Opinion ID: 874182
Heading Depth: 3
Heading Rank: 1

Heading: The Exhaustion Clause Unambiguously Requires Hill to Exhaust the Tortfeasor's Insurance Policy

Text: A preliminary issue is to determine the legal effect of the exhaustion clause. A contract must be interpreted according to the plain meaning of the words used if the language is clear and unambiguous. Cascade Auto Glass, Inc. v. Idaho Farm Bureau Ins. Co., 141 Idaho 660, 663, 115 P.3d 751, 754 (2005). An insurance policy is ambiguous if it is reasonably susceptible to different interpretations. Armstrong v. Farmers Ins. Co., 143 Idaho 135, 137, 139 P.3d 737, 739 (2006). This Court freely reviews the question of whether an insurance contract is ambiguous. Clark v. Prudential Prop. & Cas. Ins. Co., 138 Idaho 538, 541, 66 P.3d 242, 245 (2003). Hill does not dispute that the UIM provision is clear. It reads: We will pay compensatory damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an underinsured motor vehicle.. . . . . . . We will pay under this coverage only after the limits of liability under any bodily liability bonds or policies have been exhausted by payment of judgments or settlements. This language is boilerplate in the insurance industry, and a number of other jurisdictions have found virtually identical wordings to be unambiguous. E.g. Robinette v. Am. Liberty Ins. Co., 720 F.Supp. 577, 579 (S.D.Miss. 1989); Birchfield v. Nationwide Ins., 317 Ark. 38, 875 S.W.2d 502, 503 (1994). The clause explicitly creates a condition precedent to UIM benefits, entitling Hill to coverage only if she settles or receives a payment for the tortfeasor's policy limits. See Maroun v. Wyreless Sys., Inc., 141 Idaho 604, 614, 114 P.3d 974, 984 (2005) (A condition precedent is an event not certain to occur, but which must occur, before performance under a contract becomes due. (quotation omitted)).