State Farm Mutual Automobile, 126 A.3d 631

Background

On Aug. 3, 2008 Matthew Kelty was injured when a rope tied to the Lovegroves’ truck broke while he was in a tree trimming branches on their property; Kelty sued John Lovegrove and State Farm.
State Farm paid the Lovegroves’ bodily-injury liability limits but denied PIP benefits, arguing the injury did not meet statutory PIP requirements; Superior Court initially granted summary judgment for State Farm.
This Court (Kelty v. State Farm, 73 A.3d 926) reversed, holding the “transportation use” requirement was improper and remanding for PIP coverage determination.
On remand the policy’s PIP structure provided the $15,000 statutory minimum for pedestrians but limited any excess PIP (up to $100,000) to the insured and defined relatives who live with them; Kelty argued the limitation was void as against public policy and sought the full $100,000.
The Superior Court held the relationship-based limitation void as against public policy and awarded the full $100,000; the Supreme Court (en banc) reversed, concluding the statute mandates only $15,000 minimum and the excess limitation was permissible.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Kelty is entitled to the full $100,000 excess PIP despite the policy limiting excess to the insured/household relatives	Kelty: the policy’s excess limitation is an exclusion void as against Delaware public policy; he should receive the full $100,000	State Farm: Kelty is limited to the $15,000 statutory minimum because he is not a covered relative and the policy limitation is valid	Court: limitation is valid; Kelty gets statutory $15,000 (reversing Superior Court)
Whether the contested clause is an invalid "exclusion" (subject to heightened scrutiny) or a permissible "limitation" on excess coverage	Kelty: clause operates as an exclusion that nullifies coverage and so is non‑customary and void	State Farm: clause is a limitation restricting only excess coverage to insured/relatives and is permissible	Court: clause is a limitation (not an exclusion) on coverage above the statutory minimum and is allowed by §2118 and public policy
Whether courts may require more than the statutory minimum PIP based on public policy	Kelty/Superior Ct.: public policy favors full compensation and discourages exclusions based on relationship; thus relationship-based limits should be invalid	State Farm: the General Assembly sets mandatory minimums; courts should not expand them because doing so would distort statutory incentives and raise costs	Court: the legislature, not courts, sets mandatory limits; judicially imposing higher minimums would disrupt statutory incentives and likely raise premiums
Whether Kelty’s alternative contention that he was an "occupant" (not a "pedestrian") applies	Kelty (raised for first time on appeal): he was an occupant, so the pedestrian limitation doesn’t apply	State Farm: issue was not raised below; factual posture treated him as pedestrian	Court: issue waived; appellate review refused because it was not fairly presented to the trial court

Key Cases Cited

Kelty v. State Farm Mut. Auto. Ins. Co., 73 A.3d 926 (Del. 2013) (prior appeal overruling the “transportation use” requirement)
State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d 557 (Del. 1988) (invalidated an exclusion that barred household members from recovering any statutory minimum coverage)
Nationwide Gen. Ins. Co. v. Seeman, 702 A.2d 915 (Del. 1997) (considered validity of limiting excess coverage and weighed public policy encouraging purchase of additional coverage)
State Farm v. Daprato, 840 A.2d 595 (Del. 2003) (explaining that legislative bodies, not courts, should change statutory coverage schemes)
Progressive N. Ins. Co. v. Mohr, 47 A.3d 492 (Del. 2012) (analyzing household exclusions and their effect on incentives to buy excess coverage)
Harris v. Prudential Prop. & Cas. Ins. Co., 632 A.2d 1380 (Del. 1993) (describing the Financial Responsibility Law’s goal of providing basic insurance coverage)
Cubler v. State Farm Mut. Auto. Ins. Co., 679 A.2d 66 (Del. 1996) (distinguishing exclusions that affect statutory minimum coverage)
Universal Underwriters Ins. Co. v. Travelers Ins. Co., 669 A.2d 45 (Del. 1995) (upholding exclusions above statutory minimum for certain risks)