Rejection of Uninsured Motorist Coverage Continues With Every Renewal

Posted on February 10, 2021 by Barry Zalma

Change in Statute Has no Effect on Rejection of UM Coverage

Insurance companies, on rare occasions sue other insurance companies over which is responsible for a claim where there is a potential dual coverage. Such lawsuits are seldom beneficial to the insurers or the insurance industry.

In Mary Reaney-Gates, Wife Of/And Mark Gates, Carla P. Bubacz, Wife Of/And Rex Bubacz v. Teodoro Rivera Mendoza, ICM Insurance Company, And The Hanover American Insurance Company, NO. 2020-CA-0298, Court Of Appeal Fourth Circuit State Of Louisiana (February 3, 2021) an insurance coverage dispute arising from a 2010 automobile accident Government Employees Insurance Company (“GEICO”) and Hanover American Insurance Company (“Hanover”), was issued in favor of Hannover after the trial court reformed GEICO’s policy to provide UM coverage it was never ordered nor paid for.

FACTUAL BACKGROUND

On July 2, 2010, GEICO issued a renewal auto insurance policy to Mark F. Gates (“Mr. Gates”) and Mary Reaney-Gates (“Mrs. Gates”) (collectively, the “Gates”). Previously, on September 30, 1998, Mr. Gates, the named insured, had executed a UM rejection form. Mr. Gates had renewed the GEICO policy multiple times, dating back before 1998. Each of the renewals provided $300,000 per person/per accident limits for bodily injury liability, and rejected UM coverage. When the GEICO renewal policy was issued in 2010, all that was required to validly reject UM coverage was for the named insured to have rejected the coverage on a commissioner-prescribed form in connection with a predecessor policy, as long as the policy limits had not changed in the interim.

In 2011, the Gates filed suit against the alleged at-fault driver, Teodoro Rivera Mendoza (“Mendoza”), and his liability insurer ICM Insurance Company (“ICM”); and Hanover, the UM insurer of Carla P. Bubacz, who was Mrs. Gates’ guest passenger. Years later, Hanover asserted that the GEICO liability policy covering the Gates’ vehicle provided UM coverage that primed Hanover’s coverage. When Mendoza’s liability insurer, ICM, became insolvent, it was replaced by the Texas Property and Casualty Insurance Guaranty Association (“Texas Property”).

In 2019, GEICO and Hanover filed cross motions for summary judgment regarding the existence of UM coverage. In the judgment, the trial court reformed the automobile policy issued by GEICO to provide the plaintiffs with uninsured motorist (“UM”) bodily injury coverage in an amount equal to the limits of liability for bodily injury arising from the September 27, 2010 auto accident. The trial court further decreed that the GEICO insurance policy provided the primary layer of uninsured motorist coverage in connection with the plaintiffs’ claims. GEICO appealed the judgment.

DISCUSSION

The burden of proof rests with the mover. In GEICO’s motion for summary judgment, it concedes that it issued a policy to the Gates that was in full force and effect on the accident date. However, according to GEICO, the policy was issued with UM coverage rejected on all renewals beginning on or after November 30, 1998 based on the UM rejection form executed by Mr. Gates on September 30, 1998.

Hanover asserted that GEICO had no valid UM rejection attached to the policy in effect when the accident occurred in September 2010. The Court of Appeal rejected Hanover’s contention that once an initially valid UM rejection became invalid due to a change in the law, it was forever invalid even though the law was changed to restore the validity of the rejection. The Court of Appeal concluded that under the law in effect at the time of the accident, Mr. Gates had no UM coverage from GEICO in 2010 because he executed a rejection of UM coverage form in 1998, and the GEICO policy was continuously renewed thereafter without a change in the limits of bodily injury.

When the trial court granted Hanover’s motion for summary judgment, reformed the GEICO policy to provide UM coverage for the Gates’ September 2010 automobile accident, and declared that the GEICO policy provided the primary layer of uninsured motorist coverage it erred.

Because the named insured rejected UM coverage in writing on the form required by the state the Gates’ GEICO policy provided no UM coverage on September 27, 2010, the date of the accident. The UM waiver executed by Mr. Gates in 1998 was still valid. Accordingly, the Court of Appeal reversed the judgment granting Hanover’s motion for summary judgment, and reversed the judgment denying GEICO’s motion for summary judgment. Hanover’s claims against GEICO were dismissed with prejudice.

ZALMA OPINION

When an insured rejects UM coverage properly and for 12 years accepts renewal without such coverage the insured intentionally and effectively rejected the coverage. To claim, by asserting law changes requiring new policies to require a specific rejection on each new policy does not change the fact that Gates continually rejected UM coverage with every one of the 12 annual renewals or 24 six month renewals. Courts should not change a policy wording without evidence of mutual mistake or fraud. None existed and that is why the judgment was reversed.

? 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 https://www.zalma.com and [email protected].

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.

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