Uninsured Motorist Coverage – Traps for the Unwary

In May of this year, the Georgia Court of Appeals issued two decisions involving uninsured motorist coverage that all agents should be aware of, as both of them create potential E&O exposure.  In the first case, the Court of Appeals held that the insureds had uninsured motorist coverage in the amount of their liability coverage, not the statutory minimum of $25,000, even though the declarations page for their policy stated that was the amount of uninsured motorist coverage.  Under a law that took effect in 2002, an insured who did not affirmatively reject uninsured motorist coverage had such coverage for the same amount as their liability coverage, unless the insured affirmatively elected a lesser amount of coverage.

In this case, the insureds had previously rejected uninsured motorist coverage for a policy that had been continuously renewed since 1986.  However, in 2003, the insureds changed their minds and requested that uninsured motorist coverage be added to their policy.  Unfortunately, for the insurance company, it was not able to produce any documentation of that request, as it had been made over the telephone or possibly, the internet.  Since the law required the insurance company to prove that the insureds had affirmatively elected an amount of uninsured motorist coverage less than their liability limit, the absence of any such documentation proved to be fatal to its case.  The fact that the declarations page for the policy had continuously shown a limit of $25,000 for such coverage from the time it was requested in 2003 until the loss event nine years later was not sufficient proof of an affirmative election by the insureds in the opinion of the court.

A similar lack of documentation also proved to be fatal to the insurance company in the second opinion issued by the Court of Appeals.  In that case, the Court held that the uninsured motorist coverage under the insureds’ umbrella insurance policy had not been properly cancelled.  The major issued decided by the Court was that the cancellation and non-renewal requirements imposed by O.C.G.A. Section 33-24-45 on personal lines motor vehicle insurance policies also applied to umbrella policies that include such coverage.  Thus, those portions of umbrella policies can only be cancelled or non-renewed for the reasons and in the manner specified by that statute.

O.C.G.A. Section 33-24-45 requires that a notice of cancellation or non-renewal be delivered to the insured either in person or by first class mail that is evidenced by a receipt provided by the U.S. Postal Service or such other proof of mailing as would be accepted by the Postal Service.  In this case, the insurance company claimed it had sent the insureds a notice of cancellation of the uninsured motorist provision of their umbrella policy two years before the loss event.  As in the previous case, the declarations pages for the policy issued during that two year period showed their was no uninsured motorist coverage under it.  And like the previous case, the Court held that was not sufficient to overcome the insureds’ denial that they had received any notice of cancellation from the insurance company.  Since the company could not produce a receipt issued by or acceptable to the U.S. Postal Service for the mailing of that notice, the uninsured motorist coverage was still in effect at the time of the loss event.

The lesson of the above two cases for insurance agents is clear.  It is essential in dealing with uninsured motorist coverages that the letter of the applicable law be followed, as the courts will not make exceptions based on the duty of an insured to read their policies.  An agent who does not properly document everything that is done with respect to such coverages is leaving himself or herself open for an E&O claim.

 

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