INSURANCE-RELATED COURT CASES

Digested from case reports published in the North Eastern Reporter 2d, West Publishing Co., St. Paul, MN

Is rejection of UM/UIM valid when premium is not shown?

This case arose from a lawsuit filed by William Hollon, an ambulance driver, who was injured in two automobile accidents while employed by American Ambulette and Ambulance Service, Inc. American's liability insurer was Twin City Fire Insurance Company. Hollon sued Twin City, the drivers of the automobiles involved in the accidents (Tina Clary and David Robinson), and his own personal UM/UIM insurance carrier, Guide One Insurance Company. Twin City filed for summary judgment, claiming that American had rejected UM/UIM coverage. Hollon argued American's rejection was ineffective because the written offer of UM/UIM coverage did not set forth the premiums for coverage as required by statute. The trial court found that American had "expressly and knowingly" rejected UM/UIM coverage and that, therefore, Twin City had no obligation to indemnify Hollon. Hollon appealed.

On appeal, Twin City presented an affidavit of American's co-owner, Kenneth Miller as evidence of American's knowledge at the time it rejected coverage . In the affidavit, Miller stated: "Before approving and signing these rejection forms, I was informed, aware, and understood: (a) that UM/UIM coverage was available; (b) the amount of the premium that would be charged for UM/UIM coverage if I selected UM/UIM coverage, or of the reduced premium if I selected reduced UM/UIM limits; (c) what UM/UIM coverage was; and (d) that I was rejecting UM/UIM coverage in its entirety." The Court of Appeals for Montgomery County rejected the affidavit as evidence and found that a rejection of UM/UIM is not valid if the insurer's written offer does not state the premium to be charged, even when there is extrinsic evidence showing that the insured was aware of the premium. Accordingly, it found Hollon was entitled to UM/UIM coverage as a matter of law. Twin City appealed the decision of the appellate court.

The Supreme Court of Ohio reversed the decision of the appellate court and found in favor of Twin City. In reaching its decision, the court first reviewed the requirements under Ohio law for a valid rejection of UM/UIM. These requirements, referred to as the Linko requirements, resulted from the court's decision in a previously decided case. In that case, the court held the offer must set forth in writing "a brief description of the coverage, the premium for that coverage, and an express statement of the UMAJIM coverage limits." Since that case was decided, however, the Ohio legislature amended relevant statutory law to create a presumption of a valid offer when an insured signs a rejection of coverage. The revised statute reads: "A named insured's or applicant's written, signed rejection of both coverages as offered under division (A) of this section, or a named insured's or applicant's written, signed selection of such coverages in accordance with the schedule of limits approved by the superintendent, shall be effective on the day signed, shall create a presumption of an offer of coverages consistent with division (A) of this section and shall be binding on all other named insureds, insureds, or applicants."

Applying this new statutory language, and refusing to elevate form over substance, the court found that Twin City's written offer of UM/UIM coverage, in conjunction with Miller's unrebutted affidavit, demonstrated that American's rejection was made after having received a brief description of coverage, an express statement of UM/UIM coverage limits, and the applicable premiums. Thus, the Linko requirements were met, and the rejection was valid.

The judgment of the Court of Appeals for Montgomery County was reversed.

Hollon vs. Clary et al.-No. 2003-2079-Supreme Court of Ohio-December 17, 2004-820 North Eastern Reporter 2d 881.

Anti-stacking policy language is clarified

Patricia and Edward Kelly had an automobile insurance policy with Prudential Property & Casualty Insurance Company with underinsured motorist coverage of $100,000 for each of their four vehicles. Pursuant to the policy, UIM coverage was available only when the liability limits of the driver responsible for the accident were lower than the limits of the UIM coverage.

In August 2001, Patricia Kelly was involved in an automobile accident with Richard Brown. She filed a lawsuit against Brown, and eventually settled for $100,000, the limit of Brown's insurance policy. The Kellys then claimed underinsured motorist coverage under their Prudential policy. Prudential denied the Kellys' claim. It then filed a declaratory judgment action, claiming the policy did not provide for UIM coverage because the liability limits under the Prudential policy were the same as the Brown policy. The Kellys filed a counter-claim, arguing that the policy allowed them to stack the UIM coverage on each of their four vehicles, thus providing coverage of $400,000.