Farmers Insurance Exchange v. Dotson

(а) representation ingly, accept the conditional engages a client admission lawyer’s inquiry panel’s knowing that interests and the recommendation. intent to

adverse to the client’s with the another, lawyer or and causes benefit the Ill injury potentially serious or serious hereby Raymond It is ordered that Jacob client; or suspended practice Miller be of law (b) simultaneously represents clients year day, thirty for one and one effective lawyer that the knows have adverse inter- days opinion. after the of this issuance See lawyer ests with the intent benefit 241.21(a). C.R.C.P. It is also ordered another, potential- or and causes serious or respondent pay proceed- the costs of this ly injury serious to a client.... ing thirty in the amount of within $212.93 Schindelar, People 4.31. See v. days opinion after the announcement of this (Colo.1993) (lawyer P.2d 1146 who disbarred Supreme Court. prohibited entered into loan transaction with client and failed to disclose the inherent who sup

conflicts of interest involved and did not

ply appropriate legal client with documents repayment

to ensure of loan or disclose inad loan).

equacy security other On the

hand, “[s]uspension generally appropriate lawyer of a conflict of interest

when knows fully and does not disclose to client the EXCHANGE, FARMERS INSURANCE conflict, possible effect of that and causes Petitioner, injury potential to a client.” Id. at People Lopez, 4.32. See v. v. (Colo.1990) (representation of client when DOTSON, Respondent. M. Trent there was an obvious conflict of interest with making client’s business interest and the No. 95SC122. misrepresentation applications liquor Colorado, Supreme Court of suspension warrant licenses six-month En Banc. law). practice of respondent’s failure to disclose the March obvious conflicts interest this сase be- respondent’s tween Hebert and the other

clients, respon- and between Hebert and the himself,

dent caused Hebert substantial disciplinary

harm. The assistant counsel is recommending part restitution as

conditional civil admission because set-

tlement reached between Hebert and the

respondent’s professional malpractice carrier $75,000. mitigation

The sole factor is that

respondent prior disciplinary has no record. 9.32(a). multiple

ABA Standards at of- factor, aggravating

fenses are an id.

9.22(d); pattern as is the existence of a 9.22(c).

misconduct, Taking id. at the seri- together

ousness of the misconduct aggravation,

factors in we conclude that sus- year day

pension for one and one is an

appropriate disciplinary Accord- sanction. Lambdin, P.C.,

Levy Levy, & Marc R. Battalora, Englewood, Linda A. for Petition- er. n P.C., Bromley, R.

Michael Michael R. Bromley, Springs, Respondent. ‍‌​‌​‌‌​​‌​‌‌​‌‌‌​​​​‌‌​​‌​​​‌​​​‌‌‌​​​‌‌‌​‌​​‌​​‍Colorado P.C., Ogden, Ralph Ogden, Wilcox & Den- ver, for Curiae Colorado Trial Amicus Law- yers. Opinion

Justice KOURLIS delivered the the Court. granted certiorari to review the appeals opinion

court Dotson v. Estate Pearson, (Colo.App.1994), that a named insured exclusion1 an automobile insurance contract is of the Colorado Act, Reparations Auto Accident sections 10- (1994 -725, 4-701 to C.R.S. & therefore, Supp.), and void. We affirm the appeals. of the court of I. following

We derive the facts from the parties’ summary judgment motions before court. trial pur- Rhonda Dotson and Robert Pearson chased an automobile insurance (Farmers), Exchange Farmers Insurance petitioner in this action. The listed both Rhonda Dotson and Pearson as Robert general, 1. In a named insured exclusion in an insured under the when such liability coverage excludes caused another insured under the bodily injury to an individual who is a named coverage, responsibility insureds2 and had an effective date Farmers denied expiration judgment against May 1991 and an date June Dotson’s Pearson’s estate. policy insured an automobile 1991. The response Dotson filed to Farmers’ mo- registered to and owned Rhonda Dotson. summary judgment tion for and a cross mo- 8, 1991, driving summary judgment. argued was tion for

On June Pearson Dotsоn time, policy’s At Rhonda Dotson insured vehicle. exclusion from liability riding passenger persons as a in the car. For for was insured was reasons, against public policy. control of the void as unknown Pearson lost Dotson further guard into a rail. Both claimed that our vehicle and crashed decision v. State and Rhonda Dotson were killed. Farm Mutual Automobile Pearson Insurance (Colo.1984), P.2d 689 585 invalidated such Dotson, husband, Trent Rhonda Dotson’s exclusions as void under the Colorado Auto brought against suit Robert Pearson’s estate - Act, Reparations §§ Accident 10-4-701 to wrongful death of his wife. to recover for the (1994 (No- 725, 4A Supp.) C.R.S. & 1995 summary judgment, the trial court found On Act). Therefore, Fault Rhonda Dotson’s for Rhonda Dotson’s death Pearson liable precluded claims were not and Dotson was theory loquitur. ipsa under a of res Ulti- entitlеd to recover from Farmers under the mately, judgment the trial court entered a against Pearson’s estate the amount of $300,000: $50,000 represented granted summary judgment the solatium The trial court 13-21-203.5, Farmers, pursuant grounds amount to section 6A for on the that Rhonda (1993 $250,000 Supp.), represent- C.R.S. Dotson was a named insured and was not damages. ed economic entitled to recover benefits under the policy. Because Trent Dotson’s claims were garnishment of Trent Dotson filed writ Dotson’s, derivative of Rhonda Trent Dotson against Farmers to collect Pearson’s precluded recovery. was also liability policy judg- automobile based on his appealed ment Pearson’s estate. The Farm- Trent Dotson the trial court’s policy provided pay ruling appeals. Relying ers’ that Farmers would of the court “damages person any appeals for which insured our decision in of court bodily injury legally any entry summary liable because of reversed the trial court’s of person arising ownership, ... out of the for Farmers. Dotson v. Estate of private Pearson, passenger (Colo.App.1994). maintenance or use of a appeals car....” Farmers filed answer disclaim- court of a two to one decision ing any responsibility interpreted Meyer for Pearson’s debt and that named Dotson filed a traverse. insured exclusions like the one in the Farm- contrary ers’ are to the No-Fault Act summary Farmers then a motion for filed against public policy. void as therefore judgment claiming that the terms of the in- Id. at 20. court of held policy precluded surance Rhonda Dotson Assembly’s General enactment collecting benefits as result of the 10-4-418(2)(b), (1994),per- 4A C.R.S. negligence Pearson. excluded mitting household exclusions coverage: “liability change public policy contracts did not person.” an insured defined the Rather, the state. the statute created a nar- person” term “insured as named insured or exception row for certain household exclu- any family member of named insured. Un- general public policy sions to the of the No- exclusion, Dotson, der this Rhonda as a disfavoring Fault Act exclusions from cover- named insured under the insurance majori- age. Disagreeing Id. at 21. recovering damages ty’s interpretation Meyer, Judge Plank which individual insured under the dissented. contract was liable. Since Trent Dotson’s petitioned claims Pearson were derivative of his this court for certiorari claims and his wife was excluded frоm to determine: wife’s usually primary ciary insured under the insurance

2. A named benefi- Daigle, Estate cover- terms. Matter an exclusion from Whether (Colo.1981). However, if even a age bodily caused to exclusion”) (“named unambiguous, provision may provision is con- be underlying if it void and unenforceable violates sistent with the “dilute, condition, policy by attempting Reparations Auto Accident Colorado Act, -725, statutorily coverage.” limit mandated Aetna sections 10-4-701 to C.R.S. McMichael, Casualty P.2d & Sur. Co. v. (Colo.1995). this court has We hold that named insured exclusions provisions in refused to enforce automobile of this state ‍‌​‌​‌‌​​‌​‌‌​‌‌‌​​​​‌‌​​‌​​​‌​​​‌‌‌​​​‌‌‌​‌​​‌​​‍policies against public pol that are Rep- Accident reflected in the Colorado Auto See, icy. e.g., Kral v. American Hardware -725, Act, §§ 10-4-701 to 4A C.R.S. arations Co., Ins. Mut. (1994 Supp.). We therefore affirm & (Colo.1989)(subrogation clause and release trial appeals’ the court of reversal of the agreement trust unenforceable because summary judgment for Farmers and court’s inability full would result obtain com with return this case to the court pensation public and would for loss violate to the trial court for directions to remand policy). opin- proceedings consistent with this public policy ion. Act The of the No-Fault expressed in the declaration in- II. KM-702, cluded the Act. See C.R.S. (1994). This declaration states: policy at issue in The Farmers insurance Legislative general declaration. The as- “liability coverage does this ease states sembly purpose in declares that its enact- apply liability bodily injury to an not ing part inadequate 7 is to avoid person.” defines an compensаtion to victims of automobile ac- person a named insured or a as either cidents; registrants require of motor family. of the named insured’s Be- member procure vehicles in this state to insurance cause Rhonda Dotson was a named insured liability covering legal arising out of own- under the insurance this exclusion ership or use of such vehicles and also precludes rights are her and all those whose providing persons occupying benefits to recovering damages derivative of hers from persons injured such vehicles and liability based on the of an insured under the involving accidents such vehicles. policy. question we must resolve public pol- whether this exclusion violates the It is clear from this declaration that en- icy expressed of this state as in the No-Fault acting legislature Act the No-Fаult Act.3 inadequate compensation to “avoid tended accidents,

victims of automobile and to re- quire purchase that motor vehicle owners A. provide coverage policies which argues Meyer, both and no-fault benefits.” not the insurance does (emphasis original). 689 P.2d at 588 public policy. violate Farmers further ar- considered we whether house- gues that our decision v. State poli- hold exclusions automobile insurance Farm, Mutual Automobile Insurance cies violated the of the No- (Colo.1984), dispositive is not Fault Act. involved three consolidated disagree. this case. We cases, injured In two of the indi- cases. attempting ambiguity, In the an viduals were to recover benefits absence given liability coverage provided must be effect accord to a mem- ing plain ordinary meaning ber of the same household. 689 P.2d at of its 587- dispute parties 3. between the Dotson was excluded from as a mem- There is factual as to whether Rhonda Dotson was a member ber of Pearson’s household. we do Robert Pearson's household. Farmers does not Robert opinion. an exclusion in this not consider such argue argue did not below that Rhonda here and case, considering Adcock After 88. In a third under- Act, riding passen- lying the No-Fault held the injured as “house- plaintiff whole exclusion,” including hold the “named in- insured. ger in a car owned and Id. she Adcock, sured” exclusion issue in permissive be the car was driver of policy.4 Id. at thus, void an insured under user of the car and We stated: “The exclusion is neither autho- plaintiffs the terms harmony statute with rized nor plaintiffs of the driver was not a member legislative purpose mаndating liability cases, insur- household. In all three the trial Id. provide bodily ance to injured parties’ court claims dismissed the property inadequate damages to avoid in the respec- because of compensation to victims of automobile acci- tive The exclusion clause Thus, Meyer, Id. dents.” as is clear from upon by In- relied Farm Mutual Auto State discussion, foregoing we invalidated Company typi- surance in the Adcock case is along general named insured exclusions with liability coverage cal. It stated that did “ against public policy household exclusions as ‘any member insured or and void. residing in the same ” an insured.’ B. cases, granted In group the we argues that even if our to in- certiorari determine: “Whether the Meyer invalidated named insured exclu- the sured or a of the insured’s house- membеr present sion their insurance the may hold recover under the insured’s legislature’s enactment of section 10-4- coverage, notwithstanding the existence of a 418(2)(b), (1994), legal- revived and C.R.S. purports in the clause which exclude ized such exclusions. Farmers ar- coverage.” Id. We referred these gues that the enactment of section 10-4- collectively exclusions the “household ex- 418(2)(b) changed public policy of Despite clusion.” the use of the term Act, thus, allowing No-Fault certain limited exclusion,” “household fact consid- exclusions in to the household addition exclu- policy may ered both an insurance whether sion. recovering liability exclude insureds from benefits under To their own contract determine whether 10- 4-418(2)(b) permits and whether of an insured’s insurers members house- include similarly precluded. hold be insured in thеir named automobile Meyer, throughout opinion. In we defined the term "household ex- We considered va- lidity Meyer. clusion” as follows: of both in Generally, operates the household exclusion precludes 5. The named an insured exclusion making pay- relieve an carrier from liability damages collecting from an ments for or death loss pol- same insurance individual insured under the liability policy under the terms of where the icy. general addressed this when named insured or or household we resolved the Adcock case in the deci- injured member is in a motor vehicle accident Adcock, In was sion. the named insured at- by operation negligent caused the vehi- tempting injuries by caused recover for cle the insured or a member of his/her permissive user named insured's car. Un- family or household. issue, permissive der Meyer, (emphasis 689 P.2d at 587 n. 1 added and policy. user was an under the In the insured omitted). citations It is clear from this definition case, present attempting the named insured is that we used the term "household exclusion” to injuries recover for caused apply to two distinct situations. first is policy. under Adcock insured Like the injured precluded an where individual is the tortfeasor insured under the same coverage that individual is a because member was the victim. Adcock the tortfeasor the same as the insured permissive as a car while in user of the policy. This a household is referred to as exclu- present case the is a named tortfeasor throughout opinion. sion of this the remainder However, under the because in both The second is where an individual under the cases tortfeasor is insured same the individual is because either victim, insured or a under the as the we do not find distinc- significance. This referred to as a named insured exclusion tion to be of

32 contracts, guided change public policy of and we are the state statutory long rules of con- established allow exclusions from addition to interpreting statutes we legislature

struction. When the household exclusion. The give must full effect to the intent presumed to have acted with full must be legislature. v. Travelers Indem. judicial Passamano knowledge precedent. of relevant (Colo.1994). Co., 1312, Heiserman, 882 P.2d 1318 To do 898 P.2d 1054. In so, interpret statutory in accor- courts terms excluding held that household members or plain ordinary meaning. dance with their liability coverage insureds from Comm’rs, County Bertrand v. Board of the Act. 689 P.2d at 223, (Colo.1994); Scoggins P.2d v. Uni Assembly If the General had intended 202, (Colo.1994); gard Ins. 869 P.2d of valid broaden the class exclusions be- 2-4-101, see 1B C.R.S. When the members, yond household it would have ex- clear, language of a statute is is no there contrast, plicitly said so. the General interpretive employ need to rules of statuto Assembly expressly ‍‌​‌​‌‌​​‌​‌‌​‌‌‌​​​​‌‌​​‌​​​‌​​​‌‌‌​​​‌‌‌​‌​​‌​​‍scope limited the of sec- ry Corp. construction. Resolution Trust v. 10-4r418(2)(b) pronounce- tion and made no (Colo.1995). Heiserman, 1049, regarding change ments a broad sea in the public policy of the No-Fault Act. We legislature enacted section 10-4- therefore decline to infer one. 418(2)(b) 5, § in 1986. See ch. sec. 10-4- 418(2)(b), 1986 Colo. Sess. Laws 580. It

states: C. The commissioner shall not that a find Relying Schlessinger Schlessinger, v. form, certificate, or contract of (Colo.1990), Mayo 796 P.2d 1385 v. Na- comply surance rider does not Union, (Colo. tional Farmers applicable requirements and standards of 1992), argues Farmers further that this court ground this title on the it excludes 418(2)(b) interpreted has section as re- 10-4— by claims made a member of of pealing Meyer. making our decision in In household another member the of argument, Farmers concedes that our same household. in Such exclusions are Meyer in decision had the effect of invalidat- conformity public policy of this ing both the household exclusion clause and state. the named insured exclusion clause. Since added.) (Emphasis legislature we have concluded that the did plain meaning of section 10-4r- exclusion, not revive the named insured we 418(2)(b) may is that insurers exclude house- Meyer must next determine whether has claiming liability hold members from benefits been otherwise overruled. under an insurance issued to another Although in Schlessinger Mayo and we did hоusehold member in an automobile insur- 10-4-418(2)(b) repealed state that section our ance The statute makes no mention in decision we never held as Farmers general may similarly whether implies Meyer was rendered void the be excluded from for claims made 10-4-418(2)(b). enactment of section Fur legislature specifi- another insured. The thermore, reading Schlessinger a close and cally phrase used the more limited “member Mayo support does not Farmers’ contention generic of a household” rather than the more 418(2)(b) that section revived the validi 10-4 — purposes delineating term “insured” for ty of the named insured exclusion. coverage. who be excluded from Be- only cause the statute on its face validates Schlessinger, In we considered whether household exclusion clauses and not nаmed parental the No-Fault Act im- rendered the insured exclusion clauses there is no need to munity inapplicable doctrine to a claim child’s inquiry legislative make further into the parent injuries sustained in an tent of act. the automobile accident. 796 P.2d 1385. Be- support language Meyer We further no cause court of in find the the relied 10-4-418(2)(b) void, parental immunity of section for Farmers’ con- the doctrine Assembly Meyer. tention that the General intended we discussed our decision After so, Meyer doing disposi- validity held we was not sole issue of the of a household exclu- case it did tive of the because not involve the sion clause. Id. at specifically 56 n. We parental immunity doctrine. Id. at 1388. inquiry stated that would our we limit to the household exclusion and “not the more de- parental next whether We considered tailed policy.” classifications contained immunity public policy doctrine violated Id. so, doing In the No-Fault Act. we stated significant that we considered it that “the From this discussion it is clear that since Assembly legislatively repealed General our decision in we have not consid- 1986, by enacting decision in ered whether exclusion 10-4-418(2)(b), (1987).” Id. C.R.S an violates further stated: of the No-Fault Act. Our statements view, Assembly’s our enact- General Schlessinger Mayo legislature that the 10-4-418(2)(b) ment of section a clear repealed Meyer by enacting section 10-4- signal interpretation that this court’s 418(2)(b) validity were limited to the of a purpose declaration exclusion clause situations Reparations Auto Accident Act did not cor- family attempts where one member to collect respond to purpose actually intended damages from another member who Assembly. the General lives the same household. See All- also justifying Id. we Because found the reasons Feghali, state Ins. v.Co. parental immunity doctrine to be similar (Colo.1991) (holding Schlessinger disposi- exclusion, justifying to those the household plaintiffs’ tive of claims that household exclu- we no found indication that the As- General purpose sion clause violates sembly parental repeal intended to im- act). These cases did relate to and have munity although doctrine. we bearing no on the named insured exclusion. 10-4-418(2)(b) indicated that section altered Act, of the No-Fault Our decision v. State Farm Coffman (Colo. made no determination as to whether named Mutual Auto. Ins. proper 1994), insured exclusions were under the supports our conclusion that act.6 рertains the rationale of it still viable law. Mayo, brought company Coffman, argued State Farm that declaratory judgment seeking a action deter- Schlessinger Meyer we overruled in ef- and policy mination that the automobile insurance fect nullified the rule of announced there- law provided coverage no for a wife’s claims that at no time were household exclu- against husband. P.2d her at 56. The Coffman, sions invalid. P.2d at 280. policy excluded for the as both wife Thus, that is- State Farm claimed a the spouse named insured and as a of a Meyer prior after sued but the enactment living named the same household. 10-4-418(2)(b) of section Relying Schlessinger, Id. on could have a valid indicated we 10-4-418(2)(b) rejected that household exclusion clause. repealed section deci- We our Meyer. sion in both these contentions. first noted that Although Mayo, Id. at 57. using “repeal,” simply recog- the the wife was from be- word Assembly cause of both a named insured nized that: General “[T]he exclusion and clause, a parties contrary household exclusion time law to a the establish rule of presenting elected to treat the previously matter the nonconstitutional rule of law artic- members, parental immunity prohibits family 6. among doctrine ble collusive suits and suing parent simple negligence. child the of costs. Ins. containment Allstate Schlessinger, 796 P.2d at 1387-88. rationale (Colo.1991). Feghali, Co. v. 814 P.2d 866-67 preservation for this doctrine includes the family harmony, of similarity, Because of this the extent we dis- legitimate the maintenance of Schlessinger cussed the household exclusion in control, parental authority and and the safe- referring precludes we were to the exclusion that guarding assets. Id. at These pursuing household members benefits justifying reasons are similar to those house- based on the of another household mem- possible hold exclusion such as the avoidance of and ber not the named insured exclusion. disruption family, possi- the avoidance of dissenting: Coffman, Chief Justice VOLLACK by this court.”7 ulated although that the en- further held 281. We our majority, relying opinion on 10-4-418(2)(b) changed of section actment Farm Mutual Automobile v. State respect to the state public policy with (Colo.1984), Co., P.2d 585 Insurance exclusions, Meyer ren- was not contrary holds that it is prior to issued dered void. in an apply a exclusion clause named insured 10-4-418(2)(b) could of section enactment preclude a named insured household exclusion. not had a valid have recovering provisions under the Coffman, clear it is After our decision Meyer did not Assembly’s policy. Because enactment of same the General us, 10-4-418(2)(b) presently before not our deci- address the fact scenario did make section ease, I Rather, instant 10-4- and thus does sion in void. the named

418(2)(b) exception dissent. I would hold merely a narrow created exclusion, applied to co- Meyer. holding that when exclude holding in Our to the other, against collecting insureds from each void as policy. contrary public still is not policy of the No-Fault Act is in effect.

I. III. (Farmers) Exchange Insurance (the policy) to conclusion, issued an insurance we hold our decision Robert Pearson with an Rhonda Dotson and Automobile v. State Farm Mutual 15,1991, May expira- (Colo.1984), and an effective date of Insurance Bоth and tion Dotson in auto- date June named insured exclusions validated listed as “named insureds” Pearson are policies as mobile vehicle The insured was owned Neither public policy of the No-Fault Act. registered to Dotson. Assembly’s enactment of section the General 10-4-418(2)(b), (1994), 4A C.R.S. nor subse- 8, 1991, driving On Pearson June quent changed case law has riding passenger vehicle and Dotson was respect Act with to named the No-Fault rail, guard with a when the vehicle collided Thus, named insured ex- insured exclusions. killing The re- both Dotson Pearson. invalid. clusions remain husband, spondent, brought an ac- Dotson’s tion estate recover Pearson’s In this Trent Dotson as of Dotson. The trial wrongful death personal representative of Dotson is Rhonda summary judgment against court entered damages eligible the Farm to collect $300,000. Pearson in the amount ex ers’ Because the named insured invalid, policy is Rhonda Dot gar- clusion in the a respondent then filed writ of son’s as a named insured does judg- status to against Farmers collect his nishment Dotson, derivatively, preclude her or Trent pursuant ment from Pearson’s estate Therefore, recovery. affirm the policy. Farmers filed an answer Farmers appeals the court of and return denying ‍‌​‌​‌‌​​‌​‌‌​‌‌‌​​​​‌‌​​‌​​​‌​​​‌‌‌​​​‌‌‌​‌​​‌​​‍liability policy. decision of under the Farmers appeals court of with di summary the case to the for then filed a motion to the trial court for claiming rections to remand denying coverage policy, under the opin proceedings consistent with this policy the that the terms of excluded because ion. “liability bodily injury per- an to insured for

son,” required pay could not be to VOLLACK, C.J., dissents, as the result of Pear- out benefits to Dotson J., ERICKSON, joins negligence. son’s the dissent. particular legisla- exercising ognizes practical legislative power effect that its the

7. We note that in Assembly repeals Coffman, nor over- may the neither 884 P.2d at 279 n. General tion have. See by this The use of rules cases decided court. opinions merely rec- in this or other such terms public granted summary judgment policy liability The trial policy court for a Farmers, holding bodily in favor of that because the coverage exclude to a respondent’s See, a wife was “named insured” e.g., Weisberg named insured. v. Detroit policy Exch., the and because the ex- under Mich.App. Auto. Inter-Ins. insureds, (1971). named cludes there N.W.2d remaining no material were facts be decid- ap- The named insured has exclusion been The court of reversed trial ed. plied types least two different situa- order, holding that court’s the “named tions. The more common of these is when a sured” exclusion was invalidated this injured riding named insured is while as a holding Meyer. court’s passenger in the insured In vehicle. situation, effect II. operating driver because the the vehicle majority holds that our decision permission insured and is proposition stands for the provision thus covered the omnibus of the policy precludes a named insured exclusion policy.2 The named exclusion then applying clause an insurance preclude operates recovery the named preclude recovering a named insured from permissive insured from the driver. such liability provisions under the of the situation, therefore, upon party whom from another insured on named the same permis- imposed wоuld be —the policy. majority misconstrues our hold- sive driver —is not a named under ing Meyer, improperly and thus broadens policy. scope opinion. discussing of that Before Meyer, however, situation, exposition brief on the The second which is the one case, “named insured” exclusion and relat- before in the us instant occurs when necessary ed insurance exclusion is in two are individuals eo-insureds under a sin- engage principled gle analysis order In such a the named addressing precludes and other ex- cases these exclusion either co-insured recovering against clusions. the other. if an accident occurs when one eo-insured is Commentators and the case iden- law have driving, passenger, and the other is .a related, distinct, analytically tified two but passenger co-insured not reсover from commonly exclusions found in insur- situation, co-insured. driver such policies. ance These are the “named insured upon party whom the would be (or exclusion”) exclusion” “insured and the imposed co-insured driver —is —the “household exclusion.”1 insured under the The “named or insured” “insured” exclu- precludes designat- sion who individual The other related clause com- as an monly ed insured in the policies recover- found is the ing injuries. for his own Appleman John A. exclusion” “household clause. standard Appleman, Jean Insurance poli- & Law and Prac- household “This exclusion clause states: A, up- cy any tice at 315 Courts have does not grounds obligation held ... the insured liability 'coverage pro- is concerned with member of the insured rights per- tection of the and claims of residing third in the same as the in- Schemer, sons whеn the named insured liable became sured.” Irvin E. Automobile Lia- Insurance, (3d 24.06[1], persons, bility § to third and it not 24-11 is thus ed. recognized provides coverage the distinction between these 2. An clause omnibus for those Union, Mayo clauses in v. National persons using Farmers per- with the insured vehicle noted, (Colo.1992), P.2d 56 n. 2 where we the named E. mission of insured. Irvin Scherm- regard with to a named insured clause ex- that Insurance, er, 22.02[3], Liability Automobile bodily injury "any cluded for insured 1995). (3d 22-18 ed. person,” ap- that "the named insured exclusion plicable petitioner] strictly [the not a house- hold exclusion clause.” 1995). commonly purpose declaratory complaint judg- stated for the Farmers’ ment, household exclusion is that the exclusion trial that court held the exclusion “protects the insurer from fraudulent or col- clause was thus valid and that Farmers was obligated provide lusive lawsuits between members of the same for Porfi- defense family.” Meyer, pay any 689 P.2d at 591. judgment against rio or rendered

him. III. (Adcock), In the third case Marianne Ad- we considered “whether a passenger by cock was a vehicle owned ‘household exclusion clause’ an automobile by her and driven John DeCrescentis with is invalid because it permission. Adcock’s vehicle was Repara- violates the Colorado Automobile volved in an accident and Adcock filed (the “Act”) ], Act ... [ tions and is therefore negligence action DeCrescentis. Ad- contrary as reflected cock was insured State Farm Mutual Au- Act.” Id. at 587. addressed three (State Farm) Company tomobile Insurance cases, involving consolidated each different provided under a that the applications combinations and of the above apply insurance contained therein did not described exclusion clauses. “any any family insured or member of the (Meyer), In the first case Kenneth residing the same household as driving was a vehicle which his mother the insured.” Id. The also contained passenger when the vehicle was stating an omnibus “in- clause that the term accident, injuring Meyer’s volved in an moth- anyone using sured” included the vehicle er. and his mother lived in the same permission of the named insured. Meyer’s Mey- household. mother then sued complaint Adcock and DeCrescentis filed a inju- damages personal er to recover for her declaratory judgment, contending carrier, Meyer’s ries. Farm State obligated provide State Farm was a de- (State Farm), Company Mutual Insurance pay any judgment fense for DeCrescentis or declaratory seeking him, filed suit rendered and the trial court Meyer’s mother was not entitled to re- complaint. dismissed the damages Meyer’s cover additional under lia- together, We considered these cases bility policy, Meyer’s based on a clause stated: bodily inju- that stated that We hold that the household ry coverage “any did not invalid provi- because it is any member of the of an insured Repara- sions of [Colorado Automobile residing in the same household as the in- thereby tions public poli- Act] violates sured.” Id. The trial court entered sum- cy expressed Act. mary judgment, holding that the above against Meyer, added). clause claim (emphasis Id. at 588 We based this and the court of affirmed. holding upon perceived what we to be the public policy underlying expressed the Act as (Aguirre), the second cаse Clara in the Act’s declaration which Aguirre passenger was a in a ear driven states: husband, Aguirre, they her Porfirio when Legislative were involved a one-car collision in which general declaration. bodily injuries. assembly Clara suffered Clara purpose sued declares that its in en- damages. acting Porfirio to recover part inadequate vehicle 7 is to avoid compensation was insured Ex- Insurance to victims of automobile acci- (Farmers) dents; change policy listing require registrants both of motor ve- Clara and Porfirio as named procure insureds. The hicles in this state to excluding coverage covering legal contained a clause liability arising out of own- “liability ership insured for or use of such vehicles and also (a) any providing member of the same household persons оccupying benefits to (b) servant, except such insured persons injured in vehicles and to named insured.” involving Id. at 588. Pursuant accidents such vehicles. (1994). 4A C.R.S. We then ex- instant Meyer. case was never in addressed 10-4— Meyer inapposite is thus amined Act in more and detail ascer- case at bar. mandatory tained that insurance is Meyer clearly invalidated household exclu- under the Act. further determined that Meyer Aguirre sions and scenarios.4 Meyer n treatment of the named insured ex- the household exclusion not sanctioned by any provisions pertaining per- of the clear, clusion in Adcock is less the court Act. missible exclusions Meyer spoke only invalidating the house- exclusion, hold and no such exclusion was at commonly We then discussed the asserted Instead, issue in the Adcock case. Adcock rationаle for the household exclusion: that it involved a being named insured exclusion protects the insurer from fraudulent or collu- applied insured, prevent so as to a named sive lawsuits between members of the same riding in passenger, a vehicle as a from re- family.3 law, examining After relevant case covering permissive from a driver whose rationale, stating we dismissed this that “we negligence injury caused the named insured agree with those courts that have noted that damages. and factually Adcock is thus dis- possibility justify barring such a does not tinguishable from the instant case. of non-collusive claims.” 689 P.2d at n treatment of the Ad- Meyer As I read facts, court, despite cock the unfortunate Finally, we held that misuse of the “household exclusion” lan- the household guage, exclusion is invalid. The application invalidated the of the exclusion is named insured pre- neither authorized statute exclusion when used to insured, riding clude a named harmony passenger, nor in as a pur- recovering from, from permissive pose mandating driver liability insurance negligence whose causes the named insured provide coverage and damages. This differs from the property damage inadequate to avoid application of the named insured clause compensation to victims of automobile Here, the instant case. the named insured accidents. being applied preclude clause is one added). (emphasis insured, riding passenger, named as a Meyer The three factual scenarios recovering another named insured ways illustrative of the various in which the negligence whose causes the named insurеd exception named insured and the household passenger injury damages. Meyer did applied. exclusion can be combined and A situation, speak to such a and did not comparative analysis Meyer, however, application invalidate this of the named in- demonstrates that the factual Meyer scenario ap- clause.5 therefore does not Notably, Meyer sepa grounds we did not discuss in that the household exclusion was invalid usually support against public rate rationale policy. Meyer, offered to 689 P.2d at 592. exclusion, which is that We then remanded the case to the trial court for protection proceedings is concerned with the holding of the consistent with the rights persons Meyer: and claims of third when the that the household exclusion was inval- per named sons, point insured becomes liable to such third id. At no did we hold that the named invalid, and it is thus not insured exclusion was and on remand in liability policy Aguirre for a nothing Meyer exclude for bodi would have See, ly injury e.g., Weisherg precluded to a named insured. the trial court from that the Exch., Mich.App. v. Detroit Auto. Inter-Ins. named insured exclusion in the insurance 513, 194 Aguirre N.W.2d 193 recovering judg- Clara Aguirre ment Porfirio from Farmers. Aguirre 4. The court of noted that the case involved both a household generally exclusion and a 5.While invalidated household Pearson, clauses, sweep- insured exclusion. Dotson v. that case made no such (Colo.App.1994). ing pronouncements regard 903 P.2d appeals The court of with to named in- Therefore, thus concluded that invalidated sured exclusion clauses. it follows both the generally household exclusion and the named did not invalidate named clauses, insured exclusion. Id. at 21. only This conclusion is insured exclusion but invalidated unsupported by procedural posture applied named insured exclusion clauses when holding Meyer. Meyer, preclude recovering we reversed the trial a named insured from permissive court’s in favor of Fanners on the driver.

ply relationship the instant case. I hold that the collusion as is the fami- would between ly application living of the named insured clause members and those in the same by potential The supported public the case before us household. for collusion de- is underlying relationship I from the policy, and would thus the court of rives be- reverse parties, appeals. they tween not the fact that happen to live under roof or the same be marriage. rеlated blood or IV. Similarly, the concern containment of May Assem- Colorado General applies costs equally insurance in the context bly amended section 10-4-418 with the fol- If co-insureds. the exclusion lowing language: invalidated, premiums is stant case The commissioner shall not find that a likely expansion will rise as a result of this form, policy certificate, contract of in- coverage. comply surance or rider does not with the Finally, applicable requirements avoiding disruption the interest in and standards of family by litigation may unit ground this title on the that it of the arise in excludes co-insureds, just it of claims a member of the context as made against example, household member of within household. For a father same include his policy household. are in could son on an insurance Such exclusions though conformity even the father and son in differ- of this live By ent excluding state. households. household excluding members but not 10-4-418(2)(b), 4A C.R.S. co-insureds, intra-family litigation might oc- underly considerations precluded. cur that otherwise ‍‌​‌​‌‌​​‌​‌‌​‌‌‌​​​​‌‌​​‌​​​‌​​​‌‌‌​​​‌‌‌​‌​​‌​​‍could be ing this upholding amendment counsel foregoing analysis that indicates it is interpret exclusion the instant case. relationship parties, between the and not ed the above amendment in Allstate Insur members, family their as status household or Company Feghali, ance v. that relevant in determining is whether an (Colo.1991), and held section 10 — 4- policy invalid as 418(2)(b) legislatively authorized household public policy. The fact that two indi- policies and thus are both viduals named insureds on the same legislative evinced a intent just probative as relationship of a public policy. exclusions are consistent with where sanctions exclusion as the at 866. fact that those individuals live in the same FeghaU, justifica- we identified three marriage. house or are related blood or tions for the approval Because does not facts household exclusion. These consider- because considerations of (1) prevention ations are: of collusive public policy underlying the enactment of (2) suits; prevention of an increase 10-4-418(b)(2) apply equally to insur- might cost result in provisions co-insureds, excluding ance increase in the number of uninsured driv- respectfully I dissent. ers; (3) avoiding family disruption by litigation. unit Id. at Each of say I am authorized to that Justice Feghali equally justifies factors identified joins in ERICKSON this dissent. permitting precluding a clause eo-insureds bringing suits each other. potential for collusion between co-in- just great sureds is as that between relationship

or household members. The be- jointly purchase

tween those who an insur- just give likely

ance rise to

Case Details

Case Name: Farmers Insurance Exchange v. Dotson

Court Name: Supreme Court of Colorado

Date Published: Mar 18, 1996

Citation: 913 P.2d 27

Docket Number: 95SC122

Court Abbreviation: Colo.