contrary to that strong policy in favor of coverage. Accordingly, we conclude that such an exclusion provision contained in a rental vehicle company's rental agreement and incorporated by reference into the insurance policy covering those rental vehicles is against the public policy of this state and will be considered void. [2] The overwhelming majority of jurisdictions that have considered the validity of intoxication exclusion provisions have also concluded that such provisions are void as against public policy. The most often-cited case involving an intoxication exclusion provision is Allstate Insurance Co. v. Sullivan, 643 S.W.2d 21 (Mo.Ct.App.1982). In Allstate the defendant, Sullivan rented an automobile from Budget Rent A Car (Budget) at St. Louis Municipal Airport. The rental agreement contained a provision, like the provision in International's rental agreement, that the rental vehicle should not be operated [w]hile under the influence of intoxicants or narcotics. Id. at 22. The insurance policy between Budget and its insurer, Allstate, provided that there would be coverage for any person operating a rental vehicle with Budget's permission as long as that operation was within the scope of such permission. Id. Sullivan was then involved in an accident while he was intoxicated. The court there concluded that because Missouri had enacted a Motor Vehicle Safety Responsibility Law, it was the public policy of that state to assure financial remuneration for damages sustained through the negligent operation of motor vehicles on the public highways of this state not only by the owners of such automobiles but also by all persons using such vehicles with the owner's permission, express or implied. Id. The court went on to distinguish between use of an automobile and operation of an automobile and determined that Sullivan's use of the rental car was for a broad, almost unfettered use. Id. at 23. The court adopted the distinction between use and operation employed in Weathers v. Royal Indemnity Co., 577 S.W.2d 623 (Mo.1979), and Farm Bureau Mutual Insurance Co. v. Broadie, 558 S.W.2d 751 (Mo.Ct.App.1977):  Use is said to involve its [the motor vehicle's] employment for some purpose or object of the user. Operation of the vehicle, on the other hand, is said to involve the driver's direction and control of its mechanism for the purpose of propelling it as a vehicle. Weathers, 577 S.W.2d at 627. See also Broadie, 558 S.W.2d at 754. In applying that distinction to the facts before it, the Missouri court in Allstate held that the intoxication exclusion provision restricted only the operation of the rental vehicle and that, therefore, even though Sullivan's operation of the rental vehicle may not have been within the scope of Budget's permission, Sullivan's use of the rental vehicle had been. Thus, because the Motor Vehicle Safety Responsibility Law required that liability insurance be provided for the named insured and also for `any other person    using any such motor vehicle    with the express or implied consent of such named insured,' the public policy of the state mandated that Sullivan's permissive use be insured by Allstate's policy with Budget even though Sullivan's operation of the rental vehicle was contrary to the terms and conditions of the rental agreement. 643 S.W.2d at 23. In so concluding, the Missouri court recognized that [i]n determining the extent of coverage here we must be aware of the serious consequences of allowing restrictions in the rental agreement to determine the coverage to be provided. The liability protection for which the lessee has paid could be reduced to a nullity by rental provisions prohibiting operation of the car `negligently' or contrary to any statute or ordinance. Id. In City of Norfolk v. Ingram, 235 Va. 433, 367 S.E.2d 725 (1988), the Virginia court also held that an intoxication exclusion provision, contained in an insurance policy that insured a city-owned motor vehicle, was void as against public policy. The court opined that Nowhere in the statute do we find any authority to restrict the manner of operation. If we were to hold that omnibus coverage to operate a motor vehicle could be conditioned upon a restriction against driving it while intoxicated, there is no rational reason why such coverage could not be limited by the owner's prohibition of the user's operation of the loaned vehicle in violation of law, thus incorporating any traffic violation   . Such a rule would essentially undercut the legislative policies of protecting a permissive user against liability to others and creating a means of recovery to any party injured when struck by a vehicle operated by a permissive user. Id. 367 S.E.2d at 727. Additionally, in Donegal Mutual Insurance Co. v. Long, 387 Pa.Super. 574, 564 A.2d 937, 945 (1989), the court concluded that intoxication exclusion provisions were void as against public policy because [a] slight deviation from such a restrictive lease could render an injured victim devoid of adequate protection, which is contrary to the intent envisaged by the Pennsylvania vehicle and traffic law in question in Donegal. See also P & H Vehicle Rental and Leasing Corp. v. Garner, 416 So.2d 503, 506 (Fla.Dist.Ct.App. 1982) (the provision    attempting to avoid liability if the lessee is driving while intoxicated is invalid as against public policy). [3] We acknowledge a minority position that has held that intoxication exclusion provisions are not void as against public policy. However, in reviewing those cases, we find them distinguishable on their facts. In Public Employees Mutual Insurance Co. v. Hertz Corp., 59 Wash.App. 641, 800 P.2d 831 (1990) ( PEMCO ), the rental vehicle agency involved was a self-insurer. In Rhode Island, we have concluded that a certificate of self-insurance is not sufficient to satisfy the dictates of § 31-34-1. Miles-Un-Ltd, Inc. v. Fanning, 624 A.2d 843 (R.I.1993). Furthermore, in PEMCO, the State of Washington did not have a statute specifically requiring rental vehicle companies to furnish proof of financial responsibility. Thus, in this state we have a stronger policy of insurance coverage for rental car companies than in PEMCO, as evidenced by the specific mandates of chapter 34 of title 31. Accordingly, the analysis of PEMCO is not applicable to the case before us. In Philadelphia Indemnity Insurance Co. v. Carco Rentals, Inc., 923 F.Supp. 1143 (W.D.Ark.1996), the intoxication exclusion provision at issue was contained in a rental agreement and, as with the Indemnity policy, was incorporated by reference into an insurance policy. However, unlike the situation before us now, the insurance policy incorporating the intoxication exclusion provision in Carco only provided insurance coverage in excess of the statutory minimum requirements. The rental vehicle company involved in Carco was insured by another insurance policy that provided the basic insurance coverage mandated by law, and that insurance policy did not incorporate the intoxication exclusion provision. Therefore, the court felt that the intoxication exclusion provision in the excess insurance policy was enforceable because the minimum statutory requirements for insurance coverage had already been met by the basic-coverage insurance policy. Here the policy issued by Indemnity was the only source of insurance coverage for International and was the only coverage satisfying the mandates of chapter 34 of title 31. Therefore, the analysis in Carco is not applicable to the appeal before us. In Sutherland v. NN Investors Life Insurance Co., 897 F.2d 593 (1st Cir.1990), the Court of Appeals for the First Circuit, interpreting Massachusetts law, also held that an intoxication exclusion provision was not void as against public policy. However, some nineteen years before the decision in that case, there existed a Massachusetts statute that specifically permitted the use of intoxication exclusion provisions in insurance policies. Id. at 595 (citing Mass.Gen.Laws ch. 175, § 108). Although that statute was repealed in 1971, the Court of Appeals appeared to be persuaded by that previous approval of intoxication exclusion provisions. The Court of Appeals found that, after the repeal of Mass.Gen.Laws ch. 175, § 108, insurers were even less restricted in their use of intoxication exclusion provisions in policies because they no longer had to conform to the requirements of the repealed statute. The court went on to state  erroneously, as discussed above  that there were no cases, anywhere, suggesting that it is against public policy to exclude coverage for injuries due to intoxication. [4] Sutherland, 897 F.2d at 596. Because the Massachusetts Legislature had expressed a different public policy with respect to insurance coverage for motor vehicles, the decision in Sutherland, like the decisions in PEMCO and Carco, is of no assistance here. Accordingly, for all the foregoing reasons, we conclude, in keeping with this state's strong public policy, as expressed by the General Assembly in chapter 34 of title 31, that intoxication exclusion provisions that attempt to restrict or limit insurance coverage for rental vehicles are void as against public policy. Therefore, Indemnity must provide coverage to Knoller for the accident involving Ryan and Young.