Fisher v. State Farm

Fisher v. State Farm, 2013 MT 208 (July 30, 2013) (7-0) (Rice, J.)

Issue: Whether the district court properly granted summary judgment to the plaintiffs on the basis that the family member exclusion in the plaintiffs’ umbrella policy was unconscionable.

Short Answer: No. A household exclusion in an umbrella policy does not violate Montana public policy, and the plaintiffs did not meet their burden of proving unconscionability.


Facts: Les and Sharon McCartney (represented by a limited conservator, Kathleen Fisher) were in a car accident in December 2007. Les was driving when he negligently hit a parked vehicle. Sharon, a passenger, sustained serious injuries.

Les has an auto liability policy with bodily injury limits of $250k/$500k, and a personal liability  umbrella policy with a $2 million limit. State Farm paid the per-person bodily injury limit of $250k to Sharon, but denied her claim for additional coverage under the umbrella policy on the basis of a family member exclusion.

Procedural Posture & Holding: Les and Sharon sued for declaratory relief, arguing the exclusion was ambiguous, violated their reasonable expectations, violated Montana public policy, and was unconscionable. The district court granted summary judgment to Les and Sharon on the basis of unconscionability. State Farm appeals, and the Supreme Court reverses for entry of judgment in State Farm’s favor.

Reasoning: The policy excludes coverage for bodily injured to an insured, and defines insured as including the named insured and any relatives whose primary residence is the named insured’s household. Sharon is Les’s spouse and lives with him; thus, she is an insured under the umbrella policy and her bodily injury claims are not covered. The Court holds that the policy is unambiguous, and did not violate Les and Sharon’s reasonable expectations because it unambiguously precludes coverage. While the Court has voided auto policy exclusions as against public policy when they contravene mandatory statutory minimum coverage, the exclusion here applies to optional coverage, and does not violate any statute. The exclusion does not violate the made-whole doctrine or result in illusory coverage. The Court joins the majority of jurisdictions in holding that a household exclusion in an umbrella policy does not violate public policy.

Unconscionability requires a finding of contractual terms that are unreasonably favorable to the drafter, and no meaningful choice on the part of the other party regarding acceptance of those provisions. Terms are unreasonably favorable when they are so one-sided as to be unconscionable. Plaintiffs have not made this showing. Family member exclusions are not arbitrary, as they make it possible to provide broad coverage at an economical cost by excluding those in the family circle who are likely to be riding frequently in the family car.