Written By Attorneys William Krekstein and Mark R. Fischer, Jr.
Note: This article is an interpretation of current law and is offered for informational purposes only. This material is not legal advice and should not be construed or used as a substitute for the advice of an attorney.
The Pennsylvania Superior Court has upheld a previous decision requiring a new written election of lower UM/UIM (“uninsured motorist/underinsured motorist”) limits whenever a change is made to the liability limits in an automobile policy.
In Blood v. Old Guard Insurance Company, 2006 PA Super 44 (March 2, 2006), the insured submitted a claim for UIM benefits to Old Guard. The original policy had liability limits of $500,000.00, and reduced UIM coverage limits of $35,000.00, pursuant to a reduction form signed by the insured. Subsequently, the insured requested a reduction of the liability limits by completing a change request form. Although it included a section relating to UIM coverage, the insured only completed the portion of the change request form relating to liability coverage. After Old Guard provided UIM benefits on the claim at the reduced limit of $35,000.00, the insureds filed a declaratory judgment action, arguing that the lack of an explicit reduction of UIM coverage limits on the form lowering the liability limits makes the UIM limits equal to the liability limits. On November 28, 2003, the Crawford County Court of Common Pleas granted Old Guard’s motion for summary judgment on the claim, holding that the change in liability limits was nothing more than a modification of the existing policy, so no new UIM reduction form was necessary.
On December 30, 2004, the Superior Court reversed the decision of the trial court based on the requirements set forth in sections 1731 and 1734 of the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”). The court acknowledged that the MVFRL permits the insured to choose a lesser amount of UIM coverage by affirmatively requesting the lower amount in writing, but that this request must include both a signature and an express designation of the amount of UIM coverage requested. The court referenced its prior decision in Smith v. The Hartford Insurance Co., 849 A.2d 277 (Pa. Super. 2004). In Smith, the court held that where UM/UIM coverage was originally rejected pursuant to the proper form, a subsequent increase in liability limits did not require a new rejection form. However, the Smith court specifically held that a written selection of reduced UM/UIM coverage is different from rejection, in that the purpose of such written election is to refute presumption that without an explicit election in written form, UIM coverage would equal the liability limits. Id. at 281. Applying this to the situation in Blood, the court determined that since Old Guard failed to obtain a specific request for reduction of the UIM benefits on the subsequent change request form signed by the insured, the UIM coverage limit on the policy was now presumed to equal to the reduced liability coverage limit.
On March 2, 2006, after Old Guard’s petition for reargument was granted, the Superior Court issued a second opinion en banc upholding its previous reversal of the trial court’s decision. In a nearly identical opinion to the December 2004 decision, the court rejected an additional argument by Old Guard that the change request form applied only to liability coverage limits. The court stated that this argument was not plausible because the options for UIM coverage limits were also listed on the same form. The court reasoned that Old Guard could have protected itself either by having separate change request forms for each coverage limit or by stating on the form that only the initialed portions were applicable. Since Old Guard failed to do this, the change request form applied to both liability and UIM coverage.
In a dissent, Judge Orie Melvin contended that after a rejection or reduction of UM/UIM coverage has been made, the MVFRL does not explicitly require a new UM/UIM sign down form each time a policyholder changes the liability limits. Judge Orie Melvin stated that it is illogical to reason that the insureds’ written request to reduce liability limits could operate to increase UM/UIM limits, especially considering that they already had lower UIM limits and made no request to increase or decrease the limit when the liability limit was changed. Therefore, the insured’s original election to reduce UIM coverage should remain in effect.
Based on this decision, any time a new liability coverage limit is selected, an insurer must obtain a new UM/UIM reduction form or the UM/UIM coverages will automatically change to equal the new liability limits.
NOTE: Since the publication of this article, this opinion has been reversed by the Pennsylvania Supreme Court. For a discussion on the Supreme Court's ruling, please see article.
