Underinsured Motorist Coverage Under Multiple Policies

Hanfelder v. Geico Indemnity Co., 791 Ariz. Adv. Rep. 33 (App. Div. I, May 22, 2018) (J. Thompson)

IN ORDER TO REQUIRE INSURED TO CHOOSE ONLY ONE UIM COVERAGE FROM MULTIPLE POLICIES WRITTEN BY SEPARATE AFFILIATED INSURANCE COMPANIES, INSURER MUST SPECIFY IN THE POLICY THE CHOICE MUST BE MADE AS TO SPERATE POLICIES WRITTEN BY SEPARATE COMPANIES “UNDER COMMON MANAGEMENT”

Plaintiff was injured in an a car crash. The third party's insurer paid him policy limits.  Plaintiff then recovered underinsured motorist [UIM]policy limits against a GEICO Casualty Insurance policy he had. Then he made a new policy limit demand against  a GEICO Indemnity Insurance  policy he was also insured under. GEICO Casualty is a wholly owned subsidiary of GEICO Indemnity. GEICO Indemnity denied the claim asserting its “multiple coverages” clause. Plaintiff brought this declaratory relief action and the trial court granted GEICO Indemnity summary judgment based upon the “multiple coverages” amendment to the GEICO Indemnity policy. The Arizona Court of Appeals reversed and remanded.

The policy language in question provides:

If separate policies or coverages with us are in effect for you or any person in your household, they may not be combined to increase the limit of our liability for a loss; however, you have the right to select which policy or coverage is to be applicable for the loss.

 Arizona's UIM statute provides:

If multiple policies or coverages purchased by one insured on different vehicles apply to an accident or claim, the insurer may limit the coverage so that only one policy or coverage, selected by the insured, shall be applicable to any one accident. ...

For the purposes of this subsection, "insurer" includes every insurer within a group of insurers under a common management.

A.R.S. §20-259.01(H) (2017).

In construing the UIM statute liberally in favor of finding coverage, the court of appeals found that although the two GEICO companies were under common management, the policy language “If separate policies or coverages with us are in effect” meant separate policies with GEICO Indemnity and not separate policies with separate GEICO companies.  A.R.S. §20-259.01(H) is not self-executing. If GEICO wanted the policy language to apply here it needed to specify in the policy that “us” means any policy written by any GEICO affiliate. 

GEICO's letter to plaintiff informing him he needed to choose between the UIM coverages under the two different policies was of no moment; there is no authority for the proposition that an insurer can amend its policy with post-accident correspondence.

Finally, the fact the plaintiff obtained a multi-policy discount was of no help to GEICO. Even assuming this is true, a premium discount would not place [the insured] on notice that his UIM coverage would be limited. GEICO Indemnity could have drafted the Amendment to apply to all separate policies or coverages purchased from any GEICO affiliate but did not do so.