Beaver v. American Family Insurance (CA1 5/20/14)

Allowing a new exclusion to UIM coverage.

Sally lived with her father. After getting hit while riding her motorcycle she sought UIM benefits under his auto policy. Although she was a relative living in his household, and would therefore normally be covered, the policy excluded relatives who owned a motor vehicle. So AmFam denied her claim; she sued; the trial court ruled for her; AmFam appealed. This opinion reverses, holds the exclusion valid, but remands on reasonable expectations.

Sally argued that the AmFam exclusion was really a disguised “other vehicle’ exclusion. That exclusion (excluding UIM coverage if the policy does not cover the vehicle for liability) is invalid because the statute (20-259.01) allows the policyholder to buy UIM coverage for all insureds. But the statute and public policy do “not restrict the parties’ right to agree on who is an insured.” Sally, because she owned a motorcycle, was by AmFam’s exclusion not an insured at all. That isn’t and end-run around the prohibition of “other vehicle” UIM exclusions because, you see, under the policy she did not merely have no UIM coverage, she had none at all.

Sally also argued reasonable expectations – i.e., her father’s reasonable expectations –  because the exclusion was allegedly buried inconspicuously. The trial court hadn’t had to reach that argument; this court does, says she’s entitled to try to prove it, and therefore remands.

(link to opinion)