Last week, in a 6-2 decision, the Mississippi Supreme Court held that the named-driver exclusion is invalid for purposes of providing the statutory minimum limits. LYONS v. DIRECT GENERAL INSURANCE COMPANY OF MISSISSIPPI (Miss. February 13, 2014).
Although the named driver exclusion varies from state to state or even policy to policy, it is typically a clause in your automobile policy that excludes all coverage to a specially named driver that has access to the insured vehicle. These are fairly common to today’s policies.
At the same time, however, Mississippi law requires liability insurance at least to certain minimum limits for every motor vehicle operated within the state.
In Lyons, the Court held that because of Mississippi’s mandatory liability insurance statute, which makes no mention of any exclusions, “named-driver” exclusions create a conflict with the statute and are declared invalid up to the minimum limits. Accordingly, the named-driver exclusion has no effect, at least up to the mandatory minimum limits.
The Court held that “[o]ur statutes create an absolute requirement for liability insurance up to the statutory minimum.” Judge Dickinson, writing for the majority, explained that the mandatory liability insurance requirements applies to vehicles, not owners or operators. In other words, no matter who is driving the car, the car must at all times be covered for at least minimum limits. In very broad language, the Court commented that “automobile insurers are not fee to escape the statutorily required minimum-liability coverage simply by inserting an exclusion of their choice–no matter how well-reasoned– into their policies.”
Moreover, the Court recognized that the logic of this ruling could extend to all exclusions that reduce the available coverage below the minimum limits. However, the Court simply said the issue was not before them, while conceding “it does showcase a problem that suggests additional analysis.”
The case is not the law of Mississippi until a mandate is issued. The defendants will likely move for a rehearing which will delay the issuance of the mandate for several more months. I suspect there will be a significant effort by many carriers to amend the statute to permit traditional exclusions. But for now, this is a very interesting development for insurance companies and their lawyers.