Few loopholes in auto insurance law have been as troublesome as the so-called “family exclusion” or “household exclusion.”
The primary idea behind the family exclusion or household exclusion was to prevent fraudulent claims. Insurers wanted to decrease the chances that family members or co-residents would collude to purposely cause a crash and receive an insurance pay-out.
However, the risk of this scenario to insurers is very small, particularly in light of the price that is paid by the public as a result of the stringent policy guidelines set forth in “family exclusion” or “household exclusion” provisions.
For example, our Charlotte car accident attorneys know that a family exclusion can apply anytime a married couple, child and parent or members of the same family are in a crash together. So if you are driving and are in a crash wherein family members or roommates are your passengers, the insurance company has the ability to restrict compensation to those individuals – regardless of the actual extent of their injuries.
Not all states are on board with this. For example, New Jersey in the 1970 case of Kish v. Motor Club of America Ins. ruled such provisions invalid as contrary to public policy. Same with North Dakota in the 1975 case of Hughes v. State Farm Mut. Auto Ins. Co., Oregon in 1984 with Dowdy v. Allstate Ins. Co., Delaware in 1988 with State Farm Mut. Auto Ins. Co. v. Waggeman, Kentucky with the 1996 case of Lewis v. West Am. Ins. Co., Rhode Island with the 1998 ruling in Glaude by Stephenson v. Continental Ins. Co. and Washington State with the 2001 ruling in Safeco Ins. Co. v. Auto Club Ins. Co.
However, others like Florida (most recently in Travelers Commercial Ins. Co. v. Harrington) have found it totally valid. In Travelers, the Florida Supreme Court ruled the family member exclusion could be applied to limit uninsured motorist compensation to the daughter of the insured who was riding in her father’s vehicle, even though it was driven by a family friend. The state high court reversed an earlier ruling finding exclusion of family vehicles from UM coverage was invalid because it conflicted with state statutes and public policy interest. Not so, the Florida Supreme Court ruled, adding that when the insured rejects stacked coverage, that decision goes for everyone else on the policy too.
Although South Carolina generally holds family exclusions invalid, that’s not necessarily true if the policy was obtained out-of-state. Earlier this year, the South Carolina Supreme Court took on this issue in Green v. U.S. Automobile Association Auto and Property Insurance Company. Here, a mother making a left-turn at an intersection was struck by an oncoming car, causing serious injury to her minor child. The policy was insured by a Florida policy under the child’s father’s name, although the mother had lived in South Carolina for several years. The insurer refused coverage for child injuries, citing Florida’s family exclusion. The South Carolina Supreme Court ruled that the exclusion, valid under Florida statute and public policy, was not void as against South Carolina public policy.
In North Carolina, courts have only invalidated the family member exclusion with regard to statutory limits for mandatory coverage. In Odum v. Nationwide Mut. Ins. Co. in 1991, the North Carolina Supreme Court ruled family exclusion notwithstanding, the insurer still had to pay the statutory minimum to all injured parties who suffered compensable harm.
We understand all of this can be confusing. That’s why we invite auto accident victims to contact our offices to learn more about how the legal obligations and restrictions apply to their individual case.
Contact the North Carolina injury lawyers at the Lee Law Offices by calling 800-887-1965.
Travelers Commercial Ins. Co. v. Harrington, Oct. 23, 2014, Florida Supreme Court
More Blog Entries:
SC Property v. Brock – Insolvent Auto Insurers and State Insurance Guaranty Association, Nov. 3, 2014, Charlotte Auto Accident Lawyer Blog