Farmers Ins. Group v. Reed

• Decision Date: 26 November 1985
• Docket Number: No. 14421,14421
• Citation: 712 P.2d 550,109 Idaho 849
• Parties: FARMERS INSURANCE GROUP, a corporation, Plaintiff-Respondent, v. Thomas REED and Betty Reed, husband and wife, Cindy Reed, a minor, Defendants, and Darrell James Hamilton, Jr., a minor; and Darrell Hamilton, and Karen Hamilton, husband and wife, Defendants-Appellants. Thomas REED and Betty Reed, husband and wife; and Cindy Reed, a minor, Defendants-Counterclaimants, v. FARMERS INSURANCE GROUP, a corporation, Plaintiff-Counterdefendant. Darrell James HAMILTON, Jr., a minor; Darrell Hamilton and Karen Hamilton, husband and wife, Defendants-Counterclaimants-Appellants, v. FARMERS INSURANCE GROUP, a corporation, Plaintiff-Counterdefendant-Respondent.
• Court: Idaho Supreme Court

Page 550

712 P.2d 550

109 Idaho 849

FARMERS INSURANCE GROUP, a corporation, Plaintiff-Respondent, v. Thomas REED and Betty Reed, husband and wife, Cindy Reed, a minor, Defendants, and Darrell James Hamilton, Jr., a minor; and Darrell Hamilton, and Karen Hamilton, husband and wife, Defendants-Appellants.

Thomas REED and Betty Reed, husband and wife; and Cindy Reed, a minor, Defendants-Counterclaimants, v. FARMERS INSURANCE GROUP, a corporation, Plaintiff-Counterdefendant.

Darrell James HAMILTON, Jr., a minor; Darrell Hamilton and Karen Hamilton, husband and wife, Defendants-Counterclaimants-Appellants, v. FARMERS INSURANCE GROUP, a corporation, Plaintiff-Counterdefendant-Respondent.

No. 14421.

Supreme Court of Idaho.

Nov. 26, 1985.

Stipulation for Dismissal with

Prejudice Withdrawn Jan. 30, 1986.

Costs and Attorney Fees Waived

Jan. 30, 1986.

Larry Clyel Berry (argued), Twin Falls, Stephan C. Rice and Kim Jay Trout, Lewiston, for appellants.

Kevin F. Trainor, Twin Falls, and W. Marcus W. Nye (on rehearing only), Pocatello, for respondents.

ON REHEARING

HUNTLEY, Justice.

On October 17, 1978, Thomas and Betty Reed gave their daughter, Cindy, permission to operate the family pickup. Darrell Hamilton, Jr., and his brother, Kevin, were passengers in the pickup. Shortly before 11:00 p.m., Cindy allowed Darrell to operate the pickup. Darrell was unable to negotiate a curve, and the vehicle rolled several times. As a result of injuries sustained in this accident, Kevin Hamilton was killed. At the time of the accident, Darrell was 16 years old, and Kevin was 10.

Following the accident, Darrell and Karen Hamilton, parents of Darrell, Jr., and Kevin, filed an action naming Thomas and Betty Reed, Cindy Reed as an individual and their son Darrell Jr. as defendants, seeking medical and funeral expenses, and general damages occasioned by the loss of their son Kevin. The complaint alleged that Kevin's death resulted from the negligent operation of the vehicle by Darrell, Jr. It was also alleged that Cindy Reed was negligent and careless in entrusting the 3/4 ton, 4-wheel drive pickup to Darrell, Jr.

We granted rehearing, primarily, because the Montana Supreme Court recently held that Montana's newly enacted compulsory insurance law (which is identical to Idaho's) invalidated an auto insurance policy's household exclusion clause. Transamerica Insurance Co. v. Royle, 656 P.2d 820, 824 (Mont.1983). The doctrine of parent-child immunity could have been a defense for the insurance company to avoid the statutory requirement that " '[e]very owner of a motor vehicle ... shall continuously provide insurance against loss resulting from liability imposed by law for bodily injury or death ... suffered by any person ...' " Transamerica, 656 P.2d at 821 (quoting Mont. Code Ann. § 61-6-301(1) (1980)) (emphasis deleted in part). The Montana court held, however, that parent-child immunity did not apply to bar automobile negligence actions between family members. Transamerica, 656 P.2d at 824.

The number of states allowing an intrafamily automobile negligence action now totals almost thirty. Unah By and Through Unah v. Martin, 676 P.2d 1366, 1367-68 (Okla.1984). See, Hollister, Parent-Child Immunity: A Doctrine in Search of Justification, 50 Fordham L.Rev. 489, 528-32 (1982) [hereinafter cited as Hollister]. Since November, 1983, every state which has considered intrafamily immunity in the context of negligently caused automobile accidents and household exclusion clauses has allowed intrafamily suits in this narrow area and invalidated the exclusion clause in the insurance contract. This list includes Oregon, Wyoming, Ohio, Oklahoma and Colorado. Meyer v. State Farm Mutual Automobile Insurance Co., 689 P.2d 585, 589-90 (Colo.1984); Dorsey v. State Farm Mutual Automobile Insurance Co., 9 Ohio St.3d 27, 457 N.E.2d 1169, 1171 (1984); Unah, 676 P.2d at 1370; Winn v. Gilroy 681 P.2d 776, 784-85 (Or.1984); Allstate Insurance Co. v. Wyoming Insurance Department, 672 P.2d 810, 813-14 (Wyo.1983). The statutory and public policy analysis expressed herein, and in those recent decisions, requires that this Court withdraw its prior opinion and, by this decision, reverse and remand for trial.

The history of how parent-child immunity arose in the common law of many states was extensively recounted in Pedigo v. Rowley, 101 Idaho 201, 610 P.2d 560 (1980), and need not be repeated here. Suffice it to say that the 1891 Mississippi decision, Hewellette v. George, 68 Miss. 703, 9 So. 885 (1891), which established the doctrine had no basis in English common law and relied solely on perceived public policy existing in the last century. Though quickly adopted by many other states, several exceptions allowing intrafamily lawsuits were also rapidly incorporated. The common law exceptions now total at least nine, including suits (a) against the estate of another family member, (b) where the parent is acting in his business capacity, (c) where a willful or malicious tort is involved, (d) where the suit is for a partnership accounting, (e) for depletion of assets, or over a (f) contract, (g) property dispute, or (h) by a child against his parents for injuries caused by negligent operation of a motor vehicle. The last exception (now recognized in many states) allows intrafamily suits in automobile negligence actions where liability insurance is present. This final exception is fast becoming standard even in the handful of states which still have blanket intrafamily immunity. See, Nocktonick v. Nocktonick, 227 Kan. 758, 611 P.2d 135, 138-39 (1980); Pedigo v. Rowley, 101 Idaho at 202-03, 610 P.2d at 561-62; Transamerica, 656 P.2d at 823; Balts v. Balts, 273 Minn. 419, 142 N.W.2d 66, 71-72 (1966); Hollister, at 509-11; Note, Pedigo v. Rowley: Parental Immunity in Idaho, 17 Idaho L.Rev. 301, 304-06 (1981).

Contrary to a widespread assumption, the general doctrine of intrafamily immunity has never been incorporated into Idaho common law. Intrafamily immunity was accepted and applied in Pedigo only in the explicitly narrow area of negligent parental supervision. Pedigo, 101 Idaho at 205, 610 P.2d at 564. However, we decline to herein broaden the scope of the doctrine in Idaho, and will not apply it to shield insurance companies in automobile negligence actions. We leave to another day the question of whether, under other circumstances, the intrafamily immunity doctrine should be expanded beyond the narrow limits established in Pedigo.

The relevant statute in the case at bar reads:

49-233. Required Motor Vehicle Insurance.-- (a) Every owner of a motor vehicle ... shall continuously provide insurance against loss resulting from liability imposed by law for bodily injury or death or damage to property suffered by any person caused by maintenance or use of a motor vehicle....

I.C. § 49-233 (1978) (emphasis added).

Farmers Insurance Company issued a policy to the Reeds, and its language tracks almost exactly the "any person" language in the statute. The company agreed:

"To pay all damages the insured becomes legally obligated to pay because of:

(A) bodily injury to any person ... arising out of the ownership maintenance or use ... of the described automobile or non-owned automobile." (Emphasis added.)

However, unlike the statute, the insurance contract contains a clause which excludes coverage for household members. This is in spite of the clear legislative mandate ordering coverage extended for damage, injury or death suffered "by any person." This type of exclusion in a liability insurance policy leaves completely unprotected those family members injured when another family or household member is at the wheel in a negligently caused automobile accident. Unless the defendant can show that something shields it from the statutory obligation "imposed by law" to pay damages caused by the policy holder to "any person," the household exclusion clause is flatly and unmistakably in violation of Idaho's compulsory insurance law.

Traditionally, insurance companies have been relieved from their obligation "imposed by law" to compensate by the intrafamily immunity doctrine. If there is intrafamily immunity in Idaho in the context of automobile accidents, then the household exclusion clauses are valid. If there is no intrafamily immunity shield, the household exclusion clauses are invalid statutorily and as against public policy. ¹

We will first explain why we decline to implement the immunity in this narrow area. Thereafter, we will examine whether the statute and public policy completely invalidate the exclusion clause.

Essentially, two factors support the intrafamily immunity: (1) preservation of family harmony and (2) prevention of collusion or fraud. Pedigo, 101 Idaho at 203, 610 P.2d at 562. It was feared that family harmony in certain areas would be disrupted because of the acrimony engendered when family members are pitted as adversaries against each other, and because a judgment might erode the family financial base. But today, the presence of mandatory automobile liability insurance completely undercuts that rationale in this area. Thus, we feel that allowing an action, and subsequent recovery to the extent of the coverage under the automobile liability insurance, will enhance rather than disrupt family harmony. The Oklahoma Supreme Court recently adopted this approach in responding to the family disharmony argument:

Disruption of domestic tranquility is much less likely where the minor child can be compensated for his losses under the parent's liability coverage, which additionally eases any financial strain on the family resulting from the accident.

Unah, 676 P.2d at 1369. The court added:

While the existence of liability insurance--in this case compulsory coverage--does not create liability, its presence is significant, and cannot be ignored in the determination of whether our courts should continue to deprive unemancipated minors the right enjoyed by...