Minnesota Supreme Court holds Resident-Relative Exclusions are enforceable

The Minnesota Supreme Court, in Poitra v. Short, 966 N.W.2d 819 (Minn. 2021), recently held “resident-relative” exclusions in insurance policies are not void due to public policy.

In 2014, a two-year-old Bentley Poitra was bitten by a dog at his grandparents’ residence. Bentley’s parents, Justen and Debra (“the Poitras”) filed a claim through the grandparent’s homeowner’s policy through North Star Mutual Insurance (“North Star”). North Star denied the claim, as Bentley resided with his grandparents and was subject to the “resident relative” exclusion on his grandparents’ policy.

The Poitras filed a declaratory judgment action seeking to void the resident-relative exclusion due to public policy. The Poitras argued the abolition of intrafamilial tort immunities rendered resident-relative exclusions unenforceable as impermissible attempts to circumvent the purpose of the immunities. The district court granted North Star’s motion to dismiss for failure to state a claim. The court of appeals affirmed, and the Poitras appealed.

The Minnesota Supreme Court held resident-relative exclusions were enforceable and not void due to public policy. Parties are generally free to contract as they desire so long as coverage required by law is not omitted and the policy provisions do not contravene applicable statutes. Precluding liability and excluding coverage are two different things. The court found that while the Poitras’ argument that denying family members recovery solely because of the relationship to the insured was compelling, North Star also presented a compelling argument that invalidating resident-relative exclusions may increase insurance rates, price out people who need coverage, and encourage collusive claims. The right to sue does not equate to the right to have the claim covered by insurance, the court ruled. Thus, the court held the resident-relative exclusions are not void due to public policy.

“Resident-relative” policy issues come in many forms — “drop-down” limits, additional insureds statuses for certain auto claims, etc., and can be extremely fact-intensive. If you have any coverage questions, please contact Tom Brock, Bob Kuderer, or Matt Johnson from our office.