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August 2013

Auto Policy Not Considered As Providing Excess Coverage Over Another Auto Policy Where “Other Insurance” Clauses Conflict

A California appellate court recently held that absent inclusion of exclusionary language authorized by California’s underinsured motorist statute, an auto liability insurer could not rely on its “other insurance” clause to support the position its policy provided excess coverage.

According to the Aug. 12 opinion in Progressive Choice Insurance Co. v. California State Automobile Association Inter-Insurance Bureau, Benjamin White was injured in a traffic collision while riding as a passenger in a vehicle operated by Scott Tortora. The third party who caused the collision was underinsured. White was insured under two automobile insurance policies.

The first policy was issued by Progressive to Tortora and covered Tortora’s vehicle. The Progressive policy provided underinsured motorist (UIM) bodily injury coverage with limits of $100,000 per person. The second policy was issued by the California State Automobile Association (CSAA) to White as the named insured. The CSAA policy provided UIM bodily injury coverage with limits of $50,000 per person.

White settled with the at-fault driver’s auto insurer for the limit under that policy of $25,000. White then made a claim for UIM benefits under the Progressive and CSAA policies. CSAA denied coverage. Progressive paid the sum of $62,500 to White. Progressive then demanded that CSAA reimburse Progressive $20,833.33, the pro-rata share of the payment made to White. CSAA denied any obligation to reimburse Progressive.

Progressive filed an action for contribution against CSAA. CSAA contended that pursuant to California Insurance Code Section 11580.2, subdivision (c)(2), its policy provided no UIM coverage to White. The trial court granted Progressive’s motion for summary judgment and judgment was entered in the amount of $20,833.33 in favor of Progressive. CSAA appealed.

Section 11580.2 generally requires that all auto insurance policies issued in California provide UIM coverage with limits of at least $30,000 per person. However, Section 11580.2, subdivision (c), provides that the “insurance coverage provided for in this section does not apply either as primary or as excess coverage: [¶] . . . (2) To bodily injury of the insured while in or upon or while entering into or alighting from a motor vehicle other than the described motor vehicle if the owner thereof has insurance similar to that provided in this section.” 

Section 11580.2, subdivision (d), addresses allocation where more than one auto policy provides coverage as follows: “Subject to paragraph (2) of subdivision (c), the policy or endorsement may provide that if the insured has insurance available to the insured under more than one uninsured motorist coverage provision, any damages shall not be deemed to exceed the higher of the applicable limits of the respective coverages, and the damages shall be prorated between the applicable coverages as the limits of each coverage bear to the total of the limits.” 

On appeal, CSAA contended that the following “Other Insurance” provision in its policy excluded coverage: “With respect to bodily injury to an insured person occupying a motor vehicle not owned by you, the coverage under this Part applies only as excess insurance over any similar insurance available to such insured person and covering such automobile as primary insurance. In this situation this coverage will apply only in the amount by which the limits of liability for this coverage exceeds the limits of liability of such other insurance. If there is other similar insurance on a loss covered by this Part, we will pay our proportionate share as our limit of liability bears to the total limits of all applicable similar insurance. But, any insurance for a vehicle you do not own is excess over any applicable similar insurance.”

CSAA argued that its “Other Insurance” provision excluded UIM coverage as proscribed in Section 11580.2, subdivision (c)(2). The California Court of Appeal, Second Appellate District, disagreed and distinguished CSAA’s “Other Insurance” provision from the statutorily approved exclusion set forth in Section 11580.2, subdivision (c)(2).

The Court of Appeal noted that CSAA’s “Other Insurance” provision allowed CSAA to act as an excess policy. However, the statutory exclusion of Section 11580.2, subdivision (c)(2), states that there would be no UIM coverage at all. Additionally, the court found that in prior policies, when CSAA had wished to include the statutory exclusion provided under Section 11580.2, subdivision (c)(2), it had quoted the language in Section 11580.2, subdivision (c)(2). Further, the court noted that the subject CSAA policy set forth several additional exclusions that were substantially similar to other statutory exclusions provided for under Section 11580.2, subdivision (c). None, however, mirrored the language of Section 11580.2, subdivision (c)(2).

Absent inclusion of language tracking the statutory exclusion set forth in Section 11580.2, subdivision (c)(2), the Court of Appeal found that the CSAA and Progressive policies were implicated. Although the CSAA policy’s “Other Insurance” clause contained an excess coverage provision, CSAA could not rely on that provision because the Progressive policy had a pro-rata provision. Under Section 11580.2, subdivision (d), the pro-rata provision in the Progressive policy took precedence over the excess coverage provision in the CSAA policy. Thus, the court affirmed the decision of the trial court and held that the loss must be allocated on a pro-rata basis between Progressive and CSAA.

Click here for opinion.

The opinion in Progressive Choice Insurance Co. v. California State Automobile Association Inter-Insurance Bureau, 2013 Cal.App. LEXIS 642, 13 C.D.O.S. 8852, is not final. It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court. These events would render the opinion unavailable for use as legal authority in California state courts.

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Matthew S. Foy