Disclosure Requirements for Rejection of Uninsured/Underinsured Coverage Ill-Defined
There have been numerous cases over the last few years from the New Mexico Appellate courts dealing with the rejection of uninsured/underinsured motorist coverage (UM/UIM). Over the years, a number of strict requirements have been placed on insurance companies for the rejection of UN/UIM coverage by insureds.
Among the most important requirements are that the rejection be in writing, signed by the insured and made a part of the policy. In addition, the courts have required that the different premium rates for coverage with and without uninsured/underinsured coverage be stated in the policy so that the insured could make an educated decision on whether or not to reject the coverage.
These requirements are now well established. However, the exact form of these requirements has not yet been firmly specified. This lack of specificity led to the recent New Mexico Court of Appeals case of Curry v. Great Northwest Insurance Co.. Specifically, the Court had to address what form and where the disclosure of different premiums had to be placed in the policy in order for a rejection of coverage to be valid.
In this case, the policyholder argued that the competing premium rates had to be placed on the signed rejection form under Jordan v. Allstate. The insurer argued that this was not the case and that the competing premiums merely had to be placed within the insurance application.
The Court of Appeals agreed with the insurer stating that the Jordan v. Allstate made no such requirement that the premium rates be stated on the rejection form itself. It should be noted that that neither the insured nor the Court of Appeals disputed the requirement that UM/UIM coverage options and premiums be provided to the insured. Nor was it disputed by the parties that the coverage options and rates were provided to the insured. The only question was where that information needed to be disclosed.
New Mexico public policy strongly favors UM/UIM coverage on every automobile in the state. The default rule is to provide the maximum level of UM/UIM possible under the policy and any ambiguity should be construed in favor of the insured. Any rejection of UM/UIM coverage should be made knowingly and intelligently. This means that the coverage options must be fully disclosed to the insured.
The Court set forth the requirements of Jordan v. Allstate upon which much of the dispute in Curry v. Great Northwest Insurancewas centered as follows:
“(1) offer[s] the insured UM/UIM coverage equal to his or her liability limits, (2) inform[s] the insured about premium costs corresponding to the available levels of coverage, (3) obtain[s] a written rejection of UM/UIM coverage equal to the liability limits, and (4) incorporate[s] that rejection into the policy [delivered to the insured] in a way that affords the insured a fair opportunity to reconsider the decision to reject[.]”
The Court in Curry agreed that though Jordan placed great emphasis on the requirement of a writing and full disclosure of policy coverage options, the Jordan case, “did not address every method insurers may use to provide this information or the validity of those methods.”
The Court thereby concluded that the coverage options and corresponding premium information did not need to appear on the rejection form but simply needed to be part of the policy. The Court reiterated that there is no “one particular way the information must be provided.”
The lack of specificity will likely have a number of consequences. First, there was a dissent filed in the this case indicating a very high likelihood that the case will be appealed to the New Mexico Supreme Court. Second, assuming that the Court of Appeals’ opinion holds up, one may safely assume that some insurers will do their level best to bury the coverage and premium options deep inside the policy.
As we have stated time and time again, uninsured/underinsured motorist coverage is absolutely essential in New Mexico which has among the highest rates of uninsured motorists in the country. This coverage will likely be all the coverage available in case of an auto accident. Even if there is coverage, there will likely be only the minimal $25,000 required under New Mexico law.
In short, do not reject UM/UIM coverage. If further persuading is necessary, ask yourself why it is that the is that the Courts must place so many restrictions on the rejection of coverage and the consequent loss of premiums to the insurance company. And if the friendly insurance agent offers you these savings on premiums, politely decline!
