A general term in a policy of motor vehicle insurance, applicable to the entire policy, which expressly and unambiguously excluded coverage of accidents and losses occurring outside the United States and Canada was valid and enforceable as applied to the uninsured motorist coverage required by G. L. c. 175, Section 113L. [811-814]
CIVIL ACTION commenced in the Superior Court Department on October 27, 1986.
A motion to dismiss was heard by John P. Forte, J., sitting under statutory authority.
The Supreme Judicial Court on its own initiative transferred the case from the Appeals Court.
Michael P. Hickey for the plaintiffs.
Mary Holland Harvey for the defendant.
HENNESSEY, C.J. The plaintiff Laura Heinrich-Grundy was injured in a motor vehicle accident in Nassau, Bahamas. At the time of the accident, she was a passenger, and neither of the involved vehicles carried insurance which could compensate her for her injuries. She filed a claim to recover for her damages under the uninsured motorist and medical payments provisions of her Massachusetts automobile insurance policy issued by the defendant. The defendant rejected this claim, based on a policy term that excludes coverage for accidents and losses occurring outside the United States and Canada (the
territorial restriction). The plaintiffs sued the defendant to recover under the policy. A judge of the Superior Court allowed the defendant's motion to dismiss the plaintiffs' action for failure to state a claim on which relief may be granted, see Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 (1974), and the plaintiffs appealed. We took the case on our own motion, and now affirm.
The territorial restriction explicitly and unambiguously excludes coverage for accidents and losses occurring outside the United States and Canada. [Note 2] The plaintiffs do not dispute this. Rather, they contend that, as applied to uninsured motorist coverage, [Note 3] the territorial restriction is invalid and unenforceable because it is contrary to the language and policy of the statute that requires insurers to provide such coverage, G. L. c. 175, Section 113L (1986 ed.). "[N]o matter how explicit the exclusionary language may be, it cannot prevail if it is contrary to the statutory language or the legislative policy of G. L. c. 175, Section 113L." Cardin v. Royal Ins. Co., 394 Mass. 450 , 453 (1985). Our inquiry, then, is whether the defendant has, by reason of the territorial restriction, attempted to confine its liability within limits narrower than the Legislature intended.
The plaintiffs rely on our decisions in Cardin, supra, and Surrey v. Lumbermens Mut. Casualty Co., 384 Mass. 171 (1981). They particularly emphasize certain broad dicta in Cardin, such as the statement that "any policy exclusion to uninsured motorist coverage is unenforceable in light of the Legislature's decision not to sanction such exclusions in the statute." Cardin, supra at 457. We have previously cautioned, however, that Cardin's reference to "any exclusion" must be interpreted in light of the facts of that case. Johnson v. Hanover Ins. Co., 400 Mass. 259 , 264 n.8 (1987). See Morrissey v. Peerless Ins. Co., 400 Mass. 1003 , 1004 (1987); Lumbermens Mut. Casualty Co. v. DeCenzo, 396 Mass. 692 , 694-695 (1986). Both Cardin and Surrey involved policy exclusions which applied only to the uninsured motorist coverage provisions of the policies, and not to the policy as a whole. In this case, however, the challenged territorial restriction is a general condition of coverage, applicable to the entire insurance policy.
General Laws c. 175, Section 113L, requires that automobile insurance policies issued or delivered in Massachusetts provide uninsured motorist coverage "in amounts or limits prescribed for bodily injury or death for a liability policy under this chapter." The apparent legislative intent is to establish parity between uninsured motorist coverage and liability coverage. Where we have invalidated exclusions to uninsured motorist coverage, it has been because the insurer attempted to impose restrictions on uninsured motorist coverage which did not apply to the liability coverage under its policy. In Surrey we invalidated a provision excluding uninsured motorist coverage where there was no physical contact with the uninsured automobile. In Cardin, we invalidated a "regular use" exclusion to uninsured motorist coverage. See also Johnson, supra at 260-264. In each of these cases, the challenged exclusion applied solely and exclusively to the uninsured motorist coverage provision of the policy, and restricted that coverage within limits narrower than those applicable to liability coverage under the policy.
Other courts that have considered this issue have also found critical the distinction between general conditions of coverage applicable to the entire policy, and specific exclusions applicable
only to uninsured motorist coverage, and have upheld territorial restrictions on uninsured motorist coverage where, as here, those limitations were no greater than those on liability coverage. See, e.g., Curtis v. Allstate Ins. Co., 473 F. Supp. 315 (E.D. La. 1979), aff'd, 631 F.2d 79 (5th Cir. 1980); Robles v. California State Auto Ass'n, 79 Cal. App. 3d 602, 609-610 (1978); Mission Ins. Co. v. Brown, 63 Cal. 2d 508, 510 (1965); Fischer v. State Farm Mut. Auto. Ins. Co., 495 So. 2d 909, 910 (Fla. Dist. Ct. App. 1986); State Farm Auto. Ins. Co. v. Cabuzzi, 123 N.H. 451 (1983); Marchant v. South Carolina Ins. Co., 281 S.C. 585 (1984); Lovato v. Liberty Mut. Fire Ins. Co., 109 Wash. 2d 43 (1987). Also upholding territorial restrictions on uninsured motorist coverage, although on different grounds, are Robson v. Hartford Ins. Group, 156 Ariz. 247 (Ariz. App. 1987); Transamerica Ins. Co. v. McKee, 27 Ariz. App. 158 (1976); Kvalheim v. Farm Bureau Mut. Ins. Co., 195 N.W. 2d 726 (Iowa 1972); and American Casualty Co. v. Foster, 31 Misc.2d 818 (N.Y. Sup. Ct. 1961). But see Cashman v. Economy Fire & Casualty Co., 795 F.2d 50 (8th Cir. 1986) (Minnesota law); Serefeas v. Nationwide Ins. Co., 338 Pa. Super. 587 (1985); Gerardi v. Harleysville Ins. Co., 293 Pa. Super. 375 (1981). We note that the Cashman court was construing a statute that was amended subsequent to the accident at issue in that case, and that the result would be different under the statute as amended. See Cashman, supra at 50-51. We distinguish the cases from the Superior Court of Pennsylvania on the ground that the governing statutes construed in those cases differ significantly from G. L. c. 175, Section 113L. In Gerardi, the court construed a statute which listed specific exceptions to mandatory coverage, and applied the "elementary rule of statutory construction that `[e]xceptions expressed in a statute shall be construed to exclude all others.'" Id. at 378. Similarly, in Serefeas, the court construed a statute which specifically distinguished between accidents occurring within, and without, the Commonwealth of Pennsylvania, and established different criteria for recovery for each class of accident. Arguably, this legislative scheme impliedly proscribed further classification of accidents by reason of the place of their occurrence.
We conclude, therefore, that the Legislature did not intend to proscribe territorial restrictions on compulsory uninsured motorist coverage that are coextensive with valid territorial restrictions on liability coverage. We add that we think this result is in accordance with good public policy. There are good reasons for insurers to limit their liability for losses caused by uninsured motorists in foreign countries. "Insurers providing uninsured motorists coverage must base their rates on the risk that the insured will be struck by an uninsured vehicle. It is certainly rational to exclude countries where the number of uninsured motorists is unknown or so high as to make coverage impractical." Curtis, supra at 317. Moreover, those motorists who do not engage in frequent foreign travel should not be required to subsidize, by reason of higher rates, the additional costs of quantifying and underwriting this risk.
[Note 1] Henry Grundy, her husband, who claims damages for loss of consortium.
[Note 2] The territorial restriction appears in a section of the policy entitled "General Provisions and Exclusions," and provides that "Compulsory Bodily Injury to Others (Part 1) only covers accidents in Massachusetts. All the other Parts provide coverage for accidents and losses which happen in the United States or Canada. We consider United States territories and possessions and Puerto Rico to be part of the United States. We will pay for accidents and losses which happen while your auto is being transported between ports of the United States and Canada. Your auto is not covered in any other country" (emphasis in original).
[Note 3] The plaintiffs also challenge the application of the territorial restriction to the medical payments provision of the policy, on similar arguments based on G. L. c. 175, Section 11C (1986 ed.). Unlike uninsured motorist coverage, however, medical payments coverage is not compulsory, but may be provided, or not, at the insurer's option. See id. The terms and conditions on which such optional coverage may be offered are entirely a matter of contract. See Morrissey v. Peerless Ins. Co., 400 Mass. 1003 , 1004 (1987); Johnson v. Hanover Ins. Co., 400 Mass. 259 , 265-266 (1987); Thomas v. Hartford Accident & Indem. Co., 398 Mass. 782 (1986); Lumbermens Mut. Casualty Co. v. DeCenzo, 396 Mass. 692 (1986).