Use It or Lose It! The Failure to Use the Insurance. Loss of the Statutory Presumption. FOLLOW STEPTOE & JOHNSON ON TWITTER:

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1 Use It or Lose It! The Failure to Use the Insurance Commissioner s s UIM Forms Results in the Loss of the Statutory Presumption FOLLOW STEPTOE & JOHNSON ON TWITTER: ALSO FIND US ON Steptoe & Johnson PLLC. All Rights Reserved.

2 Keynote Speakers W. Randolph Fife Michelle E. Piziak Charleston, WV Charleston, WV,

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4 On October 7, 2013, the West Virginia Supreme Court of Appeals issued the decision i of Thomas v. McDermitt, et al. New Syllabus Point: An insurance company s failure to use the West Virginia Insurance Commissioner s prescribed forms pursuant to West Virginia Code d (2011) results in the loss of the statutory presumption and a reversion to the standards enunciated in Bias v. Nationwide Mutual Insurance Co., 179 WVa W.Va. 125, 365 SE2d789 S.E.2d (1987).

5 In Bias v. Nationwide Mt. Ins. Co., 179 W.Va. 125, 265 S.E.2d 789 (1988) the West Virginia Court held: Where an offer of optional coverage is required by statute, the insurer has the burden of proving that an effective offer was made, and that any rejection of said offer by the insured was knowing and informed When an insurer is required by the statute to offer optional coverage, it is included in the policy by the operation of law when the insurer fails to prove an effective offer and a knowing and intelligent rejection by the insured

6 Bias held that to be effective the offer of optional coverage must be commercially reasonable and state, in definite, intelligible and specific terms : The nature of the coverage offered; The coverage limits; and The costs involved.

7 In 1993, the West Virginia Legislature enacted W.Va. Code d Form for making offer of optional uninsured and underinsured coverage. The statute indicated that: Optional limits are to be offered at the time of initial application for liability coverage, upon a request for different coverage limits and upon the insured s s request; Offers shall be prepared and made available on forms prepared by the West Virginia Insurance Commissioner; Offers must include the coverage offered, the rate calculation, all levels and amounts of coverage available, the number of vehicles subject to the coverage; and allow for the waiver of any or all of the coverage; The statute states [t]he contents of a form described in this section which has been signed by an applicant shall create a presumption that such applicant and all named insureds received an effective offer of the optional coverages described in this section and that such applicant exercised a knowing and intelligent election or rejection, as the case may be, of suchoffer asspecified specified in the form. Suchelection or rejection shall be binding on all persons insured under the policy.

8 Informational Letter 121 Says the form must inform a named insured of the optional coverages offered; Says the form must inform the named insured of the rate calculation for the optional coverages including amount of coverage and the number of vehicles; and h f h d d h Says the form must give the named insured the option to reject the optional coverage.

9 Form Compliance It is not necessary that the reproduced forms be exact replicas of the Commissioner forms in size and shape. A minimum of 10 point font size and commonly used font face are required. All portions of the Commissioner s forms that are in bold must likewise be in bold. The form must be completed, dated and signed by a named insured in their own handwriting. Offers must include the Important Notice and Form A (if split limits) or the Important Notice and Form B (if single limits) or the Important Notice and Form A and Form B if both split and single limits coverages are offered.

10 Form Completion Carrier must provide the number of vehicles covered by the policy. Carrier must indicate whether there is a multi car discount used in the premium calculation. Carrier must identify the name of the agent or type NONE if no agent is used. Carrier must provide the policy number. Carrier must identify the policy period. Carrier must indicate the premium amount for that policy period for each optional coverage for which the named insured is eligible. Carrier is permitted to offer limits beyond those that are required by statute. Ifth those are not offered, carrier should type Not Available in blank spaces provided for those offers.

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13 Compliance issues resolved judicially prior to the Thomas decision: Form need not be offered if a change is requested in different types of coverage (such as comprehensive or collision); must request a change in liability coverage to trigger duty to provide forms. Named insured s selection or rejection is binding on all persons insured under the policy. Removal of named insured (who completed waiver) does not invalidate the binding effect of that waiver.

14 The West Virginia Code indicates that [t]he contents of a form described in this section which has been signed by any named insured shall create a presumption that all named insureds under the policy received an effective offer of the optional coverages... And that all such named insured exercised a knowing and intelligent election or rejection, as the case may be, of such offer as specified in the form. The statute does not indicate what happens if there is no signed form the contents of which are described by the Code. The statute also does not indicate how the presumption it describes is to be rebutted. The Thomas decision establishes what happens if there is no signed and completed form as described by the West Virginia Code. The Thomas Court concluded that the statutory creation of a presumption only makes sense if you havethe opportunity to prove a knowing andintelligent selection or rejection of a commercially reasonable offer of optional coverage.

15 The Supreme Court indicated that the statute only superseded a portion of Bias such that: An insurance company s failure to use the West Virginia Insurance Commissioner s prescribed forms results in the loss of the statutory presumption and a reversion to the standards enunciated in Bias. Uponloss of the presumption, the insurer is obligated to prove, per the Bias standards: (1) that it made a commercially reasonable offer of coverage; and (1) that it made a commercially reasonable offer of coverage; and (2) the insured knowingly and intelligently rejected/selected said coverage.

16 W.Va. Code f The Thomas Court did not address W.Va. Code f which governs the issue with ihregard to excess liability policies. i That statute provides that carriers shall offer uninsured and underinsured motor vehicle coverage on such policies in an amount not less than the amount of liability insurance purchased by the named insured: Provided, That the named insured may decline any or all of the coverage offered under the excess or umbrella type policy.

17 W.Va. Code f The statute also states the offer shall be made to the named insured on a form prepared and made available by the Insurance Commissioner. The statute also says that [t]he contents of a form described in this section which has been signed by a named insured shall create a presumption p that such named insured and all named insureds received an effective offer of the optional coverages described in this section and that such named insured exercised a knowing and intelligent election or rejection, as the case may be, of such offer specified in the form.

18 As a result of the excess statute the Insurance Commissioner prepared p Informational Letter 130. Mandatory UM limits will have been met by the underlying policy; therefore, ALL UM and UIM offered with excess policies is optional. Again, the statute requires an offer ofnot less thanthe the amountofliabilitycoverageof coverage. Informational Letter 130: Says the form must inform the named insured of the rate calculation for the optional coverages including amount of coverage and the number of vehicles; and Says the form must give the named insured the option to accept or reject the optionalcoverages coverages.

19 Form Compliance It is not necessary that the reproduced forms be exact replicas of the Commissioner i forms in size and shape. A minimum of 10 point font size and commonly used font face are required. All portions of the Commissioner s forms that are in bold must likewise be in bold. The form must be completed, dated and signed by a named insured in their own handwriting. Offers must include the Important Notice and Form A (if split limits) or the Important Notice and Form B (if single limits) or the Important Notice and Form A and Form B if both split and single limits coverages are offered.

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22 The Supreme Court of Appeals of West Virginia has held that, prior to the 2001 enactment of W.Va. Code f, there was no requirement that optional coverages be offered with excess/umbrella policies. i Newark kins. Co. v. Brown, 218 W.Va. 346, 624 S.E.2d 783 (2005). We assume that the failure to use the forms established in Informational Letter 130 will be treated like those at issue in Thomas. See, e.g., Larocco v. Old Republic Ins. Co., 2009 WL (S.D. W.Va. Sept. 28, 2009).

23 Points to Take Away The failure to use the Insurance Commissioner s forms does not automatically mean that coverage is added by operation of law; If possible just use the forms. Just because you can prove a knowing and intelligent selection or rejection of a commercially reasonable offer does not mean that you should want to. If you must deviate from the forms, make sure that you have the information the law requires but try not to incorporate extensive amounts of additional information.

24 Questions?