Berendes v. Farmers Insurance Exchange

(Farmers Automobile Policy Did Not Afford Underinsured Motorist Coverage To Deceased Pedestrian)

In Berendes v. Farmers Ins. Exch., 221 Cal.App.4th 571 (November 18, 2013), the California Third District Court of Appeal affirmed the trial court’s entry of summary judgment in favor of Farmers Insurance Exchange (“Farmers”) finding that underinsured motorist coverage was not afforded under policies issued to the father of Kristina Berendes for a wrongful death claim filed by the husband and daughter of Kristina Berendes after she was struck and killed in a crosswalk by an automobile operated by an underinsured driver. Farmers issued automobile policies to Kristina Berendes’ father, William Felix. The policies afforded coverage for a 2001 Chrysler PT Cruiser (“PT Cruiser”) and a 2005 Mercedes-Benz ML350. Kristina was listed as a rated driver under the Farmers’ policy affording coverage for the PT Cruiser. She was not identified as an insured under the Farmers’ Mercedes policy. Farmers also issued a $1 million umbrella policy excess of the Mercedes and PT Cruiser policies.

Farmers denied coverage of the underinsured motorist claim asserted by Kristina’s husband and daughter based on the contention that she did not qualify as an insured under the Farmers Mercedes and PT Cruiser policies relative to underinsured motorist coverage. Thereafter, Tina’s husband (Todd) and daughter (Taylor) filed a bad faith lawsuit against Farmers in connection with its denial of underinsured motorist coverage under the PT Cruiser and Mercedes policies.

Todd and Taylor contended Insurance Code section 11580.2 required Farmers to afford underinsured motorist coverage to Kristina under the PT Cruiser and Mercedes policies absent an express waiver of such coverage. Section 11580.2 states that “no insurance policy covering a person for liability insurance shall be issued in this state unless the policy also covers the person for the liability of an underinsured motorist.”

In rejecting plaintiffs’ argument that Section 11580.2 required Farmers to afford underinsured motorist coverage to Kristina for the accident, the Court of Appeal stated as follows:

Therefore, the statute requires insurers to include a provision in automobile insurance policies covering the "insured" for the liability of an underinsured motorist. If a person is the “insured,” the only way for the insurer to exclude coverage for the liability of an underinsured motorist is by written agreement excluding that coverage. (§ 11580.2, subd. (a)(1).) If, on the other hand, a person is not the "insured," then there is no underinsured motorist coverage under the statute, and no written agreement excluding that coverage is necessary because what is not included in the first place need not be excluded. The latter is the case here because Kristina was not the "insured" for the purpose of applying this statute.

Section 11580.2, subdivision (b) defines the "insured," for the purpose of applying the statute, as "any person with respect to damages he or she is entitled to recover for care or loss of services because of bodily injury to which the policy provisions or endorsement apply . . ."

Under section 11580.2, subdivision (b), the following people were the "insured" under Felix's policies: (1) Felix, who was the named insured, (2) Felix’s spouse, (3) relatives living in Felix's household, (4) others engaged in activities with the covered automobile, and (5) loss of consortium claimants for injuries to people in the other categories.

Kristina did not fit within any of these statutory categories at the time of her death. She was neither the named insured nor the spouse of the named insured. Although she was the daughter of the named insured, she did not live in the same household. And she was a pedestrian at the time of the accident, so she was not engaged in an activity related to one of the covered vehicles.

Since Kristina did not fit into the statutory definition of the "insured," for the purpose of applying section 11580.2, Farmers was under no statutory obligation to provide her coverage under these circumstances for the liability of underinsured motorists. And since there was no obligation to give her that coverage, there was no reason for Farmers to obtain a written agreement excluding her from such coverage.

Todd and Taylor also contended that the Farmers’ policies were ambiguous as the liability (Part I) and underinsured motorist (Part II) coverages included different definitions of “insured.” The Court of Appeal rejected the plaintiffs’ arguments and held as follows:

Part I of each automobile policy was titled, '"LIABILITY," while part II was titled "UNINSURED MOTORIST." Each part had its own definition of “insured person." Both definitions included the named insured and relatives living in the same household. But the part I definition also included "[a]ny person using your insured car," a provision not found in the part II definition. On the other hand, the part II definition included "[a]ny other person while occupying your insured car," which was not included in the part I definition. Neither definition of "insured person" in the main text of the policies - that is, not considering the endorsements - included Kristina, except when she was driving or occupying the insured car.

An amendment to the PT Cruiser policy changed the definition of “insured person" in PART I - LIABILITY to include Kristina. The evidence showed that she was a listed or rated driver on that policy. Endorsement 1042A ,to that policy stated that it amended PART I - LIABILITY and it expressly added to the definition of "insured person" any "listed driver." It continued: "Listed Driver means a driver expressly rated on this policy to operate your insured car and for whom a premium has been paid to operate your insured car." In at least three places, Endorsement 1042A stated that it applied to PART I — LIABILITY, at one point stating that the definition was to be "Used In This Part Only." There was no mention of PART II - UNINSURED MOTORISTS in Endorsement 1042A, and there was no similar endorsement to the policy modifying the definition of "insured person" as it related to PART II — UNINSURED MOTORISTS.

C. Analysis

Plaintiffs argue that, "using two definitions of insured person, Defendant Farmers has created an ambiguity. It is reasonable to assume that the insured person definition in the endorsement has modified both the liability portion and uninsured portion of the policy." To the contrary, the express terms of the policies provided distinct definitions of "insured person" for each of the two relevant parts of the policy. It cannot be argued that the definition of "insured person" found in PART I — LIABILITY of the policies applied to the provisions of PART II UNINSURED MOTORISTS without ignoring the express policy language. (See Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18 [policy ambiguous only when both interpretations are reasonable].)

With this express policy language in mind, we must conclude that Kristina was covered as a "listed driver," and therefore an "insured person," under PART I - LIABILITY of the PT Cruiser policy, but that the definition of "insured person" under PART II - UNINSURED MOTORISTS remained unchanged and did not include Kristina unless she was occupying the insured car. When she was hit and killed by Duril's car, Kristina was a pedestrian, not an occupant of the insured car. Under the express terms of the policies, Kristina was not entitled to underinsured motorist coverage for the accident.