Exclusion Clear & Unambiguous Applies

Unless the Legislature Specifically Prohibits Action It is Not Against Public Policy

Insurance policies, if written in clear and unambiguous language, are enforceable. The United States District Court for the Eastern District of Arkansas in a simple, brief and unambiguous opinion did away with a public policy argument against an exclusionary clause in a policy.

In American Alternative Ins. Corp. v. Williams, — Fed.Appx. —- 2016 WL 362378, United States District Court for the Eastern District of Arkansas—Little Rock (Jan. 29, 2016) the court found that there is no public policy unless the Legislature makes it so.


While paramedic Anthony Williams was riding as a passenger in his employer’s ambulance, he was injured in a collision with a city bus owned by Central Arkansas Transit Authority (CATA) and driven by Thurman Scott. Mr. Williams obtained a judgment against CATA and Scott in the amount of $475,000. After CATA paid its liability limits of $25,000, Mr. Williams sought underinsured motorist (UIM) benefits from American Alternative Insurance Corporation (AAIC), the insurer for his employer, ambulance owner Metropolitan Emergency Medical Services. AAIC in turn filed this diversity action seeking a declaratory judgment that it was not liable because the insurance policy excluded from the definition of an “underinsured motor vehicle” one owned by a governmental unit or agency such as CATA.

The parties filed cross-motions for summary judgment, and the district court entered judgment in favor of AAIC. Mr. Williams appealed arguing, as he did below, that the relevant policy clause excluding coverage is void as against public policy; alternatively, he argues that the clause was not negotiated.


Under Arkansas law, an insurer issuing a commercial automobile liability policy is not required to offer UIM coverage. AAIC’s exclusion of government-owned vehicles from UIM coverage in the policy at issue is not void as against public policy because the Legislature has not spoken on the issue.

Courts will not find insurance coverage exclusions void as against public policy unless the legislature specifically prohibited the exclusion. Since the Legislature did not speak on the issue, there was no public policy offended by the exclusion.

Finally, Mr. Williams’s argument that the exclusion clause was not negotiated is not a basis for reversal since he was not the person who negotiated the contract and the contract was valid as it appeared.


The state in this case maintained a very low limit of insurance coverage for auto accidents incurred by its employees. Mr. Williams obtained a judgment of $475,000 and tried to collect it from his insurance company rather than the governmental entity who caused his injury.

ZALMA-INS-CONSULT                      © 2016 – Barry Zalma

Barry Zalma, Esq., CFE, practiced law in California for more than 43 years as an insurance coverage and claims handling lawyer.  He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.

He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.

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Mr. Zalma’s new e-books  “Getting the Whole Truth,” “Random Thoughts on Insurance – Volume III,” a collection of posts on this blog; “Zalma on California SIU Regulations;”  “Zalma on California Claims Regulations – 2013″ explains in detail the reasons for the Regulations and how they are to be enforced; “Rescission of Insurance in California – 2013;”  “Zalma on Diminution in Value Damages – 2013; “Zalma on Insurance,” “Heads I Win, Tails You Lose,”  “Arson for Profit”  and others that are available at www.zalma.com/zalmabooks.htm

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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