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

• Decision Date: 29 November 1988
• Docket Number: CA-CIV,No. 1,1
• Citation: 160 Ariz. 453,773 P.2d 1012
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Plaintiff-Appellee, v. Sylvester J. DIMMER and Germaine D. Dimmer, husband and wife, Defendants-Appellants. 9794.
• Court: Arizona Court of Appeals

Page 1012

773 P.2d 1012

160 Ariz. 453

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Plaintiff-Appellee, v.Sylvester J. DIMMER and Germaine D. Dimmer, husband and wife, Defendants-Appellants.

No. 1 CA-CIV 9794.

Court of Appeals of Arizona Division 1, Department C.

Nov. 29, 1988.

Reconsideration Denied Jan. 27, 1989.

Review Denied June 13, 1989. ^*

[160 Ariz. 454] Ridenour, Swenson, Cleere & Evans by James W. Evans, David L. Knapper, Lloyd J. Andrews, Phoenix, for plaintiff-appellee.

Van O'Steen and Partners by Stephen I. Leshner, W. Marc Ducker, Phoenix, for defendants-appellants.

OPINION

SHELLEY, Presiding Judge.

AppellantsSylvester J. Dimmer and Germaine D. Dimmer appeal from summary judgment entered for appelleeState Farm Mutual Automobile Insurance Company in State Farm's action for declaratory relief and from the denial of appellants' cross-motion for summary judgment.The trial court held that the Dimmers' automobile liability policy, on which the liability limits were $50,000 per person and $100,000 per occurrence, provided coverage of only $15,000 as applied to Germaine Dimmer's claim against Sylvester Dimmer for injuries she sustained while riding as a passenger in a covered automobile.¹

The appeal presents the following issues: (1) whether the "household exclusion" clause in State Farm's automobile liability policy is void on public policy grounds; and (2) whether the doctrine of reasonable expectations precludes enforcement of State Farm's "household exclusion" clause in this case.We have jurisdiction pursuant to A.R.S. § 12-2101(B).

Facts and Procedural History

Sylvester Dimmer purchased the policy that is the subject of this litigation in or about 1972 from Ed Ricestead of Glendale.According to Dimmer, Ricestead explained to him the coverages he should have.Dimmer testified:

All my policies covered what I thought was maximum coverages and when I was working real estate I carried a little higher liability because it was required by our broker and actually I thought I had a higher liability but because of the conservative nature of this I probably in talking with Ed that's why I came down to the 50 on liability.

Dimmer received a copy of the policy when he bought it, and thereafter spoke to Ricestead only about coverages Ricestead recommended for him.Dimmer did not ask Ricestead or anyone else from State Farm to explain to him when policy provisions would apply or not apply.Other than in general terms, Dimmer stated Ricestead never detailed the facts and situations in which the policy coverages would and would not apply.He also did not suggest that Dimmer read the policy or addenda he received from State Farm.Dimmer believed he probably read the addenda that were sent to him.

Eventually Dimmer acquired a 1978 Ford LTD.During the period from May 29, 1982 through November 29, 1982, Dimmer's State Farm policy provided bodily injury liability coverage on the Ford LTD in the amount of $50,000 for "each person" and $100,000 for "each accident."The policy's declarations page listed Sylvester J. Dimmer as the "named insured."The declarations page also stated:

YOUR POLICY CONSISTS OF THIS PAGE, ANY ENDORSEMENTS, AND THE POLICY BOOKLET, FORM9803.4 PLEASE KEEP TOGETHER.

Page 2 of the policy booklet contained the following definitions:

Bodily injury--means bodily injury to a person and sickness, disease or death which results from it.

....

Insured--means the person, persons or organization defined as insureds in the specific coverage.

....

Person--means a human being.

....

You or your--means the named insured or named insureds shown on the declarations page.

Section 1 of the policy booklet, which discussed liability coverage, began in the middle of page 4 and ended on page 6.On page 4 it provided in part:

We will:

1. pay damages which an insured becomes legally liable to pay because of:

a. bodily injury to others, and

b. damage to or destruction of property including loss of its use, caused by accident resulting from the ownership, maintenance or use of your car; and

2. defend any suit against an insured for such damages with attorneys hired and paid by us.We will not defend any suit after we have paid the applicable limit of our liability for the accident which is the basis of the lawsuit.

On pages 5 and 6 it provided in part:

Limits of Liability

The amount of bodily injury liability coverage is shown on the declarations page under "Limits of Liability--Coverage A--Bodily Injury, Each Person, Each Accident."Under "Each Person" is the amount of coverage for all damages due to bodily injury to one person.

....

We will pay damages for which an insured is legally liable up to these amounts.

....

When Coverage A Does Not Apply

In addition to the limitations of coverage in "Who Is an Insured" and "Trailer Coverage":

THERE IS NO COVERAGE:

....

2.FOR ANY BODILY INJURY TO:

....

d. ANY:

(1) INSURED OTHER THAN YOU; OR

(2) FAMILY MEMBER OF AN INSURED RESIDING IN THE SAME HOUSEHOLD AS THE INSURED.

TO THE EXTENT THE LIMITS OF LIABILITY OF THIS POLICY EXCEED THE LIMITS OF LIABILITY REQUIRED BY LAW.

Dimmer's affidavit in support of the Dimmers' motion for summary judgment stated in pertinent part:

4.My intention and understanding of the coverage provided by these policies was that my wife would be covered to the same extent as any other person would be for any injuries that they would have been covered for under these policies, including uninsured motorists and underinsured motorists coverages.

5.Neither State Farm Mutual Automobile Insurance Company nor any of its agents ever suggested to me that any exclusion existed on the policy that would preclude my wife from having the same coverage as any other person would as to any accident she or they were involved in.Nor was I offered any alternate policy option for securing such coverage.

6.If I had known that there was any question of my wife not being insured to the same extent as any other person, I certainly would have sought a different insurance policy.

....

10.Since the time of the accident, I have read my policy over and found no reason to think we would not be covered for $50,000 on the policy, or on the underinsurance.

On November 19, 1982, Mrs. Dimmer was injured while riding as a passenger in the 1978 Ford LTD, which was being driven by Dimmer.Mrs. Dimmer thereafter filed suit against Dimmer in Maricopa County Superior Court.On September 24, 1986, State Farm filed its amended complaint in this action, seeking a declaration that its policy on the Ford LTD provided Dimmer with liability coverage in the amount of $15,000 only.The Dimmers' answer alleged that Mrs. Dimmer sustained damages exceeding $65,000 in the accident, and that she was entitled to the $50,000 liability coverage provided by the State Farm policy on the Ford LTD.On cross motions for summary judgment, the trial court ruled for State Farm.The trial court's minute entry of June 30, 1987 stated in pertinent part:

As to the issue of whether the Ford LTD policy provided for coverage above the $15,000 statutory minimum, the court concludes that it does not.The clear language of the policy precludes coverage for bodily injury to a family member of an insured residing in the same household as the insured except as required by law.Under the holding in Arceneaux v. State Farm Mutual Automobile Insurance Company, 113 Ariz. 216, 550 P.2d 87(1976), the parties were free to include a household exclusion so long as it did not preclude recovery for the statutory minimum.This court does not read Spain v. Valley Ford [sic] Insurance Company, 152 Ariz. 189, 731 P.2d 84(Ariz.1986) as overruling Arceneaux on this issue.Spain merely reconfirms that the carrier cannot circumvent public policy as reflected in the legislative intent by using offset provisions.Here, defendants have shown no public policy requiring that household members be provided with policy limit coverage.Additionally, the court concludes that the policy is not ambiguous and the defendants' affidavits do not present a showing of reasonable expectations within Darner Motor Sales v. Universal Underwriters Insurance Company, 140 Ariz. 383, 682 P.2d 388(1984).

The trial court entered formal judgment in accordance with its ruling, and this timely appeal followed.

Does the Household Exclusion Violate Public Policy?

The Dimmers acknowledge that in Arceneaux v. State Farm Mutual Auto Ins. Co., 113 Ariz. 216, 550 P.2d 87(1976), our supreme court held that a household exclusion similar to the one under consideration here was void to the extent it would exclude the $15,000 minimum coverage required by the Uniform Motor Vehicle Safety Responsibility Act, but was enforceable to the extent the policy's liability limits exceeded $15,000.The court stated:

In matters not mandated by law (or the public policy of this state)the parties should be permitted to make their own contractual arrangements.

Id. at 217, 550 P.2d at 88.The Dimmers argue, however, that in view of later appellate decisions in Arizona and other jurisdictions,Arceneaux is no longer viable.

The Dimmers note that since 1980 a number of courts in other jurisdictions have voided household exclusions and held, either explicity or implicitly, that in situations in which such exclusions would apply, the insurer must provide coverage up to the policy limits, not merely the minimum limits required by statute.The authorities cited by the Dimmers, however, indicate that is a minority position in this country.Meyer v. State Farm Mutual Auto. Ins. Co., 689 P.2d 585, 592-94, (Colo.1984)²;Family Exclusion--Validity, 52 A.L.R. 4th 18(1987).We also note that of the cases the Dimmers cite in support of the minority position, three do not specifically address the question of whether the household exclusion was sustainable to the extent the policy limits exceeded the statutory minimum limits, ...