Morales v. Eveready Ins. Co., 39 A.D.2d 46 (N.Y. 1972)
An insurance policy exclusion that conflicts with the public policy of protecting innocent victims of motor vehicle accidents is unenforceable, even if the exclusion is part of a private agreement between the insurer and the insured.
Summary
The case addresses whether an insurance company, Eveready, could disclaim coverage based on a policy exclusion for vehicles not leased on an annual basis. Morales, a driver leasing a car from Abco Leasing Company, was involved in an accident. Eveready, Abco’s insurer, disclaimed coverage. The court held the disclaimer invalid, finding it violated the public policy of ensuring financial responsibility for drivers and protecting accident victims. The court reasoned that once Eveready issued the policy, its obligations extended as broadly as the applicable statutes required, and the attempted exclusion was unenforceable.
Facts
On April 8, 1967, Efrain Morales, while driving a car he leased from Abco Leasing Company, was involved in an accident with the plaintiffs, who were passengers in his car. Abco had an insurance policy with Eveready Insurance Company. Eveready’s policy included Automobile Endorsement No. 3, which stated coverage did not apply to vehicles used as “Drive-Yourself private passenger vehicles (except leased on annual basis.)” Eveready disclaimed coverage because Morales did not lease the car on an annual basis.
Procedural History
The initial judgment was likely in favor of Eveready, upholding the disclaimer. The Appellate Division reversed this judgment. The New York Court of Appeals affirmed the Appellate Division’s reversal, holding the disclaimer invalid and obligating Eveready to defend and pay any judgment against Morales.
Issue(s)
1. Whether an insurance policy exclusion that conflicts with the public policy of protecting innocent victims of motor vehicle accidents is enforceable.
Holding
1. No, because once an insurance policy is issued, the insurer’s obligation arises by operation of law and is as broad as the requirements of applicable statutes. Any attempted exclusion not permitted by law cannot limit responsibility under the policy.
Court’s Reasoning
The court reasoned that New York’s public policy, as reflected in the Insurance Law and the Vehicle and Traffic Law, aims to protect innocent victims of traffic accidents by ensuring that motorists are financially responsible. Section 167 of the Insurance Law mandates that liability insurance policies cover those using a vehicle with the owner’s permission. Section 311 of the Vehicle and Traffic Law defines an “owner’s policy of liability insurance” as providing coverage as defined in regulations promulgated by the superintendent of insurance. These regulations, found in 11 NYCRR 60.1, repeat the requirements of Section 167 and Section 311. Section 60.2 lists permissible exclusions, and the exclusion in Eveready’s policy was not among them. Citing the legal maxim "expressio unius est exclusio alterius" (the expression of one thing is the exclusion of another), the court found the exclusion invalid. The court stated: “Once Eveready issued its policy to Abco, its obligation, with the exception of permitted exclusions, arose by operation of law and was as broad as the requirements of the applicable statutes. Any attempted exclusion, not permitted by law, would not serve to limit its responsibility under the policy, whatever its private agreement with Abco.” The court also noted that Eveready would be unjustly enriched if it collected premiums without providing the required coverage. The court highlighted the importance of protecting the public from uninsured drivers and ensuring compensation for injuries sustained in accidents, stating: “It is the public policy of New York to protect the innocent victims of traffic accidents.”