Household Exclusion in Auto Policy Ambiguous

 

In State Farm Mut. Auto. Ins. Co. v. Menendez, 2010 WL 21070 (Fla.App. 3 Dist.), the plaintiffs were passengers in a vehicle being driven by their daughter, Fabiola Llane, and owned and insured by Llane's grandmother, Gilda Menendez. At the time of the accident, the plaintiffs lived with their daughter, but no family members lived with the grandmother. 

 

The relevant insurance policy included a household exclusion that stated that the policy did not cover bodily injury for “any insured or any member of an insured's family residing in the insured's household.” State Farm contended that the plaintiff's damages were not covered under the policy because Llane fell into the category of “insureds” under a different provision of the policy and, since she lived with the plaintiffs, their claim was barred. The plaintiffs rejected that interpretation of the policy and sought a declaratory judgment, which was granted by the trial court. State Farm appealed. 

 

After reviewing the specific arguments of both parties, The District Court of Appeal of Florida, Third District, held that the policy language was ambiguous and susceptible to different interpretations and therefore must be construed in favor of the insured.

 

Thus, the court held that the household exclusion in the policy did not bar the bodily injury claims of the insured's daughter and son-in-law who were not residing in the insured's household.

 

Editor's Note: Courts in other jurisdictions have found household and family exclusions in auto policies to be invalid either because of public policy considerations or because they violate mandatory insurance statutes. Here, however, the Florida court emphasized that it would perform its analysis based on the “well-established principles guiding interpretations of insurance policies”—that exclusionary clauses must be construed in favor of an insured and if a policy's language is subject to differing interpretations, the language should be construed liberally in favor of the insured and strictly against the insurer.