Shelter General Ins. Co. v. Lincoln
| Decision Date | 24 March 1999 |
| Docket Number | No. 97-1443,97-1443 |
| Citation | 590 N.W.2d 726 |
| Parties | SHELTER GENERAL INSURANCE COMPANY, Appellee, v. Kara LINCOLN, Administrator of the Estate of Rona Lynn Muehlenthaler, Deceased; and Keith Muehlenthaler, Executor of the Estate of Morris Jacob Muehlenthaler, Deceased, Appellants. |
| Court | Iowa Supreme Court |
Glenn L. Norris and George F. Davison, Jr., of Hawkins & Norris, Des Moines, for appellant Lincoln.
Kasey W. Kincaid of Faegre & Benson, Des Moines, for appellant Muehlenthaler.
Roy M. Irish of Patterson, Lorentzen, Duffield, Timmons, Irish, Becker & Ordway, L.L.P., Des Moines, for appellee.
Considered by LARSON, P.J., and LAVORATO, SNELL, TERNUS, and CADY, JJ.
This is an appeal from a grant of summary judgment in a declaratory judgment action. The appellants ask us to overrule our prior decisions recognizing the validity of a family member exclusion in an automobile liability insurance policy. We decline to do so and affirm the summary judgment order.
In September, 1995, Morris Muehlenthaler was driving his truck when it collided with a train. Both Morris and his wife, Rona, a passenger in the vehicle, were killed. Defendant Kara Lincoln was appointed as the administrator of Rona's estate, and defendant Keith Muehlenthaler is the executor of Morris's estate.
At the time of the accident, the plaintiff, Shelter General Insurance Company, provided insurance to the Muehlenthalers under three motor vehicle liability insurance policies and a personal umbrella liability policy. The motor vehicle liability policies provided bodily injury coverage up to $250,000 per person and $500,000 per occurrence. The policies also provided uninsured motorist coverage up to $100,000 per person and $300,000 per occurrence. The personal umbrella liability policy included a coverage limit of $2,000,000 for each occurrence.
Each of the policies contained language excluding liability coverage for "[b]odily injury to the insured or any member of the family of the insured residing in the same household as the insured." With one exception, Shelter denied coverage for the Muehlenthalers' claims arising from the collision. Shelter conceded Rona's estate was entitled to the $100,000 policy limit for uninsured benefits under the policy covering the truck.
The defendants objected to Shelter's decision to deny coverage beyond the $100,000 in uninsured benefits. Shelter filed a petition for declaratory judgment. The defendants challenged the family member exclusion claiming it had no factual basis, was an unconstitutional restriction on the parties' freedom to contract, violated public policy regarding contractual freedom, and interfered with public policy supporting the family.
Shelter filed a motion for summary judgment. The defendants presented evidence indicating that most companies providing automobile liability insurance in Iowa included the family member exclusion and did not give insurance consumers the option of removing the exclusion. There was evidence a few companies with a limited market share in Iowa did provide liability coverage without the exclusion.
The district court granted Shelter's motion. Relying on our decisions in Walker v. American Family Mutual Insurance Co., 340 N.W.2d 599 (Iowa 1983), and Rodman v. State Farm Mutual Automobile Insurance Co., 208 N.W.2d 903 (Iowa 1973), it upheld the family exclusion provision. The court declared there was no coverage for the accident other than the $100,000 policy limit for uninsured benefits under the policy for Morris's truck.
Where the facts are not in dispute, our review in a declaratory judgment action is to determine whether the district court correctly determined the legal consequences arising from the terms of the insurance policy. See Principal Cas. Ins. Co. v. Blair, 500 N.W.2d 67, 68 (Iowa 1993). To the extent constitutional issues are implicated, we consider the totality of the circumstances under a de novo review standard. Lumbermens Mut. Cas. Co. v. Department of Revenue & Fin., 564 N.W.2d 431, 434 (Iowa 1997).
We first recognized the validity of a family member exclusion in an automobile insurance liability policy in 1973. See Rodman, 208 N.W.2d at 909. In Rodman, we declined to extend the principle of reasonable expectations to cases in which an ordinary lay person would not misunderstand the extent of his coverage from a reading of the policy unless there were other circumstances attributable to the insurer which would cause such expectations. Id. at 908.
The issue was raised again in 1983 when it was argued the family member exclusion violated Iowa public policy. Walker, 340 N.W.2d at 600-01. In Walker we rejected the claim that chapter 321A (Motor Vehicle Financial Responsibility) evidenced a broad public policy to protect persons injured in motor vehicle accidents from financially irresponsible motorists. Id. at 601. We also rejected the argument that our recent decisions abrogating interspousal and parental immunity and finding the guest statute unconstitutional marked a general judicial pronouncement that courts should protect individuals and the public from the financial burdens imposed by automobile accidents. See id. at 602.
In Walker we also rejected the invitation to follow the lead of other states which had invalidated family member exclusions. Id. We distinguished those cases because they arose in states which had mandatory automobile insurance laws. Id. We also distinguished cases arising in states in which there was a judicially recognized public policy of assuring protection to the innocent victims of automobile accidents and no insurance policy without the clause was available. Id. at 602-03.
In 1993, we addressed the issue of whether a family member exclusion in a homeowners liability policy was invalid. Principal Cas. Ins. Co., 500 N.W.2d at 68-69. We held neither public policy nor the constitutional guarantee of equal protection invalidated the family exclusion. Id. at 69-70.
In 1998 we cited with approval two of our prior decisions upholding a family member exclusion. See United Fire & Cas. Co. v. Victoria, 576 N.W.2d 118, 121 (Iowa 1998) (citing Walker and Principal Cas. Ins. Co.). We reaffirmed this position most recently in Krause v. Krause, 589 N.W.2d 721, 724 (Iowa 1999), where we noted the futility of challenging a family exclusion clause.
We point out that [the appellee] does not challenge the validity of the family member exclusion in the policy. Indeed, such a challenge would fail because we have upheld the validity of family member exclusions in the past.
Krause, 589 N.W.2d at 724 (citing Victoria, Principal Cas. Ins. Co., and Walker).
In asking us to reverse this long line of prior decisions, the defendants argue the reasonable expectations of insurance consumers are frustrated by the family member exclusion. They contend the family member exclusion has no basis in fact (actuarially or otherwise), is an unconstitutional restriction on the ability of parties to freely contract, violates the public policy of Iowa, and is contrary to the public policy of encouraging family units.
We have previously rejected the application of the principle of reasonable expectations to invalidate a family member exclusion in an automobile liability policy. Rodman, 208 N.W.2d at 908. The policies in this case clearly excluded coverage for bodily injury to the insured or any member of the insured's family who resided in the same household. An ordinary lay person would not misunderstand the scope of the coverage. The defendants have not made any claim of circumstances attributable to Shelter which would have fostered different coverage expectations. The defendants' claim that the insureds' reasonable expectations were frustrated is without any support in the record and was properly subject to summary judgment.
The defendants claim our decisions in Rodman and Walker were based on the erroneous assumption that consumers had the freedom to negotiate the terms and conditions of their liability insurance policies. They contend the vast majority of automobile policies sold in Iowa contain family member exclusions and the insurers will not provide policies without them. 1 The defendants argue we should invalidate the exclusions because of the...
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