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

Decision Date29 July 1985
Docket NumberNo. 15327,15327
Citation103 N.M. 105,703 P.2d 882,1985 NMSC 69
PartiesLorrine ESTEP, a Personal Representative of the Estate of James T. Estep, Deceased, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Defendant-Appellee, v. Lorrine ESTEP, in her individual capacity, Defendant-Appellant.
CourtNew Mexico Supreme Court

WALTERS, Justice.

Lorrine Estep, as Personal Representative of the estate of her deceased husband, James T. Estep, and in her individual capacity as an injured claimant, sought a judgment against State Farm Mutual Automobile Insurance Company to declare that the exclusion of coverage for household members in an automobile liability insurance policy is invalid or, in the alternative, that she is covered by the uninsured motorist provisions of the policy. The trial court granted summary judgment for State Farm on both claims. Mrs. Estep appeals.

On July 18, 1982, Lorrine was a passenger in a 1974 Ford Bronco registered in the name of and driven by her husband, James Estep. The State Farm policy insuring the vehicle provided automobile liability insurance and uninsured motor vehicle coverage. An accident occurred; James died as a result, and Lorrine suffered personal injuries. Lorrine presented a claim against James's estate, alleging injuries sustained as a result of James's negligence in the operation of the vehicle, and she also filed this declaratory judgment action against State Farm.

In granting summary judgment, the trial court sustained the validity of the household exclusion clause contained in the insurance policy, and refused to declare that Lorrine could recover under the policy's uninsured motorist coverage. Mrs. Estep appeals the correctness of the court's ruling on both of these questions of first impression.

Under the terms of the insurance policy, State Farm agreed:

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

(A) bodily injury sustained by other persons

* * *

* * *

caused by accident arising out of the * * * use * * * of the owned motor vehicle;

The policy further provided, in what is commonly known as the "household exclusion," the following:

This insurance does not apply * * *

* * *

* * *


(All emphasis to the policy language has been added.) Mrs. Estep fits within the definition of both alternatives listed in Exclusion (h), since the policy defines an "insured" as including the spouse of the named insured, and she was also a member of the family residing in the same household as James.

Mrs. Estep's principal argument is that the household exclusion clause is void as against public policy because it conflicts with those provisions of the Financial Responsibility Act, NMSA 1978, Sections 66-5-201 to 66-5-248, as were in effect at the time of the accident in this case. It is her contention, first, that the purpose of the Act was to provide protection to members of the general public from injury resulting from operation of motor vehicles, and to protect the vehicle operator from suspension of his license if a judgment of liability should be rendered against him but he was insured at the time of an accident; and secondly, that the primary purpose of protecting persons injured through motor vehicle accidents is frustrated by the household exclusion clause.

Suggesting that New Mexico's public policy regarding automobile insurance coverage is reflected in our statutes and in case law, we are reminded by appellant that exclusionary clauses in insurance policies require a narrow construction, particularly when the insurer has expressed coverage through broad promises. King v. Travelers Insurance Co., 84 N.M. 550, 505 P.2d 1226 (1973).

Looking to the statutes to discern the legislature's concerns (and we refer to the statutes effective in 1982), we note that Section 66-5-213 of the Financial Responsibility Act provides that an unsatisfied judgment against a motorist shall be forwarded to the division of motor vehicles upon the request of the judgment creditor or his attorney. Section 66-5-215 requires that, upon receipt of the certified copy of a judgment, the division of motor vehicles "forthwith suspend the license and registration * * * of any person against whom such judgment was rendered, except as hereinafter otherwise provided * * *." Section 66-5-219 then makes the following exception:

The provisions of * * * [Section] 66-6-215 NMSA 1978 shall not apply

A. to the driver or owner if the owner had in effect at the time of the accident an automobile liability policy or bond with respect to the vehicle involved in the accident * * *

Section 66-5-230 outlined the policy requirements:

A. A "motor vehicle liability policy" means an owner's policy or an operator's policy of liability insurance, certified as provided in Section 66-5-227 or Section 66-5-228 NMSA 1978 as proof of financial responsibility for the future and issued * * * by an insurance carrier duly authorized to transact business in this state to or for the benefit of the person named therein as insured.

B. The owner's policy of liability insurance:

* * *

* * *

(2) shall insure the person named therein, and any other person, as insured, using any such vehicle or 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 vehicle * * *

We apply the definition of "motor vehicle liability policy" in Section 66-5-230(A) to "owner's policy of liability" referred to in Section 66-5-230(B) and to "automobile liability policy" referred to in Section 66-5-219(A), because the Act nowhere defines "owner's liability policy" or "automobile liability policy." The Supreme Court of Arizona agreed that the meanings were the same, in Jenkins v. Mayflower Insurance Exch., 93 Ariz. 287, 380 P.2d 145 (1963), and we concur in its rejection of "artful distinctions" between motor vehicle liability policy, owner's liability policy and automobile liability policy. The terms are not contradistinctive. Read together, the statutes require a policy of insurance enabling owners of motor vehicles to respond in damages to innocent victims injured by negligent drivers.

With some logic, Mrs. Estep urges that the household exclusion clause in the insurance policy in this case is in conflict with the requirement of Section 66-5-230(B)(2) that the policy "shall insure * * * against loss from liability imposed by law." (Her emphasis.) We have held that when an insurance provision conflicts with the public policy expressed in a statute, it is void. Chavez v. State Farm Mutual Automobile Insurance Co., 87 N.M. 327, 329, 533 P.2d 100, 102 (1975). New Mexico has established that interspousal immunity is an "archaic precept" out of tune with and contrary to public policy. Maestas v. Overton, 87 N.M. 213, 531 P.2d 947 (1975). Since a wife in this jurisdiction has a cause of action for injuries suffered because of her husband's negligence, it is difficult to discern how a fundamental public policy purpose of the Financial Responsibility Act--i.e., to provide financial protection to those who sustain injury through the negligence of motor vehicle owners or operators--is served, or how the requirement of the Act--i.e., to provide proof of financial responsibility for losses from liability imposed by law which arise from the use of an insured motor vehicle--is observed, when the family exclusion clause in the policy specifically carves out from coverage a considerable segment of the "other" persons described in Section 66-5-230(B)(2) who are entitled by law to recover for the owner's or driver's negligence.

Our bemusement is not diminished when we consider what is commonly referred to as the "Conformity Clause" of State Farm's policy, wherein State Farm warrants to its insured that the policy complies with "any motor vehicle financial responsibility law * * * to the extent of the coverage and limits required thereby * * *." (The clause continues and adds " * * * but not in excess of the limits of liability stated in this policy." "Limits of liability" is elsewhere defined in the policy as meaning the policy's stated monetary limits of liability; it does not refer to the limits imposed by exclusion of liability coverage to a class of certain persons.) The Act mandates protection for "loss from liability imposed by law for damages arising out of the * * * use of such vehicle." Sec. 66-5-230(B)(2). State Farm's inclusion of a restriction against coverage for household members is not only a contradiction of the "broad promise" (King v. Travelers, supra) in its "Conformity Clause" warranty, but it is a violation of the requirements of the Act and a repudiation of New Mexico's public policy. See Hughes v. State Farm Mut. Auto. Ins. Co., 236 N.W.2d 870 (N.D.1975).

Under materially and substantially identical Financial Responsibility Acts, other jurisdictions have reached the result we adopt today. For extremely thoughtful and exhaustively researched opinions on the questions of insurance exclusions and public policy as related to the provisions of acts requiring proof of financial responsibility, we are impressed with the expositions of Justice Williams in Mutual of Enumclaw Ins. Co. v. Wiscomb, 95 Wash.2d 373, 622 P.2d 1234 (1980), and Paulson, J., in Hughes v. State Farm Mut. Ins. Co., supra. See also Transamerica Ins....

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