423 P.3d 431
Idaho2018Background
- On March 18, 2014, Jennifer Eastman was injured while a passenger in a Spokane Transit Authority (STA) van; her medical bills and lost wages exceeded available insurance proceeds.
- Eastman recovered $50,000 from the at-fault driver and $48,846 in UIM from STA's policy, leaving substantial uncompensated damages.
- Eastman sought UIM benefits under her own Farmers policy (limits $500,000). Farmers denied coverage based on an "Other Insurance" clause that disclaimed UIM for injuries sustained while occupying another vehicle that had UIM coverage (the "non‑owned vehicle" exclusion).
- The district court granted Farmers summary judgment, finding the exclusion plain and enforceable and relied in part on Purdy v. Farmers Ins. Co. of Idaho.
- The Idaho Supreme Court vacated and remanded, holding the non‑owned vehicle exclusion violates Idaho public policy as articulated in Hill v. American Family and analogous authority, and therefore must be invalidated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Farmers' non‑owned vehicle exclusion violates Idaho public policy governing UIM coverage | Eastman: exclusion nullifies purchased UIM protection and produces absurd results (insured worse off riding in a vehicle with minimal UIM than if tortfeasor were uninsured); conflicts with Hill's policy to "scrupulously guard" UIM benefits | Farmers: exclusion is unambiguous and enforceable; Purdy controls; Legislature (and Director of Insurance) regulates UIM and policy terms should be respected | Held for Eastman: exclusion violates Idaho public policy (per Hill) and is void; district court judgment vacated and case remanded to invalidate the exclusion |
| Whether Purdy controls and requires enforcement of the exclusion | Eastman: Purdy predates the 2008 statutory change and Hill; public policy now forbids enforcing such exclusions | Farmers: Purdy held identical clause unambiguous and enforceable; public policy does not mandate invalidation; Director approval and statutory scheme support enforcement | Held: Purdy is not controlling in light of Hill and the 2008 statutory development; Hill’s public policy analysis supersedes Purdy |
| Whether ambiguity or policy disclosure arguments require relief regardless of public policy ruling | Eastman: policy language/Disclosure Statement ambiguous or inconsistent; should be read to allow offset rather than bar coverage | Farmers: Disclosure Statement is non‑contractual; policy language is clear and was previously upheld in Purdy | Court: declined to decide the ambiguity/disclosure arguments because exclusion is invalidated on public‑policy grounds |
| Whether appellate fees should be awarded | Farmers: sought fees arguing appeal merely reargued district court | Eastman: prevailed and sought costs | Court: denied attorney fees; granted Eastman costs on appeal as prevailing party |
Key Cases Cited
- Hill v. American Family Mut. Ins. Co., 150 Idaho 619 (Idaho 2011) (articulates Idaho public policy protecting UIM benefits; UIM statute remedial and to be liberally construed)
- Purdy v. Farmers Ins. Co. of Idaho, 138 Idaho 443 (Idaho 2003) (prior Idaho decision enforcing identical Other Insurance clause; court explains Purdy is no longer controlling post‑Hill)
- Kline v. Farmers Ins. Exch., 277 Neb. 874 (Neb. 2009) (Nebraska court invalidating similar not‑owned‑but‑insured exclusion on public policy grounds)
- Veach v. Farmers Ins. Co., 460 N.W.2d 845 (Iowa 1990) (Iowa court rejecting similar exclusion because it makes coverage contingent on vehicle rather than insured’s loss)
- Illinois Farmers Ins. Co. v. Cisco, 178 Ill.2d 386 (Ill. 1997) (Illinois court striking similar exclusion as contrary to public policy)