Court Opinion

ID: 9571709
Source: CourtListenerOpinion
Date Created: 2023-08-21 20:34:27.697344+00
Date Added: 2024-06-11T12:30:50.119741
License: Public Domain

WUEST, Justice
(concurring in part and dissenting in part).
The majority decision is a great victory for the insurance companies, but a sad day for the people of South Dakota. In 1978, the guest statute was repealed by our legislature. The insurance companies responded with the household exclusion. This exclusion negates liability coverage for the insured to the people who are most often his passengers and most likely to be injured — his family.
If the insured is judgment proof, the injured members of the family are left without any recourse for their injuries. If the family exclusion clause is valid, a majority of South Dakotans do not have adequate liability coverage although they are paying for it.
The majority decision holds the family exclusion clause void up to $25,000.00. I agree. Where I disagree with the majority is limiting the void portions to $25,000.00. It should be the policy limits. If the exclusion is void, it is void. If it is dead it is dead. If an apple has a rotten spot, it is still a rotten apple.
The cases from other jurisdictions are split.1 The cases supporting the majority *887opinion reason parties are free to contract for coverage above the minimum required by law. The fallacy of that argument is: Who do you contract with when all the insurance companies have a family exclusion provision in their policies? 2 Mr. South Dakotan has to take it or leave it. The policies become contracts of adhesion which will be addressed later in this opinion.
The majority places a great deal of weight on the provisions of SDCL 32-35-75 to support their theory of limiting coverage to $25,000.00. All that statute means is liability/coverage may be more than $25,-000.00. I would adopt the so-called minority rule for South Dakota as the Cimarron policy household exclusion is void in its entirety and Cimarron should be liable up to the policy limits.
My opinion is bolstered by the trial court’s determination, with which I agree, that the Cimarron policy is a contract of adhesion. SDCL 32-35-113 mandates every driver maintain some form of financial responsibility on his or her motor vehicle. For the majority of people, that means automobile liability insurance. I repeat, the insurance agent who sold Croyle, Sr. his Cimarron policy testified all automobile insurance policies available in South Dakota contain household exclusions identical or substantially similar to the Cimarron policy. This testimony has not been controverted.
The fact that insurance policies without household exclusions are unavailable in this state undercuts any assertion the parties are free to contract for coverage in excess of $25,000.00. See Mutual of Enumclaw Ins. Co. v. Wiscomb, 97 Wash.2d 203, 643 P.2d 441, 445 (1982). To say there is freedom to contract regarding coverage for household members is to ignore reality. The record is clear that South Dakotans are faced with a “take-it-or-leave-it” proposition when it comes to purchasing automobile insurance. Indeed,
the ‘take it or leave it’ nature of obtaining automobile liability coverage, and the effect of the policy’s [household] exclusion on third parties who are or may be ignorant of the insurance arrangements and unable or incompetent to contract for coverage for themselves, illustrates the fragility of any assertion that the terms of this or similar insurance policies truly are the product of conscious bargaining between the parties. The argument might be more credibly made were there evidence that the insureds had been, or traditionally are, offered the choice of including or excluding coverage for family members.
Estep, 103 N.M. at 109-110, 703 P.2d at 886-887.
I would find the Cimarron policy to be a contract of adhesion, and because our legislature has, as a practical matter, mandated automobile liability insurance, I would find the household exclusion violates public policy irrespective of SDCL ch. 32-35. See Rozeboom v. Northwestern Bell Telephone Co., 358 N.W.2d 241 (S.D.1984); Durham v. Ciba-Geigy Corp., 315 N.W.2d 696 (S.D.1982); State Farm Mut. Auto. Ins. Co. v. Mastbaum, 748 P.2d 1042, 1045 (Utah 1987) (Durham, J., dissenting).
A rationale offered in support of household exclusions is the protection of insurers from fraudulent or collusive lawsuits among family members. See, e.g., Farmers Ins. Exch. v. Call, 712 P.2d 231 (Utah *8881985); Wiscomb, 97 Wash.2d 203, 643 P.2d 441; State Farm Mut. Auto. Ins. Co. v. Traycik, 86 Mich.App. 285, 272 N.W.2d 629 (1979). I would find this argument unpersuasive in this instance for the following reasons.
First, collusion and fraud are the exception rather than the rule, and thus, the exclusion far exceeds the evil it was designed to protect against. Wiscomb, 643 P.2d at 444.
[T]he possibility of collusion exists to a certain extent in any case. Every day we depend on juries and trial judges to sift evidence in order to determine the facts and arrive at proper verdicts. Experience has shown that the courts are quite adequate for this task.
In addition, other safeguards exist to protect insurers against unscrupulous collusive households. Insurers conduct thorough investigations, require prompt notice of accidents, and function as specialists in their fields. They are not likely to be easy victims of fraudulent lawsuits. The insured is always represented by the insurance company, who will carefully represent the insurer’s interest as well as the insured. Furthermore, most policies require cooperation from the insured and provide penalties for false statements.
Call, 712 P.2d at 235-36.
Second, this jurisdiction has rejected laws premised, in whole or in part, upon the collusion rationale. The common law doctrine of intraspousal immunity was rejected by statute and judicial decision years ago, see SDCL 25-2-15; Scotvold v. Scotvold, 68 S.D. 53, 298 N.W. 266 (1941), and South Dakota’s Automobile Guest Statute, SDCL 32-34-1, was repealed in 1978, 1978 S.D.Laws ch. 240, § 1. Implicit in the rejection of these laws is recognition by our legislature that the collusion rationale is no longer adequate justification for prohibiting an entire class of persons from redress for personal injuries.
It is clear the Cimarron policy is a contract of adhesion, and under such circumstances, I would hold the household exclusion imposed upon Croyle, Sr. void in its entirety as violative of public policy and reverse the trial court on that issue. See Rozeboom, 358 N.W.2d 241; Durham, 315 N.W.2d 696.
The practical result of the majority decision is to leave many South Dakota drivers exposed to liability if injuries to a family member exceeds damages of $25,000.00. Since the average person or his agent does not read the exclusions, those insureds with policy limits in excess of $25,000.00 are in for a surprise when a family member is injured — no coverage in excess of $25,-000.00.
Anybody who has purchased an automobile liability policy knows cost for coverage in excess of $25,000.00 is minimal. The expense of voiding the family exclusion clause in its entirety would cost very little.
I concur with the majority on the other issues.

. The majority position holds such exclusions void only as to the minimum coverages required by statute. Thus, where the policy limits exceed the statutory minimum, the insurer’s liability is limited to the coverage required by statute. See, e.g., State Farm Mut. v. Nationwide Mut., 307 Md. 631, 516 A.2d 586 (1986); State Farm Mut. Auto. Ins. Co. v. Mastbaum, 748 P.2d 1042 (Utah 1987); Stepho v. Allstate Ins. Co., 259 Ga. 475, 383 S.E.2d 887 (Ga.1989); DeWitt v. Young, 229 *887Kan. 474, 625 P.2d 478 (1981); State Farm Mut. Auto. Ins. Co. v. Shelly, 394 Mich. 448, 231 N.W.2d 641 (1975); Arceneaux v. State Farm Mut. Auto. Ins. Co., 113 Ariz. 216, 550 P.2d 87 (1976); Estate of Neal v. Farmers Ins. Exchange, 93 Nev. 348, 566 P.2d 81 (1977); Allstate Ins. Co. v. Wyoming Ins. Dept., 672 P.2d 810 (Wyo.1983). See generally 7 Am. Jur.2d Automobile Insurance § 30 (1980).
A minority of jurisdictions hold that where the household exclusion is held invalid as viola-tive of public policy, the limits of the insurer’s liability are those provided by the policy, rather than the lesser limits required by statute. See, e.g., State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d 557 (Del.1988); Meyer v. State Farm Mut. Auto. Ins. Co., 689 P.2d 585 (Colo.1984). See also Kish v. Motor Club of Am. Ins. Co., 108 N.J.Super. 405, 261 A.2d 662 (1970).

. The insurance agent who sold Croyle, Sr. his Cimarron policy testified all automobile insurance policies available in South Dakota contain household exclusions identical or substantially similar to the Cimarron policy. •