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“Hyper-technical” Deviations in Waiver Language are Negligible in PA UIM Case

December 15, 2016

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The Superior Court of Pennsylvania recently affirmed the decision of the Erie County Court of Common Pleas in an underinsured motorist (“UIM”) case on December 14.  The case of <em><a href="">Petty v. Federated Mutual Insurance</a></em> arises out of a car accident that occurred on September 1, 2012.  The plaintiffs were passengers in a car owned by McQuillen Chevrolet-Buick-Pontiac-GMC Truck, Inc. (“McQuillen”) when they were hit by another vehicle driven by Kelley Cooley (“Cooley”).  Cooley was insured by State Farm and settled the resulting suit for the limit of her policy.
The plaintiffs then sought UIM coverage from McQuillen’s auto policy which Federated Mutual Insurance (“Federated”) denied.  Federated asserted that McQuillen had rejected UIM coverage by signing a waiver form.  The plaintiffs then filed a declaratory judgment action against Federated asserting that the waiver form language did not comply with the statutory requirements of 75 Pa.C.S. § 1731(c).  Federated moved for judgment on the pleadings and prevailed.
75 Pa.C.S. § 1731 of Pennsylvania’s Motor Vehicle Financial Responsibility Law requires that any UIM coverage rejection form must state:
<strong>By signing this waiver I am rejecting underinsured motorist coverage under this policy, for myself and all relatives residing in my household. Underinsured coverage protects me and relatives living in my household for losses and damages suffered if injury is caused by the negligence of a driver who does not have enough insurance to pay for all losses and damages. I knowingly and voluntarily reject this coverage.</strong>
<strong>(c.1) Form of waiver.--Insurers shall print the rejection forms required by subsections (b) and (c) on separate sheets in prominent type and location. The forms must be signed by the first named insured and dated to be valid. The signatures on the forms may be witnessed by an insurance agent or broker. Any rejection form that does not <em>specifically comply</em> [emphasis added] with this section is void. If the insurer fails to produce a valid rejection form, uninsured or underinsured coverage, or both, as the case may be, under that policy shall be equal to the bodily injury liability limits. On policies in which either uninsured or underinsured coverage has been rejected, the policy renewals must contain notice in prominent type that the policy does not provide protection against damages caused by uninsured or underinsured motorists. Any person who executes a waiver under subsection (b) or (c) shall be precluded from claiming liability of any person based upon inadequate information.        </strong>
Federated's form was identical to the statute, except the heading was slightly different:
<strong>Option 2. Rejection of Underinsured Motorists Coverage</strong>
On appeal, the plaintiffs raised whether Federated’s waiver form complied with statutory requirements when it added the phrase “Option 2”, replaced the term “protection” with “coverage”, added an “s” to the end of “motorist”, and boxed a portion of the form.  In addition, they raised whether the court erred in holding that “specific compliance” allowed Federated to deviate from the statutory form, whether the court erred in conducting a substantive analysis of the deviations, and did it err when it considered contract principles.
Thankfully, the Superior Court found that the Federated waiver’s language was a verbatim recitation of the statute.  They also agreed with the lower court’s evaluation that any differences in the heading were “hyper-technical” and do not cause any confusion or an uninformed waiver.  In other words, nice try plaintiffs, but no dice.
This case demonstrates the importance of policy and contractual language when interpreted by a court.  It shows that some courts allow flexibility when interpreting a policy.  That said, underwriters would be well served by adhering to specific statute language to the greatest degree possible.  Thanks to Peter Cardwell for his contribution to this post.  Please email <a href="">Brian Gibbons</a> with any question.

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