Liberty Mutual Insurance Company v. Goddard, 81 N.Y.2d 509 (1993)
A “livery exclusion” in the uninsured motorists coverage endorsement of a personal automobile liability policy is unenforceable because it is not based on statute or regulation and is inconsistent with the purpose of mandatory uninsured motor vehicle statutes and public policy.
Summary
Liberty Mutual sought to stay arbitration of an uninsured motorist claim, arguing that its policy with the vehicle’s owner, Karim, validly excluded coverage for vehicles used to carry persons for a fee (a “livery exclusion”). The respondents were passengers injured when Karim’s livery vehicle collided with another car. The Court of Appeals held the livery exclusion in the uninsured motorist endorsement unenforceable, as it contravened public policy and lacked statutory authorization, upholding the lower courts’ decisions to compel arbitration.
Facts
John Karim owned and operated a vehicle as a livery. Respondents were passengers in Karim’s vehicle. Karim’s vehicle ran a stop sign and collided with a vehicle owned by Jeannette Williams and operated by Frank Venable. Liberty Mutual insured Karim’s vehicle under a policy that excluded coverage for vehicles used to carry persons for a fee, both in the liability coverage and uninsured motorists coverage endorsement. Liberty Mutual denied coverage based on the livery exclusion after respondents sued Karim for personal injuries. The other vehicle was insured.
Procedural History
Respondents demanded arbitration from Liberty Mutual under the uninsured motorists coverage. Liberty Mutual commenced a proceeding to stay arbitration, arguing the livery exclusion applied. Supreme Court denied the stay and dismissed the petition. The Appellate Division affirmed for the same reasons. The Court of Appeals granted leave to appeal.
Issue(s)
Whether a “livery exclusion” contained in the uninsured motorists coverage endorsement of a personal automobile liability policy is invalid and unenforceable.
Holding
Yes, because the livery exclusion is not based on any statute or regulation and is inconsistent with the purpose of the mandatory uninsured motor vehicle statutes and the public policy of New York State.
Court’s Reasoning
The court reasoned that Insurance Law § 3420 mandates uninsured motorist coverage in every auto insurance policy. Unlike regulations for liability, no-fault, and supplemental uninsured/underinsured coverage, there is no statute or regulation that expressly permits a livery exclusion for uninsured motorist coverage. The Court emphasized that the absence of explicit authorization is critical: “when the Legislature and the State want to allow exclusions, they say so.”
The Court stated, quoting Rosado v Eveready Ins. Co., 34 NY2d 43, 49, “its obligation, with the exception of permitted exclusions, [arises] by operation of law and [is] as broad as the requirements of the applicable statutes.”
The court further reasoned that enforcing such an exclusion would undermine the public policy of ensuring compensation for innocent victims of motor vehicle accidents. The purpose of compulsory uninsured motorist coverage is to protect insured persons injured by financially irresponsible motorists. Exclusions narrow the scope of coverage mandated by statute, and are viewed with disfavor. The court quoted Matter of Country-Wide Ins. Co. v Wagoner, 45 NY2d 581, 586, saying that the goal is “to make the prescribed compensation available in all such cases, calls for a policy of inclusion rather than exclusion in determining whom it covers”.
The court dismissed Liberty Mutual’s argument that the Superintendent of Insurance’s inaction on the livery exclusion constituted tacit approval. While agency interpretations are given weight, courts retain the duty to interpret statutes reasonably. The court also found questionable whether a claim to the Motor Vehicle Accident Indemnification Corporation (MVAIC) is an adequate remedy, especially considering notice requirements. To allow the insurer to escape liability would unjustly enrich the insurer at the public’s expense.