Tortfeasor’s Coverage Stands in UIM Claim

By Don R. Sampen, published, Chicago Daily Law Bulletin
[January 10, 2017]

The 5th District Appellate Court recently held that underinsured motorist coverage language limiting the insurer’s obligation to the amount by which the limit of such coverage exceeded the at-fault driver’s liability coverage, was not ambiguous, despite an “other insurance” clause in the policy arguably giving rise to an ambiguity.

The case is Sherrod v. Esurance Insurance Services Inc., 2016 IL App (5th) 150083 (Nov. 21, 2016). The plaintiff insured, Apryl Sherrod, and was represented by the Gogel Law Firm in St. Louis. O’Hagan LLC represented the insurer Esurance.

The plaintiff and his daughter were struck by a drunken driver, Andrew Fraticelli, in 2011. The daughter was killed and the plaintiff injured.

Fraticelli was covered under an insurance policy with liability limits of $100,000 per person and $300,000 per occurrence. Under the plaintiff’s settlement with Fraticelli’s insurer, the plaintiff and her daughter’s estate received $100,000 each.

The plaintiff also had automobile coverage with Esurance. The Esurance policy provided underinsured motorist limits of $50,000 per person and $100,000 per occurrence. By express language in the policy, however, the UIM coverage was payable only to the extent that the UIM limit exceeded the limits of the liability insurance paid on behalf of the at-fault driver.

In addition, the Esurance policy contained an “other insurance” clause applicable to the UIM coverage. That clause limited Esurance’s obligation if other UIM insurance were also available to the plaintiff. The clause included language stating that the coverage applicable to a vehicle not owned by the plaintiff “shall be excess over any collectible insurance providing such coverage on a primary basis.”

The plaintiff submitted a claim for UIM coverage from Esurance. It denied the claim on the ground that the plaintiff and her daughter’s estate each had already received an amount that exceeded the UIM policy per person limit of $50,000.

The plaintiff contended, however, that the other-insurance clause obligated Esurance to apply its $50,000 limit as excess over any other collectible insurance, or at least that the clause was ambiguous in that regard.

The trial court agreed and granted summary judgment in favor of the plaintiff, finding that Esurance owed each the plaintiff and her daughter’s estate an additional $50,000. Esurance took this appeal.

Analysis

In an opinion by Justice S. Gene Schwarm, the 5th District reversed. He noted initially that the Esurance policy’s limitation on UIM coverage to the difference between the UIM policy limit and the amount the insured recovered under the tortfeasor’s liability policies was consistent with the terms of the Illinois Insurance Code, 215 ILCS 5/143a-2(4).

He further observed that the plaintiff even conceded that, based on this limitation, Fraticelli’s vehicle did not constitute an “underinsured motor vehicle” and that the Esurance policy’s setoff provisions were unambiguous.

Schwarm then turned to the other-insurance clause that, at least in the plaintiff’s view, required Esurance to pay UIM coverage in excess to the amounts recovered from the tortfeasor.

Esurance countered with the argument that the other insurance provisions were limiting provisions that did not create coverage and that, in context, they referred only to other primary UIM coverage, not the tortfeasor’s liability coverage.

Schwarm noted that an other insurance clause comes into play only when a policy is otherwise triggered and the insurer becomes obligated to pay. In this case, however, according to Schwarm, there was no insurance under the Esurance policy — due to the availability of the tortfeasor’s own liability coverage — so there could be no “other” insurance with which Esurance could share the loss.

The plaintiff relied on a Missouri case, which apparently bought the ambiguity argument: Hartford Underwriters Insurance Co. v. Ledbetter, 353 S.W.3d 645 (Mo. Ct. App. 2011). Schwarm noted, however, that the case was not binding in Illinois and that, moreover, the policy here contained an Illinois choice-of-law provision.

In sum, Schwarm said that an other insurance provision does not create an ambiguity where an unambiguous provision otherwise bars coverage. Thus, the plaintiff’s attempt to rely on the other insurance provision to create an ambiguity failed.

The court reversed the judgment in favor of the plaintiff and remanded for entry of judgment in favor of Esurance.

Justice Richard P. Goldenhersh dissented, arguing that the policy was ambiguous.

Key points

• UIM policy provisions that limit such coverage to the difference between the policy’s stated UIM limit and the liability coverage provided the at-fault driver are valid, enforceable and consistent with the Illinois Insurance Code.
• Where coverage is barred by an unambiguous policy provision, the fact that another policy provision is ambiguous will not create coverage.
• An other insurance clause becomes operable only when a policy is otherwise triggered and the insurer becomes obligated to pay.