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

Decision Date02 December 1987
Docket NumberNo. 19779,19779
Citation748 P.2d 1042
PartiesSTATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Respondent, v. Thomas Layton MASTBAUM and Kathleen Marie Mastbaum, Defendants and Appellants.
CourtUtah Supreme Court

B.H. Harris and James C. Jenkins, Logan, for defendants and appellants.

Henry E. Heath and Barbara L. Maw, Salt Lake City, for plaintiff and respondent.

HOWE, Justice.

Defendants Thomas Layton Mastbaum and Kathleen Marie Mastbaum, his wife, seek reversal of a summary judgment entered by the trial court in favor of plaintiff State Farm Mutual Automobile Insurance Company.

On May 30, 1981, defendants were involved in an automobile accident near Garden City, Utah. Kathleen Mastbaum, who was seated in the front passenger seat, sustained severe personal injuries. She filed a civil action for damages against her husband, Thomas Mastbaum, the driver of the vehicle, alleging that at the time of the accident, he was under the influence of alcohol and negligently drove into an oncoming vehicle. Thomas had purchased an insurance policy on his vehicle from plaintiff. Plaintiff subsequently brought this action for declaratory judgment that the family exclusion provision in the policy was valid and enforceable, that it was therefore not required to defend Thomas in the civil action brought by his wife, and that plaintiff was not required to pay any judgment she might obtain in her action. The trial court, on motion of plaintiff for summary judgment, awarded plaintiff the relief sought. Defendants bring this appeal.

The policy contained the following family or household exclusion:

THIS INSURANCE DOES NOT APPLY UNDER: (h) COVERAGE A ["Bodily Injury Sustained By Other Persons"], TO BODILY INJURY TO ANY INSURED OR ANY MEMBER OF THE FAMILY OF AN INSURED RESIDING IN THE SAME HOUSEHOLD AS THE INSURED.

While this case was pending on appeal in this Court but before oral argument, we decided Farmers Insurance Exchange v. Call, 712 P.2d 231 (Utah 1985). In that case, we held that a household or family exclusion clause in an automobile insurance policy contravenes the statutory requirements found in Utah's No-Fault Insurance Act, Utah Code Ann. §§ 31-41-1 to -13 (1974, Supp.1985) (now sections 31A-22-306 to -309 (1986)), as to the minimum benefits which must be provided to all persons sustaining personal injuries. We found it unnecessary to address the validity of the exclusion clause with respect to insurance coverage provided by the policy in excess of the statutorily mandated minimums. However, in that case, a majority of this Court allowed recovery on the policy in excess of the statutory minimum amount because the insurer was unable to produce any evidence that the insurance policy had ever been delivered to the insured. In the instant case, that void in the evidence does not exist since it is undisputed that Thomas Mastbaum did receive a copy of the insurance policy at the time it was issued by plaintiff.

The sole question then for our determination in this case is whether the household and family exclusion is valid in the policy issued by plaintiff as to amounts and benefits provided by the policy in excess of those which are statutorily mandated. In a case involving a policy with a somewhat analogous exclusion, Allstate Insurance Co. v. U.S. Fidelity & Guaranty Co., 619 P.2d 329 (Utah 1980), we held that an exclusion of a named driver was unenforceable only to the extent of statutory minimum coverage. In sustaining the exclusion as to policy amounts above the minimum coverage, we said:

Our decision does not, however, read the named driver exclusionary endorsement out of the contract entirely. Rather, contracting parties are free to limit coverage in excess of the minimum required limits, and the exclusion found in the contract is valid in relation to any coverage exceeding the minimum amounts. Thus, a balance is struck between the necessity of securing minimum automobile liability coverage and the availability of lower premiums because of the exclusion of high insurance risks. This effectuates the express two-fold purpose of the Utah No-Fault Insurance Act which is to require the payment of certain prescribed benefits in respect to motor vehicle accidents while stabilizing the rising costs of automobile accident insurance.

Allstate Insurance Co., 619 P.2d at 333 (footnotes omitted). In so holding, we relied on Utah Code Ann. § 41-12-21(g), which provides:

Any policy which grants the coverage required for a motor vehicle liability policy may also grant any lawful coverage in excess of or in addition to the coverage specified for a motor vehicle liability policy and such excess or additional coverage shall not be subject to the provisions of this act....

We also cited with approval and followed Estate of Neal v. Farmers Insurance Exchange, 93 Nev. 348, 566 P.2d 81 (1977).

Two years after our decision in Allstate Insurance Co. v. U.S. Fidelity & Guaranty Co., supra, we relied upon its precedence in deciding Dairyland Insurance Corp. v. Smith, 646 P.2d 737 (Utah 1982). In that case, an insurer brought suit to void an automobile policy due to material misrepresentations made by the owner of the policy as to who would drive the vehicle. We reversed a trial court ruling that the policy was void ab initio and held, on the authority of Allstate, that the policy could not be rescinded after the occurrence of an accident to the extent of statutorily required minimum coverage, but could be rescinded as to amounts in excess of the minimum coverage.

The vast majority of cases in which the issue before us has been decided have held that household exclusions or analogous exclusions are enforceable with respect to policy amounts in excess of the statutory minimum required amount. Estate of Neal v. Farmers Insurance Exchange, supra; DeWitt v. Young, 229 Kan. 474, 625 P.2d 478 (1981); Arceneaux v. State Farm Mutual Automobile Insurance Co., 113 Ariz. 216, 550 P.2d 87 (1976); Allstate Insurance Co. v. Wyoming Insurance Department, 672 P.2d 810 (Wyo.1983); Staser v. Fulton, 684 S.W.2d 306 (Ky.Ct.App.1984); Universal Underwriters Insurance Co. v. American Motorists Insurance Co., 541 F.Supp. 755 (N.D.Miss.1982) (applying Mississippi law); Pennsylvania National Mutual Casualty Insurance Co. v. Parker, 282 S.C. 546, 320 S.E.2d 458 (Ct.App.1984); State Farm Mutual Automobile Insurance Co. v. Nationwide Mutual Insurance Co., 307 Md. 631, 516 A.2d 586 (1986). In reaching their decisions, two appellate courts have cited with approval and relied upon our decision in Allstate Insurance Co. v. U.S. Fidelity & Guaranty Co., supra. See State Farm Mutual Automobile Insurance Co. v. Nationwide Mutual Insurance Co., supra, Pennsylvania National Mutual Casualty Insurance Co. v. Parker, supra. Another appellate court, although not citing Allstate Insurance Co. v. U.S. Fidelity & Guaranty, employed the same reasoning as we did in Allstate, to wit, freedom of contract to limit coverage in excess of the minimum required amounts thereby presumably obtaining a lower premium because of the exclusion of a high risk. Staser v. Fulton, supra.

The leading case espousing the minority view that a household exclusion is invalid as to all amounts of the policy is Meyer v. State Farm Mutual Automobile Insurance Co., 689 P.2d 585 (Colo.1984). In that case, the court, after recognizing that there were "two equally compelling arguments," held that because the statutes of that state authorized the writing of insurance policies providing greater coverage than the statutory minimum, there was a legislative intent to avoid inadequate compensation to victims of automobile accidents. A dissenting opinion pointed out that the court's decision was contrary to the majority of appellate courts which have considered this issue and which have adopted the rule that although an insurance policy must comply with statutory requirements, a statute has no effect upon insurance which it does not require. The Court of Appeals of Maryland, in State Farm Mutual Automobile Insurance Co. v. Nationwide Mutual Insurance Co., supra, recently had precisely the same issue before it as we do in the instant case. In a well-considered opinion, the court found the majority opinion in Meyer to be unpersuasive and stated that while Maryland's compulsory insurance statutes also have the purpose of assuring recovery for innocent victims of motor vehicle accidents, the court did not view that purpose as extending beyond the prescribed statutory minimum coverage so far as the household exclusion was concerned.

We adhere to Allstate and the majority view and hold that the household or family exclusion is valid in this state as to insurance provided by an automobile policy in excess of the statutorily mandated amounts and benefits. While the minority view is attractive from the standpoint of an injured victim, the policy must be enforced as written when its provisions do not conflict with our mandatory automobile insurance statutes. The summary judgment is reversed, and the case is remanded to the trial court for further proceedings consistent with this opinion.

HALL, C.J., concurs.

ZIMMERMAN, Justice: (concurring)

As a matter of public policy and in the absence of some legislative statement on the subject, I agree with the majority that household member exclusions should be invalid only up to the limits set by our mandatory automobile insurance statutes. However, Justice Durham's recitation of the legislative history surrounding the 1986 amendment of the relevant statutes does persuade me that with respect to insurance policies written after the effective date of that act, household member exclusions will be entirely invalid because the legislature has now made it clear that such exclusions are contrary to public policy. However, I cannot join Justice Durham in finding that the expression of such an intention in 1986 should be applied to the determination of the...

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