Opinion ID: 771956
Heading Depth: 2
Heading Rank: 2

Heading: Effects of Failure to Maintain Underlying Insurance

Text: 26 The remaining issues in the case involve the appropriate interpretation of the policy's provisions in connection with the failure to maintain underlying uninsured motorist coverage. These issues are more perplexing. As noted above, the umbrella policy consists of the nine-page booklet, the uninsured motorist addendum, the declarations page, and four pages of endorsements. The Your Duties to Us section of the nine-page booklet and the uninsured motorist addendum both address the effect of a failure to maintain underlying insurance. The former states that [i]f the required underlying limits are not maintained, you will be responsible for the underlying limit amount of any loss. However, the latter provides that [i]f these underlying limits are not maintained, this coverage will not apply. Thus, one provision suggests that in such a circumstance, an insured will merely be responsible for any loss up to the underlying limits before gaining access to the umbrella coverage, while the other provision indicates that the umbrella coverage will not be available to the insured at all. David Israel argues that these two provisions when read together create a fundamental ambiguity regarding the effect of an insured's failure to maintain underlying coverage. 5 27 State Farm responds that the Your Duties to Us section also states that We may not provide coverage if you refuse to... maintain your underlying insurance. The uninsured motorist addendum's more definite statement that coverage will not be available if underlying limits are not maintained is in no way inconsistent with this earlier provision, State Farm argues, and the addendum's more definite statement may not simply be read out of the policy. State Farm also argues that in any case, as found by the district court, the Your Duties to Us section of the umbrella policy applies in the context of liability coverage only, and is not relevant to uninsured motorist claims. In support of this argument, State Farm points to language in the Your Duties to Us section requiring an insured to notify State Farm if a suit is filed against him or her, a duty that would appear to be applicable only in the context of liability coverage, where the insured would be a defendant. 28 Interpreting the provisions of the policy addressing underlying coverage thus requires a determination of whether the Your Duties to Us section applies to the uninsured motorist coverage and, if so, a further determination of whether the Your Duties to Us language, in combination with the language in the uninsured motorist addendum, creates an ambiguity. 29 With regard to the applicability of the Your Duties to Us section, Israel argues that the uninsured motorist addendum must necessarily be read with reference to the entire nine-page Personal Liability Umbrella Policy booklet, including the Your Duties to Us section. For instance, Israel points out that while the uninsured motorist addendum does not define such crucial terms as you or insured, any detailed understanding of the coverage described in the uninsured motorist addendum necessarily depends on the definitions of these terms as set out in the nine-page booklet. Israel argues that nothing in the policy language suggests that while the Definitions section of the nine-page booklet applies to the uninsured motorist addendum, the Your Duties to Us section does not. Israel also disputes the district court's holding that all the conditions imposed in the latter clearly refer to the liability cover[age] of the policy (emphasis in original). He argues that on the contrary, these conditions must also be read as applying to uninsured motorist coverage, since, for example, this section is the only place in the policy that states that the insured is required to notify State Farm of an accident, an obvious prerequisite to any uninsured motorist claim. Finally, while Israel does not raise this point, it is also worth noting that the uninsured motorist addendum expressly states, All other provisions of this policy apply, thereby arguably incorporating the Your Duties to Us section of the nine- page booklet. 30 If the Your Duties to Us section does apply to the uninsured motorist coverage, the question arises whether the underlying coverage provision in Your Duties to Us conflicts with the underlying coverage provision in the uninsured motorist addendum, creating an ambiguity under Connecticut law sufficient to justify construing the policy against the insurer as drafter of the insurance contract. We have found no Connecticut precedent--and none has been cited to us--that is directly on point. Both parties point out that Connecticut courts have set out broad state-law principles of policy construction and interpretation that must provide the background for resolving the present question. Under Connecticut law, terms in a policy are to be construed from the perspective of a reasonable layperson in the position of the purchaser of the policy, Ceci v. Nat'l Indem. Co., 622 A.2d 545, 547 (Conn. 1993), and any ambiguity in the policy's terms must be construed against the insurer as drafter of the contract, see Streitweiser v. Middlesex Mut. Assurance Co., 593 A.2d 498, 500 (Conn. 1991). On the other hand, these rules may not be applied unless the terms or provisions in question are indeed ambiguous, and such ambiguity is not demonstrated by the mere fact that the parties advance different interpretations of the language in question. See Stephan v. Pennsylvania Gen. Ins. Co., 621 A.2d 258, 261 (Conn. 1993). In addition, we note that in the context of primary uninsured motorist policies, the Connecticut courts have repeatedly held that a limitation of liability on uninsured motorist coverage must be construed most strongly against the insurer. See, e.g., Streitweiser, 593 A.2d at 500; American Universal Ins. Co. v. DelGreco, 530 A.2d 171, 181 (Conn. 1987). 31 While we are aware of these general principles, we are not sure how the Connecticut courts would apply them to the specific facts of this case. In particular, it is not clear to us whether Connecticut's strong public policy in favor of uninsured motorist coverage, see generally Streitweiser, 593 A.2d at 500-01, and the resulting presumption against an insurer limiting this coverage, see id. at 500, have any application in the context of an umbrella policy generally or in this case in particular. In addition, we have found no case--nor has one been cited to us--that specifically addresses whether a policy is ambiguous when it first states that in a particular circumstance coverage may not be provided and then states that in the same circumstance coverage will not be provided. Nor are we confident that under Connecticut law a policy's specification of a particular result of a failure to maintain underlying insurance (e.g., responsibility for any loss up to the underlying limits) implies as a matter of law that the specified result will be the sole consequence of the failure to maintain coverage. 32