Weekly Law Resume: Uninsured Motorist Coverage – Statutory Exclusions vs Policy Language

by Low, Ball & Lynch
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Progressive Choice Insurance Co. v. California State Automobile Association Inter-Insurance Bureau
California Court of Appeal, Second Appellate District (August 12, 2013)

Insurance Code Section 11580.2, the uninsured motorist law, sets out to protect innocent drivers against losses caused by negligent and financially irresponsible motorists. This case concerns the allocation of an Underinsured Motorist (UIM) loss between two automobile insurance companies, and whether section 11580.2(c)(2) operates to exclude coverage as a matter of law when the insurer did not expressly include that statutory exclusion in its policy.

On March 27, 2006, Benjamin White was injured in a traffic collision, while riding as a passenger in a vehicle being operated by Scott A. Tortora. The party who caused the collision was underinsured. Progressive Insurance provided a $100,000 bodily injury policy to Tortora for the vehicle he was driving at the time of the accident. White had his own policy for $50,000 through the California State Automobile Association Inter-Insurance Bureau (CSAA). White received the limits of the at-fault driver’s policy, and then made a claim for underinsured motorist benefits under both Progressive and CSAA policies.

CSAA denied coverage and Progressive paid the entire outstanding sum. Progressive argued that Insurance Code section 11580.2(d) was applicable. This provision was the Legislature’s “anti-stacking clause,” which provided that if more than one uninsured motorist policy was available, the limits would not exceed the higher of the two applicable limits, and the damages would be prorated between them. Progressive then demanded reimbursement from CSAA for their pro-rata share of the payment based on applicable policy limits of the two policies. CSAA denied contribution and argued that the Progressive policy was the sole source of coverage.

On November 9, 2010, Progressive filed an action for contribution from CSAA on a pro-rata share. Both parties filed motions for summary judgment. CSAA relied on Insurance Code Section 11858.2(c)(2), which states that coverage does not apply to bodily injury claims of an insured when they have been occupying or getting into or out of a vehicle not described in their own policy “if the owner thereof has insurance similar to that provided in this section.” CSAA argued that Progressive’s policy was “similar,” so its coverage was excluded. Progressive argued that the coverage was not “similar” because the policy limits were different. The trial court granted Progressive’s motion and entered judgment against CSAA. CSAA appealed.

On appeal, Progressive changed its argument (which the Court and CSAA confirmed it could). It no longer argued that the exclusion was inapplicable because the Progressive policy was not “similar” to the CSAA policy. Rather, it contended that section 11580.2(c)(2) was inapplicable because CSAA failed to include the necessary language to invoke that statutory exclusion in its policy. CSAA contended that the “Other Insurance” provision of its policy expressly incorporated that section by stating that “…any insurance for a vehicle you do not own is excess over any applicable similar insurance.”

The Court of Appeal disagreed. The language of the “other insurance” provision merely provided that if there was a “similar” policy, CSAA’s policy would be excess to the other policy. However, the language of the statutory exclusion in 11580.2(c)(2) provided that there would be no coverage at all. CSAA did not include that language in its policy, although virtually all of the other exclusions in section 11580.2(c) were written into the policy. Further, the Court noted that past versions of the CSAA policy had in fact expressly included the language excluding coverage as stated in 11580.2(c)(2). Thus, if it had wished, CSAA could have (and previously did) include the exclusionary language.

The Court also noted that CSAA’s policy provided coverage in excess of the minimum amounts required by the statute. Because of this, and because CSAA could have provided the language of the exclusion in its policy and did not, the Court held that CSAA’s policy was providing greater coverage than the statute. The Court then noted that existing case law made clear that where an insurer provides greater coverage than required under the law, the insurer may not rely on statutory restrictions on coverage that were not expressly incorporated into the insurance policy. Hence, CSAA could not rely on the exclusion in 11580.2(c)(2), and the pro rata sharing provision of 11580.2(d) would apply. The Court of Appeal upheld the trial court granting of judgment in Progressive’s favor.

COMMENT

This case confirms that if a carrier wishes to rely on the statutory exclusions, they must be quoted exactly or substantially in the policy. If not, courts may find that the carrier has forfeited the exclusion, and may not read it into the policy.

For a copy of the complete decision see:

http://www.courtinfo.ca.gov/opinions/documents/B242429.PDF

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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