Los Angeles Uninsured Motorist Attorney Barry P. Goldberg counsels those injured by “underinsured” motorists, and their attorneys, to become familiar with the Uninsured Motorist Statute and to always read the applicable insurance policies. After appropriately settling with the underinsured motorist, with all of the attendant conditions and proof, it can sometimes be a task to figure out what amount is owed when there are multiple Uninsured Motorist insurers on the particular risk. Generally, Underinsured Insured Motorist losses should be allocated on a pro-rata basis between the multiple insurers—-but, not always!
California Insurance Code § 11580.2, the uninsured motorist law, creates a statutory scheme to protect “innocent drivers against losses caused by negligent and financially irresponsible motorists.” State Farm Mut. Auto Ins. Co. v. Yang (1995) 35 Cal.App.4th 563, 567-68. A fair case can be made that drivers that carry the state minimum liability coverage of 15/30/5 (set in 1974) are “financially irresponsible motorists.”
Section 11580.2 (b) defines “uninsured motor vehicle” to include “an ‘underinsured motor vehicle’ as that term is defined in [section 11580.2,] subdivision (p).” That subdivision defines an “[u]nderinsured motor vehicle” as “a motor vehicle that is an insured motor vehicle but insured for an amount that is less than the uninsured motorist limits carried on the motor vehicle of the injured person.” Section 11580.2 (p)(2). Most insurance policies include a similar or identical definition for “underinsured motor vehicle.”
To confuse matters, many insurance policies contain an authorized statutory exclusion [§ 11580.2(c)(2)] commonly known as the “excess insurance clause'” which was partially designed to prevent double recovery in situations where more than one policy’s uninsured motorist protection is involved, It also attempts to ensure the carriers that no company will have to pay more than its fair share of the loss. (See, California State Auto. Assn. Inter-Ins. Bureau v. Huddleston (1977) 68 Cal.App.3d 1061, 1068.)
However, the fair allocation of UIM losses was further addressed by the Legislature in § 11580.2(d): “Subject to paragraph (2) of subdivision (c), the policy or endorsement may provide that if the insured has insurance available to the insured under more than one uninsured motorist coverage provision, any damages shall not be deemed to exceed the higher of the applicable limits of the respective coverages, and the damages shall be prorated between the applicable coverages as the limits of each coverage bear to the total of the limits.” (Emphasis added.)
In most cases, it is simply a mathematical calculation of comparing the two applicable UIM coverages and prorating them. For example, if driver has $50,000 uninsured motorist coverage and was borrowing a friend’s car that also had its own $50,000 uninsured motorist coverage, then the UIM damages would be split between the carriers 50/50, and so on.
Essentially, where the proration provision is included in a UIM insurance policy, it must be given effect. Allstate Ins. Co. v. Mercury Ins. Co. (2007) 154 Cal.App.4th 1253, 1260. Where multiple automobile insurance policies are applicable, an insurance policy containing the pro-rata provision takes precedence over an insurance policy providing that it is excess coverage. Prieto v. State Farm Mut. Auto. Ins. Co. (1969) 268 Cal.App.2d 891, 893-94. Where two automobile insurance policies provide uninsured motorist coverage, and one policy contains an excess coverage clause in its “other insurance” provisions while the other contains a statutory proration clause, the proration clause takes precedence. Planet Ins. Co. v. United Services Automobile Assn. (1994) 23 Cal App.4th 1256, 1262.
Many insurance policies attempt to side-step this rule and include creative “exclusions” in order to avoid paying a proportional share of UIM damages. The one to look for in the policies is the “statutory exclusion” of section 11580.2 (c)(2), excluding UIM coverage where an insured suffers bodily injury “while in or upon or while entering into or alighting from a motor vehicle other than the . . . motor vehicle [described as covered under this section] if the owner thereof has insurance similar to that provided in this section.” See Darrah v. California State Automobile Assn. (1968) 259. Cal.App.2d 243, 246; upholding the exclusionary language in the policy.
With limited exceptions, the “statutory exclusion” is not automatically applied because the section was designed to prevent double recovery. See, California State Auto. Assn. Inter-Ins. Bureau v. Huddleston (1977) 68 Cal.App.3d 1061, 1068. Where the UIM damages are pro-rated—there is no double recovery. Although section 11580.2(c) does not expressly require that the exclusion be included in an auto policy in order to apply, it does not prohibit an insurer from forfeiting the statutory exclusion by not including the language in the policy. (See, e.g., Utah Property & Casualty Ins. Etc. Assn. v. United Services Auto. Assn. (1991) 230. Cal.App.3d 1010, 1019.
Based upon the foregoing, I urge policyholders and their counsel to carefully examine the applicable UM/UIM policies to make certain that the damages will be pro-rated. As in any “insurance coverage” analysis, you must always start with the actual policies in effect at the time of the loss. An insured can obtain the policy by asking his agent, or customer service representative, for an “exemplar” policy form. This step is missed by many attorneys. While it is true that most situations will call for proration, because it takes precedence, there are circumstances where the statutory exclusion will exclude UIM coverage.
For more information about blog author and attorney Barry P. Goldberg’s uninsured and underinsured motorist expertise, please visit his web page, Los Angeles Uninsured Motorist Attorney.
Call Mr. Goldberg today for a free consultation. (818) 222-6994