Falness

FACTS AND PROCEDURAL HISTORY

John and Anna Hugg were both named insureds in a policy of automobile liability insurance issued by State Farm Automobile Insurance Company (State Farm). Both were killed in a collision with another vehicle which was uninsured. It is undisputed that both John Hugg, who was driving the Huggs’ vehicle at the time, and the other driver were negligent.

State Farm paid the estate of Anna Hugg the $100,000 policy limit for uninsured motorist coverage, but refused to pay anything under the liability coverage, contending that there was no coverage for Anna Hugg’s claims, as she was a named insured. The policy issued by State Farm contained a number of exclusions, including the so-called *967 named insured exclusion, which provided that “There is no coverage ... for any bodily injury to: ... you.” “You” was defined in the policy as “the named insured or named insureds shown on the declarations page.”

State Farm filed an action in federal district court to resolve the coverage issue. The district court granted summary judgment for Mrs. Hugg’s estate, holding that the named insured exclusion was unenforceable as a matter of Arizona law. State Farm appealed to…