State Farm Mutual Automobile Insurance Co. v. Hodgkiss-Warrick

SCOTT, J.,

Dissenting.

I strongly dissent from the majority’s opinion which, applying Pennsylvania law, does not allow Karen Hodgkiss-Warrick to recover from her underinsured motorist (UIM) policy.

Karen had resided with her adult daughter, Heather, for less than a year when she suffered debilitating injuries due to Heather’s negligence which caused an accident in Kentucky in Heather’s leased car. Karen’s recovery from Heather’s insurance company was $60,000 shy of the amount necessary for Karen’s extensive medical bills. To close this deficit, Karen filed claims "against her own insurance carrier, State Farm, on two UIM policies — one on her own vehicle and another on her estranged husband’s. However, because Karen’s UIM policy excluded vehicles owned by or leased to a resident relative, State Farm denied the claim on her policy. Furthermore, because Karen and her husband were separated at the time of the accident and not residing together, State Farm denied Karen’s claim under her husband’s UIM policy.

In short, Karen could not recover under her policy because of whom she was living with and could not recover under her husband’s policy because of whom she was not living with. Had Heather moved in across the street or next door to Karen, or had the two not shared their duplex as a single *888dwelling,9 Karen would have been compensated; had Karen still been living with her husband, she, would have been compensated; had Karen been riding in the vehicle belonging to either of the other two passengers, she would have been compensated. However, since Karen lived (for the time) with her adult daughter (over whose insurance policy limits she had no control), the majority holds today that she may not recover.

It seems to me the insurance contract makes an arbitrary distinction based solely on Karen and Heather’s familial relationship and the fact that they lived in the same household at the time of the accident. It is certainly not based on the fact that Karen had the opportunity to ensure that her twenty-three-year-old daughter had higher limits on her liability policy. She clearly had no such control.

The exemption in Karen’s policy excludes UIM coverage when the underin-sured vehicle is “owned by, rented to, or furnished or available for the regular use of you or any resident relative.” The “regular use” part of the exemption has no bearing on this case. Karen did not regularly use her daughter’s car, nor was it available for her regular use. She had her own car. In fact, the day of the accident marked only the second time Karen had ever ridden in Heather’s car. Yet, she was denied coverage because she was living with her daughter at the time of the accident, making her a “resident relative.” If Karen and Heather had not been related, but had been living together, the terms of Karen’s UIM policy would have allowed recovery.

Thus, I see the real issue’ in this case as whether a family or household exclusion is permissible in Kathy’s UIM policy under the facts of this case. Plainly, such ah exclusion would not be allowed in a liability policy. Lewis by Lewis v. W. Am. Ins. Co., 927 S.W.2d 829 (Ky.1996) (“Such exclusions limit the insurance coverage available for a person’s injuries solely on the basis of the injured party’s status as a member of the policyholder’s family. We find that such an exclusion to insurance coverage is deleterious to our community interests and is repugnant to the public policy of our Commonwealth.”). While the courts of our Commonwealth have upheld regular use exemptions in UIM policies, the facts of those cases are quite different from those of the case at bar. In fact, the “justification for the regular-use exclusion is ... the fact that the insured or another family member [ (typically a parent who owns the car in which his or her minor child is injured or one spouse attempting to collect from a UIM policy on the other spouse’s vehicle) ] has control over how much liability is purchased.” Murphy v. Kentucky Farm Bureau Mut. Ins. Co., 116 S.W.3d 500, 503 (Ky.App.2002). This case simply does not fit that mold.

While the parties to this action do have the most significant contacts with Pennsylvania, and therefore, under our conflicts of laws analysis, Pennsylvania law would be applicable, “Kentucky courts have traditionally refused to apply the law of another state if that state’s law violates a public policy as declared by the Kentucky legislature or courts.” State Farm Mut. Auto. Ins. Co. v. Marley, 151 S.W.3d 33, 35 (Ky.2004). If the family or household exclusion in Kathy’s policy is enforceable under the facts of this case, it is clearly contrary to our Commonwealth’s public policy, as this Court held in Marley, id. at 36: “[i]t is clear that the public policy of Kentucky is to ensure that victims of mo*889tor vehicle accidents on Kentucky highways are fully compensated.” For that public policy reason and those that follow below, I would affirm the Court of Appeals, apply Kentucky law, and allow Kathy to recover under her UIM policy.

I believe Kentucky’s public policy is violated in this instance, as the exclusion in the current case is like that in Marley, id. One of the issues raised in Marley was whether a family exclusion in an umbrella policy was valid and enforceable in Kentucky. This Court was tasked with determining whether the umbrella policy was, in fact, an automobile policy under the MVRA. We held: “[t]he insurance policy in this case covers automobile accidents. The mere fact that the policy is labeled as an umbrella policy and written separately from the underlying automobile policy, or that it covers claims other than automobile accidents, does not validate an exclusion provision of this nature.” Id. at 35-36. Like the UIM coverage in the case at bar, the umbrella policy in Marley was over- and-above the minimum liability coverage required by the MVRA and was entirely optional. Certainly, if the family exclusion was unenforceable in this extra, optional policy, it is unenforceable as to Karen’s UIM policy under the facts of her case.

The majority cites several cases which are readily distinguishable from the case at bar. For example, in Preferred Risk Mut. Ins. Co. v. Oliver, 551 S.W.2d 574 (Ky.1977), this Court held that motorcycles could be excluded from uninsured motorist coverage. However, the exclusion of an entire class of vehicles from coverage is readily distinguishable from the exclusion of members of one’s family who happen to reside together at the time of an accident. No one injured on a motorcycle would have been covered under the policy. The driver’s familial relationship to the insureds was immaterial.

The majority also argues that, in Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437, 449 (Ky.1997), this Court upheld a “regular use” exclusion almost identical to that in Karen’s policy. While the exclusions in the two policies are similar, the Court’s reasoning for upholding it in Glass is entirely inapplicable to the facts of the case at bar. In that case, we quoted a Court of Appeals’ decision noting, “‘[t]he purpose of UIM coverage is not to compensate the insured or his additional insureds from his own failure to purchase sufficient liability insurance.’ ” Glass, 996 S.W.2d at 450 (Ky.1997) (quoting Windham v. Cunningham, 902 S.W.2d 838, 841 (Ky.App.1995)). However, in the case at bar, Karen did not fail to purchase sufficient liability insurance in her own policy. Her problem here was that she had no control over the insurance coverage her adult daughter, Heather, purchased on her leased vehicle. The only insurance policy Karen had control over was her own. With that control, she purchased UIM coverage to protect her in the event she was in an accident involving an underinsured vehicle.

The majority also relies on Burton v. Kentucky Farm Bureau Mut. Ins. Co., 326 S.W.3d 474 (Ky.App.2010) in support of its position. However, Burton is also easily distinguishable, as it involved a wife attempting to recover from her UIM policy after she was injured in a vehicle operated by her husband. The vehicle was registered to both the husband and wife. Clearly, since she was an owner of the vehicle, the person seeking to recover from the UIM policy had control over the amount of liability insurance purchased. Again, I reiterate that the “justification for the regular-use exclusion is ... the fact that the insured or another family member [ (typically a parent who owns the car in which his or her minor child is injured or one spouse attempting to collect from a *890UIM policy on the other spouse’s vehicle) ] has control over how much liability is purchased.” Murphy, 116 S.W.3d at 503.

Further, in Edwards v. Carlisle, 179 S.W.3d 257 (Ky.Ct.App.2004), Edwards was denied UIM benefits because she regularly used the vehicle she was driving when she was involved in an accident. Edwards’ denial of coverage did not result from the fact that another family member which whom she resided regularly used the vehicle. Rather, it was her own regular use which barred her.

Finally, in Murphy, 116 S.W.3d 500, the estate of a child killed in a car accident attempted to recover UIM benefits from the policies of other household members (belonging to the child’s sister and stepfather). In that case, the mother of the deceased child had the opportunity to secure adequate liability insurance on the vehicle in question, which she owned.

Absent from any of the cases relied upon by the majority is a factual situation such as that in the present case. Kathy, the party seeking relief, had no control over the limits of Heather’s liability policy. Heather’s car was not available for her mother’s regular use. In fact, the day of the accident was only the second time Kathy had ridden in her daughter’s car. This is not a case in which the loss resulted from Kathy’s “failure to purchase sufficient liability insurance.” Glass, 996 S.W.2d at 450. She did all she could within reason to ensure that she would be adequately insured in the event of an accident. However, under the majority’s opinion, she will be left owing even her medical expenses.

In closing, I would like to reiterate the inequities caused by the family or household exclusion this Court recognized in Lewis:

First, every day in our Commonwealth parents participate in car pools and drive their children and their neighbor’s children to school, social, and recreational events. However, if the parents’ negligence results in an automobile collision equally and seriously injuring all passengers, only the neighbor’s children can be fully compensated. The policy holders’ children, despite the severity of their injuries are limited to the minimum mandated insurance coverage.
Second, when two married couples drive to dinner in the driver’s car and all are injured by the driver’s negligence, the driver’s friends are protected by the full amount of insurance coverage but not the driver’s spouse. If one of the friends operates the automobile, the friend’s spouse is provided full insurance protection, but not the owner or owner’s spouse.
Third, it is commonplace for two neighborhood families to drive to a common destination with the children from both families intermingled in both cars. Unfortunately, if the cars negligently collide, only those children who happen to be riding with their neighbor can be fully compensated.

927 S.W.2d at 833. This is just the sort of inequity we have in this case.

It is for these reasons that I dissent and would affirm the Court of Appeals under this factual scenario.

CUNNINGHAM, J., joins.

. The duplex had separate living quarters on each side, including a bedroom and living room. However, the kitchen and dining area was shared between the two.