Johnson v. State Farm Mutual Automobile Insurance Co.
520 S.W.3d 92
Tex. App.2017Background
- In 2008 Jerry Johnson (driver) injured his son Jacob (minor passenger) in a single-vehicle collision while driving a rented car; Jacob lived with his parents at the time and moved out in 2015.
- Jerry held a State Farm Personal Auto Policy and a State Farm Personal Liability Umbrella Policy; both contained family-member exclusions that limit or exclude coverage for injuries to family/relatives residing in the household, except the auto policy preserves the statutory minimum liability amount ($25,000 at the time).
- Jacob claimed liability recovery and underinsured-motorist (UIM) benefits under the auto policy; State Farm offered the statutory-minimum payment and denied UIM on the theory a passenger who recovers liability from the same policy cannot also recover UIM for the same loss.
- Jerry sought declaratory relief that the family-member exclusions are invalid (public policy, constitutional, unconscionability) or, alternatively, that their applicability is judged at the time a claim is made rather than at the time of the accident.
- Trial court: held auto policy family exclusion valid and applied as of the accident (liability limited to statutory minimum), denied UIM to Jacob, but held umbrella policy covered excess liability because Jacob was not an "insured" under the umbrella when Jerry became legally liable. Parties appealed; State Farm cross-appealed.
Issues
| Issue | Plaintiff's Argument (Jerry/Jacob) | Defendant's Argument (State Farm) | Held |
|---|---|---|---|
| Validity of auto-policy family-member exclusion | Jerry: exclusion violates public policy, constitutional rights, and is unconscionable; should be void | State Farm: exclusion is a standard Board-approved form and valid except to extent it conflicts with statutory minimums | Court: exclusion valid and enforceable; invalid only to extent it conflicts with statutory minimum per Johnson/Sanford precedent (insured gets statutory minimum) |
| Timing for determining "resident"/family-member status | Jerry: "is a resident" means status is judged when claim is made (post-accident moves should affect coverage) | State Farm: residency is judged as of time of the accident | Court: residency (and thus application of family exclusion) is determined as of the time of the accident; allowing post-accident moves would render exclusion meaningless |
| UIM availability to family passenger injured by insured driver | Jacob: he should get UIM benefits despite recovering statutory liability because the rental car wasn’t "available for regular use" and thus could be an underinsured vehicle | State Farm: UIM exists to protect against negligence of other motorists; a passenger who recovers liability from same policy cannot also recover UIM for same loss | Court: UIM not available to Jacob; allowing both liability and UIM from same policy for same insured would convert UIM into extra liability coverage and defeat precedent and policy intent |
| Application of umbrella exclusion (whether Jacob was an "insured") and timing of when insured status is measured | State Farm: umbrella excludes bodily injury to an "insured" (relatives whose primary residence is the household) and insured status should be judged at time of accident; no umbrella coverage for Jacob | Jerry: exclusion ambiguous and should be applied when insured becomes "legally liable" (trial court applied insured-status at time of judgment) | Court: determined insured-status must be judged at time of the accident; reversed trial court’s holding that umbrella covered excess—rendered judgment that umbrella provides no coverage for Jacob |
Key Cases Cited
- Travelers Ins. Co. v. Joachim, 315 S.W.3d 860 (Tex. 2010) (standard review rules for summary judgment)
- National Cty. Mut. Fire Ins. Co. v. Johnson, 879 S.W.2d 1 (Tex. 1993) (family-member exclusion addressed; plurality/controlling holdings discussed)
- Liberty Mut. Fire Ins. Co. v. Sanford, 879 S.W.2d 9 (Tex. 1994) (per curiam adopting Johnson plurality rationale limiting invalidity to statutory minimum)
- Stracener v. United Servs. Auto. Ass’n, 777 S.W.2d 378 (Tex. 1989) (purpose of UM/UIM is to protect insureds from negligence of other motorists)
- Fortis Benefits v. Cantu, 234 S.W.3d 642 (Tex. 2007) (unconscionability/subrogation analysis; courts reluctant to override express policy language)
- Charida v. Allstate Indem. Co., 259 S.W.3d 870 (Tex. App.—Houston [1st Dist.] 2008) (family-member and UIM interaction; insured family members limited to statutory minimum)
- Farmers Tex. County Mut. Ins. Co. v. Griffin, 868 S.W.2d 861 (Tex. App.—Dallas 1993) (UIM not meant to protect family from their own negligence)
- Rosales v. State Farm Mut. Auto. Ins. Co., 835 S.W.2d 804 (Tex. App.—Austin 1992) (passenger who recovers full liability under same policy cannot also recover UIM)
- Parekh v. Mittadar, 97 So.3d 433 (La. App. 2012) (single-vehicle/rental-car UM exclusion—rental vehicle held "available for regular use" and excluded from UM/UIM)