STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Respondent, v. KENNETH WAYNE AMMAR et al., Defendants and Appellants, 126 Cal. App. 3d 837

Opinion COLOGNE, Acting P. J. Kenneth and Doreen Ammar, minor children of Patricia Ammar, were injured because of the negligent driving of their mother while riding in her automobile. Each sued the mother who forwarded the claims to State Farm Mutual Automobile Insurance Company (State Farm) under its automobile liability insurance policy covering the automobile involved, in which she was the named insured. By its terms, State Farm had contracted to pay all sums for which she became legally liable for bodily injuries to others, except as otherwise excluded.

A clause in the policy excludes liability coverage for claims brought by (1) the named insured, (2) any other insured, and (3) any member of the family of the named insured or other insured residing in the same household with the named insured or other insured.

The policy defines “insured” ás including, in pertinent part: (1) the named insured, (2) the spouse of the named insured, and “(3) any relatives of the [named insured], or of his or her spouse.” “Relative” is further defined as “a person related to the named insured or spouse by blood, marriage or adoption who is a resident of the same household.” State Farm filed a declaratory relief action against its named insured seeking a determination its policy affords no coverage for her children’s claims because each is an “insured,” i.e., a relative living in the same household.

State Farm concedes the general family exclusion (exclusion (H)(3) on p. 4 of the policy) is invalid under Farmers Ins. Exchange v. Teachers Ins. Co. (1980) 101 Cal.App.3d 804 [161 Cal.Rptr. 738], and Phelps v. Allstate Ins. Co. (1980) 106 Cal.App.3d 752 [165 Cal.Rptr. 263]. It contends, however, the minors are excluded under the general provision eliminating liability coverage for claims brought by “any other insured,” and under the policy any relatives living in the same household of the named insured are “insureds.” The children, of course, live in the same household.

The trial court found: The policy language denying coverage for bodily injury to an insured is plain, conspicuous and clear; the exclusion is permitted by Insurance Code

section 11580.1, subdivision (c), it being constitutional and not against public policy; and State Farm has no duty to defend or pay the claims of these children. After years of judicial straining to reconcile the oftentimes competing interests of automobile liability insurers, their insureds and the state’s interest by way of a general public policy making owners of motor vehicles financially responsible to those injured by them in the operation of such vehicles (see Wildman v. Government Employees’ Ins.

Co. (1957) 48 Cal.2d 31, 39 [307 P.2d 359]), the Legislature announced the public policy “in regard to provisions authorized or required to be included in policies affording automobile liability insurance. ...” (§ 11580.05; Farmers Ins. Exchange v. Cocking (1981) 29 Cal.3d 383, 388 [173 Cal.Rptr. 846, 628 P.2d 1]; Meritplan Ins. Co. v. Woollum (1975) 52 Cal.App.3d 167, 174-176 [123 Cal.Rptr. 613].) Concurrently with the adoption of

section 11580.05, the Legislature also enacted

section 11580.1, carefully delineating the minimum required coverages of, and the extent of permitted exclusions to coverage in, policies of automobile liability insurance issued in this state. Of particular interest is the language of

section 11580.1, subdivision (c)(5), which reads: “(

c) In addition to any exclusion as provided in paragraph (3) of subdivision (b), the insurance afforded by any such policy of automobile liability insurance to which subdivision (

a) applies may, by appropriate policy provision, be made inapplicable to any or all of the following: “

(5) Liability for bodily injury to an insured.” This clear and unambiguous language authorizes the carriers of automobile liability insurance to provide for exclusion of claims of liability coverage for bodily injury brought by an insured. Several recent cases have defined the extent to which the new enactments expressly control the ability of an insurer to exclude automobile liability coverage regarding claims made against a named insured. In Farmers Ins. Exchange v. Teachers Ins. Co., supra, 101 Cal.App.3d 804, an attempt to contract with an insured to avoid coverage of claims from a class of persons as to which no express exclusion was authorized by

section 11580.1, was declared void as against the legislatively declared public policy (see also Phelps v. Allstate Ins. Co., supra, 106 Cal.App.3d 752). Conversely, in Farmers Ins. Exchange v. Cocking, supra, 29 Cal.3d 383, denial of a claim specifically falling within the express exclusion of

section 11580.1, subdivision (c)(5), was deemed insulated from attack on general public policy grounds because of the Legislature’s declaration, and the statute permitting exclusion was upheld as constitutional in the face of an equal protection challenge. The children in the case at bar make the same challenges as in Cocking. We hold Cocking mandates a similar result here because the policy gives these children protection as insureds. In Farmers Ins. Exchange v.

Cocking, supra, 29 Cal.3d 383, the court was presented with the situation where the wife was injured while riding as a passenger in a car driven by her husband and sought to recover under the indemnity afforded in his policy. Farmers, having issued a policy with language similar to that found in the instant case, sought declaratory relief. “Farmers relied upon the following exclusion in its policy: ‘[T]his policy does not apply under

Part I (liability insurance) ... to the liability of any insured for bodily injury to (

a) the named insured, or (

b) a relative of the named insured who is a resident of the same household.’” Another relevant provision of the policy provided that: “If the insured named in Item 1 of the Declarations is an individual, the term ‘named insured’ includes his spouse if a resident of the same household.” At the time of the accident, the claimant was the named insured’s wife living with him in the same household. Accordingly, all parties agreed the exclusion, if valid, would bar bodily injury coverage for her injuries. The court provided an extensive review of the law applicable before enactment of

section 11580.1, and the effect of the legislative response, concluding: “‘[T]he concept of a household exclusion is a common one which has long enjoyed judicial support. Its purpose is to prevent suspect inter-family legal actions which may not be truly adversary and over which the insurer has little or no control.

Such an exclusion is a natural target for the insurer’s protection from collusive assertions of liability. [¶] ... [T]he freedom of the parties to exclude risks from an insurance contract is well established: [Citations.]’ “. .. the Legislature has merely excluded one class from mandatory liability coverage, consistent with a preexisting judicial rule, founded upon freedom of contract and the insurer’s legitimate interest in minimizing future losses attributable to fraud or collusion. These considerations fully satisfy the rational basis test.

The Legislature reasonably. may have concluded that the benefits to the public from automatically including ‘family member’ coverage in all automobile liability policies were outweighed by the probable adverse consequences of such a rule. It is not unreasonable to suppose that substantial increases in premiums would be forthcoming if such coverage were declared mandatory. It may well have been a legislative concern that an increase in the costs of liability insurance might result in an appreciable increase in the number of uninsured drivers to the ultimate detriment of the general public.

In addition, family members are frequently protected by the medical coverage provisions of the insured’s policy, or by other medical or casualty insurance, thereby diluting the necessity for liability coverage. The Legislature may have deemed it unwise to require an insured to purchase expensive liability insurance in order to protect himself or another insured from potential injuries.” (Farmers Ins. Exchange v. Cocking, supra, 29 Cal.3d 383, at pp. 389, 390.) The California Supreme Court held the public policy established by the Legislature in

section 11580.1 authorizing the exclusion of insureds has a rational basis and must be sustained as against the equal protection constitutional attack (Farmers Ins. Exchange v. Cocking, supra, at pu 389). It made no suggestions the exclusion should apply to spouses only and spoke of the family or household members as a group in the context of the permitted exclusion. Certainly the children here properly come within that group. No valid distinction can be drawn from the fact the insureds here are minor children not of driving age.

One may hypothetically conjure family members such as a day-old child with respect to whom the potential for negligence does not justify his being an “insured.” Nevertheless, as the child grows, the potential for liability and the responsible parents’ desire for coverage increases. As the child matures and finds himself able to manipulate the controls, the risk of liability is decidedly present. When the child reaches that stage of maturity where he thinks he can handle the car, even though he has no license and is admonished not to attempt to drive, the risk is reál.

We believe it would be a mistake to attempt to analyze on a case by case approach the validity of the inclusion of a minor child living in the household of his parents who has been named an insured on their policy. The amount of risk should not be determinative, but as suggested in Farmers Ins. Exchange v. Cock ing, supra, when it spoke of likely legislative concern for the general public to avoid an increase in the number of uninsured drivers, the family relationship justifies inclusion of the family members as insureds.

That the Legislature contemplated family members who are minors as insureds under automobile liability policies is made quite clear by references in

section 11580.1 (in contexts not directly pertinent here) to the all age-encompassing phrases, “a relative of the named insured who is a resident of the named insured’s household” (subd. (b)(4), re permissive users covered for loading) and “resident of the same household as the named insured” (subd. (d)(1) 1, re duty of insurer to defend in certain contexts). Where the inclusion as an insured is proper, the legislative authority gives the carrier the right to exclude coverage for claims against the named insured. Farmers Ins. Exchange v.

Cocking, supra, 29 Cal. 3d 383, dictates an automobile liability policy may properly exclude coverage to an insured who is, under the policy provision here, a person related to the named insured or spouse by blood, marriage or adoption and is a resident of the same household. Judgment affirmed. Wiener, J., concurred. A11 references are to the Insurance Code unless otherwise specified. Certain stipulated facts were introduced at the time of the declaratory relief trial. In addition, the automobile liability policy from which the dispute arises was entered into evidence.

The policy covers only a four-month period, from May 5, 1977, to September 10, 1977, and the accident occurred within that span. At the time of the accident, the children were approximately 8 and 14 years of age, respectively.

Section 11580.05, in pertinent part, reads as follows: “The Legislature declares that the public policy of this state in regard to provisions authorized or required to be included in policies affording automobile liability insurance or motor vehicle liability insurance issued or delivered in this state shall be as stated in this article, that this

article expresses the total public policy of this state respecting the content of such policies We do not believe the classification is overbroad since the related person must live in the same household. This would make him a member of the family and within the ambit of the discussion in Cocking. Certainly there is no comparison to a group the size of all the residents of San Diego County as suggested by the dissent. It is highly unlikely, however, the carrier would want to cover as “insureds” a group that size in order to prevent suits against the named insured.