Buyer Beware

Buyer Beware!

By Julio M. Zapata

Does it matter how or if a person buying liability auto insurance accepts Underinsured Motorist coverage? According to a recent court decision, it does matter and ultimately the responsibility to obtain Underinsured Motorist coverage lies with the insured.

In Blevins v. Government Employees Insurance Company, the Arizona Court of Appeals considered whether state law required that an insured sign a form rejecting underinsured motorist (“UIM”) coverage in order to avoid UIM coverage. In reversing summary judgment, the Court of Appeals held that the statute does not require a signed form to reject UIM coverage. However, this decision reaffirms that the consumer is obligated to seek out UIM coverage once an offer of coverage has been made, which is contrary to what many other states require.

Why is this important? In Arizona, every insurance company that writes liability auto insurance is required to provide the consumer with a written offer for UIM coverage. UIM coverage is insurance for damages incurred by an insured when an accident is caused by a motorist who is not sufficiently insured. Whether or not a consumer expressly signs a form rejecting or accepting UIM coverage may create an insurance coverage problem.

The facts in Blevins are similar to how most of us obtain or renew automobile insurance. Blevins purchased auto insurance from GEICO in August 2006. His insurance policy indicated that he purchased liability coverage but rejected UIM coverage. Blevins was injured in a January 2008 auto accident. After he settled with the other driver, he submitted a claim to GEICO because the other driver was underinsured. GEICO denied his claim.

The key issue for the Court of Appeals was whether Section 20-259.01(B) of the Arizona Revised Statutes required that an insurer obtain a written rejection of UIM coverage from an insured in order to avoid coverage. The relevant portion of the statute provides “Every insurer writing automobile liability or motor vehicle liability policies shall also make available to the named insured thereunder and shall by written notice offer the insured and at the request of the insured shall include within the policy underinsured motorist coverage which extends to and covers all persons insured under the policy, in limits not less than the liability limits for bodily injury or death contained within the policy. The selection of limits or rejection of coverage by a named insured or applicant on a form approved by the director shall be valid for all insureds under the policy.”

Under Blevins, the Court reasoned that the statute requires an insurer to “both ‘offer’ and ‘make available’ UIM coverage.” And, after the offer is made, the insured must request the coverage. However, if the insurer does not provide the statutorily mandated offer, the insured is entitled to receive UIM coverage as a matter of law. When an offer is made, unlike many other states, Arizona law will not impute coverage, unless expressly accepted. Arizona takes the approach that unless expressly accepted, coverage is not automatic once an offer is made making UIM coverage available. In contrast, many other states require the consumer to expressly reject the UIM offer of coverage to avoid coverage. Here, the Court made clear that the insurer need only make the written offer. The insured must then expressly request that the offered coverage be included in his policy. Thus, the consumer shoulders the burden of seeking out the coverage.

Blevins is a warning to consumers that if they want UIM coverage, they must affirmatively accept the coverage once it is offered and made available from the insurer. Consumers cannot presume that simply because UIM was offered that it will be part of their insurance coverage. Beware of what you believe you are purchasing when it comes to UIM coverage. Always confirm with your agent that coverage you actually have to protect yourself and your family from future injuries.