Florida Supreme Court Holds Family Vehicle Exclusion Not in Conflict with PIP Law, Non-Stacking Uninsured Motorist Election by Named Insured Applies to All Insureds
Oct 29, 2014
By Matthew C. Scarfone, Esq.
In an opinion released on October 23, 2014, the Florida Supreme Court upheld a family vehicle exclusion in an automobile insurance policy issued by Travelers Commercial Insurance Co. (“Travelers”), and held that a “non-stacking” uninsured motorist (“UM”) coverage election signed by the named insured applied to all insureds under the policy.
Crystal Harrington was injured in a single car accident while riding as a passenger in a car owned by her father, but driven-with permission-by a non-family member, Joey Williams. The car was insured by Travelers and Harrington’s mother was the named insured and purchaser of the policy, which provided $100,000 in liability coverage per person and $300,000 per accident. The Travelers policy also provided “non-stacked” UM coverage with the same limits. Williams had his own policy with Nationwide, but was also covered under the Travelers policy because it defined an “insured” to include any person “lawfully occupying the vehicle”. Therefore, under the Travelers policy, Harrington was a Class I insured, and Williams was a Class II insured.
After the accident, Nationwide and Travelers both paid Harrington the limits of their liability benefits, but these benefits did not fully cover Harrington’s damages. Harrington sought UM benefits from Travelers, but was denied based upon an application of the family vehicle exclusion, which states that an “uninsured vehicle” does not include any vehicle:
Owned by or furnished or available for the regular use of you or a “family member” unless it is a “your covered auto” to which Coverage A of the policy applies and bodily injury liability coverage is excluded for any person other than you or any “family member” for damages sustained in the accident by you or any “family member[.]”
Because the vehicle at issue was owned by the named insured’s spouse, and the policy did not exclude bodily injury coverage for any person other than the named insured or a family member, this exclusion was applied and the claim was denied.
Harrington filed suit, and the trial court granted summary judgment for Harrington, holding that the family vehicle exclusion conflicted with sections 627.727(3), Fla. Stat. (2009), and that the “non-stacking” UM election executed by Harrington’s mother-the named insured-did not apply to Harrington because she did not personally sign it. The First DCA affirmed these rulings, and certified two questions of great public importance to the Florida Supreme Court: (1) whether the family vehicle exclusion conflicts with section 627.727(3), Fla. Stat., and (2) whether UM benefits are “stackable” when the named insured expressly elected “non-stacking” UM coverage, but the insured claiming UM benefits did not expressly make an election. The Florida Supreme Court answered both in the negative.
Under Florida law, UM benefits extend to “underinsured” as well as “uninsured” motorists. Harrington claimed that, because the bodily injury liability benefits did not fully cover her damages, she had a statutory right to UM benefits. Harrington argued that applying Travelers’ “family vehicle exclusion” to deny her claim for UM benefits conflicted with the law that extended UM benefits to underinsured motorists.
The Florida Supreme Court relied on the fact that, although section 627.727(3)(b), Fla. Stat. (2009) does extend UM coverage to underinsured motorists, the statute also expressly states that the term “uninsured motor vehicle” is “subject to the terms and conditions of such coverage.” The court explained that terms and conditions of the family vehicle exclusion clearly and unambiguously excluded the vehicle in question from UM coverage, and that the Florida Supreme Court has historically upheld similar policy definitions. Finally, the court noted that any other holding would “require treating a vehicle as both insured and uninsured under the same policy in contravention of a long line of well-established precedent.”1
Harrington also argued that, because she did not personally elect “non-stacking” UM coverage, she was entitled to “stacked” UM benefits, even though her mother-the named insured-elected “non-stacking” UM coverage. Section 627.727(1), Fla. Stat. requires insurers to issue UM coverage with limits equal to the limits for liability coverage unless the insured to signs a “rejection of coverage or election of lower limits on behalf of all insureds.” Section 627.727(9), Fla. Stat. requires that an election of “non-stacking” coverage must be signed by a named insured, but does not include the same language stating that the election is made on behalf of all insureds. The trial court relied on the different language used these subsections to hold that a waiver of “stacking” coverage must be signed by the insured who claims benefits.
The Florida Supreme Court disagreed, and found that the First DCA improperly resorted to statutory construction when the unambiguous terms of the election form itself stated that the insured selected “non-stacking” coverage on behalf of all insureds under the policy. The court also noted that the First DCA’s holding would create inconsistencies in coverage, put additional insureds in a better position than the named insured, and prevent the insurer from receiving the benefit of the reduced risk it bargained for. The court held that a waiver executed by a named insured electing “non-stacking” UM coverage is binding on all insureds under the policy.
This opinion protects insurance carriers from un-bargained-for risks, and upholds their freedom to contract within the confines of the law. Carriers may rest assured that similar family vehicle exclusions are valid and enforceable, and that a named insured’s waiver of “stacked” UM coverage is binding on all insureds. However, insurers should take care to include language in any waiver of “stacked” UM coverage stating that the waiver is binding on all insureds.
1 The Court also held that the exclusion did not conflict with subsection (3)(c), which provides UM coverage when a non-family member’s operation of an insured vehicle causes injury to an insured, and the policy excludes liability coverage for the non-family member. The Travelers policy at issue did not exclude coverage for non-family members, and thus, did not conflict with 627.727(3)(c), Fla. Stat. (2009).
To unsubscribe from this newsletter, please send an e-mail to Brooke Ellis at bellis@cftlaw.com.