Invalid UM Waiver ≠ Drop-Down: Berger v. Lexington Insurance and the Limits of Umbrella Liability under Louisiana Law

Introduction

Berger v. Lexington Insurance (5th Cir. Aug. 5 2025) addresses whether a commercial umbrella insurer must “drop-down” to provide uninsured/underinsured motorist (UM/UIM) benefits when its insured’s attempt to waive UM coverage under the umbrella policy was defective and the underlying automobile policy carried only limited UM coverage.

• Parties. Eric and Mona Berger (plaintiffs-appellants) sought additional UM benefits after Eric was rear-ended while driving a truck owned by his employer, EnLink Midstream Operating. Lexington Insurance Company (defendant-appellee) issued EnLink a $5 million umbrella liability policy sitting above a $3 million National Union commercial auto policy.
• Procedural Posture. The district court granted Lexington summary judgment, holding the umbrella did not drop-down to fill the “gap” between the $100,000 UM limit elected in the auto policy and the $3 million liability limit. The Fifth Circuit affirmed.

The opinion is unpublished but significant: it cements, in the excess-insurance/UM context, that an invalid UM waiver in an umbrella policy does not itself compel the umbrella to provide primary-level UM coverage when (i) the policy’s liability-limit clause is keyed to the scheduled underlying limit, and (ii) Louisiana’s UM statute is the only reason UM is implicated.

Summary of the Judgment

• The court affirmed summary judgment for Lexington.
• It held the umbrella policy’s “Retained Amount” clause—defined by reference to the full limits of scheduled underlying insurance—places the umbrella squarely in Kelly Category II/III, which precludes drop-down coverage.
• Louisiana’s UM statute merely reads UM benefits into the underlying $3 million auto limit; it does not rewrite the umbrella’s own attachment language.
• An invalid UM waiver in the umbrella form likewise does not alter the attachment point because drop-down depends on policy language, not waiver validity.
• The policy was not ambiguous, and plaintiffs’ alternative arguments (future medicals, written-off bills) were abandoned or conceded below.

Analysis

1. Precedents Cited and Their Influence

• Kelly v. Weil, 563 So. 2d 221 (La. 1990) – Three-category framework for excess policies. Categories II & III (fixed scheduled limits; “greater of” clauses) generally bar drop-down. Berger’s umbrella fell here.
• Louisiana Insurance Guaranty Ass’n v. Interstate Fire, 630 So. 2d 759 (La. 1994) – Clarified Kelly categories and “collectibility” language; reinforced strict-construction caveat. Relied on for doctrinal background.
• Washam v. Chancellor, 507 So. 2d 806 (La. 1987) – Nearly identical fact pattern: reduced UM limit in primary policy; umbrella refused to drop-down. Berger treats Washam as controlling.
• Dupree v. Hill, 530 So. 2d 1226 (La. App. 2d Cir. 1988) & Lindsay v. Poole, 579 So. 2d 1145 (La. App. 2d Cir.), writ denied, 588 So. 2d 100 (La. 1991) – Follow-on cases upholding Washam logic even when waiver was incomplete or coverage reduced post-issuance.
• Transco Exploration Co. v. Pacific Employers, 869 F.2d 862 (5th Cir. 1989) – Example of Category III language and no drop-down.

2. Court’s Legal Reasoning

1. Burden of Proof. Under Louisiana law, the insured bears initial burden to show coverage. Plaintiffs had to prove the umbrella attached below $3.21 million (auto limit + settlements + workers’ comp), something they conceded they could not do.
2. Policy Construction. The umbrella’s insuring clause obligates Lexington only for sums “in excess of the Retained Amount.” “Retained Amount” equals the full limits of scheduled underlying insurance, without regard to collectibility. The auto policy’s scheduled limit is $3 million.
3. Kelly Categorization. Because the umbrella references a predetermined schedule (not the collectibility of those limits), it falls into Category II/III. These categories “clearly preclude drop-down.”
4. Statutory Overlay. La. R.S. §22:1295 makes UM coverage mandatory within automobile liability policies unless validly rejected. It implies UM into the $3 million auto limit, but does not rewrite the umbrella. Thus no statutory trigger forces drop-down.
5. Invalid Waiver Irrelevance. Although EnLink’s umbrella-policy waiver lacked initials and was invalid, the waiver’s failure only means UM coverage is deemed included in the umbrella above its attachment point. It does not relocate that attachment point.
6. No Ambiguity. Plaintiffs claimed the phrase “sums that the insured becomes legally obligated to pay” is impossible in UM context. Court found no textual clash; even if ambiguous, ambiguity concerns scope of obligation, not attachment level.
7. Procedural Waiver. Additional ambiguity arguments first raised on appeal were disregarded (Fifth Circuit rule).

3. Impact of the Decision

Berger reinforces—within the Fifth Circuit—the durability of Washam and Kelly for Louisiana excess-insurance disputes. Key practical effects include:

• Insureds & Brokers: Cannot rely on umbrella policies to backfill UM gaps created by low UM elections or defective waivers in primary policies. They must ensure sufficient UM limits at the auto-policy level.
• Excess Insurers: Provides strong precedent to resist drop-down claims rooted solely in UM statute or waiver defects, so long as policy attachment is keyed to stated underlying limits.
• Litigation Strategy: Plaintiffs seeking UM benefits must develop evidence of damages exceeding the combined underlying limits—merely alleging waiver defects will not suffice.
• Legislative Cue: If the Louisiana Legislature wishes umbrella policies to respond differently when waivers are invalid, statutory amendment—not judicial reinterpretation—would be required.

Complex Concepts Simplified

• Uninsured/Underinsured Motorist (UM/UIM) Coverage: Insurance that pays the insured when the at-fault driver lacks insurance (or enough insurance). Louisiana law imposes UM coverage in automobile policies unless expressly waived on a state-approved form.
• Umbrella / Excess Policy: An extra layer of liability coverage that sits “over” specified primary policies. It ordinarily pays only after the primary limits are exhausted.
• Drop-Down Coverage: A situation where an excess policy steps down to act as primary insurance, filling a gap left by the primary insurer. Whether it drops depends on policy wording.
• Scheduled Underlying Insurance: The list of primary policies (and their monetary limits) identified in the umbrella policy’s schedule. These limits typically set the umbrella’s attachment point.
• Kelly Categories: Louisiana’s tri-part test for excess policies:
  • Category I – Explicitly hinges on collectibility of underlying insurance → likely drop-down.
  • Category II – Attachment based on fixed scheduled limit, irrespective of collectibility → no drop-down.
  • Category III – “Greater of scheduled limit or other collectible insurance” → also no drop-down for scheduled policies.
• Invalid Waiver vs. No Waiver: A deficient waiver form means UM coverage remains in force at that layer, but it does not change where that layer begins.

Conclusion

Berger v. Lexington Insurance confirms that, under Louisiana law, the mere presence of an invalid UM waiver in an umbrella policy does not compel the umbrella insurer to provide primary-level UM coverage. The Fifth Circuit—echoing Washam, Kelly, and related authorities—held that attachment language keyed to scheduled underlying limits forecloses drop-down, regardless of statutory UM mandates or waiver defects. For policyholders, the decision is a cautionary tale: the safest place to secure adequate UM protection is in the primary automobile policy, not by hoping the umbrella will fill an unintended gap. For insurers and courts, Berger offers a concise reaffirmation of Louisiana’s structured approach to excess liability and UM interplay, ensuring doctrinal stability in a frequently litigated niche.