In John Bielec v. American Int’l Group Inc., et al., the Pennsylvania Court of Common Pleas, Philadelphia County, addressed the validity of an insurer’s rejection of underinsured motorist (“UIM”) coverage.  In brief, the plaintiff was an employee of Verizon Communications, Inc. (“Verizon”), who was involved in an automobile accident during the course of his employment.  At all times relevant, Verizon was insured by National Union Fire Ins. Co. (“National Union”).  Following the accident, the plaintiff attempted to claim UIM coverage under Verizon’s National Union policy.  National Union rejected the plaintiff’s UIM claim contending there was no UIM coverage provided under its policy.  The plaintiff commenced the instant declaratory judgment action seeking UIM coverage under the National Union policy.

In determining whether the plaintiff was entitled to UIM coverage, the court first looked to the requirements of the relevant Pennsylvania statute, i.e. the Motor Vehicle Financial Responsibility Law (“MVFRL”).   Under the MVFRL, Verizon was required to insure its fleet of commercial vehicles under a commercial insurance policy.  However, before obtaining such a policy, its insurer needed to provide Verizon the option of obtaining UIM coverage.  Upon receipt of this offer, Verizon was required to either accept or decline such coverage.  Under the MVFRL, the rejection of such coverage required specific steps to be taken or else the rejection would be deemed void.  Ultimately, Verizon opted to reject UIM coverage.  However, although Verizon opted to reject such coverage, the Verizon representative did not sign and date the UIM Rejection Form in the space immediately below the UIM rejection language.  Conversely, the representative placed a signature and date and the very bottom of the document leaving multiple paragraphs of text in between the UIM rejection language and her signature.

Ultimately, the court concluded that the UIM Rejection Form was void.  Looking to the specific facts of this case, the court noted that although the Rejection Form was signed, the form allowed for at least three paragraphs to intervene between the specific UIM rejection language and Verizon’s signature and date.  Specifically, the court noted that one of the intervening paragraphs allowed for the rejection of stacked limits of UIM coverage, which the court stated voided the validity of Verizon’s attempt to reject UIM coverage.  Moreover, notwithstanding the foregoing, the court also reasoned that Verizon’s failure to notify its employees that it was rejecting UIM coverage also gave rise to a public policy argument as to why Verizon’s rejection was void.  Thus, the court concluded that Verizon’s rejection of UIM coverage was void and not a basis to deny the plaintiff’s claim for coverage.

Consequently, this case illustrates that courts will strictly interpret Pennsylvania statute when it comes to rejecting UIM coverage.  Thus, an insurer needs to be cognizant of the statute’s requirements or else it may find itself providing coverage where it did not intend to do so.

Thanks to Colleen Hayes for her contribution to this post.