(Editor's note: In this month's issue, we introduce a new "Down to Cases" columnist, Barry Zalma, Esq., CFE. Barry is an attorney and consultant. We hope you enjoy his columns.)

Insured's misunderstanding cannot overcome clear policy languageOn July 20, 2001, a man sustained severe wrist and neck injuries when a car he was driving was struck in the rear by a vehicle that itself had been rear-ended by another vehicle. That vehicle was owned by the state of Tennessee and was driven by a state employee, who was acting within the scope of her employment. This woman was held to be solely at fault for the accident.Shortly before the accident, the injured man had moved to Tennessee from Georgia. He bought an auto insurance policy from an agent who represented the insurance company that had issued his previous policy, when he was a Georgia resident. The injured man later stated in an affidavit that the agent told him that Tennessee did not require drivers to have auto liability insurance and that a high percentage of Tennessee drivers were uninsured.The injured man's policy had a $1 million excess liability endorsement. The man said the agent told him that "to make my policy work, the policy limits would have to be synchronized" and "the underlying coverages would have to match." Relying on this information, the man said he raised the limits of his uninsured/underinsured motorist coverage to the same amounts as those required for bodily injury under the endorsement, which was $250,000 per person and $500,000 per accident. After the man received his new policy, he said he reviewed the first five pages–the policy declarations and summary–with the agent. A description of the policy's "Optional Excess Protection" appeared on the third page. It said this $1 million of coverage applied to all "covered exposures" and "additional covered exposures." This section of the summary also stated the aforementioned underlying bodily injury limits the insured was required to maintain. (The split limits also required $100,000 in property damage per accident. As an alternative to the $250/$500/$100 split limits, the insured could opt for a $500,000 combined single limit.)Directly underneath this provision, under the heading of General Policy Information, appeared this statement: "The coverage and limits shown here are subject to the restrictions, conditions, and exclusions of the policy and its endorsements." One of the applicable endorsements was entitled "Optional Excess Liability Coverage." The 12-page endorsement read, in pertinent parts, as follows:"We will pay damages for which a covered person becomes legally liable due to an occurrence resulting in personal injury, bodily injury, or property damage, up to the limit of liability shown in the Coverage Summary for Optional Excess Liability. Any payment is subject to the minimum retained limit, the exclusions listed in the section called Losses We Do Not Cover and the other provisions of this endorsement."Among the exclusions listed under Losses We Do Not Cover was: "Benefits payable to you or anyone else under any … Uninsured or Underinsured Motorist … coverage."After the accident, the injured man sought coverage for his expenses, stating that the policy should provide benefits above the policy's uninsured/underinsured coverage limits. After the insurer rejected the claim, the insured man and his wife sued the insurer, as well as the other two drivers involved in the accident and the state of Tennessee. Eventually, the two other drivers were dropped from the litigation, leaving only the insurance company and the state of Tennessee.The insurer filed a motion for summary judgment with the complete insurance policy attached. A trial court granted the insurer's motion, finding that the excess liability endorsement's exclusion for uninsured/underinsured benefits was clear and that the policy's coverage summary "does not create an ambiguity."Later, the trial court conducted a non-jury trial with the state of Tennessee as the only remaining defendant. Under Tennessee law, the state's liability for tort damages was limited to $300,000 per claim. Given the injured man's large medical expenses and the effect of his injuries on his life, the court said it could "easily set the damages" at the maximum $300,000 allowed by law. It awarded that amount to the injured driver.The injured man and his wife appealed the trial court's decision to grant summary judgment to the insurance company. The plaintiffs argued that the conflict between the broad description of excess insurance in the policy coverage summary and the terms of the Optional Excess Liability Coverage endorsement created an ambiguity that must be resolved in their favor. In the alternative, they alleged that the injured man's recollection of a misrepresentation made by the agent created a genuine dispute as to a material fact, which precluded summary judgment. The insurer, however, pointing to the aforementioned exclusion, maintained that the insurance policy's excess coverage did not apply to the uninsured/underinsured motorist claim at all.The appeals court acknowledged that the policy summary's description of Optional Excess Protection stated that it "applies to all 'covered exposures' and 'additional covered exposures,'" but said that wasn't the whole story."The point of a summary portion of an insurance policy is just that, to provide a brief summary of the contents of the policy," the appeals court said. "It is impossible to include all of the important provisions of the policy in the summary, because then it becomes much more than a summary. The endorsement containing the exclusionary language is plainly alluded to in the summary, alerting the insured that there may be possible limitations to the policy. When read as a whole, the policy and its intent are clear."In regard to the misrepresentation allegation, the trial court had found that it wasn't supported by the injured man's affidavit, and the appeals court agreed.In the affidavit, the injured man said, "I believe(d) that my excess coverage protection would apply to uninsured motorist claims because the policy was changed to make the uninsured motorist limits the same as the bodily injury limits."The trial court, however, had disagreed with that conclusion: "The Court does not interpret this as meaning that the insurance agent promised or stated that the umbrella policy would contain extra UM coverage. The affidavit returns again to his subjective belief that his umbrella policy somehow provides UM coverage. Such is not the case."In their appeal, the plaintiffs argued that the insurer took an unreasonable amount of time in raising its policy exclusion defense, and therefore it should be stopped from requiring the injured man to recollect, with more precision than already contained in his affidavit, the exact statements of the agent. The insurance company, on the other hand, contended that the affidavit failed to establish either that the injured man reasonably relied to his detriment upon the agent's statements or that a genuine issue of material fact existed. It said the court must look to the actual representations made by the agent, instead of any subjective conclusions the injured man may have drawn from them.The appeals court examined the policy's coverage summary, which it said was vital to the issue at hand. The summary's description of Optional Excess Protection stated in capital letters that the coverage provided is "EXCESS LIABILITY." While the summary specified the underlying bodily injury and property damage limits that had to be maintained, the appeals court noted that the "provisions of the summary say nothing at all about uninsured motorist coverage.""It is clear that 'excess liability' means liability of the insured," the appeals court said. "It applies to all 'covered exposures' and 'additional covered exposures.' The insured has no 'exposures' where uninsured/underinsured motorist coverage is concerned. Basically, (such) first-party insurance provides insurance money to the insured because of the 'exposure' of some at-fault third party who injures the insured."As did the trial court, we must separate what the agent actually told (the plaintiff) from what (the plaintiff) assumed therefrom," the court continued. "The agent told him that for his excess coverage protection to work properly, the underlying coverages would have to match. This is true under the very opening provisions of the Optional Excess Protection … but deals only with liability coverage, and the agent did not represent otherwise."No further representations are asserted as to the agent," the court said, but the injured man "then makes the assumption" that since the underlying limits for his uninsured/underinsured coverage were the same as the bodily injury limits required by the Optional Excess Protection Endorsement, he would have "excess coverage if I was in a wreck with an uninsured or underinsured driver and my damages exceeded the uninsured motorist limits.""This is simply an unjustified assumption" on the part of the injured man, the court said.The appeals court said it was "very unfortunate" that the plaintiff was unable to obtain full compensation for his injuries from the at-fault party, the state of Tennessee, whose partial governmental immunity limited such claims to $300,000. "However, this fact provides no basis for visiting such liability on the uninsured/underinsured motorist carrier," the appeals court said, "which is after all not at fault, and must answer solely under the provisions of its insurance contract." It upheld the trial court's decision.Holt v. Pyles, No. M2005-02092-COA-R3-CV; 2007.TN.0000592 (www.ver-suslaw.com) (Tenn.App. 04/24/2007).Barry Zalma, Esq., CFE is a California attorney. His practice emphasizes the representation of insurers and others in the business of insurance. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He provides expert witness testimony and consults with plaintiffs and defendants concerning insurance coverage, insurance claims handling and bad faith. He has qualified as an expert in state and federal courts in California, Mississippi, Texas and New Mexico, as well as in the Grand Caymans. He can be reached at [email protected]. His consulting practice's Web site is www.zic.bz.