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 email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Books from Full Court Press
Insurance Law Deskbook: Learn the insurance basics that are essential to every civil practitioner. The Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, state appellate courts, and foreign courts that have molded the American insurance law, as well as vital explanatory chapters, historical context, form letters, and more.
California Insurance Law Deskbook: California has long led the way when it comes to insurance jurisprudence in the United States, and few know more about California insurance law than Barry Zalma. The California Insurance Law Deskbook is intended to help law students, practitioners, insurance lawyers, professional claims personnel, insured persons, and anyone else involved in insurance. Similar to Barry Zalma’s general Insurance Law Deskbook, this title focuses on the state where the author has long resided and practiced as an expert in California law. The book, published for the first time under Full Court Press, includes the full texts or digests of insurance-related decisions of the U.S. Supreme Court, the U.S. District Courts of Appeal, and California appellate courts, as well as vital explanatory chapters and historical context.
Insurance Bad Faith and Punitive Damages Deskbook: Understand the relationship between insurance, the tort of bad faith, and why punitive damages are awarded to punish insurers. Previously, a person suing an insurance company in the United States could only recover contract damages, but when the tort of bad faith was created by the courts contract law was enormously affected, allowing insureds to sue insurers for both contract and tort damages, including punitive damages. Read a thoughtful analysis of how punitive damages apply in the United States to insurance bad faith suits, and why some states allow judges and juries to award punitive damages against insurers in civil litigation.
Mr. Zalma’s books available as Kindle books or paperbacks at Amazon.com can be reached at http://zalma.com/zalma-books/
Mr. Zalma’s reports can be found on Tumbler at https://www.tumblr.com/search/bzalma on Facebook at https://www.facebook.com/barry.zalma and you can follow him on Twitter at https://twitter.com/bzalma
The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.