We all know that sometimes it's not what you say, but how you say it that counts. This is especially true in coverage cases gone bad. Although we here at GWB "bleed insurance blood," we've seen our share of what one attorney terms "SODs" - or "sub-optimal documents." The adjuster who writes in her claims file that SIU should interview a witness but "leave it off the record unless really good;" the adjuster who just got hit with a departing colleague's files and writes in a claims file that although the insured has called a couple of times, he "just hasn't got the time to deal with him right now;" the adjuster or SIU investigator who touts his or her merit for a promotion by pointing out the money saved in denying claims.
We all know that adjusters are overworked and that the role of an SIU investigator is to investigate claims and, if the claims are invalid, the denial of invalid claims saves the insurer money. But investigators and claims adjusters, in the words of the West Virginia insurance agent, "have to know how to describe it!" If you are putting it in writing (and consider first whether you should), assume it will be discovered by an ugly, angry, insurer-hating policyholder attorney who will put the worst possible spin on it, and choose your words accordingly. It isn't fair, but that's the way it is these days.
Submitted by Jennifer D. Eubanks
The South Carolina Supreme Court held that an insurer was not required to add UIM coverage when the insured failed to return a UIM offer form he received when renewing his policy. In Government Employees Insurance Co. v. Draine
, No 4726 (S.C. App. August 11, 2010), the insured purchased automobile insurance from GEICO in 2003, rejecting all UIM coverage. In 2004 and in 2005, GEICO sent the insured renewal materials, including UIM offer forms. In 2005, the insured did not complete the UIM offer form or return it to GEICO. Following an automobile accident in 2005, the insured argued for a reformation of his policy to include UIM coverage under section 38-77-350(E) of the South Carolina Code based on his failure to return the 2005 UIM offer form within thirty days along with his renewal materials.
In its review of section 38-77-350, the Court held that the term "form" in subsection (E) of section 38-77-350 refers only to the UIM forms required to be offered to new applicants, not those forms provided to insureds who are renewing their existing policies. Citing Floyd v. Nationwide Mut. Ins. Co
., 367 S.C. 253, 626 S.E.2d 6 (2005), the Court explained that the purpose of section 38-77-350 is for insureds to know their options and make an informed decision regarding optional coverage. While GEICO could not be certain whether the insured made an informed decision about UIM coverage when the insured did not return the form in 2005, the Court said that it would be illogical to presume the insured desired coverage merely because he failed to return a form when he unquestionably made an informed decision as a new applicant in 2003. Accordingly, the Court held that the insured's policy should not be reformed to add UIM coverage.
* This opinion favors insurers by not requiring a new meaningful offer of UIM coverage to be made each time a policy is renewed, provided a valid UIM offer was made when the policy was acquired. If a meaningful offer was not made to a new applicant, however, a meaningful offer must be made upon renewal.
SOUTH CAROLINA - UIM - SOPHISTICATED INSURED
In two recent decisions, the South Carolina Supreme Court addressed offers of UIM coverage to sophisticated insureds. In Grinnell Corp. v. Wood
, No. 26869 (S.C. August 16, 2010), the Court held that where the risk manager of a nationwide company is sophisticated in the procurement of automobile insurance coverage, he can knowingly and intelligently reject the coverage even in the event that the offer/rejection form is not properly completed. Despite the insureds failure to properly execute the UIM form, the Court found that each of the four prongs of the Wannamaker test were satisfied and a meaningful offer was made due to the sophistication of the parties.
In Ray v. Austin
, No. 26858 (S.C. August 16, 2010), the Court found that a meaningful offer of UIM coverage was made even without full compliance with the Wannamaker test. The Court held that a mere offer of UIM coverage "up to the liability limits," without more, is not sufficient to satisfy the fourth prong of the Wannamaker test. The Court held, however, that a meaningful offer of UIM coverage was made and knowingly and intelligently rejected by a sophisticated insured who never expressed any intention to obtain UIM coverage. The Court said that it would "refuse to apply the Wannamaker factors in a manner that contravenes the very purpose behind the meaningful offer requirement." Citing Floyd v. Nationwide Mut. Ins. Co.
, 367 S.C. 253, 626 S.E.2d 6 (2005), the Court explained that the clear purpose of the meaningful offer requirement is to protect insureds - to give them the opportunity "to know their options and to make an informed decision as to which amount of coverage will best suit their needs." Accordingly, the Court held that a meaningful offer was made when a sophisticated insured knowingly and intelligently rejected UIM coverage.
* These opinions are important to insurers on two levels. First, Justice Pleicones, concurring in both opinions, suggested that there should be no need to discuss the Wannamaker factors when there is no dispute as to whether a sophisticated insured made an informed decision. This may be the first step to a scaling back of the Wannamaker test. Second, a standard UIM offer form giving an insured the option to purchase UIM coverage "in limits up to the limits of liability coverage" is no longer sufficient to satisfy the fourth prong of the Wannamaker test provided the insured is sophisticated and clearly understands the nature of coverage being offered.
NC - UIM OFFER
The North Carolina Court of Appeals reversed a trial court's grant of summary judgment to the insurer in a case involving whether an insurer provided an insured with the opportunity to accept or reject UIM coverage. In Nationwide Mutual Ins. Co. v. Burgdoff,
No. COA09-117 (N.C. App. September 7, 2010), Nationwide failed to provide the insured with a valid North Carolina Rate Bureau UM/UIM selection/rejection form, as required by statute. The Court held that Nationwide's failure to provide the form is not sufficient without more to result in an increase of UIM coverage beyond the statutory limits of North Carolina General Statutes Section 20-279.21(b)(4). Citing Williams v. Nationwide Mutual Ins. Co.
, 174 N.C. App. 601, 621 S.E.2d 644 (2005), the Court explained that the key in questions regarding an increase in UIM coverage is whether the insured was given any opportunity at all to even consider the coverage. Accordingly, the Court remanded the case to the trial court to determine whether Nationwide provided the insured with any opportunity to reject or select UM/UIM coverage.
* While insurers should strive to obtain a signed NC selection/rejection form, the absence of a signed form is not necessarily a violation of North Carolina's statutory UM/UIM requirements. So long as the insured was given an opportunity to select coverage, the policy's UM/UIM limits can be enforced. Evidence of selection/rejection can include testimony or affidavits of the insured's agent or the insured.
NC - BAD FAITH- Res Judicata
The North Carolina Court of Appeals held that an insurer's motion to dismiss on res judicata grounds should have been denied when the claims in the underlying negligence action were not the same as those in the subsequent action based on unfair claim settlement practices. In Lee v. Allstate Ins. Co.,
No. COA09-1694 (N.C. App. August 3, 2010), the insured filed a UIM claim against Allstate. Plaintiff filed a motion to compel arbitration after she was unsuccessful in her numerous attempts to collect under the UIM policy. After being awarded $125,000 by the arbitrators, the insured moved for entry of judgment upon the arbitration award in trial court. While the motion was pending, the insured filed a complaint against Allstate alleging that Allstate engaged in unfair settlement practices in its bad faith failure to settle. After filing the complaint against Allstate, the trial court entered judgment upon the arbitrators' award and ordered that Allstate "shall have no liability" to the insured beyond the UIM policy limits. Subsequently, Allstate moved to dismiss the insured's bad faith complaint under the doctrine of res judicata.
The Court found that the claims in the underlying action were not identical to those in the unfair trade practices complaint and did not exist at the time the insured's complaint in the underlying action was filed. The Court distinguished the insured's prior action, involving coverage under a UIM policy, from the present action, involving recovery for damages for unfair trade practices. Citing Northwestern Financial Group, Inc. v. County of Gaston
, 110 N.C. App. 531, 430 S.E.2d 689 (1993), the Court stated that in order for res judicata to apply, "both remedies must have been available at the time the first action was commenced." Since the conduct underlying the insured's complaint for unfair trade practices occurred after the insured filed the original action, the Court held that the doctrine of res judicata did not bar the inusred's claims.