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Despite Error, Insurer Escapes Liability for UM/UIM Coverage

September 18, 2020

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<p style="text-align: justify;">In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2020/09/Beach.pdf">Beach</a> v. The Navigators Ins. Co</em>., No. 1550 MDA 2019 (Pa. Super. Ct. Sept. 11, 2020), the plaintiffs sought UIM coverage under an automobile insurance policy issued to their employer. The dispute centered on the applicable limits of the UIM policy.</p>
<p style="text-align: justify;">The question as to the applicable UIM limit arose out of an error the insurer made when renewing the policy at issue. Beaches’ employer sought to renew an existing Navigators policy with $35,000 in UIM coverage. Navigators tendered a declaration page for the renewal, but the declarations page contained several errors, including the provision of $1,000,000 in UIM coverage. The employers’ broker immediately contacted the insurer the same day the declaration page was issued to correct the error. The insurer issued a corrective endorsement shortly thereafter. However, the plaintiffs demanded coverage beyond the $35,000 UIM limit.</p>
<p style="text-align: justify;">The plaintiffs appealed the trial court’s grant of summary judgment to Navigators. First, they argued that a valid underinsurance coverage sign-down form was not executed as required by Pennsylvania’s Motor Vehicle Financial Responsibility Law (“MVFRL”). The MVFRL requires insurers to offer UM and UIM coverage, and an insurer is precluded from offering a policy with UM/UIM limits lower than the bodily injury coverage limits. The Superior Court disagreed, reasoning that the record included three written requests from the employer for lower UIM limits, and the mere fact that an obvious scriveners error was made was insufficient to warrant an expansion of coverage or subsequent writing from the insured because the error was immediately identified by the employer’s agent and shortly thereafter corrected by the insurer.</p>
<p style="text-align: justify;">The Court also affirmed dismissal of the bad faith claim. The burden of proof for bad faith requires clear and convincing evidence that the insurer lacked a reasonable basis for denial of benefits and either knew or recklessly disregarded the lack of reasonableness in denying the claim. The Court held “there can be no dispute that Navigators had a reasonable basis for denying” the claim in reliance on the $35,000 limit. The Court was similarly unpersuaded by the argument that Navigators engaged in bad faith by denying payment because the record reflected that Navigators offered the $35,000 limit on more than one occasion and claimant rejected those offers.</p>
<p style="text-align: justify;">This case reveals that insurers should act quickly to rectify errors on a declaration page and should ensure that they offer UM and UIM coverage as required under the MVFRL.</p>
<p style="text-align: justify;">Thank you to Jennifer Seme for her contribution to this post. Please contact <a href="mailto:Haquino@wcmlaw.com">Heather Aquino</a> with any questions.</p>

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