Mar 16

Family Member Exclusions on Auto Insurance in Montana

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Let’s say you and your family members are in a single vehicle accident, and your spouse and/or child have been injured. You then call the insurance company, who tells you that there is no coverage for the accident. Don’t take the insurance company adjuster’s answer as the final answer because each state may handle “family member exclusions” differently. Contact a Montana lawyer for assistance.

Family member exclusions are invalid as applied to auto policies obtained under the Mandatory Liability Insurance Act, which requires Montanans to carry coverage “against loss . . . suffered by any person . . . .” Mont. Code Ann. § 61-6-301(a) (2011). The statute contains no exception for unnamed family members residing under the same roof. In Transamerica Ins. Co. v. Royle, the Montana Supreme Court held “a family exclusion clause is void and unenforceable.” 656 P.2d 820, 824 (1983). The Court reasoned that the legislature had “expressly outlawed the ‘household exclusion’” by the language of the statute. Id. at 823.

The family member exclusion is void against Montana’s “strong public policy that insurance is intended to serve a fundamental protective purpose . . . .” Wellcome v. Home Ins. Co., 849 P.2d, 190, 193 (1993). The Montana Supreme Court has invalidated the auto insurance family member exclusion “due to its failure to honor the reasonable expectations of the purchaser of the policy.” Royle, 656 P.2d at 824; see also Shook v. St. Farm, 872 F.Supp. 768, 773 (1994); Bennett v. St. Farm Mut. Auto Ins. Co., 862 P.2d 1146, 1149 (1993); Wellcome, 849 P.2d at 193.

Notably, in Royle, the Court enforced the insured’s reasonable expectation that he would be indemnified for injuries he caused his child “even though painstaking study of the policy provisions would have negated those expectations.” 656 P.2d at 824. Montana’s consumer approach to the interpretation of auto insurance contracts prohibits providers from promising to insure against liability for bodily injury sustained by anyone, but then excluding relatives from the benefits of such coverage.

In sum, family member exclusions are unenforceable in Montana because it undermines the language and purpose of the Mandatory Liability Insurance Act. It is also void against public policy because it fails to honor a consumer’s reasonable expectations as purchaser of the policy. However, you should contact a Montana lawyer well versed in dealing with these issues to ensure you’re rights are being protected.

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