Insured Bound By Low Underinsured Limit

January 27, 2015 / Writing and Speaking

The 1st District Appellate Court recently held that a policy form used for an insured’s selection of an underinsured automobile coverage limit sufficiently stated the requirements of the Insurance Code so as to make the insured’s selection of minimum coverage binding.

The insurer in American Service Insurance Co. v. Iousoupov, 2014 IL App (1st) 133090 (Dec. 12, 2014), was represented by Beermann, Pritikin, Mirabelli, Swerdlove LLP. The Law Offices of Meyer & Blumenshine represented the additional insured beneficiary of the coverage, Iouri Iousoupov.

ASI issued a commercial auto policy to Car Service Co. Inc. (CSC), a taxi company that had as many as 14 drivers working as independent contractors. The policy provided $500,000 per occurrence liability coverage and coverage for uninsured and underinsured motorists in the amount of $20,000 per person and $40,000 per occurrence, the statutory minimum.

Attached to the policy was an election form for the selection of UM-UIM coverage titled “Uninsured Motorist Bodily Injury Election.” The form briefly described both types of coverage and provided a place for the insured to select coverage up to the liability limit or to reject coverage in excess of the UM-UIM statutory minimum. The form in this case contained a handwritten checkmark rejecting the higher limits.

The president of CSC, Elena Hodjaeva, negotiated the ASI coverage. Although she could not remember everything about her selection of coverage, her testimony indicated she understood she was rejecting a higher level of coverage. She did so because the cost of the coverage was shared with the drivers and each driver had the choice of picking a higher level of UM-UIM coverage, but most drivers did not want to pay the higher cost.

Evidence ASI provided also indicated that the company issued the policy with UM-UIM limits equal to the liability limits unless it received the form from the insured selecting the lower limit of coverage. When ASI billed for the higher coverage, taxi companies would quickly provide the election for lower coverage because they did not want to pay the higher premium. ASI testimony also indicated that the election form in this case was no longer used by the company.

In 2009, one of CSC’s drivers, Iouri Iousoupov, was injured in a collision with a driver of a vehicle having only $50,000 in liability coverage. Iousoupov then sought UIM coverage from ASI, which declined on the grounds that the limits of the other driver’s liability coverage were greater than ASI’s UIM coverage and, therefore, by statute and the policy terms, the UIM coverage was not triggered.

Subsequently, ASI sought summary judgment based on CSC’s rejection of the higher UM and UIM coverage that had been available, and the trial court granted the motion. Iousoupov brought this appeal.

Analysis

In an opinion by Justice Robert E. Gordon, the 1st District Appellate Court affirmed. He noted that, under the Insurance Code, unless the insured requests otherwise, UM coverage is equal to the limits of an automobile policy’s bodily injury liability limits, and the UIM coverage is set at the same limit as the UM limit. The code, however, permits the insured to reject UM coverage in excess of the statutory limits by written request. 215 ILCS 5/143a-2(2).

Iousoupov here claimed that the ASI election form was ambiguous, among other reasons, because the Insurance Code requires a brief description of the coverage and the description in the ASI form was inadequate.

The election form basically provided that UM coverage applies to injuries “caused by another motorist who is not covered by any bodily injury liability insurance policy, or who is insured but such coverage is not adequate to compensate” the victim. Gordon said that this description was sufficient, particularly when supplemented by ASI’s verbal explanation to CSC.

Iousoupov nevertheless contended that the title of the form, “Uninsured Motorist Bodily Injury Election,” on its face appeared to apply only to UM coverage, the form did not adequately describe what limits could be selected by the insured, the form stated that ASI had “offered” coverage without adequately describing the offer and it had other purported deficiencies.

Gordon rejected the argument. He observed that, the form’s title notwithstanding, the substance of the form described both UM and UIM coverage. The challenge to the adequacy of the purported offer, moreover, was irrelevant because the Insurance Code placed the burden on the insured to reject a higher limit, and once the insured did so, as here, the insurer had no responsibility of making an offer of higher limits.

In addition, whatever other flaws may have existed in the form, the evidence established that CSC made a knowing election to reject higher coverage limits.

Finally, an issue arose over ASI’s testimony, introduced by Iousoupov, that it no longer used the election form, apparently because the wording of the form sometimes led to litigation. The trial court struck the testimony as irrelevant and based on ASI’s post-remedial measures objection.

Iousoupov here, however, contended that such an objection did not apply to contract provisions. Even if it didn’t, Gordon said, the evidence was sufficiently clear that CSC knowingly elected to reject the higher UM-UIM coverage, so the testimony was not relevant.

The court therefore affirmed summary judgment in favor of ASI.

Key Point

An insured’s knowing rejection of higher-than-minimum UM-UIM limits will be upheld despite arguable deficiencies in a form intended to disclose options available to the ins

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