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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Nelson v. Progressive Casualty Insurance Co. (06/29/2007) sp-6136
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| KATHERINE NELSON as assignee | ) |
| of SIULEO MILO ULISESE, an | ) Supreme Court No. S- 11793 |
| individual, LILII ULISESE, an | ) |
| individual, ANITA ULISESE, an | ) Superior Court No. |
| individual, | ) 3AN-04-05601 CI |
| ) | |
| Appellants, | ) O P I N I O N |
| ) | |
| v. | ) No. 6136 - June 29, 2007 |
| ) | |
| PROGRESSIVE CASUALTY | ) |
| INSURANCE COMPANY, a foreign | ) |
| corporation, DANNY WITHERS, an | ) |
| individual, MATT DUFOUR, an | ) |
| individual, | ) |
| ) | |
| Appellees. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Peter A. Michalski, Judge.
Appearances: Jason Skala, Law Office of
Jason Skala, Eagle River, for Appellant.
Gary A. Zipkin, Guess & Rudd P.C., Anchorage,
for Appellees.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, Bryner, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
This case concerns the validity and applicability of a
named driver exclusion in an automobile insurance policy. The
pedestrian victim of a hit-and-run accident involving an
unlicensed and uninsured driver sued the drivers parents for
negligently entrusting their vehicle to their son. The parents
auto insurance carrier refused to cover the victims personal
injury claim because the parents had previously excluded their
son from coverage under the policy. The victim argues that the
exclusion of the son under the policy should not bar coverage for
the victims claim against the parents for their negligent
entrustment of the vehicle to their son. Because the tort of
negligent entrustment rests upon the sons operation of the
vehicle, which the parents elected to exclude from their
insurance coverage, and because Alaskas insurance laws permit
such exclusions, we affirm the superior courts grant of summary
judgment to the insurance carrier.
II. FACTS AND PROCEEDINGS
The facts of this case are not in dispute. On June 14,
2001, Siuleo Milo Ulisese, a twenty-one-year old uninsured and
unlicensed driver, drove his parents minivan along Fifth Avenue
in downtown Anchorage. The traffic signals at the intersection
of Fifth Avenue and C Street were not working. While driving
down Fifth Avenue, Siuleo turned left onto C Street, striking and
injuring Katherine Nelson as she was crossing in the crosswalk.
Siuleos parents, Anita and Lilii Ulisese, owned the
vehicle Siuleo was operating at the time of the accident.
Following the accident, Nelson filed an insurance claim with the
Uliseses automobile insurance carrier, Progressive Casualty
Insurance Company. After conducting an investigation,
Progressive informed Nelson and the Uliseses that it was denying
coverage because Lilii had excluded Siuleo from coverage under
the policy.1 Progressive based its denial on the Named Driver
Exclusion language in the Uliseses auto insurance policy, which
states:
If you have asked us to exclude any person
from coverage under this Policy, then we will
not provide coverage for any claim arising
from an accident or loss involving a vehicle
or rental vehicle being operated by the
excluded person. THIS INCLUDES ANY CLAIM FOR
DAMAGES MADE AGAINST YOU, A RELATIVE, OR ANY
OTHER PERSON OR ORGANIZATION THAT IS
VICARIOUSLY LIABLE FOR AN ACCIDENT ARISING
OUT OF THE OPERATION OF A VEHICLE BY THE
EXCLUDED DRIVER.
Progressive further denied coverage on the basis of AS
28.20.440(l), which provides:
Notwithstanding any other provisions of law,
a person who resides in the same household as
the person named as insured or a person who
is a relative of the person named as insured
shall be excluded from coverage under a motor
vehicle liability policy if the person named
as insured requests that the person be
excluded from coverage.
Nelson filed a claim against Siuleo for negligence and
against the Uliseses for negligently entrusting their car to
Siuleo. The claim was forwarded to Progressive. After
investigating Nelsons claim, Progressive refused to cover the
Uliseses for liability to Nelson or for the cost of defending
against Nelsons complaint. The Uliseses agreed to confess
judgment to Nelsons claims subject to arbitration on the amount
of damages and an agreement by Nelson not to enforce the damage
award against the Uliseses. The arbitration award amounted to
$177,253 plus costs and fees. Anchorage Superior Court Judge Sen
K. Tan confirmed the award. The arbitration award was forwarded
to Progressive, which again denied coverage for the Uliseses
claims because Siuleo Milo[] was an excluded driver; therefore,
coverage does not apply for him, or any claims made against Lilii
and Anita Ulisese arising out of the operation of a vehicle by
the excluded driver.
On March 25, 2004, Nelson, as assignee of the Uliseses
claim, filed a complaint against Progressive. The claim alleged
that Progressive and its employees were negligent, that they
breached their duty to defend the Uliseses, and that Progressive
wrongfully breached its contract with the Uliseses when it
refused to cover the negligent entrustment claim.2 Superior
Court Judge Peter A. Michalski granted partial summary judgment
to Progressive on the issue of coverage and dismissed Nelsons
claims with prejudice. Nelson appeals.
III. STANDARD OF REVIEW
We will affirm summary judgment if there are no issues
of material fact and the moving party is entitled to judgment as
a matter of law.3 Contract interpretation presents a question of
law, which we review de novo.4 When interpreting insurance
contracts we look to the language of the disputed policy
provisions, the language of other provisions of the policy, and
to relevant extrinsic evidence.5
IV. DISCUSSION
A. The Excluded Driver Exception to Mandatory Auto
Insurance Coverage
Alaska law generally requires Alaska drivers to carry
automobile insurance.6 Alaska Statute 28.22.101, a provision of
the Alaska Mandatory Automobile Insurance Act (AMAIA), lays out
general coverage requirements for motor vehicle insurance in
Alaska. It provides that an owners motor vehicle liability
policy must insure the person named against loss from the
liability imposed by law for damages that arise from the
ownership, maintenance, or use of a designated motor vehicle.
Insurers are generally not permitted to issue auto policies
containing provisions which reduce the scope of coverage below
the statutory minimum.7
The AMAIA supplements the Motor Vehicle Safety
Responsibility Act (MVSRA).8 The MVSRA requires an uninsured
driver who has been involved in an accident to prove financial
responsibility for the future by posting a bond or submitting a
certificate of insurance.9 The MVSRA also requires automobile
insurance policies to provide minimum coverages for a named
insured and other persons using a vehicle with the named insureds
permission.10 All policies issued in the state must meet the
content requirements imposed by the MVSRA, regardless of whether
the policies were required as proof under the act.
The AMAIA and the MVSRA coexist as part of Alaskas
Uniform Vehicle Code.11 They are not, however, coextensive.12 As
noted, the AMAIA supplements, but does not supplant the MVSRA.13
In 1997 the legislature enacted an exception to these
general coverage requirements.14 Alaska Statute 28.20.440(l)
provides:
Notwithstanding any other provisions of law,
a person who resides in the same household as
the person named as insured or a person who
is a relative of the person named as insured
shall be excluded from coverage under a motor
vehicle liability policy if the person named
as insured requests that the person be
excluded from coverage.
Subsection .440(l) thus permits named insured policyholders to
exclude select individuals from coverage. In this case, the
Uliseses endorsed an exclusion that exempted their son Siuleo
from coverage under their auto policy. Because Siuleo was
excluded under the policy, Progressive refused coverage for
Nelsons claim.
Nelson raises two arguments in support of her assertion
that Progressive should cover her negligent entrustment claim:
(1) because negligent entrustment is an independent tort, the
claim does not arise from Siuleos operation of the car; and (2)
the named insured exclusion is unenforceable because it is
ambiguous and contrary to Alaska law. We consider each in turn.
B. Nelsons Claim of Negligent Entrustment Arises From
Siuleos Negligent Act.
Alaska recognizes the common law tort of negligent
entrustment and follows the definition in the Restatement
(Second) of Torts 390 (1965), which states:
One who supplies directly or through a third
person a chattel for the use of another whom
the supplier knows or has reason to know to
be likely because of his youth, inexperience,
or otherwise, to use it in a manner involving
unreasonable risk of physical harm to himself
and others whom the supplier should expect to
share in or be endangered by its use, is
subject to liability for physical harm
resulting to them.[15]
Nelson relies on our discussion of negligent
entrustment in Ardinger v. Hummell16 to support her claim that
because negligent entrustment is considered an independent cause
of action, it arises from the independent negligence of the
entrusting defendant and is therefore complete upon the act of
entrustment. In Ardinger, we noted that negligent entrustment is
an independent cause of action against the [vehicle] owner and is
not dependent on theories of agency, joint venture, or other
forms of vicarious liability.17 Nelson asserts that Form 9330 of
the Progressive policy, which exempts from coverage claims that
aris[e] from an accident or loss involving a vehicle . . .
operated by the excluded person does not bar coverage because her
claim arose at the moment the Uliseses entrusted their vehicle to
Siuleo. In other words, Nelson contends that her claim arose
before Siuleo began driving the vehicle.
Ardinger does not go as far as Nelson would propose.
Ardinger indicates that an entrustor need not actively
participate in or direct the entrustees actions in order to be
held liable for foreseeable harm done by the entrustee.18 This
does not, however, mean that the entrustors liability did not
arise from the entrustees negligence. The entrustees act, and
the resulting injury, are still required.19
Nelson relies on the Kansas Supreme Court case of
McCart v. Muir20 to support her argument that liability for
negligent entrustment arises from the act of entrustment, not the
relationship of the parties.21 Nelsons reliance is misplaced.
In McCart, a jury found the father of a negligent driver liable
for negligently entrusting a car to his son.22 The issue in
McCart was whether an entrustor must pay for an entrustees
portion of the total negligence in apportioning fault. Answering
in the negative, McCart held that the jury should have been
instructed on comparative negligence because [t]he nature and
extent of negligence of the entrustor and entrustee are separate
and distinct. The percentages of fault may be different in
amount and should be determined separately.23 McCart was
concerned with comparative liability. Nowhere does McCart
suggest that an entrustees negligence in producing the injury is
not a required element of the claim. On the contrary, the court
noted all elements of negligent entrustment were shown: (1) the
father . . . was instrumental in furnishing the motor vehicle to
his son, Stephen; (2) the father knew or should have known
Stephen was an incompetent driver; and (3) the negligence of
Stephen in operating the vehicle was a cause of the damages.24
Several courts have concluded that where the entrustees
excluded act is a but for cause of the injury, the injury is not
covered under any theory of liability.25 The Ninth Circuit drew
this same conclusion when interpreting Alaska law in Allstate
Insurance Co. v. Ellison.26 In upholding an exclusion in a
homeowners policy for injuries arising out of the use of an
airplane, the court stated: Negligent entrustment requires both
negligent use by the entrustee and negligence by the entrustor.
Recovery must depend on the ownership or the use of the excluded
vehicle.27 The Wisconsin Supreme Court echoed this reasoning in
Bankert v. Threshermens Mutual Insurance Co.,28 noting that [the]
negligent entrustment [of an automobile] is irrelevant unless the
person to whom [the vehicle] is entrusted acts in a negligent
manner (creates an unreasonable risk) and in fact inflicts injury
as the result of such conduct.29
We cited Ellison with approval in Jones v. Horace Mann
Insurance Co.,30 a case in which a plaintiff unsuccessfully sought
to recover damages for negligent entrustment under a homeowners
policy that contained an exclusion covering motorized vehicles.31
The victim in Jones was injured in an accident involving a
snowmachine being operated by a ten-year old friend. The victim
sued the drivers parents for negligent entrustment, and the
homeowners insurer denied coverage. The exclusion at issue read:
This policy does not apply to bodily injury or property damage
which results directly or indirectly from . . . the ownership,
operation, maintenance, use, occupancy, renting, loaning,
entrusting, supervision, loading or unloading of motorized
vehicles . . . owned or operated by or rented or loaned to an
insured. 32 We held that the policy did not cover the accident
itself, and for that reason concluded that a change in the legal
theory of liability did not give rise to coverage.33 Nelson
attempts to distinguish Jones from the present case by arguing
that Jones involved an exclusion for a specific instrumentality
(a snowmachine), whereas the case before us involves an exclusion
for a specific driver (Siuleo Ulisese). This difference does not
distinguish the case. Other jurisdictions considering negligent
entrustment cases have consistently held that the analysis of
exclusionary language is not limited to the type of policy at
issue.34
We therefore hold that any liability on the part of the
Uliseses for their alleged negligent entrustment necessarily
required the underlying negligence of Siuleo in operating the
vehicle.
C. Nelsons Interpretation of the Policy Is Unreasonable.
Nelson argues that the named driver exclusion is
ambiguous and that the Uliseses did not understand it. Nelson
further asserts that the last clause of the final sentence
excludes only vicarious liability, not negligent entrustment
claims, and limits the scope of the exclusion. We consider these
arguments in turn.
1. The policy is not ambiguous.
Nelsons first argument is that the term arising from in
the policy is ambiguous. Progressive Form 9330, the named driver
exclusion election, states:
No coverage is provided for any claim arising
from an accident or loss that occurs while a
covered vehicle . . . is operated by the
excluded driver(s). THIS INCLUDES ANY CLAIM
FOR DAMAGES MADE AGAINST YOU, A RELATIVE, OR
ANY OTHER PERSON OR ORGANIZATION THAT IS
VICARIOUSLY LIABLE FOR AN ACCIDENT ARISING
OUT OF THE OPERATION OF A . . . VEHICLE BY
THE EXCLUDED DRIVER.
(Emphasis added, capitalization in the original.)
Ambiguity will be found where the contract as a whole
and all extrinsic evidence support two different interpretations,
both of which are reasonable.35 A contract provision is
considered ambiguous if it is reasonably susceptible to more than
one interpretation.36 We emphasize that only where inconsistent,
but reasonable, interpretations of the contract are possible
will ambiguity be found: The mere fact that the parties disagree
about the proper interpretation of the contract does not mean
that the contract is ambiguous.37
We have already determined that an entrustees negligent
act is a necessary element of any negligent entrustment claim
against the entrustor. Nelsons claim for recovery against
Progressive therefore necessarily arises from Siuleos act of
driving the automobile.38 Moreover, the policys exclusion plainly
indicates that any claim arising from Siuleos operation of the
automobile is not covered. Applying a reasonable interpretation
of the phrase to the facts presented here, we are unable to find
any ambiguity.39
2. Nelsons interpretation is unreasonable.
Nelson might still prevail despite our conclusion that
this policy is not ambiguous, for we need not find that an
ambiguity exists to construe the policy under the reasonable
expectations doctrine.40 This implicates her second argument:
that the last clause of the final sentence of the exclusion
excludes only vicarious liability, not negligent entrustment
claims, and limits the scope of the exclusion. And because an
insurance policy is a contract of adhesion, we construe it to
give effect to the insureds reasonable expectations.41 Thus the
objectively reasonable expectations of applicants and intended
beneficiaries regarding the terms of insurance contracts will be
honored even though painstaking study of the policy provisions
would have negated those expectations.42 We discern reasonable
expectations from the language of the disputed provisions, other
provisions, and relevant extrinsic evidence . . . .43
But Nelsons claim is supported by none of these sources. As to
the language of the disputed provision, Nelson argues that
vicariously liable modifies you and thus that an insured is able
to take advantage of the exclusion only if his or her liability
is vicarious, a grammatically tortured reading of the provision.
Both the placement and language choice indicate that the
provision is broad in excluding coverage: excluded under this
provision are the insured, relatives of the insured, and persons
or organizations vicariously liable for the accident. Any other
interpretation of the exclusion would strain credulity and defy
reasonable expectations.44 As to other provisions, there are no
other provisions in the contract that support this
interpretation. Finally, as to extrinsic evidence, Nelson
provides no evidence supporting the Uliseses belief that they
would be covered, other than her own assertion. On the contrary,
the record reflects that the Uliseses elected to remove Siuleo
from the policy at two different times. In 2000 the Uliseses
listed three members of their household as excluded drivers. The
auto policy premium was $1,427. In February 2001 Lilii added
Siuleo to the policy, and the premium increased to $3,859. In
March 2001 Siuleo was again removed from the policy, and the
policy premiums returned to $1,427. Given the repeated
fluctuations in policy premiums and corresponding financial
savings in exchange for the exclusions,45 Nelson has failed to
show that the Uliseses maintained a reasonable expectation of
coverage for injuries resulting from Siuleos operation of the
vehicle.
D. Progressives Refusal To Cover Negligent Entrustment
Claims Against the Named Insured Does Not Violate AS
28.20.440(1).
Nelson next argues that Progressives named driver
exclusion is impermissible under Alaskas automobile insurance
statutes. She contends that while AS 28.20.440(l) contemplates
exclusion of a named driver, the exclusion cannot be read to
preclude liability coverage for the named policyholders (Lilii
and Anita Ulisese). Nelson argues subsection .440(l) thus
conflicts with the statutorily mandated minimum liability
protection required by AS 28.22.101. She further asserts that
Progressive Form 9330 exceeds the permissible scope of subsection
.440(l).
In response, Progressive counters that in enacting
subsection .440(l), the legislature carved out a limited
exception to Alaskas statutorily mandated minimum liability
coverage requirements. For the reasons set forth below, we
agree.
1. The named driver exclusion is a valid exception to
statutorily mandated liability coverage.
Nelsons first argument is that application of the named
driver exclusion to her claims against the Uliseses improperly
negates the Uliseses statutorily mandated minimum liability
coverage.46 Alaska Statute 28.22.101 requires an owners
automobile policy to insure the person named against loss from
the liability imposed by law for damages that arise from the
ownership, maintenance, or use of a designated motor vehicle. It
provides for a named insureds liability coverage up to
statutorily mandated limits.47 Lilii and Anita Ulisese, as the
named insureds, maintained liability coverage under the
Progressive policy.
Alaska Statute 28.20.440(b)(2), part of the MVSRA, also
requires that an owners automobile insurance policy insure the
named insured and every other person using the vehicle with their
permission against loss for damages arising out of the ownership,
maintenance, or use of the vehicle. The stated policy behind the
MVSRA is to ensure that motorists be financially responsible for
their negligent acts so that innocent victims of motor vehicle
accidents may be recompensed for the injury and financial loss
inflicted upon them.48
However, subsection .440(l), which provides for a
specific exception from policy coverage for a named driver, can
be read in harmony with the more general provisions of AS
28.20.440 and AS 28.22.101.49 The inclusion of the phrase
[n]otwithstanding any other provisions of law plainly indicates
that subsection .440(1) was intended to be an exception to other
potentially conflicting laws. Insurers commonly allow their
insureds to use named driver exclusions to avoid covering high-
risk drivers where the premium for such coverage would be cost
prohibitive to the named insured.50 Where the loss giving rise to
damages arises from Siuleos driving, subsection .440(l) precludes
coverage under the Uliseses own liability policy for their
negligent entrustment. The minimum liability coverage otherwise
required of the Uliseses is thus circumscribed, but only to the
extent that the claim arose out of Siuleos operation of a
vehicle.
Other jurisdictions have upheld named driver exclusions
as permissible exemptions to statutorily mandated minimum
liability coverage.51 In upholding the validity of named driver
exclusions, courts have relied on public policy rationales that
balance cost reduction with the desire to encourage the
procurement of insurance coverage.52
The legislative history of House Bill 218, which became
subsection .440(l), indicates that the legislature was aware of
the potential dangers of the named driver exclusion. Minutes of
a House Labor and Commerce Committee meeting considering HB 218
reveal the committees concern that parents who elected to exclude
a child from coverage might be held personally liable with no
insurance protection for the childs auto accident.53 Committee
testimony in favor of the exclusion noted, however, that the
exclusion would enable a household with a high-risk driver to
maintain auto coverage by excluding the high-risk driver, while
encouraging the excluded driver to obtain his or her own policy.54
In providing for the exclusion, the legislature
offered insureds a chance to avoid excessive premiums they would
otherwise be required to pay if they could not exclude a high-
risk driver. Ultimately, this helps to minimize the risk that a
policyholder may elect to forgo coverage altogether.55 It also
encourages responsibility on the part of policyholders and
excluded drivers: Policyholders are given a powerful economic
incentive to ensure that an excluded driver does not operate a
policyholders vehicle, while the excluded driver is encouraged to
obtain his own insurance.56
Forcing an insurer to provide liability coverage for
claims arising out of the excluded drivers use of the vehicle
also obviates the practical effect of the exclusion. It skirts a
reasonable reading of the exclusions plain language and give
insureds the benefit of a bargain for which they did not pay.
As the Arizona Court of Appeals noted in an analogous case:
[I]t is inconceivable that the legislature
would purposely enact statutory language that
authorized the insurer to exclude coverage
for personal liability incurred by the
unacceptable driver and to exclude vicarious
liability incurred due to the unacceptable
drivers conduct, but not to exclude coverage
for the named insureds personal liability for
negligently entrusting a vehicle to the same
unacceptable driver.[57]
In light of the countervailing legislative policies at
issue, the legislatures concern with enabling households to
secure affordable insurance, and the plain language of subsection
.440(l), we hold that the named driver exclusion is a permissible
exception to Alaskas minimum liability coverage provisions.58
2. The Division of Insurance approved Form 9330.
Nelson also argues that the named driver exclusion in
Progressives Form 9330 exceeds the scope of AS 28.20.440(l),
citing the following language on Form 9330: WARNING: If you have
asked us to exclude coverage under this policy for any person,
this policy will not meet the minimum coverage requirements of
either Alaskas mandatory automobile insurance or financial
responsibility laws. Nelson contends that subsection .440(l)
does not contemplate that insurers could exclude the named
policyholder from coverage, and asserts that Progressives warning
on Form 9330 indicated it knew its attempt to limit coverage is
prohibited by law.
On the contrary, however, Progressives warning was in
compliance with Division of Insurance regulations intended to
make policyholders aware of the law. The Division of Insurance
recognized that subsection .440(l) allowed policyholders to
exclude members of their household from their policy in exchange
for a reduction in premium payments. The Division of Insurance
bulletin 97-07 states:
A named driver exclusion should be signed by
the named insured each policy period, and a
policy with a named driver exclusion should
carry a warning that the policy may be
inadequate to satisfy the obligations of a
motor vehicle owner or operator under the
Alaska Motor Vehicle Responsibility Act or
the Alaska Mandatory Insurance Law.
Bulletin 98-10 superseded bulletin 97-07. It required
insurers to file and receive approval from the director of the
division for policy forms that comply with subsection .440(l).59
Bulletin 98-10 states: [a]n automobile liability insurance policy
that limits coverage for named persons other than as specified in
AS 28.20.440(l) must clearly indicate that the policy does not
meet the minimum coverage standards of either Alaskas mandatory
automobile insurance or financial responsibility laws. Bulletin
98-10 requires that exclusions that go beyond AS 28.20.440(l)
must be reviewed by the Division of Insurance. Progressive
submitted, and the division approved, Progressives Form 9330.
We have not directly addressed what weight we give to
Division of Insurance approvals of insurance forms.60 We have
previously recognized that other jurisdictions have suggested
that courts could give substantial deference to such approvals.61
In Government Employees Insurance Co. v. Graham-Gonzalez,62 we
looked to the divisions exercise of its delegated authority to
regulate forms under Title 21, and its subsequent approval of the
application form in question, in finding that a statute requiring
insurers to offer under insured motorist coverage did not require
application forms to state the amount of the policy premium. We
noted that even if we applied our independent judgment, the
divisions approval of forms . . . would be entitled to some
deference. In such cases this court gives some weight to what the
agency has done, especially where the agency interpretation is
longstanding. 63
The Division of Insurance was concerned about
policyholders unwittingly executing named driver exclusions
without understanding the scope of potential risks involved. The
division encouraged insurance companies to develop a disclosure
form. Progressive included a plain warning on Form 9330
notifying insureds of the risks of the exclusion.64 It appears
the warning language on Form 9330 was in response to the
divisions requirements. The division required insurers to obtain
approval from the director of the division for this exclusion,
and Progressive did so. The division approved Form 9330. Lilii
Ulisese signed it. The division clearly intended that
Progressives exclusion would eliminate a named policyholders
coverage for claims arising out of the excluded drivers operation
of the vehicle.
As in Graham-Gonzalez, it is unnecessary for us to
determine the precise standard of review we should apply to the
divisions approval of Form 9330.65 Even if we give only some
weight to the divisions approval of Form 9330, it is consistent
with our view of subsection .440(l). We have already noted that
the purpose of subsection .440(l) is to allow policyholders to
obtain affordable auto insurance by giving them the option to
exclude a high-risk member of their household from their policy.
The division approved the form, and in doing so must have
contemplated the potential risks that could arise. For these
reasons we find that subsection .440(l) and Form 9330 provide a
narrow exception to the minimum liability coverage otherwise
required by AS 28.20 and AS 28.22.66
V. CONCLUSION
The superior court correctly determined as a matter of
law that the named driver exclusion in the Uliseses insurance
policy operated to exclude Nelsons claim for negligent
entrustment. The excluded activity, Siuleos operation of the
vehicle, is an indispensable element of a claim of negligent
entrustment. The Progressive exclusion is neither ambiguous nor
illegal. Finally, AS 28.22.440(l) sets forth a limited exception
to the statutorily mandated liability coverage provisions
otherwise required in AS 28.20 and AS 28.22. We therefore AFFIRM
the decision of the superior court.
_______________________________
1 It is undisputed that on March 5, 2001 Lilii Ulisese
endorsed Progressive Form 9330, entitled NAMED DRIVER EXCLUSION
ELECTION, a provision of the Uliseses auto policy that excluded
Siuleo from coverage.
2 Nelsons claims against Progressive claims adjusters
Danny Withers and Matt Dufour are not at issue in this appeal.
3 Jones v. Horace Mann Ins. Co., 937 P.2d 1360, 1361
(Alaska 1997).
4 Id.
5 Cox v. Progressive Cas. Ins. Co., 869 P.2d 467, 468 n.1
(Alaska 1994).
6 Progressive Ins. Co. v. Simmons, 953 P.2d 510, 521 n.13
(Alaska 1998).
7 Burton v. State Farm Fire & Cas. Co., 796 P.2d 1361,
1363 (Alaska 1990).
8 AS 28.20.010.640. [A]lthough the MVSRA has never been
a mandatory insurance law, as of 1968 the acts policy content
requirements became mandatory for all policies written in the
state. Simmons, 953 P.2d at 520.
9 See AS 28.20.010.
10 AS 28.20.440(b)(2).
11 Simmons, 953 P.2d at 21.
12 Id. at 520-21.
13 Id.
14 Ch. 81, 113, SLA 1997.
15 See Neary v. McDonald, 956 P.2d 1205, 1208 (Alaska
1998) (applying Restatement (Second) of Torts 390 to determine
whether parents had sufficient control of their sons car to
support negligent entrustment claim against them by motorcyclist
injured in collision with sons car).
16 982 P.2d 727 (Alaska 1999).
17 Id. at 733 (quoting Karen L. Ellmore, Annotation,
Negligent Entrustment of Motor Vehicle to Unlicensed Driver, 55
A.L.R.4th 1100, 1106 (1987)).
18 Id.
19 See, e.g., Restatement (Second) of Torts 390 cmt. b,
illus. 4:
A lends his car to his friend B for B to use
to drive a party of friends to a country club
dance. A knows that B has habitually become
intoxicated at such dances. On the
particular occasion B becomes intoxicated and
while in that condition recklessly drives the
car into the carefully driven car of C, and
causes harm to him. A is subject to
liability to C.
(Emphasis added.)
20 641 P.2d 384 (Kan. 1982).
21 Id. at 389-90.
22 Id. at 387.
23 Id. at 389.
24 Id. at 388 (emphasis added).
25 See Jay M. Zitter, Annotation, Validity, Construction,
and Application of Named Driver Exclusion in Automobile Insurance
Policy, 33 A.L.R.5th 121, 199-200 (1995).
26 757 F.2d 1042, 1045 (9th Cir. 1985). The disputed
exclusion stated: We do not cover bodily injury or property
damage arising out of the ownership, maintenance, use, loading or
unloading of aircraft. Id. at 1043-44.
27 Id. at 1045.
28 329 N.W.2d 150 (Wisc. 1983).
29 Id. at 153.
30 937 P.2d 1360 (Alaska 1997).
31 Id. at 1367.
32 Id.
33 Id. at 1367. See also Northern Ins. Co. of New York
v. Ekstrom, 784 P.2d 320, 323 (Colo. 1989) ([The term] arising
out of has been construed to bar coverage where, but for the
covered cause of loss, the injury would not have occurred. . . .
The exclusion applies to a specific instrumentality, namely an
automobile, rather than a theory of recovery.).
34 See, e.g., State Farm Mut. Auto. Ins. Co. v. Graham,
860 P.2d 566, 567-68 (Colo. App. 1993) (relying on previous case
involving motor vehicle exclusion in homeowner policy to decide
case involving named driver exclusion); Pierce v. Oklahoma Prop.
& Cas. Ins. Co., 901 P.2d 819, 823-24 (Okla. 1995) (relying on
previous case involving excluded instrumentality clause in
homeowners policy to decide case involving named driver
exclusion).
35 C.P. ex rel. M.L. v. Allstate Ins. Co., 996 P.2d 1216,
1222 at n.38 (Alaska 2000).
36 Id.
37 Jarvis v. Aetna Cas. & Sur. Co., 633 P.2d 1359, 1363
(Alaska 1981).
38 Cf. New York Life Insur. Co. v. Rogers, 641 P.2d 218,
222 (Alaska 1982) (death likely due to hypothermia in water after
airplane crash excluded from coverage where it result[ed] from
airplane travel).
39 In determining whether a policy exclusion precluded
claims result[ing] from airplane travel, we noted [t]he question
whether such a death results from travel in an airplane must be
answered by applying a reasonable interpretation of the phrase to
the facts presented. Id. See also McCauley v. Metropolitan Prop.
& Cas. Ins. Co., 36 P.3d 1110, 1113 (Wash. App. Div. 1 1999) (The
phrase arising out of means originating from, having its origin
in, growing out of, or flowing from ); State Farm Mut. Auto. Ins.
Co. v. Graham, 860 P.2d 566, 567 (Colo. App. 1993), (concluding
phrase arising out of not ambiguous in a claim for negligent
entrustment as such a claim was related to, flowed from, and
would not exist but for the acts of the entrusted driver). But
see, e.g., Pablo v. Moore, 995 P.2d 460, 462-64 (Mont. 2000)
(applying minority rule that looks to specific theory of
coverage, rather than underlying cause of injury, to determine
coverage and concluding phrase arising out of ambiguous in policy
exclusion); Marquis v. State Farm Fire & Cas. Co., 961 P.2d 1213
(Kan. 1998) (same).
40 West v. Umialik Ins. Co., 8 P.3d 1135, 1138 (Alaska
2000).
41 Id.; C.P. ex rel. M.L. v. Allstate Ins. Co., 996 P.2d
1216, 1222 (Alaska 2000).
42 Bering Strait Sch. Dist. v. RLI Ins. Co., 873 P.2d
1292, 1295 (Alaska 1994) (quoting Robert Keeton, Basic Text on
Insurance Law 6.3(a), at 351 (1971)).
43 Williams v. Crawford, 982 P.2d 250, 253 (Alaska 1999).
44 See Ness v. Natl Indem. Co. of Nebraska, 247 F. Supp.
944, 947 (D. Alaska 1965) (A court cannot and should not do
violence to the plain terms of a contract by artificially
creating ambiguity where none exists. In situations in which
reasonable expectations favor the insurer, and any other would be
strained and tenuous, no compulsion exists to torture or twist
the language of the contract.).
45 Some courts considering the validity of named driver
exclusions have analyzed whether the exclusion is supported by
consideration, as in the form of lower premiums. See 7A Lee R.
Russ et al., Couch on Insurance 110:22 (3d ed. 1995).
46 See Ward v. Baker, 425 S.E.2d 245 (W. Va. 1992)
(holding named driver exclusion of no force or effect up to
limits of states mandatory minimum insurance coverage limits).
47 AS 28.22.101(a).
48 AS 28.20.010.
49 Progressive Ins. Co. v. Simmons, 953 P.2d 510, 516
(Alaska 1998) (To determine whether two statutory provisions
conflict, we must interpret them together, in context with other
pertinent provisions rather than in isolation, and with a view
towards producing a harmonious whole.).
50 See Jay M. Zitter, Annotation, Validity, Construction,
and Application of Named Driver Exclusion In Automobile Insurance
Policy, 33 A.L.R.5th 121, 137-38 (1995).
51 See, e.g., Lopez v. Dairyland Ins. Co., 890 P.2d 192
(Colo. App. 1994) (holding named driver exclusion valid under
statutory scheme mandating insurers offer uninsured motorist
coverage); State Farm Mut. Auto. Ins. Co. v. Washington, 641 A.2d
449 (Del. 1994) (holding named driver exclusion valid so long as
not used to delete uninsured motorist coverage); Pierce v.
Oklahoma Prop. & Cas. Ins. Co., 901 P.2d 819 (Okla. 1995)
(holding named driver exclusion based on poor driving record of
excluded individual consistent with compulsory liability
insurance laws); Tapio v. Grinnell Mut. Reinsurance, 619 N.W.2d
522 (S.D. 2000) (upholding named driver exclusion). But see Ward
v. Baker, 425 S.E.2d 245 (W. Va. 1992) (holding named driver
exclusion of no force or effect up to limits of states mandatory
minimum insurance coverage limits).
52 See, e.g., St. Paul Fire & Marine Ins. Co. v. Smith,
787 N.E.2d 852, 858 (2003) (Ill. App.) (discussing public policy
rationales of sister states in upholding named driver exclusion);
Pierce, 901 P.2d at 823 (same). But see Iowa Mut. Ins. Co. v.
Davis, 752 P.2d 166 (Mont. 1988) (Although not expressly
prohibited . . . a named driver exclusion is contrary to the
public policy of [Montanas mandatory insurance statutes], and is,
therefore, invalid.).
53 1997-98 Minutes of the House Labor & Commerce
Committee, May 1, 1997, at 328.
54 Id.
55 See Taipo, 619 N.W.2d at 525.
56 See Zamora v. Dairyland County Mut. Ins. Co., 930
S.W.2d at 739, 741 (Tex. App. 1996) (holding that named driver
exclusion furthered public policy by enabling families with
members having bad driving records to secure affordable insurance
and deterred insured drivers from entrusting automobiles to
unsafe drivers).
57 State Farm Auto. Ins. Co. v. Dressler, 738 P.2d 1134,
1138 (Ariz. App. 1987).
58 Our decision today is confined to the named driver
exclusion as it applies to liability coverage. We do not reach
the issue of whether the named driver exclusion is valid when
uninsured or underinsured motorist coverage is at issue.
59 Insurance forms made part of a policy, including
Progressive Form 9330, are subject to state regulation. Alaska
Statute 21.42.120 requires forms that are to become part of an
insurance policy to be filed and approved by the director of the
Division of Insurance.
60 See Govt Employees Ins. Co. v. Graham-Gonzalez, 107
P.3d 279, 286 (Alaska 2005) (noting that independent judgment
standard typically applies to question of law unless issue
involves agency expertise or determination of fundamental policy
questions on subjects committed to the agency).
61 Id. (citing McTaggart v. Liberty Mut. Ins., 983 P.2d
853, 957-58 (Kan. 1999) (noting that the interpretation of a
statute by an administrative agency charged with the
responsibility of enforcing that statute is entitled to judicial
deference)). See also Lee v. John Deere Ins. Co., 802 N.E.2d
774, 779 (Ill. 2003) (noting that approval of director of
division of insurance is entitled to great weight, although it is
not conclusive on the courts).
62 107 P.3d at 286.
63 Id. (quoting Diaz v. Silver Bay Logging, Inc., 55 P.3d
732, 741 (Alaska 2002)).
64 Because named driver exclusions eliminate significant
coverage, such exclusions must be accompanied by strict
requirements in the policies so as to insure the insureds full
knowledge and consent to the endorsement. Phoenix Indem. Ins.
Co. v. Pulis, 9 P.3d 639, 643 (N.M. 2000) (citing Jay M. Zitter,
Annotation, Validity, Construction and Application of Named
Driver Exclusion in Automobile Insurance Policy, 33 A.L.R.5th
121, 2[a] at 137-38 (1995)).
65 Graham-Gonzalez, 107 P.3d at 287.
66 Nelson finally argues that a deemer clause in the
policys general provisions, which provides that if any part of
the policy fails to conform with Alaska law it shall be deemed
amended to conform with state requirements, mandates coverage in
this case. Because we have held that the named driver exclusion
is valid, and Nelsons argument on this point presupposes the
illegality of the exclusion, her argument fails.
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