Court Opinion

ID: 9571708
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:34:27.69238+00
Date Added: 2024-06-11T12:30:50.116903
License: Public Domain

MILLER, Chief Justice
(on reassignment).
This is an appeal dealing with the validity of a “household exclusion” in an automobile insurance policy. The trial court held that the exclusion is invalid and unenforceable for claims up to the limits mandatorily required by the state’s financial responsibility law, but valid and enforceable for claims in excess thereof, irrespective of the policy limits. We affirm.
FACTS
On or about November 9, 1988, Allen Paul Croyle, Jr. (Croyle) was driving his father’s 1973 Oldsmobile in Rapid City, South Dakota, when he collided with a vehicle driven by Jeanette St. Peter. Croyle was accompanied in the vehicle by his sister Nonanna. As a result of the collision, St. Peter died1 and Nonanna suffered personal injuries.
At the time of the accident, the automobile was insured by Cimarron Insurance Company (Cimarron) under a policy purchased by Croyle’s father (insured). The insurance policy provided liability coverage in the amount of $300,000. Additionally, the policy provided both uninsured and underinsured coverage, each in the amount of $300,000. The policy also contained a household liability coverage exclusion, which stated: “We do not provide liability coverage for any person for bodily injury to you or any family member.” The policy defined a family member as a person related by blood, marriage, or adoption, who is a resident of the insured’s household. Likewise, the underinsured portion of the policy *883stated an “underinsured motor vehicle” does not include any vehicle “owned by or furnished or available for the regular use of you or any family member.”
Nonanna filed a claim against Cimarron based upon her brother’s negligence. Ci-marron advised Croyle that insurance coverage would not be provided under insured’s policy; however, Cimarron agreed to defend Croyle, reserving any rights it had to deny coverage based upon the policy’s exclusions.
Subsequently, Cimarron filed a declaratory judgment action against Nonanna, Croyle, and insured. After the amended complaint was answered, cross-motions for summary judgment were filed. Nonanna alleged the household exclusion contained in the liability portion of the policy was rendered void when the South Dakota Legislature adopted a mandatory financial responsibility law for all vehicles. See SDCL 32-35-113 and SDCL 32-35-70. Cimarron argued the household exclusion was not void or, in the alternative, it was void only to the extent of the mandatory limits required by the financial responsibility law ($25,000).
The trial court held that the household exclusion contained in the liability portion of the policy was void and unenforceable up to the $25,000 coverage required by statute. However, the trial court held that the household exclusion was valid and enforceable for the amount of coverage exceeding the $25,000 statutory minimum. In other words, the trial court held Cimar-ron liable for Nonanna’s injuries up to $25,-000.
Prior to entry of summary judgment, Nonanna submitted an additional argument to the effect that the household exclusion was contrary to the “reasonable expectations” of the insured. The trial court heard limited testimony on that issue. After hearing the testimony, and without acknowledging the applicability of the reasonable expectations doctrine, the trial court found insured did not have a reasonable expectation of coverage.
Nonanna appealed to this court and Ci-marron cross-appealed. We consider the following issues:
I.
WHETHER CIMARRON’S HOUSEHOLD EXCLUSION IS VOID AS CONTRARY TO SDCL 32-35-113, SDCL 32-35-70 AND PUBLIC POLICY, AND, IF SO, WHETHER IT IS VOID IN ITS ENTIRETY OR ONLY AS TO THE STATUTORY MINIMUM COVERAGE.
II.
WHETHER NONANNA CROYLE IS ENTITLED TO UNDERINSURED BENEFITS PURSUANT TO THE CI-MARRON POLICY.
I.
Prior to 1986, South Dakota’s Financial Responsibility Law required proof of financial responsibility only after a motorist was involved in an accident or convicted of certain motor vehicle offenses. See SDCL 32-35-43; Novak v. State Farm Mut. Auto. Ins. Co., 293 N.W.2d 452 (S.D.1980). However, in 1986, the South Dakota Legislature mandated that all owners and operators of motor vehicles maintain proof of financial responsibility for future events. Pursuant to SDCL 32-35-113:
Every driver or owner of a motor vehicle shall at all times maintain in force one of the forms of financial responsibility on the motor vehicle by one of the following methods:
(1) Having in force on the motor vehicle an owner’s policy of liability insurance as provided in § 32-35-70[.]2
SDCL 32-35-70 provides, in pertinent part:
An owner’s policy of liability insurance ... shall insure the pjerson named therein and any other person as insured, using any insured vehicle or vehicles with the express or implied permission of the *884named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance, or use of the vehicle or vehicles ... subject to limits exclusive of interests and costs, with respect to each insured vehicle, as follows: twenty-five thousand dollars because of bodily injury to or death of one person in any one accident and, subject to the limit for one person, fifty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and twenty-five thousand dollars because of injury to or destruction of property of others in any one accident[.]
In Novak, we acknowledged our willingness to void household exclusions where maintaining automobile liability insurance was mandated by statute: “[T]he mandatory requirements of SDCL 32-35-70 ... would eliminate the -policy defense of household exclusion [.]” 293 N.W.2d at 454 (emphasis added). At the time Novak was decided, the provisions of SDCL 32-35-70 were not mandatory.
The above statutes create a strong public policy favoring monetary protection and compensation for the benefit of those injured through the negligent operation of a vehicle. Cimarron’s household exclusion effectively renders Nonanna, and others like her, uninsured and thus unprotected, in violation of public policy. These exclusions are:
[Particularly disturbing when viewed in light of the fact that this class of victims is the one most frequently exposed to the potential negligence of the named insured. Typical family relations require family members to ride together on the way to work, church, school, social functions, or family outings. Consequently, there is no practical method by which the class of persons excluded from protection by this provision may conform their activities so as to avoid exposure to the risk of riding with someone who, as to them, is uninsured.
Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wash.2d 203, 208, 643 P.2d 441, 444 (1982).
The vast majority of jurisdictions hold such household exclusions invalid under similar statutory schemes. See, e.g., Arceneaux v. State Farm Mutual Automobile Ins. Co., 113 Ariz. 216, 550 P.2d 87 (1976); Stevens v. State Farm Mutual Automobile Ins. Co., 21 Ariz.App. 392, 519 P.2d 1157 (1974); DeWitt v. Young, 229 Kan. 474, 625 P.2d 478 (1981); Bishop v. Allstate Ins. Co., 623 S.W.2d 865 (Ky.1981); State Farm Mut. Auto. Ins. Co. v. Traycik, 86 Mich.App. 285, 272 N.W.2d 629 (1979); State Farm Mut. Auto. Ins. Co. v. Sivey, 404 Mich. 51, 272 N.W.2d 555 (1978); Transamerica Ins. Co. v. Royle, 202 Mont. 173, 656 P.2d 820 (1983); Estate of Neal v. Farmers Ins. Exch., 93 Nev. 348, 566 P.2d 81 (1977); Estep v. State Farm Mut. Auto. Ins. Co., 103 N.M. 105, 703 P.2d 882 (1985); Allstate Ins. Co. v. Anzalone, 119 Misc.2d 222, 462 N.Y.S.2d 738 (1983); Hughes v. State Farm Mut. Auto. Ins. Co., 236 N.W.2d 870 (N.D.1975); Jordan v. Aetna Casualty & Surety Company, 264 S.C. 294, 214 S.E.2d 818 (1975); Mutual of Enumclaw, supra; Farmers Ins. Exchange v. Call, 712 P.2d 231 (Utah 1985). See generally, Annotation, Validity, under insurance statutes, of coverage exclusion for injury to or death of insured’s family or household members, 52 A.L.R.4th 18 (1987).
We hereby declare Cimarron’s household exclusion in the liability portion of the policy invalid as violative of South Dakota public policy.
Having found that Cimarron’s household exclusion violates public policy, we must now determine the extent to which the exclusion is void. Nonanna argues the exclusion is invalid as to the full amount of liability coverage provided by the policy ($300,000). Cimarron contends its liability should be limited to $25,000, the minimum coverage required by SDCL 32-35-70. The trial court held the exclusion invalid as to the $25,000 statutory minimum, but valid and enforceable with respect to the excess coverage under the policy. We agree.
There is a split among the jurisdictions which have addressed this issue. The ma*885jority position holds such exclusions void only as to the minimum coverages required by statute. Thus, where the policy limits exceed the statutory minimum, the insurer’s liability is limited to the coverage required by statute. Arceneaux, supra; Stepho v. Allstate Ins. Co., 259 Ga. 475, 383 S.E.2d 887 (1989); DeWitt, supra; Bishop, supra; State Farm Mut. v. Nationwide Mut., 307 Md. 631, 516 A.2d 586 (1986); State Farm Mutual Auto. Ins. Co. v. Shelly, 394 Mich. 448, 231 N.W.2d 641 (1975); Estate of Neal, supra; State Farm Mut. Auto. Ins. v. Mastbaum, 748 P.2d 1042 (Utah 1987); Allstate Ins. Co. v. Wyoming Ins. Dept., 672 P.2d 810 (Wyo.1983). See generally 7 Am.Jur.2d Automobile Insurance § 30 (1980).
In contrast, a minority of jurisdictions hold that where the household exclusion is held invalid as violative of public policy, the limits of the insurer’s liability are those provided by the policy, rather than the lesser limits required by statute. Meyer v. State Farm Mut. Auto. Ins. Co., 689 P.2d 585 (Colo.1984); State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d 557 (Del.1988); Kish v. Motor Club of America Insurance Company, 108 N.J.Super. 405, 261 A.2d 662 (1970).
The South Dakota Legislature specifically addressed the matter of excess or additional insurance coverage in SDCL 32-35-75, which provides:
Any policy which grants the coverage required for a motor vehicle liability policy may also grant any lawful coverage in addition to the coverage specified for a motor vehicle liability policy and such excess or additional coverage shall not be subject to the provisions of this chapter. With respect to a policy which grants such excess or additional coverage the term ‘motor vehicle liability policy’ shall apply only to that part of the coverage which is required by § 32-35-70 or 32-35-71. (Emphasis added.)
By the statute’s plain language, excess coverage is not subject to the provisions of this state’s statutes on financial responsibility of motorists! Therefore, we must follow the majority rule and hold that the insurer’s liability is limited to the coverage required by statute. As clearly stated by the trial court in its Conclusion of Law V:
The clear legislative intent expressed by this statute is that an insurance company is free to provide liability coverage in excess of the mandatory limits now required by SDCL 32-35-70 and SDCL 32-35-113(1). However, the legislature, by enacting SDCL 32-35-75 specifically stated that such additional coverage is not subject to the provisions of the financial responsibility act. As a result, Defendant Nonanna A. Croyle cannot argue that the financial responsibility statute expresses any public policy with regard to this additional coverage. In fact, such additional coverage is specifically excluded from the provisions of the financial responsibility act. (Emphasis added.)
The insurance industry is highly regulated in South Dakota. There are extensive statutes and regulations prescribed and promulgated by the state legislature and insurance department. In Petition of Famous Brands, Inc., 347 N.W.2d 882, 884 (S.D.1984), this court stated the basic controlling constitutional theory:
While it may be elementary, it behooves us to acknowledge that as a result of constitutional provisions distributing the powers of government among three departments, the legislative, executive, and judicial, courts have no legislative authority, and should avoid judicial legislation, a usurpation of legislative powers, or any entry into the legislative field. Thus it has been said that whatever its opinion may be as to the wisdom of a statute or the necessity for further legislation, the duty of the court is to apply the law objectively as found, and not to revise it.
It is for the legislature to change the laws. This court has no authority to do so, despite results which may appear to be unjust. As stated earlier, the legislature has clearly spoken on this issue.
Therefore, we must adhere to the policy established, in clear and unambiguous lan*886guage, by the legislative branch of government.
II.
Nonanna contends she is also entitled to underinsured motorist coverage. The underinsured motorist portion of the Cimarron policy excludes from coverage any vehicle “owned by. or furnished or available for the regular use of you or any family member.” Cimarron contends this language clearly exempts the insured vehicle from underinsured coverage and is not inconsistent with South Dakota public policy. The trial court denied Nonanna this coverage below. We agree.
SDCL 58-11-9.4 requires that all motor vehicle liability insurance policies contain underinsured motorist coverage in an amount equal to the bodily injury limits of the policy. SDCL 58-11-9.5 elucidates further:
Subject to the terms and conditions of such underinsured motorist coverage, the insurance company agrees to pay its own insured for uncompensated damages as its insured may recover on account of bodily injury or death arising out of an automobile accident because the judgment recovered against the owner of the other vehicle exceeds the policy limits thereon. Coverage shall be limited to the underinsured motorist coverage limits on the vehicle of the party recovering less the amount paid by the liability insurer of the party recovered against. (Emphasis added.)
Cimarron argues that the above emphasized language of SDCL 58-11-9.5 is legislative recognition of the right of insurance companies to place conditions on underinsured motorist coverage. We agree. The terms of statutes are to be construed according to their plain and ordinary meaning. Appeal of AT & T Information Systems, 405 N.W.2d 24 (S.D.1987); Oahe Conservancy Subdistrict v. Janklow, 308 N.W.2d 559 (S.D.1981). The clear implication of this language is that underinsured motorist coverage may be subject to certain terms and conditions. Dairyland Ins. Co. v. Finch, 32 Ohio St.3d 360, 513 N.E.2d 1324 (1987). By its terms, Cimarron’s policy excludes the insured’s vehicle from underinsured motorist coverage. We affirm the trial court on this issue.
We have considered the other issues raised by Croyle and find them to be lacking in merit.
SABERS and AMUNDSON, JJ., concur.
WUEST and HENDERSON, JJ., concur in part and dissent in part.

. Croyle was subsequently convicted of vehicular homicide.

. In addition to liability insurance, future financial responsibility may be demonstrated by (1) having a bond in force, (2) maintaining a certificate of deposit of money or securities, or (3) self-insurance. SDCL 32-35-113(2), (3), (4).