NEED DOES NOT CREATE COVERAGE
Herman Duke and Gayle Duke (the “Dukes”) appealed a summary judgment granted in favor of , Sentry Select Insurance Company (“Sentry”). The trial court found that uninsured motorist coverage had been validly rejected by the owner of the vehicle driven by Herman Duke at the time of the accident. In Herman Duke and Gayle H. Duke v. Morgan Storm Evans, et al, No. 47,383-CA (La.App. Cir.2 08/08/2012) the Louisiana Court of Appeal resolved the dispute.
On February 24, 2008, Herman Duke was driving a vehicle on Airline Drive in Bossier City, Louisiana and was injured as the result of a collision with a vehicle driven by Morgan Evans. The vehicle driven by Duke was owned by his employer, Orr Motors of Louisiana, Inc. (“Orr Motors”), which was a named insured in an automobile liability policy issued by Sentry.
Subsequently, the Dukes filed a petition for damages against the defendants, Morgan Evans and United Services Automobile Association (“USAA”), her liability insurer. The Dukes sued Sentry alleging uninsured/underinsured motorist (“UM”) coverage through the Sentry policy. Sentry filed an answer denying UM coverage. A UM rejection form had been signed on January 31, 2005, by William Gregg Orr, who was the owner and authorized representative of Orr Motors and the other auto dealerships listed as named insureds in the Sentry policy. The form contains the handwritten names of two named insureds, “Class Motors of Texarkana, Inc.” and “Gregg Orr Auto Collection,” above Orr’s signature.
Pursuant to a settlement agreement, the Dukes collected the full $10,000 liability limits provided by the USAA insurance policy and dismissed their claims against Evans and USAA. The Dukes and Sentry filed motions for summary judgment based on the Sentry insurance policy. After a hearing, the district court found that UM coverage had been validly waived because Gregg Orr possessed the authority and the intent to reject UM coverage for all of the dealerships listed as named insureds in the policy and had signed the rejection form. The court rendered judgment granting Sentry’s motion for summary judgment, denying the plaintiffs’ motion and dismissing their claims.
The plaintiffs contend the district court erred in granting Sentry’s motion for summary judgment. In four assignments of error, the plaintiffs argue that the UM rejection was invalid because Orr Motors, a named insured, was not specifically listed on the waiver form.
Louisiana statutes govern the issuance of UM coverage and provides that no automobile liability insurance policy shall be issued in this state unless coverage is provided therein for the protection of persons insured under the policy who are legally entitled to recover damages from owners or operators of uninsured or underinsured motor vehicles because of bodily injury. However, the coverage required under this Section is not applicable when any insured named in the policy either rejects coverage, selects lower limits, or selects economic-only coverage, in the manner provided in the statute. Such rejection of UM coverage must be made only on a form prescribed by the commissioner of insurance. The prescribed form provided by the insurer and signed by the named insured or his legal representative. A properly completed and signed form creates a rebuttable presumption that the insured knowingly rejected coverage.
Completion of the prescribed form involves six tasks: (1) initialing the selection or rejection of coverage; (2) if limits lower than the policy limits are chosen, then selecting the amount of coverage; (3) printing the name of the named insured or legal representative; (4) signing the name of the named insured or legal representative; (5) filling in the policy number; and (6) the date. The statutory requirement of UM coverage will be read into any automobile liability policy unless validly rejected. Any exclusion from coverage in an insurance policy must be clear and unmistakable.
In the present case, the parties do not dispute that Sentry provided the prescribed UM form, that the form is initialed to reject UM coverage, includes the policy number and is dated. Nor do plaintiffs dispute that Gregg Orr was the person authorized to obtain liability insurance and to reject UM coverage for the dealerships he owned, including Orr Motors, which was listed as a named insured in the Sentry policy. This court has previously found that pursuant to this statutory language, any named insured in the policy may reject UM coverage for all other insureds.
Gregg Orr signed the form below the following statement: “The choice I made by my initials on this form will apply to all persons insured under my policy.” Thus, the express language of the prescribed form demonstrates that the rejection of UM coverage is binding on all named insureds, including Orr Motors.
The evidence presented supports the district court’s finding that UM coverage was validly rejected. Consequently, the district court did not err in granting Sentry’s motion for summary judgment.
Insurance, contrary to the desire of some, is a contract just like any other. It makes certain promises to the person insured. After an accident with an uninsured motorist or underinsured motorist the person injured really wants to receive benefits for all injuries incurred. The coverage is designed to provide to replace the coverage the tortfeasor — the person who caused the accident — did not buy himself.
States, like Louisiana, require insurers to offer the coverage and automatically provide it unless specifically rejected. That is what happened in this case and although we can empathize with the Dukes, the person who bought the insurance specifically rejected UM/UIM coverage. No promise was made by Sentry and the Dukes — no matter how badly injured — could not create a coverage that never existed.
© 2012 – Barry Zalma
Barry Zalma, Esq., CFE, has practiced law in California for more than 40 years as an insurance coverage and claims handling lawyer. He also serves as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders.
He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant.
Mr. Zalma recently published the e-books, “Zalma on Insurance Fraud – 2012″; “Zalma on Diminution in Value Damages – 2012,”“Zalma on Insurance,” “Heads I Win, Tails You Lose — 2011,” “Zalma on Rescission in California,” “Arson for Profit” and others that are available at www.zalma.com/zalmabooks.htm.