Failure to Initial a Form Became Purchase of UM/UIM Coverage
Louisiana Compels UM/UIM Coverage When New Policy Issued Without New Rejection of UM/UIM
Posted on July 6, 2021 by Barry Zalma
Louisiana’s Legislature enacted a statute compelling Uninsured and Underinsured Motorist insurance unless the insured specifically rejects it on a form prepared by the state. In Martin Baack And Brenda Baack v. Michael Mcintosh, Et Al., No. 2020-C-01054, C/W No. 2020-C-1117, Supreme Court Of Louisiana (June 30, 2021) the insured rejected UM/UIM coverage properly but, when the policy was renewed, it failed to fulfill all of the requirements of the statute. The Louisiana Supreme Court interpreted the failure to initial parts of a form at renewal required that UM/UIM coverage even though the insured signed the rejection form.
FACTS
Martin Baack, an employee of Pilgrim’s Pride Corporation (“Pilgrim’s Pride”), was driving his work vehicle when he was struck by a vehicle driven by Michael McIntosh. The vehicle Mr. Baack was driving belonged to PPC Transportation Company (“PPC Transportation”). Both Pilgrim’s Pride and PPC Transportation are subsidiaries of JBS USA Holdings, Inc. (“JBS”).
Mr. McIntosh was determined to be solely at fault for the accident and pled guilty to improper lane usage. Mr. Baack and his sued individually and on behalf of their minor daughter naming as defendants Mr. McIntosh, his insurer, and Zurich American Insurance Company (“Zurich”) in its capacity as the UM provider for PPC Transportation’s vehicle.
The Zurich policy at issue was initially procured in 2002 by Swift Foods Company (“Swift”), the predecessor of JBS. At that time, Swift properly rejected UM coverage via a UM form initialed and signed by its corporate controller, William Trupkiewicz. The policy was renewed on an annual basis and Zurich sent new UM forms to Swift, and subsequently its successor JBS, every year. In 2011, JBS increased its liability limits from $3,000,000 to $5,000,000 necessitating a new UM form. Mr. Trupkiewicz initialed and signed a new form properly rejecting UM coverage.
In 2012, 2013, and 2014, JBS’s risk manager, Stephany A. Rockwell, submitted new signed and dated UM forms without initialing the blanks provided to reject UM coverage or select UM coverage with limits lower than the policy’s bodily injury liability limits. The 2014 form was attached to the policy which was in effect at the time of Mr. Baack’s accident.
Zurich maintained the initial rejection by Mr. Trupkiewicz remained valid for the life of the policy, including the 2014 renewal in effect at the time of the accident. The trial court denied Zurich’s motion for summary judgment and subsequent writs to the court of appeal and this Court were also denied.
The matter proceeded to a five-day jury trial. The jury found the Zurich policy did not provide UM coverage because JBS had rejected it.
The Court of Appeal reversed the trial court’s judgment and observed that “[p]roof of an insured’s rejection of UM coverage … is satisfied solely by the existence of a properly completed and signed UM form, and the insured’s intent is irrelevant in this determination.” The Court of Appeal ruled that the 2014 form was properly completed and that Zurich bore the consequences of JBS’s failure to initial the form signifying its rejection of UM coverage. Finding the jury legally erred in its determination of no UM coverage, the court of appeal performed a de novo review of the facts and awarded Mr. Baack damages but rejected the Baacks’ request for penalties and attorney fees. In a separate appeal pertaining to costs, the court of appeal reversed the trial court and rendered judgment assessing Zurich with all court costs.
DISCUSSION
Zurich averred that the court of appeal erred in finding UM coverage exists under the 2014 policy. In Louisiana, UM coverage is determined not only by contractual provisions, but also by applicable statutes. Thus, whether coverage exists turns on the interpretation of the policy and UM statute.
UM coverage is not required by Louisiana statute if any insured named in the policy either rejects coverage, selects lower limits, or selects economic-only coverage, in the manner provided in the statute. The UM statute is liberally construed. Exclusions are strictly construed and the insurer bears the burden of proving any insured named in the policy rejected, in writing, the UM coverage.
A proper rejection of UM coverage remains valid for the life of the policy and does not require the completion of a new form when a policy is renewed. The fact that a UM form rejecting coverage was properly executed by JBS in 2011, however, did not prevent JBS from changing that rejection by submitting a new form to Zurich.
The form allows for the insured to initial one of only four selections: UMBI coverage at lower limits than liability coverage; economic-only coverage with same limits; economic-only UMBI coverage at lower limits; or no UMBI coverage. Critically, the insured is not able to actively select UM coverage on the form.
The only way to “select” UM coverage on the form is to not initial any of the provided choices. Under the statute, a signed and dated UM form with no selection equates to a selection of UM coverage. Zurich was aware JBS signed and returned these forms every year and should have known that signing and submitting these forms could have specific legal consequences. If Zurich believed the failure to make a selection on the forms was a mistake, it was incumbent on Zurich to follow up with JBS to make any necessary corrections.
The plain language of the UM statute dictates that the failure to initial any of the options available on the UM form necessarily results in statutory UM coverage. Courts lack the authority to alter the terms of insurance contracts under the guise of contractual interpretation when the policy’s provisions are couched in unambiguous terms. This is not a case where a minor mistake or omission on the UM form occurred. Rather, the forms signed by Ms. Rockwell in 2012, 2013, and, specifically, 2014 demonstrate that JBS did exactly what is statutorily required to change its prior rejection of UM coverage.
Ms. Rockwell’s 2014 form was part of the Zurich policy in effect at the time of the accident and clearly meets all the statutory requirements to change JBS’s 2011 rejection of UM coverage. Therefore, the Supreme Court affirmed the court of appeal’s determination that UM coverage exists at the time of the accident.
Louisiana law provides for the imposition of penalties against insurance companies who act in bad faith. However, the sanctions of penalties and attorney fees are not assessed unless a plaintiff’s proof is clear that an insurer’s failure to pay is arbitrary, capricious, or without probable cause. Given Zurich’s reliance on prior appellate jurisprudence, the Supreme Court found it had a reasonable basis to dispute the issue of UM coverage and was not obligated to pay penalties. The judgment of the court of appeal was affirmed.
ZALMA OPINION
Three justices dissented. The Supreme Court, faced with a severely injured plaintiff, decided that by not selecting one of four options on the state created form, although the insured signed the rejection form, was a selection of UM/UIM coverage. The blamed the underwriters for not forcing full compliance. The decision seems to be an act of sophistry, the Court of Appeal and Supreme Court wanted to help the injured person and found a way to interpret the policy and statute to change a rejection of UM/UIM coverage into a request for coverage.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4