244 Cal. App. 4th 725
Cal. Ct. App.2016Background
- Larry Haering owned California Fleet, insured by a primary State National policy (Dec 9, 2011–Dec 9, 2012) that included a $1,000,000 UM/UIM endorsement and a listed $1,000,000 occurrence/aggregate limit for certain coverages.
- Topa issued an excess liability policy for the same period that identified the State National policy as the underlying insurance and stated it “follows form” to the immediate underlying policy except for provisions inconsistent with the Topa policy.
- The Topa policy’s insuring agreement limited indemnity to “loss which is in excess of the applicable limits of liability” and defined “loss” as amounts paid in settlement of losses “for which the Insured is liable” (i.e., third‑party liability), and it excluded coverage for obligations imposed under UM/UIM or other first‑party laws.
- Haering was injured in an accident with a driver whose liability limit was $25,000; Haering recovered the driver limit and then recovered $975,000 under State National’s UM/UIM endorsement (after proration), and then claimed the $1,000,000 excess from Topa.
- Topa denied coverage, arguing (1) the Topa insuring agreement covers only third‑party liability (not first‑party UM/UIM benefits), and (2) the policy excludes UM/UIM/first‑party obligations. The trial court granted summary judgment for Topa; judgment was entered and Haering appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a following‑form excess policy must provide UM/UIM benefits after the underlying limit is exhausted | Haering: Topa “follows form” to State National and therefore must incorporate the $1M UM/UIM endorsement | Topa: Its insuring agreement unambiguously limits coverage to third‑party liability; following‑form language excludes provisions inconsistent with Topa policy; UM/UIM is first‑party and excluded | Court: Held for Topa. The Topa insuring clause covers only third‑party liability; following‑form incorporation does not expand coverage to first‑party UM/UIM absent a broad‑as‑primary endorsement or inconsistent language in Topa policy |
Key Cases Cited
- Montrose Chemical Corp. v. Admiral Ins. Co., 10 Cal.4th 645 (describing distinction between first‑party and third‑party liability coverage)
- Garvey v. State Farm Fire & Casualty Co., 48 Cal.3d 395 (focus of third‑party liability is insured’s legal obligation to pay others)
- Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1 (insured bears burden showing claim falls within insuring agreement; courts will not force coverage)
- Foster‑Gardner, Inc. v. National Union Fire Ins. Co., 18 Cal.4th 857 (clear policy language governs interpretation)
- Coca Cola Bottling Co. v. Columbia Casualty Ins. Co., 11 Cal.App.4th 1176 (discussion of following‑form endorsements and limits of incorporation)
- Furlough v. Transamerica Ins. Co., 203 Cal.App.3d 40 (statutory UM requirement does not extend to umbrella/excess policies)
- Matarasso v. Continental Cas. Co., 82 A.D.2d 861 (following‑form umbrella did not incorporate underlying UM because umbrella protects against third‑party liability only)
- Hartbarger v. Country Mut. Ins. Co., 437 N.E.2d 691 (same reasoning: umbrella/ excess policy limited to third‑party liability; omission of UM from exclusions not ambiguous)
- Mazzaferro v. RLI Ins. Co., 50 F.3d 137 (Second Circuit reversed trial court; excess policy’s third‑party limitation controls over endorsement-based arguments)