The Arkansas Supreme Court has denied an insurer’s appeal of a lower court finding that the language of its insurance policy at issue in a case involving an underinsured driver is ambiguous.
Philadelphia Indemnity Insurance Company Inc. was the insurer for Focus Inc., a non-profit entity serving disabled children and adults.
In May 2009 a bus driven by a Focus employee and carrying passengers whom Focus served was involved in a collision with another vehicle in which several passengers were killed and others seriously injured.
The driver of the other vehicle was found to be at fault. He was insured for liability with 21st Century Insurance.
“The policy had a property-damage limit of $25,000 per accident and bodily-injury coverage that provided a limit of $50,000 in the aggregate,” Justice John N. Fogleman explained in delivering the opinion of the Court. “Because most of the subsequent claims exceeded [the driver’s] policy limits, [his] vehicle was underinsured for the damages caused by its driver. At the time of the accident, Focus was insured by appellant for underinsured-motorist coverage with an alleged damage limit of $1 million.”
Philadelphia Insurance acknowledged its duty to pay the $1 million for the underinsured-motorist coverage and maintained that it had no further liability beyond that amount.
The insured passengers and the estates of the deceased passengers filed a counter claim against Philadelphia Insurance. Asserting that “Focus negligently failed to restrict its driver … from using her cell phone while driving the bus,” they contended that an additional $1 million in liability coverage was provided for in the business auto declarations of the liability policy.
Philadelphia Insurance maintained, however, that the policy was combined-single-limit (CSL) and filed a motion to dismiss.
The Craighead County Circuit Court denied Philadelphia’s motion and instead ruled that the policy was ambiguous.
At “issue is whether the insurance policy, which reflects liability coverage of ‘$1 million CSL’ and underinsured-motorist coverage of ‘$1 million CSL,’ provides an aggregate coverage of $2 million or a coverage limited solely to $1 million,” Fogleman wrote.
The Declarations Page of the contained a table of “Schedule of Coverages and Covered Autos.”
“That schedule of coverage provides that the liability coverage contains a limit of $1 million while the underinsured-motorist coverage also contains a limit of $1 million. The initials ‘CSL’ are designated beside each $1 million amount in the limit columns for both liability and underinsured-motorist coverage,” according to Fogleman.
The CSL term, he said, “is not defined in the 248-page policy, nor is it found anywhere else in the policy other than the ‘Schedule of Coverages and Covered Autos.'”
Fogleman also noted that an affidavit submitted by a senior vice president for Philadelphia Insurance “stated that the policy was a CSL policy and referenced a dictionary of insurance terms that defined CSL as combining the limits of bodily injury liability and property-damage liability.”
The definition did not, however, contain an underinsured-motorist coverage provision. Therefore, the circuit court was free to reject the CSL definition offered in the affidavit, Fogleman wrote.
Philadelphia also argued that sections in the policy state that if two or more of its policies issued to the same insured apply to the same “‘accident’ the aggregate maximum Limit of Insurance under all the Coverage Forms or policies shall not exceed the highest applicable Limit of Insurance under any one Coverage Form or policy.”
The Court rejected Philadelphia’s argument that the business auto liability coverage and the under-insured motorist coverage were actually provided under two separate policies, however. It pointed to the fact that “the liability coverage and underinsured-motorist coverage are nevertheless under the same coverage form,” adding that only a single policy number was listed in the case under review.
Philadelphia’s assertion that the lower court misconstrued the phrase “duplicate payments” was also rejected by the Court.
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