Opinion ID: 1572709
Heading Depth: 1
Heading Rank: 1

Heading: The Automatic Termination Clause.

Text: United first argues that it has no coverage because the policy was automatically terminated when the Victorias became insured by State Farm. United relies on this clause in its policy: If you obtain other insurance on your covered auto, any similar insurance provided by this policy will terminate as to that auto on the effective date of the other insurance. United argues that, while the policies are different in some respects, they are nevertheless similar for purposes of the automatic termination clause. They say this is so because the policies cover the same vehicle and provide the same general type of coverage even though there were differences in the policies, such as the limits of liability. The Victorias respond that (1) this automatic termination clause violates Iowa Code section 515D.4 (1993), which provides the permitted grounds for cancellation of a policy; (2) the automatic termination provision is so ambiguous and confusing that it is unenforceable; (3) United is estopped from enforcing it; (4) there was no proof of the insured's intention to cancel the United policy by buying a replacement policy; and (5) the United and State Farm policies were not similar. Because we resolve the issue on the fifth argument, the lack of similarity of the policies, we do not address the remaining arguments raised by the Victorias. The United policy does not define similar. United argues that policies with different limits of liability are nevertheless similar for purposes of this clause if they provide the same general type of coverage. Here, United's policy provided liability coverage of $250,000 per person and $500,000 per accident, while State Farm's limits were $100,000 and $300,000, respectively. United argues that an insured can obtain lower limits of liability under a second policy and still have similar coverage. It might well be the understanding of an insurance professional that these policies are similar. However, to an average policy buyer, a policy with substantially lower limits would not likely be viewed as similar. When the consequences of buying a similar policy are so serious as to cause an automatic termination, an insured should be informed as to what constitutes similar coverage. We have said that, [w]hen interpreting ambiguous words in insurance contracts, the language should be interpreted from the viewpoint of an ordinary person, not a specialist or expert. Steinbach v. Continental W. Ins. Co., 237 N.W.2d 780, 782 (Iowa 1976). As one court concluded in a similar case, [s]imilar is not defined by the policy and may be used in English to mean the same or identical though it is defined as showing some resemblance; related in appearance or nature; alike though not identical. American Heritage Dictionary 1206 (1979). It is difficult to imagine being called upon to interpret a more imprecise term. This inherent vagueness fully justifies the conclusion that the term similar is ambiguous.... The rules require the court to resolve the ambiguity in favor of the insured and interpret the provision in its most inclusive sense, for the benefit of the insured. Continental Cas. Co. [v. Phoenix Const. Co.], 46 Cal.2d [423,] 438, 296 P.2d 801, [810 (1956)]. The [two policies] are not the same; they provide different limits for third party liability. This difference is likely to be the most important and significant difference in the eyes of the insured. Motors Ins. Corp. v. Bodie, 770 F.Supp. 547, 550 (E.D.Cal.1991) (footnote omitted) (applying California law) (policy providing bodily injury coverage of $25,000/$50,000 and property damage coverage of $10,000 not similar to policy providing bodily injury coverage of $15,000/$30,000 and property damage coverage of $10,000); accord Employers Mut. Cas. Co. v. Martin, 671 A.2d 798, 801 (R.I.1996) ($300,000 liability coverage under one policy and $200,000 under another; policies not similar under automatic termination provision). This court applies an objective test to determine the existence of an ambiguity. The question is whether a genuine uncertainty exists as to which of two or more possible meanings is the proper one. FDIC v. American Cas. Co., 528 N.W.2d 605, 608 (Iowa 1995). When an insurance policy is reasonably susceptible to two different interpretations, it will be construed in favor of the insured. The differences in the policies are apparent. In addition to the disparate limits of liability, the State Farm policy provides no fault coverage and emergency road services, while the United policy does not. The United Fire policy includes underinsured motorist coverage, which the State Farm policy apparently does not. The coverage purchased under the State Farm policy is not similar for purposes of the automatic termination clause, and we therefore affirm on that issue.