Hanfelder v. GEICO Indemnity Co. – 5/22/2018

June 7, 2018

Arizona Court of Appeals Division One holds that insurers must use clear policy language to effectively limit coverage to one underinsurance policy.

After an accident, a motorcyclist received the full amount up to policy limits from the other driver’s insurance company, which he alleged was not sufficient to cover all losses.  The motorcyclist had two underinsurance (“UIM”) policies:  one through GEICO Indemnity Company and the other through its wholly owned subsidiary, GEICO Casualty.  GEICO Casualty tendered its UIM policy limit but GEICO Indemnity denied coverage under its policy.  The motorcyclist brought a declaratory action over coverage and the trial court granted summary judgment for GEICO Indemnity.  The motorcyclist appealed.

The Court of Appeals reversed and remanded, holding that the policy language at issue failed to limit underinsurance coverage to a single GEICO entity.  Arizona law authorizes insurers to limit coverage to one policy when an insured has multiple polices from the same insurer or a group of insurers under common management.  A.R.S. § 20-259.01(H).  However, this provision is not self-executing and Arizona courts construe UIM statutes liberally in favor of coverage and construe exclusions strictly and narrowly.  The policy language at issue limited the insured to coverage under only one of the “separate policies or coverages with us,” but “us” was not defined.  The related term “we” was defined to mean only GEICO Indemnity and so the Court refused to read “us” broadly to include GEICO Casualty as well.

Judge Thompson authored the opinion; Judges Swann and Beene concurred.