Elliott v. Geico Indemnity Company

(Insured is not entitled to underinsured motorist benefits, wherein the total recovery made from third party motorist and her employer exceeded the available underinsured motorist limits afforded by insured’s policy.)

In Elliott v. Geico Indemnity Co., 231 Cal.App.4th 789 (November 19, 2014), the California Third District Court of Appeal affirmed the trial court’s entry of summary judgment in favor of Geico Indemnity Company (“Geico”) relative to whether the insured, Christina Elliott, was entitled to the difference between the policy limits of a driver which struck and killed her husband (i.e., $15,000) and her underinsured motorist limits of $100,000 such that she was entitled to $85,000, wherein she also recovered $250,000 from the driver’s employer, bringing her total recovery to $265,000. Hence, because Elliott’s total recovery of $265,000 exceeded Geico’s underinsured motorist limits of $100,000, she was not entitled to recover any portion of the underinsured motorist limits under the Geico policy.

The parties’ dispute arose out of a pamphlet sent with the Geico policy which explained that Elliott would be entitled to the difference between a negligent driver’s policy limits and the underinsured motorist limits afforded by the Geico policy. The pamphlet did not refer to recovery from a third party tortfeaser such as the negligent driver’s employer. As a result of Geico’s position, Elliott filed a lawsuit for bad faith against Geico. The trial court entered summary judgment in favor of Geico holding that Elliott’s recovery of $265,000 from the negligent driver and her employer exceded the Geico underinsured motorist limits such that Elliott was not entitled to recovery of any portion of such limits. Elliott appealed the trial court’s entry of summary judgment.

In affirming the trial court’s entry of summary judgment, the Court of Appeal held that Insurance Code section 11580.2 subdivision (p)(4) and the language of the Geico policy unambiguously allowed Geico to credit the entire tort recovery of $265,000 made by Elliott against the Geico underinsured motorist limits such that Geico was entitled to decline to pay any portion of such limits to Elliott.

In rejecting Elliott’s arguments, the Court of Appeal stated as follows:

We also reject Elliott's claim the Geico policy is ambiguous with respect to whether Geico may deduct from the underinsured motorist coverage limits the amount paid on behalf of the owners of Peterson's Corner in settlement of Elliott's wrongful death case.

Section IV of the Geico policy is titled: “UNINSURED MOTORIST AND UNDERINSURED MOTORIST COVERAGE Protection For You and Your Passengers For Injuries Caused By Uninsured/Underinsured and Hit-And-Run Motorists.” The section defines “underinsured motor vehicle” to mean “a motor vehicle that is insured under a motor vehicle liability policy, or motorcycle liability insurance policy, self-insured, or for which a cash deposit or bond has been posted to satisfy a financial responsibility law, but insured for an amount that is less than the uninsured motorist limits carried on the motor vehicle of the injured person.” Under the heading, “LOSSES WE WILL PAY,” the section provides in relevant part: “Under this coverage, we will pay damages for bodily injury to an insured, caused by accident which the insured is legally entitled to recover from the owner or operator of an … underinsured motor vehicle … arising out of the ownership, maintenance or use of that motor vehicle.”

Under the heading, “LIMITS OF LIABILITY,” after setting forth the coverage limits for “‘each person’” and “‘each occurrence,’” the section provides: “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.” The section then repeats: “The amount payable under this coverage will be reduced by all amounts: a) paid by or for all persons or organizations liable for the injury … .”

The foregoing limitation of liability is taken, nearly word for word, from the Insurance Code. Section 11580.2, subdivision (p)(4), provides: “When bodily injury is caused by one or more motor vehicles, whether insured, underinsured, or uninsured, the maximum liability of the insurer providing the underinsured motorist coverage shall not exceed the insured's underinsured motorist 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.” In Vanwanseele-Walker, supra, 41 Cal.App.4th 1093, the Court of Appeal for the Fourth Appellate District held this provision requires 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. The court first explained: “If the coverage limits are lower than the victim's underinsurance policy limits, the insured is entitled, at most, to recover the difference between the two.” (Id. at p. 1101, italics added.) However, “the plain words of the statute” also allow the insurer to deduct from the coverage limits payments made by or for “‘any person or organization that may be held legally liable for the injury.’” (Ibid.) Thus, “‘“[a]s the statutory scheme is designed, the underinsured motorist carrier gets a dollar-for-dollar credit for all payments by third party tortfeasors to the insureds, whether the insureds are made whole or not. In other words, a carrier providing underinsured motorist benefits never pays the full amount, only the difference between the policy limits and all contributions by all tortfeasors to all insureds.”’ [Citations.]” (Id. at p. 1102.)

Here, Elliott concedes the underinsured motorist benefits to which she is entitled must be reduced by the amount received from Shaffer's insurer. While Elliott disputes the same applies to the amount paid for the owners of Peterson's Corner in settlement of her wrongful death action, she does not directly dispute the owners are persons “that may be held legally liable for the injury.” (§ 11580.2, subd. (p)(4).) Indeed, she sued the owners under the doctrine of respondeat superior claiming they were legally liable for the injury because Shaffer drank on the job prior to getting behind the wheel. Thus, under the plain words of both the statute and the Geico policy, Geico's maximum liability “shall not exceed” Elliott's underinsurance coverage limits ($100,000) less amounts paid for the owners of Peterson's Corner ($250,000). Since $250,000 is more than $100,000, Elliott is not entitled to any payment from Geico. (See Vanwanseele-Walker, supra, 41 Cal.App.4th at p. 1101.) And while, as Elliott points out, we are tasked in this appeal with interpreting the Geico policy, not the Insurance Code, where the policy tracks the language of section 11580.2, subdivision (p)(4), and that subdivision plainly allows the offset taken by Geico, we must also conclude the policy is plain and unambiguous with respect to Geico's ability to deduct from the policy limits the amount paid on behalf of the owners of Peterson's Corner.