Minimum Auto Liability Limits
October 12, 2015
The injured passenger brought an action against the insurer of a vehicle seeking a declaration that the judgment against the driver, who was the son of the insured, was covered under the insured's auto policy. This case is Lyons v. Direct General Insurance Company of Mississippi, 138 So.3d 887 (2014).
Lyons suffered severe injuries in a single-car auto accident. The accident occurred when the car driven by Holliday, in which Lyons was a passenger, left the road and hit a tree. As a result of a lawsuit, Lyons won a default judgment of $72,500 from Holliday.
Holliday's mother, Lang had insured the vehicle with Direct General Insurance Company. However, the policy included a provision specifically excluding Holliday from any coverage, so the insurer denied any coverage for the default judgment. Lyons then filed this action seeking a declaration that the policy did cover the judgment. Lyons argued that the policy covered the judgment against Holliday because Mississippi law requires minimum liability coverage for all permissive drivers. The insurer countered that the law lacks any requirement for coverage of all permissive drivers and that the policy exclusion as to Holliday is valid.
The circuit court granted summary judgment to the insurer. The court of appeals reversed and remanded. The insurer then appealed to the Supreme Court of Mississippi.
The Supreme Court noted that prior to 2001, Mississippi contained no general requirement that the owner or operator of a vehicle carry liability insurance. Since then, however, the legislature did pass a law requirement that all vehicles operated within the state have liability insurance. The court found that the statute requires that an insurance card be maintained in the motor vehicle and that the insurance card serve as proof of liability insurance that is in compliance with the limits required by statute. The court said that the statute leaves no doubt that an insurer may not issue the card for use as proof of coverage unless the policy complies with minimum statutory requirements. Thus, if the policy provides no liability coverage for certain drivers, it does not comply.
Accordingly, the court held that the Direct General policy did not comply with the minimum liability coverage requirements of the statute. Moreover, this mandatory liability insurance requirement pertains to vehicles, not owners or operators. Said differently, every vehicle operated within Mississippi must have the statutorily required minimum coverage requirements of $25,000 for injury to one person, $50,000 for injury to two or more people, and $25,000 for property damage. The court ruled that a liability policy that purports to exclude that coverage for certain drivers fails to comply with the statutory mandate.
The court ruled that even though Holliday was an excluded driver under the policy issued by Direct General, the exclusion did not operate to eliminate liability coverage in the minimum amounts required by law. The ruling of the appeals court was affirmed.
Editor's Note: The Supreme Court of Mississippi holds that the statutory minimum requirements for mandatory auto liability insurance applies to vehicles rather than the owner or operator. So, even though the auto policy in question excluded coverage for the driver, coverage did exist for the injured passenger because such coverage applied to the vehicle involved in the accident.