California Court of Appeals, Third District, Nevada
APPEAL from a judgment of the Superior Court of Nevada County, No. 77371 Sean P. Dowling, Judge.
[Copyrighted Material Omitted]
Law Offices of Scott A. Bonzell and Scott A. Bonzell for Plaintiff and Appellant.
Gilbert, Kelly, Crowley & Jennett, Timothy W. Kenna and John J. Moura for Defendant and Respondent.
Christina Elliott appeals from a judgment dismissing her lawsuit against Geico Indemnity Company (Geico), which was entered after the trial court granted Geico’s motion for summary judgment. Elliott’s husband was killed when his motorcycle was struck by a truck driven by a drunk driver, Lesa Shaffer, who was returning home from her job at Peterson’s Corner, a restaurant and bar in Nevada City. The trial court concluded Geico was not required to pay underinsured motorist benefits under a motorcycle insurance policy issued to Elliott and her husband (Geico policy) because Elliott recovered more than the $100, 000 underinsured motorist coverage limits in settlement of a wrongful death action brought against Shaffer and the owners of the restaurant (Shaffer’s insurer paid $15, 000 and the owners’ general liability insurer paid $250, 000).
We agree and affirm. As we explain, the Geico policy unambiguously allows Geico to deduct from the underinsured motorist coverage limits “the
amount paid to the insured by or for any person or organization that may be held legally liable for the injury.” In addition to the $15, 000 paid to Elliott for Shaffer’s liability, $250, 000 was paid by the restaurant owners’ general liability insurer in settlement of Elliott’s claim that the owners were also liable for her husband’s death because Shaffer consumed alcohol in the course of her employment prior to the accident. Because $265, 000 was paid to Elliott in settlement of her claims that both Shaffer and the owners may be held legally liable for the injury, Geico properly deducted this amount from the underinsured motorist coverage limits.
The facts are undisputed. Elliott’s husband was riding his motorcycle on State Route 49 in Nevada County when it was struck by an oncoming truck that had crossed the center line and entered into his lane of travel. The driver of the truck, Shaffer, was returning home from her job at Peterson’s Corner. She was intoxicated.
Shaffer’s insurance policy had a bodily injury limit of $15, 000 per person, while the Geico policy had an underinsured motorist coverage limit of $100, 000 per person. However, in settlement of a wrongful death action brought against both Shaffer and the owners of Peterson’s Corner, Elliott recovered not only the $15, 000 policy limit from Shaffer’s insurer, but also $250, 000 from the owners’ general liability insurance carrier.
Following the settlement, Elliott submitted a claim to Geico for $85, 000 in underinsured motorist benefits ($100, 000 underinsured motorist coverage limits minus $15, 000 recovered from Shaffer’s insurer). Her interpretation of the policy’s underinsured motorist coverage was not based on the language of the policy itself, but rather on a document she received along with the policy purporting to explain the uninsured motorist and underinsured motorist coverage provided in the policy. (Abbreviations “UM” (uninsured motorist) and “UND” (underinsured motorist) may be used post.) Under the heading, “UNDERINSURED MOTORIST COVERAGE EXPLAINED, ” the document states: “The underinsured motorist portion of your UM & UND coverage pays the difference between your UM & UND limits and the at fault driver’s Bodily Injury limits based on the amount of your injuries. For example: If your UM & UND limits are $100, 000/$300, 000, the at fault driver’s Bodily Injury limits are $25, 000/$50, 000, and you sustain injuries totaling $50, 000, we will pay $25, 000 under your UM & UND coverage (the difference between your injuries and the amount you recover from the at fault driver). However, if you carry $25, 000/$50, 000 UM & UND coverage, there would be no difference between the two and no payment would be due even though your injuries exceed that amount.” Geico denied Elliott’s claim on the
basis her total recovery in the wrongful death action was $265, 000 and the terms of the actual policy allowed Geico to deduct from the underinsured motorist coverage limits “the amount paid to the insured by or for any person or organization that may be held legally liable for the injury.”
Elliott sued Geico for breach of contract and breach of the covenant of good faith and fair dealing. She alleged in the operative complaint that the document containing the explanation of underinsured motorist coverage (UM/UND form) is part of the Geico policy, Geico breached its obligations under the policy by denying such coverage, and Geico did so in violation of the implied covenant of good faith and fair dealing.
Geico moved for summary judgment. Geico argued the dispositive policy provision is the following: “When bodily injury is caused by one or more motor vehicles under this coverage, our maximum liability for providing Underinsured Motorists coverage shall not exceed the insured’s Underinsured Motorists coverage limits, less the amount paid to the insured by or for any person or organization that may be held legally liable for the injury.” Geico explained this provision is taken, nearly word for word, from Insurance Code section 11580.2, subdivision (p)(4),  which has been held to require underinsured motorist benefits be reduced, not only by the amount recovered from the negligent driver’s insurer, but also by the amount recovered from a third-party tortfeasor. (See Mercury Ins. Co. v. Vanwanseele-Walker (1996) 41 Cal.App.4th 1093, 1101-1102 [49 Cal.Rptr.2d 28] (Vanwanseele-Walker).) Geico also argued Elliott had no reasonable expectation of coverage under the policy since the policy itself is unambiguous and any potential ambiguity created by the example provided in the UM/UND form must be resolved by the terms of the policy. Finally, because the policy uses the statutory language found in section 11580.2, subdivision (p)(4), Geico argued the policy must be construed in accordance with the statute and no reasonable insured would expect coverage above that required by the statute.
Elliott opposed the motion. She argued: (1) the rights and obligations of the parties must be determined by the terms of the Geico policy, and not the Insurance Code; (2) the UM/UND form is part of the Geico policy; (3) the terms of the UM/UND form provide coverage; (4) the Geico policy should be interpreted in favor of a finding of coverage; (5) her reasonable expectation of coverage under the UM/UND form must be protected; (6) because the
Geico policy is an adhesion contract, it is subject to the closest possible scrutiny; (7) the conflicting terms of the UM/UND form and the “boilerplate section” allowing for a greater offset against the underinsured motorist coverage limits creates an ambiguity that must be resolved in favor of a finding of coverage; (8) Geico must be held to its own explanation of underinsured motorist coverage contained in the UM/UND form; and (9) Vanwanseele-Walker, supra, 41 Cal.App.4th 1093 and other cases relied upon by Geico in its motion are not controlling.
The trial court granted the motion, explaining: “[T]he primary question before this court is whether or not the document which includes the ‘Underinsured Motorist Coverage Explained (UND)’ section is part of the policy. Plaintiff contends that it is part of the policy because it was included with the policy documents and includes the policy number. [¶] However, the court finds that such document is not part of the policy. Many of the documents provided to plaintiff with the policy included the policy number: the ‘Safe-Riding Cyclist’ letter, the proof of insurance cards, a community service statement, a consumer information document and a privacy notice. If the court were to accept plaintiff’s argument, then all of these documents would be considered part of the policy. [¶] Furthermore, there is only one document entitled ‘California Motorcycle Insurance Policy, ’ and it consists of 20 pages. Page 15 of the policy, under the heading ‘Limits of Liability, ’ specifically provides that the ‘amount payable under this coverage will be reduced by all amounts... paid by or for all persons or organizations liable for the injury.’ This provision is unambiguous. An insured’s reasonable expectation of coverage can only be examined where there is an ambiguity in the actual policy. [Citation.] Because there is no ambiguity, plaintiff’s expectations of coverage are irrelevant. Moreover, even if there were any ambiguity, as stated in the case of [Hervey v. Mercury Casualty Co. (2010) 185 Cal.App.4th 954 [110 Cal.Rptr.3d 890]], ...