Opinion ID: 2395601
Heading Depth: 1
Heading Rank: 4

Heading: State Farm v. Wagamon Household Exclusion Void

Text: This Court first considered the household exclusion in State Farm Mutual Automobile Insurance Company v. Wagamon, Del.Supr., 541 A.2d 557 (1988). In Wagamon, this Court considered an absolute household exclusion in an automobile policy issued by State Farm. [1] We held that the absolute household exclusion violated the public policy of this State and was void. In reaching that decision, this Court concluded that the Delaware Financial Responsibility Laws and the statute mandating insurance on Delaware registered vehicles must be read together. State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d at 560. This Court then determined that: The plain meaning of these two sections is clear and unambiguous: motor vehicles registered in Delaware must be insured against legal liability up to the stated limits for the benefit of the named insured and any person operating the vehicle with the permission of the insured. The nature of the coverage required by § 2118(a)(1) relates to, indemnity from legal liability for bodily injury, death or property damage, while § 2902 simply requires insurance against loss from the liability imposed by law for damages.... Significantly, however, neither statute restricts liability coverage to certain claims based upon the relationship of the plaintiff to the defendant. Rather, both provisions are drafted in broad language which provides for liability coverage for all claims up to the stated limits, regardless of the identity of the plaintiff. Id. Thus, this Court held that the absolute household exclusion clause in the State Farm policy was void: Reading both statutes in pari materia can only lead to the conclusion that § 2118 was meant to protect persons injured in an automobile accident, regardless of their affiliation with the insured. Any attempt to restrict this class of protected persons is invalid. Id. (citations omitted). In Wagamon, the insurer, State Farm, argued alternatively that if its household exclusion clause was invalid, it should only be invalid to the extent of $15,000 per person of liability coverage, so that a household claimant would be able to recover up to the minimum amount of liability insurance mandated by 21 Del.C. § 2902. State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d at 561. This Court rejected State Farm's alternative argument for two reasons. First, the household exclusion clause violated the public policy of Delaware. Id. Second, the household exclusion clause in State Farm's policy was separable and could be stricken independently of the remaining contract provisions. Id.