Oklahoma Supreme Court rules that Loaned Vehicle Exclusion is against public policy.
In Ball v. Wilshire Insurance Company, the court ruled that a loaned vehicle exclusion which excluded coverage for those using the car with the owner’s permission was unenforceable, since Oklahoma public policy requires that the general public be protected up to the minimum amount of legislatively mandated coverage. The court also ruled, however, that there was no duty to defend under the policy, since such a duty was not required to fulfill the public policy behind mandatory minimum liability coverage. The court also determined that Wilshire did not act in bad faith in delaying UM payment to Ball, since the law was unsettled.
Ball was driving a loaner car owned by Drumright while her car was being repaired. She collided with another car, causing serious injuries. Wilshire, Drumright’s insurer, refused to defend or pay on the subsequent lawsuit, but it did pay the statutory minimum limits to the injured parties in the garnishment action. Ball then sued Wilshire, claiming that Wilshire should have defended her, and also claiming that she was entitled to UM benefits.
The court ruled that public policy required minimum liability limits to be available to the general public. To the extent that the loaned vehicle exclusion meant that no insurance was available to the public, it was invalid. Presumably, the exclusion would be upheld as to any amounts over the minimum required limits.
The opinion does not state whether Ball had her own insurance. We suspect that if she had, however, the loaned vehicle exclusion would have been upheld because the victims would have had minimum limits, even though such limits were inadequate.
The court then said that just because minimum limits were required for the protection of the public, did not mean that there was any duty to defend Ball in the underlying action. The defense duty was contractual, and not required by the compulsory insurance law. Similarly, the court dodged the question as to whether the loaned vehicle exclusion could permissibly remove Ball from the definition of an insured for UM purposes. Instead, the court merely stated that the issue was unsettled, and therefore, Wilshire did not act in bad faith.
