Court Opinion

ID: 9549952
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:26:52.26933+00
Date Added: 2024-06-11T15:21:05.289364
License: Public Domain

Chief Justice VOLLACK
dissenting:
The majority, relying on our opinion in Meyer v. State Farm Mutual Automobile Insurance Co., 689 P.2d 585 (Colo.1984), holds that it is contrary to public policy to apply a named insured exclusion clause in an insurance policy to preclude a named insured from recovering under the liability provisions of the policy from another named insured on the same policy. Because Meyer did not address the fact scenario presently before us, and thus does not apply to the instant ease, I dissent. I would hold that the named insured exclusion, when applied to exclude co-insureds from collecting against each other, is not contrary to public policy.
I.
Farmers Insurance Exchange (Farmers) issued an insurance policy (the policy) to Rhonda Dotson and Robert Pearson with an effective date of May 15,1991, and an expiration date of June 9, 1991. Both Dotson and Pearson are listed as “named insureds” in the policy. The insured vehicle was owned by and registered to Dotson.
On June 8, 1991, Pearson was driving the vehicle and Dotson was riding as a passenger when the vehicle collided with a guard rail, killing both Dotson and Pearson. The respondent, Dotson’s husband, brought an action against Pearson’s estate to recover for the wrongful death of Dotson. The trial court entered summary judgment against Pearson in the amount of $300,000.
The respondent then filed a writ of garnishment against Farmers to collect his judgment from Pearson’s estate pursuant to the Farmers policy. Farmers filed an answer denying liability under the policy. Farmers then filed a motion for summary judgment denying coverage under the policy, claiming that because the terms of the policy excluded “liability for bodily injury to an insured person,” Farmers could not be required to pay out benefits to Dotson as the result of Pearson’s negligence.
*35The trial court granted summary judgment in favor of Farmers, holding that because the respondent’s wife was a “named insured” under the policy, and because the policy excludes coverage for named insureds, there were no material facts remaining to be decided. The court of appeals reversed the trial court’s order, holding that the “named insured” exclusion was invalidated by this court’s holding in Meyer.
II.
The majority holds that our decision in Meyer stands for the proposition that public policy precludes a named insured exclusion clause in an insurance policy from applying to preclude a named insured from recovering under the liability provisions of the policy from another named insured on the same policy. The majority misconstrues our holding in Meyer, and thus improperly broadens the scope of that opinion. Before discussing Meyer, however, a brief exposition on the “named insured” exclusion and another related insurance policy exclusion is necessary in order to engage in a principled analysis of Meyer and other cases addressing these exclusions.
Commentators and the case law have identified two related, but analytically distinct, exclusions that are commonly found in insurance policies. These are the “named insured exclusion” (or “insured exclusion”) and the “household exclusion.”1
The “named insured” or “insured” exclusion precludes an individual who is designated as an insured in the policy from recovering for his own injuries. John A. Appleman & Jean Appleman, Insurance Law and Practice § 4409, at 315 (1979). Courts have upheld such exclusions on the grounds that liability 'coverage is concerned with the protection of the rights and claims of third persons when the named insured became liable to such third persons, and it is thus not contrary to public policy for a liability policy to exclude coverage for bodily injury to a named insured. See, e.g., Weisberg v. Detroit Auto. Inter-Ins. Exch., 36 Mich.App. 513, 194 N.W.2d 193 (1971).
The named insured exclusion has been applied in at least two different types of situations. The more common of these is when a named insured is injured while riding as a passenger in the insured vehicle. In this situation, the insurance policy is in effect because the driver is operating the vehicle with the permission of the insured and is thus covered by the omnibus provision of the policy.2 The named insured exclusion then operates to preclude recovery by the named insured from the permissive driver. In such a situation, therefore, the party upon whom the liability would be imposed — the permissive driver — is not a named insured under the policy.
The second situation, which is the one before us in the instant case, occurs when two individuals are eo-insureds under a single policy. In such a case, the named insured exclusion precludes either co-insured from recovering against the other. Thus, if an accident occurs when one eo-insured is driving, and the other is .a passenger, the passenger co-insured may not recover from the driver co-insured. In such a situation, the party upon whom the liability would be imposed — the co-insured driver — is a named insured under the policy.
The other related exclusion clause commonly found in insurance policies is the “household exclusion” clause. The standard household exclusion clause states: “This policy does not apply under coverage A, to any obligation ... for bodily injury to the insured or any member of the family of the insured residing in the same household as the insured.” Irvin E. Schemer, Automobile Liability Insurance, § 24.06[1], at 24-11 (3d ed. *361995). The commonly stated purpose for the household exclusion is that the exclusion “protects the insurer from fraudulent or collusive lawsuits between members of the same family.” Meyer, 689 P.2d at 591.
III.
In Meyer, we considered “whether a ‘household exclusion clause’ in an automobile liability insurance policy is invalid because it violates the Colorado Automobile Reparations Act [ (the “Act”) ], ... and is therefore contrary to public policy as reflected in the Act.” Id. at 587. Meyer addressed three consolidated cases, each involving different combinations and applications of the above described exclusion clauses.
In the first case (Meyer), Kenneth Meyer was driving a vehicle in which his mother was the passenger when the vehicle was involved in an accident, injuring Meyer’s mother. Meyer and his mother lived in the same household. Meyer’s mother then sued Meyer to recover damages for her personal injuries. Meyer’s insurance carrier, State Farm Mutual Insurance Company (State Farm), filed suit seeking a declaratory judgment that Meyer’s mother was not entitled to recover additional damages under Meyer’s liability policy, based on a clause in Meyer’s insurance policy that stated that bodily injury coverage did not apply to “any insured or any member of the family of an insured residing in the same household as the insured.” Id. The trial court entered summary judgment, holding that the above clause precluded the claim against Meyer, and the court of appeals affirmed.
In the second case (Aguirre), Clara Aguirre was a passenger in a ear driven by her husband, Porfirio Aguirre, when they were involved in a one-car collision in which Clara suffered bodily injuries. Clara sued Porfirio to recover damages. The vehicle was insured by Farmers Insurance Exchange (Farmers) under a policy listing both Clara and Porfirio as named insureds. The policy contained a clause excluding coverage for “liability of any insured for bodily injury to (a) any member of the same household of such insured except a servant, or (b) the named insured.” Id. at 588. Pursuant to Farmers’ complaint for declaratory judgment, the trial court held that the exclusion clause was valid and that Farmers was thus not obligated to provide a defense for Porfirio or pay any judgment rendered against him.
In the third case (Adcock), Marianne Ad-cock was a passenger in a vehicle owned by her and driven by John DeCrescentis with Adcock’s permission. The vehicle was involved in an accident and Adcock filed a negligence action against DeCrescentis. Ad-cock was insured by State Farm Mutual Automobile Insurance Company (State Farm) under a policy that provided that the liability insurance contained therein did not apply to “any insured or any member of the family of an insured residing in the same household as the insured.” Id. The policy also contained an omnibus clause stating that the term “insured” included anyone using the vehicle with the permission of the named insured. Adcock and DeCrescentis filed a complaint for declaratory judgment, contending that State Farm was obligated to provide a defense for DeCrescentis or pay any judgment rendered against him, and the trial court dismissed the complaint.
We considered these cases together, and stated:
We hold that the household exclusion is invalid because it is contrary to the provisions of the [Colorado Automobile Reparations Act] and thereby violates public policy as expressed in the Act.
Id. at 588 (emphasis added). We based this holding upon what we perceived to be the public policy underlying the Act as expressed in the Act’s legislative declaration which states:
Legislative declaration. The general assembly declares that its purpose in enacting this part 7 is to avoid inadequate compensation to victims of automobile accidents; to require registrants of motor vehicles in this state to procure insurance covering legal liability arising out of ownership or use of such vehicles and also providing benefits to persons occupying such vehicles and to persons injured in accidents involving such vehicles.
*37§ 10-4 — 702, 4A C.R.S. (1994). We then examined the Act in more detail and ascertained that liability insurance is mandatory under the Act. We further determined that the household exclusion was not sanctioned by any of the provisions pertaining to permissible exclusions in the Act.
We then discussed the commonly asserted rationale for the household exclusion: that it protects the insurer from fraudulent or collusive lawsuits between members of the same family.3 After examining relevant case law, we dismissed this rationale, stating that “we agree with those courts that have noted that such a possibility does not justify the barring of non-collusive claims.” Meyer, 689 P.2d at 591.
Finally, we held that
the household exclusion is invalid. The exclusion is neither authorized by statute nor in harmony with the legislative purpose mandating liability insurance to provide coverage for bodily injury and property damage to avoid inadequate compensation to victims of automobile accidents.
Id. at 592 (emphasis added).
The three factual scenarios in Meyer are illustrative of the various ways in which the named insured exception and the household exclusion can be combined and applied. A comparative analysis of Meyer, however, demonstrates that the factual scenario in the instant case was never addressed in Meyer. Meyer is thus inapposite to the case at bar.
Meyer clearly invalidated household exclusions in the Meyer and Aguirre scenarios.4 Meyer ⅛ treatment of the named insured exclusion in Adcock is less clear, as the court in Meyer spoke only of invalidating the household exclusion, and no such exclusion was at issue in the Adcock case. Instead, Adcock involved a named insured exclusion being applied so as to prevent a named insured, riding in a vehicle as a passenger, from recovering from a permissive driver whose negligence caused the named insured injury and damages. Adcock is thus factually distinguishable from the instant case.
As I read Meyer ⅛ treatment of the Ad-cock facts, this court, despite the unfortunate misuse of the “household exclusion” language, invalidated the application of the named insured exclusion when used to preclude a named insured, riding as a passenger, from recovering from, a permissive driver whose negligence causes the named insured injury and damages. This differs from the application of the named insured clause in the instant case. Here, the named insured clause is being applied to preclude one named insured, riding as a passenger, from recovering from another named insured whose negligence causes the named insured passenger injury and damages. Meyer did not speak to such a situation, and did not invalidate this application of the named insured clause.5 Meyer therefore does not ap*38ply to the instant case. I would hold that the application of the named insured clause in the case before us is supported by public policy, and I would thus reverse the court of appeals.
IV.
In May 1986, the Colorado General Assembly amended section 10-4-418 with the following language:
The commissioner shall not find that a policy form, certificate, or contract of insurance or rider does not comply with the applicable requirements and standards of this title on the ground that it excludes coverage of claims made by a member of a household against another member of the same household. Such exclusions are in conformity with the public policy of this state.
§ 10-4-418(2)(b), 4A C.R.S. (1994).
The public policy considerations underlying this amendment counsel upholding the exclusion in the instant case. We interpreted the above amendment in Allstate Insurance Company v. Feghali, 814 P.2d 863 (Colo.1991), and held that section 10—4-418(2)(b) legislatively authorized household exclusions in insurance policies and thus evinced a legislative intent that household exclusions are consistent with public policy. Id. at 866.
In FeghaU, we identified three justifications for the legislative approval of the household exclusion. These policy considerations are: (1) The prevention of collusive suits; (2) the prevention of an increase in the cost of liability insurance that might result in an increase in the number of uninsured drivers; and (3) avoiding disruption of the family unit by litigation. Id. at 866. Each of the factors identified in Feghali equally justifies permitting a clause precluding eo-insureds from bringing suits against each other.
The potential for collusion between co-insureds is just as great as that between family or household members. The relationship between those who jointly purchase an insurance policy is just as likely to give rise to collusion as is the relationship between family members and those living in the same household. The potential for collusion derives from the underlying relationship between the parties, not the fact that they happen to live under the same roof or be related by blood or marriage.
Similarly, the concern for containment of insurance costs applies equally in the context of co-insureds. If the exclusion in the instant case is invalidated, insurance premiums will likely rise as a result of this expansion of coverage.
Finally, the interest in avoiding disruption of the family unit by litigation may arise in the context of co-insureds, just as it may within a household. For example, a father could include his son on an insurance policy even though the father and son live in different households. By excluding household members under the policy, but not excluding co-insureds, intra-family litigation might occur that otherwise could be precluded.
The foregoing analysis indicates that it is the relationship between the parties, and not their status as household or family members, that is relevant in determining whether an insurance policy exclusion is invalid as against public policy. The fact that two individuals are both named insureds on the same policy is just as probative of a relationship where public policy sanctions exclusion as the fact that those individuals live in the same house or are related by blood or marriage.
Because Meyer does not apply to the facts of this case, and because considerations of public policy underlying the enactment of section 10-4-418(b)(2) apply equally to insurance policy provisions excluding co-insureds, I respectfully dissent.
I am authorized to say that Justice ERICKSON joins in this dissent.

. We recognized the distinction between these clauses in Mayo v. National Farmers Union, 833 P.2d 54, 56 n. 2 (Colo.1992), where we noted, with regard to a named insured clause that excluded coverage for bodily injury to "any insured person,” that "the named insured exclusion applicable to [the petitioner] is not strictly a household exclusion clause.”

. An omnibus clause provides coverage for those persons using the insured vehicle with the permission of the named insured. Irvin E. Schermer, Automobile Liability Insurance, § 22.02[3], at 22-18 (3d ed. 1995).

. Notably, we did not discuss in Meyer the separate rationale usually offered to support the named insured exclusion, which is that liability coverage is concerned with the protection of the rights and claims of third persons when the named insured becomes liable to such third persons, and it is thus not contrary to public policy for a liability policy to exclude coverage for bodily injury to a named insured. See, e.g., Weisherg v. Detroit Auto. Inter-Ins. Exch., 36 Mich.App. 513, 194 N.W.2d 193 (1971).

. The court of appeals noted that the Aguirre case involved both a household exclusion and a named insured exclusion. Dotson v. Pearson, 903 P.2d 19, 20 (Colo.App.1994). The court of appeals thus concluded that Meyer invalidated both the household exclusion and the named insured exclusion. Id. at 21. This conclusion is unsupported by the procedural posture of the holding in Meyer. In Meyer, we reversed the trial court’s judgment in favor of Fanners on the grounds that the household exclusion was invalid as against public policy. Meyer, 689 P.2d at 592. We then remanded the case to the trial court for further proceedings consistent with the holding in Meyer: that the household exclusion was invalid. At no point did we hold that the named insured exclusion was invalid, and on remand in the Aguirre case, nothing in Meyer would have precluded the trial court from holding that the named insured exclusion in the insurance policy precluded Clara Aguirre from recovering a judgment against Porfirio Aguirre from Farmers.

.While Meyer generally invalidated household exclusion clauses, that case made no such sweeping pronouncements with regard to named insured exclusion clauses. Therefore, it follows that Meyer did not generally invalidate named insured exclusion clauses, but only invalidated named insured exclusion clauses when applied to preclude a named insured from recovering from a permissive driver.