Mayfield v. Imperial Fire & Casualty Insurance
Docket: No. 94-696
Court: Louisiana Court of Appeal; December 6, 1994; Louisiana; State Appellate Court
The appeal addresses the validity of a business use exclusion in an automobile liability policy under the compulsory motor vehicle liability security law. The trial judge upheld the exclusion, which Imperial Fire Casualty Insurance Co. invoked to deny coverage for an accident involving Carlton Reedom, who was driving in the course of his employment with Domino's Pizza. The exclusion stipulates that coverage does not apply if the vehicle is used for employment purposes unless the insurer is informed of the business use and the corresponding premium is paid. Reedom admitted to being within the scope of his employment at the time of the accident, and the policy documents indicated that he had denied his vehicle would be used for commercial purposes. Imperial Fire sought summary judgment, arguing that the exclusion is not barred by statute. They cited a precedent case, Morris v. American Surety, which upheld similar exclusions. Conversely, Mayfield and associated parties argued that the exclusion violates Louisiana statutes (La.R.S. 32:861 and 32:900), asserting that it can lead to a lack of required minimum insurance coverage, contrary to the law’s intent to protect injured parties rather than vehicle owners or operators. They referenced several cases supporting their position. The Louisiana Supreme Court has not definitively ruled on this matter, although debates within the RPM Pizza case highlight differing views on whether such exclusions contradict the Motor Vehicle Safety Responsibility Law. Justice Watson suggested the exclusion is void due to its conflict with the law’s purpose, while Justice Cole viewed it as a legitimate recognition of varying insurer risks, cautioning against rendering all policies as 'all risk' by eliminating such exclusions. Judge Lobrano's comments in the Morris case highlight a misinterpretation by the Stanfel court regarding his earlier decision in Rudison. He clarified the distinction between business use exclusions and those applicable to permissive users, emphasizing that the current case does not involve a permissive user denied coverage, as the policy's insured risks remain unchanged regardless of the user. He noted that business use inherently presents a higher risk than personal use, justifying higher premiums, and cited prior cases affirming the enforceability of business use exclusions. Lobrano argued that extending the Stanfel decision excessively could lead to all auto liability policies being categorized as 'all risks' policies, which he believes contradicts legislative intent. The trial court supported this reasoning, asserting that insurers should have the ability to set premium pricing based on risk, and concluded that the business use exclusion in question is enforceable without conflict with state compulsory insurance laws. The summary judgment favoring Imperial Fire was affirmed, as the legal issues presented did not involve factual disputes. Costs of the appeal were assigned to the appellants.