9.6 Household Exclusion


Homeowners insurance is generally designed to protect a homeowner, or a named insured under the policy from liability claims arising from injuries on their property.[68] Under Arizona law, a homeowner's policy's exclusion of personal liability and medical coverage for bodily injury to any insured has been upheld as valid and enforceable and not violative of public policy.[69] As the court stated in Farmers Insurance Exchange v. Cocking:[70]

[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 [.]

In determining whether this exclusion applies, it must first be stated that there is little Arizona law dealing with this issue. However, a review of the Arizona decisions as well as decisions from other jurisdictions provide insight into how this might be resolved.[71]

For example, in State Farm Fire & Casualty Co. v. Powers,[72] three-year old Briana Powers, the daughter of James and Christine Powers, was seriously injured in a spa located at the home of a friend. The minor daughter sued the landowner and her parents for negligence. The court in reviewing a household exclusion held that the household exclusion of personal liability and medical coverage for bodily injury unambiguously excluded coverage for injuries sustained by Briana Powers based on the policy's definition of insured and excluded such coverages for bodily injury to any insured. In arriving at this decision, the court stated that the policy unmistakably excludes from coverage claims for bodily injury sustained by an insured as defined by the policy, and because the minor child resided with the parents in the same household, she plainly fell within such definition, thereby clearly excluding her bodily injuries from coverage under the Policy.

In Groff v. State Farm Fire & Casualty Co.,[73] the court also upheld a household exclusion. In Groff, plaintiffs were the parents of a child who had lost an eye in a bow-and-arrow accident involving another child. The Groff parents sued the other child's parents in state court alleging negligent supervision. Plaintiffs also brought a federal court action alleging that the homeowners insurance policy issued to them by State Farm obligated the insurance company to provide them a defense. The court rejected plaintiffs' argument, stating:

Under the terms of the policy, State Farm is required to provide a defense against claims within, or arguably within, the liability coverages of the policy. But the terms of the standard "household exclusion" contained in the plaintiff's policy unmistakably exclude from coverage claims for bodily injury sustained by an "insured" as defined in the policy; and plaintiffs' minor son is plainly an "insured" within that definition, since he is a "relative" and resides in the same household as the named insureds. Thus, the policy unambiguously excludes coverage, and the defendant is not required to defend the state court...

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