Opinion ID: 724595
Heading Depth: 2
Heading Rank: 1

Heading: The Coverage Claim

Text: 9 It is undisputed that the United States is an additional insured under the terms of Weatherford's policy as one legally responsible for his acts or omissions because Weatherford was acting in the scope of his employment at the time of the accident. It is also undisputed that the terms of the policy purchased by Weatherford were ambiguous and would have been interpreted as providing for separate coverage for Sharon Luz's loss of consortium claim under California law. See Abellon v. Hartford Ins. Co., 212 Cal.Rptr. 852, 858-59 (Cal.App.1985). It is further undisputed that NHIC altered the terms of Weatherford's policy prior to the accident so as to define injury in a manner that would exclude separate coverage for loss of consortium claims. Finally, all parties agree that Weatherford is entitled as the named insured to the former higher coverage limitations under California law because NHIC did not provide him with adequate notice of this change in his coverage. Allstate Ins. Co. v. Fibus, 855 F.2d 660, 663 (9th Cir.1988) (when a renewal policy is issued and the insurer fails to clearly and conspicuously notify the named insured of the specific reduction in coverage, the insurer is bound by the prior greater coverage). The sole issue is whether the United States as an additional insured is similarly entitled to enforce the former higher coverage limitations against NHIC based on NHIC's inadequate notice to Weatherford. This Court reviews the district court's grant of summary judgment de novo. Jones v. Union Pacific R.R., 968 F.2d 937, 940 (9th Cir.1992). 10 NHIC asserts that the United States as an additional insured is not entitled to enforce the former higher coverage limitations against it as Weatherford would as the named insured. Unlike Weatherford, the United States relied on no prior coverage representations, making the inadequacy of notice to the named insured irrelevant. Because the United States was unaware that the prior terms of the insurance policy even existed until after the policy had been amended to reduce the coverage limitation, NHIC argues that the United States is entitled to no more than $100,000 coverage for both Jon Luz's personal injuries and his wife's loss of consortium claim under the revised terms of Weatherford's policy. NHIC relies on the Tenth Circuit's opinion in Government Employees Ins. Co. v. United States, 400 F.2d 172 (10th Cir.1968) (GEICO ). That case involved a U.S. serviceman who was involved in an automobile accident while acting in the scope of his employment. After the plaintiff recovered a judgment against the United States under the FTCA, the United States filed a third-party complaint against the serviceman's insurer asserting that it qualified as an additional insured under the terms of the serviceman's policy. The insurance company denied coverage, asserting an endorsement later added to the terms of the serviceman's original contract excluding the United States as an additional insured. The Tenth Circuit panel held that the subsequent endorsement excluding the United States as an additional insured was enforceable because the insurance company had provided the named insured with legally adequate notice of the change in coverage. Id. at 175. Even if the notice were inadequate, the Court went on to write that the United States, unlike the named insured, would not be entitled to assert the greater coverage against the insurance company because, unlike the named insured, it had not relied upon the assumption that the policy remains unaltered, for indeed, the third party has not relied at all on the insured's contract of insurance. Id. at 175-76. 11 With all due respect to the Tenth Circuit, we find GEICO unpersuasive. The principle of reasonable reliance is a corollary of the well-accepted principle that, under California law, the renewal of an insurance policy means the continuation of coverage on substantially the same terms. American Cas. Co. v. Baker, 22 F.3d 880, 893 (9th Cir.1994). A renewed insurance policy is chronologically new but perpetuates the terms and conditions of the original policy unless the parties provide otherwise. Sandgren v. Fire Ins. Exch., 134 Cal.Rptr. 590, 591 (Cal.App.1976). Here there was a renewal with no agreement to change the material terms of the policy limits. Based on the above caselaw, any material change was ineffective, meaning that the original policy limits continued in force. As one of a class for whose benefit the insurance contract was expressly made, the United States is entitled as an additional insured to enforce the terms of the policy against the insurer as a third party beneficiary even though it was not an actual party to the insurance contract. Northwest Mut. Ins. Co. v. Farmers Ins. Group, 143 Cal.Rptr. 415, 421-22 (Cal.App.1978). Having determined that NHIC's unilateral action was insufficient to alter the former terms of the policy's coverage limitations, that the terms of those former coverage limitations continued unabated in the renewed policy, and that the United States is entitled to enforce those terms against the insurer as a third party beneficiary, we see no need for actual reliance on the part of the additional insured. As a result, we conclude that the United States is entitled to assert the former higher coverage limitations against NHIC.