In Bundul v. Travelers Indem. Co., 2008 WL 2967007 (Minn.App.), the trustee of the heirs and next of kin of an automobile passenger, who was killed in an accident, brought a declaratory judgment action against the umbrella liability insurer for the automobile's owners and driver, asserting that the policy's "household exclusion" was void and unenforceable under the Minnesota Automobile Insurance No-Fault Act.

 The insureds maintained a primary policy with limits that exceeded those required by law. The umbrella policy provided coverage of "$1,000,000 Per Occurrence," but it also contained a "household exclusion"-for any injury to, or death of, "any person who is related by blood … to an 'insured' and who is a resident of the household of that person."

 The insurer contended that its clear "household exclusion" in the umbrella policy did not violate any rule or principle of law and was legally enforceable. The trustee argued that the exclusion was precluded by express statutory language and by public policy. The trustee argued that Minnesota 's abolition of family tort immunity was assimilated into the Minnesota Automobile Insurance No-Fault Act, thus making the insurer's household exclusion, which barred recovery of insurance benefits for an intrafamily tort, unenforceable. The trustee also argued that the exclusion conflicted with the Act's underlying public policy of "compensating victims of automobile accidents."

 The district court denied the insurer's motion for summary judgment, ruling that the exclusion was void and unenforceable, and the insurer appealed.

In its decision, the appeals court explained that the extent of an insurer's obligations to its insured was governed by the language of the contract to which the parties agreed, so long as the policy did not omit legally required coverage or contravene applicable statutes. Thus, even if there is an express agreement between an insurer and an insured, no exclusion will be held valid and enforceable if it contravenes the law because the subject matter of any contract must be legal.

The court further explained that the minimum insurance coverages for injury, death, and other specified losses resulting from automobile accidents in Minnesota are governed by the state's No-Fault Act , and no class of accident victims could be precluded from the mandated coverages of the Act. However, the court stated, no language in the Act rendered invalid an exclusion of a particular class of accident victims from coverage beyond that mandated by the Act. And, once an insurance policy alone, or a primary and an umbrella policy together, has satisfied the coverage mandate of the no-fault act, no further Act regulation of coverages exists.

Therefore, the court reversed the district court decision, holding that the Minnesota No-Fault Automobile Insurance Act did not preclude the "household exclusion" in a personal liability umbrella insurance policy so long as the underlying primary insurance policy provided the coverage mandated by the Act.