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The Missouri Supreme Court Rejects the Buy-One-Get-One-Free Approach to Auto Liability Insurance

March 10, 2015

After leaving almost 10,000 empty seats in its Champions League game against Roma last September, the professional football team in Manchester City chose to offer a buy-one-get-one-free deal on tickets at its October match against CSKA Moscow. (“Football” here is meant in the European sense, a game most Americans call “soccer”, which in the fall of 2016 may be the only professional football played in St. Louis. Go Ambush!) The promotion was a success in that City went on to sell out its match against CSKA. The buy-one-get-one-free deal, however, drew the derision of fans of City’s rival Manchester United, who saw it as a sign of a lack of fan support for City. United’s fans even composed a catchy song to toast City’s ticket promotion, with the clever lyric: “If you go down to Man City, you’ll buy one get one free, buy one get one free, buy one get one free”. Nevertheless, one cannot argue with success of the buy-one-get-one-free ticket deal for Manchester City. Maybe the Chicago White Sox should look into it.

The buy-one-get-one-free (BOGOF) marketing technique does have its critics. Some suggest that retailers use the promotion in connection with a price for the “purchased” product that amounts to twice its normal price. Others contend that BOGOF targets consumers who are bad at math. Many people, for example, do not realize that a 50% increase in quantity is the same as a 33% discount in price. Still others believe that the promotion encourages waste by inducing consumers to buy more product than they need.

Among the critics of the buy-one-get-one-free approach, we can now include the Missouri Supreme Court, at least in terms of auto liability insurance. In Dutton v. American Family Mutual Insurance Company, the court considered whether the insurer was required to provide at least the minimum amount of auto liability insurance ($25,000) required by the Motor Vehicle Financial Responsibility Law (MVFRL) when the insured was a driving a vehicle at the time of the accident that he owned but did not insure on the policy at issue. The policy contained a specific exclusion for vehicles owned by the insured but not insured under that policy.

The Missouri Supreme Court noted that the MVFRL provides for both “owner’s” and “operator’s” policies of auto liability insurance. The statute requires an owner’s policy to “designate by explicit description or by appropriate reference all motor vehicles with respect to which coverage is thereby to be granted.Such a policy must “insure the person named therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle“. On the other hand, the MVFRL requires an operator’s policy to “insure the person named as insured therein against loss from the liability imposed upon him or her by law for damages arising out of the use by him or her of any motor vehicle not owned by him or her“.

The court read these provisions of the statute together to hold that the MVFRL does not require an auto liability policy to cover claims which involve a vehicle owned by the insured but not specifically insured or designated by that particular policy. As a result, the exclusion which removed coverage for such a vehicle was enforceable.

The court’s holding in Dutton shows that if an insured wants liability insurance for a vehicle he owns, he should buy an owner’s policy specifically for it. The court in Dutton refused to mandate coverage for that owned vehicle under the MVFRL’s operator’s provision because that coverage, by definition, applies only to vehicles “use[d]” by the insured but “not owned by him”. Otherwise, the Missouri Supreme Court commented, “Owners and insurers alike would be surprised to learn that their purchase of insurance on a single motor vehicle made them the insurer of all passenger cars.”

Essentially, BOGOF may work in Man City, but not Jeff City, at least with respect to auto liability insurance.