Liability insurance step down clause to provide only minimum limts to permissive user upheld

Step down exclusion to minimum liability limits for permissive user did not violate policy under No Fault Act.

Kentucky Farm Bureau Mutual Insurance Company v. Shelter Mutual                        Insurance Company
2008-SC-000781-DG     November 18, 2010
Opinion of the Court by Justice Scott. All sitting; all concur.  This case arose from a two-car accident in which Farm Bureau insured the non-owner, but permissive driver, of the vehicle, while Shelter insured the vehicle through the owner’s policy.  The Court was confronted with two automobile insurance policies, both claiming to provide only excess coverage.  The Court found somewhat unsatisfactory the “two-step” framework wherein the trial court examines each policy, determines that the excess clauses are mutually repugnant, and prorates the damages between the insurance companies.  Instead, the Court held that, based on legislative intent underlying the Kentucky Motor Vehicle Reparations Act (MVRA) KRS 304.39-010, et. seq., and the spirit and intent of the MVRA, in instances where both the vehicle owner and non-owner driver are separately insured, the vehicle owner’s insurance shall be primary.