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Farmers Insurance Exchange v. Dotson3/18/1996
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 Adcock 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. Adcock 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. ยง 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. 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. Meyer's treatment of the named insured exclusion in Adcock is less clear,
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