324 P.3d 870
Ariz. Ct. App.2014Background
- Sally Ann Beaver, living with her father, was injured while riding a motorcycle she owned; the tortfeasor's limits were insufficient.
- Beaver sought underinsured motorist (UIM) coverage under her father's American Family “Family Car Policy,” which did not insure her motorcycle.
- The Policy defined an “insured person” as the named insured (“you”) or a “relative” living in the household, but the Relative definition excluded any person who, or whose spouse, owns a motor vehicle other than an off-road vehicle.
- American Family denied Beaver’s UIM claim on the basis she owned a vehicle and thus was not a “relative”/insured under the Policy.
- The superior court held the exclusion was the functional equivalent of an impermissible “other vehicle” exclusion under Arizona’s Uninsured/Underinsured Motorist Act (A.R.S. § 20-259.01) and declared Beaver an insured.
- The Court of Appeals reversed and remanded, holding the UMA does not bar the insurer from defining who is a person insured under the policy to exclude a resident family member who owns a vehicle.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Policy’s “relative” definition (excluding resident relatives who own vehicles) is void under Arizona’s UMA as an “other vehicle” exclusion | Beaver: The exclusion is the functional equivalent of an impermissible “other vehicle” exclusion and violates the UMA’s public policy | American Family: The UMA requires offering UIM to persons insured under the policy but does not define who is an insured; the parties may define insureds and may exclude resident relatives who own vehicles | Held: Reversed — the UMA does not prohibit the insurer from omitting a resident family member who owns a vehicle from the class of “persons insured under the policy” |
| Whether the doctrine of reasonable expectations entitles Beaver to UIM coverage despite the clear Policy definition | Beaver: Father could not reasonably have anticipated the exclusion would bar his daughter; thus reasonable expectations may supply coverage | American Family: Reasonable expectations are irrelevant if the named insured’s expectations are not shown | Held: Court of Appeals: Reasonable expectations argument was not foreclosed; superior court may consider it on remand (plaintiff may attempt to prove named insured’s expectations) |
| Whether either party is entitled to attorneys’ fees on appeal | Beaver sought fees under A.R.S. § 12-341.01 | American Family sought costs and partial success argues it is entitled to costs | Held: Each side partially prevailed; Beaver’s fee request denied; American Family awarded taxable costs on appeal if procedural rules followed |
Key Cases Cited
- Taylor v. Travelers Indem. Co. of Am., 198 Ariz. 310 (clarifies the concept of “other vehicle” exclusions and portability of UIM coverage)
- Higgins v. Fireman’s Fund Ins. Co., 160 Ariz. 20 (holds certain “other vehicle” exclusions void under UMA)
- Calvert v. Farmers Ins. Co., 144 Ariz. 291 (discusses UMA public policy and portability of UIM coverage)
- Famuliner v. Farmers Ins. Co., 619 S.W.2d 894 (upholds resident-relative-with-vehicle exclusion where person was not an insured under the policy)
- Farmers Ins. Co. of Wash. v. Miller, 549 P.2d 9 (distinguishes other-vehicle invalidation cases and upholds omission of resident relative who owned an automobile)