The California Second District Court of Appeal, in Hervey v. Mercury Casualty Company, upheld a provision in an automobile policy that called for the reduction of uninsured motorist (UM) coverage by amounts paid under the policy's medical payment coverage.

Lauren Hervey was insured by a Mercury policy that included UM coverage.  The policy stated that the UM coverage would be reduced by the amounts paid under the policy's medical payment insurance provisions.  The policy's medical payment coverage provisions included an endorsement that deleted standard policy provisions that require a policyholder who receives medical payment benefits to reimburse the insurer when the policyholder recovers payments for the policyholder's injuries.

Hervey was injured by an uninsured driver.  Mercury paid medical expenses related to her injuries under the policy's medical payment coverage.  Hervey sought UM coverage.  Mercury agreed to settle the UM claim but took the position that it would reduce the UM coverage by the amount the company paid Hervey under the medical payment coverage.

Hervey sued Mercury for breach of contract.  She claimed that the policy was ambiguous and that the ambiguity should be interpreted in her favor.

The Court of Appeal ruled that "Hervey's effort to construct an ambiguity is to no avail."  In ruling for Mercury, the court concluded, "Under the medical expenses provisions of the policy, the insured here could receive from a third party a payment for his or her injury without having to credit or pay back the insurer for medical payments for the same injury.  But it would seem anomalous to expect the insurer itself to pay twice for the same injury, once under the medical expense coverage of the policy and again under the uninsured motorist coverage of the policy."

The court's opinion in the case is available at www.courts.ca.gov