Household Exclusion In PAP under Review by Florida Supreme Court
The Florida Supreme Court recently answered the question of whether the household exclusion in the personal auto policy eliminates coverage for injuries suffered by members of the household of a permissive driver. This case is State Farm Mutual Automobile Insurance Company v. Menendez, 2011 WL 3715044 ( Fla. ). (Note that this opinion has not yet been released for publication in the permanent law reports. Until released, the opinion is subject to revision or withdrawal.)
State Farm sought a review of a lower court ruling in which the court determined that the household exclusion in the personal auto policy (PAP) issued to Menendez could not be enforced. Menendez, the named insured in the PAP, permitted her granddaughter, Llanes, to use her vehicle. While operating the vehicle the granddaughter was in an accident, resulting in injuries to her, her parents, and Menendez. When the accident occurred, Llanes was living with her parents and Menendez was living at a separate address.
The issue came before the Florida Supreme Court on appeal. The insurer argued that, because the granddaughter, as a permissive driver, was an insured under the auto policy and she resided with her parents, the household exclusion prevented any coverage for the parents' bodily injuries. Menendez argued that the term “the insureds” at the end of the exclusion refers to the named insured and that the term does not include permissive drivers. Under this latter interpretation, the household exclusion would eliminate coverage for bodily injury claims of members of only the named insured's household.
The court ruled that the text of the policy unambiguously excludes coverage for any bodily injury claims asserted by members of a permissive driver insured's family residing in the household of the permissive driver insured. This court said that this meaning emerges from the policy's separate definitions of the terms “insured” and “the named insured” and the ways the words “insured” and “insured's” are used in the text of the household exclusion. Both the broader context of the policy's defined terms and the immediate context of the policy exclusion provision point unambiguously to the conclusion that the household exclusion is applicable in this instance.
The court said that the policy clearly and consistently distinguishes the term “insured” from the concept of the “named insured”. In the context of the household exclusion, which excludes coverage for any bodily injury to any insured or any member of an insured's family residing in the insured's household, the reference to “the insured's household” cannot reasonably be understood as denoting only the named insured's household. In support of its decision, the court noted that its interpretation of the household exclusion was consistent with the reasoning and views adopted by a large majority of other jurisdictions that have addressed similarly worded personal auto policy provisions; cites from the Fifth Circuit, Kentucky, Missouri, and North Dakota were listed.
The decisions of the lower courts were quashed and the case was remanded for proceedings consistent with this opinion. The plain language of the household exclusion precludes coverage for bodily injuries suffered by members of the household of the permissive driver insured.
Editor's Note: The Florida Supreme Court upholds the household exclusion in the State Farm personal auto policy with this decision. This exclusion was put in place to prevent possible collusion among family members in claiming injuries due to auto accidents. The court also reinforces the separation of insureds by noting the distinctions between the named insured and other insureds.