The Truth about the Family Member Exclusion in New Jersey Automobile Policies

Most motor vehicle insurance policies have some form of the following exclusion:

“This policy does not provide liability coverage for you or any member of your family for bodily injury to you or any member of your family.”

The reasoning behind the so-called “family member exclusion” is that it prevents an at-fault person from benefiting when the injured person is a family member or closely related. The fear is that a person may cause an accident in which his child or spouse is injured, and then share the benefits of insurance coverage for any injuries sustained.

Courts across the country have taken different views of this type of exclusion.

Most states have held the “family member exclusion” to be fully valid and enforceable. These states typically reject the argument that the exclusion nullifies or negates state laws that require coverage for liability and uninsured motorists.

A few states find the family member exclusion invalid, but only to the extent that it conflicts with legally imposed minimum limits on automobile liability insurance. For example, if a state has a minimum requirement of $20,000 for motor vehicle accident liability insurance, a family member may be entitled to up to $20,000, but the family member exclusion will prohibit any additional recovery.

In New Jersey, as in the remaining states, the courts have ruled that the family member exclusion is not valid in any way and cannot be used to limit the rights of family members to collect on a family member owned motor vehicle insurance policy. The court cited mandatory coverage as set forth in the state’s motor vehicle financial responsibility statute.

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