6.15 Coverage Limitations Above Financial Responsibility Act Mini-mums

• Jurisdiction: Arizona

Arizona's Financial Responsibility Act requires a minimum of $15,000.00 per person and $30,000.00 per accident aggregate liability coverage. Beyond the minimum financial responsibility act coverage limits, the parties to the insurance contract are permitted to make their own contractual arrangements. A.R.S. Sec. 28-4009(D) provides:

A policy that grants the coverage required for a motor vehicle liability policy may also grant lawful coverage in excess of or in addition to the coverage specified for a motor vehicle liability policy, and the excess or additional coverage is not subject to this chapter. With respect to a policy that grants the excess or additional coverage, the term "motor vehicle liability policy" applies only to that part of the coverage that is required by this section.^[219]

By enacting A.R.S. Sec. 28-4009(D), the Arizona legislature balanced the competing public policy goals of compensating victims of automobile accidents and permitting freedom of contract. By enacting A.R.S. Sec. 28-4009(D), the legislature intended that not all layers of automobile liability insurance have the same restrictions on exemptions from coverage. The Arizona courts have also struck a balance between these competing policy goals.

In Arceneaux v. State Farm Mutual Automobile Insurance Co.,^[220] the appellant was injured in an automobile accident due to the negligence of her father. At the time of the accident, the appellant was a member of her father's household. Her father had purchased an automobile liability policy through State Farm Mutual Automobile Insurance Company. The State Farm policy contained a "household exclusion" which precluded coverage for any member of the insured's household. The issue before the court in Arceneaux was whether the household exclusion was void, or only invalid to the extent it conflicted with the minimum limits required by Arizona's Financial Responsibility Act. The court held that the policy need not provide more coverage than what the statute required. In doing so, the court found that the household exclusion was invalid only to the extent it conflicted with the minimum coverage requirements of Arizona's Financial Responsibility Act. In reaching this decision, the court balanced two competing public policies: (1) requiring minimum automobile coverage as expressed in Arizona's Financial Responsibility Act; and (2) allowing parties to freely contract in matters not mandated by law or public policy. In matters not mandated by...