In Elliott v. Geico Indemnity Company (filed 11/19/14) 2014 DAR 15495, Christina Elliot’s husband was killed when his motorcycle was struck by a drunken driver, Lesa Shaffer, who was returning home from her job at Peterson’s Corner, a restaurant and bar. The Elliotts had underinsured motorist coverage with Geico with a limit of $100,000. Shaffer’s auto insurer paid its $15,000 policy limit. But in addition, Elliot asserted legal liability against Peterson’s Corner because Shaffer consumed alcohol in the course of her employment prior to the accident. The General Liability carrier for Peterson’s Corner paid her $250,000 on this claim.
In her Nevada County Superior Court action, Elliot sought $85,000 against Geico. The trial court concluded Geico was not required to pay underinsured motorist benefits because Elliot had recovered more than the $100,000 underinsured motorist coverage limit. Elliot appealed to the Court of Appeal, Third Appellate District, claiming that Geico could deduct only the $15,000 payment received from motorist Shaffer’s insurer. The appellate court disagreed, affirming the judgment.
Insurance Code section 11580.2, subdivision (p) (4), provides the maximum liability of the insurer in this situation shall not exceed the underinsured 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’s policy tracked this statutory language. As Geico argued, and both the trial court and appellate court agreed, the language unambiguously expresses Geico’s right to deduct both the adverse driver’s policy limit and the payment by ANY person or organization that may be held liable for the injury.
Nonetheless, Elliot pointed to a document she received along with the policy purporting to explain that the underinsured motorist portion of the policy “pays the difference between its limits and the at fault driver’s Bodily Injury limits.” The appellate court however notes that this form in question was provided only to assist the insured in determining whether she should elect uninsured and underinsured policy limits exceeding those same limits provided for bodily injury liability coverage, or simply decline such coverage entirely. California law requires that the former coverage limits be offered at a minimum of the same limit as the latter coverage. A greater limit is a matter of choice for the insured; rejection of the coverage is likewise the insured’s choice. Geico’s form urges the insured not to reject uninsured and underinsured coverage, with the explanation seized upon by Elliott.
Here, the potentially misleading explanation contained in the form in question is not a part of the policy, ruled the appellate court. Because the Elliotts did not execute the agreement to delete or modify the underinsured motorist coverage in the policy, the form in question cannot be said to modify the policy in any way; nor can it be a part of the policy.
Elliott further argued that she could reasonably rely upon the form’s language as to her expectation of coverage, with all doubts to be resolved against Geico as the drafter of the documents; and that the contract was one of adhesion because the policy language was no more conspicuous than the information in the accompanying form. The court quickly rejected these arguments: “the firm doctrine,” which argues the insured’s reasonable expectations, comes into play only where the policy is ambiguous, which this was not. Finally, the court found the contract was not one of adhesion: the policy provision in question was “plain and clear” and sufficiently “conspicuous,” including capitalized headings that would reasonably bring the provision to the insured’s attention.