An insured under a personal auto policy walks into a rental car agency to rent a car. Along with the car, the agency offers him supplemental liability insurance (SLI) for an additional $10 for each day of the rental period. Gripped by the fear tactics employed by the car rental representative, he elects to buy that optional coverage. Unfortunately, he then is involved in an auto accident that results in a lawsuit against him. When the time comes to settle that lawsuit, which is required to pay first: the insurance company that provided the SLI, or his personal auto insurance?

In Vigilant Insurance Company v. Lincoln General Insurance Company (2008 U.S. Dist. LEXIS 65172), the U.S. District Court (Dist. Nevada) addressed this very issue and held that the SLI insurer should pay first. The Ninth Circuit Court of Appeal recently concurred. At issue were three insurance policies: the SLI policy issued by Lincoln General Insurance Company to Dollar Rent-A-Car but covering rental customers who purchased the supplemental coverage; a personal auto policy issued to the rental customer by GEICO; and an excess auto liability policy issued to the rental customer by Vigilant Insurance Company. Together, the GEICO and Vigilant policies provided $2.5 million of liability protection to its mutual policyholder. The Lincoln General SLI policy provided up to $1 million in coverage to rental customers.

“Other Insurance” Clauses

The following is a brief summary of the coverage provided by each policy: The GEICO policy provided a primary layer of auto liability insurance, covering the insured against claims of bodily injury or property damage arising out of the use of a covered auto. However, for non-owned autos, its “other insurance” clause mandated that its insurance is excess over any other insurance available to the insured.

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