Elliott v. Geico Indemnity Co.

Filed 11/19/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(Nevada)
----
CHRISTINA ELLIOTT,
Plaintiff and Appellant, C072129
v. (Super. Ct. No. 77371)
GEICO INDEMNITY COMPANY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Nevada County, Sean P.
Dowling, Judge. Affirmed.
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
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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.
FACTS
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.
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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.
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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),1 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
(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
1 Undesignated statutory references are to 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.”
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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], any ambiguity can be resolved by
the terms of the policy itself. [¶] Further, this provision conforms with [section]
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11580.2[, subdivision ](p)(4). As held by the [Court of Appeal for the Fourth Appellate
District] in the case of [Vanwanseele-Walker, supra, 41 Cal.App.4th 1093], all amounts
received [from] persons potentially liable for the injury operate to offset the
underinsured-motorist limits.”
DISCUSSION
I
Standard of Review
“A defendant’s motion for summary judgment should be granted if no triable issue
exists as to any material fact and the defendant is entitled to a judgment as a matter of
law. [Citation.] The burden of persuasion remains with the party moving for summary
judgment. [Citation.]” (Kahn v. East Side Union High School Dist. (2003) 31 Cal.4th
990, 1002-1003 (Kahn); Code Civ. Proc., § 437c, subd. (c).) On appeal from the entry of
summary judgment, “[w]e review the record and the determination of the trial court de
novo.” (Kahn, supra, 31 Cal.4th at p. 1003.) Here, the operative facts are undisputed
and liability depends solely on the correct interpretation of the Geico policy, a question of
law subject to de novo review on appeal. (Hervey v. Mercury Casualty Co. (2010) 185
Cal.App.4th 954, 962-963 (Hervey) [“the interpretation of a contract, including whether
an insurance policy is ambiguous or whether an exclusion or limitation is sufficiently
conspicuous, plain, and clear, is a question of law”].)
II
Interpretation of Insurance Policies
“Ordinary rules of contract interpretation apply to insurance policies. [Citation.]
‘Under statutory rules of contract interpretation, the mutual intention of the parties at the
time the contract is formed governs interpretation. [Citations.] Such intent is to be
inferred, if possible, solely from the written provisions of the contract. [Citation.] The
“clear and explicit” meaning of these provisions, interpreted in their “ordinary and
popular sense,” unless “used by the parties in a technical sense or a special meaning is
6
given to them by usage” [citation], controls judicial interpretation. [Citation.] Thus, if
the meaning a layperson would ascribe to contract language is not ambiguous, we apply
that meaning. [Citations.] [¶] . . . In the insurance context, we generally resolve
ambiguities in favor of coverage. [Citations.] Similarly, we generally interpret the
coverage clauses of insurance policies broadly, protecting the objectively reasonable
expectations of the insured. [Citations.] These rules stem from the fact that the insurer
typically drafts policy language, leaving the insured little or no meaningful opportunity or
ability to bargain for modifications. [Citations.] Because the insurer writes the policy, it
is held “responsible” for ambiguous policy language, which is therefore construed in
favor of coverage.’ ” (Hervey, supra, 185 Cal.App.4th at p. 961, quoting AIU Ins. Co. v.
Superior Court (1990) 51 Cal.3d 807, 821-822.)
However, “[a]lthough it is generally true that an ambiguity in an insurance policy
is construed against the insurer who causes the ambiguity, where the language is that of
the Legislature, this principle does not apply. [Citation.] In such situations, ‘the statute
[and, hence, the insurance policy provision in conformity therewith] must be construed to
implement the intent of the Legislature and should not be construed strictly against the
insurer. . . .’ ” (State Farm Mut. Auto. Ins. Co. v. Messinger (1991) 232 Cal.App.3d 508,
519, quoting Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal.3d 674,
684.)
III
Analysis of Elliott’s Claims on Appeal
With the foregoing legal principles in mind, we now address and reject each of
Elliott’s claims on appeal. As she did below, Elliott asserts: (1) the UM/UND form is
part of the Geico policy; (2) the conflicting terms of the UM/UND form and the policy
provision 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; (3) the
meaning of the Geico policy must be determined in accordance with Elliott’s reasonable
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expectation of coverage, with all doubts resolved against Geico; and (4) as an adhesion
contract, the Geico policy must be construed in Elliott’s favor because the provision
allowing the challenged offset is not conspicuous, plain, and clear.
A.
The UM/UND Form Is Not Part of the Geico Policy
We first reject Elliott’s claim the UM/UND form is part of the Geico policy. The
20-page policy includes the following declaration: “By accepting this policy, you agree
that: [¶] . . . [¶] c) this policy, along with the application and Declaration sheet,
embodies all agreements relating to this insurance.” The two-page declaration sheet lists
a single endorsement and sets forth the coverages, policy limits, and deductibles
contained in the policy. The endorsement listed on the declaration sheet is found on a
single page immediately following the 20-page policy and amends the policy to include
towing coverage. By accepting the policy, Elliott agreed these documents, along with her
application, would constitute the entirety of her contract with Geico relating to the subject
insurance.
The UM/UND form, not one of the documents listed in the policy as part of the
insurance contract, was provided by Geico to comply with section 11580.2, subdivision
(a), which states in relevant part: “No policy of bodily injury liability insurance covering
liability arising out of the ownership, maintenance, or use of any motor vehicle, . . . shall
be issued or delivered in this state to the owner or operator of a motor vehicle, or shall be
issued or delivered by any insurer licensed in this state upon any motor vehicle then
principally used or principally garaged in this state, unless the policy contains, or has
added to it by endorsement, a provision with [uninsured motorist] coverage limits at least
equal to the limits specified in subdivision (m)[2] and in no case less than the financial
2 Subdivision (m) of this section states: “Coverage provided under an uninsured
motorist endorsement or coverage shall be offered with coverage limits equal to the limits
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responsibility requirements specified in Section 16056 of the Vehicle Code[3] insuring the
insured, the insured’s heirs or legal representative for all sums within the limits that he,
she, or they, as the case may be, shall be legally entitled to recover as damages for bodily
injury or wrongful death from the owner or operator of an uninsured motor vehicle. The
insurer and any named insured, prior to or subsequent to the issuance or renewal of a
policy, may, by agreement in writing, in the form specified in paragraph (2) or paragraph
(3), (1) delete the provision covering damage caused by an uninsured motor vehicle
completely, or (2) delete the coverage when a motor vehicle is operated by a natural
person or persons designated by name, or (3) agree to provide the coverage in an amount
less than that required by subdivision (m) but not less than the financial responsibility
requirements specified in Section 16056 of the Vehicle Code.” (§ 11580.2, subd. (a)(1),
italics added.)
Paragraphs (2) and (3) of subdivision (a) set forth the language required to be
included in the agreement specified in paragraph (1). For example, the agreement to
delete the provision covering damage caused by an uninsured motor vehicle must state:
“ ‘The California Insurance Code requires an insurer to provide uninsured motorists
coverage in each bodily injury liability insurance policy it issues covering liability arising
of liability for bodily injury in the underlying policy of insurance, but shall not be
required to be offered with limits in excess of the following amounts: [¶] (1) A limit of
thirty thousand dollars ($30,000) because of bodily injury to or death of one person in
any one accident. [¶] (2) Subject to the limit for one person set forth in paragraph (1), a
limit of sixty thousand dollars ($60,000) because of bodily injury to or death of two or
more persons in any one accident.”
3 Vehicle Code section 16056, subdivision (a), provides in relevant part: “No policy
or bond shall be effective . . . unless the policy or bond is subject, if the accident has
resulted in bodily injury or death, to a limit, exclusive of interest and costs, of not less
than fifteen thousand dollars ($15,000) because of bodily injury to or death of one person
in any one accident and, subject to that limit for one person, to a limit of not less than
thirty thousand dollars ($30,000) because of bodily injury to or death of two or more
persons in any one accident . . . .”
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out of the ownership, maintenance, or use of a motor vehicle. Those provisions also
permit the insurer and the applicant to delete the coverage completely or to delete the
coverage when a motor vehicle is operated by a natural person or persons designated by
name. Uninsured motorists coverage insures the insured, his or her heirs, or legal
representatives for all sums within the limits established by law, that the person or
persons are legally entitled to recover as damages for bodily injury, including any
resulting sickness, disease, or death, to the insured from the owner or operator of an
uninsured motor vehicle not owned or operated by the insured or a resident of the same
household. An uninsured motor vehicle includes an underinsured motor vehicle as
defined in subdivision (p) of Section 11580.2 of the Insurance Code.’ ” (§ 11580.2,
subd. (a)(2).) The agreement may also contain additional language “not in derogation of
or in conflict with the foregoing” statutorily mandated statement. (Ibid.)
Subdivision (n) of this section provides in relevant part: “Underinsured motorist
coverage shall be offered with limits equal to the limits of liability for the insured’s
uninsured motorist limits in the underlying policy, and may be offered with limits in
excess of the uninsured motorist coverage. For the purposes of this section, uninsured
and underinsured motorist coverage shall be offered as a single coverage.” (§ 11580.2,
subd. (n).)
In accordance with the foregoing provisions, the UM/UND form provided by
Geico states: “California law requires insurers to offer Uninsured Motorist Bodily Injury
(UM & UND) coverage in limits equal to but not exceeding your Bodily Injury (BI)
Liability limits, up to a limit of $30,000/$60,000. You may select a higher limit of UM
& UND, up to $100,000/$300,000. You may also reject the coverage entirely or select
UM & UND limits less than your BI limits, but not less than the minimum limit of
$15,000/$30,000.” The form then recommends the insured not reject UM/UND
coverage, provides the explanation of UND coverage relied upon by Elliott in this appeal,
recites the statutory language required by section 11580.2, subdivision (a)(2) and (3), and
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provides a place for the insured to make the statutorily authorized decision to delete
UM/UND coverage or modify the coverage limits.
It does not appear Elliott made a selection on the UM/UND form, thereby
retaining the $100,000/$300,000 UM/UND coverage limits already contained in the
policy. As section 11580.2, subdivision (a), makes clear, the UM/UND form is a
separate “agreement” that, if executed, deletes or modifies the UM/UND coverage
contained in the policy. Because Elliott did not execute the agreement to delete or
modify the UM/UND coverage in the policy, the UM/UND form cannot be said to have
modified the policy in any way. For the same reason, the form is not part of the Geico
policy.
Nevertheless, Elliott argues, “every time the Elliotts or their counsel asked Geico
or Geico’s counsel for a copy of the policy issued to the Elliotts, Geico produced papers
including the [UM/UND form], often with a sworn affidavit of the policy’s accuracy.”
Elliott also relies on the fact that during discovery, Geico asked Elliott to “[a]dmit the
genuineness of the policy attached hereto as Exhibit ‘A,’ ” and attached not only the
policy, but also the UM/UND form and other documents containing the policy number,
including a letter thanking the Elliotts for choosing Geico for their motorcycle insurance
needs and an invitation to take advantage of lower insurance rates by completing a
motorcycle safety course. Elliott then asked Geico to admit the same set of documents
“is a true and correct copy” of the Geico policy, to which Geico responded: “Admit.”
Elliott further relies on a declaration signed by Geico’s counsel and submitted with the
motion for summary judgment that also attaches the foregoing documents and states:
“Exhibit ‘1’ is a true and correct copy of the [Geico policy].” Elliott does not offer any
argument or citation to authority as to the legal effect of the foregoing admissions.
However, to the extent Elliott argues we should treat them as a judicial admission that the
UM/UND form is part of the Geico policy, she is mistaken. “[J]udicial admissions
involve facts, not legal theories or conclusions. [Citations.]” (Stroud v. Tunzi (2008) 160
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Cal.App.4th 377, 384.) Whether the UM/UND form is part of the Geico policy is a
question of law and therefore not subject to judicial admission.
Finally, Elliott argues “common sense” tells us the UM/UND form is part of the
Geico policy because it “looks exactly like all the other pages of the Geico policy with
which it is shipped -- same type face, same type size, same headline style, and so on.
And the lengthy policy number -- 4132-50-28-42 -- is affixed to the bottom of the page.”
The problem with this argument is two-fold. First, as the trial court pointed out, the
policy number is also affixed to the welcome letter, invitation to complete a motorcycle
safety course, and other documents that clearly do not set forth policy terms. Second, the
fact the UM/UND form is typographically similar to the actual policy is consistent with
our conclusion it is a separate potential agreement to modify the terms of the policy by
deleting or altering UM/UND coverage. However, as we have explained, no such
modification occurred in this case.
We conclude the UM/UND form is not part of the Geico policy.
B.
The Policy’s Underinsured Motorist Coverage Provisions Are Not Ambiguous
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 “[u]nderinsured 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
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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
[negligent driver’s bodily injury] 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
13
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.
Elliott argues the policy’s underinsured motorist coverage provisions are
ambiguous because the UM/UND form’s explanation of the coverage and the terms of
the policy itself present “a clear dichotomy in the underinsured coverage offered.” This
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argument is premised on the notion the UM/UND form is part of the Geico policy. We
have already concluded it is not. Since the UM/UND form is not part of the policy, it is
by definition extrinsic evidence. Such evidence is “admissible to interpret an insurance
policy if ‘ “relevant to prove a meaning to which the language of the instrument is
reasonably susceptible.” ’ [Citation.] Although parol evidence may be admissible to
determine whether the terms of a contract are ambiguous [citation], it is not admissible if
it contradicts a clear and explicit policy provision. [Citation.]” (Hervey, supra, 185
Cal.App.4th at p. 961.) The explanation of underinsured motorist coverage and example
provided by Geico in the UM/UND form is accurate as far as it goes, but does not point
out the recovery of such benefits is offset, not only by the amount recovered from the at
fault driver, but also by the amount paid by or for any person or organization that may be
held legally liable for the injury. To the extent Elliott seeks to use the UM/UND form to
prove the Geico policy is reasonably susceptible to her interpretation that the latter offset
is unauthorized, the terms of the policy itself are clear and explicit on the point. Indeed,
Elliott’s argument that the UM/UND form and the policy provision relied upon by Geico
present a “clear dichotomy” in the underinsurance coverage provided is a tacit admission
that her interpretation of the UM/UND form contradicts the policy terms.
Nor are we persuaded by Elliott’s argument that the policy provision relied upon
by Geico “is so badly written that any careful reader would be baffled.” Elliott misquotes
the provision as beginning, “ ‘when bodily injury is caused by one or more motor
vehicles under this policy’ ” (italics added), and argues: “The injury to Greg Elliott was
not caused by a motor vehicle ‘under this policy.’ It was caused by the motor vehicle of
a drunk driver who had her own policy with a different insurer. Does that mean this
coverage doesn’t apply here at all?” As previously stated, the actual policy provision
begins: “When bodily injury is caused by one or more motor vehicles under this
coverage . . . .” (Original emphasis removed; italics added.) We are confident a
reasonable insured would understand “coverage” to mean uninsured and underinsured
15
motorist coverage provided by section IV of the policy. Elliott further argues: “The
provision also states that it allows a reduction in benefits for payments made by ‘any
person or organization that may be held legally liable for the injury.’ That could very
sensibly be read as a definition or description of the at-fault driver―not the at-fault
driver and anyone else.” Not so. As previously explained, the language, “less the
amount paid to the insured by or for any person or organization that may be held legally
liable for the injury” is taken, word for word, from section 11580.2, subdivision (p)(4),
and plainly allows an offset for all contributions made by all tortfeasors to all insureds.
(Vanwanseele-Walker, supra, 41 Cal.App.4th at p. 1102.)
The policy provision allowing Geico to deduct from the underinsured motorist
policy limits the amount paid by or for any person or organization that may be held
legally liable for the injury is not ambiguous.
C.
The Doctrine of Reasonable Expectation of Coverage Does Not Apply
Elliott next contends we must apply the “firm doctrine” that the meaning of an
insurance policy must be determined by the insured’s reasonable expectation of coverage,
with all doubts resolved against the insurer. She is mistaken. “It is settled in this state
that ‘the doctrine of reasonable expectation of coverage comes into play only where there
is an ambiguity in the policy.’ [Citation.]” (Lumbermens Mut. Cas. Co. v. Vaughn
(1988) 199 Cal.App.3d 171, 179; cf. Producers Dairy Delivery Co. v. Sentry Ins. Co.
(1986) 41 Cal.3d 903, 912.) Having concluded the Geico policy is unambiguous with
respect to Geico’s ability to 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, “we need not delve into [Elliott’s] arguments concerning [her]
reasonable expectations of [coverage].” (Helfand v. National Union Fire Ins. Co. (1992)
10 Cal.App.4th 869, 884.)
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D.
Independent Tests Applicable to Adhesion Contracts Are Satisfied
Finally, Elliott argues that because the Geico policy is an adhesion contract, “it is
not enough the exclusionary clause [i.e., the policy provision allowing the challenged
deduction] could be deemed to be precise. It also must pass muster under two other
independent tests. (1) The exclusion must be conspicuous and (2) the language of the
exclusion must be plain and clear. . . . First, the exclusion must be positioned in a place
and printed in a form which would attract a reader’s attention. Secondly, the substance of
the exclusion must be stated in words that convey the proper meaning to persons
expected to read the contract.” (Ponder v. Blue Cross of Southern California (1983) 145
Cal.App.3d 709, 719.)
For the reasons expressed in part III B. of this opinion, we conclude the provision
allowing Geico to deduct from the underinsured motorist coverage limits the amount paid
by or for any person or organization that may be held legally liable for the injury is
sufficiently “plain and clear” to satisfy the latter independent test. We also conclude the
provision is sufficiently “conspicuous” to satisfy the former. As Geico describes in its
briefing on appeal: “It is in the same section [‘SECTION IV ― UNINSURED
MOTORIST AND UNDERINSURED MOTORISTS COVERAGE’] as the grant of
coverage, in the same font and size, follows the grant of coverage on the same page, and
is set out in an outline format. The outline format uses prominent headings in total
capital letters, and the five individual subdivisions of the ‘LIMITS OF LIABILITY’
section are separated by empty lines.” In Hervey, supra, 185 Cal.App.4th 954, the Court
of Appeal for the Second Appellate District held an exclusionary provision to be
conspicuous where “prominently featured” under a descriptive heading that was “printed
in the same boldface type as the other headings of the Policy.” (Id. at p. 967.) Here, the
provision allowing Geico to deduct from the underinsured motorist coverage limits the
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amount paid by or for any person or organization that may be held legally liable for the
injury is no less conspicuous.
DISPOSITION
The judgment is affirmed. Geico Indemnity Company shall recover its costs on
appeal. (Cal. Rules of Court, rule 8.278(a).)
HOCH , J.
We concur:
HULL , Acting P. J.
DUARTE , J.
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