Rejection of UM/UIM Coverage by Named Insured Binding on Driver
Every state requires insurers to offer uninsured motorist (UM) and underinsured motorist (UIM) coverage when issuing a liability insurance policy. The statutes do not require the insured to buy the coverage and allows the named insured the right to reject UM/UIM coverages.
In Lester Beeman v. ACCC Insurance Company, 2171114, Alabama Court of Civil Appeals (April 12, 2019) Lester Beeman sought UM/UIM coverage although he was injured while driving a car owned and insured by his mother who had rejected UM/UIM coverage. The insurer, ACCC refused to pay Beeman’s claim for UM/UIM coverage because the named insured of its policy had rejected the coverage in accordance with Alabama law.
In January 2017, Lester Beeman was injured in an automobile accident. At the time of the accident, Beeman was driving an automobile insured under a policy of insurance (“the policy”) purchased by Renada Reese from ACCC Insurance Company (“the insurer”). The operator of the other automobile involved in the accident, Kimberly LaChance, was allegedly uninsured.
Beeman sued the uninsured and ACCC to obtain uninsured-motorist (“UIM”) benefits from the insurer. The insurer moved to dismiss Beeman’s claim against it arguing that Reese was the “named insured” in the policy and that she had rejected UIM coverage, as permitted by the Alabama Code.
After a hearing on the insurer’s motion, the trial court granted the motion and dismissed the claim against the insurer. The case proceeded to trial against LaChance, who failed to appear at trial, and the trial court entered a default judgment against her on August 13, 2018.
The appropriate standard of is on appeal of a summary judgment is to view the evidence most strongly in the pleader’s favor if it appears that the pleader could prove any set of circumstances that would entitle her to relief. A dismissal is proper only when it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief.
The initial application for insurance, which was executed in June 2013, indicates that Reese is the sole applicant; in the initial application, Reese specifically rejected UIM coverage. The renewal certificate for the period from January 2017 to July 2017 indicates that the “policyholder” is Reese. Nothing in the initial application, the renewal certificate, or the policy defines the term “named insured” or indicates specifically that Reese is the “named insured” under the policy. Moreover, neither the initial application, which does not list Beeman at all, nor the renewal certificate indicate that Beeman is a “named insured.” The renewal certificate reflects that Beeman is listed on the declarations page as a “driver.” He is an “insured person” under the policy because he is Reese’s son, living in her household, and endorsed on the policy.
Beeman argues on appeal, as he did below, that he is a “named insured” on the policy and that, therefore, Reese’s rejection of UIM coverage is not binding on him. Caselaw makes clear that each named insured must reject UIM coverage for himself or herself.
Beeman contends that consideration of the policy language in the “UIM section” of the policy, which defines “insured person” as “you, a relative, or a resident” and “any other person occupying your insured auto,” results in the definitive conclusion that he is, in fact, an “insured person” under the policy and that he is, therefore, entitled to UIM coverage because he did not personally reject that coverage.
Beeman’s reliance on the definitions contained in the “UIM section” of the policy is disingenuous in light of the fact that the issue in the present case is whether Beeman is entitled to such coverage. Furthermore, there is no authority indicating that a person known or anticipated to be an “insured person” under a policy is, in fact, a “named insured” of the policy and therefore entitled to UIM coverage unless he or she specifically rejects it.
The fact that the terms “you” and “your” are defined to include both the named insured – the person named on the declarations page of the policy – and the named insured’s spouse actually makes clear that the named insured’s spouse is not a named insured nor is the named insured’s child.
The renewal certificate clearly identifies Reese as the named insured. Beeman is listed on the renewal certificate only as a “driver.” Although no Alabama court has directly considered the question whether being listed on a declarations page as a “driver” equates with being a “named insured” or “policyholder” under the policy, the courts of several of our sister states have.
The Alabama court found persuasive the decision of the Eleventh Circuit Court of Appeals in Rimas v. Progressive Specialty Insurance Co., 292 F. App’x 833 (11th Cir. 2008), in which the court affirmed a summary judgment in favor of the insurance company on Mark Rimas’s claim that he was entitled to UIM benefits under a policy of insurance executed by Wendell Robinson. Like Beeman in the present case, Rimas was listed as a “driver” on the policy, but he was not listed as a “named insured.” The Eleventh Circuit Court of Appeals concluded that only a named insured is entitled to specifically reject UIM coverage under a policy.
Beeman was added to the policy as a driver. The renewal certificate continues to list only Reese as the policyholder. Thus, the court of appeal concluded that Beeman does not provide a convincing argument that his inclusion on the renewal certificate as a “driver” resulted in his being made a named insured or a policyholder and, therefore, that he did not have a right to reject UIM coverage.
Although the language in the application does not specifically mention that it is binding on “additional insureds” or other persons covered by the policy, the language in the policy does indicate that the rejection of UIM coverage by the policyholder rejects such coverage for those insured under the policy. The only party with the right to reject UIM coverage is the named insured or the policyholder, which, in the present case, was Reese. Her rejection of UIM coverage is binding on Beeman.
Reese’s rejection of UIM coverage was effective as to Beeman. Accordingly, because Beeman has presented no set of facts under which he would be entitled to recover UIM benefits, we affirm the judgment of the trial court dismissing Beeman’s claim against the insurer.
As a famous economist once said: “There is no such thing as a free lunch.” Reese made a financial decision to reject UM/UIM coverage. As a result she paid no premium for UM/UIM coverage. Beeman, as just a driver of a vehicle insured by Reese who had nothing to do with the purchase of the insurance, had no right to require an insurer to provide him with UM/UIM coverage without paying a premium or even making contact with the insurer until after a loss. Since UM/UIM was properly rejected he had no right to recover UM/UIM benefits. He has a judgment against the other driver and will hopefully collect some of the judgment.
© 2019 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant 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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
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