Personal Umbrella Policy Not Required to Incorporate the Statutory Terms of Uninsured Motorist Coverage

In Melissa Komorsky v. Farmers Ins. Exchange, et al. (No. B286443, filed 3/1/19, ord. pub. 3/29/19), a California appeals court held that there is no public policy mandating the inclusion of Insurance Code section 11580.2’s requirements for uninsured motorist (UM) coverage in a personal umbrella policy, even if the underlying primary policy is governed by the statute.

Plaintiff Melissa Komorsky’s mother, Linda Liker, was killed by an uninsured motorist. Linda Liker and her husband Alan had $250,000 in UM coverage under a primary auto policy issued by Farmers Insurance Exchange. The Likers also had a personal umbrella policy issued by Truck Insurance Exchange that attached an Endorsement Adding Uninsured/Underinsured Motorist Coverage with limits of a further $1 million.

Komorsky and Alan Liker both made UM claims but when Liker objected to Komorsky sharing in the UM benefits, she sued alleging breach of contract and bad faith against the insurers, and tortious interference against Liker. In a ruling on coverage, the trial court found that both Liker and Komorsky were entitled to UM benefits under the primary auto policy because the UM statute, Insurance Code section 11580.2, mandates UM coverage for “heirs” and the primary policy conformed to the statute. However, the court held that only Liker had a right to UM benefits under the umbrella policy because it was not governed by the UM statute and did not include nonresident relatives, such as Komorsky, in its definition of “who is insured.”

Farmers interpleaded the $250,000 primary limit with the court, and the parties settled on an allocation. The trial court then denied Komorsky’s motion for leave to amend to add causes of action for coverage by estoppel under the umbrella policy and for reformation. After denial of the motion for leave to amend, the trial court granted the insurers’ motion for judgment on the pleadings.

Insurance Code section 11580.2 states that: “A policy shall be excluded from the application of this section if the automobile liability coverage is provided only on an excess or umbrella basis.” However, Komorsky argued that the limitation applies only to the statute’s authorization to waive UM coverage but where an excess or umbrella policy does include UM coverage, the statutory requirements, including coverage for “heirs,” are incorporated as a matter of public policy, no matter what the insurance policy might specify.

The appeals court disagreed, stating that “[w]hether section 11580.2 applies to the uninsured motorist coverage in the Truck umbrella policy is a question of statutory construction. . . . We consider first the words of a statute, as the most reliable indicator of legislative intent. . . . Section 11580.2, subdivision (a)(1) includes the language, ‘A policy shall be excluded from the application of this section if the automobile liability coverage is provided only on an excess or umbrella basis.’ This language plainly and unambiguously provides section 11580.2’s requirements for uninsured motorist coverage do not apply to policies providing only umbrella or excess coverage, as courts have held without noting any ambiguity.”

The court went on: “Komorsky does not identify any purported ambiguity in the statutory language. Instead, she argues public policy compels the conclusion that any uninsured motorist coverage in an excess or umbrella policy that ‘follows form’ to the underlying primary coverage must satisfy the requirements of section 11580.2 ‘to avoid fracturing families in wrongful death claims.’ We disagree. We may not interpret the statute in a manner contrary to its plain language to conform to an intention the Legislature never expressed. . . . ‘We may not rewrite the statute to conform to an assumed intention that does not appear in its language.’”

The appeals court then confirmed the trial court’s construction of the umbrella policy’s “who is insured” provision as including only the Likers and any resident relatives, but not including Komorsky.

The court also disposed of Komorsky’s attempt to allege coverage by estoppel, stating: “As a general rule, where coverage does not exist under an insurance policy it cannot be created by estoppel. [] ‘[I]t is the general and quite well settled rule of law that the principles of estoppel and implied waiver do not operate to extend the coverage of an insurance policy after the liability has been incurred or the loss sustained.’”

The court noted that “[a]n exception to the rule against coverage by estoppel applies where a liability insurer defends an action against its insured without reserving the right to deny coverage.” (Citing Dollinger DeAnza Associates v. Chicago Title Ins. Co. (2011) 199 Cal.App.4th 1132 and Miller v. Elite Ins. Co. (1980) 100 Cal.App.3d 739.) However, “[t]he exception is inapplicable here . . . because Komorsky is not an insured under Truck’s uninsured motorist endorsement and Truck did not defend any action against her.”

Likewise, the Komorsky court found no basis for reformation to add her to the Likers’ umbrella policy. The court stated that: “A complaint for reformation based on mutual mistake must allege ‘facts showing how the mistake was made, whose mistake it was, and what brought it about, so that the mutuality may appear.’”  However, “[t]he proposed second amended complaint . . . does not allege the Likers intended the uninsured motorist coverage under the Truck umbrella policy to apply to Komorsky as the heir of an insured, alleges no facts showing why the endorsement does not reflect such a mutual intention, and alleges no facts showing the Likers knew of or suspected any unilateral mistake. Komorsky does not claim she could truthfully allege such facts.  We conclude the [proposed second amended] complaint fails to allege facts sufficient to justify reformation.”

And having found no grounds for either coverage by estoppel or reformation, the appeals court left intact the trial court’s dismissal by having granted the insurers’ motion for judgment on the pleadings.

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April 2, 2019