California Court of Appeal Affirms Judgment in Favor of Insured When Uninsured/Underinsured Liability Coverage Limit Had Been Met

In a motorcycle accident case, Christina Elliott appealed the dismissal of her lawsuit against Geico Indemnity Company. Mrs. Elliott’s husband was struck and killed by the defendant, who had been driving while intoxicated. While Mrs. Elliott recovered damages from the defendant’s insurer and the restaurant owner’s insurer, she sought additional damages under Geico’s underinsured/uninsured motorist policy.   At issue was whether Geico was required to pay Mrs. Elliott, under the underinsured motorist liability coverage of her policy, in addition to the recovery she had already obtained from the defendant’s insurer and the restaurant owner’s insurer.The facts demonstrated that the defendant, Lesa Shaffer, was returning home from her job at a restaurant and bar in Nevada City. She had been drinking, and her truck crossed the center line and entered the deceased’s lane of travel. His motorcycle was struck by Ms. Shaffer’s vehicle, and he died.

Ms. Shaffer’s insurer paid $15,000, and the restaurant owner’s general liability insurer paid $250,000 to Mrs. Elliott, after the settlement of a wrongful death action brought against Ms. Shaffer and the restaurant owner. Mrs. Elliot then submitted an insurance claim to Geico for $85,000, which is the underinsured motorist coverage limit minus the $15,000 recovered from Ms. Shaffer’s insurance company.

The trial court held that Geico was not required to pay underinsured motorist benefits under a motorcycle insurance policy issued to Mrs. Elliott and her husband. Mrs. Elliott had recovered more than the $100,000 underinsured motorist coverage limit in the settlement of a wrongful death action brought against Ms. Shaffer and the restaurant owner.

On appeal, the court stated that their standard of review in a summary judgment motion is to review the record and trial court determination de novo. Here, interpreting the insurance policy requires resolving any ambiguities in favor of coverage. The court stated that coverage clauses are generally interpreted broadly, to protect the reasonable expectations of the insured. The policy reason behind interpreting the policy in favor of the insured is that the insurer typically drafts the policy language.

First, the court rejected Ms. Elliott’s claim that the uninsured/underinsured form was part of the Geico insurance policy. The uninsured/underinsured form was a separate agreement that modified the terms of the policy by deleting or altering the uninsured/underinsured motorist coverage. In this case, the court stated there was no modification, and the uninsured/underinsured form was not part of the Geico policy.

The court next rejected Ms. Elliott’s claim that the Geico policy was ambiguous regarding whether Geico could deduct the amount that was already paid from the underinsured motorist coverage.   The court cited to the limitation of liability within the policy and made clear that it reiterates the Insurance Code provision that requires underinsured motorist benefits to be reduced by the amount recovered from the negligent driver’s insurer, as well as the amount recovered from a third-party tortfeasor.

Ms. Elliott conceded that the amount to which she was entitled must be reduced by the amount received from Ms. Shaffer’s insurer. She disputed that the same theory applied to the amount paid by the owner of the restaurant in the settlement of her wrongful death action ($250,000.00). She sued the owner under the legal doctrine of respondeat superior on the grounds that it was legally liable for her husband’s injury because Ms. Shaffer drank while working, before getting behind the wheel of the truck.

The statute and the policy made clear that Geico’s maximum liability would not exceed Ms. Elliott’s underinsurance coverage limit ($100,000), minus the amounts paid by the owner of the restaurant ($250,000). The appellate court stated that Ms. Elliott is not entitled to more payment from Geico.

The court was not persuaded that the policy’s underinsured motorist coverage provision was ambiguous.

Here, the appellate court also held that the doctrine of reasonable expectation of coverage did not apply. The rule is that this doctrine comes into play only when there is ambiguity in the policy.  But here the court held that the Geico policy was not ambiguous with respect to Geico’s ability to deduct from the underinsured motorist coverage limits the amount already paid.

At Sharifi Firm, we help victims of motorcycle accidents in Southern California pursue compensation for their injuries. We provide a free consultation and can be reached by calling 1-866-422-7222.

More Blog Posts:

California Court of Appeals Affirms Jury’s Purported Use of Math in Accident Verdict, Southern California Injury Lawyer Blog, April 20, 2015

California Court of Appeals Reverses Dismissal of Vehicle Accident Case as Forum Issue Remains Unsettled, Southern California Injury Lawyer Blog, September 11, 2015

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