GEICO v. Sharon Bell, administratrix of the estate of Kaysha Bell: An insurer’s denial of liability coverage to an individual because of an applicable liability exclusion (i.e., household exclusion) or definition does not trigger the availability of uninsured motorist coverage to the individual under the same policy.

• Pertinent Facts

In June 2013, Kaysha Bell was killed in a single-vehicle accident. She was a passenger in a 2012 Honda, of which she was the co-owner with Shandarius Steiner, who was driving at the time of the accident. Steiner and Bell purchased an insurance policy from GEICO, that included uninsured motorist (“UM”) coverage.

Bell’s mother, on behalf of the estate, sued Steiner, GEICO, and others (under the Dram Shop Act) for damages for Bell’s death, and obtained a judgment in the amount of $1,000,000.00. The trial court included in its judgment that the GEICO policy provided uninsured motorist coverage in accordance with the policy’s definition of “uninsured auto.” GEICO filed a post-judgment motion contesting the trial court’s conclusion that the Honda was an uninsured auto under the policy. GEICO also sought remittitur of the judgment against it to $50,000.00, which were the limits of the policy. The trial court granted the remittitur, but denied the post-judgment motion. GEICO appealed. GEICO v. Sharon Bell, administratrix of the estate of Kaysha Bell [Ms. 2140745 Mar. 10, 2017], — So.3d — (Ala.Civ.App. 2017).

• Relevant Policy Provisions

The GEICO policy provides that GEICO will “pay damages which an insured becomes legally obligated to pay because of … bodily injury, sustained by a person.” However, it contains the following exclusion to that coverage, known as the “household exclusion”: “[b]odily injury to any insured or any relative of an insured residing in his household is not covered.” The household exclusions would apply to exclude liability coverage for bodily injury to Bell.

Under the UM coverage, an “insured auto” is a vehicle that is “described in the declarations page and covered by the bodily injury   coverage of this policy,” whereas an “uninsured auto” is defined as follows:

“[A] motor vehicle which has no bodily injury liability bond or insurance policy applicable with liability limits complying with the financial responsibility law of the state in which the insured auto is principally garaged at the time of an accident. This term also includes an auto whose insurer is or becomes insolvent or denies coverage and an auto for which the limits of liability under all bodily injury insurance policies available to the injured person are less than the damages which the injured person is legally entitled to recover.”

An “uninsured auto” specifically does not include an “insured auto.”

• Arguments of the Parties

On appeal, Bell argued that the Honda, which was identified in the dec page and for which Steiner/Bell had paid a premium for bodily-injury liability coverage, was converted to an “uninsured auto” because of the language used in the definition of “insured auto” in the UM coverage section of the policy. Bell argued that because the policy excludes liability coverage for Bell’s death under the household exclusion section of the policy, the Honda is not actually covered by the bodily injury liability provisions, and becomes and uninsured auto.

GEICO argues that Honda is an “insured auto” because the vehicle is described in the dec page, and the same vehicle cannot be both an “insured auto” and an “uninsured auto” under the same policy.

• Analysis of the Court

The definition of “insured auto” contained in the UM coverage section of the GEICO policy requires the vehicle to be named in the dec page and be covered by the bodily injury liability coverage of the policy. It is undisputed that the Honda is described in the dec page. The issue is whether the Honda is covered by the bodily injury liability coverage of the GEICO policy. The court found Bell’s argument to be a strained and unreasonable construction of the policy, because under Alabama law, UM coverage and policies deal with the insuring of the vehicle, not the motorist.

The Alabama Supreme Court has previously answered the issue of whether an insurance policy can exclude from its definition of uninsured auto a vehicle that it defined as being described within the policy.[1] A vehicle that is insured under an insurance policy “does not become uninsured because liability coverage may not be available to a particular individual.”[2] This is supported by the extensive body of Alabama law allowing insurance companies to draft exclusions and definitions into a policy to protect itself.[3]

In a case that is directly on point with the issues at hand in the instant case, the Supreme Court held that “when the insurance carrier of the vehicle involved in an accident denies liability coverage to an individual because of an applicable liability exclusion or exclusionary definition, that denial does not trigger the availability of uninsured motorist coverage to that individual under the same policy.”[4]

Bell further alleged that the subject policy violates Alabama’s Uninsured Motorist statute (Alabama Code § 32-7-23) because the policy is more restrictive than the statute. Bell contends the statute does not prohibit an insured who is denied coverage under the bodily injury liability section of the policy from recovering under the UM section of the policy. The court agreed that such a recovery was not prohibited, but neither is it required.[5] In keeping with prior caselaw, the Alabama Court of Civil Appeals rejected Bell’s argument that the GEICO policy, and specifically the household exclusion, violated the Alabama Uninsured Motorist statute (Alabama Code § 32-7-23).

The appellate court held that an insurer’s denial of liability coverage to an individual because of an applicable liability exclusion or definition does not trigger the availability of uninsured motorist coverage to the individual under the same policy. As such, the judgment of the trial court was reversed and the case remanded with instructions to enter judgment in favor of GEICO.

[1] See Watts v. Preferred Risk Mut. Ins. Co., 423 So.2d 171 (Ala. 1982).

[2] Watts, 423 So.2d at 175.

[3] See Ex parte O’Hare, 432 So.2d 1300 (Ala. 1983).

[4] Hall v. State Farm Mut. Auto. Ins. Co., 514 So. 2d 853, 855 (Ala. 1987); see also Allstate Ins. Co. v. Hardnett, 763 So.2d 963, 964 (Ala. 2000) (holding: “This Court has consistently upheld exclusions within an uninsured-motorist portion of a policy that deny coverage for a vehicle that is covered under the liability portion of the same policy.”); Phyall v. Allstate Ins. Co., 551 So. 2d 303 (Ala. 1989).

[5] See Mathis v. Auto-Owners Ins. Co., 387 So.2d 168 (Ala. 1980) (citing Lammers v. State Farm Mut. Auto. Ins. Co., 261 So.2d 757 (Ala.Civ.App. 1972) (holding that household exclusions have been repeatedly upheld in UM policies)).

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Photo by Isaías Campbell.