Umbrella Insurance Can Increase Medical Payment Coverage

An appellate court in New Jersey issued an important opinion a few months ago, holding that a homeowners insurance policy on a house in one city provides coverage for a second house in another city that was underinsured. Significantly, the umbrella policy covering the first house applied to the medical payment limit, thereby increasing medical payment coverage up to the $1 million umbrella limit.

Here are the details of Berardi v. FMI Ins. Co. (N.J. Super., Nov. 28, 2023, No. A-2940-22):

The insureds owned a house in New York. There was a homeowners insurance policy for the property. The liability limit was $1 million, the medical payment limit was $10,000, and the “personal excess liability umbrella coverage” limit was $5 million. The policy was issued by Franklin Mutual Insurance Company.

The insureds also owned a second house in New York. There was a homeowners insurance policy for the second property. The liability limit was $1 million, the medical payment limit was $5000, and there was a “limited animal liability coverage form” which lowered the liability limit for dog bites to $10,000. The policy was issued by Scottsdale Insurance Company.

The insureds’ dog bit a housecleaner at the second house, the one with the liability limit of $10,000 and the medical payment limit of $5000. The housecleaner made claims against both policies, naturally. But Franklin Mutual Insurance Company denied the claim.

The court held that Franklin Mutual Insurance Company was on the hook for the $1 million liability claim even though the dog bite happened at the second house, insured by Scottsdale Insurance Company. The court pointed out that the Franklin Mutual Insurance Company policy said, “we do cover bodily injury to a residence employee while performing such duties at other premises.”

Additionally, the court held that Franklin Mutual Insurance Company had to reimburse the housecleaner’s medical payments up to the $1,000,000 limit of the umbrella policy. Franklin Mutual Insurance Company had argued that the housecleaner had to exhaust the $1 million liability limit first, but the court disagreed.

Appeals in New Jersey go through the Appellate Division of the Superior Court, which is the court that wrote this opinion. The highest court in New Jersey is the New Jersey Supreme Court.

The opinion is not supposed to be cited as precedent unless permission is granted. Nevertheless, the reasoning is powerful.