Policy Limits Are Policy Limits – The Policy Says Only What It Says

Policy Limits Are Policy Limits – The Policy Says Only What It Says

Barry Zalma   By Barry Zalma, Attorney and Consultant

Just because, after an accident, an insured wishes he had higher policy limits does not mean the insured can change the language of a policy. That does not stop them from trying. In Paul Davis and Sarah K. Davis v. Travelers Property Casualty Company of America, No. 10-2023 (1st Cir. 10/03/2011) the First Circuit, with retired Supreme Court Justice Souter sitting on the panel, ruled in favor of the insurer because the language of the Travelers' policy was clear and unambiguous.

(Lexis.com subscribers can access the Lexis enhanced version of the Davis v. Travelers Prop. Cas. Co., 2011 U.S. App. LEXIS 20067 (1st Cir. Me. Oct. 3, 2011) decision with core terms, case law links, and Shepard's. Non subscribers can access the free unenhanced version of the Davis v. Travelers Prop. Cas. Co., 2011 U.S. App. LEXIS 20067 (1st Cir. Me. Oct. 3, 2011) decision available from lexisONE Free Case law.)

The First Circuit described the appeal as follows: "This is a meritless appeal from the district court's summary judgment for the defendant Travelers Property Casualty Company of America on an underinsured motorist coverage claim brought by Paul Davis and his spouse."


Davis was the manager of both the Maine and New Hampshire offices of Oce USA Holding, Inc., a subsidiary of a multinational corporation. He lived in Maine, where he kept a company car that was insured under a multistate policy issued by Travelers, by the terms of which he was an insured. While driving in New Hampshire on his way to the company office there, a driver conceded to be underinsured under the policy definition smashed into him and caused severe injury.

Vehicular Accident

The Policy

The terms and extent of legally required or conventional coverage against damage by uninsured and underinsured drivers vary from state to state, and business policies addressing multistate activity deal with the variety by separate endorsements, subject to selection and application in a given case according to the terms of the policy. Here, if the Maine endorsement applies, coverage is limited to $100,000 (much less than Davis's claims), whereas the New Hampshire endorsement would extend the dollar limit to $5,000,000.

On the thirtieth page of the 562 page policy, this term appears:


The LIMIT OF INSURANCE for the coverages shown below is the LIMIT OF INSURANCE shown for the State where a covered "auto" is principally garaged. Refer to the specific coverage endorsement for description of the coverage provided for each State listed below.

The district court held that the Maine terms apply.


It is undisputed that the insured car was garaged in Maine and undisputed that the limit of coverage under the Maine endorsement is $100,000. Since the limit of coverage is the point of contention, that should be the end of the matter, but the Davises say that the policy is infected with an ambiguity that entitles them to the higher New Hampshire limit, under the familiar standard (about which there is no choice of law issue) that policy language means what a reasonable insured person would take it to mean, and that language reasonably susceptible to more than one reading should be read in favor of the insured.

The Davises' only other attempts to show the New Hampshire endorsement applicable boil down to asserting that Mr. Davis could naturally expect New Hampshire law to apply because his accident occurred there, and because he received benefits under the New Hampshire workers' compensation law. But it is enough to say that these two considerations have nothing to do with any term of the policy in question and engender no ambiguity in its key to coverage by reference to principal garage state.

The First Circuit concluded that there is no reasonable basis for the Davises' claim.


When dealing with a multi-state policy it might be the best protection for a corporate client by having the same limit of liability for uninsured and underinsured motorist coverage equal to that purchased to protect third parties and not limit it to a particular state's minimum.

Reprinted with Permission from Zalma on Insurance, (c) 2011, Barry Zalma.

Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He recently published the e-books, "Heads I Win, Tails You Lose - 2011," "Zalma on Rescission in California," "Zalma on Diminution in Value Damages," "Arson for Profit" and "Zalma on California Claims Regulations," "Murder and Insurance Fraud Don't Mix" and others that are available at Zalma Books.

Mr. Zalma can be contacted at Barry Zalma, zalma@zalma.com and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma's Insurance Fraud Letter.

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