Eaton v. State Farm Mut. Auto. Ins. Co.

Decision Date11 February 1993
Docket NumberNo. 18085,18085
Citation849 S.W.2d 189
PartiesPebble J. EATON, Plaintiff-Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.
CourtMissouri Court of Appeals

Dan L. Birdsong, Charles Bennett, Thomas, Birdsong & Clayton, P.C., Rolla, for defendant-appellant.

Mark Turley, Williams, Robinson, Turley & White, Rolla, for plaintiff-respondent.

GARRISON, Judge.

Plaintiff (Respondent) filed a two-count petition against State Farm (Appellant). Count I sought a declaratory judgment establishing coverage under the uninsured motorist and underinsured motorist provisions of a State Farm policy. 1 Jury was waived and the case was submitted pursuant to a Stipulation of Fact which provided, in pertinent part, that: plaintiff was injured in a one-car accident on February 15, 1987; the car belonged to plaintiff's parents, was being used with their permission, and was being driven by plaintiff's husband who was then living with her; the car was covered by a policy issued by State Farm to plaintiff's parents; and plaintiff's husband had no other liability insurance applicable to his operation of the vehicle.

Plaintiff's original claim was under State Farm's liability coverage based upon the negligence of her husband. State Farm, however, denied coverage based on the "household exclusion" which provided that:

THERE IS NO COVERAGE:

....

2. FOR ANY BODILY INJURY TO:

....

(c) Any insured or any member of an insured's family residing in the insured's household. 2

Plaintiff then made a claim against State Farm under its uninsured motorist and underinsured motorist coverages. 3

State Farm's policy provided "uninsured motor vehicle" coverage which would "pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle" on the condition that the "bodily injury must be caused by accident arising out of the operation, maintenance or use of an uninsured motor vehicle." Plaintiff claimed that the "uninsured motor vehicle" coverage applied because, based on State Farm's denial of liability under its liability coverage, the motor vehicle was therefore uninsured as to her claim.

The State Farm policy contained the following definition of an uninsured motor vehicle:

Uninsured Motor Vehicle--means:

1. a land motor vehicle, the ownership, maintenance or use of which is:

....

b. insured or bonded for bodily injury at the time of the accident; but

....

(2) The insuring company denies coverage or is or becomes insolvent;

....

An uninsured motor vehicle does not include a land motor vehicle:

1. insured under the liability coverage of this policy;

State Farm denied liability under the "uninsured motor vehicle" coverage on the theory that the vehicle was not an "uninsured motor vehicle" under the policy definition.

The trial court, in its Findings of Fact and Conclusions of Law, found that plaintiff was an insured person under State Farm's uninsured motorist 4 coverage because she was occupying the car while it was being used with the consent of the owners; the accident was caused by the negligence of plaintiff's husband and such negligence was the direct and proximate cause of plaintiff's injuries; plaintiff's husband was not insured under any liability insurance that would apply to plaintiff's claim against him; the car was an "uninsured motor vehicle" within the meaning of State Farm's policy because its use "was not insured for bodily injury liability to plaintiff"; the exception of a vehicle "insured under the liability coverage of this policy" from the definition of an "uninsured motor vehicle" did not apply to the subject vehicle because its use was not insured for bodily injury to plaintiff under the liability coverage; plaintiff's claims were covered under the uninsured motorist coverage of the policy; "it is at least arguable that the language of the policy's uninsured motor vehicle exception is ambiguous" as applied to plaintiff's situation and should be construed against State Farm; and the uninsured motor vehicle exception from the definition of an "uninsured motor vehicle" was contrary to public policy and, therefore, void. State Farm appeals from the judgment which incorporated these findings. 5

In reviewing a declaratory judgment, the appellate court is to sustain the decree or judgment unless there is no substantial evidence to support it, unless it is against the weight of the evidence, unless it erroneously declares the law, or unless it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo.banc 1976); and Abco Tank and Mfg. Co. v. Federal Ins. Co., 550 S.W.2d 193, 197 (Mo.banc 1977). Here, we believe the law was erroneously applied, requiring that the judgment be reversed.

The argument that denial of liability coverage because of the "household exclusion" thereby entitles the insured to uninsured motorist coverage is not unique. Numerous cases have rejected that contention where, as here, the insured vehicle was not an "uninsured motor vehicle" under the policy definition of that term. Harrison v. MFA Mut. Ins. Co., supra; Hussman v. Government Employees Ins. Co., 768 S.W.2d 585 (Mo.App.1989); McEwen v. Menees, 680 S.W.2d 414 (Mo.App.1984); Hoerath v. McMahan, 669 S.W.2d 281 (Mo.App.1984); and Brannon v. Security Mut. Cas. Co., 610 S.W.2d 315 (Mo.App.1980). Of similar import is Zink v. Allis, 650 S.W.2d 320 (Mo.App.1983), arriving at the same result from application of a "fellow-employee" exclusion. See also, Truck Ins. Exchange v. Gilliham, 659 S.W.2d 16, 17 (Mo.App.1983).

The controlling authority on which each of those cases was decided is Harrison v. MFA Mut. Ins. Co., supra. The Harrison case involved a one-car accident and the insurer's denial of liability coverage under the "household exclusion." Like the instant case, MFA denied plaintiff's claim under the uninsured motorist coverage because the policy provided that the term "uninsured highway vehicle" excluded an "insured automobile." (Here, the exception was described as a vehicle "insured under the liability coverage of this policy.") In Harrison, supra, the Supreme Court held that the uninsured motorist coverage did not apply. The same reasoning applies here.

The significance of an insurance policy's exclusion of a vehicle "insured under the liability coverage" from the definition of an "uninsured motor vehicle" was recently underscored by this court in Viessman v. Allstate Ins. Co., supra. In that case plaintiff was a passenger in a vehicle operated by her husband. As in the instant case, the insurer denied coverage based upon the "household exclusion" and plaintiff then claimed entitlement to uninsured motorist coverage. Allstate attempted to avoid that coverage by relying on the Harrison, Hussman, McEwen, Hoerath and Brannon cases, supra. The court found coverage, however, because the Allstate policy, unlike the policies in those cases and the instant case, did not contain language excluding an insured automobile from the policy definition of an uninsured vehicle. Unlike the Viessman case, the facts here are consistent with those in the Harrison case and its progeny.

Failure to give effect to the clear policy language excluding the vehicle "insured under the liability coverage of this policy" from the definition of "uninsured motor vehicle" would be to effectively abrogate the "household exclusion." As indicated earlier in this opinion, the parties agree that this exclusion applies here. Thus, a holding that the insured vehicle was not excluded from the definition of "uninsured motor vehicle" (in contravention of the policy language) would result in liability coverage being excluded under the "household exclusion" and the uninsured motorist coverage nevertheless stepping in and providing the excluded coverage. At least two courts have found this or a similar result to be unacceptable in view of the fact that there is a rational basis for such exclusions. Harrison v. MFA Mut. Ins. Co., supra, and Zink v. Allis, supra.

The thrust of plaintiff's argument is that the use of the vehicle was not insured for bodily injury liability to her and, therefore, from her perspective it was, in fact, an uninsured vehicle. This contention is based on the trial court's finding that the policy's exclusion of a vehicle "insured under the liability coverage of this policy" did not apply "because its use at the time of the accident was not insured for bodily injury to plaintiff, Pebble Eaton, under the liability coverage of the policy."

The same argument is implicit in other cases which denied uninsured motorist coverage where the liability coverage did not apply by reason of a policy exclusion (whether it be the "household exclusion" or "fellow-employee" exclusion) and the definition of uninsured motor vehicle excluded a vehicle insured under the policy. In fact, plaintiff's position is essentially the same as that taken in the dissenting opinion to Harrison v. MFA Mut. Ins. Co., supra. There, the argument was made that the uninsured motorist coverage should apply because "the auto was uninsured as to her." (Emphasis ours.) This position was obviously rejected by the majority opinion in Harrison. It was also rejected in Hoerath v. McMahan, supra, a case very similar to the instant case, where plaintiffs argued that because they were excluded from liability coverage under the "household exclusion," the vehicle was "uninsured as to them" (emphasis ours) and they should have been allowed to recover under the uninsured motor vehicle provisions of the policy. The Hoerath court held, at page 283, relying on Harrison v. MFA Mut. Ins. Co., supra, that "the household exclusion, combined with the fact that the insured vehicle could not also be an 'uninsured motor vehicle' under the policy, prevented plaintiffs from recovering...

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