Court: Court of Appeals of Arizona; June 27, 1991; Arizona; State Appellate Court
The court affirms the trial court's summary judgment, ruling that an umbrella policy is exempt from the requirements of A.R.S. 20-259.01, the Uninsured Motorist Act. The case revolves around Doris Ormsbee, who, after an insurance review by an Allstate agent in 1983, purchased a personal umbrella policy (PUP) for $1,000,000 while maintaining a primary automobile policy with liability limits of $100,000/$300,000 and underinsured motorist (UIM) limits of $100,000. Allstate did not offer UIM or uninsured motorist (UM) coverage with the umbrella policy, and these coverages are not mentioned in the policy's liability section. The PUP specifies that it provides only excess insurance and requires the insured to maintain liability coverage. In 1987, Ormsbee sustained injuries in an accident involving an underinsured motorist, Lyle Jaress, who had $100,000 in liability coverage, which was insufficient to cover her damages. She received $100,000 in UIM benefits from her primary policy and $25,000 from her grandson's policy, but argued she was entitled to an additional $1,000,000 under the umbrella policy due to Allstate's failure to offer UIM coverage. The court notes that the Gilmore case, while not involving an umbrella policy, supports this conclusion by clarifying that umbrella insurance is designed to cover catastrophic losses exceeding the limits of underlying coverage, which must be maintained by the insured.
The policy in question is not an umbrella policy, as it serves as the sole automobile insurance for the relevant party. The Allstate policy, however, is recognized as a true umbrella policy. The supreme court, referencing Professor Appleman, acknowledged that umbrella policies play a crucial role in managing high-risk liabilities at a low premium cost. They typically extend coverage beyond standard automobile and homeowner policies, often providing substantial additional limits. Appleman criticized the judicial classification of umbrella policies as automobile liability insurance, arguing that such interpretations harm consumers by potentially leading to increased premiums or reduced availability of coverage.
In the Gilmore case, the court concluded that automobile liability insurance policies fall under the definition provided in A.R.S. 20-259.01(A), (B), and (C), except for true umbrella policies, which should be exempt from the Uninsured Motorist Act. The rationale for this exemption is that the act aims to protect injured motorists by ensuring they can recover amounts equivalent to minimum statutory coverage from primary policies, while umbrella policies are supplementary. This position aligns with rulings in Moser v. Liberty Mutual Insurance Co. and O’Hanlon v. Hartford Accident and Indemnity Company, as well as the Florida district court's reasoning in Continental Insurance Company v. Howe. The court affirmed this interpretation, emphasizing that requiring umbrella policies to provide uninsured motorist coverage does not advance public policy. The policy also offers excess liability insurance related to aircraft and residences but excludes coverage for business-related vehicle or property activities.
