Strategies, Challenges, and Answers

Household Exclusion Conflicts With Nevada’s Compulsory Auto Insurance Law. Nevada Supreme Court Allows Insurer To Enforce Exclusion And Prevent Payments In Excess Of Compulsory Minimum Limits

Household ExclusionAn adjuster recently wrote to the Nevada Law Blogs asking if there would be insurance coverage to pay a mother for the wrongful death of her child who died as a result of the negligence of her husband, the deceased child’s father.  This question focuses on the household exclusion found in many auto policies.

Household exclusions attempt to eliminate coverage when one member of the household sues another for negligence.  At least in the Nevada auto realm, the answer to this question is found in the case of Estate of Neal v. Farmers Ins. Exch., 93 Nev. 348, 566 P.2d 81 (1977).  In the Neal case, the father of the family was at the wheel when the family auto left the road, killing him and injuring his family.

The injured family brought suit against the deceased father’s estate seeking damages for their injuries.  Farmers insured the family car.  The Farmers policy included a household exclusion.  Farmer’s argued that the household exclusion precluded it from having to pay any amount in indemnity.  

The injured family argued that the household exclusion should be totally void as against public policy.  See State Farm Mut. Auto. Ins. v. Hinkel, 87 Nev. 478, 488 P.2d 1151 (1971).  Therefore, they argued, they should be compensated up the full value of coverage on the declaration sheet.

However, the Nevada Supreme Court found a middle ground.  The Court pointed out that the household exclusion would not be invalid, except for the fact that Nevada has a Compulsory Insurance law, now found at NRS 485.185.  That Compulsory Insurance Law requires that all vehicles registered in the state carry a minimum amount of insurance.

Giving a little to both sides, the Court found that the exclusion was still viable, but only in amounts exceeding the minimum security limits of the state.  The decision is a judicially created step-down of the policy limit from the full face value of the policy, down to the limits of Nevada’s Compulsory Insurance Law. 

If you have a question about compulsory insurance coverage and whether exclusions remain valid, please contact Mike Mills at 702-240-6060×114 to discuss your questions with a professional.