7.6 Government-Owned Vehicle Exclusion

• Jurisdiction: Arizona

Arizona's Financial Responsibility Act does not apply to government-owned automobiles. A.R.S. Sec. 28-1221 provides in relevant part: "The provisions of this chapter shall not apply with respect to any motor vehicle owned by the United States, this state or any political subdivisions of this state or any municipality therein. . ."^[96] "This chapter" refers to chapter 7 of title 28, A.R.S., which contains the Financial Responsibility Act. A.R.S. Sec. 20-259.01, which imposes the UM requirement, is not a part of chapter 7 or of title 28 but, rather, is a part of chapter 2 of title 20, Arizona's insurance code. Because of this, a question existed as to whether government-owned vehicle exclusions were valid in the UM/UIM coverage context. This question was answered by the court of appeals in McClellan v. Sentry Indemnity Co.,^[97] where the court held that the government-owned vehicle exclusion in Sentry's policy was unenforceable to the extent of minimum coverage benefits required by A.R.S. Sec. 20-259.01; the exclusion was enforceable to coverage above the required minimum limits.

In McClellan, the claimant was a police officer who was injured in a motor vehicle accident while on duty. The owner of the police car, the City of Phoenix, carried no motor vehicle liability insurance covering the claimant's injuries. The City was not a self-insurer within the meaning of A.R.S. Sec. 28-1222. Because the police car, which was driven by a negligent co-employee, was not covered by any motor vehicle liability insurance, the claimant sought coverage under the UM provisions of his own policy with Sentry. The Sentry policy contained a government-owned vehicle exclusion.

The insurance company argued that the Uninsured Motorist Act must be read in pari materia with the Financial Responsibility Act.^[98] Accordingly, the company argued, because A.R.S. Sec. 28-1221 excludes government-owned vehicles from the requirements of the Financial Responsibility Act, the legislative intent must have been to exclude such vehicles from the requirements of the Uninsured Motorist Act as well. Rejecting this argument, the court in McClellan stated:

We agree that to some extent the Financial Responsibility Act and the Uninsured Motorist Act must be read together. However, we do not believe that the exclusion of government-owned vehicles from the requirements of the Financial Responsibility Act was intended to apply to the Uninsured Motorist Act. First, we note that the only reference in...