Insurance – Automobile Insurance Policy – Named Driver Exclusion

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Excluding a 14-year-old from an automobile insurance policy does not violate public policy, and the exclusion can be enforced so long as it complies with the requirements of section 38-77-340.

We affirmed the decision of the circuit court.

In this appeal of a declaratory judgment, Appellant Tamasha F. Floyd, as Guardian ad Litem for Jayvon G., argued the circuit court erred in determining that an automobile insurance policy issued by Respondent First Acceptance Insurance Company, Inc. lawfully excluded coverage for any claims arising out of a single-car accident that occurred while an excluded driver was operating the insured vehicle. Specifically, Appellant argued the court erred by enforcing the exclusion because (1) the insurance policy listed the incorrect year of birth for the excluded driver and (2) the excluded driver was only 14 years old when the initial policy was issued and thus incapable of obtaining a driver’s license or securing his own insurance.

This case arose from a car accident that took the life of the driver, Kevin Morazan, and severely injured the front seat passenger, Jayvon G. In 2018, Kevin took the keys to his mom’s 2004 Ford Expedition and picked up a few friends. Kevin, who was 17 years old and unlicensed, lost control of the car, ran off the road, hit a mailbox, and overturned. Jayvon’s mother brought a negligence suit against Kevin’s mother and against the special administrator of Kevin’s estate. In a separate action, First Acceptance—the insurance company that issued the policy for the Ford Expedition—sought a declaration that it had “no duty to defend, indemnify, or make any payments whatsoever for any claims” arising out of the accident because the policy listed Kevin Morazan as an excluded driver.

Two years before the accident, First Acceptance issued a personal automobile insurance policy to Carlos Morazan, Kevin’s father. The application includes a “Named Driver Exclusion” form. The form authorizes the exclusion of named individuals “in consideration of the premium charged” and states the insurance company “shall not be liable for damages, losses, or claims arising out of the operation” of the insured vehicle by the excluded driver “whether or not such operation or use was with the express or implied permission of its owner.” Kevin Morazan is listed on this form as an excluded driver. Section 38-77-340 of the South Carolina Code (2015), which authorizes the named driver exclusion, provides that in order for a driver to be effectively excluded, the named insured must declare either that the excluded driver has turned their license in to the Department of Motor Vehicles or that an appropriate policy of liability insurance has been executed in the name of the excluded driver. Here, the named driver exclusion form indicates that an appropriate policy of liability insurance had been properly executed in Kevin’s name. In accordance with the execution of the form, the policy issued to Carlos includes a named driver exclusion endorsement that excludes Kevin from the policy. The circuit court found that the policy lawfully excluded coverage of the accident and held that the exclusion was enforceable. Thus, the court determined “First Acceptance [had] no duty to defend, indemnify, or make any payments whatsoever for any claims arising out of the above-referenced accident.”

On appeal, Appellant contended that excluding a 14-year-old from an insurance policy violates South Carolina law and public policy. First, the named driver exclusion in this case complies with every element of section 38-77-340 and, therefore, must be enforced as written. Second, excluding a 14-year-old from an insurance policy does not violate the purpose of the named driver exclusion statute or public policy. All requirements of this statute have been met.

Next, we addressed Appellant’s argument that it is impossible for a 14-year-old to be excluded under section 38-77-340 because they cannot obtain a driver’s license or their own insurance policy. Carlos had to inform the insurance company about 14-year-old Kevin. Schlechta’s testimony at trial suggested that First Acceptance’s typical practice is to “disclose then exclude” these young people, which is what Carlos chose to do. And by continuing to exclude Kevin from the policy when he became driving-aged, Carlos benefitted by avoiding teenage driver premiums. He was able to do so because he declared Kevin was covered by other insurance, and the exclusion was valid even though Kevin did not actually have alternative insurance. In making this decision, Carlos accepted the financial risk of being personally responsible for anything that happened if Kevin ended up behind the wheel. The named driver exclusion statute implies this result.

Affirmed.

First Acceptance Insurance Company Inc. v. Floyd (Lawyers’ Weekly No. 012-053-25, 11 pp.) (Per Curiam) Appealed from Beaufort County Circuit Court (Jocelyn Newman, J.) Clifford Bush, III and James Andrew Smith, both of Law Offices of Clifford Bush, III, LLC, of Beaufort, for Appellant. Wesley Brian Sawyer, of Murphy & Grantland, P.A., of Columbia, for Respondent. South Carolina Court of Appeals Unpublished