7.9 Owned But Uninsured Vehicle Exclusions

• Jurisdiction: Arizona

As a counterpart to regular use exclusions applicable to automobile liability coverage, standard UM and UIM policies contain a similar exclusion that precludes UM and UIM coverage where the insured is occupying an owned but uninsured vehicle at the time of the accident. Initially these "owned but uninsured" exclusions were upheld by the Arizona courts. The first case to uphold the exclusion was Owens v. Allied Mutual Insurance Co.^[126] In this case, the court upheld Allied's "owned but uninsured" exclusion based upon the following analysis:

Several other jurisdictions have considered the contention urged by plaintiff, and under practically identical statutory provisions have held that their statutes did not mandate coverage when the named insured was, at the time of injury, driving a self-owned uninsured vehicle. See Rushing v. Allstate Insurance Co., 216 So. 2d 875 (La. App. 1968); National Union Indemnity Co. v. Hodges, 238 So. 2d 673 (Fla. Dist. Ct. App. 1970); McElyea v. Safeway Insurance Co., 266 N.E.2d 146 (Ill. App. 1970). We concur with the result reached in these decisions. We can see nothing in the statute which requires an insurer to extend uninsured motorist protection under one policy to a policyholder who has elected not to insure another vehicle owned by him, so as to give coverage at such times as he might be driving that uninsured vehicle. Any other interpretation would allow an insured to purchase one liability policy on one owned vehicle and claim uninsured motorist coverage . . . (thereunder for himself and others) while driving any number of other uninsured automobiles also owned by him.

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The exclusionary clause as applied to the facts here involved is reasonable and has been filed with and approved by the Insurance Director as required by A.R.S. Sec. 20-259.01. Plaintiff urges that an affirmance of the trial court's judgment would result in excluding uninsured motorist coverage for a named insured, for example, when the named insured was not driving any motor vehicle but rather was injured by an uninsured motorist while walking down the street. We express no opinion as to whether the statute mandates coverage under such circumstances, but we do wish to emphasize that our opinion here is limited to the fact situation before the Court and the particular policy considerations inherent in that fact situation.^[127]

The Owens decision and its progeny^[128] were overruled by the supreme court in Calvert v. Farmers Insurance Co. of Arizona.^[129]

The court in Calvert held that "owned but uninsured" vehicle exclusions contravene the public policy underlying Arizona's Uninsured Motorist Act. The court observed that the legislature had provided very specific exceptions to the mandatory UM coverage requirements of A.R.S. Sec. 20-259.01, i.e., public or livery conveyances, vehicles rented to others, or vehicles used primarily in the business of transporting property or equipment. The court then noted that if the legislature had intended to include additional authorized exclusions, such as the "owned but uninsured" vehicle exclusion, it would have expressly done so. Consequently, the court in Calvert declared that it would not reduce coverage unless authorized to do so by the legislature:

The purpose of our statute is to close the gap in protection under the Safety Responsibility Act, A.R.S. Sec. 28-1101 et seq., by requiring insurance companies issuing automobile liability policies to provide the insured with financial protection against uninsured motorists for bodily injury suffered due to the negligence of such individuals. [Citations omitted.] The statute does not contemplate a piecemeal whittling away at the liability protection for injuries caused by uninsured motorists. [Citations omitted.] As noted, above, an express provision in Sec. 20-259.01 authorizing "other vehicle" exclusions in uninsured motorist coverage could easily have been incorporated into the...