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State Farm Family Use Exclusion: A New CSA Opinion

State Farm recorded another win in a family use exclusion case this week in the Maryland Court of Special Appeals, in Stickley v. State Farm.

This is an awful case. Plaintiff was a passenger in a car accident in Montgomery County in which her husband was killed. Plaintiff suffered catastrophic injuries. Plaintiff and her husband had coverage with State Farm, which provided typical coverage for State Farm, at least in Maryland: $100,000 per person/$300,000 per accident. Plaintiff also had a $2,000,000 umbrella policy with State Farm. Plaintiff’s counsel obviously wanted to get to the umbrella.

Regrettably, the State Farm umbrella policy included an exclusion for personal injury claims that result from the negligence of another insured. Plaintiff’s lawyer sought a declaratory judgment, claiming that her Umbrella Policy constituted “private passenger motor vehicle liability insurance,” voiding the family use exclusion regardless of the unambiguous language of the policy.

The question, ultimately, is whether the personal liability umbrella policy is a policy of “private passenger motor vehicle liability insurance,” thereby requiring an insurer to offer coverage under the umbrella policy for a claim made by a family member in the same amount as the coverage made by a nonfamily member, pursuant to Ins. § 19-504.1.

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Maryland Insurance Code §19-504.1 provides that:

    (b) An insurer shall offer to the first named insured under a policy or binder of private passenger motor vehicle liability insurance liability coverage for claims made by a family member in the same amount as the liability coverage for claims made by a nonfamily member under the policy or binder.

Plaintiff’s argument was that the umbrella policy that Plaintiff and her husband had with State Farm included private passenger motor vehicle liability and uninsured motorist coverage. Accordingly, the reasoning follows, the umbrella should fall under § 19-504.1. Plaintiff also argued that, in Popham v. State Farm, a trial judge in Montgomery County ruled that a “personal liability umbrella policy or excess policy . . . is a motor vehicle liability policy as contemplated by Maryland law that requires insurance companies to offer uninsured motorist coverage at the same levels as liability coverage.” Maryland Court of Appeals decided Popham on a different issue, but I think the logic is that if the Maryland high court had disagreed – a court that is clearly not afraid to fire out a little dicta – it likely would have said that in its opinion.

But, alas, both the trial judge, Montgomery County Judge Terrance McGann, and the Maryland Court of Special Appeals disagreed. In an opinion by Judge James R. Eyler, the court agreed that the question of what constitutes “private passenger motor vehicle liability insurance” and whether that phrase refers only to primary insurance policies, or whether it extends to umbrella policies, is an issue of first impression in Maryland. But after a walk through the three big household exclusion cases in Maryland – Jennings v. GEICO, State Farm v. State Farm, and Stearman v. State Farm – and § 19-504.1, the court concluded that it is just too great of a leap to assume that the Maryland General Assembly’s expansion of the right to obtain insurance above the mandatory minimum without a household exclusion as encompassing all insurance policies that have elements of “private passenger motor vehicle liability insurance.” It will be interesting to see if the Court of Appeals will take certiorari on this case. If I were betting, I would bet against it.

Of the five opinions discussed in this blog, four of them involve State Farm.

The take home message is pretty clear to me: if you are a State Farm insured, don’t expect them to err in your favor in deciding whether coverage applies. In State Farm’s world, the ties go to the insurance company. [Fill in your own "not really in good hands with State Farm" joke here. I'll try one for Ravens' fans: you are in Lee Evans' hands with Allstate.]
You can find the court’s full opinion in Stickley v. State Farm here.

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  • Brian

    Switched to Erie years ago. Never looked back.

  • Avenger

    I’ve never been insured with State Farm but I would expect any insurer to defend its policy provisions, and to apply them consistantly. Insurance premiums are predicated upon the predictablity of losses, and when courts arbitrarily find coverage where none ever was intended, the predictability of losses is destroyed.