UM/UIM Waiver Effective
States require insurers to offer uninsured motorist (UM) and underinsured motorist (UIM) coverage to all people acquiring automobile liability insurance. The insured, if he, she or it, does not want the coverage the insured can waive the right to receive the coverage. It is only after an accident with an uninsured or underinsured motorist that questions arise about the effectiveness of the waiver signed by the insured.
In Fatai King v. U.S. Xpress, Inc. and Mountain Lake Risk Retention Group, Inc., No. 16-3623, United States Court of Appeals for the Third Circuit, (July 11, 2018) Fatai King was involved in an accident while driving a truck for his employer. King sought to collect uninsured motorist benefits from his employer’s commercial automobile insurer. Because his employer waived uninsured motorist protection under the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”), 75 Pa. Cons. Stat. Ann. § 1701 et seq., and the waiver complies with the MVFRL, the District Court enforced the waiver.
King was driving a truck owned by his employer, Defendant U.S. Xpress, Inc. (“USX”), and insured by Defendant Mountain Lake Risk Retention Group, Inc., (“Mountain Lake”), when he was hit by an unidentified vehicle that left the scene. King sustained injuries and filed a claim seeking uninsured motorist benefits from Mountain Lake. Mountain Lake denied the claim because the commercial automobile policy it issued to USX included USX’s signed rejection of uninsured motorist protection (“the waiver”). King filed a lawsuit asserting breach of contract and bad faith and alleging that USX’s wavier was invalid and unenforceable because it did not comply with the statutes.
Section 1731 provides that insurers must offer uninsured and underinsured motorist coverage, but the purchase of such coverage is “optional.” To validly waive uninsured or underinsured motorist benefits, a written waiver must “specifically comply” with the statutorily-provided forms for rejecting uninsured or underinsured motorist protection. If the insurer fails to produce a valid rejection form, uninsured or underinsured coverage, or both, as the case may be, under that policy shall be equal to the bodily injury liability limits.
A verbatim reproduction of the language is not required. Thus an insurer’s uninsured motorist form may “specifically comply” with § 1731 if the form differs from the statutory form in an inconsequential manner” or “contains de minimis deviations from the statutory rejection form.
Here, USX’s signed waiver included the required statutory language and additional language, underlined below:
By signing this waiver I am rejecting uninsured motorist coverage under this policy for myself and all relatives residing in my household and all persons driving or working under the authority of any named insured or riding as a passenger in an insured vehicle. Uninsured coverage protects me and relatives residing in my household for losses and damages suffered if injury is caused by the negligence of a driver who does not have any insurance to pay for losses and damages. I knowingly and voluntarily reject this coverage for all insured drivers, and I act on full authority of all insureds under this commercial auto policy.
The additional language adapts the statutory form’s language to the commercial, rather than individual, setting but does not change or limit the scope of coverage, create ambiguity, or contravene the contracting parties’ understanding of the intended coverage.
While the additional language tailors the waiver to the commercial setting and might be viewed as “consequential,” the Third Circuit could not imagine that the Pennsylvania courts would strike down what appears to be a necessary clarification. Indeed, in the commercial setting, a waiver that refers only to households would be confusing and could potentially be misunderstood.
Accordingly, the District Court was found by the Third Circuit to have properly granted summary judgment to USX and Mountain Lake on King’s breach of contract claim.
UM/UIM coverage is not something every insured or business is willing to buy. The state statutes allow the insured to waive its right to obtain the coverage as long as the waiver complies with the state statute. Although the language used by the insurer was not identical to that in the statute it provided the information needed and the waiver was upheld.
© 2018 – 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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