State Farm Mutual Automobile Insurance Co. v. Hodgkiss-Warrick
2013 Ky. LEXIS 399
| Ky. | 2013Background
- Karen Hodgkiss-Warrick, a Pennsylvania resident, was severely injured in a car accident in Kentucky while riding in her daughter Heather’s leased vehicle; Heather and Karen lived together in Pennsylvania.
- Heather’s liability insurer paid its policy limits, which were insufficient to cover Karen’s medical expenses; Karen sought underinsured motorist (UIM) benefits under two State Farm policies (her own and her husband’s).
- Karen’s State Farm UIM policy issued in Pennsylvania excluded coverage for vehicles “owned by, rented to, or ... available for the regular use of you or any resident relative”; State Farm denied coverage under Karen’s policy on that basis.
- The trial court applied Pennsylvania law and granted summary judgment to State Farm, holding the regular-use exclusion enforceable under Pennsylvania law.
- The Kentucky Court of Appeals reversed, applying Kentucky public-policy reasoning to allow recovery; the Kentucky Supreme Court granted discretionary review.
- The Kentucky Supreme Court reversed the Court of Appeals, holding Pennsylvania law governs and the regular-use exclusion is enforceable; no Kentucky public-policy exception required applying Kentucky law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for UIM coverage dispute | Kentucky public policy disfavours household/regular-use exclusions; Kentucky law should apply and invalidate the exclusion | Apply Restatement §188: Pennsylvania has the most significant relationship; Pennsylvania law governs coverage | Pennsylvania law governs; apply law of state with most significant contacts (Pennsylvania) |
| Public-policy override of choice-of-law | Kentucky’s MVRA and cases (Marley, Bishop) imply a strong public policy against household exclusions that should override §188 | Kentucky MVRA does not mandate UIM; UIM is optional and exclusions are permitted if reasonable; no dominant Kentucky policy to override choice-of-law | Kentucky public policy does not clearly prohibit the regular-use exclusion; no compelling reason to displace Pennsylvania law |
| Enforceability of the regular-use exclusion under Kentucky law | The exclusion is functionally a household exclusion and should be invalid as contrary to Kentucky policy of full compensation | Kentucky precedent (Glass and subsequent cases) permits regular-use exclusions as reasonable limits on optional UIM coverage | Even under Kentucky law, the exclusion is not against public policy; Glass approved similar exclusions |
| Enforceability under Pennsylvania law | (Plaintiff disputed applicability but not extensively) Regular-use exclusion is invalid under general public-policy principles | Pennsylvania precedent upholds regular-use/household exclusions in UIM policies to reflect underwriting/pricing expectations | Pennsylvania law upholds the regular-use exclusion (Burstein and related Pennsylvania cases); exclusion enforceable |
Key Cases Cited
- Motorists Mut. Ins. Co. v. Glass, 996 S.W.2d 437 (Ky. 1999) (upholding a regular-use exclusion from UIM coverage under Kentucky law)
- Lewis v. American Family Ins. Group, 555 S.W.2d 579 (Ky. 1977) (adopting Restatement §188 approach for choice-of-law in insurance contract disputes)
- Marley v. State Farm Mut. Auto. Ins. Co., 151 S.W.3d 33 (Ky. 2004) (invalidating household exclusion in umbrella/liability context under Kentucky public policy to fully compensate accident victims)
- Burstein v. Prudential Property & Cas. Ins. Co., 809 A.2d 204 (Pa. 2002) (Pennsylvania Supreme Court upholding regular-use exclusion from UIM coverage against public-policy challenge)
- Williams v. GEICO, 32 A.3d 1195 (Pa. 2011) (reiterating Pennsylvania authority that certain exclusions to UIM coverage are permissible to contain insurance costs)
- Preferred Risk Mut. Ins. Co. v. Oliver, 551 S.W.2d 574 (Ky. 1977) (permitting exclusions from optional vehicle coverages under Kentucky law)