Excess “Follow Form” Policy Does Not Cover Underinsured Motorist Claim Covered By Underlying Policy

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Uninsured motorist (“UM”) and underinsured motorist (“UIM”) coverages “are strictly ‘first party’ coverages because the insurer’s duty is to compensate its own insured for his or her losses, rather than to indemnify against liability claims from others,” according to the Court of Appeal in Haering v. Topa Insurance Company, 244 Cal.App.4th 725 (2016)(italics in original).  As such, the Court concluded that a “follow form” excess policy that limits the insurer’s obligation to indemnify to “losses for which the insured is liable,” i.e., third party liability claims, does not provide UM/UIM coverage in excess of an underlying primary policy that included UM/UIM coverage.

The plaintiff in Haering was injured in an auto accident caused by a negligent driver.  He settled his claim with the driver by accepting the driver’s policy limit.  The plaintiff then submitted a claim for UIM benefits under his own auto policy and recovered the UIM limits under that primary policy.  When he submitted a claim to his excess insurer, the insurer declined coverage.

In the ensuing lawsuit, the plaintiff argued that the excess policy’s insuring agreement, stating that “[t]he provisions of the Immediate underlying policy are incorporated as part of this policy,” meant that the excess policy provided the same coverage as the underlying primary auto policy.  The Court disagreed.  The Court noted that the excess policy had an exception to that provision for any terms that were inconsistent with the excess policy and the insuring agreement’s limitation to “losses for which the insured is liable” provided coverage for only claims brought by third parties against the insured, not claims for benefits submitted by the insured himself.  The Court added that the absence of an express exclusion for UM/UIM claims was not required when the claims did not fall within the insuring agreement in the first instance.

The Court further observed that the statutory requirement for UM/UIM coverage in California Insurance Code section 11580.2 did not apply to excess policies.

Holding that the excess insurer owed no coverage for the plaintiff’s first party UIM claim, the Court affirmed summary judgment for the insurer.

Teresa Cho is a partner with Musick, Peeler & Garrett in its Los Angeles office.  Her full bio and contact information can be found at: http://www.musickpeeler.com/professional/Teresa_Cho