Geographic Limitation In Insurance Policy

Aledo insurance lawyers will not often run across what happened in this case, but it something to know about. The case is styled, McCallas v. State Farm Mutual. The opinion was issued by the Houston Court of Appeals [14th Dist.] in 1986.
The issue presented is whether the trial court was correct in holding that Personal Injury Protection (PIP) benefits can be denied on a geographic basis. This appeals court agreed with the decision of the trial court.
On March 3, 1984, McCalla was involved in an automobile accident on the island of Jamaica. He was hospitalized and treated. He has incurred expenses in excess of $2,500. Before the accident, McCalla was issued an insurance policy which was in effect at the time of the accident. This policy contained PIP coverage which was mandated by the Legislature. State Farm denied benefits because the policy applied only to accidents and losses which occurred in the United States and its territories or possessions, Puerto Rico or Canada. Thus, State Farm argued, the policy was not in effect when McCalla was driving in Jamaica.
Texas Insurance Code, Section 1952.152 provides in part as follows:
(a) An insurer may not deliver or issue for delivery in this state an automobile liability policy, including a policy provided …, unless the insurer provides personal injury protection coverage in the policy or supplemental to the policy.

1952.158 An insurer shall exclude benefits to any insured, or the insured’s personal representative, under the coverage required by this subchapter if the insured’s conduct contributed to the injury the insured sustained and that conduct:
(1) involved intentionally causing injury to the insured; or (2) occurred while committing a felony, or while seeking to elude lawful apprehension or arrest by a law enforcement official.

McCalla argued the only exclusions allowed are those contained in Texas Insurance Code, Section 1952.158 and that State Farm cannot exclude coverage based on territorial limitation since it does not fall within the exclusions mandated by the Legislature. When the Legislature specifies a particular extent of insurance coverage, any attempt to void or narrow such coverage is improper and ineffective according to the Texas Supreme Court. When specific exclusions or exceptions to a statute are stated by the Legislature, the intent is usually clear that no other shall apply.
The Texas Supreme Court held in 1978, what could be termed firm language, that the PIP statute sets forth the only exclusions of PIP benefits authorized by statute. Any attempt to add additional exclusions is repugnant to the statute.
McCalla cited to additional authority which holds that the only exclusions allowed for denying PIP are those found in the PIP statute. These authorities are very persuasive as to the public policy intent of the Legislature in enacting the PIP statute, however, the court did not find them controlling in this case.
Unlike the other decisions in which concerned the validity of written waivers and which dealt with the interpretation of accident in the policy, this question is one of basic policy coverage. No exclusion is involved.
The policy issued to McCalla covered accidents which occurred in the United States, its territories and possessions, Puerto Rico or Canada. It did not apply to Jamaica. While the PIP statute dictates the type of coverage which must be provided, it does not dictate where the policy is effective. When McCalla purchased his insurance he knew or should have known that it did not cover accidents which occurred outside the jurisdictional limits stated in the policy. If he wanted a policy with coverage beyond the jurisdictional limits stated then he could have negotiated with the insurer for this extended coverage. An insurance policy is a contract entered into between the parties whereby each party becomes bound by the terms of the agreement.
Other decisions have used the distinction between basic coverage and exclusion. A policy was not in effect when the insured had an accident in a vehicle not covered by the policy.
When Michael McCalla had his accident in Jamaica, he was outside the territorial limits of his policy, therefore, he was outside the basic coverage of his policy.