Farmers Insurance Co. of Arizona v. Woodruff

In Farmers Insurance Co. of Arizona v. Woodruff, 127 Ariz. 196, 619 P.2d 24 (App. 1980), one of the drivers involved in the accident that injured the plaintiffs was uninsured and the other, who was driving the truck in which the plaintiffs were passengers, was covered by a liability and uninsured motorist policy issued by Western Insurance Companies. Id. at 197, 619 P.2d at 25. The plaintiffs settled their liability claims with Western and agreed not to pursue an uninsured motorist claim against Western. See id. They instead filed a claim under the uninsured motorist provisions of their own policy with Farmers Insurance Company of Arizona. See id. Farmers took the position that under the "other insurance" clause in its policy, the plaintiffs could not collect uninsured motorist benefits from the policy unless the primary insurance on the truck had been exhausted. See id. Woodruff held that the plaintiffs' failure to make a claim under the uninsured motorist coverage of the policy on the truck barred their claim against their own insurer. Id. at 198, 619 P.2d at 26. It explained that "a passenger can settle a claim of liability against the driver under the driver's policy without at the same time reducing or exhausting his claim against the driver's insurance company for the negligence of the uninsured motorist." Id. In such a case, the injured passenger could not assert a claim for uninsured motorist coverage under his own policy because it was "excess" coverage. See id. The Court noted that "'to hold otherwise would allow companies primarily liable to transfer liability by making token settlements. Such a holding would not give effect to the clear, unambiguous language of excess insurance clauses.'" Id.