Some excess/umbrella policies specifically state that their limits do not apply over the sub-limits contained in a primary liability policy.  The umbrella policy at issue in Berardi v. FMI Ins. Co., No. A-2940-22 (N.J. Super Ct. App. Div. Nov. 28, 2023) did not.  The New Jersey appeals court concluded that the umbrella policy provided coverage over a primary policy sub-limit.

Berardi is a dog bite case.  Those are often rich cases for discussion in Coverage Opinions.  But here the specific dog bite issue was not particularly interesting.

After concluding that the primary liability policy’s Medical Expenses coverage part applied, and the limit of $10,000 was owed, the parties disputed whether the umbrella policy provided Medical Expense coverage.  The primary policy’s $10,000 limit for Medical Expenses was exhausted; however, the primary policy’s principal limit of liability was $1,000,0000.  [The court called it the overarching limit.]

The policy language at issue was as follows: “[i]f the occurrence is covered by a primary policy, the limit of liability under the MPL 80 applies to any damages which exceed the limits of the primary policies described in this coverage form together with any other collectible insurance available to the insured.”  (emphasis mine).

The court seized on the word “limits” in the umbrella policy and concluded that the policy provided coverage over the exhausted Medical Expenses limit of $10,000:

“The plain text of the umbrella endorsement does not refer explicitly to sublimits. We note from a grammatical perspective, moreover, that the plural ‘limits’ could refer either to the overarching maximum limits of two or more separate policies, or to various limits set forth within either or both the FMI and Scottsdale policies.  The plain text, in other words, is ambiguous and could support either party’s interpretation.

“Neither party cites published precedent specifically addressing whether a general reference to policy limits in an umbrella excess coverage endorsement includes or excludes sublimits. Accordingly, we resort to the well-established principle that ‘[w]here the language of a policy will support two meanings, one favorable to the insured and the other favorable to the insurer, the interpretation sustaining coverage must be applied.’ (citation omitted). We add that if FMI wanted the umbrella excess coverage to apply solely to damages above the maximum amount of liability provided by the primary policies, and not to any or all the sublimits specified in the policies, it could have drafted the umbrella excess coverage endorsement to make that clear.”