“Furnished” and “owned” have two distinct connotations and that the State Farm exclusion did not preclude UIM coverage for decedent under the parents’ policy: WILLIAMS V. STATE FARM MUTUAL AUTOMOBILE ASSOCIATION (SC 6/19/2008)

WILLIAMS V. STATE FARM MUTUAL AUTOMOBILE ASSOCIATION
INSURANCE: UIM –  "furnished" and "owned" have two distinct connotations and that the State Farm exclusion did not preclude UIM coverage for decedent under the parents’ policy
2006-SC-000856-DG.pdf
PUBLISHED: REVERSING AND REMANDING
OPINION BY SCHRODER
FROM MENIFEE COUNTY
DATE RENDERED: 6/19/2008

Williams appeals COA’s opinion affirming TC’s entry of summary judgment in favor of State Farm on Williams’ claim for UIM benefits stemming from a one-vehicle accident in which Williams’ son, Paul, was killed while riding as a passenger. Williams first presented a claim to State Farm under the policy insuring the vehicle involved in the accident (which happened to be owned by Williams’ other son, Aaron, who was also killed), which was promptly paid. Williams then presented an UIM claim to State Farm under the policy insuring Williams and his wife’s vehicle in which Paul was included as a household driver, but State Farm denied this claim based on the exclusion which provided that UIM coverage was not afforded where the injury occurred in a vehicle "furnished for the regular use of you, your spouse or any relative." At the TC level, State Farm successfully argued that the vehicle involved in the accident was owned by a relative (Aaron) that lived in the same household as the policyholders (parents), with the TC granting summary judgment by finding that the vehicle owned by Aaron was furnished for his use. On appeal, the COA affirmed the TC in a 2-1 decision and rejected Williams’ argument that since the vehicle was owned by Aaron, it could not have been "furnished" by the parents to Aaron. The COA found no ambiguity in the exclusionary language by the mere omission of the phrase "owned by" in the clause. Williams again appealed.

The Supreme Court granted discretionary review to consider whether a vehicle "furnished" to a relative includes a vehicle "owned" by the relative rather than the policyholder in the context of this UIM exclusion. The SC felt that the main case relied upon by State Farm (and the lower courts) to support its position, Murphy v. Ky. Farm Bureau (2003), was easily distinguishable in that the exclusion contained in the KFB policy at issue therein expressly excluded vehicles "owned by or furnished or available" for the regular use of family members. The SC found this language to be much broader in scope than the similar language contained in State Farm’s policy. As Kentucky law dictates that terms in insurance contracts be given their plain, ordinary meaning according to the usage of the average person, the SC concluded that "furnished" and "owned" have two distinct connotations and that the State Farm exclusion did not preclude UIM coverage for Paul’s estate under the parents’ policy.

BY Chad Kessinger