Appeals Court: excess policy covered golf cart injury

Listen to this article

Ambiguity in a “follow-form” provision prevented an insurance carrier from enforcing a family member exclusion to bar excess liability coverage of injuries sustained by the daughter of insureds while she was riding in a golf cart, the Appeals Court has ruled.

Callie Hilinski, the daughter of Lisa and Scott Hilinski, suffered a severe knee injury while riding in a golf cart owned by Scott and driven by the daughter’s friend. According to the Hilinskis, Callie suffered more than $2.5 million in damages.

At the time, Lisa and Scott held automobile and excess liability policies issued by Privilege Underwriters Reciprocal Exchange.

Privilege sought declaratory relief in Norfolk Superior Court, arguing that a family member exclusion precluded excess coverage of the daughter’s claim.

The Hilinskis countered that such exclusions are unenforceable as a matter of Massachusetts public policy.

Judge Maynard M. Kirpalani rejected the insureds’ argument and concluded the exclusion applied to bar the daughter from tapping into her parents’ excess liability coverage.

On appeal, the panel agreed with the lower court that public policy did not bar the exclusion in question.

However, in reversing the lower court’s grant of summary judgment to Privilege, the panel found the Hilinskis were entitled to underinsured motorist coverage under the excess policy because a “follow-form” provision in that policy failed to clearly and unambiguously incorporate UIM coverage limitations or exclusions from the auto policy.

“[W]e conclude that the excess policy is ambiguous as to whether it incorporates limitations on what constitutes an ‘underinsured motor vehicle’ in the auto policy’s UIM coverage,” Judge Robert E. Toone Jr. wrote for the panel. “Because that ambiguity must be resolved against Privilege, the company that drafted the policy, and in favor of the Hilinskis, and because Privilege has not asserted any other ground for denying UIM coverage under the excess policy, Callie’s claim for such coverage should not have been denied.”

The 19-page decision is Privilege Underwriters Reciprocal Exchange v. Hilinski, Lawyers Weekly No. 11-016-25.

‘Sloppy’ drafting?

The Hilinskis’ lawyer, James C. Crowley Jr., said the case is noteworthy because it involved a “high-end” rather than standard automobile policy approved by the commissioner of insurance. According to Crowley, other high-end insurers providing coverage in the commonwealth use the same follow-form language for excess policies that was found to be ambiguous in Hilinski.

“That follow-form language is certainly going to have a problem here in Massachusetts and possibly other states,” the Hyannis lawyer said. “The essence of this case is if you are going to use these [follow-form provisions], you need to make them clear and unambiguous so a normal person can have some understanding of it. [P]olicies out there for high net-worth individuals are going to have trouble trying to use any of the underlying auto policy exclusions for uninsured and underinsured claims.”

Braintree PI attorney J. Michael Conley said that for all intents and purposes the Hilinskis’ public policy argument had been foreclosed by Massachusetts case law allowing homeowner’s insurance policies to exclude claims against an insured for injury to a household member.

According to Conley, the insurance company’s ultimate loss on the Hilinskis’ claim for coverage can be attributed to “sloppy drafting” of its follow-form provision.

“If [the insurer says] it right in the follow-form provision and says that the coverage and exclusions are exactly as they are in the underlying policy, life is simple,” Conley said.

Ryan E. Alekman, a PI attorney in Springfield, said he was struck by just how confusing the language in Privilege’s follow-form clause was.

If [the insurer says] it right in the follow-form provision and says that the coverage and exclusions are exactly as they are in the underlying policy, life is simple.

“It says the provisions of this policy supersede and replace similar provisions of the underlying policy,” Alekman said. “Then the next sentence says we will not provide broader coverage than the underlying policy. Which is it? I’m a lawyer who has been practicing for 27 years. I’m thoroughly confused by what they were trying to do by writing the policy the way they did.”

Counsel for Privilege did not respond to a request for comment.

Golf cart crash

According to court records, Callie Hilinski suffered injuries in 2018 when her friend was driving a golf court. At the time, Callie’s parents had automobile and excess policies issued by Privilege. The automobile policy provided $250,000 in bodily injury coverage and $250,000 in UIM coverage. The excess policy provided $10 million in excess liability coverage and $1 million in excess UIM coverage.

During the course of negotiations, Privilege offered only the $250,000 bodily injury liability limit under its automobile policy to settle Callie’s claims. The insurer contended there was no excess liability coverage under the excess policy and further denied UIM coverage under either of the policies issued to the Hilinskis.

The insurer filed an action in Superior Court for a declaratory judgment capping its liability at the auto policy’s $250,000 bodily injury limit. The Hilinskis filed counterclaims for declaratory relief, breach of contract, and unfair trade practices under G.L.c. 93A and G.L.c. 176D.

The trial court ruled for Privilege on the parties’ cross-motions for summary judgment.

Ambiguous policy language

Privilege argued that Callie’s claim for excess liability coverage was subject to an exclusion in the excess policy for “damages, defense costs or any other costs or expenses … [f]or personal injury to you or an insured under the policy.” The policy defines “insured” as “you or a family member.”

As it was undisputed that Lisa and Scott were the insureds under the excess policy and that Callie was their daughter, Privilege argued that the exclusion clearly applied.

On appeal, the panel rejected the Hilinskis’ argument that enforcement of the exclusion would violate Massachusetts public policy.

Toone wrote that there was no state law and, therefore, no public policy arising from that law, prohibiting such exclusions in umbrella or excess insurance policies.

“It is ultimately the responsibility of the Legislature and Commissioner of Insurance to determine whether such exclusions should be allowed after considering the full range of interests implicated, including the validity of any ‘apprehension of insurers about the scope and profusion of intrafamily claims’ and ‘the added exposure, were the exclusion to be scuttled, and with what practical effect on the premiums charged,’” he wrote.

However, the panel agreed with the Hilinskis that Callie was entitled to UIM coverage under the excess policy.

The excess policy’s UIM coverage provision stated Privilege will “pay damages for bodily injury an insured is legally entitled to receive from the owner or operator of an uninsured or underinsured auto” insofar as those damages are “in excess of the underlying insurance or the minimum required underlying limits, whichever is greater.”

The excess policy also provided its family member exclusion “does not apply to coverage provided under Excess Uninsured/Underinsured Motorists Coverage if a limit for this coverage is shown on your Declarations.”

But the panel found a follow-form provision for Privilege’s excess policy created an ambiguity as to whether exclusions applicable to UIM coverage in the automobile policy also applied to UIM coverage under the excess policy.

Toone noted that in a 2007 case, Allmerica Fin. Corp. v. Certain Underwriters at Lloyd’s, London, the Supreme Judicial Court explained a follow-form provision allows an insured to give effect to the same set of exceptions “in each layer of the insurance program” by making the excess policy a “carbon copy” of the primary policy.

Toone said the follow-form provision in Privilege’s excess policy failed in meeting its objective with respect to Callie Hilinksi’s claim because the provision’s language was “ambiguous and confusing” on the question of whether it incorporated the auto policy’s UIM coverage provisions.

“The [follow-form] provision first states that Privilege ‘will cover damages to the extent that they are both covered by the required underlying insurance and not excluded by this policy,’” Toone wrote. “The term ‘underlying insurance’ is elsewhere defined in the excess policy to mean ‘all liability insurance providing coverage for damages that are covered by this policy.’”

The panel recognized that the problem with that language is that UIM coverage is not liability coverage.

“Accordingly, this first sentence is, at the very least, ambiguous as to whether the excess policy’s follow-form provision incorporates only provisions in the auto policy applicable to liability coverage, and not provisions applicable to UIM coverage,” Toone wrote. “This ambiguity is significant because both limitations relied on by the [trial] judge and Privilege apply only to UIM coverage in the auto policy.”

Toone explained that additional language in the follow-form provision only exacerbated the lack of clarity.

“The provision’s second and third sentences refer to ‘underlying policy’ (an undefined term) instead of ‘underlying insurance,’ but, when read in tandem, fail to clarify whether and how UIM coverage is limited under the excess policy,” Toone wrote. “To the extent the third sentence suggests that the excess policy incorporates coverage limitations in the UIM coverage provisions in the auto policy, the second sentence indicates to the contrary that the excess policy ‘supersedes and replaces’ such provisions.”

The panel rejected Privilege’s arguments to salvage the purported purpose of its follow-form clause.

“Because few purchasers of automobile insurance and liability policies come with a prior understanding of follow-form provisions and how they are supposed to work, it is essential that such a provision explain in a clear and unambiguous manner how the excess policy incorporates coverage limitations or exclusions in the underlying policy,” Toone said. “The follow-form provision in Privilege’s excess policy fails to do so with respect to limitations and exclusions in the auto policy’s UIM coverage.”