Recently, the Eleventh Circuit Court of Appeals in Coker v. American Guar. & Liab. Ins. Co., 825 F.3d 1287 (11th Cir. 2016) (applying Georgia law) held that UM policy exhaustion requirements were enforceable under Georgia law. The Court found that Georgia’s UM statute did not transform excess policies into primary policies.
This case involved a catastrophic head-on automobile accident. The claimants recovered various amounts of money provided under a five tier tower of insurance totaling $75M in UM coverage. The first two layers of the tower afforded $5M and $10M of UM coverage respectively. The claimants settled with the insurers issuing coverage for the first two layers for an amount less than the full UM policy limits that were available.
Under Georgia’s insurance laws that were in existence in 2007 when the automobile accident occurred, every auto policy was required to provide UM limits (including UIM limits) equal to the policy liability coverage limits unless expressly rejected in writing. This was changed in 2009 when an amendment to the statute exempted excess and umbrella policies. Nevertheless, in 2007 the exemption did not exist. Because the defendant insurers had failed to obtain waivers of UM coverage, they were required to afford excess UM (including UIM) coverage up to their respective limits which were $75M in the towered insurance program. The Court found that nothing in Georgia’s UM statute required an excess insurer to “drop down” and pay a loss falling within the underlying limits. Because the excess policies in question attached at $15M (the first two layers of coverage which settled), therefore the claimants did not exhaust the underlying policies, a condition precedent to coverage under the excess policies above in the tower never materialized. The Court held that the claimant had willingly settled with the primary and first umbrella insurers for less than their policy limits and, therefore, was uncompensated by his own volition.